The E-Commerce Imperative

Chapter 1

challenges, issues and strategies

• Internet – profoundly change the business world– enabled a new way of conducting commerce

• e-commerce

• Electricity and power motor

• Computer and Internet

• Customer relationship management are – the competitive advantage – the bottom–line for market leadership

of the information age

Customer information is the currency of success in the 21st century marketplace

• Amazon.com– Earth’s biggest bookstore– The real prize

• Earth’s biggest customer database– Not: name, address, balance

– Buying behavior

– Shop the WEB• The place to find anything customers want to buy

online

• Amazon’s customer acquisition technique– Selling product– PlanetAll

• Help 1.5 million members– To keep up important professional and personal contacts– Electronically remind a member of a special occasion

• 15 millions items happen to be a mouse click away

– One stop convenience– Bring buyers, sellers of everything, everywhere

• Business-to-Business marketplace– Establish industrial communities-of-interests– Ariba and Commerce One

• Change from selling procurement software

• To establishing multi-seller, multi-buyer procurement market-places

• Owning the customer, the whole customer, is the ultimate prize of 21st century business

• Economies shift– From producer– To consumer

• The secret is– Customize offerings– One customer at a time

• Seller Beware

• Magic in owning customers– Give them what they want, when and where

they want it

• Key:– Capturing and analyzing info about buying

behavior

• Knowing what the customers want

• Buying experience is nothing less than delight– Providing full spectrum of individualized goods

and service

Concept is simple, implementation is HARD– Internet

• Three pillars of any business transformation– Technology, process and people

• Goal of course:– Understanding how internet changes the world of

business

– E-commerce • is not a single event

• Is a ongoing journey

– Support the complete external business process• Information stage (electronic marketing, networking)

• Negotiation stage (electronic markets)

• The fulfillment (order process, electronic payment)

• Satisfaction stage (after sales supports)

Internet & business landscape

• Industrial age– Automobile, interstate highway

• Information age– Internet

• Eliminates the constraints of time and distance

• Business ubiquity: conduct business everywhere, all the time

• From “The network is the computer”– Sun Microsystems’ slogan

• To “The network is the business”– Company information available worldwide– Business transaction flow friction-free

anywhere, anytime to customers, suppliers, and trading partners

– Information appliances are business touch points

• Cell phone, pagers, palm tops, web TV,…

Power shift to the customers

• Digital economy– IS customer-centric– NOT product centric

• IMB Global service vs. IBM MAPICS

• Company engineers customer processes that delight will win

• Information is power– Authoritarian society

• One-way hierarchical • Info flow down: One to many

– Democracy • Matrix forms of communication• Many to many

– Industrial age• Info flow one way: from producer to customers

– Information age• Internet provide many to many connection

• Turn the produce-customer relationship upside down

• Customer Age– Customer centric– Mass customization (vs. mass production)

• EC is– Reengineering end-to-end customer process

• Complete solution

• Reducing time

• Eliminate steps where possible

• Build consumer communities-of-interest

• Provide full service consumer process

• OR someone else will

• EC is – Reaching out the ultimate consumer

• B2B, B2C

• B2B’s customer– The one who requisitions, received and often recommends

– The one who actually place orders (the purchasing agent)

• Ultimate customer: the only who recommend

Global sales channel

• NO geographic market territories• Global potential and perspective

– The net levels the playing field– Daunting task

• Multiple languages, legal systems and business cultures

• French ban yahoo.com auction

– Expect new entrants from anywhere, anytime– Never rest to compete in the global marketplace

Reduced the cost of buying and selling

• Company MUST take this opportunity or find itself at a significant competitive disadvantage– Dell vs. Compaq, ….– Variable cost are near ZERO– Potential customers are tremendous– Initial cost is high– Printing and distribution cost are nil

• Direct online sales– Simple (see-buy-get)

• Book

– Complex (see-configure-negotiate-contract-fulfill-settle)

• Dell, Cisco

• Direct online sale dramatically “TURN” physical inventory– Dell

• 1993, sales (2.9 billions) inventory (220 million)

• 1997, sales (12.3 billions) inventory (233 million)– 8 days of inventory

• 2000, 5 days

• Aiming for HOURS instead of DAYS

– Wal-Mart• Just in time inventory

– Outsourcing inventory control directly to its major suppliers in real-time

Converging touch points

• E-Commerce applications and systems must be available regardless of device or location– Web browser– Customers, suppliers, trading partners’ touch

points– Mobile workforce

– Integrate• Telephone

• Call centers

• Palm top, lap top, cell phone, PDA, fax, pager, IP telephone, email, digital postal mail, kiosk

– Digital touch points create new sources of customer information

• Analyze buying behavior

• Customize offering to individual

Always open for business

• A web site follows the sun, greeting markets as they arise each day– Demands non-stop systems and network assets– Redundancy, scalability, and fail-safe

• The good news:– “digital sales staff” work around the clock

without demanding overtime

• The sobering news:– E-commerce systems require availability and

reliability that can be achieved only through much effort and investment

• Reliability– eBay outage

• 1999, lost 3 – 5 millions revenues in the second quarter

• Scalability– “stampedes” with breaking news– Speed is important

• Online shoppers would wait for 8 seconds for a site to download

• Slow securities-trading site (Trade stocks)

Reduced Time-to-Market

• Time-to-market – No longer a competitive advantage

– A competitive necessity

• Microsoft– Beta version

– Reach market before release

– Customers actually involved in product development

– Customers prefer what they already known

• Time-to-market can and must be successfully managed– Collaborative product development– Knowledge sharing

Enriched buying experience

• Multimedia presentation of products– Fit an outfit at Lands’ End.com

• Tools assist customers in buying process– Dell.com help you configure a computer

• Chat room– Customer to share their product and service exp

erience• Potential buyer can learn

• Specialty goods– Purchase decision have many dimension

– Involve multi-step process

– Community-of-interest

• 大學招生、遊學、留學

• B2B: Sharing– product specification– bill of material– product scheduling

across suppliers and trading partners in real-time to increase productivity in design, development, and procurement

Customization

• Cornerstone for building a customer-centric business

• Interacts electronically with customers– Buying behavior can be analyzed to customize– One-to-one marketing revolution

• Find solution better fit their need

• Saving time in searching– Never presenting a huge catalog

– Greater relationship• Business know what customer will buy• Cross selling

– Harvard Business School 入學許可， 豪華學生宿舍• Up-selling

– New computer game, luxury video card

• Demographics• Biographics: long term interests of the indiv

idual

Self service

• Customer service with greater satisfaction and reduced cost

• Frustrated customers– Navigate call center

– Intolerable on-hold

– A human abruptly told you to call another number

• Customer will go to the self-service lane on the information highway

Reduced barriers of market entry

• A benefit and a cause of concern• New entrants can be successful

– Discover and delivery value to customer• Hotmail.com

– Reaches 1,000,000 members in 6 month with 50k budget– Reaches 12M in one years

– Competitors and replication is sure to follow

• Requires constant stream of innovation to sustain competitive advantages

Demographics of the internet users

• Information about income, sex, age and geographic– Early users

• Young, male, educated

– Now• Information appliance

• More normative

• Electronic market is much smaller than total consumer market– Not even closer to critical mass– Bandwidth demographic

• Business

• Individual bandwidth demographic– Keep it simple and snappy

– Track bandwidth trend

Power shift to Communities-of-Interest

• Customers go communities-of-interest first to explore and discover solution– Yahoo! Chat room vs. U.S. stock trading

• People having common interest go to share ideas, information, and opinions

• Customer pull info instead of marketing push

• Industrial age– Labor union

• Information age– Consumer union

• Consumers go there first to discover and explore solution

Cybermediation

• The middleman is dead, long live the middleman.

• Cybermediaries can provide compelling values– Aggregating many and diverse resources aroun

d a complete solution via internet

– An airline ticket is not a vacation• Focus on the bundles of solutions

– Customers needs and requirement

• Look for ways to aggregate value– Industry portal

Logistics and Physical Distribution

• Physical aspect of doing business– Often forgotten component in e-commerce

discussion

• Time value for info– Internet: ability to move info around the world

at the speed of light

• Time value of product– Physical distribution channel

• Warehouse of info age– Not a holding bin– An assembly plant

• Fedex: Flying warehouse

• Factory of the future– Amazon.com take over Fedex?– Fedex take over Amazon.com?

Branding

• Loyalty and acceptance still have to be EARNED– Enter a credit card number at the “BEST” price

site???– First on the net

• Brand name on the net

– Building loyalty and ultimate trust• Convenient, cost-effective, informative, simple,

secure, and reliable

When most market behave like the stock market

• Death of fixed pricing– Coca cola test price base on weather

• The reality of internet pricing: dynamics– Real-time and global– Interactive and close to perfect info

• Internet buying decision– Price, availability, perceive quality, and service

Auction everywhere

• Liquidate surplus goods– Last minute deal and bargains for unsold media

time• Priceline.com: excessive airline capacity

• Help company set price on first run goods– Fixed price will fade in the digital economy

Hyper-efficiency

• BPR, business process reengineering– Internal efficiency

• Internet streamline business processes– Hyper-efficient supply chains– Value chains of information

Conclusions

• Manager must know the “look and feel” of – Digital economy– New infrastructure– New way of conducting business and

competing– New business models– New rule of competition

• Internet– Is NOT a competitive advantage– Is a NECESSITY

Homework 1

• Pick an Internet phenomenon which attract you most– Find an example from .tw country domain– Write an one page report

• Describe the e-commerce site

• The upside of the e-commerce site

• The downside of the e-commerce site

– upload your report to cu.nsysu.edu.tw