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CHAPTER 4 INTERNET TECHNOLOGY AND THE DIGITAL FIRM.
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.
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 organization’s functional areas and supply chain management. Finally management challenges and opportunities deserve careful scrutiny .
<ul><li>Internet technology </li></ul><ul><li>Standardised communication architecture. </li></ul><ul><li>Direct communication between related parties. </li></ul><ul><li>Reduced transaction costs </li></ul><ul><ul><li>Airline ticket $8 $1 </li></ul></ul><ul><ul><li>Banking $1.08 $0.13 </li></ul></ul><ul><li>Infrastructure for electronic business. </li></ul><ul><li>Unbundling the information from the product. </li></ul>
Business model: An abstraction of what and how the enterprise delivers a product or service,showing how the enterprise creates wealth .
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: Measurement of how many people a business can connect with and how many products it can offer those people .
INTERNET BUSINESS MODELS Asia capacity Exchange Covisint E-steel Fibermarket Bid-ask system where multiple buyers can purchase from multiple sellers. On-line exchange Shopnow.com Dealernet Industrial mall Insure market Concentrates information about products and services from multiple providers at one central point.Purchases can search,comparison-shop,and sometimes complete the sales transaction. Marketplace concentrator Amazon.com Wine.com, Wingspanbank.com Sells physical goods or services on-line instead of through a physical storefront or retail outlet. Delivery of nondigital goods and services takes place through traditional means. Virtual Store front Examples Description Category
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 Ebay Ubid Bigequip.com Provides electronic clearinghouse for products where price and availability are constantly changing, sometimes in response to customer actions Auction E*TRADE Ameritrade Buyers can view rates and terms, but the primary business activity is to complete the transaction. Transaction broker Partnet Travelocity Provides product, pricing, and availability information. Some facilitate transactions, but their main value is the information they provide. Information broker
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 advertiser’s web site so that a person clicking on it will be transported to the advertiser’s 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.
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)electronic 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.
<ul><li>Customer-Centered Retailing </li></ul><ul><li>Direct sales over web </li></ul><ul><li>Interactive marketing and personalization. </li></ul><ul><li>M-Commerce and next generation marketing </li></ul><ul><li>Custom self-service </li></ul>
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.
User Web site Based on your portfolio and recent market trends, here are some recommendations. Welcome back, Steve P.Munson. Check out these recommended titles: One Minute Manager leading change results-based leadership. Sarah, Here are the items you want to bid on: Iron scroll lamp sparkle beach barbie beatles silk tie. Web Personalization
Business-to-Business electronic commerce. Exchange Type of on-line marketplace where multiple buyers can purchase from multiple sellers using a bid-ask system. Exchange S1 S2 S3 S4 S5 B1 B2 B3 B4 B5 Sellers Buyers <ul><li>Catalogs </li></ul><ul><li>Sourcing </li></ul><ul><li>Automated purchasing </li></ul><ul><li>Processing and fulfillment </li></ul>
Phone or fax mill Arrange Carrier Negotiate price Schedule shipments Fill out bills of lading Bill Customer Reconcile received goods against receiving report BEFORE S h I p m e n t AFTER Recovered paper supplier Fibermarket exchange Paper mill FIBERMARKET EXCHANGE
Marshall Industries Virtual Distribution System
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.
Examples of electronic payment systems for E-commerce
Buyer <ul><li>Retailer </li></ul><ul><li>Information </li></ul><ul><li>Orders </li></ul><ul><li>Service and support </li></ul><ul><li>Manufacturers,suppliers, </li></ul><ul><li>and Distributors </li></ul><ul><li>Purchases </li></ul><ul><li>Bids </li></ul><ul><li>Banks </li></ul><ul><li>Credit checks </li></ul><ul><li>payment authorization </li></ul><ul><li>Electronic payments transfer </li></ul>Business-to-consumer Business-to-Business Electronic Commerce Information Flow
<ul><li>ORGANIZATION BENEFITS OF INTRANETS </li></ul><ul><li>Connectivity: accessible from most computing platforms </li></ul><ul><li>Can be tied to internal corporate systems </li></ul><ul><li>Can create interactive applications with text,audio,and video </li></ul><ul><li>Scalable to larger or smaller computing platforms as requirements change </li></ul><ul><li>Easy to use,universal web interface </li></ul><ul><li>Low start-up costs </li></ul><ul><li>Richer,more responsive information environment </li></ul><ul><li>Reduced information distribution costs </li></ul>
<ul><li>Finance and Accounting </li></ul><ul><li>General ledger reporting </li></ul><ul><li>Project costing </li></ul><ul><li>Annual reports </li></ul><ul><li>Budgeting </li></ul><ul><li>Human Resources </li></ul><ul><li>Corporate policies </li></ul><ul><li>Employee Savings plans </li></ul><ul><li>Benefits enrollment </li></ul><ul><li>On-line training </li></ul><ul><li>job postings </li></ul>Corporate Intranet <ul><li>Manufacturing and production </li></ul><ul><li>Quality measurements </li></ul><ul><li>Maintenance schedules </li></ul><ul><li>Design specifications </li></ul><ul><li>Machine output </li></ul><ul><li>Order tracking </li></ul><ul><li>Sales and Marketing </li></ul><ul><li>Competitor analysis </li></ul><ul><li>Price updates </li></ul><ul><li>promotional campaigns </li></ul><ul><li>Sales presentations </li></ul><ul><li>Sales contacts </li></ul>Functional applications of Intranets
Customers Suppliers Logistics services Distributors Intranet Planning & forecasting Shipping Inventory Order processing Accounting Procurement Production Intranets and Supply Chain Management
<ul><li>MANAGEMENT CHALLENGES AND </li></ul><ul><li>OPPORTUNITIES </li></ul><ul><li>Unproven Business models </li></ul><ul><li>Business Process change Requirements </li></ul><ul><li>Channel Conflicts </li></ul><ul><li>Legal Issues </li></ul><ul><li>Security and Privacy </li></ul>