The Business Environment

1
Chapter 4

• The Business Environment

2
Topics

• E-commerce Business Environment
• Intermediaries
• New competition

3
E-Commerce Business Environment

• Low cost of entry
• Global reach
• Huge potential markets
• Intense competition

4
The three categories form an integrated structure
Integration is the future of e-commerce.
5
The three categories are applications that
communicate with each other via the infrastructure

• Another way to view integration

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A B2C transaction and a supplychain purchasing
transaction are similar

• Supply chain links value chains
• Categories somewhat arbitrary
• Categories are a model

7
Digital Products

• Potential killer applications/services
• Software
• Recorded music
• Digital books
• Information services
• Diminishing returns does not apply
• E-commerce is a digital technology

8
The law of diminishing returns applies to
physical products.
At some point, unit cost increases with volume.
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Digital products do not experience diminishing
returns.

• High startup cost
• First copy
• Low incremental cost
• After breakeven
• Pure profit

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Intermediaries

• An intermediary is a middleman
• Disintermediation
• Eliminating the middleman
• Sometimes claimed as e-commerce benefit
• Reintermediation
• New middlemen replace the old ones
• An e-commerce reality

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Intermediaries
Intermediaries provide services that lie off the
value chain.
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Some intermediaries
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Negating Location

• Geography no longer matters
• Global competition
• Examplewriting this textbook
• Participants
• The authors (Florida and Ohio)
• The publisher (Boston)
• Production (New England)
• Printing and warehousing (Indiana)

14
A manuscript page

• Created by the authors
• Florida
• Ohio
• MS Word

15
Rough art

• Created by the authors
• Florida
• Ohio
• Visio

16
A copy edited page

• Copy editor in Massachusetts
• MS Word

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A finished page

• Paging done in Massachusetts
• Adobe Acrobat
• All electronic communication

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Bots

• Bot is an intelligent agent
• Increases customer power

Source www.botspot.com
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The competitive advantage model
The two yellow boxes represent activities that
happen simultaneously.
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Time for technologies to reach 50 million users
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The accelerating pace of innovation

• Textbook
• 198036 months
• 200021 months
• Lose 40 of competitive advantage
• Rapid obsolescence
• Time to market is key
• Delay means lost opportunity

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Evolving E-Commerce Business Strategies

• Dangereverything becomes a commodity
• Frictionless e-commerce
• No competitive advantage for anyone
• Brand name matters more than ever
• Brand name reduces perceived risk
• Bricks-and-clicks strategy
• Reduced cycle time is a key objective
• Reduce time to market
• React quickly to change

23
The 20 top technology-related brand names in the
US

• This list is from 2001
• How would it change today?

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Information Technology as Strategic Tool

• Modern business is
• Extremely competitive
• Changing at an accelerating rate
• Impossible to keep current manually
• Information technology infrastructure
• Essential
• A strategic resource