E-Commerce Management
45-869
Fall 2003
Tridas Mukhopadhyay
tridas@cmu.edu
Introduction
• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework
Course Goals
Primary Goal:
• Develop a managerial foundation for
Electronic Commerce
• Secondary Goals:
• Study E-Commerce Applications
• Impact of the Internet on Management
What’s a Business Model?
Major Components
Key Question
Value Proposition
Revenue Model
Market Opportunity
Competitive Environment
Why would customers buy from you?
Competitive Advantage
Market Strategy
Organizational Development
How do you absorb value?
Management Team
What type of leaders?
How do you make money?
What is your marketspace?
Who are the competitors?
How do you attract customers?
What type of organizational structure?
Topics
• Strategy Fundamentals
• Strategic Analysis
• Process Redesign
• Digital Products
• e-Retailing
• e-Service
• Business-to-Business E-C
• Supply Chain Management
• Strategies for E-Commerce
Grading
• 2 Exercises
• 20 (Individual)
• Class Participation
• 10 (Individual)
• 3 Best Case Reports
• 30 (Team)
• Team Presentation
• 10 (Team)
• Final Exam
• 30 (Individual)
Pedagogy
Professor / TA
Students
Lecture & Discussion
Participation
Case Analysis (4)
Report & Discuss
Exercise (2)
Solve & Submit
Team Project
Study & Present
Final Exam
Solve & Submit
Team Presentation
Analyze an on-line business
• Business model
• Competitive structure
• Value chain / creation
• Strengths/Weaknesses/Opportunities/Threats
• IT Use
Team Presentation
1.
Business Model. What are the products/services of the
chosen business? Which markets? What are the sources and
magnitudes of revenue? What are the major cost categories?
2.
Competitive Structure. Who are the competitors? Which
competitors tend to dominate the marketplace? Are new
entrants or substitute products/services likely in the competitive
arena? What are the powers of buyers and suppliers?
3.
Value Chain. What are the primary and secondary
activities of this business? Which of them are critical? How
does it create value for its customers? What role does the
Internet play?
4.
SWOT. What are the critical success factors for this
business? What are its strengths? What are its weaknesses?
What are the future opportunities and threats?
5.
IT. How does it use IT today? What is distinctive about
its IT use? How can it use IT as a strategic lever? What would
Introduction
• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework
What is Electronic Commerce?
Use the Internet, Web or any electronic means to do the following
•
•
•
E-Commerce: Alternate Perspectives
 Is eCommerce = eBusiness?
 Is eCommerce = dot-coms?
 Is eCommerce = e-tailing?
 Is eCommerce = B2B exchanges?
Does Southwest Airline fit this mold?
• Search and reserve flights
• Click ‘N Save Internet specials
Direct
Selling
• Special Double Credit for Internet buyers
• Transport passenger reliably
• Receive itinerary and specials by e-mail
Has the Web affected the value chain?
• Web revenue 49%, over $2.6 billion
• Web tickets costs $0.60, traditional ticket $ 9
• Over 4 million customers have signed up
Has the Web changed industry structure?
• Online competitors began the web selling method
• Web accounts for 22% of industry sales!
• Customers have changed their expectations
How about edmunds.com?
edmunds.com
• Online catalog of new and used cars
• Specs and invoice prices
Intermediaries
Transfer to autobytel.com
• Fill in your choice
• A near-by dealer offers you a deal
Has the Web affected the value chain?
• New intermediaries
• Information Intermediaries( Edmunds, KBB)
• Referral Intermediaries (Autobytel, CarPoint)
• On-line info, ordering, financing, insurance, warranty
• Auto exchange Covisint to redefine supply chain
Has the Web changed industry structure?
• 60% of new car buyer first go to Web, save $500
• Dealers save about $350 per car
• FordDirect.com, 4200 dealers
• GMBuypower.com, 5000 dealers
Intra-Organizational
P2P Commerce?
Types of
Electronic
Commerce
M-Commerce?
Business-to-Business +
Business-to-Consumer +
Business-to-Government
Consumer-to-Consumer
Business Customers vs. Consumers
Characteristic
Percentage on-line
Transaction value
Price sensitivity
Rational
Volatility of relationship
Number of customers
Electronic efficiency
Business
Consumer
Introduction
• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework
Why Electronic Commerce?
• World Wide Web (Ease, ubiquity, platform
independence)
• Internet Explosion (Commercial and residential)
• Huge Market (Retail, commercial, providers)
• Competitive Pressure (Lower entry barrier)
World Wide Internet Users by Regions (in millions)
800
700
600
Middle East
500
Latin America
400
Asia Pacific
300
Europe
200
North America
100
0
2000
eMarketer 2002
2001
2002
2003
2004
How are Internet users different from
general population?
• Household Income (Mean $52k vs. $42k)
• Education (College grad 30.5% vs. 27%)
• Gender (Female 51.3% vs.Male 48.7%)
• High Growth Rate
Source:e Marketer 2002
US B2C revenues (in Billions)
109
88
68
50
18
27
32
1999 2000 2001 2002 2003 2004 2005
eMarketer 2002
Series1
US B2B e-Commerce Revenues (in Billions)
800
720
700
600
481
500
revenues
400
306
300
200
226
149
100
0
1999
source: eMarketer 2002
2000
2001
2002
2003
Worldwide B2B e-Commerce Revenues (in
Billions)
2367
2500
2000
1409
1500
revenues
1000
500
823
474
278
0
2000
2001
source: e-Marketer 2002
2002
2003
2004
Possible Benefits of E-Commerce
Customers
Suppliers
•
•
•
•
•
•
So, Why Did the Dot-Coms Crash?
•
•
•
•
Introduction
• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework
Internet Milestones
• 1970: ARPANET established
• 1974: TCP/IP introduced
• 1980: US Dept of Defense adopts TCP/IP
• 1984: TCP/IP diffuses abroad
• 1988: Internet opened to commercial world
• 1991: WWW introduced
• 1993: Mosaic introduced
Evolution of E-Commerce
• Inter-Organizational Systems (American Hospital Supply)
• Airline Reservation Systems (Sabre and Apollo)
• Electronic Data Interchange (Fortune 1000 companies)
• The Web and the Internet (Universal)
A Framework for Electronic Commerce
Applications
• Supply Chain / Procurement
• Online Marketing / Home Shopping
Business,
Public
policy,
legal &
privacy
issues
Infrastructure
Security, Authentication, Directories /
catalogs, Electronic Payment
Message Transfer
EDI, e-mail, HTTP
Content & Publishing
HTML, XML, JAVA, Web
Networking
Telecom, Cable, Wireless, Internet, VAN
Technical
standards
for
documents,
security,
and
network
protocols
Barriers (?)
•
•
•
•
•
•
E-Commerce: Business Requirements
• Security
• Reliability
• Electronic Payment
• Ubiquity
• Speed
• Ease of Use
Where is E-Biz today?
Gap between perception and reality.
Realities
Perceptions
 40% Public Internet
X No one is Profitable on
Companies Profitable 2002 the Internet
 B2B volume $3.9 trillion
worldwide in 2003
 Many B2C operations
made money in 2002
X B2B never happened
 E-Biz investments
continue to rise
X Companies ditched Web
X B2C is a bad idea
Source: Business Week (5/12/03), NY Times (5/19/03), Wall St. J. (4/28/03).
Key Points
• We’ve only seen the tip of the iceberg
• Some barriers are moving targets
• Back to business fundamentals!