electronic commerce lecture 3 recap: technology and business pressures amazon vs nobles & barnes...

Electronic Commerce

Lecture 3 Recap: Technology and Business

Pressures Amazon vs Nobles & Barnes Largest e-bookstore in the world vs

largest retail bookstore chain What is Electronic Commerce? Projects and all

Traditional Businesses Intel/Motorola/Sun/IBM

Ftp, http, smtp, mime, Java, CGI, HTML, Javascript, …

Internet

ee-Consumers

Consumers

Internet

ee-Store

Consumers

…

E-Business Design Not like introduction of a new product or a

new service; infrastructure is already there Many challenges

One new e-door: from nothing to something Two doors: One existing (tradtional) door + one

new e-door Do these two doors lead to the same room (ideal),

different rooms (tight interface), or the existing traditional business room (create chaos)

One Big e-door: with the existing door goes to the background and slowly migrate into the e-business side (www.egghead.com)

A Business Week Articlewww.businessweek.com/1999/99_40/b3649007.htm on 1-Dec-99

Gearing up to serve this newly empowered customer turns the classic business model on its head

On the Net, speed trumps mass almost every time Amazon.com vs Barnes & Noble

Posting an annual sales rate of $1.2 billion = 235 B&N superstores

Spent $56 million on fixed assets such as computers and warehouses = $472 million on its 1,999 or so stores

$21.2 billion market capitalization = $1.8 billion of B&N Cisco Systems Inc. handles 78% of all its orders

over the Net and never even touches half, or $4 billion, of them

Historic ViewBefore the Railroad Travel between New York and

Boston in four days Transportation depends on

weather and location of waterways

Dispersed work force (92% of population in 1830 is rural)

8,000 U.S. time zones Vacation (if at all) near home Transport a ton of goods for

5-15 cents per mile (wagon or steamboat in 1825)

After the Railroad Travel between New York

and Boston in less than one day

Transportation depends on the ability to lay rails

Concentrated work force (50% population in urban)

4 U.S. Time Zone Vacation away from home Transport a ton of goods for

1 cent per mile (by rail in 1884)

What About NowWith Internet/EC No need to travel between

any two cities; view them Transportation depends on

traffic and your line speed Dispersed work force

(telecommuter) One Time Zone (mine) Vacation in home or never

take one Transport a ton of goods

for much more than one cents because of inflation and other factors

After the Railroad Travel between New Yock

and Boston in less than one day

Transportation depends on the ability to lay rails

Concentrated work force (50% population in urban)

4 U.S. Time Zone Vacation away from home Transport a ton of goods for

1 cent per mile (by rail in 1884)

Your Reading Assignments Chapter 1: From E-Commerce to E-

Business Value stream

Chapter 2: E-Business Trend Spotting Transaction time to processing time

Chapter 1: Introduction Value chain

Chapter 2(Kalakota & Robinson, 1999)

Major Trends (Table 2.1) Consumer trends

Speed of service Self-service Integrated solutions, not piecemeal products

Service/Process trends Convergence of sales and service:

Customization and integration Ease of use: Make service consistent and

reliable Flexible fulfillment and convenient service

delivery: Streamline your supply chain

Chapter 2(Kalakota & Robinson, 1999)

Major Trends (Table 2.1) Organizational trends

Contract manufacturing: Becoming brand intensive, not capital intensive

Retain the core, outsource the rest: Business process outsourcing

Increasing process transparency and visibility

Continuous Innovation and employee retention

Enterprise technology trends Enterprise applications: Connect the

corporation Infrastructure convergence: Increasing

melding of voice, data, and video Multichannel integration: Computer

telephony integration and voice recognition Wireless applications enter the mainstream Leveraging legacy investments: The rise of

middleware for application integration

Chapter 2(Kalakota & Robinson, 1999)

“The Fortune 500 Web” (11/98)

Lack of appropriate software Web page design will not be sufficient Search engines 6/98: 400 of the 500 Fortune companies (

www.fortune.com: GM, Ford, Wal-Mart, Exxon, GE, IBM, Citigroup, Philip Morris, Boeing, AT&T, Bank of America, Mobil,…)

‘Content negotiation’, multilingual pages/docs, universal accessibility

Conclusion?

“Web Home Pages as Advertisements” (8/99)

“Beliefs about Web sites” “Beliefs about traditional advertisements” INFORM (make aware/create beliefs) to

PERSUADE (generate positive attitudes and behaviors)

“Rating home pages as a person: tender, factual, heart warming, sensitive, gentle, rational, emotional, and logical”

“When people view a [home page], they are making a judgment, however intuitive and unconscious the process may be. This judgment concerns the sorts of experiences they would have, the ease of locomoting, of moving, of exploring – in a word, of functioning – in the environment they are viewing.”

What is EC - ‘97 do more with less - do more with e Internet-based commerce/Internet

commerce e-business e-enterprise Internet enterprise Business use of the Internet

Electronic Commerce? What?

www.webmd.com www.irs.govwww.trade.gov.hk

New Channels - good? marketing and distribution channel

for everyone marketing globally is by default “each person has the global

distribution channel at his/her disposal while only the global companies were able to do so in the past”

Channels - bad? no longer there is a way to find out if

the company is an existing giant or just a small startup

competitors spring up unexpectedly and unknownly around you

perfect competition may become a reality because of the low cost distribution channel and information availability

Electronic Commerce(Source R.3.)

EC is the “delivery of information, products/services, or payments via telephone lines, computer networks, or any other means.” : Completion of transactions between two parties facilitated by electronic data communications and networks

Electronic Commerce(Source R.3.)

EC is the “application of technology toward the automation of business transactions and workflows.”: Business transactions from start to end are facilitated by information technology and carried out quite differently as compare to the traditional way of doing buisness.

Electronic Commerce(Source R.3.)

EC is a “tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.”

EC “provides the capability of buying and selling products and information on the Internet and other online services.”

Supply Follows Demand leads to different categories of e-

commerce (Internet Enterprise) : government and non-profit enterprises

more will come: why? “The connections are always what the people want, but deprived of us due to inhibiting transaction cost. Now that the new information technology has lowered the threshold and put them within our reach, they will happen.”

Electronic Commerce Were there anything like it before and

now? Distance Learning/Virtual University

university for advanced learning? Not only pedagogical; social interaction; responsibility; making friends (networking); growing up; maturing;

distance learning provides advanced learning only??

e-Generation

Electronic Commerce Do we want it? Could we avoid it? Could we sit on the sideline and

watch it go by? If the answer is ‘no,’ then it is time for most of us to play catchup games. If the answer is ‘yes,’ then it is history; been there done that.

Do We Know EC? New field, yet it seems that we have been

there before No supporting data, yet we (or just I) think it

will stay Overload? Product promotion is immediate

(right in your face) New Markets? Reaching more (global and

diverse) customers (new channel of distribution)

Effective? Delivery of information is substantially cheaper

As Consumers… No store hours to remember No ‘directions’ to remember but

only the URL (Brand name loyalty?) More choices (brands, stores,

promotions, warranties, etc.) Better services (quick delivery?) Quick access to product information

As Conumers…new opportunities

Virtual auctions/entrepreneurs Virtual “consumer reports” Virtual “encyclopedia”/library Virtual job market Virtual consultants (build a house,

gardening, recipes…) Virtual tours

Reduce Transaction CostsTo send a fax for example, requires

making up the fax by hand or using word processing software, making a copy, take it to a shop where fax service is provided, pay for the service and receive the invoice for it; not to mention that one has to travel to the shop, by personal vehicle or using public transportation

Reduce Transaction CostsTo send a fax for example, requires typing

in the content of the fax using a laptop, send out the content to a fax processing site using wireless connection service (iMac) and you receive an acknowledgement to your electronic mailbox. Task is done. No transportation costs; of course one has to assume that equipement costs are equivalent

View of a person

Each organization has its own (integrated) customer information, but the customer’s own information that different organizations own deserves integration, too. The latter is a view for a whole person rather than the traditional view of a customer.

As Consumers…Great. Expands one’s memory

distributedlydistributedly, intelligence artificially, and view globallyglobally augmented by ubiquitous/ingeneous interfaces that allow mobility mobility across the globe

As Consumers…Think Again?

Scatters data and knowledge - in all kinds of organizations and in all kinds of format : freely captured and unknowingly ‘shared’ among benefiting organization

As Consumers…Extended

Connects a person to other persons and other organizations one number for all occasions: “ok, we

will give you a new account number.” We did not have that luxury before of having ‘free’ personal access to organizations

As Businesses… Either you go into e-commerce or

you stay out of e-community Marketplace (Do you know your

market?) Entrepreneurs fast forward:

minimum capital outlay, technology savvy

Finding the right supplier at reduced costs

As Businesses… The costs of information (for front and

back office operations) go down: “creating, processing, distributing, storing, retrieving paper-based information”

Cost of a cheque = 95 cents vs 2 cents for electronic payment

Inventory costs go down No more physical limitation (of how

much you can display)

As Businesses… Improve competitiveness… Shorten the period from product

development to market (time to market)

BPR strikes heads on Marketing Environmentally friendly – reduce

papers…

Business Pressures(Turban, et.al., Table 1.2)

Market and Economic Pressures Strong competition Global economy Regional trade agreements (e.g., NAFTA) Extremely low labor cost in some

countries Frequent and significant changes in

markets Increased power of consumers

Business Pressures(Turban, et.al., Table 1.2)

Societal & Environmental Pressures Changing nature of workforce Government deregulations Shrinking government subsidies Increased importance of ethical and legal

issues Increased social responsibility of

organizations Rapid political changes

Business Pressures(Turban, et.al., Table 1.2)

Technological Pressures Rapid technological obsolescence Increased innovations and new

technologies Information Overload Rapid decline in technology cost

versus performance ratio

As Government… Encourages EC with the view that it

benefits the society Telecommuting Reduce average time to complete tasks Less travelled public roadways Basement price, more people can afford it

(if they could access it!!!) Open the market to others that may not be

able to reach Delivery of social and public services

Quotes “Today more and more people in the private sector are

making what amounts to billions of dollars in decisions about e-commerce, and they are doing it without a reliable base of information.” Commerce Secretary William M. Daley, 25 May in Washington, D.C. (source: IEEE Spectrum, July 1999)

Impact Reduce cycle time – delivery of

products (especially digital products and services)

Corporate image can be established in a relatively short period

Provide quicker and deeper customer services

Impact Customerization of products and

services to the extreme Direct (1-to-1), customized

advertisement is possible Ordering systems can be used

effectively in reducing errors and expediting the delivery

Marketplace to marketspace

Impact Transforming Organizations Redefining Organizations Impacts on Manufacturing Impacts on Finance and

Accounting Human resource management,

training and education

Impact: Marketing

Direct marketing sales (mail order and telemarketing: TV show) in the US in 1998 was estimated at $75 billion; B2C sales were $2 billion

Internet marketing?www.tide.comwww.doubleclick.net

Memory Excessive reliance on computer-

based retrieval system Loss of personal memory :

inevitably diminishes the ability to reason and make judgements?? Would it happen?

Social memory versus personal memory

ee-Business Rules? Technology is no longer an after thought in

forming business strategy, but the actual cause and driver: Technology was never a driving force in the formulation of strategy

The ability to streamline the structure, influence, and control of the flow of information is dramatically more powerful and cost-effective than moving and manufacturing physical products

Inability to overthrow the dominant, outdated business design often leads to business failure

ee-Business Rules? The goal of new business designs is to

create flexible outsourcing alliances between companies that not only off-load costs, but also make customers ecstatic

e-Commerce is enabling companies to listen to their customers and become either "the cheapest," "the most familiar," or "the best."

ee-Business Rules Don't use technology just to create the product.

Use the technology to innovate, entertain, and enhance the entire experience surrounding the product, from selection and ordering to receiving and service

The business design of the future increasingly uses reconfigurable e-business community models to best meet customers' needs

The tough task for management is to align business strategies, processes, and applications fast, right, and all at once. Strong leadership is imperative.

Two Views of Where EC is Going

acquisition of information vs conduct of actual business transactions

connection of persons vs connection of organizations

Two Classes b2c e-commerce or retailing in the Internet

company retailing sites, such as B&N, Gateway, Wellcome

domain portal sites, such as WebMD, Expedia, Amazon.com (not sure…)

general portal sites, such as Yahoo! Business contacts/buyers-sellers/market place,

such as Go.com, JobDB.com, www.hkjobs.com newspapers

Will it work b2c ec one in five persons have made some

purchases over the net 50% used e-tickets 60% of Charles Schwab trading via Web distance learning US$8 billion 1998 to estimated US$20

billions in 1999 Internet retailing revenue: implications?? No more traditional shopping malls?

Analysis of B2C EC threshold of users implies success transaction costs reduced? Supply and demand presentation WOULD YOU USE IT?

B2B EC actual business transactions and

connection of organizations types: selling/buying between business -

company sites target other business partners

types: portal sites but for businesses; cybercash, security system integration,…

B2BEC - US$43 billion in 1998; expect to hit US$1.3 trillion by the end of 2003

Other ‘possibilities’ of EC Industrial E-Commerce: logistic centers,

a case in point; third-party or company-owned? Governmental agencies involvement?

Person-centered e-commerce: improves one’s own life and better quality of life overall?

Empowered an individual? Networking...