slide 1-1 e-business strategy and implementation mis 415/575 spring 2011 introduction
TRANSCRIPT
Overview
1. E-business, what is it?2. Why study e-business?3. Characteristics4. Expectations (Dotcom-boom vs. –bust)5. Types of E-business6. Impact of E-Business on Market Structures
(example)
1. E-Business, E-Commerce – what is it? Electronic commerce
Shopping on the Web Businesses trading with other businesses Internal company processes Broader term: electronic business (e-business)
Electronic commerce includes: All business activities using Internet technologies
Internet and World Wide Web (Web) Wireless transmissions and personal digital
assistants Dot-com (pure dot-com)
Businesses operate only online
2. Why Study E-Business? The Internet changes everything except the
rules of business.Shapiro/Varian, Information Rules
E-commerce technology is different, more powerful than previous technologies
Traditional commerce: Passive consumer Sales-force driven Fixed prices Information asymmetry
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3. Unique Features of E-commerce Technology and Their Significance
Is ubiquitous (available everywhere, all the time) Offers global reach (across cultural/national boundaries) Operates according to universal standards (lowers
market entry for merchants and search costs for consumers)
Provides information richness (more powerful selling environment)
Is interactive (can simulate face-to-face experience, but on a global scale)
Increases information density (amount and quality of information available to all market participants)
Permits personalization/customization Social Technology (“Web 2.0”)
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4. Expectations: Amazon at 10: Profitable at Last
Story of Amazon in many ways mirrors story of e-commerce itself
Process of continuous change and exploration for profits
What are the reasons why people shop at Amazon? Why wasn’t it profitable from Day 1? How and when did it become profitable? How many of you have used Amazon recently? What was your experience? Do you think Amazon will remain profitable?
5. Types of E-Commerce
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Business-to-consumer (B2C): Consumer shopping on the Web
Business-to-business (B2B): E-procurement
Transactions conducted between Web businesses
Supply Chain management Business processes
Using Internet technologies to support organization selling and purchasing activities
Types of E-Commerce (cont’d)
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Web helping people work more effectively Telecommuting (telework)
Consumer-to-consumer (C2C) Individuals buying and selling among themselves
Web auction sites C2C sales included in B2C category
Seller acts as a business (for transaction purposes)
Business-to-government (B2G) Business transactions with government agencies
Paying taxes, filing required reports B2G transactions included in B2B discussions
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6. Example: Economic Forces and Electronic Commerce
Economics Study how people allocate scarce resources
Through commerce and government actions Commerce organizations participate in markets
Potential sellers come into contact with buyers Medium of exchange available (currency or barter)
Organization hierarchy (flat or many levels) Bottom level includes largest number of employees
Transaction costs Motivation for moving to hierarchically structured firms
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Transaction Costs Total of all costs that a buyer and seller incur
Gathering information and negotiating purchase-and-sale transaction
Brokerage fees and sales commissions Cost of information search and acquisition
Sweater dealer example
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Markets and Hierarchies General trend toward hierarchies Coase’s analysis of high transaction costs
Hierarchical organizations formed Replace market-negotiated transactions Strong supervision and worker-monitoring elements
Sweater example Oliver Williamson (extended Coase’s analysis)
Complex manufacturing, assembly operations Hierarchically organized, vertically integrated
Manufacturing innovations increased monitoring activities’ efficiency effectiveness
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Using Electronic Commerce to Reduce Transaction Costs
Electronic commerce Change vertical integration attractiveness Change transaction costs’ level and nature
Example: employment transaction Telecommuting
May reduce or eliminated transaction costs
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Network Economic Structures Neither market nor hierarchy Strategic alliances (strategic partnerships)
Coordinate strategies, resources, skill sets Form long-term, stable relationships with other
companies and individuals Based on shared purposes
Strategic partners Come together for specific project or activity Form many intercompany teams
Undertake variety of ongoing activities
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Network Economic Structures (cont’d.)
Network organizations Well suited to technology industries
Information intensive Sweater example
Knitters organize into networks of smaller organizations Specialize in styles or designs
Electronic commerce role Makes such networks easier to construct, maintain
Predominant in near future
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Network Effects Activities yield less value as consumption amount
increases Law of diminishing returns
Example: hamburger consumption Networks (network effect)
Exception to law of diminishing returns More people or organizations participate in
network Value of network to each participant increases
Example: fax machine
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Using Electronic Commerce to Create Network Effects
E-mail account Provides access to network of people with e-mail
accounts Smaller network
E-mail generally less valuable Internet e-mail accounts
Far more valuable than single-organization e-mail Due to network effect
Need way to identify business processes Evaluate electronic commerce suitability
For each process
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Identifying Electronic Commerce Opportunities
Focus on specific business processes Break business down
Series of value-adding activities Combine to generate profits, meet firm’s goal
Commerce: conducted by firms of all sizes Firm
Multiple business units owned by a common set of shareholders or company
Industry Multiple firms selling similar products to similar
customers