Chapter 5: EC in Service Industries ppsx

❚ Services ProvidedInformation and booking of airlines, hotels, cars, and even golf courses Fare comparisons 360 degree video tours of top destinations Electronic Travel magazine Tips pr

Chapter 5

EC in Service Industries

❚ Discuss the impact of EC on the travel industry

❚ Describe the online job market, its drivers and

benefits

❚ Describe the electronic real estate market

❚ Understand how stock trading is done online and

❚ Discuss cyberbanking, its drivers and

capabilities

❚ Discuss implementation issues of online

financial services and its future

❚ Describe electronic auctions, their benefits,

implementation, and impacts

❚ Describe some innovative applications in the

Opening Vignette:

Ordering Journals Electronically

❚ How a large university automated the

purchasing of magazines and journals,

saving $365,000/year

❚ Direct Marketing: Buyer-to-seller; orders and

payments

❚ Market maker charges $5/transaction Vs

about $40 (conventional agents)

Ordering time reduced by up to 80%

Opening Vignette:

Ordering Journals Electronically (cont.)

Publisher

Publisher’s Bank

Automated Clearing House (ACH)

Rowe Com’s Account

Rowe.Com System

EDI

Order + Payment

EDI, Internet Order Browsing

Broker-Based Services

❚ Brokers work as intermediaries between buyers and

sellers

❚ Agents basically make the markets

❚ Agents provide many services

❚ Most of the value-added tasks of brokers can be

❚ Service Industries Vs Manufacturing and

Product’s Retailing

❙ Service Industries

❘ pure EC ⇒ substantially reduced cost

❘ bank and brokerage houses

• possible digitization of the entire process

❘ travel and real estate agents

• viewing an online video clip or seeing photos of a hotel

or a house for sale

❙ Manufacturing and Product’s Retailing

❘ physical delivery cost may be high

Travel and Tourism Services

❚ By the year 2000, close to 25 percent of all

business-to customer Internet commerce will

be related to tourism

❚ The Internet is an ideal place to plan,

explore, and arrange almost any trip

❚ IBM’s vision of seamless electronic travel

using smart cards

❚ Services Provided

Information and booking

of airlines, hotels, cars,

and even golf courses

Fare comparisons

360 degree video tours of top destinations

Electronic Travel

magazine

Tips provided by people that experienced certain situations (like a visa

problem)

Pictures of major attractions

Providing maps

Information about entertainment and ticket purchasing (such as

www.ticketmaster.com)

Converting 200

Travel and Tourism Services (cont.)

Worldwide business and places locator

E-mail to

Chat rooms

and bulletin

boards

Major international news

Shopping for travel

accessories and

books

Special interest vacations

Current status

of flights(real time)

Fare tracker (free e-mail alerts on low fares)

Bed and breakfast recommendations

Restaurant reviews

Special discount

information

Frequent flier deals

Travel news

Travel and Tourism Services (cont.)

❚ Benefits and Limitations

❙ People are still reluctant to

provide credit card numbers

❚ Corporate Travel: New Business Model

❚ The Impact of EC on the Travel Industry

❙ Porter’s framework of competitive advantage (the

❙ The industry is clearly transformed

Travel and Tourism Services (cont.)

❚ Impacts on the industry

Travel and Tourism Services (cont.)

❙ Multimedia helps customers understand the

products

❙ Offering of lower-cost trips

❙ Providing a more personalized service

❙ Saving money in a paperless environment

❙ Increasing the convenience of getting

information at home

❙ Supporting a customer-focused strategy (such

as targeted advertisement and integration of

products); push information to customers

❚ Travel agencies, as we know them today, will

disappear

❚ Only their complex value-added activities will

not be automated

❚ These complex activities will be performed

by a new breed of intermediates

Travel and Tourism Services (cont.)

❚ The Future

Travel and Tourism Services (cont.)

❙ Collaborative organizational process performed

by multiple organizational intelligent agents

❙ Acting autonomously

❙ Work cooperatively

❙ Work collectively to achieve the collective goal

❙ Example — How will your next vacation be

planned, booked and paid for?

The Employment Placement Market

❚ Job markets

❙ Employers are looking for employees with

specific skills, and individuals are looking for a

job

❙ Very volatile market

❙ Moved to the Internet

❙ Millions of job seekers, hundred of thousands of

jobs

❚ Shortcomings of the Non-Internet Job Market

The Employment Placement Market (cont.)

❙ Cost—Classified ads are expensive.

❙ Life cycle— Unless renewed, at an additional cost, the

life of the ads is only days or weeks.

❙ Place— Most ads are local Nationwide ads are very

expensive International ads are even more expensive.

❙ Minimum information— Because of the high cost, the

information provided is minimal and may not appeal to

some job seekers.

❙ Search— It is very time consuming for individuals to find

all relevant newspapers A trip to a library results in

finding only major out of town newspapers.

❙ Finding applicants— Most job seekers, in the pre Internet era,

did not place ads about their availability Some sent unsolicited letters

with resumes This situation made it difficult for companies to find

employees with special skills They had to use employment agencies

and pay them high commissions.

❙ Matching— It was difficult to match candidates to open jobs as

well as to match supply and demand.

❙ Lost and dated material— Some applications or letters of

response tended to get lost, or arrive late A letter in a big city may

travel two weeks to arrive at a distance of a few blocks.

❙ Speed— Communication by mail is slow and so is the processing

of a large number of applications Frequently, employers lose good

employees, since by the time the application is processed, the

applicant had taken another job Similarly, applicants accept less

The Employment Placement Market (cont.)

❚ The Internet Job Market

The Employment Placement Market (cont.)

❙ The Internet offers a perfect environment; it is

especially effective for technology-oriented

❚ The Advantage of the Electronic Job Market

The Employment Placement Market (cont.)

❙ For job seekers

❘ Ability to find very detailed and timely information on a large number of jobs world-wide

❘ Ability to quickly communicate with potential employers

❘ Ability to post resumes for large-volume distribution

❘ Ability to search for jobs quickly from any place at any time

❘ Obtain several support services at no cost

• writing resume ⇒ career development ⇒ how to interview

❘ Find employer profile & industry guides

❙ For employers

❘ Ability to advertise to a large number of job seekers

❘ Ability to save on advertisement costs

❘ Lower the cost of processing (using electronic application forms)

❘ Ability to provide greater ‘equal opportunity’ for job seekers

❘ Ability to find highly skilled employees

❘ Ability to conduct tests quickly, online

❘ Ability to change and update ads quickly

❘ Ability to fill up positions rapidly

❘ Interviewing from distance

The Employment Placement Market (cont.)

❚ The Limitations of the Electronic Job Markets

The Employment Placement Market (cont.)

❙ Many people do not use the Internet

❙ Security

❙ Privacy

❙ Lack of face-to-face contact

❚ Major Services Available on the Net

❙ Finding a job

❙ Writing and posting resumes

❙ Career planning

❚ The Intranet Job Market

❙ Most companies organize an internal electronic

job market

❙ Openings are posted for employees to look at,

and search engines enable managers to identify

talents even if the people were not actively

The Employment Placement Market (cont.)

Real Estate: From Virtual Realtors to Virtual

Reality

❚ You can view many properties on the screen

❚ You can sort and organize properties

❚ You can find detailed information about the

properties

❚ You can search, compare and apply for loans

❚ Real Estate Applications

Real Estate: From Virtual Realtors to Virtual

Reality (cont.)

❙ International Real Estate Directory and News is

the most comprehensive Web site

❙ Mortgage comparisons and calculations and other

financing information; mortgage application

www.eloan.com ; www.homeshark.com

❙ Searching residential real estate in multiple databases

www.homescout.com

❙ Real estate related maps are available on:

www.mapquest.com

❙ Automating the closing of real estate transactions,

Real Estate: From Virtual Realtors to Virtual

Reality (cont.)

❚ Real Estate Applications

❙ The National Association of Realtors,

www.realtor.com has links to property listings in all

major US cities

❙ To find how much house you can afford, consult:

www.replace.com/links.html

❙ Mortgage brokers can pass on loan applications

over the Net and receive bids from lenders that

want to issue the mortgages

Real Estate: From Virtual Realtors to Virtual

Reality (cont.)

❚ Real Estate Applications

❙ To find mortgage interest rates online use:

● www.bankrate.com

● www.eloan.com

● www.quickenmortgage.com

❙ To rent an apartment or a house try www.rent.net

Several additional services are available

including a virtual walk through of some listings

Real Estate: From Virtual Realtors to Virtual

Reality (cont.)

❚ Real Estate Applications

Trading Stocks Online

$100 in traditional brokerage)

❚ E*Trade, Schwab Online

The order is routed to Schwab’s host computer

in San Francisco and, within a split second, forwarded to the trading floor of the New York Sock Exchange (NTSE).

In a few seconds, (most cases), Schwab

Order is transferred to

Schwab’s floor brokers

at the NYSE, who take

it to the specialist, who

finds the best price and,

if satisfactory, the

order is fulfilled.

Yes

Order is automatically transferred to a

specialist and fulfilled based on the bid and ask prices.

No

Is the order larger than 30,000 shares?

Order is placed, as

described earlier, on an

electronic form from

any computer with

access to the Web,

anywhere in the world.

❚ Investment Information

❙ For municipal bond pricing see :

www.bondmarkets.org and www.investinbonds.com

❙ For overall market information and many links see:

❙ www.aaii.com provides articles from the Journal of

the American Association of Individual Investors

❙ pomaven.com reports the latest findings and pricing

of IPOs

❙ For chart lovers try www.bigcharts.com

❙ For mutual funds evaluation and other interesting

investment information see www.morningstar.net

❙ Almost anything that you need will be provided to

you by www.yahoo.com

much more

❚ Initial public Offerings (IPOs)

Cyberbanking and Personal Finance

❚ Electronic banking

❙ Saves time and

money for users

❚ Implementation Issues in Banking and Online

Trading

Cyberbanking and Personal Finance (cont.)

Encrypted SSL Session

External Firewall

B of A Web Server

Internal Firewall

B of A Application

Logon Screen

•User ID

B of A Web Site

Customer’s

Computer

❙ Securing Financial Transactions

❘ Application Case: Security at NationsBank

❙ Using the Extranet

❙ Imaging Systems

❙ Pricing Online Vs Offline Services

❙ The Future of Banking

❘ building alliances quickly with banks, and software vendors, and information providers

❘ effective outsourcing without neglecting to build house skills, particularly with respect to customer information systems

in-❘ focusing on the profitable customers to provide broad channels for services and products

Cyberbanking and Personal Finance (cont.)

Alternative Strategies for Banking

❙ Customers’ Agents— banks unable to achieve economies of scale

❘ Offer customers the widest possible choices, including products

from multiple sources, and provide the customers with integrated information services

❙ Product Manufacturers— banks able to achieve economies of scale

❘ It will strengthen a trend that can already be seen in a number of product segments and in core processing services for small and

medium sized institutions

❙ Integrated Players— banks with a strong brand and position from

manufacturing to delivery

❘ Many banks will adopt a hybrid strategy, but every player needs to make crucial decisions about which areas are strategically too risky

Billing Online

❚ Automatic transfer of mortgages

authorizes its bank to pay the mortgage, including tax

escrow payments.

❚ Automatic transfer of funds to pay monthly utility bills

customers to pay their gas and water bills automatically

form their bank accounts.

those in Hong Kong, allow customers to pay from bank

accounts, or ATMs.

❚ Paying bills from online banking account

Billing Online (cont.)

Bill Consolidator Billers

Phone

Credit Card

Utility

❙ Such payments can be made into any bank

account Many people pay their monthly rent and

other bills directly into the payee’s bank

accounts

❚ A merchant-to-customer direct billing

Billing Online (cont.)

❙ Under this model, a merchant like American Express posts bills on its Web site, where customers can

view and pay them This means that the customers have to go to many Web sites to pay all their bills

Several utilities in Los Angeles allow customers to pay bills on the utilities’ Web site, charging

customers 20 cents per transaction, which is less

than the price of a postage stamp

❚ Using an intermediary

❙ According to this model, a third party like MSFDS

(Microsoft and First Data Corporation)

consolidates all bills related to each customer in

one site, and in a standard format Collecting a

certain commission, this intermediary makes it

convenient both for the payee and payer to

complete transactions This model is of interest

to vendors such as E*Trade, and Intuit

❚ Personal finance online

Billing Online (cont.)

❚ Used when the conventional marketing

channels are ineffective or inefficient

❚ Offer trading opportunities for both buyers and sellers which are not available in the

conventional channels

❚ Internet provides much cheaper infrastructure

with many more involved sellers and buyers

❚ Individual consumers and corporations alike can participate in this rapidly growing and very

convenient form of electronic commerce

Auctions: From Theory to Practice

Price Discovery

Allocation Mechanism

Distribution Mechanism

Buyer

Role

Short term acquisition

of resources, e.g for demand peaks, auction

as a mechanism to achieve an equilibrium

Often experts/

professional collectors trying to acquire rare items at a reasonable price

Bargain hunting, gambling motive

Bargain hunting, gambling motive;

possible side motive: charity

Clearance of inventory

Attention, direct sales channel, public relations; possible side motive: charity

Achieve high breadth and depth of the auctions, high trading volume results in high

Limited role because

of 1:n supplier - buyer relation;

possible function as

❚ Limitations of traditional auctions

goods

the auction site

auctioneer and other employees)

Auctions: From Theory to Practice (cont.)

❚ Electronic Auctions

Auctions: From Theory to Practice (cont.)

❙ Early auctioning done on local area networks

❘ the auctioning of pigs in Taiwan and Singapore

❘ the auctioning of flowers in Holland

❘ the auctioning of cars in Japan

❙ Auctions on the Internet started in 1995

❘ similar to offline auctions, except for the fact that they are done on a computer

❘ some last days, others a short time

❘ detailed information is available

❘ start bidding by sending e-mail or filling out an electronic