Enterprise manage information systems 6th by laudon ch04

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

The Digital Firm: Electronic Business

and Electronic Commerce

1 How has Internet technology changed value

propositions and business models?

2 What is electronic commerce? How has

electronic commerce changed consumer retailing

and business-to-business transactions?

3 What are the principal payment systems for

electronic commerce?

4 How can Internet technology facilitate

management and coordination of internal and

interorganizational business processes?

5 What are the major managerial and

organizational challenges posed by electronic

business and electronic commerce?

Management Challenges

1 Digitally integrating the enterprise requires a

complete change of mind-set

2 Finding a successful Internet business model

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

• 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

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

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

Electronic Business, Electronic Commerce, and the Emerging Digital Firm

The changing economics of information

Figure 4-1

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

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

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

• 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

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

Electronic Commerce

The benefits of disintermediation to the consumer

Figure 4-2

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

Electronic Commerce

Web site personalization

Figure 4-3

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

• 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

Lightnin Lights Up with the Internet

• What are the benefits of using Web-based order

configuration software?

• How does this system provide value to Lightnin

and its customers?

Electronic Commerce

Window on Technology

Electronic Commerce

Before-after diagram of changes in Lightnin’s ordering process

Figure 4-4

Private Industrial Network

using extranet to link to its suppliers and business

partners

development, marketing, scheduling, inventory

management, and unstructured communication

Electronic Commerce

Business-to-Business Electronic Commerce

Electronic Commerce

A private industrial network

Figure 4-5

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

Electronic Commerce

A Net marketplace

Figure 4-6

• 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

• Digital credit card payment systems: Secure credit card

payment over Web

identification, shipping information, to facilitate

payment process

Accumulates micropayment purchases as debit balance

paid periodically on credit card or telephone bills

Electronic Commerce

Electronic Commerce Payment Systems

• 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

• 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

Electronic Commerce

Electronic commerce information flows

• 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

• 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

• Finance and Accounting: Integrated view of financial

and accounting information online

employees; online publishing

coordinate activities of sales force

manufacturing information to different parts of

organization

Electronic Business and the Digital Firm

Intranet Applications for Electronic Business

Electronic Business and the Digital Firm

Functional applications of intranets

• 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

• Unproven business models

• Business process change requirements

• Channel conflicts

• Legal issues

• Trust, security, and privacy

Management Challenges and Opportunities

Business Process Change Requirements

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

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?

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?