The Digital Firm: Electronic Business and Electronic Commerce

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

• How has Internet technology changed value
  propositions and business models?
• What is electronic commerce? How has electronic
  commerce changed consumer retailing and
  business-to-business transactions?
• What are the principal payment systems for
  electronic commerce?

3
Objectives

• How can Internet technology facilitate management
  and coordination of internal and
  interorganizational business processes?
• What are the major managerial and organizational
  challenges posed by electronic business and
  electronic commerce?

4
Management Challenges

• Digitally integrating the enterprise requires a
  complete change of mind-set.
• Finding a successful Internet business model.

5
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
Internet Technology and the Digital Firm

• The Internet
• Rapidly becoming infrastructure of choice
• Universal, easy-to-use set of technologies and
  standards
• Web sites available 24/7
• Extended distribution channels
• Reduced transaction costs
• Reduced network and coordination costs

6
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions

• Past Information about products and services
  bundled with their physical value chain
• Today The Internet has unbundled information
  from traditional value chain, creating new
  business models

7
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions

• Information Asymmetry
• One party has more information essential to the
  transaction than the other party
• The Internet shrinks information asymmetry

8
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions

• Richness and Reach
• Richness depth and detail of information
• Reach how many people a business can connect
  with how many products offered those people
• Internet allows much richer communication with
  farther reach

9
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
The changing economics of information
Figure 4-1
10
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions

• Internet Business Models
• Virtual storefront Sells physical products
  directly to consumers or businesses.
• Information broker Provides product pricing and
  availability information generates revenue from
  advertising or directing buyers to sellers.
• Transaction Broker Processes online sales
  transactions for fee.

11
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions

• Internet Business Models
• Online Marketplace Provides digital environment
  where buyers and sellers meet
• Content Provider Provides digital content, such
  as news revenue from fees or advertising sales
• Online Service Provider Provides connectivity
  revenue from fees, advertising, or marketing
  information

12
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions

• Internet Business Models (cont.)
• Virtual Community Provides online meeting place
  for people of similar interests
• Portal Provides initial point of entry to the
  Web, along with specialized content and services
• Syndicator aggregates content or applications to
  resell as package to third-party Web sites

13
Electronic Commerce
Categories of Electronic Commerce

• Business-to-consumer (B2C) Retailing products
  and services to individual shoppers
• Business-to-business (B2B) Sales of goods and
  services among businesses
• Consumer-to-consumer (C2C) Consumers selling
  directly to consumers

14
Electronic Commerce
Customer-Centered Retailing

• Direct Sales Over the Web
• Disintermediation Removal of intermediary steps
  in a value chain, selling directly to consumers,
  significantly lowers purchase transaction costs
• Reintermediation Shifting intermediary function
  in a value chain to a new source, such as
  service hubs

15
Electronic Commerce
The benefits of disintermediation to the consumer
Figure 4-2
16
Management Challenges and Opportunities
Business Process Change Requirements

• Unproven business models
• Business process change requirements
• Channel conflicts
• Legal issues
• Trust, security, and privacy