THE DIGITAL FIRM: THE DIGITAL FIRM: ELECTRONIC ELECTRONIC COMMERCE AND COMMERCE AND ELECTRONIC ELECTRONIC BUSINESS BUSINESS (Laudon & Laudon 4)(Laudon & Laudon 4)

Chapter

vvvv

Internet Technology & Digital Firm

FEATURES & CHARACTERISTICSInternet Technology & Digital Firm

FEATURES & CHARACTERISTICS

• Information Technology Infrastructure:Information Technology Infrastructure: Provides a Provides a universal and easy-to-use set of technologies and universal and easy-to-use set of technologies and technology standards that can be adopted by all technology standards that can be adopted by all organizationsorganizations

• Direct communication between trading partners:Direct communication between trading partners: Disintermediation removes intermediate layers, Disintermediation removes intermediate layers, streamlines processstreamlines process

• Round-the-clock service:Round-the-clock service: Web sites available to Web sites available to consumers 24 hours a dayconsumers 24 hours a day

• Extended distribution channels: Extended distribution channels: Outlets created for attracting customers who otherwise Outlets created for attracting customers who otherwise would not patronize would not patronize

• Reduced transaction costs:Reduced transaction costs: Costs of searching for Costs of searching for buyers, sellers, etc. reducedbuyers, sellers, etc. reduced

Business Model: Business Model: • Defines an enterprise Defines an enterprise

• Describes how the enterprise delivers a Describes how the enterprise delivers a product or serviceproduct or service

• Shows how the enterprise creates wealthShows how the enterprise creates wealth

New Business Models & Value PropositionsNew Business Models & Value Propositions

4.4

Internet Business Models

• Virtual storefront:Virtual storefront: Sells goods, services on-lineSells goods, services on-line• Information broker:Information broker: Provide info on products, Provide info on products,

pricing, etc.pricing, etc.• Transaction broker:Transaction broker: Buyers view rates, terms Buyers view rates, terms

from various sourcesfrom various sources• OnlineOnline Marketplace:Marketplace: Concentrates information Concentrates information

from several providersfrom several providers• Content provider:Content provider: Creates revenue through Creates revenue through

providing client for a fee, and advertisingproviding client for a fee, and advertising

moremore

4.5

• On-line service provider:On-line service provider: Provides service, support for Provides service, support for hardware, software productshardware, software products

• Virtual community:Virtual community: Chat room, on-line meeting placeChat room, on-line meeting place

• Portal:Portal: Initial point of entry to Web, specialized content, Initial point of entry to Web, specialized content, servicesservices

• Syndicator:Syndicator: Aggregate information from several sources Aggregate information from several sources sold to other companiessold to other companies

• Auction:Auction: Electronic clearinghouse products, prices, Electronic clearinghouse products, prices, change in response to demandchange in response to demand

• Dynamic pricing: Dynamic pricing: real-time interactions betweenreal-time interactions between buyers buyers and sellersand sellers determine worth of itemsdetermine worth of items

• Banner ad:Banner ad: Graphic display used for advertising, linked to Graphic display used for advertising, linked to the advertiser’s Web sitethe advertiser’s Web site

Internet Business Modelscontinued

• Information asymmetry: Information asymmetry: One party in a One party in a transaction has more information than the transaction has more information than the otherother

• Increases richness:Increases richness: Depth and detail of Depth and detail of informationinformation

• Increases reach:Increases reach: Number of people Number of people contactedcontacted

Changing Economies of InformationChanging Economies of Information

Ric

hn

es

sR

ich

ne

ss New levels of richness and reach attainable

Reach

ENABLERS

Explosion of connectivity

Dissemination of

standards

Figure 4-1

The Changing Economics of Information

Categories of Electronic CommerceCategories of Electronic Commerce

Business-to-customer (B2C):Business-to-customer (B2C): Retailing of Retailing of products and services directly to individual products and services directly to individual customerscustomers

Business-to-business (B2B): Business-to-business (B2B): Sales of Sales of goods and services among businessesgoods and services among businesses

Consumer-to-consumer (C2C):Consumer-to-consumer (C2C): Individuals use Web for private sales or Individuals use Web for private sales or exchangeexchange

B2C: Business-To-CustomerB2C: Business-To-Customer

• Customer-centered retailing:Customer-centered retailing: Closer, yet more Closer, yet more cost-effective relationship with customerscost-effective relationship with customers

• Web sites:Web sites: Provide information on products, Provide information on products, services, prices, ordersservices, prices, orders

• Disintermediation: The removal of organizations or The removal of organizations or business process layers responsible for certain business process layers responsible for certain intermediary steps in a value chainintermediary steps in a value chain

• Reintermediation:Reintermediation: The shifting of the The shifting of the intermediary role in a value chain to a new sourceintermediary role in a value chain to a new source

Benefits of Disintermediation to the ConsumerBenefits of Disintermediation to the Consumer

Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/

Sweater

$48.50

$40.34

$20.45

B2C: Business-To-CustomerB2C: Business-To-Customer

Web Site PersonalizationWeb Site Personalization

Dramatically Dramatically lower costslower costs

B2C: Business-To-CustomerB2C: Business-To-Customer

M-Commerce & Next Generation MarketingM-Commerce & Next Generation Marketing

Mobile commerce (m-commerce):Mobile commerce (m-commerce):• Wireless devices used to conduct both business-to-consumer Wireless devices used to conduct both business-to-consumer

and business-to-business e-commerce transactions over the and business-to-business e-commerce transactions over the InternetInternet

• Extend personalization by delivering new value-added services Extend personalization by delivering new value-added services directly to customers at any time and placedirectly to customers at any time and place

B2C: Business-To-CustomerB2C: Business-To-Customer

Customer Personalization

Figure 4-4

B2C: Business-To-CustomerB2C: Business-To-Customer

B2B: Business-To-Business Electronic CommerceB2B: Business-To-Business Electronic Commerce

Automation of purchase, sale transactions Automation of purchase, sale transactions

from business to business from business to business

• Private industrial networks:Private industrial networks: Coordination Coordination between companies for efficient supply chain between companies for efficient supply chain management and collaborative activitiesmanagement and collaborative activities

• Electronic hubs:Electronic hubs: On-line marketplaces, point-On-line marketplaces, point-to-point connections, integrated informationto-point connections, integrated information

A Private Industrial Network

Figure 4-5

B2B: Business-To-BusinessB2B: Business-To-Business

A Net Marketplace

Figure 4-6

B2B: Business-To-BusinessB2B: Business-To-Business

Electronic Commerce Payment Systems

SYSTEM DESCRIPTION

CREDIT CARDS SECURE SITE PRESERVES INFORMATION

ELECTRONIC CASH DIGITAL CURRENCY USED FOR MICROPAYMENTS

PERSON-TO-PERSON SEND MONEY TO SITES UNABLE TO USE CREDIT CARDS

DIGITAL WALLET SOFTWARE STORES CREDIT CARD INFORMATION

ELECTRONIC CHECK CHECK WITH ENCRIPTED DIGITAL SIGNATURE

SMART CARD MICROCHIP STORES ELECTRONIC CASH

ELECTRONIC BILL PAYMENT ELECTRONIC FUNDS TRANSFER

Electronic Commerce Information Flows

Figure 4-7

Figure 4-8

Functional Applications of Intranets

• Unproven business modelsUnproven business models

• Business process change requirementsBusiness process change requirements

• Channel conflictsChannel conflicts

• Legal issuesLegal issues

• Security and privacySecurity and privacy

MANGEMENT CHALLENGES & OPPORTUNITIESMANGEMENT CHALLENGES & OPPORTUNITIES

4.21

ETHICAL AND SOCIAL ISSUES IN THE DIGITAL FIRMLaudon & Laudon 5

Chapter

4.22

•Principles of right and wrong

•Can be used by individuals acting as free moral agents to make choices to guide their behavior

Ethics

4.23

Relationship between Ethical, Social, and Political Issues in an Information Society

Moral

Dimensions

4.24

• Computing power doubles every 18 Computing power doubles every 18 months:months: Dependence on computer systemsDependence on computer systems

• Rapidly declining data storage costs:Rapidly declining data storage costs: Easy Easy maintenance of individual databasesmaintenance of individual databases

• Datamining advances:Datamining advances: Analysis of vast quantities Analysis of vast quantities of dataof data

• Networking advances and the Internet:Networking advances and the Internet: Remotely accessing personal dataRemotely accessing personal data

Key Technology Trends that Raise Ethical Issues

4.25

• Responsibility:Responsibility: Accepting the potential costs, Accepting the potential costs, duties, and obligations for decisionsduties, and obligations for decisions

• Accountability: Accountability: Assessing responsibility for Assessing responsibility for decisions made and actions takendecisions made and actions taken

• Liability: Liability: Permits individuals to recover damagesPermits individuals to recover damages

• Due process:Due process: Laws are well-known and Laws are well-known and understood, with an ability to appeal to higher understood, with an ability to appeal to higher authoritiesauthorities

Basic Concepts of Ethics

4.26

• Golden rule:Golden rule: Do unto others as you would have Do unto others as you would have them do unto youthem do unto you

• Immanuel Kant’s categorical imperative:Immanuel Kant’s categorical imperative: If If an action is not right for everyone to take, then it is an action is not right for everyone to take, then it is not right for anyonenot right for anyone

• Descartes’ rule of change:Descartes’ rule of change: If an action cannot If an action cannot be taken repeatedly, then it is not right to be taken at be taken repeatedly, then it is not right to be taken at any timeany time

• Utilitarian principle: Utilitarian principle: Put values in rank order Put values in rank order and understand consequences of various courses of and understand consequences of various courses of actionaction

Classic Ethical Principles

4.27

• Risk aversion principle: Risk aversion principle: Take the action Take the action that produces the least harm or incurs the that produces the least harm or incurs the least costleast cost

• Ethical “no free lunch” rule: Ethical “no free lunch” rule: All All tangible and intangible objects are owned by tangible and intangible objects are owned by creator who wants compensation for the workcreator who wants compensation for the work

Pragmatic Ethical PrinciplesPragmatic Ethical Principles

4.28

Information Rights: Privacy and Freedom in the Internet Age

• Privacy:Privacy: Claim of individuals to be left Claim of individuals to be left alone, free from surveillance or interference alone, free from surveillance or interference from other individuals, organizations, or the from other individuals, organizations, or the statestate

• Fair information practices:Fair information practices: Set of Set of principles governing the collection and use of principles governing the collection and use of information on the basis of U.S. and information on the basis of U.S. and European privacy lawsEuropean privacy laws

4.29

General Federal Privacy LawsGeneral Federal Privacy Laws

• Freedom of Information Act, 1968 • Privacy Act of 1974• Electronic Communications Privacy Act of 1986• Computer Matching and Privacy Protection Act

of 1988• Computer Security Act of 1987• Federal Managers Financial Integrity Act of

1982

4.30

CookiesCookies• Tiny files deposited on a hard driveTiny files deposited on a hard drive• Used to identify the visitor and track visits to the Web siteUsed to identify the visitor and track visits to the Web site

Web bugsWeb bugs• Tiny graphic files embedded in e-mail messages and Web pages Tiny graphic files embedded in e-mail messages and Web pages • Designed to monitor on-line Internet user behaviorDesigned to monitor on-line Internet user behavior

Opt-out model / Opt-in modelOpt-out model / Opt-in model• OUT-Informed consent permits the collection of personal information OUT-Informed consent permits the collection of personal information • OUT-Consumer specifically requests for the data not to be collectedOUT-Consumer specifically requests for the data not to be collected• IN-Informed consent prohibiting an organization from collecting any IN-Informed consent prohibiting an organization from collecting any

personal information personal information • IN-Individual has to approve information collection and useIN-Individual has to approve information collection and use

Internet Challenges to Privacy

4.31

P3PP3P• Platform for Privacy Preferences ProjectPlatform for Privacy Preferences Project

• Industry standard designed to give users Industry standard designed to give users more control over personal informationmore control over personal information

Technical Solutions

4.32

Technical Solutions

4.33

• Under what conditions should the privacy of Under what conditions should the privacy of others be invaded?others be invaded?

• What legitimizes intruding into others’ lives through unobtrusive surveillance, through market research, or by whatever means?

• Do we have to inform people that we are Do we have to inform people that we are eavesdropping? eavesdropping?

• Do we have to inform people that we are using credit history information for employment screening purposes?

Ethical Issues

4.34

• Intellectual property:Intellectual property: Intangible creations protected Intangible creations protected by lawby law

• Trade secret:Trade secret: Intellectual work or product belonging to Intellectual work or product belonging to business, not in public domainbusiness, not in public domain

• Copyright:Copyright: Statutory grant protecting intellectual Statutory grant protecting intellectual property from getting copied for 28 yearsproperty from getting copied for 28 years

• Patents:Patents: Legal document granting the owner an Legal document granting the owner an exclusive monopoly on the ideas behind an invention for exclusive monopoly on the ideas behind an invention for 20 years20 years

Property Rights

4.35

• Maintaining boundaries: Family, work, and leisure: “Do anything anywhere” environment blurring boundaries between work and family time

• Dependence and vulnerability: No regulatory or standard-setting forces

• Employment- Trickle-down technology and reengineering job loss: Causes millions of middle-level managers and clerical workers to lose their jobs

• Equity and access- Increasing racial and social class cleavages: Society of computer literate and skilled, versus computer illiterate and unskilled

Quality of Life