Liquidity - Makerere University E

Liquid assets-Assets that can be easily bought or
Availability of liquid assets to a market or
company e.g. cash
Asset's ability to be easily converted buying or
selling without losing in value., are known as
liquid assets.
Also the need for a critical mass of buyers and
 The fixed cost of deploying EC can be very high
 Without a large number of buyers, sellers will
not make money
Early liquidity—achieving a critical mass of
buyers and sellers as fast as possible, before the
market-maker’s cash disappears
Quality uncertainty—the uncertainty of
online buyers about the quality of
products that they have never seen,
especially from an unknown vendor
 Provide free samples
 Return if not satisfied
Microproduct—a small digital
product costing a few cents
 Insurance, escrow, and other services
Electronic catalogs—the presentation of product
information in an electronic form; the backbone of
most e-selling sites
Evolution of electronic catalogs
 Merchants—advertise/promote products/services
 Customers—source of infoand price comparisons
 Consist of product database, directory and search
capability and presentation function
 Replication of text that appears in paper catalogs
 More dynamic, customized, and integrated
Electronic catalogs allow integration of:
 Order taking and fulfillment
 Electronic payment
 Intranet workflow
 Inventory and accounting system
 Suppliers’ extranet
 Relationship to paper catalogs
Assembled specifically for:
 A company
 An individual shopper
Customization systems can:
 Create branded, value-added capabilities
 Allows user to compose order
 May have individualized prices, products,
and display formats
 Automatically identify the characteristics
of customers based on the transaction
Boise Cascade Office Products--$3-billion
office products wholesaler of over 200,000
different items
 They had a 900-page paper catalog that was
mailed once each year; minicatalogs
tailored to customers’ individual needs
 The company placed its catalogs online in
1996 (
Sales through the Web site:
 1997—20 percent
 1999—30 percent
 2004—80 percent (expected)
 2009—even higher sales
Production of a single paper catalog took 6 weeks/Web
catalog takes 1 week to set
Pricing major advantage of customized catalogs
Electronic orders cost 55% less to process than paperbased orders
Search engine—a computer program
that can access a database of Internet
resources, search for specific
information or keywords, and report
the results
Software (intelligent) agent—software
that can perform routine tasks that
require intelligence
E-commerce users use both search engines and
intelligent agents
Search engines find products or services
Software agents conduct other tasks (comparisons) e.g.
 Buyer agents or shopping bots
 User or personal agents
 Monitoring-and-surveillance agents
 Data Mining agents
Electronic shopping cart—an order-processing
technology that allows customers to accumulate
items they wish to buy while they continue to shop
Auction—a market mechanism by which a
seller places an offer to sell a product and
buyers make bids sequentially and
competitively until a final price is reached
Auctions deal with products and services for
which conventional marketing channels are
ineffective or inefficient
Traditional auctions are generally
a rapid process
 It may be difficult for sellers to
move goods to the auction site
 Commissions are fairly high
Electronic auctions (e-auctions)—auctions
conducted online
 Host sites on the Internet serve as brokers
 Services for sellers to post their goods for
 Allowing buyers to bid on those items
 Many sites have certain etiquette/ rules that
must be adhered to in order to conduct fair
Auctions are mainly based on dynamic
 Major online auctions offer:
 Consumer products
 Electronic parts
 Artwork
 Vacation packages
 Airline tickets
 Collectibles
 Excess supplies and inventories being
auctioned off by B2B
Dynamic pricing—prices change based on supply
and demand relationships at any given time
The four major categories of dynamic pricing are
based on the number of buyers and sellers
 One buyer, one seller
 One seller, many potential buyers
 One buyer, many potential sellers
 Many sellers, many buyers
One buyer, one seller uses
 Negotiation
 Bargaining
 Bartering
Price will be determined by:
 Each party’s bargaining power
 Supply and demand in market
 Business environment factors
One seller, many potential buyers
 Forward auction—an auction in which a seller
entertains bids from buyers
 English auction—an auction in which buyers bid
on an item in sequence, as price rises with time
 Yankee auction—auction of multiple identical
items in which bidders can bid for any number of
the items offered, and the highest bid wins
Dutch auction—auction of multiple identical
items, with prices starting at a very high
level and declining as the time passes
 Free-fall (declining price) auction—a
variation of the Dutch auction in which only
one item is auctioned at a time; the price
starts at a very high level and declines at
fixed time intervals, the winning bid is the
lowest one when the time expires
One buyer, many sellers
Reverse auction (bidding, or tendering
system)—auction in which the buyer
places an item for bid (tender) on a request
for quote (RFQ) system, potential
suppliers bid on the job, with price
reducing sequentially, and the lowest bid
wins; primarily a B2B or G2B mechanism
One buyer, many potential sellers
 ”Name-your-own-price” model
 Consumer-to-business (C2B) model
Many sellers, many buyers
 Double Auction—buyers and their
bidding prices and sellers and their
asking prices are matched, considering
quantities on both sides
Possibility of fraud—defective goods
or receive goods/services without
 Limited participation—invitation
only or open to dealers only
 Lack of security—C2C auctions
sometimes unencrypted
 Limited software
Bartering—an exchange of goods and services
 Bartering exchanges
 Give your offer to intermediary
 Intermediary assesses value of your
product or service in”points”
 Use “points” to buy what you need
 Bartering sites must be financially secure
 Intermediary auctions/sells the item or
service to recover its money with profit
E-bartering—bartering conducted
online, usually by a bartering
 Bartering exchange—a marketplace in
which an intermediary arranges
barter transactions
Mobile computing permits real-time access
to info, applications and tools that were
accessible only from a desktop computer
Mobile commerce (m-commerce)—
EC conducted via wireless devices
M-business—the broadest definition of
m-commerce, in which e-business is
conducted in a wireless environment
changes the
manner in which
people and
 Interact
 Communicate
 Collaborate
applications are
expected to
change the way
 Live
 Play
 Do business
The PC-based Internet culture is changing
to one based on mobile devices
M-commerce creates new business models
for EC, notably location-based applications
Large corporations transforming their
businesses to include m-commerce-based
products and services
An example of the spread of m-commerce is
DoCoMo’s i-Mode; some applications of I-Mode are:
Shopping guides
Maps & transportation
News and reports
Personalized movie
Dining and
Additional services
 Banking
 Stock trading
 Telephone directory
 Dictionary services
 Horoscopes
Impacts of e-markets on B2C direct marketing:
Product promotion
New sales channel
Direct savings
Reduced cycle time
Customer service
Brand or corporate
Ordering systems
Market operations
Technology and organizational learning
 To survive, companies will have to
learn and adapt quickly to the new
 Corporate change must be planned
and managed
 New technologies will require new
organizational structures and
The changing nature of work
 More competition in the global
marketplace means firms reducing
employees and outsourcing to countries
where labor is cheap
This creates new opportunities and new
risks; forces us to think new ways about
jobs, careers and salaries
Digital-age workers need flexibility—
truly secure jobs will be few, many will
work from home
 Digital-age companies will have to prize
core workers as its most valuable asset—
empowering them and providing them
with means to expand their knowledge
and skill base
New/improved product capabilities
 E-markets allow for new products to be
created and/or for existing products to be
customized in innovative ways
 Customer profiles and data on customer
preferences—source of information for
improving products or designing new
 Customization creates specific products for
each customer, based on their exact needs
New business models
 E-markets affect individual companies,
products, entire industries
 Improving the supply chain
 Impacts on manufacturing
 Manufacturing systems changing from
mass production lines to demand-driven,
just-in-time manufacturing
Impacts on Manufacturing (cont.)
 Build-to-order—the biggest change in
manufacturing will be the move to
build-to-order systems
 Manufacturing or assembly will start
only after an order is received
 Will change not only the production
planning and control, but also the entire
supply chain
Impacts on finance and accounting
 E-markets require special finance and
accounting systems—most are electronic
payment systems complicated by legal
issues and international standards
 Executing an electronic order triggers backoffice transactions
 These activities must be efficient,
synchronized, and fast so EC is not slowed
Impact on human resource management
and training
 EC is changing how people are recruited,
evaluated, promoted, and developed
 EC also is changing the way training and
education are offered to employees
 Online distance learning and virtual
courses are exploding
 Training costs falling by 50% or more
How do we compete in the web economy?
What about intermediaries?
What organizational changes do we need?
Should we auction and what?
Should we have our own auction site or use
a third-party site?
Should we barter?
What m-commerce and l-commerce
opportunities are available?