The Digital Firm: Electronic Business and Electronic Commerce

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Chapter
The Digital Firm Electronic Business and
Electronic Commerce
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm

• Information technology infrastructure The
  Internet provides a global, easy-to-use, and
  inexpensive communication platform for all
  organizations and individuals.
• Direct communication between trading partners
  Disintermediation (direct buying) removes
  intermediate (in the middle) layers and speeds up
  buying and selling as well as making both sides
  financially better off (no middleman).

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm
(Continued)

• Round the clock service Web sites available to
  consumers 24 hours
• Additional sales channels (via internet)
  Customers have wider choice, either physical
  shops nearby or internet. Companies also have
  many more customers from all over the world.
• Reduced information costs Costs of searching for
  buyers and sellers decreases

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm
(Continued)

• Higher enforcement (legal) costs Since buyer and
  seller may be far away from each other (sometimes
  in different countries), it is difficult to use
  courts to settle problems. More problems arise
  in internet shopping since customers cannot
  easily handle the product (compared to physical
  shops).

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
The Changing Economies of Information

• Information asymmetry One party in a transaction
  has more information than the other. The Internet
  decreases information asymmetry (sometimes).
• Increases richness The Internet increases the
  depth, detail, and scope of information at very
  low cost.
• Increases reach The Internet increases the
  number of people who can be contacted
  efficiently.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet has made it possible for entrepreneurs
to create New Business Models and Value
Propositions
Business Model Just means what kind of product
or service you sell and to which customers and
how, e.g. selling books in a shop is one model,
amazon is another model, selling both in shops
and on internet (like Marks and Spencer) would be
a third model. Value PropositionThe value
proposition just means the reasons why customers
choose that firm and not other firms, e.g. What
does Mercedes-Benz give that other car companies
do not?
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Business Models

• Virtual storefront Sells goods or services
  online (Amazon.com)
• Information broker Provides information on
  products or services (Edmunds.com)
• Transaction broker Provides online transaction
  facility (eTrade.com, Expedia.com)
• Online marketplace Provides a trading platform
  for individuals and firms (eBay.com)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Business Models (Continued)

• Content provider Creates revenue by providing
  content (WSJ.com, TheStreet.com)
• Online service provider Provides online
  services, including search service. (Google.com,
  Xdrive.com)
• Virtual community Provides an online community
  to focused groups (Friendster.com, iVillage.com)
• Portal Provides initial point of entry to Web,
  specialized content, services (Yahoo.com,
  MSN.com)

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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
Categories of Electronic Commerce

• Business-to-customer (B2C) Retailing of products
  and services directly to individual customers
  (Wal-Mart.com)
• Business-to-business (B2B) Sales of goods and
  services to other businesses (Grainger.com,
  Ariba.com)
• Consumer-to-consumer (C2C) Individuals using the
  Web for private sales or exchange (eBay.com )

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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Business-To-Consumer

• Advantages of E-commerce
• Customer-centered retailing Closer and more
  personalized relationship with customers is
  possible
• Web sites Provide a corporate-centered portal
  for the consumer to quickly find information on
  products, services, prices, orders

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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-Commerce (Continued)

• Disintermediation The elimination of
  organizations or business process layers
  responsible for certain intermediary steps in a
  value chain, reducing costs to the consumer
• Reintermediation Instead of middleman, now we
  have information-providing companies. They help
  us to find what we want on the internet and give
  us (objective??) advice on products, services,
  and sellers.

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ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
Interactive Marketing and Personalization

• Clickstream tracking tools
• Collect data on customer activities at Web sites
  and store them in a log

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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
Web Site Visitor Tracking
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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
Web Personalization

• Create unique personalized Web pages for each
  customer
• Increased closeness to customer increases value
  to the customer, while reducing costs of
  interacting with the customer

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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
Web Site Personalization
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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Collaborative filtering

• Compares information gathered about a specific
  users behavior at a Web site to data about other
  customers with similar interests to predict what
  the user would like to see next. The software
  then makes recommendations to users based on
  their assumed interests. E.g. in Amazon you see
  customers who purchased this book also purchased
  ..

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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Customer self-service

• The use of Web sites to provide customers with
  access to information and answers to questions
• Replacing human call center operators and clerks
• UPS.com Customer tracking of packages
• Orbitz.com Customer self-help for organizing and
  managing a trip
• Dell.com My Order Status facility

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Electronic Data Interchange (EDI)
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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Business-to-Business Electronic Commerce New
Efficiencies and Relationships

• Electronic Data Interchange (EDI) Enables the
  computer-to-computer exchange between two
  organizations of standard transactions.
  Currently 80 of B2B e-commerce uses this system.
  
• In the last 15 years EDI is being replaced by
  more powerful and cheaper Web-based alternatives
  (more powerful because of search, prioritize,
  compare, etc. capabilities)

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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
Net Marketplaces Improve B-2-B commerce

• B2B online catalogs provide buyers with access to
  thousands of parts and other goods
  (Grainger.com)
• Procurement (finding, buying, paying for,
  transporting) inputs becomes easier (Ariba.com)

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Management Information Systems Chapter 4 The
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ELECTRONIC COMMERCE
A Net Marketplace
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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Four different types of Net Marketplaces
(Continued)

• Third-party Net marketplaces help many buyers and
  suppliers to meet each other for spot purchasing
  (Freemarkets.com, GEPolymerland.com)
• Industry-owned Net marketplaces are used mainly
  for long-term (annual or more) contracts to buy
  directly inputs to production (ChemConnect.com)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE

• Private Industrial Networks
• The largest Web-based form of B2B commerce
• Private B2B extranets that focus on continuous
  business process coordination between a small
  group of companies for collaboration and supply
  chain management. Wal-Mart uses its own private
  network to coordinate more than 15,000 suppliers
  to its stores.

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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
A Private Industrial Network
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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
How Intranets Support Electronic Business

• Intranets are organisational information systems
  which help share data between people (who have
  passwords) in various departments of that
  organisation.
• Extranets are parts of intranets which (with
  password) is available to outsiders (suppliers,
  customers, transportation companies) who need
  some of that organisations data to coordinate
  activities such as delivering inputs from
  suppliers or finished products to customers.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets

• Compared to computer networks (using physical
  wired connections) connecting or disconnecting
  someone to the organisational information system
  network is as easy as creating a new user and
  password.
• And other benefits are

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets (Continued)

• Easy to use, universal standard Web interface
• Low costs
• Richer, more responsive information environment
  than corporate manuals
• Reduced information distribution costs

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Management Information Systems Chapter 4 The
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ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Finance Accounting Information on an Intranet

• Project costing
• Annual reports
• Budgeting

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources Information on an Intranet

• Company
• Online publishing of corporate policy
• Job postings and internal job transfers
• Company telephone directories, training

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Management Information Systems Chapter 4 The
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ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Sales and Marketing Information on an Intranet

• Competitor analysis
• Price updates
• Promotional campaigns
• Sales presentations
• Sales contracts

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ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Manufacturing and Production Information on an
Intranet

• Production schedules
• Maintenance schedules
• Design specifications
• Order tracking