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Chapter 18
E-Communities, Global EC, and Other EC Issues
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Learning Objectives
Describe the role and impact of virtual communitiesEvaluate the issues involved in global ECAnalyze the impact of EC on small businessesDescribe the relationship between EC and BPR, knowledge management, and virtual corporationsUnderstand the research opportunities in ECDescribe the future of EC
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The Australian Fishing Community
Australian Fishing Shop (aufish.com.au) is a small e-tailer carrying information for recreational fisherpeopleSells vacation fishing trips and equipment
Hints and tips for fishingWhat’s newPhoto galleryChat boardsAuction mechanismMuch more
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The Australian Fishing Community (cont.)
Very small company that survives because its strategy is:
Provide value-added servicesAllow advertisers to sponsor the siteAims at the global marketAggregate orders with a small number of suppliersBank on a virtual community
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Virtual Communities
The Internet Virtual Communities The Web is being transformed into a social
Web of communities. Four major types:Communities of transactionsCommunities of interestCommunities of relations (practice)Communities of fantasy
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Virtual Communities (cont.)
Communities of transactions
Facilitate buying and sellingEvineyard.com
Sells wineProvides expert information on winesProvides chat room
Communities of interest
Place for people to interact with each other on a specific topicMotley fool (fool.Com)
Forum for individual investors
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Virtual Communities (cont.)
Communities of relations (practice)
Be organized around certain life experiencesPlasticsnet.com used by thousands of engineers in the plastics industry
Communities of fantasy
Place for participants to create imaginary environmentsESPNet participants create competing teams and “play” with Michael Jordan
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Figure 18-1Virtual Community Categorization Scheme
Source: Schubert and Ginsburg (2000).
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Virtual Communities (cont.)
Ways to transform a community site into a commerce site:
Understand a particular niche industryIts information needsUse a step-by-step process by which it does the research needed to do business
Build a site that provides valuable information
Through partnerships with existing publishers and information providersBy gathering it independently
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Virtual Communities (cont.)
Set up the site to mirror the steps a user goes through in the information-gathering and decision-making processBuild a community that relies on the site for decision supportStart selling products and services, such as sample chips to engineers, that fit into the decision-support process
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Virtual Communities (cont.)
The Expected PaybackCustomer loyalty increasesIncreased salesCustomer participation and feedback increasesIncreased repeat traffic to siteDrive new traffic to the site
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Virtual Communities (cont.)
Creating economic valueMembers input useful information in the form of comments, feedback, elaborating their attitudes and beliefs, and information needs of the communityThe community brings together consumers of specific demographic and interestCommunities charge members content fees for downloading certain articles, music, or pictures
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Figure 18-2Value Creation in Electronic Communities
Source: Kannen et al. “Marketing Information on the I-Way,” Communications of the ACM, June 1996. Kannen et al. © 1998 AMC, Inc. Reproduced by permission.
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Virtual Communities (cont.)
Financial viability of communitiesBased on sponsorship and advertisementExpenses are very high because of the need to provide:
Fresh contentFree servicesFree membership
This model did not work well, many companies sustained heavy losses in 2000-2001; too few members, too few purchases
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Key Strategies forSuccessful Online Communities
Be member-centric from the startDefine community’s focusInvolve community membersWeigh internal staffing and outsourcingBuying vs. building technologiesProvide personalization
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Key Strategies for Successful Online Communities (cont.)
Minimize need for participants to go elsewhere for:
Content
Service
Trading
Facilitate communication among membersKeep an open door to the outsideBuild alliances and partnerships
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Key Strategies for Successful Online Communities (cont.)
Eight principles for community success:Increase traffic and participation in communityFocus on needs of members (use facilitators and coordinators)Encourage free sharing of opinions and informationFinancial sponsorship is a must
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Key Strategies for Successful Online Communities (cont.)
Eight principles for community success (cont.):
Consider the cultural environmentCommunities are not just discussion groups; provide tools and activitiesMembers must be involved in activities and recruitingGuide discussions, provoke controversy, raise sticky issues
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Global Electronic Commerce
While geographical market boundaries may be falling, global interest-based communities will spring upMainly in support of business-to-business financial and other repetitive, standard transactions, e.g. EFT & EDIThe emergence of the Internet and the extranets resulted in an inexpensive and flexible infrastructure that can greatly facilitate global trade
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Barriers to Global Electronic Commerce
Legal IssuesUncoordinated actions must be avoided and an international policy of cooperation should be encouraged
Market Access IssuesCompanies starting e-commerce need to evaluate bandwidth needs by analyzing the data required, time constraints, access demands, and user technology limitations
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Barriers to Global Electronic Commerce (cont.)
Financial IssuesCustoms and taxationElectronic payment systems
Other IssuesIdentification of buyers and sellersTrustSecurity (for example, viruses)
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Barriers to Global Electronic Commerce (cont.)
Other Issues (cont.)Cultural diversityInternational agreements (multi-lateral agreements)Role of governmentPurchasing in local currenciesLanguage and translation
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The U.S. Policy RegardingGlobal Electronic Commerce
The private sector should leadGovernments should avoid undue restrictions on electronic commerceWhere government involvement is needed, its aim should be to support and enforce a predictable minimalistic, consistent and simple legal environment for commerce
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The U.S. Policy RegardingGlobal Electronic Commerce (cont.)
Governments should recognize the unique qualities of the InternetElectronic commerce on the Internet should be facilitated on a global basisGlobal marketspace erases national borders and gives small companies worldwide reach
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Global Electronic Commerce
Localization—just translating from one language to another is inadequate
Localize content
Adapt local business practices
Globalization and joint venturesJoining marketplaces
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Culture
Multiple cultures warrant different marketing approachesCredit cards are widely used in the U.S., but not in ChinaMany European and Asian customers complete transactions with off-line payments
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Culture (cont.)
Small, seemingly insignificant details make a difference
ColorsFormattingSymbolsNavigation Fonts
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Breaking down theGlobal EC Barriers
Value the human touchBe strategicKnow your audienceBe a perfectionistRemember, it’s the Web
Integrate properlyKeep the site flexible and up-to-dateSynchronize contentOECD (oecd.org)
“Dismantling the Barriers to Global EC”Major report on all issues in this chapter
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The Opportunities for Small Businesses
InexpensiveSource of informationWay of advertisingWay of conducting market researchWay to build (or rent) a storefrontWay of providing catalogsWay to reach worldwide customers
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The Opportunities for Small Businesses (cont.)
Lower transaction costNiche market, specialty products (cigars, wines, sauces) are the best place to beImage and public recognition can be accumulated fast
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Risks and Disadvantagesfor Small Businesses
Inability to use EDI, unless it is EDI/InternetLack of resources to fully exploit the WebLack of expertise in legal issues, advertisementLess risk tolerance than a large company
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Risks and Disadvantagesfor Small Businesses (cont.)
Disadvantage when a commodity is the product (for example, CDs)No more personal contact, which is a strong point of a small businessNo advantage to being in a local community
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Success Factors for Small Businesses
Niche products Low volumeNot carried by regular retail stores
Small volumeE.g., special books
Oldtechnical
International productsNot easily available to off-line customers
InformationGartnerGroup provides access to online research material by subscriptionSmaller companies may provide specialized information (home and gardening)
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Success Factors forSmall Businesses (cont.)
Capital investment must be smallInventory should be minimal or non-existentElectronic payments schema existPayment methods must be flexibleLogistical services must be quick and reliable
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Success Factors forSmall Businesses (cont.)
The Web site should be submitted to directory-based search engine services like Yahoo, in a correct wayJoin an online service or mall and do banner exchangeDesign a Web site that is functional and provides all needed services to consumers
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Success Factors forSmall Businesses (cont.)
Web site design should follow basic principlesMarket properly (see Chapters 3 and 4)Understand your customers and their buying habitsPrice product or service correctlyAnticipate cash flow needs
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Success Factors forSmall Businesses (cont.)
Monitor your:CompetitionTechnologyMarketplace changes
Keep growth slow and steadyDelegateDevelop good internal communications
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Business Process Reengineering (BPR)
Redesign of the enterprise process and BPR
Does not make sense to automate poorly designed process—so restructure
Necessary to change processes to fit commercially available software
Fit is required between systems and processes of different companies
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Business Process Reengineering (BPR) (cont.)
Change processes to fit procedures and standards of public e-marketplacesAdjust procedures and processes to align with available services
LogisticsPaymentsSecurity
Changes to assure flexibility and scalability
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Figure 18-3Software Cybermall in Korea
Source: Publicly distributed governmental documents in Korea.
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Workflow Software
Workflow—supports automation of business processes
Managing movement of informationSequence of steps making up work procedureMaintaining record of changes in status of document or transaction
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Workflow Software (cont.)
Two categories:Collaborative workflow—products address project-oriented and collaborative processesProduction workflow—tools address mission-critical, transaction-oriented processes
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Virtual Corporations
A company composed of partners who are in different locations (several possible structures)
Virtual corporations (VC): networking between business partners
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Virtual Corporations (cont.)
Major attributes of VCs:
ExcellenceUtilizationOpportunism
B2B platform for VCs:
Lack of bordersTrustAdaptability to changeTechnology
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Knowledge Management (KM)
Knowledge is recognized as the most important asset in any organizationKM activities:
Capturing or creating knowledgeStoring and protecting knowledgeUpdating it constantlyUsing it whenever necessary
Collected from internal and external sourcesIntegrated with EC and/or BPR
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Knowledge Management (cont.)
Knowledge base—database containing knowledge or organization’s know-how
Used for knowledge sharing
Knowledge management promotes integrated approach to processing knowledge:
IdentifyingCapturingRetrievingSharingEvaluating
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Research in EC
Behavioral IssuesConsumer behavior Building consumers behavioral profiles and identify ways to utilize themSeller’s behavior and motivation Issue-oriented research (e.g., trust, intermediaries)Internet usage pattern and willingness to buyMental model of consumer product search process, comparison process, and negotiationHow to build trust in the e-marketspace
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Research in EC (cont.)
Technical IssuesMethods that help customers find what they wantModels for extranet design and managementNatural language processing and automatic language translationMatching smart card technology with payment mechanisms
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Research in EC (cont.)
Technical Issues (cont.)Integrating EC with existing corporate information systems, databases, etc.Retrieval of information from an electronic industry directoryEstablishing standards for international tradeBuilding a mobile Internet distribution command system
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Managerial Research Issues
AdvertisementMeasuring the effectiveness, integration and coordination
ApplicationsCreating a methodology of finding EC business applications
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Managerial Research Issues (cont.)
StrategyDesigning strategic advantage strategy for ECInitiating “where to market” strategyFinding way to integrate EC into organizations
ImpactsIdentify the necessary organization structure and cultureIntegration with ERP and SCM
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Figure 18-4Framework for B2C EC Research
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The IS World Survey
Major areas for research findings:Strategic issuesAssessment valuationOrganizational transformation and societal issuesTechnology adoption issuesTheory and methodology
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The IS World Survey (cont.)
Major areas for research findings (cont.):
Marketing and CRM issuesTechnical issuesSecurity and legal issuesLogistics/operationsMiscellaneous
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The Future of Electronic Commerce
Opportunities for buyingIncrease rapidly
Internet usageIncrease exponentiallyAccess via cell phones!
M-commerceNo need for a computer brings more
people to the web
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The Future of Electronic Commerce (cont.)
Purchasing incentivesIncrease buyers’ advantages
Increased security and trustSignificant improvement is expected
Efficient information handingAccessible from anywhere
Innovative organizationsRestructured and reengineered
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The Future of Electronic Commerce (cont.)
Virtual CommunitiesSpreading rapidly
Payment systemsAbility to use e-cash cards and make
micropayments is getting close to reality
Business-to-businessContinues to grow rapidly
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The Future of Electronic Commerce (cont.)
B2B exchangesProvide infrastructure
AuctionsIncreasing rapidly
Going globalMost appealing benefit of EC
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The Future of Electronic Commerce (cont.)
E-government--comprehensiveGovernment-to-consumers (G2C)Government-to-government (G2G)Government-to-business (G2B)Government-to-employees (G2E)
Intrabusiness ECImproving internal supply chain
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The Future of Electronic Commerce (cont.)
Technology trendsClients
Thin client and embedded clientServers
Windows NT
Networks XDSL and wireless communication
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The Future of Electronic Commerce (cont.)
Technology TrendsEC software and services
Availability of all types of EC softwareCompanies support auctions and multiple types of certifications
EC knowledge The quantity and quality of EC knowledge is increasing rapidly
Networked economy
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Managerial Issues
Finding a community that matches your businessGoing global
Threats—difficult to accomplish, especially on large scaleOpportunities—create collaborative projects with partners in other countries (last a long time)
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Managerial Issues (cont.)
Small can be beautifulCompeting on commodities with the big guys is very difficult (especially in cyberspace)Finding niche markets is advisableMore opportunities in providing support services than in trading
Restructuring is likely; should be investigatedThe future of EC is very bright, but planning is a must