The Digital Firm: Electronic Business and Electronic Commerce

1
4
Chapter
The Digital Firm Electronic Business and
Electronic Commerce
2
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

3
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

4
Management Information Systems
Chapter 4
The Digital Firm Electronic Business and
Electronic Commerce
Corrugated Supplies Case

• Challenge trillions of product configurations,
  short lead times, many competitors
• Solution Web extranet for order entry,
  customization, inventory, change orders, and
  shipping
• Demonstrates how IT and the Web coordinate the
  flow of information about orders, production,
  inventory and shipment
• Illustrates how systems in the digital firm
  connect demand, supply, and fulfillment to
  achieve operational excellence

5
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.
• Direct communication between trading partners
  Disintermediation removes intermediate layers and
  streamlines processes.

6
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

7
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

8
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.

9
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
10
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
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)

11
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
Internet Business Models (Continued)

• Content provider Creates revenue by providing
  content (WSJ.com, TheStreet.com)
• Online service provider Provides online
  services, including search service. (Google.com,
  Xdrive.com)
• Virtual community Provides an online community
  to focused groups (Friendster.com, iVillage.com)
• Portal Provides initial point of entry to Web,
  specialized content, services (Yahoo.com,
  MSN.com)

12
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 )

13
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Business-To-Consumer

• Advantages of E-commerce
• Customer-centered retailing Closer and more
  personalized relationship with customers is
  possible
• Web sites Provide a corporate-centered portal
  for the consumer to quickly find information on
  products, services, prices, orders

14
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-Commerce (Continued)

• Disintermediation The elimination of
  organizations or business process layers
  responsible for certain intermediary steps in a
  value chain, reducing costs to the consumer
• Reintermediation The shifting of the
  intermediary role in a value chain to a new
  source, adding additional value to the consumer

15
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
16
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

17
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Web Site Visitor Tracking
18
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

19
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Web Site Personalization
20
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.

21
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Customer self-service

• The use of Web sites to provide customers with
  access to information and answers to questions
• Replacing human call center operators and clerks
• UPS.com Customer tracking of packages
• Orbitz.com Customer self-help for organizing and
  managing a trip
• Dell.com My Order Status facility

22
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
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.

23
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Four different types of Net Marketplaces

• Distributors B2B online catalogs provide buyers
  with access to thousands of parts and other goods
  (Grainger.com)
• Procurement platforms Platforms for purchasing
  goods and materials and also sourcing,
  negotiating with suppliers, paying for goods, and
  making delivery arrangements (Ariba.com)

24
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Four different types of Net Marketplaces
(Continued)

• Independent exchanges Third-party Net
  marketplace that is primarily transaction-oriented
  and that connects many buyers and suppliers for
  spot purchasing (Freemarkets.com,
  GEPolymerland.com)
• Industry consortia Industry-owned Net
  marketplaces used primarily for long-term
  sourcing of direct inputs to production
  (ChemConnect.com)

25
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Electronic Data Interchange (EDI)
26
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
• Private B2B extranets that focus on continuous
  business process coordination between a small
  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.

27
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
A Private Industrial Network
28
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
A Net Marketplace
29
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Electronic Commerce Payment Systems
30
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
How Intranets Support Electronic Business

• Benefits
• Functional applications
• Good examples CARE and Mitre Corporation

31
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
  

32
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

33
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets

• Finance and accounting
• Human resources
• Sales and marketing
• Manufacturing and production

34
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets
35
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Finance Accounting

• General ledger reporting
• Project costing
• Annual reports
• Budgeting

36
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources

• Company
• Online publishing of corporate policy
• Job postings and internal job transfers
• Company telephone directories, training

37
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources (Continued)
Employees

• Healthcare
• Employee savings
• Competency tests

38
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Sales and Marketing

• Competitor analysis
• Price updates
• Promotional campaigns
• Sales presentations
• Sales contracts

39
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Manufacturing and Production

• Quality measurements
• Maintenance schedules
• Design specifications
• Machine outputs
• Order tracking

40
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Business Process Integration

• The Internet and collaborative commerce
• Collaborative commerce When firms use the
  Internet to cooperate closely in the development,
  production, and distribution of products and
  services
• GE Plastics maintains an Intranet where its
  customers (selected fabricators) can find
  information on product design and new
  developments.

41
Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Collaborative Commerce
42
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.
43
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

44
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
• Managing business process changes
• Safeguarding security and privacy