CHAPTER 4 INTERNET TECHNOLOGY AND THE DIGITAL FIRM.

Internet technology
Standardised communication architecture. Direct communication between related parties. Reduced transaction costs Airline ticket $8 $1 Banking $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 Sells physical goods or services on-line instead of Amazon.com front through a physical storefront or retail outlet. Wine.com, Delivery of nondigital goods and services takes Wingspanbank.com place through traditional means. Marketplace Concentrates information about products and concentrator services from multiple providers at one central point.Purchases can search,comparison-shop,and sometimes complete the sales transaction. On-line exchange Bid-ask system where multiple buyers can purchase from multiple sellers. Shopnow.com Dealernet Industrial mall Insure market 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 E*TRADE the primary business activity is to Ameritrade complete the transaction. Auction Provides electronic clearinghouse for products where price and availability are constantly changing, sometimes in response to customer actions Consumers submit a bid to multiple sellers to buy goods or services at a buyer specified price. Ebay Ubid Bigequip.com

Reverse auction

Priceline.com Importquote.com

Aggregator

Mobshop.com Groups of people who want to purchase a particular product sign up and then seek a volume discount from vendors.

Digital product delivery

Sells and delivers software, multimedia, and other digital products over internet.

Regards.com Photodisc Salon.com Thestreet.com

Content provider Creates revenue by providing content. The customer may pay to access the content, or revenue may be generated by selling advertising space or by having advertisers placement in an organized listing in a searchable database. On-line service Provides service and support for hardware and provider software users. Virtual community Portal Provides on-line meeting place where people with similar interests can communicate and find useful information.

Pcsupport.com @backup Xdrive.com Geocities Fortunecity Tripod

Provides initial point of entry to the web along with Yahoo specialized content and other services. Barrabas Aggregates content or applications from multiple sources and resells them to other companies. Thinq Screaming Media

Syndicator

Internet Business Models

Dynamic pricing Pricing of items based on real time interactions between buyers and sellers that determine what an item is worth at any particular moment. Portal Web site or other service that provides an initial point of entry to the web or to internal company data. Banner ad Graphic display on a web page used for advertising. The banner is linked to the advertisers web site so that a person clicking on it will be transported to the advertisers web site. Syndicator Business aggregating content or applications from multiple sources,packaging them for distribution,and reselling them to third-party web sites. Pure-play Business model based solely on the internet. Clicks-and-mortar Business model where the web site is an extension of a traditional bricks-and-mortar businesses.

Electronic Commerce
Business-to-Consumer(B2C)electronic commerce Electronic retailing of products and services directly to individual consumers. Business-to-business(B2B)electronic commerce Electronic sales of goods and services among businesses. Consumer-to-consumer(C2C)electronic commerce Consumers 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

Manufacturer

Distributor

Retailer

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.

Web Personalization
User
Web site

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Business-to-Business electronic commerce.

Exchange Type of on-line marketplace where multiple buyers can purchase from multiple sellers using a bid-ask system. Sellers S1 S2 S3 S4 S5 Exchange Catalogs Sourcing Automated purchasing Processing and fulfillment Buyers B1 B2 B3 B4 B5

BEFORE
Phone or fax mill Arrange Carrier Negotiate price Schedule shipments
S h I p m e n t

Fill out bills of lading

FIBERMARKET EXCHANGE

Bill Customer

Reconcile received goods against receiving report

AFTER
Recovered paper supplier Fibermarket exchange Paper mill

Digital wallet Software 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 card A 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 system Electronic 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

Payment system Credit cards Description Commercial example

Secure services for credit card payments on PC Authorize Web authorize the internet that protect information transmitted among users, merchant sites, and IC Verify processing banks Digital currency that can be used for micropayments Flooz.com e-Coin

Electronic cash(e-cash)

Person-toSend money via the web to individuals who Paypal person payment are not set up to accept credit card payments Billpoint systems. Yahoo payDirect

Payment System Description

Commercial Example Netchex

Electronic check

Check with secure digital signature.

Smart card

Microchip that stores electronic cash to use for on-line and off-line micropayments

Mondex

Electronic bill payment

Supports electronic payment for online and physical store purchases of goods or services after the purchase has taken place

Checkfree Billserve.com

Electronic Commerce Information Flow

Business-to-consumer Business-to-Business

Buyer

Retailer Information Orders Service and support

Manufacturers,suppliers, and Distributors Purchases Bids

Banks Credit checks payment authorization Electronic payments transfer

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

Corporate Intranet

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

Intranets and Supply Chain Management

Suppliers

Planning & forecasting

Order processing Intranet Accounting

Shipping

Procurement Production

Inventory

Logistics services

Distributors

MANAGEMENT CHALLENGES AND OPPORTUNITIES

Unproven Business models

Business Process change Requirements

Channel Conflicts

Legal Issues

Security and Privacy