E-Commerce Management

45-869

Fall 2003

Tridas Mukhopadhyay

tridas@cmu.edu

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

Course Goals

Primary Goal:

• Develop a managerial foundation for

Electronic Commerce

• Secondary Goals:

• Study E-Commerce Applications

• Impact of the Internet on Management

What’s a Business Model?

Major Components Key Question

Value Proposition Why would customers buy from you?

Revenue Model How do you make money?

Market Opportunity What is your marketspace?

Competitive Environment Who are the competitors?

Competitive Advantage How do you absorb value?

Market Strategy How do you attract customers?

Organizational Development What type of organizational structure?

Management Team What type of leaders?

Topics• Strategy Fundamentals

• Strategic Analysis

• Process Redesign

• Digital Products

• e-Retailing

• e-Service

• Business-to-Business E-C

• Supply Chain Management

• Strategies for E-Commerce

Grading

• 2 Exercises

• Class Participation

• 3 Best Case Reports

• Team Presentation

• Final Exam

• 20 (Individual)

• 10 (Individual)

• 30 (Team)

• 10 (Team)

• 30 (Individual)

Pedagogy

Professor / TA Students

Lecture & Discussion Participation

Case Analysis (4) Report & Discuss

Exercise (2) Solve & Submit

Team Project Study & Present

Final Exam Solve & Submit

Team PresentationAnalyze an on-line business

• Business model

• Competitive structure

• Value chain / creation

• Strengths/Weaknesses/Opportunities/Threats

• IT Use

1. Business Model. What are the products/services of the chosen business? Which markets? What are the sources and magnitudes of revenue? What are the major cost categories?2. Competitive Structure. Who are the competitors? Which competitors tend to dominate the marketplace? Are new entrants or substitute products/services likely in the competitive arena? What are the powers of buyers and suppliers?3. Value Chain. What are the primary and secondary activities of this business? Which of them are critical? How does it create value for its customers? What role does the Internet play? 4. SWOT. What are the critical success factors for this business? What are its strengths? What are its weaknesses? What are the future opportunities and threats?5. IT. How does it use IT today? What is distinctive about its IT use? How can it use IT as a strategic lever? What would be the possible risks and benefits?

Team Presentation

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

What is Electronic Commerce?

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•

•

Use the Internet, Web or any electronic means to do the following

E-Commerce: Alternate Perspectives

Is eCommerce = eBusiness?

Is eCommerce = dot-coms?

Is eCommerce = e-tailing?

Is eCommerce = B2B exchanges?

Does Southwest Airline fit this mold?

• Search and reserve flights

• Click ‘N Save Internet specials

• Special Double Credit for Internet buyers

• Transport passenger reliably

• Receive itinerary and specials by e-mail

Direct Selling

Has the Web affected the value chain?

Has the Web changed industry structure?

• Web revenue 49%, over $2.6 billion

• Web tickets costs $0.60, traditional ticket $ 9

• Over 4 million customers have signed up

• Online competitors began the web selling method

• Web accounts for 22% of industry sales!

• Customers have changed their expectations

How about edmunds.com?

edmunds.com

• Online catalog of new and used cars

• Specs and invoice prices

Transfer to autobytel.com

• Fill in your choice

• A near-by dealer offers you a deal

Intermediaries

Has the Web affected the value chain?

• New intermediaries

• Information Intermediaries( Edmunds, KBB)

• Referral Intermediaries (Autobytel, CarPoint)

• On-line info, ordering, financing, insurance, warranty

• Auto exchange Covisint to redefine supply chain

Has the Web changed industry structure?• 60% of new car buyer first go to Web, save $500

• Dealers save about $350 per car

• FordDirect.com, 4200 dealers

• GMBuypower.com, 5000 dealers

Business-to-Business +

Business-to-Government

Business-to-Consumer +

Consumer-to-Consumer

Intra-Organizational

Types of Electronic Commerce

P2P Commerce?

M-Commerce?

Business Customers vs. Consumers

Electronic efficiency

Number of customers

Volatility of relationship

Rational

Price sensitivity

Transaction value

Percentage on-line

ConsumerBusinessCharacteristic

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

Why Electronic Commerce?

• World Wide Web (Ease, ubiquity, platform independence)

• Internet Explosion (Commercial and residential)

• Huge Market (Retail, commercial, providers)

• Competitive Pressure (Lower entry barrier)

World Wide Internet Users by Regions (in millions)

eMarketer 2002

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004

Middle East

Latin America

Asia Pacific

Europe

North America

How are Internet users different from general population?

• Household Income (Mean $52k vs. $42k)

• Education (College grad 30.5% vs. 27%)

• Gender (Female 51.3% vs.Male 48.7%)

• High Growth Rate

Source:e Marketer 2002

US B2C revenues (in Billions)

1827 32

5068

88

109

1999 2000 2001 2002 2003 2004 2005

eMarketer 2002

Series1

US B2B e-Commerce Revenues (in Billions)

149

226

306

481

720

0

100

200

300

400

500

600

700

800

1999 2000 2001 2002 2003

source: eMarketer 2002

revenues

Worldwide B2B e-Commerce Revenues (in Billions)

278474

823

1409

2367

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004

source: e-Marketer 2002

revenues

Possible Benefits of E-Commerce

Customers

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•

•

Suppliers

•

•

•

So, Why Did the Dot-Coms Crash?

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•

•

•

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

Internet Milestones

• 1970: ARPANET established

• 1974: TCP/IP introduced

• 1980: US Dept of Defense adopts TCP/IP

• 1984: TCP/IP diffuses abroad

• 1988: Internet opened to commercial world

• 1991: WWW introduced

• 1993: Mosaic introduced

Evolution of E-Commerce

• Inter-Organizational Systems (American Hospital Supply)

• Airline Reservation Systems (Sabre and Apollo)

• Electronic Data Interchange (Fortune 1000 companies)

• The Web and the Internet (Universal)

Business,

Public

policy,

legal &

privacy

issues

Technicalstandards

for documents,

security,and

networkprotocols

Applications

• Supply Chain / Procurement

• Online Marketing / Home Shopping

Infrastructure

Security, Authentication, Directories /

catalogs, Electronic Payment

Message Transfer

EDI, e-mail, HTTP

Content & Publishing

HTML, XML, JAVA, Web

Networking

Telecom, Cable, Wireless, Internet, VAN

A Framework for Electronic Commerce

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•

•

•

•

•

Barriers (?)

E-Commerce: Business Requirements• Security

• Reliability

• Electronic Payment

• Ubiquity

• Speed

• Ease of Use

Where is E-Biz today? Gap between perception and reality.

Realities Perceptions 40% Public Internet Companies Profitable 2002

X No one is Profitable on the Internet

B2B volume $3.9 trillion worldwide in 2003

X B2B never happened

Many B2C operations made money in 2002

X B2C is a bad idea

E-Biz investments continue to rise

X Companies ditched Web

Source: Business Week (5/12/03), NY Times (5/19/03), Wall St. J. (4/28/03).

Key Points

• We’ve only seen the tip of the iceberg

• Some barriers are moving targets

• Back to business fundamentals!