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2. OBJECTIVES
• Analyze how Internet technology has changed value
propositions and business models
• Define electronic commerce and describe how it has changed
consumer retailing and business-to-business transactions

3. OBJECTIVES (Continued)
• Compare the principal payment systems for electronic
commerce
• Evaluate the role of Internet technology in facilitating
management and coordination of internal and
interorganizational business processes
• Assess the challenges posed by electronic business and
electronic commerce and management solutions

4. ELECTRONIC BUSINESS, ELECTRONIC COMMERCE,
AND THE EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm
• Information technology infrastructure: The Internet provides a
universal and easy-to-use set of technologies and technology
standards that can be adopted by all organizations.
• Direct communication between trading partners:
Disintermediation removes intermediate layers and streamlines
processes.

5. ELECTRONIC BUSINESS, ELECTRONIC COMMERCE,
AND THE EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm (Continued)
• Round the clock service: Web sites available to consumers 24
hours
• Extended distribution channels: Outlets created for attracting
customers who otherwise would not patronize a firm
• Reduced transaction costs: Costs of searching for buyers
declines

6. ELECTRONIC BUSINESS, ELECTRONIC COMMERCE,
AND THE EMERGING DIGITAL FIRM
New Business Models and Value Propositions
Business Model:
• Defines an enterprise
• Describes how the enterprise delivers a product or service
• Shows how the enterprise creates wealth

7. ELECTRONIC BUSINESS, ELECTRONIC COMMERCE,
AND THE EMERGING DIGITAL FIRM
The Changing Economies of Information
• Information asymmetry: One party in a transaction has more
information than the other. The Internet decreases information
asymmetry.
• Increases richness: The Internet increases the depth, detail,
and scope of information.
• Increases reach: The Internet increases the number of people
who can be contacted efficiently.

8. ELECTRONIC BUSINESS, ELECTRONIC COMMERCE,
AND THE EMERGING DIGITAL FIRM
Internet Business Models
• Virtual storefront: Sells goods or services online (Amazon.com)
• Information broker: Provides information on products or
services (Edmunds.com)
• Transaction broker: Provides online transaction facility
(eTrade.com, Expedia.com)
• Online marketplace: Provides a trading platform for individuals
and firms (eBay.com)

9. ELECTRONIC BUSINESS, ELECTRONIC COMMERCE,
AND THE EMERGING DIGITAL FIRM
Internet Business Models (Continued)
• Content provider: Creates revenue by providing content
(WSJ.com, TheStreet.com)
• Online service provider: Provides online services, including
search service. (Google.com, Xdrive.com)
• Virtual community: Provides an online community to focused
groups (Friendster.com, iVillage.com)
• Portal: Provides initial point of entry to Web, specialized
content, services (Yahoo.com, MSN.com)

10. Pure E-C Vs Partial E-C
Pure E-Commerce: all dimensions are digital
• Pure online (virtual) organizations
• New-economy organization
• Sell products or services only online
Partial E-Commerce: a mix of digital and physical dimensions
• Click-and-mortar organizations
• Conduct EC activities
• Do their primary business in the physical world

11. ELECTRONIC COMMERCE
Categories of Electronic Commerce
• Business-to-customer (B2C): Retailing of products and services
directly to individual customers
(Wal-Mart.com)
• Business-to-business (B2B): Sales of goods and services to other
businesses (Grainger.com, Ariba.com)
• Consumer-to-consumer (C2C): Individuals using the Web for
private sales or exchange (eBay.com )

12. ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-commerce:
• Customer-centered retailing: Closer and more personalized
relationship with customers is possible
• Web sites: Provide a corporate-centered portal for the
consumer to quickly find information on products, services,
prices, orders

13. ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-Commerce: (Continued)
• Disintermediation: The elimination of organizations or
business process layers responsible for certain intermediary
steps in a value chain, reducing costs to the consumer
• Reintermediation: The shifting of the intermediary role in a
value chain to a new source, adding additional value to the
consumer

14. ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
Figure 8-1

15. ELECTRONIC COMMERCE
Web Personalization
• Create unique personalized Web pages for each customer
• Increased closeness to customer increases value to the
customer, while reducing costs of interacting with the
customer

16. ELECTRONIC COMMERCE
Web Site Personalization
Figure 8-2

17. ELECTRONIC COMMERCE
Collaborative filtering:
• Compares information gathered about a specific user’s
behavior at a Web site to data about other customers with
similar interests to predict what the user would like to see
next. The software then makes recommendations to users
based on their assumed interests.

18. ELECTRONIC COMMERCE
Customer self-service:
• The use of Web sites to provide customers with access to
information and answers to questions
• Replacing human call center operators and clerks
• UPS.com: Customer tracking of packages
• Orbitz.com: Customer self-help for organizing and managing a trip
• Dell.com: “My Order Status” facility

19. ELECTRONIC COMMERCE
Business-to-Business Electronic Commerce: New Efficiencies
and Relationships
• Electronic Data Interchange (EDI): Enables the computer-to-
computer exchange between two organizations of standard
transactions. Currently 80% of B2B e-commerce uses this
system.
• EDI is being replaced by more powerful Web-based
alternatives.

20. ELECTRONIC COMMERCE
Electronic Data Interchange (EDI)
Figure 8-3

21. ELECTRONIC COMMERCE
Electronic Commerce Payment Systems
Credit cards The most common form of payment. $50 Limited customer liability.
Digital wallets Electronic storage of I.D. and digital cash. Not widely used.
Accumulated balance Used for micro payments. Similar to monthly telephone bills.
Stored value Used for micro payments. Pre-payment of funds, debited on use.
Smart Cards I.D. and credit information stored on a chip attached to a card. Used in Europe.
Digital cash Electronic currency that can be transferred over the Web.
Peer-to-Peer payment Interpersonal transfer of funds such as PayPal.
Digital checking Electronic checks with digital signatures, used most often in B2B commerce.
Electronic billing presentment Used by consumers to pay bills online, provided by many banks.
and payment

22. ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Collaborative Commerce
Figure 8-7

23. MANGEMENT OPPORTUNITIES, CHALLENGES, AND
SOLUTIONS
Management Opportunities:
The Internet provides firms with extraordinary opportunities to
develop new products and services, new distribution channels,
new avenues for marketing and sales, and even entirely new
business models.

24. MANGEMENT OPPORTUNITIES, CHALLENGES, AND
SOLUTIONS
Management Challenges:
• Finding a successful Internet business model
• Organizational change challenges
• Trust, Security, and Privacy

25. Key factors for success in E-commerce
– Selection and value
– Performance and service
– Look and feel
– Advertising and incentives
– Personal attention (one-to-one marketing)
– Community relationships
– Security and reliability