internet technology and the digital firm
TRANSCRIPT
CHAPTER 4INTERNET TECHNOLOGY AND
THE DIGITAL FIRM.
Reading notes for chapter 4 in the textbook. Chapter 4 is on the digital firm, electronic commerce and
business. We have to read entire chapter carefully and digest the material thoroughly. Internet is a widely used technology today and there is no doubt that Internet and digital organization will shape every aspect of our lives, personal as well as professional in the years ahead.
Section 4.1 elaborates on the benefits of Internet technology to the organizations of any kind. Read section 4.1 carefully and pay attention to Internet business models and concepts like information asymmetry, richness, reach, dynamic pricing and portals. Table 4.1 is a concise summary of Internet business models. Customer-centered retailing, business-to-business electronic commerce, and electronic payment systems also deserve a close and critical look. Marshall Industries is an interesting example of a virtual distribution network and gives us clues about future business models. Examine figure 4.7 carefully.
Reading notes for chapter 4 in the textbook.
Section 4.3 explores how intranets support electronic business and services like group collaboration, coordination and supply chain management that are vital for any organization. Group collaboration at Internet has new dynamics and implications in product design and delivery as well as organization’s functional areas and supply chain management. Finally management challenges and opportunities deserve careful scrutiny.
Internet technology
•Standardised communication architecture.
•Direct communication between related parties.
•Reduced transaction costsAirline ticket $8$1Banking $1.08$0.13
•Infrastructure for electronic business.
•Unbundling the information from the product.
Business model:
An abstraction of what and how the enterprise delivers a product or service,showing how the enterprise creates wealth.
Changing Economics Of Information
Information Asymmetry:Situation in which the relative bargaining power of two parties in a transaction is determined by one party possessing more information essential to the transaction than the other party.
Richness:Measurement of the depth and detail of information that a business can supply to the customer as well as information the business collects about the customer.
Reach:Measurement of how many people a business can connect with and how many products it can offer those people.
INTERNET BUSINESS MODELS
Category Description Examples
Virtual Store front
Sells physical goods or services on-line instead of through a physical storefront or retail outlet. Delivery of nondigital goods and services takes place through traditional means.
Amazon.com
Wine.com,
Wingspanbank.com
Marketplace concentrator
Concentrates information about products and services from multiple providers at one central point.Purchases can search,comparison-shop,and sometimes complete the sales transaction.
Shopnow.com Dealernet
Industrial mall
Insure market
On-line exchange
Bid-ask system where multiple buyers can purchase from multiple sellers.
Asia capacity Exchange
Covisint
E-steel
Fibermarket
Information broker Provides product, pricing, and availability information. Some facilitate transactions, but their main value is the information they provide.
Partnet
Travelocity
Transaction broker Buyers can view rates and terms, but the primary business activity is to complete the transaction.
E*TRADE
Ameritrade
Auction Provides electronic clearinghouse for products where price and availability are constantly changing, sometimes in response to customer actions
Ebay
Ubid
Bigequip.com
Reverse auction Consumers submit a bid to multiplesellers to buy goods or services at abuyer specified price.
Priceline.com Importquote.com
Aggregator Groups of people who want to purchase a particular product sign up and then seek a volume discount fromvendors.
Mobshop.com
Digital productdelivery
Sells and delivers software, multimedia, and otherdigital products over internet.
Regards.comPhotodisc
Content provider Creates revenue by providing content. The customermay pay to access the content, or revenue may begenerated by selling advertising space or by havingadvertisers placement in an organized listing in asearchable database.
Salon.comThestreet.com
On-line serviceprovider
Provides service and support for hardware andsoftware users.
Virtualcommunity
Provides on-line meeting place where people withsimilar interests can communicate and find usefulinformation.
GeocitiesFortunecityTripod
Portal Provides initial point of entry to the web along withspecialized content and other services.
YahooBarrabas
Syndicator Aggregates content or applications from multiplesources and resells them to other companies.
ThinqScreamingMedia
Internet Business Models
Dynamic pricingPricing of items based on real time interactions between buyers and sellers that determine what an item is worth at any particular moment.PortalWeb site or other service that provides an initial point of entry to the web or to internal company data.Banner adGraphic display on a web page used for advertising. The banner is linked to the advertiser’s web site so that a person clicking on it will be transported to the advertiser’s web site.SyndicatorBusiness aggregating content or applications from multiple sources,packaging them for distribution,and reselling them to third-party web sites.Pure-playBusiness model based solely on the internet.Clicks-and-mortarBusiness model where the web site is an extension of a traditional bricks-and-mortar businesses.
Electronic Commerce
Business-to-Consumer(B2C)electronic commerceElectronic retailing of products and services directly to individual consumers.
Business-to-business(B2B)electronic commerceElectronic sales of goods and services among businesses.
Consumer-to-consumer(C2C)electronic commerceConsumers selling goods and services electronically to other consumers.
Mobile commerce (m-commerce)The use of wireless devices, such as cell phones or handheld digital information appliances, to conduct e-commerce transactions over the internet.
Customer-Centered Retailing
•Direct sales over web
•Interactive marketing and personalization.
•M-Commerce and next generation marketing
•Custom self-service
RetailerManufacturer Distributor Customer
Manufacturer Retailer Customer
Manufacturer Customer
Disintermediation
The elimination of organizations or business process layers responsible for certain intermediary steps in a value chain.
Reintermediation
The shifting of the intermediary role in a value chain to a new source.
User Website
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Sarah,Here are the items you want to bid on: Iron scroll lamp sparkle beach
barbie beatles silk tie.
Web Personalization
Business-to-Business electronic commerce. ExchangeType of on-line marketplace where multiple buyers can purchase from multiple sellers using a bid-ask system.
Exchange
S1
S2
S3
S4
S5
B1
B2
B3
B4
B5
Sellers Buyers
•Catalogs•Sourcing•Automated purchasing•Processing and fulfillment
Phone or fax mill
ArrangeCarrier
Negotiateprice
Scheduleshipments
Fill out billsof lading
BillCustomer
Reconcile received goods against
receiving report
BEFORE
ShIpment
AFTER
Recoveredpaper
supplier
Fibermarketexchange
Papermill
FIBERMARKET EXCHANGE
Marshall Industries Virtual Distribution System
S U P P L I E S E X T R A N E T M O D EM
C US TO M ER
I NTR A NET
U P S
C US TO M ER
Digital walletSoftware that stores credit card, electronic cash, owner identification,and address information and provides these data automatically during electronic commerce purchase transactions.
Micropayment payment for a very small sum of money, often $1.00 or less.
Electronic cash (e-cash)Currency represented in electronic form that can be exchanged with another e-cash user or retailer over the internet.
Smart cardA credit card-size plastic card that stores digital information and that can be used for electronic payments in place of cash.
Person-to-person payment systemElectronic payment system for people who want to send money to vendors or individuals who are not set up to accept credit card payments.
Examples of electronic payment systems for E-commerce
Paymentsystem
Description Commercialexample
Credit cards Secure services for credit card payments onthe internet that protect informationtransmitted among users, merchant sites, andprocessing banks
PC AuthorizeWeb authorizeIC Verify
Electroniccash(e-cash)
Digital currency that can be used formicropayments
Flooz.come-Coin
Person-to-person paymentsystems.
Send money via the web to individuals whoare not set up to accept credit card payments
PaypalBillpointYahoo payDirect
Payment System Description CommercialExample
Electronic check Check with secure digital signature. Netchex
Smart card Microchip that stores electronic cashto use for on-line and off-linemicropayments
Mondex
Electronic billpayment
Supports electronic payment for on-line and physical store purchases ofgoods or services after the purchasehas taken place
CheckfreeBillserve.com
Buyer
Retailer•Information•Orders•Service and support
Manufacturers,suppliers,and Distributors•Purchases•Bids
Banks•Credit checks•payment authorization•Electronic payments transfer
Business-to-consumer Business-to-Business
Electronic Commerce Information Flow
ORGANIZATION BENEFITS OF INTRANETS
•Connectivity: accessible from most computing platforms
•Can be tied to internal corporate systems
•Can create interactive applications with text,audio,and video
•Scalable to larger or smaller computing platforms as requirements change
•Easy to use,universal web interface
•Low start-up costs
Richer,more responsive information environment
Reduced information distribution costs
Finance and Accounting•General ledger reporting•Project costing•Annual reports•Budgeting
Human Resources•Corporate policies•Employee Savings plans•Benefits enrollment•On-line training•job postings
CorporateIntranet
Manufacturing and production•Quality measurements•Maintenance schedules•Design specifications•Machine output•Order tracking
Sales and Marketing•Competitor analysis•Price updates•promotional campaigns•Sales presentations•Sales contacts
Functional applications of Intranets
Customers Suppliers
Logistics services Distributors
Intranet
Planning &forecasting
Shipping Inventory
Order processing
Accounting
Procurement
Production
Intranets and Supply Chain Management
MANAGEMENT CHALLENGES AND OPPORTUNITIES
•Unproven Business models
•Business Process change Requirements
•Channel Conflicts
•Legal Issues
•Security and Privacy