Essentials of Management Information Systems, 6e
Chapter 4
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
The Digital Firm: Electronic Business
and Electronic Commerce
4.1
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
• British Airways: Faster, Leaner, and Internet
Enabled
4.2
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
Internet Technology and the Digital Firm
The Internet
• Rapidly becoming infrastructure of choice
• Universal, easy-to-use set of technologies and
standards
• Web sites available 24/7
• Extended distribution channels
• Reduced transaction costs
• Reduced network and coordination costs
4.3
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
• Past: Information about products and
services bundled with their physical value
chain
• Today: The Internet has unbundled
information from traditional value chain,
creating new business models
4.4
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
Internet Business Model Features
•
•
•
•
Dynamic pricing
Banner ad or pop-up ad
Information sharing
Virtual community
– Personal web site, on-line discussion group,
chat room, message board
• Services
– E-mail, Messenger, file storage, subscription
4.5
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
Internet Business Models
• Virtual storefront: Sells physical products directly to
consumers or businesses.
– Amazon.com, EPM.com
• Information broker: Provides product pricing and
availability information; generates revenue from
advertising or directing buyers to sellers.
– Edmunds.com, Kbb.com, Insweb.com, IndustrialMall.com
• Transaction Broker: Processes online sales transactions for
fee.
– E*TRADE.com, Expedia.com
4.6
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
Internet Business Models
• Online Marketplace: Provides digital environment
where buyers and sellers meet
– eBay (Dynamic Pricing), Priceline.com,
ChemConnect.com, Pantellos.com
• Content Provider: Provides digital content, such as
news; revenue from fees or advertising sales
– WSJ.com, CNN.com, TheStreet.com, Gettyimages.com,
MP3.com
4.7
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
Internet Business Models
• Online Service Provider: Provides connectivity;
revenue from fees, advertising, or marketing
information
– @Backup.com, Xdrive.com, Employease.com,
Salesforce.com
• Virtual Community: Provides online meeting
place for people of similar interests
– Motocross.com, iVillage.com (banner ad, pop-up ad),
Sailnet.com (Latin American)
4.8
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
Internet Business Models (cont.)
• Portal: Provides initial point of entry to the Web,
along with specialized content and services
– Yahoo.com, MSN.com, StarMedia.com
• Syndicator: aggregates content or applications to
resell as package to third-party Web sites
– E*TRADE (Reuters-news, Bridge Info Sys-quotes,
BigCharts.com-charts)
4.9
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Categories of Electronic Commerce
• Business-to-consumer (B2C): Retailing products
and services to individual shoppers
• Business-to-business (B2B): Sales of goods and
services among businesses
• Consumer-to-consumer (C2C): Consumers selling
directly to consumers
4.10
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Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
Direct Sales Over the Web
• Disintermediation: Removal of intermediary steps
in a value chain, selling directly to consumers,
significantly lowers purchase transaction costs
• Reintermediation: Shifting intermediary function
in a value chain to a new source, such as “service
hubs” (Ex. Information broker in Table 4-2)
4.11
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Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
The benefits of disintermediation to the consumer
Figure 4-2
4.12
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
Interactive Marketing and Presentation
• Collection of customer information using Web site
auditing tools less expensive than surveys and
focus groups.
• Web personalization technology customizes
content and banner ads on Web site to individual’s
profile and purchase history.
• Web sites and marketing shorten sales cycle and
reduce time spent in customer education.
4.13
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
Interactive Marketing and Presentation
• Combine web visitor data with customer data from other
sources to create detailed profiles of individuals.
– Off-line purchases, customer service records, or product
registrations.
• Conduct (incentive-driven) on-line market research
surveys.
• Monitor customer discussions about products that are
taking place through on-line communities and message
boards.
• Monitor the online surfing and buying behavior of large
numbers of customers at many different web sites.
4.14
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
Collection of Customer Information
• TravelWeb
– On-line reservation of more than 16,000 hotels in 138
countries.
– Track origins of users
– Track web pages and links which users click to learn
about customer preferences.
• Hyatt hotel
– Japanese users are most interested in resort’s golf
facilities.
– Shape market strategies to develop hospitality-related
products.
4.15
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
Web Personalization Technology
• Amazon.com
– Retain customer purchase and recommendation data.
– Recommend products based on purchase history and past
purchases from other buyers.
• Bluefly.com
– Display items that a visitor has recently viewed.
• Subaru.com
– Maintenance reminder, configuration of warranty repair, notice of
recalls and service campaigns, service history log, trade-in value
calculation, link to dealer web site, request a service appointment.
4.16
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Web site personalization
Figure 4-3
4.17
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
Customer Self-Service
• Web-based responses to customer questions cost a
fraction of telephone costs for live customer
service representation
• Allow interaction at customers’ convenience
• Web-based customer self-service applications,
such as airline flight information sites
• Traditional, phone-based customer call centers
being integrated with Web
4.18
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Customer-Centered Retailing
•
•
•
•
4.19
Customer Self-Service
American, Northwest: Flight departure and arrival
times, seating charts, airport logistics, check
frequent-flyer miles, and purchase tickets on-line.
Yamaha Corp. of America: Access to technical
solutions, send email to live technician.
UPS, FedEx: Track shipment, calculate shipping
cost, determine time in transit, and arrange for
package pickup.
Lend’s End: Push to talk button to request live talk
with customer services.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Window on Technology
Lightnin Lights Up with the Internet
•
What are the benefits of using Web-based order
configuration software?
•
How does this system provide value to Lightnin
and its customers?
4.20
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
•
Web, Internet streamlining procurement process
•
E-procurement eliminates inefficient, paperbased processes
•
Selling through Web sites, private industrial
networks, or Net marketplaces
4.21
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Before-after diagram of changes in Lightnin’s ordering process
Figure 4-4
4.22
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Private Industrial Network
•
•
•
4.23
Private exchange; typically consists of large firm
using extranet to link to its suppliers and
business partners
Permits firm and partners to share product
design, development, marketing, scheduling,
inventory management, and unstructured
communication
Fastest-growing type of B2B commerce
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
A private industrial network
Figure 4-5
4.24
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Net Marketplace
•
•
•
4.25
E-hub; provides single Internet-based
marketplace for many different buyers and
sellers
Industry owned or independent intermediaries
Transaction oriented; generates revenue from
purchase and sales transactions and other
services
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
A Net marketplace
Figure 4-6
4.26
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Different Types of Net Marketplace
•
•
•
•
•
•
4.27
Direct goods: goods used in a production process, e.g.,
sheet steel for auto production.
Indirect goods: goods not directly involved in a
production process, e.g., office supplies.
Contractual purchasing: long-term relationships with
designated suppliers.
Short-term spot purchasing: purchase based on
immediate needs.
Vertical markets for specific industries: automobile,
telecommunication, machine tools.
Horizontal markets with different industries: office
equipment and transportation.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Different Types of Net Marketplace
•
W. W. Grainger: Horizontal market for sourcing
maintenance, repair, and operations (MRO)
products used in many different industries.
–
4.28
Customers benefit from low search cost, low
transaction cost, wide selection, and low price.
Grainger earns revenue by charging a markup on the
products it distributes.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Different Types of Net Marketplace
•
Ariba: Long-term contractual purchasing of both
indirect and direct goods.
–
–
4.29
For buyers, Ariba automates sourcing, contract
management, purchase orders, requisitions, business
rule enforcement, and payment.
For sellers, Ariba provides services for catalog
creation and content management, order management,
invoicing, and settlement.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Different Types of Net Marketplace
•
Covisint: industry-owned vertical market for automobile
manufacturing. Founded by GM, Ford, DaimlerChrysler,
Renault, and Nissan.
–
–
–
4.30
Focus on long-term contract purchasing relationships and on
providing common networks and computing platforms for
reducing supply chain inefficiencies.
Buyers benefit from competitive pricing among alternative
suppliers.
Suppliers benefit from stable long-term relationships with large
firms.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Exchanges
•
•
•
4.31
Third-party Net marketplaces connecting
thousands of suppliers and buyers for spot
purchasing
Proliferated during early years of e-commerce
Exchanges encouraged competitive bidding,
driving prices down; suppliers reluctant to
participate
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Business-to-Business Electronic Commerce
Exchanges
•
•
4.32
Enermetrix Network: Online exchange for
retail natural gas and electricity contracts.
FoodTrader.com: Automate spot purchases
among buyers and sellers from over 180
countries in the food and agriculture
industry.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Electronic Commerce Payment Systems
•
Digital credit card payment systems: Secure
credit card payment over Web
•
Digital wallet: Stores credit card and owner
identification, shipping information, to facilitate
payment process
–
4.33
Amazon.com 1-Click, Gator, MSN Wallet,
MasterCard Wallet, American Online’s Quick
Checkout.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Electronic Commerce Payment Systems
•
Micropayment: Payment for a very small sum of
money, often less than $10.
•
Accumulated balance digital payment systems:
Accumulates micropayment purchases as debit
balance paid periodically on credit card or
telephone bills
–
4.34
PaymentOne and Trivnet.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Electronic Commerce Payment Systems
•
Stored value payment system: Enables
consumers to make instant payments based on
value stored in digital account
–
•
Smart Card: A credit-card size plastic card that
stores digital information and that can be used
for electronic payments in place of cash.
–
4.35
Ecount, RocketCash (aimed at teenagers).
Mondex, American Express Blue.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Electronic Commerce Payment Systems
•
Digital cash: Digital currency that can be used
for micropayments or larger purchases
–
•
eCoin.net.
Peer-to-Peer payment systems: Enables
payments to vendors not set up for credit-card
payments
–
4.36
The recipient “picks up” the payment by visiting the
web site and supplying information about where to
send the payment (a bank account or a physical
address).
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Electronic Commerce Payment Systems
•
Digital checking: Electronic check with secure
digital signature
•
Electronic billing presentment and payment
system: Supports electronic payment for online
and physical store purchases after purchase has
taken place
4.37
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Commerce
Electronic commerce information flows
Figure 4-7
4.38
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Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business and the Digital Firm
How Intranets Support Electronic Business
•
Connectivity: accessible from most platforms
•
Can be tied to internal corporate systems and
core transaction data
•
Can create interactive applications with text,
audio, and video
4.39
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business and the Digital Firm
How Intranets Support Electronic Business
•
Scalable to larger or smaller computing
platforms as requirements change
Easy to use, universal Web interface
Low start-up costs
Rich, responsive information environment
•
•
•
–
•
4.40
Product catalogs, employee handbooks, telephone
directories, and benefit information.
Reduced information distribution costs
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business and the Digital Firm
Intranet Applications for Electronic Business
•
Finance and Accounting: Integrated view of
financial and accounting information online
•
Human Resources: Rapid delivery of
information to employees; online publishing
•
Sales and Marketing: Collaborative place to
coordinate activities of sales force
•
Manufacturing and Production: Distribute
manufacturing information to different parts of
organization
4.41
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business and the Digital Firm
Functional applications of intranets
Figure 4-8
4.42
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business and the Digital Firm
Window on Organizations
Can Online Brokers Survive in Europe?
Is providing online financial services over the
Internet a viable business model? Why or why
not?
4.43
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Electronic Business and the Digital Firm
Business Process Integration
•
•
•
•
•
4.44
Pre-Internet, integration costly and difficult
Internet technology less expensive than building
enterprise systems
Intranets: improve coordination among internal
business processes
Extranets: coordinate processes shared with
customers and partners
Intranet promotes collaborative commerce
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Management Challenges and Opportunities
Management Challenges and Opportunities
•
Unproven business models
–
–
–
4.45
Only 43% of the independent exchanges that were
operating in the spring of 2000 survived to July 2002,
and less than 200 remained by mid-2003.
Heavy outlays for web site maintenance, supply chain
management, customer service call centers, and
customer acquisition.
Large payroll expense for skilled technical staff and
additional shipping expense to ensure on-time
delivery.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Management Challenges and Opportunities
Management Challenges and Opportunities
•
Business process change requirements
–
•
Fail, if badly managed or poorly executed.
Channel conflicts
–
–
4.46
Competition between distributors to sell the same
products or services.
Current solutions to offer only partial products on
web or pay full commission to online sales rep.
© 2005 by Prentice Hall
Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce
Management Challenges and Opportunities
Management Challenges and Opportunities
•
Legal issues
–
•
Which law to apply, if company is in Thailand, server
in Singapore, and buyer in Hungary.
Trust, security, and privacy
–
–
4.47
Hesitate to buy from unfamiliar vendors.
Security and confidentiality of personal date through
subscription and credit card transactions.
© 2005 by Prentice Hall