Chapter Twelve
Global E-Commerce: An
Examination of Issues Related to
Advertising and Intermediation
1
Agenda
E-Commerce Future and Success
Types of Websites, types of E-commerce
The Richness-Reach Tradeoff
Intermediation
2
Global E-Commerce
Predictions
Intermediaries will decrease (disintermediation)
Disintermediation will be more rapid in service
industry
Disintermediation is sensitive to product and
service characteristics
Promotions will inhibit disintermediation
New intermediaries will arise (navigators, eg.)
Logistics and Distribution are enhanced by Ecommerce (fulfillment functions)
3
Internet & Productivity
Exponential Growth of Internet
 Great potential for economic advantage
Productivity Paradox
 Lack of observation of productivity gains in
macroeconomic data
 Resolved by understanding the long gestation period
• Changes in human skills and organizational structure must occur
before true growth is seen
• Learning is important
• People remember
4
Internet & Productivity
Productivity Paradox
 What does IT buy? Lowered transaction costs, lowered
coordination costs, interoperability, increased memory
 What does IT cost? Increased learning, new procedures,
new ways of thinking
5
Critical Success Factors for
Global E-Commerce
High tech also requires high touch
Globalize operations, but localize service
Simplify and expedite transaction process
Foster trusting relationships with [& among]
customers
Focus on convenience, info, intermediation,
pricing
Get yourself found often and on top in portals
Plan to evolve to transactions
6
Types of Websites
Static
Interactional
Transactional
Portal
Business
Basis
of Firm
Links to
other
websites
and web
services
7
Richness: Variety and Depth of Content
The Richness-Reach Tradeoff-1
In the past, the
cost of
communication
limited the
amount of
information we
could distribute
over a given
territory
Today, via inter-,
intra- and
extranets, we can
distribute almost
limitless variety
and amounts of
information over a
given range, even
worldwide.
Reach: Distribution Range
8
Richness: Variety and Depth of Content
The Richness-Reach Tradeoff-2
Each
distribution
channel has its
own
characteristic
Richness-Reach
tradeoff curve
Attempting to
increase
distribution
range incurs
costs, which
lower the
available
richness.
Reach: Distribution Range
9
Richness: Variety and Depth of Content
The Richness-Reach Tradeoff-3
Attempting to
increase
richness incurs
costs, which
lower the
available
distribution
reach
Reach: Distribution Range
10
Richness: Variety and Depth of Content
The Richness-Reach Tradeoff-4
The new media BREAK the relationship
between richness and reach. No
reasonable move to increase richness or
reach will have any real cost and hence
no effect on the other characteristic.
Reach: Distribution Range
11
Global e-Commerce:
Transformation
Connecting the World
 1st Phase – Sharing databases, EFT, EDI
• Very successful!
 2nd Phase – B2C, B2B e-Commerce
• Moving value chain processes to Internet
• Is critical for survival and sustenance of the Internet
Internet Transforming Business
• US Banking Industry – 95% online services
• 32 million Americans bank online
• Airlines, Books, etc.
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Global e-Commerce
Online Spending Trends
 2002 e-Commerce Revenues
• Worldwide – $623 B., up from $41 B. in 1998
• US – $291 B., up from $31 B. in 1998
What happened to Predictions?
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Types of E-Commerce
B2B
B2E
G2B
Business
Government
B2G
Consumer
C2C
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Familiar Types - 2
B2C: Retailing
B2B: Supply Chain
G2B: Regulation
B2G: Supply/Procurement
G2C: E-government
C2G: ????
C2C: Amateur Business
B2E: Part of Employee Relations
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Global e-Commerce
Business to Business (B2B)
 Linking with other members of the value chain
•
•
•
•
•
•
•
•
Less expensive automated transactions
Enables standards for data transfer
Extends boundaries
Streamline operations (JIT)
Improve customer service
Reduce Operating Costs
Opportunities for sales automation and self-service purchases
Allows Manufacturers, wholesalers, retailers, and consumers to buy,
sell, and barter
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Global e-Commerce (continued…)
Business to Employee (B2E)
 Linking businesses to their employees
•
•
•
•
•
•
Keeps everyone “up to date”
Download tax forms
Review benefits
Signing up for medical
Buy company product at employee discount
Automatic deductions from payroll (medical, retirement plans)
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Global e-Commerce (continued…)
Business to Consumer (B2C)
 Linking businesses to customers
• Lets customer buy online
• Improves customer relationship and awareness of product and/or
service
Business to Government (B2G)
Government to Consumer (G2C)
• Thought of as democratizing factor
Consumer to Consumer (C2C)
• E-bay is current archetype
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Internet and Traditional
Advertising
Criterion
Traditional Advert
Internet Advert
Driver
Advertising
Contents
Hyperlinks
None
Network of HLs
View Timing
View when Broadcast
View on demand
Effectiveness
Measures
None or little; based on
samples & focus gps.
All hits recorded; based on
actual data
Control over
Exposure Time
Determined by advertiser Determined by web surfer
except in print media
upon use
Interactivity
None
As much as desired
Image
Perference for upscale
Preference for relevance
Pay for Performance
Not normal
Increasingly tied
Targetting
Limited
Multiple paths for targetting 19
Global and E-Commerce Issues
Cybercrime
Global Market Exploration
Internationalization
Localization
Payment System
Legal and Taxation System
Learning Curve or Quantum Leap
Intermediation …
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Intermediation
BUYER
MARKET
SPACE
BUYER
Traditionally,
buyer and seller
come together in
market space
where they can
confidently
transact.
SELLER
SELLER
SIMPLE INTERMEDIATION
Owners of the
market space get
a fee for this
intermediation
service.
21
Intermediation-2
Each of these
represents a
business
opportunity
BUYER
These complex
interactions result
in a hierarchy
made possible by
layers of
intermediation
In the traditional
marketspace, the
owners provide
safety, security,
standards,
replicability,
recording,
transportation,
etc. to increase
the confidence of
buyers and
sellers.
SELLER
COMPLEX INTERMEDIATION
As interaction
becomes more
complex, more
possibilities for
intermediation
arise
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Intermediation-3
One possibility
for intermediation
is brokerage
A more complex
form of
intermediation is
being a navigator
among
brokerages
HIERARCHY
BUYER
SELLER
COMPLEX INTERMEDIATION
GIVES RISE TO HIERARCHIES
An even more
complex form of
intermediation is
trraining or
consulting in how
to use navigators
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Intermediation-4
Assuming the
user has the
tools and the
skills and the
opportunities
As Internet
replaces the
Hierarchies of the
Marketspace, the
user becomes
“empowered”
MARKET
SPACE
BUYER
The user can take
over many of the
intermediation
functions,
resulting in “disintermediation”;
hierarchies are
broken down and
the market space
is recreated
SELLER
DISINTERMEDIATION
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Intermediation-5
However, the
complexity of the
Internet creates
more interstices.
MARKET
SPACE
BUYER
Providers can
find niches within
the interstices and
“reintermediate”
the market space,
reintroducing
hierarchical
structures.
SELLER
REINTERMEDIATION
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Intermediation & E-Commerce
Anticipated Changes in Market Structure
•
•
•
•
•
•
•
Price
Distribution of profits
Strategic interactions between market participants
Organizational hierarchies
Transaction costs
Value chain composition
Barriers to entry
 Ecommerce combines the advantages of lowered
transaction costs with lowered coordination costs
and other advantages of computer-based systems 26
Traditional Intermediation Marketing Channels
Automobile Part Manufacturer
Vehicle Manufacturers
Service Program
Mail Order &
Chains
Intermediaries
Vehicle Dealers
Direct Jobbers
Warehouse
Distributors
Oil &Rubber
Companies
Indirect Jobbers
Oil & Tire Jobbers
Repair Shops
Service Stations
Car Owner
27
Traditional Intermediary Functions
Communication, Coordination and Exchange
Costs
Assortment of Product
Warehousing and Distribution
Financing and Risk Sharing
Product Promotions
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E-Commerce & Intermediation
Digital Networks
 Direct channels between producers and
consumers
 Lowers coordination costs for producers and
retailers
 Lowers physical distribution costs
 Disintermediation - Theorizes the end of the
“middleman”
29
Intermediation Cont’d
Supporting Disintermediation
 Growing trends in online commerce
•
•
•
•
Airline tickets
Book sales
Computer Sales
Auctions
• Securities by discount brokers
Based mostly on anecdotal evidence
30
Emerging Intermediary Trends
 Theorizes that E-Commerce will not eliminate the
“Middleman”
 Selling products direct is not a new phenomenon
• Sherwin-Williams sell directly to customer
• Hart, Shaffner, Marx has about 200 retail outlets
• Gap uses direct retailing
 E-Commerce is evolving new Intermediary
functions
• CyberIntermediaries are emerging, “Hypermediation”
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Intermediary – Global Issues
Cost-Effective Distribution
 If business efforts are concentrated on small
number of key countries
• More efficient to ship goods from local distribution centers than from
home country
• Delivery services charge much more in other countries
 If business efforts are concentrated on large
number of foreign countries
• More efficient to negotiate a volume deal with a major delivery service
32
Critical Success factors for Global ECommerce
 Complement High Tech with High Touch
 Globalize Operations, but Segment Geographically to
Localize Service
 Simplify and Expedite Transaction Process
 Foster Trusting Relationships with Customers
 Reinvent with Focus on Convenience, Information,
Intermediation and Pricing Strategies
 Get Yourself Found Often and on the Top
 Plan Technology to Evolve for Transactional e-Commerce
 Prepare for m-Commerce
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