4.1
The Digital Firm: Electronic Business and Electronic Commerce
Chapter 4Essentials of Management Information Systems, 6eEssentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic CommerceChapter 4 The Digital Firm: Electronic Business and Electronic Commerce
© 2005 by Prentice Hall
4.2
Management Challenges
1. Digitally integrating the enterprise requires a complete change of mind-set.
2. Finding a successful Internet business model.
4.3
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
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
Internet Technology and the Digital Firm
4.4
• 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
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
4.5
Information Asymmetry
• One party has more information essential to the transaction than the other party
• The Internet shrinks information asymmetry
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
4.6
Richness and Reach
• Richness: depth and detail of information
• Reach: how many people a business can connect with; how many products offered those people
• Internet allows much richer communication with farther reach
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
4.7
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
The changing economics of information
Figure 4-1
4.8
Internet Business Models
• Virtual storefront: Sells physical products directly to consumers or businesses.
• Information broker: Provides product pricing and availability information; generates revenue from advertising or directing buyers to sellers.
• Transaction Broker: Processes online sales transactions for fee.
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
4.9
Internet Business Models
• Online Marketplace: Provides digital environment where buyers and sellers meet
• Content Provider: Provides digital content, such as news; revenue from fees or advertising sales
• Online Service Provider: Provides connectivity; revenue from fees, advertising, or marketing information
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
4.10
Internet Business Models (cont.)
• Virtual Community: Provides online meeting place for people of similar interests
• Portal: Provides initial point of entry to the Web, along with specialized content and services
• Syndicator: aggregates content or applications to resell as package to third-party Web sites
Electronic Business, Electronic Commerce, and the Emerging Digital Firm
New Business Models and Value Propositions
4.11
• 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
Electronic Commerce
Categories of Electronic Commerce
4.12
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”
Electronic Commerce
Customer-Centered Retailing
4.13
Electronic Commerce
The benefits of disintermediation to the consumer
Figure 4-2
4.14
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 on Web site to individual’s profile and purchase history
• Web sites and marketing shorten sales cycle and reduce time spent in customer education
Electronic Commerce
Customer-Centered Retailing
4.15
Electronic Commerce
Web site personalization
Figure 4-3
4.16
Customer Self-Service• Web-based responses to customer questions cost a
fraction of telephone costs for live customer service representation
• Web-based customer self-service applications, such as airline flight information sites
• Traditional, phone-based customer call centers being integrated with Web
Electronic Commerce
Customer-Centered Retailing
4.17
• Web, Internet streamlining procurement process
• E-procurement eliminates inefficient, paper-based processes
• Selling through Web sites, private industrial networks, or Net marketplaces
Electronic Commerce
Business-to-Business Electronic Commerce
4.18
Private Industrial Network• 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
Electronic Commerce
Business-to-Business Electronic Commerce
4.19
Electronic Commerce
A private industrial network
Figure 4-5
4.20
Net Marketplace• 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
Electronic Commerce
Business-to-Business Electronic Commerce
4.21
Electronic Commerce
A Net marketplace
Figure 4-6
4.22
Exchanges• 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
Electronic Commerce
Business-to-Business Electronic Commerce
4.23
• 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
• Accumulated balance digital payment systems: Accumulates micropayment purchases as debit balance paid periodically on credit card or telephone bills
Electronic Commerce
Electronic Commerce Payment Systems
4.24
• Stored value payment system: Enables consumers to make instant payments based on value stored in digital account
• Digital cash: Digital currency that can be used for micropayments or larger purchases
• Peer-to-Peer payment systems: Enables payments to vendors not set up for credit-card payments
Electronic Commerce
Electronic Commerce Payment Systems
4.25
• 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
Electronic Commerce
Electronic Commerce Payment Systems
4.26
Electronic Commerce
Electronic commerce information flows
Figure 4-7
4.27
• 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
Electronic Business and the Digital Firm
How Intranets Support Electronic Business
4.28
• Scalable to larger or smaller computing platforms as requirements change
• Easy to use, universal Web interface• Low start-up costs• Rich, responsive information environment• Reduced information distribution costs
Electronic Business and the Digital Firm
How Intranets Support Electronic Business
4.29
• 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
Electronic Business and the Digital Firm
Intranet Applications for Electronic Business
4.30
Electronic Business and the Digital Firm
Functional applications of intranets
Figure 4-8
4.31
• 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
Electronic Business and the Digital Firm
Business Process Integration
4.32
• Unproven business models
• Business process change requirements
• Channel conflicts
• Legal issues
• Trust, security, and privacy
Management Challenges and Opportunities
Business Process Change Requirements
4.33
Can Online Brokers Survive in Europe?
Is providing online financial services over the Internet a viable business model? Why or why not?
Electronic Business and the Digital Firm
Window on Organizations
4.34
1. Apply the value chain and competitive forces models to the music recording industry.
2. What role did the Internet play in changing value propositions and the competitive environment? To what extent has it been responsible for declining CD sales? Explain your answer.
Chapter 4 Case Study
Can the Music Industry Change Its Tune?
4.35
3. Analyze the response of the music recording industry to these changes. What management, organization, and technology issues affected this response?
4. What is the current business strategy of the music industry? Do you think it is viable? Explain your answer.
Chapter 4 Case Study
Can the Music Industry Change Its Tune?