Chapter 1 Slide: 1

Chapter 1: Introduction To E-business

Chapter 1 Slide: 2

Learning Objectives (1)

• Explain what a business model is and how it is used.

• List the technologies that are being used to foster e-business.

• Recommend how a business can use e-business techniques to develop long term marketing relationships.

• Identify the components of a marketing system.

For use with Strategic Electronic Marketing: Managing E-Business, 2e

Copyright 2003 South-Western College Publishing

Chapter 1 Slide: 3

Learning Objectives (2)

• List the components of an e-business based marketing system.

• List the components of an e-business value chain.• Explain how and why businesses need to evolve

and change to maintain competitiveness.• Explain the importance of evaluating the ethical

practices of a business and outline an ethical framework for e-business.

For use with Strategic Electronic Marketing: Managing E-Business, 2e

Copyright 2003 South-Western College Publishing

Chapter 1 Slide: 4

Vignette: General Electric (1)

www.GE.com Suppliers linked through Extranet

deliver just-in-time. Supplies bid online.

Suppliers linked through Extranet

deliver just-in-time. Supplies bid online.

Web page provides

information and ordering.

Web page provides

information and ordering.

Consumer product delivered through

distributors or shippers.

Consumer product delivered through

distributors or shippers.

Product shipped from inventory or order is routed to

factory.

Product shipped from inventory or order is routed to

factory.

Database monitors equipmentDatabase monitors equipment

Payments are made by online through Web page.

Payments are made by online through Web page.

Customer gathers information and

purchases through Web page.

Customer gathers information and

purchases through Web page.

Chapter 1 Slide: 5

Vignette: GE (2)

• Thinking Strategically – Explain why Jack Welch would see e-business as

important for GE. – Consider where e-business could have a bigger impact

for GE, in the business-to-business arena or the business-to-consumer arena.

– List reasons why GE has been able to implement a new e-business model so quickly.

– Visit the GE website (www.ge.com). Speculate on the advantages of using a Website to develop and maintain customer relationships.

Chapter 1 Slide: 6

Changing Nature of Marketing• Capture data electronically at the point of sale and route

that information from the retailer to the supplier and/or the manufacturer.

• Electronically linked distribution systems are speeding products through the channel of distribution and helping to forge strong relationships between firms.

• The World Wide Web is allowing businesses to reach customers around the world rather than just local markets.

• Information on the customer’s shopping behavior is being stored in databases to profile individuals for targeted promotions and customized products.

Chapter 1 Slide: 7

Business Models• New information technologies are allowing

businesses to redesign business models and change business practice– A business model, or commerce model, is the basic

process flow indicating how a business operates. It indicates how business functions are linked together.

• Internet based business models requires fewer hard assets (bricks and mortar assets)– Brick and mortar businesses have tangible physical

assets such a factory, office building, warehouses, etc.

Chapter 1 Slide: 8

What is E-Business

E-business, or electronic business, systems use a number of information technology-based business practices to enhance relationships between the business and the customer. E-business includes changes in marketing communication, distribution systems, and business models.

www.ibm.com/e-business/

Chapter 1 Slide: 9

What is E-Commerce

• E-Commerce: consists of using electronic information based systems to engage in transactions or commerce online. This includes automating purchasing through Web sites.

Chapter 1 Slide: 10

Table 1.1: E-Business Industry Terms (1)

• Internet: A global network of computer networks that use a common interface for communication.

• World Wide Web: A graphically based Internet standard that allows easy access to information from around the world.

• E-Business: This is the process of using information technology (IT) to support a fuller operation of a business.

Chapter 1 Slide: 11

Table 1.1: E-Business Industry Terms (2)

• E-Commerce: Uses electronic information based systems to engage in transactions or commerce online.

• Extranet: An Internet based connection between a business and its suppliers, distributors, and partners. This is not open to the general public.

• Intranets: Internal private network that use the same types of hardware, software, and connections as the Internet.

Chapter 1 Slide: 12

Four Layers Of The Internet Economy

• Layer one: Internet Infrastructure Layer – Includes companies with products and services that help create an

IP based network infrastructure. • Layer two: Internet Applications Layer

– Builds off of layer one and includes the products and services that make it technologically feasible to perform business activities online.

• Layer three: Internet Intermediary Layer– Allows the investments in infrastructure to turn into business

transactions by facilitating the meeting of buyers and sellers over the Internet.

• Layer four: Internet Commerce Layer – Includes the sales of products and services to consumers or

businesses over the Internet.

Chapter 1 Slide: 13

• How big is the Internet: 500 million users worldwide - 2005 expected 1 billion.

• How much will consumers spend online: 1.8 billion - 2005: 16 billion.

• How much will businesses spent online: 1.3 trillion - 2005: 4.3-8 trillion.

Table 1.2: E-Business Growth and Projections

Chapter 1 Slide: 14

Marketing• Marketing is the process of planning and

executing the conception, pricing, promotion, and distribution of ideas, goods, and services that create exchanges that satisfy individual and organizational needs.

• Relationship marketing implies that business undertake strategies that will hold desirable customers over a long time period.

Chapter 1 Slide: 15

A Systems Approach (1)

• Helps decision-makers look at how all aspects of a strategic business unit (SBU) interact with each other.

• Systems are seen as being organic in that they must change in response to their environment or face the possibility of becoming extinct.

Chapter 1 Slide: 16

A Systems Approach (2)

• All of the components of a business must work in unison to allow the marketing system to operate in its environment.

• This system must organize itself and find an advantage over its competitors to ensure long-term sustainability.

Chapter 1 Slide: 17

The Traditional Business System

Target Customers

Target Customers

CommunicationCommunication

Information FlowInformation Flow

Payment FlowPayment Flow

ProductProduct

PricePrice

Distribution Flow

Distribution Flow

Chapter 1 Slide: 18

Figure 1.2:The Traditional Marketing System

Environment:TechnologicalCompetitivePolitical and LegalSocial

Strategic Plan

Strategic Plan

Strategic Goal

Strategic Goal

Supply Chain

Supply Chain

TargetCustomers

TargetCustomers

CommunicationCommunication

Information FlowInformation Flow

Payment FlowPayment Flow

ProductProduct

PricePrice

DistributionFlow

DistributionFlow

Chapter 1 Slide: 19

What Are The Business’ Goals?

• Pure Play Internet?– Communicate or Sell?

• Multi-Channel Sales Approach?

• Support Brick and Mortar?– Hold Current Customers?

• Enhance Relationship Development?

Chapter 1 Slide: 20

E-Business SystemsE-Business Systems are fostering a number

of changes to the marketing system:– Customized production. – Increasing price pressure resulting in lowering prices. – Shorter channels of distribution dominated by

facilitators. – Extranet-enhanced supply chain management.– Non-linear promotions.– Electronic transfer of funds.

– Database information management systems.

Chapter 1 Slide: 21

E-Business Systems

Market-of-One Customer

Market-of-One Customer

Customized Non-Linear Promotion

Customized Non-Linear Promotion

Customized Production

Customized Production

Dynamic Pricing

Dynamic Pricing

Shorter Channels Dominated by

Facilitators

Shorter Channels Dominated by

Facilitators

Knowledge Management& Data Warehousing

Knowledge Management& Data Warehousing

Electronic PaymentsElectronic Payments

Chapter 1 Slide: 22

The E-Business System

Environment: Constant Technological Change Increased Competitive Pressure Weakened Political and Legal Influence

Greater Social Acceptance of Change

Strategic Plan

Strategic Plan

Strategic Goal

Strategic Goal

Supply Chain

Supply Chain

Market-of-OneCustomer

Market-of-OneCustomer

CustomizedNon-LinearPromotion

CustomizedNon-LinearPromotion

CustomizedProduction

CustomizedProduction

DynamicPricing

DynamicPricing

Shorter ChannelsDominated by

Facilitators

Shorter ChannelsDominated by

Facilitators

Knowledge Management& Data Warehousing

Knowledge Management& Data Warehousing

Electronic PaymentsElectronic Payments

Extranet

Chapter 1 Slide: 23

E-Business Value Chain (1)

E-business value chains view information technology as part of a business’ overall value chain adding to the competitive advantages of a business

Competitive Advantage Through Stronger Customer

Relationships(Ch 11

Strategy and Business Models)

Marketing/Sales

E-commerce: Lower costs, new market entry.(Ch 6)E-business Promotion(Ch 7)

Management (Ch 10)

Leadership: ManagementIntranets: Lower costs, better communication.Innovativeness: Speed, flexibility, new product ideas

Value Production

Differential Advantages CustomizationDynamic Pricing (Ch 5)

Customer (Ch 8)

Targeting & Support

Databases andCRM(Ch 9)

DistributionInbound Logistics

Extranets: Lowers costs increase speed(Ch 4)

E-Business Communication Platforms (Ch 3)E-Business Technological Infrastructure (Ch 2)

Chapter 1 Slide: 24

International E-business• The United States is expected to account for only

half of the expected global $7 trillion in e-business-facilitated transactions.

• Markets outside of the United States are expected to grow the fastest in areas such as wireless and HDTV delivery of Internet content.

• Cultural barriers to seamless global e-business:– Language differences, currency conversions, shipping

problems, a lack of global brand recognition, differing legal and ethical standards, and a lack of trust in foreign markets.

Chapter 1 Slide: 25

Levels of E-Commitment• Brochure Sites

– Sets up a Web page to promote a business. This can also allow contacts through email and simple product ordering.

• E-Commerce– Allows for purchasing online with automated credit

card clearance and links to inventory through databases.

• E-Business– Refocuses business practice to take advantage of new

technologies to lower costs, improve value, and respond quickly to environmental change.

Costs

Costs

Costs ??

Chapter 1 Slide: 26

Political, Legal, and Ethical Environments

• The political and legal environment:– Represents the rules by which businesses and

society operates. – Social goal is to increase the overall economic

welfare or the net benefits an economic system provides to a society.

• Ethics – The study of how individuals or businesses make

decisions given the consequences of those decisions