The Digital Firm: Electronic Business and Electronic Commerce

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Chapter
The Digital Firm Electronic Business and
Electronic Commerce
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
OBJECTIVES

• Analyze how Internet technology has changed value
  propositions and business models
• Define electronic commerce and describe how it
  has changed consumer retailing and
  business-to-business transactions

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
OBJECTIVES (Continued)

• Compare the principal payment systems for
  electronic commerce
• Evaluate the role of Internet technology in
  facilitating management and coordination of
  internal and interorganizational business
  processes
• Assess the challenges posed by electronic
  business and electronic commerce and management
  solutions

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm

• Information technology infrastructure The
  Internet provides a universal and easy-to-use
  set of technologies and technology standards that
  can be adopted by all organizations.
• Internet provides low cost connectivity
• Direct communication between trading partners
  Disintermediation removes intermediate layers and
  streamlines processes.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm
(Continued)

• Round the clock service Web sites available to
  consumers 24 hours
• Extended distribution channels Outlets created
  for attracting customers who otherwise would not
  patronize a firm
• Reduced transaction costs Costs of searching for
  buyers declines
• Reduced overheard, inventory, maintenance, etc.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
New Business Models and Value Propositions

• Business Model
• Defines an enterprise
• Describes how the enterprise delivers a product
  or service
• Shows how the enterprise creates wealth
• how it adds value, creates something people want

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Some Internet Business Models

• Virtual storefront Sells goods or services
  online (Amazon.com)
• Information broker Provides information on
  products or services (Edmunds.com)
• Transaction broker Provides online transaction
  facility (eTrade.com, Expedia.com)
• Online marketplace Provides a trading platform
  for individuals and firms (eBay.com)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Categories of Electronic Commerce

• Business-to-customer (B2C) Retailing of products
  and services directly to individual customers
  (Wal-Mart.com)
• Business-to-business (B2B) Sales of goods and
  services to other businesses (Grainger.com,
  Ariba.com)
• Consumer-to-consumer (C2C) Individuals using the
  Web for private sales or exchange (eBay.com )
• B2E

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Management Information Systems Chapter 4 The
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Commerce
ELECTRONIC COMMERCE
Business-to-Business Electronic Commerce New
Efficiencies and Relationships

• Electronic Data Interchange (EDI) Enables the
  computer-to-computer exchange between two
  organizations of standard transactions.
  Currently 80 of B2B e-commerce uses this system.
  
• EDI is being replaced by more powerful Web-based
  alternatives.
• xml, .net, other web-based data communication
  standards

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Electronic Data Interchange (EDI)
Purchase orders, documents, invoices, etc.
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE

• Private Industrial Networks
• The largest Web-based form of B2B commerce
• Fastest growing type of B2B commerce
• Private B2B extranets that focus on continuous
  business process coordination between a small key
  group of companies for collaboration and supply
  chain management.
• Wal-Mart uses its own private network to
  coordinate more than 15,000 suppliers to its
  stores.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
The Changing Economies of Information

• Information asymmetry One party in a transaction
  has more information than the other. The Internet
  decreases information asymmetry.
• Increases richness The Internet increases the
  depth, detail, and scope of information.
• Increases reach The Internet increases the
  number of people who can be contacted
  efficiently.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
The Changing Economics of Information
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Interactive Marketing and Personalization

• Clickstream tracking tools
• Collect data on customer activities at Web sites
  and store them in a log

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Web Site Visitor Tracking
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Web Personalization

• Create unique personalized Web pages for each
  customer
• Increased closeness to customer increases value
  to the customer, while reducing costs of
  interacting with the customer

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Electronic Commerce Payment Systems
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Collaborative filtering

• Compares information gathered about a specific
  users behavior at a Web site to data about other
  customers with similar interests to predict what
  the user would like to see next. The software
  then makes recommendations to users based on
  their assumed interests.
• Amazon.coms recommended books, music, etc.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
How Intranets Support Electronic Business
Intranet a private, internal network using
Internet technology
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets

• Connectivity Accessible from most computing
  platforms
• Can be tied to internal corporate systems and
  core transaction databases
• Platforms for interactive applications
• Scalable to larger or smaller computing platforms
  

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets (Continued)

• Easy to use, universal standard Web interface
• Low start-up costs
• Richer, more responsive information environment
  than corporate manuals
• Reduced information distribution costs

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND
SOLUTIONS
Management Opportunities
The Internet provides firms with extraordinary
opportunities to develop new products and
services, new distribution channels, new avenues
for marketing and sales, and even entirely new
business models, however these opportunities
should align with the overall business strategy.
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND
SOLUTIONS
Management Challenges

• Finding a successful Internet business model
• Organizational change challenges
• Trust, Security, and Privacy (using the internet)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND
SOLUTIONS
Solution Guidelines

• Determining how Internet technology can provide
  value for the business (stay up with
  current/future technology/opportunities)
• Managing business process changes (change
  management)
• Safeguarding security and privacy (firewalls,
  encryption, controls, etc.)