1 chapter twelve global e-commerce: an examination of issues related to advertising and...
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1
Chapter Twelve
Global E-Commerce: An Examination of Issues Related to Advertising and Intermediation
2
Agenda
E-Commerce Future and SuccessTypes of Websites, types of E-commerceThe Richness-Reach TradeoffIntermediation
3
Global E-Commerce Predictions
Intermediaries will decrease (disintermediation)Disintermediation will be more rapid in service
industryDisintermediation is sensitive to product and
service characteristicsPromotions will inhibit disintermediationNew intermediaries will arise (navigators, eg.)Logistics and Distribution are enhanced by E-
commerce (fulfillment functions)
4
Internet & Productivity
Exponential Growth of Internet Great potential for economic advantage
Productivity Paradox Lack of observation of productivity gains in
macroeconomic data Resolved by understanding the long gestation period
• Changes in human skills and organizational structure must occur before true growth is seen
• Learning is important
• People remember
5
Internet & Productivity
Productivity Paradox What does IT buy? Lowered transaction costs, lowered
coordination costs, interoperability, increased memory What does IT cost? Increased learning, new procedures,
new ways of thinking
6
Critical Success Factors for Global E-Commerce
High tech also requires high touchGlobalize operations, but localize serviceSimplify and expedite transaction processFoster trusting relationships with [& among]
customersFocus on convenience, info, intermediation,
pricingGet yourself found often and on top in portalsPlan to evolve to transactions
7
Types of Websites
Static
Inter-actional
Trans-actional
Business Basis
of Firm
Portal
Links to other websites and web services
8
The Richness-Reach Tradeoff-1
Reach: Distribution RangeRic
hnes
s: V
arie
ty a
nd D
epth
of
Con
tent
In the past, the cost of
communication limited the amount of
information we could distribute
over a given territory
Today, via inter-, intra- and extranets, we can distribute almost limitless variety and amounts of information over a given range, even worldwide.
9
The Richness-Reach Tradeoff-2
Reach: Distribution RangeRic
hnes
s: V
arie
ty a
nd D
epth
of
Con
tent
Each distribution
channel has its own
characteristic Richness-
Reach tradeoff curve
Attempting to increase
distribution range incurs costs, which
lower the available richness.
10
The Richness-Reach Tradeoff-3
Reach: Distribution RangeRic
hnes
s: V
arie
ty a
nd D
epth
of
Con
tent
Attempting to increase
richness incurs costs, which
lower the available
distribution reach
11
The Richness-Reach Tradeoff-4
Reach: Distribution RangeRic
hnes
s: V
arie
ty a
nd D
epth
of
Con
tent
The new media BREAK the relationship between richness and
reach. No reasonable move to increase richness or reach will have any real cost
and hence no effect on the other characteristic.
12
Global e-Commerce: Transformation
Connecting the World 1st Phase – Sharing databases, EFT, EDI
• Very successful!
2nd Phase – B2C, B2B e-Commerce • Moving value chain processes to Internet
• Is critical for survival and sustenance of the Internet
Internet Transforming Business• US Banking Industry – 95% online services
• 32 million Americans bank online
• Airlines, Books, etc.
13
Global e-Commerce
Online Spending Trends 2002 e-Commerce Revenues
• Worldwide – $623 B., up from $41 B. in 1998
• US – $291 B., up from $31 B. in 1998
What happened to Predictions?
15
Familiar Types - 2
B2C: RetailingB2B: Supply ChainG2B: RegulationB2G: Supply/ProcurementG2C: E-governmentC2G: ????C2C: Amateur BusinessB2E: Part of Employee Relations
16
Global e-Commerce
Business to Business (B2B) Linking with other members of the value chain
• Less expensive automated transactions
• Enables standards for data transfer
• Extends boundaries
• Streamline operations (JIT)
• Improve customer service
• Reduce Operating Costs
• Opportunities for sales automation and self-service purchases
• Allows Manufacturers, wholesalers, retailers, and consumers to buy, sell, and barter
17
Global e-Commerce (continued…)
Business to Employee (B2E) Linking businesses to their employees
• Keeps everyone “up to date”
• Download tax forms
• Review benefits
• Signing up for medical
• Buy company product at employee discount
• Automatic deductions from payroll (medical, retirement plans)
18
Global e-Commerce (continued…)
Business to Consumer (B2C) Linking businesses to customers
• Lets customer buy online• Improves customer relationship and awareness of product and/or
service
Business to Government (B2G)Government to Consumer (G2C)
• Thought of as democratizing factor
Consumer to Consumer (C2C)• E-bay is current archetype
19
Internet and Traditional Advertising
Criterion
Driver
Hyperlinks
View Timing
Effectiveness Measures
Control over Exposure Time
Interactivity
Image
Pay for Performance
Targetting
Traditional Advert
Advertising
None
View when Broadcast
None or little; based on samples & focus gps.
Determined by advertiser except in print media
None
Perference for upscale
Not normal
Limited
Internet Advert
Contents
Network of HLs
View on demand
All hits recorded; based on actual data
Determined by web surfer upon use
As much as desired
Preference for relevance
Increasingly tied
Multiple paths for targetting
20
Global and E-Commerce Issues
CybercrimeGlobal Market ExplorationInternationalizationLocalizationPayment SystemLegal and Taxation SystemLearning Curve or Quantum LeapIntermediation …
21
Intermediation
BUYERSELLER
MARKETSPACE
Traditionally, buyer and seller come together in
market space where they can
confidently transact.
BUYER SELLER
Owners of the market space get
a fee for this intermediation
service.
SIMPLE INTERMEDIATION
22
Intermediation-2 In the traditional marketspace, the owners provide safety, security,
standards, replicability,
recording, transportation, etc. to increase
the confidence of buyers and
sellers.
BUYER SELLER
As interaction becomes more complex, more possibilities for intermediation
arise
Each of these represents a
business opportunity
COMPLEX INTERMEDIATION
These complex interactions result
in a hierarchy made possible by
layers of intermediation
23
Intermediation-3
HIERARCHY
BUYER SELLER
A more complex form of
intermediation is being a navigator
among brokeragesOne possibility
for intermediation is brokerage
COMPLEX INTERMEDIATION GIVES RISE TO HIERARCHIES
An even more complex form of intermediation is
trraining or consulting in how to use navigators
24
Intermediation-4
MARKETSPACE
The user can take over many of the intermediation
functions, resulting in “dis-intermediation”; hierarchies are
broken down and the market space
is recreated
As Internet replaces the
Hierarchies of the Marketspace, the
user becomes “empowered”
DISINTERMEDIATION
BUYER SELLER
Assuming the user has the tools and the skills and the opportunities
25
Intermediation-5
MARKETSPACE
Providers can find niches within the interstices and “reintermediate” the market space,
reintroducing hierarchical structures.
However, the complexity of the Internet creates more interstices.
REINTERMEDIATION
BUYER SELLER
26
Intermediation & E-Commerce
Anticipated Changes in Market Structure• Price
• Distribution of profits
• Strategic interactions between market participants
• Organizational hierarchies
• Transaction costs
• Value chain composition
• Barriers to entry
Ecommerce combines the advantages of lowered transaction costs with lowered coordination costs and other advantages of computer-based systems
27
Traditional Intermediation Marketing Channels
Automobile Part Manufacturer
Vehicle ManufacturersService Program
Mail Order &Chains
Direct JobbersWarehouseDistributors
Oil &RubberCompanies
Indirect Jobbers Oil & Tire Jobbers
Service StationsRepair ShopsVehicle Dealers
Car Owner
Intermediaries
28
Traditional Intermediary Functions
Communication, Coordination and Exchange Costs
Assortment of ProductWarehousing and DistributionFinancing and Risk SharingProduct Promotions
29
E-Commerce & Intermediation
Digital Networks Direct channels between producers and
consumers Lowers coordination costs for producers and
retailers Lowers physical distribution costs Disintermediation - Theorizes the end of the
“middleman”
30
Intermediation Cont’d
Supporting Disintermediation Growing trends in online commerce
• Airline tickets
• Book sales
• Computer Sales
• Auctions
• Securities by discount brokers
Based mostly on anecdotal evidence
31
Emerging Intermediary Trends
Theorizes that E-Commerce will not eliminate the “Middleman”
Selling products direct is not a new phenomenon• Sherwin-Williams sell directly to customer
• Hart, Shaffner, Marx has about 200 retail outlets
• Gap uses direct retailing
E-Commerce is evolving new Intermediary functions
• CyberIntermediaries are emerging, “Hypermediation”
32
Intermediary – Global Issues
Cost-Effective Distribution If business efforts are concentrated on small
number of key countries• More efficient to ship goods from local distribution centers than from
home country
• Delivery services charge much more in other countries
If business efforts are concentrated on large number of foreign countries
• More efficient to negotiate a volume deal with a major delivery service
33
Critical Success factors for Global E-Commerce
Complement High Tech with High Touch Globalize Operations, but Segment Geographically to
Localize Service Simplify and Expedite Transaction Process Foster Trusting Relationships with Customers Reinvent with Focus on Convenience, Information,
Intermediation and Pricing Strategies Get Yourself Found Often and on the Top Plan Technology to Evolve for Transactional e-Commerce Prepare for m-Commerce
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