1 prentice hall, 2002 the digital economy. 2 prentice hall, 2002 learning objectives describe the...
TRANSCRIPT
1Prentice Hall, 2002
The Digital Economy
2Prentice Hall, 2002
Learning Objectives
Describe the major characteristics of the digital economyCompare marketplaces with marketspacesDescribe the nature of competition in marketspacesDescribe some economic rules of the digital economy
3Prentice Hall, 2002
Learning Objectives (cont.)
Describe the impacts of the digital economy on trading and intermediariesDescribe the impacts of the digital economy on business processes and functional areas in organizationsUnderstand the role of m-commerce in the digital economy
4Prentice Hall, 2002
The Digital Economy
Complete change of business models and strategies for success in digital economyWeb-based IT and EC facilitate competitive advantageGlobal competition: price, quality, service
5Prentice Hall, 2002
The Digital Economy (cont.)
Extensive networked computing infrastructure is expensiveWeb-based applications provide customer service, online selling, and procurement supportInnovative systems must be patented
6Prentice Hall, 2002
Digital Economy Defined
Digital communication networks (Internet, intranets)Computers
SoftwareRelated information technologies
Also Known As: Internet economy, new economy, Web economy
Economy based largely on digital technologies
7Prentice Hall, 2002
Digital Economy Defined (cont.)
Economic revolutionUnprecedented economic growth (USA)
IT growth more than doubles that of overall economyProvided over ¼ of total economic growth
Longest period of uninterrupted economic expansion in history
High-paying jobsVery low to negative unemployment in IT industry
8Prentice Hall, 2002
Marketspaces vs. Marketplaces
Marketplace: 3 main objectivesMatch buyers and sellersFacilitate exchange of information, goods, services, payments (transactions)Provide institutional infrastructure enabling efficient functioning of the market
EC in the marketplaceIncreased efficienciesDecreased cost of executing business functions
9Prentice Hall, 2002
Marketspaces vs. Marketplaces (cont.)
Marketspaces: electronic marketplaces (especially Internet-based)
Changed processes used in trading and supply chainsChanges driven by IT
Increased effectivenessLower transaction and distribution costsMore efficient markets
10Prentice Hall, 2002
Marketspaces vs. Marketplaces (cont.)
Doing business in the real world
Process raw materialsDistribute raw materials
Doing business with EC
Gathering informationSelecting informationSynthesizing informationDistributing information
11Prentice Hall, 2002
Components ofDigital Ecosystems
Digital productsInformation and entertainment products
Paper-based products: books, newspapers, magazinesProduct information: catalogs, training manualsGraphics: photographs, maps, calendarsVideo: movies, TV programsSoftware: programs, games, development tools
12Prentice Hall, 2002
Components of Digital Ecosystems (cont.)
Symbols, tokens, iconsTickets and reservations: airline, concertFinancial instruments: checks, credit cards, electronic currencies
Processes and servicesGovernment services: forms, benefits, licensesE-messaging: letters, faxesBusiness processes: ordering, inventoryingAuctions: bidding, barteringOthers
13Prentice Hall, 2002
Components of Digital Ecosystems (cont.)
ConsumersSearch for detailed informationCompare products/pricesBid or negotiate prices
SellersInnumerable products and services availableWeb sites, marketplaces
14Prentice Hall, 2002
Components of Digital Ecosystems (cont.)
IntermediariesCreate and manage online marketsMatch buyers and sellersProvide infrastructure servicesAid transactions
Support services: address implementation issues
Certification and trust servicesKnowledge providers
15Prentice Hall, 2002
Components of Digital Ecosystems (cont.)
Infrastructure companies: provide hardware, software, EC supportContent creators: create and maintain Web sitesBusiness partners: Internet collaboration usually along the supply chain
16Prentice Hall, 2002
Components of Digital Ecosystems (cont.)
Electronic marketplacesExchanges—many-to-manySell-side—one-seller-many-buyersBuy-side—one-buyer-many-sellersPublic—open to allPrivate—open to invited traders only
17Prentice Hall, 2002
Competition in Marketspaces
Competition in the Internet ecosystem (business model of the online economy)
Inclusive with low barriers to entrySelf-organizingOld rules may no longer apply
Competition is tenseLower buyers’ search costSpeedy comparisonsDifferentiation and personalization
18Prentice Hall, 2002
Competition in Marketspaces (cont.)
Consumers like differentiation and personalization
Lower pricesCustomer service
Size of company no longer significantGeographical location insignificantLanguage barriers are being removedDigital products do not have normal wear and tear
19Prentice Hall, 2002
Figure 2-2Cost Curve of Regular and Digital Products
Cost curvesBundling products/servicesBuying vs. renting
20Prentice Hall, 2002
Issues and Success Factors (cont.)
Critical Mass of Buyers & SellersHigh fixed costs of deploying ECMarket efficiencyDevelopment of strong, fair competition
Quality uncertainty and quality assurance
Provide free samplesReturn if not satisfied
21Prentice Hall, 2002
Issues and Success Factors (cont.)
Pricing on the InternetDetermines: sales volume, market share, product profitabilityPrice discrimination: different prices to different buyers through customization of productsProduct differentiation: price based on value to the customer, not cost of production
22Prentice Hall, 2002
Issues and Success Factors (cont.)
Online vs. off-line pricingClick-and-mortar—available online and off-lineBrokerage houses—50% commission discount for online trades
Economic Impacts of ECProduction function—can substitute capital for labor for same quantity of productionLower the labor needed, higher required investmentsEC lowers amount of labor/capital needed to produce the product
23Prentice Hall, 2002
Figure 2-3Economic Effects of EC
24Prentice Hall, 2002
Issues and Success Factors (cont.)
Contributors to E-market successProduct characteristics
Type: digitized, non-digitizedPriceStandards and product information available allows sale of most items: cars, computers, groceries
Industry characteristicsBrokers currently necessaryIntelligent systems may replace brokers
25Prentice Hall, 2002
Issues and Success Factors (cont.)
Seller characteristicsConsumers find sellers with the lowest pricesLow-volume, higher-profit-margin transactions
Consumer characteristicsImpulse buyersPatient buyersAnalytical buyers
26Prentice Hall, 2002
Impacts on Trading Processesand Intermediaries
Industry structureConsumers are aware of competitor’s prices through searches; intermediaries become obsoleteDigitization of more products; reduction in shipping costsSeller and customer activities converge in 1 place
Marketing Order processingDistribution PaymentsProduct development
27Prentice Hall, 2002
Impacts on Trading Processesand Intermediaries (cont.)
Industry structure (cont.)Roles and value of intermediaries in e-markets
Search costs: brokers with access to customer preferences can predict demand for productsLack of privacy: anonymity of buyer and/or sellerIncomplete information: gathers product information from many sourcesContracting riskPricing inefficiencies
28Prentice Hall, 2002
Impacts on Trading Processesand Intermediaries (cont.)
Industry structure (cont.)Disintermediation and reintermediation
Disintermediaries: match and provide informationReintermediatiaries: provide value-added services (consulting)
Syndication: sale of the same good to many customers, who integrate it with other offerings and redistribute it (virtual stock brokers)
29Prentice Hall, 2002
Impacts on Trading Processesand Intermediaries (cont.)
Syndication supply chainSyndication of information is critical to the success of ECDistributors provide free information to consumers, and package and sell the same informationContent creators sell the same information to many syndicators and distributors
30Prentice Hall, 2002
Figure 2-5The Supply Chain of Syndication
31Prentice Hall, 2002
Impacts on Trading Processesand Intermediaries (cont.)
Potential Winners and Losers in ECWinners
Internet access providersDiversified portal service providersEC software companiesProprietary network ownersOthers
32Prentice Hall, 2002
Impacts on Trading Processesand Intermediaries (cont.)
Winners in ECInternet access providersDiversified portal service providersEC software companiesProprietary network ownersOthers
Losers in EC Wholesalers (particularly small ones)BrokersSalespeopleNondifferentiated manufacturers
33Prentice Hall, 2002
Impact on Business Processesand Organizations
Improving direct marketingProduct promotionNew sales channelsDirect savingsReduced cycle timeCustomer serviceBrand or corporate image
34Prentice Hall, 2002
Impact on Business Processesand Organizations (cont.)
Other marketing-related impactsCustomization AdvertisingOrdering systemsMarkets
Transforming organizationsTechnology and organization learningChanging nature of work
35Prentice Hall, 2002
Impact on Business Processesand Organizations (cont.)
Redefining organizationsNew product capabilitiesNew business models
Impacts on manufacturingBuild-to-order
Impact on finance and accountingHuman resource management, training, and education
36Prentice Hall, 2002
Mobile Commerce
Online stock tradingOnline bankingMicropaymentsOnline gambling
Ordering and serviceOnline auctionsOthers
Applications of M-commerce
37Prentice Hall, 2002
Mobile Commerce (cont.)
A successful vendorI-mode customers can
Receive train timetableDiscount coupons for shopping and restaurantsPurchase music onlineSend or receive photosPurchase airline ticketsLocate information about books and buy them
38Prentice Hall, 2002
Managerial Issues
Digital Economy Defined Marketspaces vs. MarketplacesComponents of Digital EcosystemsCompetition in MarketspacesIssues and Success FactorsImpacts on Trading Processesand Intermediaries