CHAPTER 4

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CHAPTER 4 INTERNET TECHNOLOGY AND THE DIGITAL
FIRM.
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Reading notes for chapter 4 in the
textbook.   Chapter 4 is on the digital firm,
electronic commerce and business. We have to
read entire chapter carefully and digest the
material thoroughly. Internet is a widely used
technology today and there is no doubt that
Internet and digital organization will shape
every aspect of our lives, personal as well as
professional in the years ahead. Section 4.1
elaborates on the benefits of Internet technology
to the organizations of any kind. Read section
4.1 carefully and pay attention to Internet
business models and concepts like information
asymmetry, richness, reach, dynamic pricing and
portals. Table 4.1 is a concise summary of
Internet business models. Customer-centered
retailing, business-to-business electronic
commerce, and electronic payment systems also
deserve a close and critical look. Marshall
Industries is an interesting example of a virtual
distribution network and gives us clues about
future business models. Examine figure 4.7
carefully.    
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Reading notes for chapter 4 in the
textbook. Section 4.3 explores how intranets
support electronic business and services like
group collaboration, coordination and supply
chain management that are vital for any
organization. Group collaboration at Internet
has new dynamics and implications in product
design and delivery as well as organizations
functional areas and supply chain management.
Finally management challenges and opportunities
deserve careful scrutiny.
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• Internet technology
• Standardised communication architecture.
• Direct communication between related parties.
• Reduced transaction costs
• Airline ticket 8?1
• Banking 1.08?0.13
• Infrastructure for electronic business.
• Unbundling the information from the product.

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Business model An abstraction of what and how
the enterprise delivers a product or
service,showing how the enterprise creates wealth.
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Changing Economics Of Information Information
Asymmetry Situation in which the relative
bargaining power of two parties in a transaction
is determined by one party possessing more
information essential to the transaction than the
other party. Richness Measurement of the depth
and detail of information that a business can
supply to the customer as well as information the
business collects about the customer. Reach Mea
surement of how many people a business can
connect with and how many products it can offer
those people.
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INTERNET BUSINESS MODELS
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Reverse auction
Consumers submit a bid to multiple sellers to buy
goods or services at a buyer specified price.
Priceline.com
Importquote.com
Aggregator
Groups of people who want to purchase a
particular product sign up and then seek a
volume discount from vendors.
Mobshop.com
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10
Internet Business Models
Dynamic pricing Pricing of items based on real
time interactions between buyers and sellers that
determine what an item is worth at any particular
moment. Portal Web site or other service that
provides an initial point of entry to the web or
to internal company data. Banner ad Graphic
display on a web page used for advertising. The
banner is linked to the advertisers web site so
that a person clicking on it will be transported
to the advertisers web site. Syndicator Business
aggregating content or applications from multiple
sources,packaging them for distribution,and
reselling them to third-party web
sites. Pure-play Business model based solely on
the internet. Clicks-and-mortar Business model
where the web site is an extension of a
traditional bricks-and-mortar businesses.
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Electronic Commerce
Business-to-Consumer(B2C)electronic
commerce Electronic retailing of products and
services directly to individual
consumers. Business-to-business(B2B)electronic
commerce Electronic sales of goods and services
among businesses. Consumer-to-consumer(C2C)electr
onic commerce Consumers selling goods and
services electronically to other
consumers. Mobile commerce (m-commerce) The use
of wireless devices, such as cell phones or
handheld digital information appliances, to
conduct e-commerce transactions over the
internet.

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• Customer-Centered Retailing
  
• Direct sales over web
• Interactive marketing and personalization.
• M-Commerce and next generation marketing
• Custom self-service

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Manufacturer
Customer
Retailer
Distributor
Customer
Manufacturer
Retailer
Customer
Manufacturer
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Disintermediation The elimination of
organizations or business process layers
responsible for certain intermediary steps in a
value chain. Reintermediation The shifting of
the intermediary role in a value chain to a new
source.
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Web Personalization
User
Web site
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Sarah, Here are the items you want to bid on
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Business-to-Business electronic commerce.
Exchange Type of on-line marketplace where
multiple buyers can purchase from multiple
sellers using a bid-ask system.
Buyers
Sellers
S1
B1
B2
S2
B3
Exchange
S3
B4

• Catalogs
• Sourcing
• Automated purchasing
• Processing and fulfillment

S4
B5
S5
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BEFORE
Phone or fax mill
Arrange Carrier
Negotiate price
Schedule shipments
Fill out bills of lading
S h I p m e n t
Bill Customer
FIBERMARKET EXCHANGE
Reconcile received goods against receiving
report
AFTER
Recovered paper supplier
Fibermarket exchange
Paper mill
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Marshall Industries Virtual Distribution System
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Digital wallet Software that stores credit card,
electronic cash, owner identification,and
address information and provides these data
automatically during electronic commerce
purchase transactions. Micropayment payment for
a very small sum of money, often 1.00 or
less. Electronic cash (e-cash) Currency
represented in electronic form that can be
exchanged with another e-cash user or retailer
over the internet. Smart card A credit card-size
plastic card that stores digital information and
that can be used for electronic payments in
place of cash. Person-to-person payment
system Electronic payment system for people who
want to send money to vendors or individuals who
are not set up to accept credit card payments.
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Examples of electronic payment systems for
E-commerce
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(No Transcript)
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Electronic Commerce Information Flow
Business-to-consumer
Business-to-Business

• Retailer
• Information
• Orders
• Service and support

• Manufacturers,suppliers,
• and Distributors
• Purchases
• Bids

Buyer

• Banks
• Credit checks
• payment authorization
• Electronic payments transfer

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• ORGANIZATION BENEFITS OF INTRANETS
  
• Connectivity accessible from most computing
  platforms
• Can be tied to internal corporate systems
• Can create interactive applications with
  text,audio,and video
• Scalable to larger or smaller computing platforms
  as requirements change
• Easy to use,universal web interface
• Low start-up costs
• Richer,more responsive information environment
• Reduced information distribution costs

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• Finance and Accounting
• General ledger reporting
• Project costing
• Annual reports
• Budgeting

• Human Resources
• Corporate policies
• Employee Savings plans
• Benefits enrollment
• On-line training
• job postings

Corporate Intranet

• Manufacturing and production
• Quality measurements
• Maintenance schedules
• Design specifications
• Machine output
• Order tracking

• Sales and Marketing
• Competitor analysis
• Price updates
• promotional campaigns
• Sales presentations
• Sales contacts

Functional applications of Intranets
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Intranets and Supply Chain Management
Suppliers
Customers
Planning forecasting
Order processing
Procurement
Intranet
Production
Accounting
Shipping
Inventory
Logistics services
Distributors
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• MANAGEMENT CHALLENGES AND
• OPPORTUNITIES
• Unproven Business models
• Business Process change Requirements
• Channel Conflicts
• Legal Issues
• Security and Privacy