e-commerce 06
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1
Chapter 5
Electronic Commerce in Service Industries
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Opening Vignette:Ordering Journals Electronically
How a large university automated the purchasing of magazines and journals, saving $365,000/yearDirect E-Marketing: Buyer-to-seller; orders and paymentsMarket maker charges $5/transaction vs. about $32 (conventional agents)Ordering time reduced by up to 80%Rowe.com—Internet IPO that survived the stock market in the industry
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Broker-Based Services
Brokers work as intermediaries between buyers and sellersAgents basically make the marketsAgents provide many servicesMost of the value-added tasks of brokers can be automated
Major electronic agent-based servicesTravelEmploymentReal estateStocks
Electronic auctionsAt-home bankingInsurance
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Broker-Based Services (cont.)
Service Industries vs. Manufacturing and Product Retailing
Service IndustriesPure EC: substantially reduced cost
Bank and brokerage housesPossible digitation of the entire process
Travel and real estate agents
Viewing an online video clip or seeing photos of a hotel or a house for sale
Manufacturing and product retailingPhysical delivery cost may be high
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Travel and Tourism Services
Any experienced traveler knows that good planning and shopping around can save moneyThe Internet is an ideal place to plan, explore, and arrange almost any tripTravel-related information available at many sites including:
Expedia.com Travelweb.comTravelocity.com Trip.comAsiatravel.com Priceline.com
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Travel and Tourism Services (cont.)
Information and booking of airlines, hotels, cars, and even golf coursesFare comparisons360 degree video tours of top destinationsElectronic Travel magazineConverting 200 currencies
Providing mapsPictures of major attractionsInformation about entertainment and ticket purchasing (ticketmaster.com)Tips provided by people that experienced certain situations (like a visa problem)
Services provided:
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Travel and Tourism Services (cont.)
Special discount informationChat rooms and bulletin boardsShopping for travel accessories and booksExperts’ optionsFrequent flier dealsRestaurant reviewsCurrent status of flights(real time)Driving directions in the US
Travel newsFare tracker (free e-mail alerts on low fares)Major international newsWorldwide business and places locatorSpecial interest vacationsBed and breakfast recommendationsE-mail to intermediaryWeather watch
Services provided:
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Travel and Tourism Services (cont.)
Auctions, bids, and special salesAmerican airlines (aa.com) auctions tickets during low-volume seasonsCathay (cathaypacific.com) auctions tickets on competitive routesAer Lingus (aerlingus.ie) auctions tickets that expire in 1 or 2 weeksPriceline (priceline.com) asks consumers to specify the price they are willing to pay
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Travel and Tourism Services (cont.)
Special servicesWireless servicesDirect marketingAlliances and consortiaOther services
Interactive kiosks in hotelsInternet access in hotelsBenefits
Free information is tremendousFree information is accessible anytimeSubstantial discounts
LimitationsNot all people use the InternetIt may take a long time to find what you wantPeople are still reluctant to provide credit card numbers
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Corporate Travel: New Business Model
The Impact of EC on the Travel Industry
Porter’s framework of competitive advantage (the five forces)Focus:
EnvironmentCompetitive responsesFirm’s strategy
The industry is clearly transformedTaking away some functions traditionally performed by travel agents
Travel and Tourism Services (cont.)
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Impacts on the industryMultimedia helps customers understand the productsOffering of lower-cost tripsProviding a more personalized serviceSaving money in a paperless environmentIncreasing the convenience of getting information at homeSupporting a customer-focused strategy (such as targeted advertisement and integration of products); push information to customers
Travel and Tourism Services (cont.)
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Travel agencies, as we know them today, will disappearOnly their complex value-added activities will not be automatedThese complex activities will be performed by a new breed of intermediariesSurvival strategy
Minor improvements due to process changesBPR with significant improvementsOrganizational transformation
Travel and Tourism Services (cont.)
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Figure 5-2The Travel Industry Chain
Source: Block and Segev “The Impact of Electronic Commerce on the Travel Industry” Proceedings, HICSS 31, Hawaii © 1997 IEEE.
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Travel and Tourism Services (cont.)
Intelligent agentsStep 1: turn on PC and enter
Desired destinationDatesAvailable budgetSpecial requirementsDesired entertainment
Step 2: computer dispatches an intelliget agen that “shops around”Step 3: agent attempts to match your requirements with what is available, negotiates with vendorsStep 4: agent returns within minutes with suitable alternatives, modifies as per your wishes, books the vacation
Voice communication with agent
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The Employment Placement:Deficiencies of Manual Market
Job marketsEmployers are looking for employees with specific skills, and individuals are looking for jobsVery volatile marketMoved to the InternetMillions of job seekers, hundreds of thousands of jobs
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Driving forces of electronic job marketCost—classified ads are expensiveLife cycle—the life of the ads is only days or weeksPlace—most ads are local; nationwide and international ads are more expensiveMinimum information—because of the high cost, the information provided is minimalSearch—Time consuming for individuals to find all relevant newspapers
The Employment Placement:Deficiencies of Manual Market (cont.)
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The Employment Placement:Deficiencies of Manual Market (cont.)
Driving forces of electronic job market (cont.)Finding applicants—during pre-Internet era, job seekers
did not place ads about their availability making it difficult for companies to find employees with special skills
Matching—it was difficult to match candidates to open jobs, supply and demand
Lost and dated material—some applications or letters of response tended to get lost, or arrive late
Speed—communication by mail and processing of a large number of applications is slow; employers lose good employees, the applicant had taken another job being afraid to wait too long
Comparisons—difficult for job seekers to compare monetary value of available positions
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The Employment Placement:Deficiencies of Manual Market (cont.)
The Internet Job MarketThe Internet offers a perfect environment; it is especially effective for technology-oriented jobs
Job seekersJob offerersRecruiting firmsGovernment agencies and institutions
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The Employment Placement:Deficiencies of Manual Market (cont.)
Find very detailed and timely information on a large number of jobs world-wideQuickly communicate with potential employersPost resumes for large-volume distribution
Search for jobs quickly from any place at any timeObtain several support services at no costFind employer profile & industry guides (valuereports.Com)
The Advantage of the Electronic Job Market For job seekers
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The Employment Placement:Deficiencies of Manual Market (cont.)
Advertise to a large number of job seekersSave on advertisement costsLower the cost of processing (using electronic application forms)Provide greater (‘equal opportunity’) for job seekers
Find highly skilled employeesConduct tests quickly, onlineChange and update ads quicklyFill up positions rapidlyInterviewing from distance
The Advantage of the Electronic Job MarketFor employers
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The Employment Placement:Deficiencies of Manual Market (cont.)
The Limitations of Electronic Job MarketsMany people do not use the InternetSecurityPrivacyLack of face-to-face contact
Examples of online job servicesLocating jobsWriting and posting resumesCareer planningNewsgroups
Examples of career services on the InternetRecruiters online networkStaffNETGlobal employment networkEmployment opportunitiesIntranet job market
Intelligent agentsIntelligent agents for job seekers (jobsleuth.com)Intelligent agents for employers (resumix.com)
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Real Estate
You can view many properties on the screenYou can sort and organize propertiesYou can find detailed information about the propertiesYou can search, compare and apply for loans
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Real Estate Applications (cont.)The National Association of Realtors, realtor.com has
links to property listings in all major US citiesTo find how much house you can afford, consult: replace.comMortgage brokers can pass on loan applications over the Net and receive bids from lenders that want to issue the mortgagesTo find mortgage interest rates online use:
Lendingtree.comEloan.comHomeside.com.au
Insurance—auto, home life, health at substantial discount
Insureate.comOrder.comQuotesmith.com
Real Estate (cont.)
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Investing and Trading Stocks Online
Online stock tradingCosts between $7 and $29 per transaction (vs. $10 - $35 in traditional brokerage)No waiting on busy telephone linesNo oral communication, less chance for errorsPlace orders from anywhere, any time, day or nightNo biased broker to push youConsiderable amount of free information
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Trading Stocks Online (cont.)
Initial public offerings (IPOs)
Spring Street BrewingOffers initial and secondary securities trading over the InternetSee ipo.com
Global stock exchanges—around-the-clock global trading
Related marketsFinancial derivativesCommoditiesMutual funds
Individual investors and day tradingElectronic trading of interest rate derivatives
Swapswire.comForbes.com
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Cyberbanking and Personal Finance
Electronic bankingSaves time and money for usersOffers an inexpensive alternative to branch banking
Application Case: Cyberbanking at Wells Fargo
Capabilities of home banking
Get current account balances any timeObtain charge and credit card statementsPay billsDownload account transactionsTransfer money between accounts
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Cyberbanking and Personal Finance
International and multiple-currency bankingSome international retail purchasing can be done by credit cardOther transactions may require international banking support
Hong Kong Bank’s HEXAGON provides e-banking in AsiaMark Twain Bank in the U.S. uses e-cash to support trading in 20 foreign currenciesBank of America and other banks offer:
International capital raisingCash managementOther services on an international level
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Implementation issues in banking and online stock trading
Securing financial transactionsApplication case: Bank of America Online
Using the extranetBanks provide large business customers with personalized service by allowing them access to the bank’s intranet
Access accountsHistorical transactionsIntranet-based decision-support applications
Cyberbanking and Personal Finance (cont.)
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Cyberbanking and Personal Finance (cont.)
Imaging systems—allow customers to view images of all:
Incoming checksInvoicesOther related online correspondence
Pricing online vs. off-line servicesSome banks offer free services (fee per check or transfer)Some banks charge $5 to $10
Risks—especially in international banking
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Banking: 4 scenariosBuilding alliances quickly with banks, software vendors, and information providersEffective outsourcing without neglecting to build in-house skills (customer information systems)Focusing on the profitable customers to provide broad channels for services and productsKeeping a central role in the payment environment
Cyberbanking and Personal Finance (cont.)
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The Future of Online Banking
Three core strategies to pursue 1. Customers Agents—banks unable to achieve
economies of scaleOffer customers the widest possible choicesInclude products from multiple sourcesProvide the customers with integrated information services
2. Product Manufacturers – banks able to achieve economies of scale
Strengthen a trend that can already be seen in a number of product segmentsIn core processing services for small and medium-sized institutions
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The Future of Online Banking (cont.)
Three core strategies to pursue (cont.)3. Integrated Players—banks with a strong
brand and position from manufacturing to delivery
Many banks will adopt a hybrid strategyEvery player needs to make crucial decisions about which areas are strategically too risky:
To outsource Which capabilities need to be built up in-house
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The Future of Online Banking (cont.)
Personal finance onlineBill paying and e-checksTracking bank accounts etc.Portfolio managementInvestment trackingQuotes and prices (past and current)Budget organizationRecord keepingTax computationsRetirement goals, planning and budgeting
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Billing Online
Automatic transfer of mortgages
This method has existed for several yearsThe payer authorizes its bank to pay the mortgage, including tax escrow payments
Automatic transfer of funds to pay monthly utility bills
Since1997, the city of Long Beach has allowed its customers to pay their gas and water bills from their bank accountsMany utility companies worldwide provide this option
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Billing Online (cont.)
Paying bills from online banking account
Can be made into any bank accountMonthly rent and other bills paid directly into the payee’s bank accounts
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Billing Online (cont.)
A merchant-to-customer direct billingA merchant posts bills on its Web siteCustomers can view and pay their billCustomers have to go to many Web sites to pay all their billsSeveral utilities in Los Angeles allow customers to pay bills on the utilities’ Web site (20 cents per transaction )
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Billing Online (cont.)
Using an intermediaryA third party consolidates all bills related to each customer in one site in a standard formatCollects a certain commissionMakes it convenient to complete transactionsE*Trade and Intuit
ISPs servicesTrying to sell customized solutionsDo not have adequate billing platformsSee moneymain.com
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Online Publishing
The electronic delivery of newspapers, magazines, news, and other information through the InternetOnline Publishing Today and Tomorrow
Today— mainly used for disseminating information and for conducting sales transactions interactivelyTomorrow— include more customized material that the reader will receive free, or will pay for
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Online Publishing (cont.)
Publishing ModesNewspapersMagazinesNewsTextbooksMusicArtworkVideo clipsMovies
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Online Publishing (cont.)
Publishing MethodsOnline archive: digital archive (library catalogs, bibliographic databases)New medium: extra comprehensiveness to issue or topic Publishing intermediation: online directory for news servicesDynamic or just-in-time: create content in real-time and transmit on the fly
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Online Publishing (cont.)
Publishing music, videos, and gamesMajor issue is payment of intellectual property feesPeople-to-people (P2P) model—people swap files 3rd-party organizer may be in violation of copyright laws (Napster)
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Online Publishing (cont.)
Digital delivery of documents—secure environment
U.S. Postal Service, UPS, E-parcel.com
EncryptionSoftware for digital signatureAuthenticationNotarization
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Online Publishing (cont.)
Edutainment—combination of:EducationEntertainmentGamesGoal: encourage students to become active learnersManagerial issues
Educational games delivered as CD-ROMsDistance-learning format
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Online Publishing (cont.)
Electronic booksFrequent updates possibleContain up-to-the-minute informationSpecial eBook device necessary to view booksSee:
Wizap.comEbookconnections.comNetlibrary.com
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Knowledge Dissemination
Virtual teaching and online universitiesDistance learning and virtual universitiesMany universities offer limited courses and degrees, but use innovative teaching methods and multimedia support
MBA program in Hong KongLectures delivered on interactive TV (iTV), now on the WebStudents decide what and when they “attend” the lectureLecture, support material exercises, etc., provided on the Web
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Knowledge Dissemination (cont.)
Online advice and consultingMedical advice—provide consultation with top expertsManagement consulting—provide accumulated expertise from knowledge basesLegal advice—delivery of legal consultation services to business has considerable prospects
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Knowledge Dissemination (cont.)
Online advice and consulting (cont.)Financial advice— offer extensive financial adviceOther service online
HealthcareMatchmakingElectronic stamps
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Disintermediation and Reintermediation
Change the role of agents to:Assists in comparison shopping from multiple sourcesProviding total solutions by combining services from several vendorsProviding certifications and trusted third party control and evaluation systems
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Disintermediation andReintermediation (cont.)
Issues impacting future of intermediariesThe success of intelligent agents
Travel intelligent agentsAgents that support job matchingAgents that interpret resumesThe more intelligent the software agents become, the less human agents will be needed
Customer attitudes and behavior are importantGood experience with online agencies means fewer customers use human agentsInsurance purchasingStock purchasingVirtual travel agencies
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Disintermediation and Reintermediation (cont.)
New roles of electronic marketing intermediaries
To extend what we are familiar with in physical markets to the virtual world (e.g., search services and electronic malls) To extend payment clearing functions into the Internet (e.g., electronic cash and digital credit card services)
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Disintermediation andReintermediation (cont.)
Disintermediation in B2BExchanges decrease number of calls a sales rep pays on purchasing managersReengineering marketing and sales organizations is necessary
CybermediationElectronic intermediary (rowe.com)Affects most market functions
Hypermediation—human/electronic intermediation; may profit greatly from EC
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Managerial Issues
Effectiveness of out-of-town recruitmentPrivacy may be in dangerInternational legal issues may impact services more than productsEthical issues are prevalent in servicesThe intermediaries and their roles are changingAlliances for online initiatives are spreading rapidly