Chapter 12: Economics, Global EC, and Other EC Issues

Chapter 12
Economics, Global EC, and Other EC Issues

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The Components of Digital Electronics

Digital Products The Consumers The Sellers The Infrastructure companies The Intermediaries The Support services Content creaters
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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.
Some Issues in Digital Economy and Success Factors

The need for a critical mass of buyer
Virtual Communities
The Internet Virtual Communities
The Web is being transformed into a social Web of communities. Four major types:
Communities of transactions Communities of interest Communities of relations (practice) Communities of fantasy
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

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

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

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

The Expected Payback
Customer loyalty increases Increased sales Customer participation and feedback increases Increased repeat traffic to site Drive new traffic to the site

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

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
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
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
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)
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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
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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
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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
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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
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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
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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
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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
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Success Factors for Small Businesses

Niche products
Low volume Not carried by regular retail stores
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)
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Small volume
E.g., special books
Old technical
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
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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

Monitor your:
Competition Technology Marketplace changes
Keep growth slow and steady Delegate Develop good internal communications
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Research in EC
Behavioral Issues
Consumer behavior Building consumers behavioral profiles and identify ways to utilize them Sellers 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
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
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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
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Managerial Research Issues

Advertisement
Measuring the effectiveness, integration and coordination
Applications
Creating a methodology of finding EC business applications
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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
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
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

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
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B2B exchanges
Provide infrastructure
Auctions
Increasing rapidly
Going global
Most appealing benefit of EC
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E-government--comprehensive
Government-to-consumers (G2C) Government-to-government (G2G) Government-to-business (G2B) Government-to-employees (G2E)
Intrabusiness EC
Improving internal supply chain
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Technology trends
Clients
Thin client and embedded client Servers Windows NT
Networks
XDSL and wireless communication
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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
Managerial Issues
Finding a community that matches your business Going global
Threatsdifficult to accomplish, especially on large scale Opportunitiescreate collaborative projects with partners in other countries (last a long time)
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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

Chapter 12: Economics, Global EC, and Other EC Issues

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Chapter 12: Economics, Global EC, and Other EC Issues

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Chapter 12

Economics, Global EC, and Other EC Issues

The Components of Digital Electronics

Some Issues in Digital Economy and Success Factors

Virtual Communities (cont.)

Virtual Communities (cont.)

Virtual Communities (cont.)

Build a site that provides valuable information

Virtual Communities (cont.)

Virtual Communities (cont.)

Virtual Communities (cont.)

Virtual Communities (cont.)

Global Electronic Commerce

Barriers to Global Electronic Commerce

Market Access Issues

Barriers to Global Electronic Commerce (cont.)

Barriers to Global Electronic Commerce (cont.)

The U.S. Policy Regarding Global Electronic Commerce

The U.S. Policy Regarding Global Electronic Commerce (cont.)

The Opportunities for Small Businesses

The Opportunities for Small Businesses (cont.)

Risks and Disadvantages for Small Businesses

Risks and Disadvantages for Small Businesses (cont.)

Success Factors for Small Businesses

Success Factors for Small Businesses (cont.)

Success Factors for Small Businesses (cont.)

Success Factors for Small Businesses (cont.)

Managerial Research Issues

Managerial Research Issues (cont.)

The Future of Electronic Commerce

The Future of Electronic Commerce (cont.)

Increased security and trust

Efficient information handing

The Future of Electronic Commerce (cont.)

The Future of Electronic Commerce (cont.)

The Future of Electronic Commerce (cont.)

The Future of Electronic Commerce (cont.)

The Future of Electronic Commerce (cont.)

Managerial Issues (cont.)

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