internet technology and the digital firm

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CHAPTER 4 INTERNET TECHNOLOGY AND THE DIGITAL FIRM.

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Page 1: Internet technology and the digital firm

CHAPTER 4INTERNET TECHNOLOGY AND

THE DIGITAL FIRM.

Page 2: 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.

  

Page 3: Internet technology and the digital firm

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.

Page 4: Internet technology and the digital firm

Internet technology

•Standardised communication architecture.

•Direct communication between related parties.

•Reduced transaction costsAirline ticket $8$1Banking $1.08$0.13

•Infrastructure for electronic business.

•Unbundling the information from the product.

Page 5: Internet technology and the digital firm

Business model:

An abstraction of what and how the enterprise delivers a product or service,showing how the enterprise creates wealth.

Page 6: Internet technology and the digital firm

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.

Page 7: Internet technology and the digital firm

INTERNET BUSINESS MODELS

Category Description Examples

Virtual Store front

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.

Amazon.com

Wine.com,

Wingspanbank.com

Marketplace concentrator

Concentrates information about products and services from multiple providers at one central point.Purchases can search,comparison-shop,and sometimes complete the sales transaction.

Shopnow.com Dealernet

Industrial mall

Insure market

On-line exchange

Bid-ask system where multiple buyers can purchase from multiple sellers.

Asia capacity Exchange

Covisint

E-steel

Fibermarket

Page 8: Internet technology and the digital firm

Information broker Provides product, pricing, and availability information. Some facilitate transactions, but their main value is the information they provide.

Partnet

Travelocity

Transaction broker Buyers can view rates and terms, but the primary business activity is to complete the transaction.

E*TRADE

Ameritrade

Auction Provides electronic clearinghouse for products where price and availability are constantly changing, sometimes in response to customer actions

Ebay

Ubid

Bigequip.com

Reverse auction Consumers submit a bid to multiplesellers to buy goods or services at abuyer 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 fromvendors.

Mobshop.com

Page 9: Internet technology and the digital firm

Digital productdelivery

Sells and delivers software, multimedia, and otherdigital products over internet.

Regards.comPhotodisc

Content provider Creates revenue by providing content. The customermay pay to access the content, or revenue may begenerated by selling advertising space or by havingadvertisers placement in an organized listing in asearchable database.

Salon.comThestreet.com

On-line serviceprovider

Provides service and support for hardware andsoftware users.

[email protected]

Virtualcommunity

Provides on-line meeting place where people withsimilar interests can communicate and find usefulinformation.

GeocitiesFortunecityTripod

Portal Provides initial point of entry to the web along withspecialized content and other services.

YahooBarrabas

Syndicator Aggregates content or applications from multiplesources and resells them to other companies.

ThinqScreamingMedia

Page 10: Internet technology and the digital firm

Internet Business Models

Dynamic pricingPricing of items based on real time interactions between buyers and sellers that determine what an item is worth at any particular moment.PortalWeb site or other service that provides an initial point of entry to the web or to internal company data.Banner adGraphic 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.SyndicatorBusiness aggregating content or applications from multiple sources,packaging them for distribution,and reselling them to third-party web sites.Pure-playBusiness model based solely on the internet.Clicks-and-mortarBusiness model where the web site is an extension of a traditional bricks-and-mortar businesses.

Page 11: Internet technology and the digital firm

Electronic Commerce

Business-to-Consumer(B2C)electronic commerceElectronic retailing of products and services directly to individual consumers.

Business-to-business(B2B)electronic commerceElectronic sales of goods and services among businesses.

Consumer-to-consumer(C2C)electronic commerceConsumers 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.

Page 12: Internet technology and the digital firm

Customer-Centered Retailing

•Direct sales over web

•Interactive marketing and personalization.

•M-Commerce and next generation marketing

•Custom self-service

Page 13: Internet technology and the digital firm

RetailerManufacturer Distributor Customer

Manufacturer Retailer Customer

Manufacturer Customer

Page 14: Internet technology and the digital firm

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.

Page 15: Internet technology and the digital firm

User Website

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

Page 16: Internet technology and the digital firm

Business-to-Business electronic commerce. ExchangeType 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

•Catalogs•Sourcing•Automated purchasing•Processing and fulfillment

Page 17: Internet technology and the digital firm

Phone or fax mill

ArrangeCarrier

Negotiateprice

Scheduleshipments

Fill out billsof lading

BillCustomer

Reconcile received goods against

receiving report

BEFORE

ShIpment

AFTER

Recoveredpaper

supplier

Fibermarketexchange

Papermill

FIBERMARKET EXCHANGE

Page 18: Internet technology and the digital firm

Marshall Industries Virtual Distribution System

S U P P L I E S E X T R A N E T M O D EM

C US TO M ER

I NTR A NET

U P S

C US TO M ER

Page 19: Internet technology and the digital firm

Digital walletSoftware 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 cardA 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 systemElectronic payment system for people who want to send money to vendors or individuals who are not set up to accept credit card payments.

Page 20: Internet technology and the digital firm

Examples of electronic payment systems for E-commerce

Paymentsystem

Description Commercialexample

Credit cards Secure services for credit card payments onthe internet that protect informationtransmitted among users, merchant sites, andprocessing banks

PC AuthorizeWeb authorizeIC Verify

Electroniccash(e-cash)

Digital currency that can be used formicropayments

Flooz.come-Coin

Person-to-person paymentsystems.

Send money via the web to individuals whoare not set up to accept credit card payments

PaypalBillpointYahoo payDirect

Page 21: Internet technology and the digital firm

Payment System Description CommercialExample

Electronic check Check with secure digital signature. Netchex

Smart card Microchip that stores electronic cashto use for on-line and off-linemicropayments

Mondex

Electronic billpayment

Supports electronic payment for on-line and physical store purchases ofgoods or services after the purchasehas taken place

CheckfreeBillserve.com

Page 22: Internet technology and the digital firm

Buyer

Retailer•Information•Orders•Service and support

Manufacturers,suppliers,and Distributors•Purchases•Bids

Banks•Credit checks•payment authorization•Electronic payments transfer

Business-to-consumer Business-to-Business

Electronic Commerce Information Flow

Page 23: Internet technology and the digital firm

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

Page 24: Internet technology and the digital firm

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

CorporateIntranet

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

Page 25: Internet technology and the digital firm

Customers Suppliers

Logistics services Distributors

Intranet

Planning &forecasting

Shipping Inventory

Order processing

Accounting

Procurement

Production

Intranets and Supply Chain Management

Page 26: Internet technology and the digital firm

MANAGEMENT CHALLENGES AND OPPORTUNITIES

•Unproven Business models

•Business Process change Requirements

•Channel Conflicts

•Legal Issues

•Security and Privacy