2. The Components of Digital
Electronics
Digital Products
The Consumers
The Sellers
The Infrastructure companies
The Intermediaries
The Support services
Content creaters
2
3. Competition in Marketspace
Lower buyers’ search cost.
Speedy comparisons.
Differentiation.
Lower prices.
Customer services.
Other competitive factors to consider are:
The size of the firm may not be a significant
competitive advantage.
Geographical distance from consumer may play an
insignificant role.
Some language barriers may be easily removed.
Digital products lack normal wear and tear.
3
4. Some Issues in Digital Economy and
Success Factors
The need for a critical mass of buyer
4
5. Virtual Communities
The Internet Virtual Communities
The Web is being transformed into a social
Web of communities. Four major types:
Communities
Communities
Communities
Communities
of
of
of
of
transactions
interest
relations (practice)
fantasy
5
6. Virtual Communities (cont.)
Communities of
transactions
Facilitate buying
and selling
Evineyard.com
Sells wine
Provides expert
information on
wines
Provides chat
room
Communities of
interest
Place for people to
interact with each
other on a specific
topic
Motley fool
(fool.Com)
Forum for
individual
investors
6
7. Virtual Communities (cont.)
Communities of
relations (practice)
Be organized around
certain life
experiences
Plasticsnet.com used
by thousands of
engineers in the
plastics industry
Communities of
fantasy
Place for participants
to create imaginary
environments
ESPNet participants
create competing
teams and “play” with
Michael Jordan
7
8. Virtual Communities (cont.)
Ways to transform a community site into a
commerce site:
Understand a particular niche industry
Its information needs
Use a step-by-step process by which it
does the research needed to do
business
Build a site that provides valuable information
Through partnerships with existing
publishers and information providers
By gathering it independently
8
9. Virtual Communities (cont.)
Set up the site to mirror the steps a user goes
through in the information-gathering and
decision-making process
Build a community that relies on the site for
decision support
Start selling products and services, such as
sample chips to engineers, that fit into the
decision-support process
9
10. Virtual Communities (cont.)
The Expected Payback
Customer loyalty increases
Increased sales
Customer participation and feedback
increases
Increased repeat traffic to site
Drive new traffic to the site
10
11. Virtual Communities (cont.)
Creating economic value
Members input useful information in the form
of comments, feedback, elaborating their
attitudes and beliefs, and information needs
of the community
The community brings together consumers of
specific demographic and interest
Communities charge members content fees
for downloading certain articles, music, or
pictures
11
12. Virtual Communities (cont.)
Financial viability of communities
Based on sponsorship and advertisement
Expenses are very high because of the need to
provide:
Fresh content
Free services
Free membership
This model did not work well, many companies
sustained heavy losses in 2000-2001; too few
members, too few purchases
12
13. Global Electronic Commerce
While geographical market boundaries may be
falling, global interest-based communities will
spring up
Mainly in support of business-to-business
financial and other repetitive, standard
transactions, e.g. EFT & EDI
The emergence of the Internet and the
extranets resulted in an inexpensive and
flexible infrastructure that can greatly facilitate
global trade
13
14. Barriers to Global Electronic Commerce
Legal Issues
Uncoordinated actions must be avoided and an
international policy of cooperation should be
encouraged
Market Access Issues
Companies starting e-commerce need to
evaluate bandwidth needs by analyzing the data
required, time constraints, access demands, and
user technology limitations
14
15. Barriers to Global
Electronic Commerce (cont.)
Financial Issues
Customs and taxation
Electronic payment systems
Other Issues
Identification of buyers and sellers
Trust
Security (for example, viruses)
15
16. Barriers to Global
Electronic Commerce (cont.)
Other Issues (cont.)
Cultural diversity
International agreements (multi-lateral
agreements)
Role of government
Purchasing in local currencies
Language and translation
Purchasing in different currencies
16
17. The U.S. Policy Regarding
Global Electronic Commerce
The private sector should lead
Governments should avoid undue restrictions
on electronic commerce
Where government involvement is needed,
its aim should be to support and enforce a
predictable minimalistic, consistent and
simple legal environment for commerce
17
18. The U.S. Policy Regarding
Global Electronic Commerce (cont.)
Governments should recognize the unique
qualities of the Internet
Electronic commerce on the Internet should
be facilitated on a global basis
Global marketspace erases national borders
and gives small companies worldwide reach
18
19. The Opportunities for
Small Businesses
Inexpensive
Source of information
Way of advertising
Way of conducting market research
Way to build (or rent) a storefront
Way of providing catalogs
Way to reach worldwide customers
19
20. The Opportunities for
Small Businesses (cont.)
Lower transaction cost
Niche market, specialty products (cigars,
wines, sauces) are the best place to be
Image and public recognition can be
accumulated fast
20
21. Risks and Disadvantages
for Small Businesses
Inability to use EDI, unless it is EDI/Internet
Lack of resources to fully exploit the Web
Lack of expertise in legal issues,
advertisement
Less risk tolerance than a large company
21
22. Risks and Disadvantages
for Small Businesses (cont.)
Disadvantage when a commodity is the
product (for example, CDs)
No more personal contact, which is a strong
point of a small business
No advantage to being in a local community
22
23. Success Factors for Small Businesses
Niche products
Low volume
Not carried by
regular retail stores
Small volume
E.g., special books
Old
technical
International products
Not easily available to
off-line customers
Information
GartnerGroup
provides access to
online research
material by
subscription
Smaller companies
may provide
specialized
information (home and
gardening) 23
24. Success Factors for
Small Businesses (cont.)
Capital investment must be small
Inventory should be minimal or non-existent
Electronic payments schema exist
Payment methods must be flexible
Logistical services must be quick and
reliable
24
25. Success Factors for
Small Businesses (cont.)
The Web site should be submitted to
directory-based search engine services like
Yahoo, in a correct way
Join an online service or mall and do banner
exchange
Design a Web site that is functional and
provides all needed services to consumers
25
26. Success Factors for
Small Businesses (cont.)
Monitor your:
Competition
Technology
Marketplace changes
Keep growth slow and steady
Delegate
Develop good internal communications
26
27. Research in EC
Behavioral Issues
Consumer behavior
Building consumers behavioral profiles and
identify ways to utilize them
Seller’s behavior and motivation
Issue-oriented research (e.g., trust,
intermediaries)
Internet usage pattern and willingness to buy
Mental model of consumer product search
process, comparison process, and negotiation
How to build trust in the e-marketspace
27
28. Research in EC (cont.)
Technical Issues
Methods that help customers find what they want
Models for extranet design and management
Natural language processing and automatic
language translation
Matching smart card technology with payment
mechanisms
28
29. Research in EC (cont.)
Technical Issues (cont.)
Integrating EC with existing corporate information
systems, databases, etc.
Retrieval of information from an electronic industry
directory
Establishing standards for international trade
Building a mobile Internet distribution command system
29
31. Managerial Research Issues (cont.)
Strategy
Designing strategic advantage strategy for EC
Initiating “where to market” strategy
Finding way to integrate EC into organizations
Impacts
Identify the necessary organization structure and
culture
Integration with ERP and SCM
31
32. The Future of Electronic Commerce
Opportunities for buying
Increase rapidly
Internet usage
Increase exponentially
Access via cell phones!
M-commerce
No need for a computer brings more people to
the web
32
33. The Future of
Electronic Commerce (cont.)
Purchasing incentives
Increase buyers’ advantages
Increased security and trust
Significant improvement is expected
Efficient information handing
Accessible from anywhere
Innovative organizations
Restructured and reengineered
33
34. The Future of
Electronic Commerce (cont.)
Virtual Communities
Spreading rapidly
Payment systems
Ability to use e-cash cards and make
micropayments is getting close to reality
Business-to-business
Continues to grow rapidly
34
35. The Future of
Electronic Commerce (cont.)
B2B exchanges
Provide infrastructure
Auctions
Increasing rapidly
Going global
Most appealing benefit of EC
35
37. The Future of
Electronic Commerce (cont.)
Technology trends
Clients
Thin client and embedded client
Servers
Windows NT
Networks
XDSL and wireless communication
37
38. The Future of
Electronic Commerce (cont.)
Technology Trends
EC software and services
Availability of all types of EC software
Companies support auctions and
multiple types of certifications
EC knowledge
The quantity and quality of EC
knowledge is increasing rapidly
Networked economy
38
39. Managerial Issues
Finding a community that matches your
business
Going global
Threats—difficult to accomplish, especially on large
scale
Opportunities—create collaborative projects with
partners in other countries (last a long time)
39
40. Managerial Issues (cont.)
Small can be beautiful
Competing on commodities with the big guys is
very difficult (especially in cyberspace)
Finding niche markets is advisable
More opportunities in providing support services
than in trading
Restructuring is likely; should be investigated
The future of EC is very bright, but planning
is a must
40
