Lecture Management information systems: Solving business problems with information technology – Chapter 11

After studying this chapter you will be able to understand: How can you use information technology to improve your organization and make it better than your competitors? How competitive is your world?, What are the main factors affecting a firm’s competitive advantage? Where do you begin looking for an edge?,...

Introduction to MIS

Chapter 11 Electronic Business

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Electronic Business

Large business Small business/

supplier

Customer Salesperson

The Internet

Orders, Auctions, and EDI

Sales and CRM

Service, orders, and informationWeb hosting and

Web-based

services

 Forms of Electronic Commerce

 Production Chain and Disintermediation

 Dynamic Pricing

 Distributed Services

 Marketing Phases

 Web Advertising: Advertiser

 Web Advertising: Publisher

 Web Traffic Analyzer

 Web Hosting Options

 Cases: Travel Industry

 Appendix: Business Plans

Consumer-oriented Sales

Support

Consumer C2B

Minimal examples, possibly reverse auctions like PriceLine

C2C Auction sites (eBay) But many of these are dominated by small business sales.

Production

Chain

parts supplier supplierparts supplierparts

warehouse warehouse

supplier supplier

supplier

tool manufacturer Manufacturer

workers

wholesaler wholesaler

distributor distributor

distributor

retail store retail store

retail store retail store

Dynamic Pricing

P

Q D

S

Perfect competition price

Price consumer is willing to pay

The ultimate goal is to set individual prices for each consumer to capture the maximum price each is willing

to pay As opposed to the perfect competition price, where everyone pays the same price, and some customers gain because they were willing to pay more

Internet Service

e.g., automated document

translation

XML: Extensible Markup Language

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XML In Internet Explorer

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Web Advertising: Advertiser Perspective

Web Advertising: Publisher Perspective

 Cost per thousand viewings ($1 - $50)

 Need volume (25,000 or 1,000,000 per month)

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Website Log Analyzer

SurfStats pro

Web Hosting Options

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Simple Static HTML Website

Main Web Page

Photo

Product n Description Price

Photo

Product 3 Description Price

Photo

Simple Website with Buy Me Button

Merchant Web site

Credit Card Data

Name Address Phone Card Number Submit Card Processor Site

Customer Notification (Accept/Reject) Notify merchant

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Web Auctions

 Uncertain price

 Can set reserve price

 Good for unique items

 Efficiency depends on

 Full information

 Adequate number of

participants

Amazon.com zShops

zShop Products Cameras, Digital, Brand Vendor 1

Vendor 2 Vendor 3

Transaction Processing

Amazon.com handles credit Sends order info to merchant Merchant ships item to consumer

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Virtual Malls

 Essentially a marketing agreement

 The “mall” provides a directory to merchants

 The merchant site runs on a different server

Web Commerce Servers

Your Web site

Products Shopping cart

Sales

Web servers Database

Commerce Server Shell

Web/Commerce Hosting Company

Customers Merchants

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Application Service Provider

Business Application e.g., Accounting

Store data Analyze data Facilitate company interaction

Businesses that lease the use of the application

Web Hosting Questions

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Mobile Commerce

Fujitsu’s tablet computer

As PDAs, cell phones, and tablet computers converge; people will ultimately be able to connect to any business every place they go.

Palm VII wireless PDA Prototype Nokia 3G

Creating a Business

Idea

Plan

Implementation

a service to the dominant firm or to be

an intermediary for consumers

 Market comparison for substitute products

 Consumer focus group interviews

 Production costs

 Startup/fixed costs

 Operating costs

Forecasting Financial Data

Customers

and Sales

estimate

Infrastructure scale

Employees

Sales revenue

Marketing costs

Operating and selling costs

Salary costs

Balance Sheet Income Statement Profit and Loss Cash Flow

Financial statement estimates

Financial statements and ratios

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Breakeven Analysis

0 200000 400000 600000 800000 1000000 1200000

Forming a Corporation

 State Forms

 Articles of Incorporation

 Corporate Bylaws

 Registered Agent (self)

 Business Registration Form

 State Employer Number

control over management.

Additional Setup Steps for E-Commerce

 Additional risk and challenge

of obtaining funding.

 Website development.

 Programming cost

 Time and management

 Purchase or lease merchant

 Host site yourself.

 Time to get leased line

 Choose site location based

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Cases: Travel Industry

Cases: The Sabre Group

American Express

What is the company’s current status?

What is the Internet strategy?

How does the company use information technology?

What are the prospects for the industry?

www.sabre.com

www.americanexpress.com

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Appendix: Business Plan

 Help managers identify strategies and plan for future

 Identify goals and concrete objectives

 Provide measurement of success and identify problems

 Provide detailed information to investors

 Outline budget needs

Business Plan Structure

Rolling Thunder Bicycles Example

Rolling Thunder Estimated Sales Number of Bicycles

Estimated Sales Value

Projected Income Statement

Cost of merchandise sold 1,932,500 1,764,750 1,853,825

Operating and Admin Expenses 100,000 100,000 100,000

Other income (expense)

Shareholder related expense (10,000) (10,000) (10,000)

Federal and state income taxes (123,000) (284,100) (350,307)

Interest rate on borrow 8.00%

Interest rate on short term investments 3.00%

Depreciation, 5 years, straight line 0.2

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Projected Balance Sheet

Property, Plant and Equipment

Net Property, Plant and Equip 200,000 (60,000) (130,000)

Liabilities and Shareholders' Equity

Current Liabilities

Total Current Liabilities (40,750) (193,625) (250,925)

Total Shareholders' Equity (193,550) 196,645 299,300

Total Liabilities and Shareholders' Equity ($234,300) $3,020 $48,375

Money to be raised (equity or debt) $575,450 $308,145 $528,229

Assumptions Receivables as percent of sales:

10%

Payables as percent of material costs: 10%

Inventory as percent of material costs: 12%

Projected Cash Flow

(Increase) decrease in current assets:

Increase (decrease) in current liabilities

Total change in current liabilities (40,750) (275,875) (341,400)

Net cash provided by operations 56,450 246,645 349,300

Cash flows from Investing:

Expended for property, plant, equip (250,000) (50,000) (50,000)

Net cash used in investing (250,000) (50,000) (50,000)

Cash flows from Financing:

Net cash provided by financing 0 0 0

Net increase (decrease in cash) (193,550) 196,645 299,300

Cash and cash equivalents: