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E-Business

Define and Explain the Meaning of e-Business. Business can be define as the organized effort of individuals to produce and sell, for profit, products, services that satisfy societys need. E-business(Electronic Business) can be define as the organized effort of individuals to produce and sell, for profit, products, services that satisfy societys needs through the facilities available on the internet

The consequences of music digitalization


The creation of a new market for physical products; The creation of new, informationbased services such as Internet radio and other music search and download systems; Changed consumer buying behaviour for music products overall, including declining purchases of conventional music products, the growth of new ways for artists to obtain direct access to consumers; and Debate over ethical issues in relation to intellectual property rights and the extent of unauthorised downloading and sharing of content

The global digital music market, 2005-08


Characteristic 1. Record company revenues * 2. Broadband lines 3. Digital platform sales * 4. Single tracks downloaded 5. Illegal swaps/downloads 6. Mobile subscriptions 7. 3G mobile subscriptions 8. Portable music player sales 2005 2008 % change $22bn $18.5bn -15.9% 209mn $1.1bn 420mn 20bn 1.8bn 90mn 382mn $3.7bn 1.46bn 40bn 4.1bn 409mn 82.7% 263% 280% 100% 127% 354% 66.6%

84mn 140mn*

Sources: www.ifpi.org, ITU, OECD. Note: * = trade sales ** - 2007 data

E-business: nature, scope & impact


Economic transformation through e-business
Doing new and better things Doing things better

Social transformation through e-business


Scale, style and mechanism of communications For individuals, groups and societies

Challenges
Identifying genuine opportunities
Wrong to assume benefits are inevitable Process of understanding nature and consequences is complex

Fast moving developments with unpredictable consequences

Define and Explain the Meaning of e-Business.

Organizing e-Business Resources


Satisfying Needs Online Creating e-Business Profit

Organizing e-Business Resources

Satisfying Needs Online

24/7 access to purchasing and other customer related services Providing service to globally distributed customers Providing information to existing and potential customers Ex AOL, Amazon.com,ebay Provides customers a value added services

Question for Discussion:

What needs were satisfied by a website you visited recently?

Creating e-Business Profit

Revenue streams (Each revenue flowing into the firm) Expense reduction

source

of

Question for Discussion: How can a firm use the Internet to increase revenues and reduce expenses?

Sources of e-Business Activity

Defining e-Commerce

e-Commerce is a part of e-business; the term refers only to the activities involved in buying and selling online.
These activities may include identifying suppliers, selecting products or services, making purchase commitments, completing financial transactions, and obtaining service.

E-commerce was a term originally designed to describe electronic data interchange (EDI)
3-fold classification developed in the mid 1990s: B2C, B2B and intra-organizational. E-commerce became a portmanteau word for doing business online, but also included marketing and servicing activities

E-business is a broader term suggesting a mix of additional pre- and post-sale activities, value chains, value networks and an overall focus upon the strategic, transformational potential of digital technologies for organizations and economies.

Advantages and Disadvantages of e-Business Practices

A Framework for Understanding e-Business

Telecommunications Infrastructure Internet Software Producers Online Sellers and Content Providers Global e-Business Small e-Business Applying e-Business Strategies to Managerial, Marketing, and Financial Situations

The Three Primary Groups of e-Business

Customer Relationship Management

Customer Relationship Management (CRM) Software solutions that incorporate a variety of means to manage the tasks of communicating with customers and sharing this information with employees in order to create more efficient relationships.

Supply Chain Management

Supply Chain Management (SCM) Software solutions that focus on ways to improve communication between the suppliers and users of materials and components, enabling manufacturers to reduce inventories, improve delivery schedules, reduce costs, and so forth.

Online Sellers and Content Providers

Magazines, games, clothing, databases.

Global e-Business

The Internet facilitates communication with customers and suppliers around the world

Small e-Business

Small businesses often focus on serving a niche market that is globally distributed. Question for Discussion: What are some examples of small e-business practices and small businesses that operate globally via the Internet?

The history and development of ebusiness


in five years time, there wont be any Internet companies theyll all be Internet companies (Grove, Intel) Scope for disruptive innovation (Christensen)
Targeting customers who find existing value propositions too expensive or too complicated Offering solutions which are good enough at a lower price

Gartner hype cycle


Importance of distinguishing hyperbole commercially useful technologies Five stages to business maturity Strengths: from

useful graphical representation of an economic phenomenon; helpful reminder of technological determinism risks; opportunity to anticipate and influence future stages

Weaknesses
no clear criteria on inflection point timing, risk of being subjective (or deterministic and overly influential); does not directly rate vendor products

Gartner hype cycle

Adoption of e-business

E-readiness is a relative rather than an absolute target; rankings not always helpful Countries
EIU E-readiness rankings Western Europe has fallen back in relation to Asian markets in recent years Small vs large Sector differences
Manufacturing vs service B2B vs B2C

Companies

EC E-business scorecard

E-government
Best practice in e-government
Introducing services on a par with those in the commercial sector Develop distinctive public sector competences

Four stages in developing effective e-government


Building the initial infrastructure Putting government services online Transforming structures and processes Integrating and rationalizing the main service delivery channels

E.g. Government of Canada, Digital Britain

E-government

Fundamental Models of e-Business

Business-to-Business Model
Business-to-Consumer Model Consumer-to-Consumer Model

A Business Model

A business model is a group of shared or common characteristics, behaviors, and methods of doing business that enables a firm to generate profits through increasing revenues and reducing costs.

Business-to-Business Model

Many e-businesses can be distinguished from others simply by their customer focus. For instance, some firms use the Internet mainly to conduct business with other businesses. These firms are generally referred to as having a business-tobusiness (B2B) model. Currently, the vast majority of e-business is B2B in nature.

Business-to-Consumer Model

In contrast to those firms using a B2B model, firms like Amazon and eBay are clearly focused on individual buyers and so are referred to as having a businessto-consumer (B2C) model.

Consumer-to-Consumer Model
Unlike the B2B and B2C models, which focus on business transactions and communications, the consumer-to-consumer (C2C) model involves the growing popular use of peer-to-peer (P2P) software that facilitates the exchange of data directly between individuals over the Internet.
Question for Discussion: What are some examples of Consumers using the Internet to conduct exchanges with other consumers?

A Taxonomy for e-Business Models


Brokerage Advertising Subscription, Pay-per-View, or Membership Distribution Channel Member Affiliation Community Infomediary Portal

Brokerage e-Business Model

An e-business model that covers online marketplaces in which buyers and sellers are brought together in an organized environment to facilitate the exchange of goods. Ex- ebay.com

Advertising e-Business Model

An e-business model based on earning revenues in exchange for the display of advertisements on a firms website.
Ex- Yahoo.com, Google.com

Subscription e-Business Model

An e-business model in which access to a site is controlled by a subscription fee. Forrester.com (Forrester Research)

Pay-Per-View e-Business Model

An e-business model in which access to a site is controlled by a charge to view single items.
Question for Discussion: What are some examples of firms using the pay-per-view e-business model?

Membership e-Business Model

An e-business model in which access to a site is controlled by membership fees. Question for Discussion: What are some examples of firms using the membership e-business model?

Distribution Channel Member e-Business Model

An e-business model that includes activities of retailers, wholesalers, and manufacturers carrying on business through the Internet. Ex- Amazon.con

Affiliation e-Business Model


An e-business model that involves payments to website operators for customers who find their way to a companys site and either buy merchandise or services or perform some other action, such as registering and providing certain information. Amozon.com pays 15% finder commission

Community e-Business Model

An e-business model built around the idea that a group of online users can be regularly brought together at a commonly used website for commercial purposes.
Question for Discussion: What are some examples of firms using the community ebusiness model?

Infomediary e-Business Model


An e-business model based on the collection and sale of online information. Ex- Forrester Research ( forrester.com) ComScore(comscore.com), ClickZ.com All of which display articles written by their reporters as well as other sources Ex. Gomez.com is an infomediary that pays user for permission to track their movements on the internet & sell the information to advertisers & other internet parties

Portal e-Business Model

A type of infomediary that earns revenues by drawing users to its site and serving as a gateway or portal to information located elsewhere on the Internet.

Horizontal Portals

Portals that have a wide general reach into different informational topics.

Vertical Portals

Portals that have a narrow focus into a particular informational topic.

Applying e-Business Strategies

Managerial Situations Marketing Situations Financial Situations

Applying e-Business Strategies


Managerial Situations

Management activities & practices focus on how to organize & coordinate the work carried out by employees so basic business objective like building profitability & maintaining good Customer & supplier relationship can be achieved. Moving management activities to the internet can often improved a firms internal practices & procedures.

Applying e-Business Strategies


Managerial Situations

Ex. Web based order entry system Sales executive can verify quantities of available inventory & set delivery date Internet based system helps to improve performance

Applying e-Business Strategies


Marketing application & solutions

The internet can help provide strategic marketing solutions that reduce customer services & order entry cost, minimize inventory levels, & provide a variety of valuable information to customers. A firms website can provide a wide opportunities for communicating with customers, investors, suppliers & other interested public groups.

Applying e-Business Strategies


Financial services & solutions

Financial application include all matters involving money such as online sock market trading, banking services & the collection of payments for e-commerce transactions.

Business Plan

A document containing detailed descriptions of the fundamental structure of the firm and the activities within it, including sources of revenue, the identity of target customers, pricing, promotion, and other strategies.

e-Business Plan

A business plan or part of a larger business plan that involves a firms Internet business activities.

Basic Components of an e-Business Plan

Economic benefits? The example of email


Benefits of commercial email
improved communications better access to information lower costs than compared to conventional methods of communication improved efficiency in the workplace the easier finding of new business opportunities, and the ability to work more closely with customers and suppliers

Net effects more complex


Information overload $650bn annually in US through lowered productivity and stifled innovation Social costs of email usage
Stress Behavioural changes (e.g. interpersonal communications)

Establishing the real economic benefits


Three reasons why we may find in especially difficult to establish the real economic benefits of ebusiness: Problems in actually measuring the benefits (Triplett, 1999; Pilat, 2002) The invisibility of some of these investments. The time taken for the benefits of e-business investment to emerge (a long and variable lag of between 5 and 15 years) There is no guaranteed productivity win or improved performance from e-business investments It is important to take into account the size and sector of firm, the kinds of e-business investments firms make and how they are used. Research undertaken at the level of the firm in particular suggests that there is a close link between the ebusiness technology employed and the skills of those employed to make use of it.

Disintermediation & re-intermediation


In conventional markets, intermediaries smooth the flow of transactions between buyers and sellers.
E.g. wholesalers, retailers, travel agents and brokers.

Disintermediation is a direct consequence of the Internets capabilities to make a wide range of information efficiently available to the end user. Intermediation still relevant online:
Aggregation Providing trust Providing inter-organizational market information Matching suppliers and customers through filtering

New forms of intermediation)

intermediation

online

(or

re-

E.g. residential real estate( www.ononemap.com based on Google mashup)

Disintermediation & re-intermediation

E-business economic effects on individuals Network effects


As an e-business service is perceived to be more valuable, so more people will tend to use it. This phenomenon is termed a network effect The value of a network is proportional to the square of the number of users of the system But are all network connections and all groups equally valuable? E.g. Facebook

The long tail : An interpretation of the Pareto law applied to the


stimulation of consumer demand possible in electronic markets, developed by journalist Chris Anderson. It refer to the ability of firms to obtain significant profits from the sale of small amounts of priviously hard-to-find items to many customers, rather than selling only large amount a smaller number of popular items. Ex book selling

E-business technologies increase the power that individuals have as economic agents in relation to suppliers & markets. Consumer power is a complex phenomenon & has social as well as economics characteristics. Consumer power in internet economy can be considered to have three components Expert power : Sanction power : Legitimate power

E-business economic effects on individuals Search, search costs & consumer power

E-business economic effects on individuals


Expert power : reflects the ability the consumer now has to accumulate information on quality & prices in market, independently of companies. Sanction power : reflects the consumers ability to reward a supplierthrough continued loyalty or punish them through withdrawing their patronage or through engaging in negative WOM(word of mouth) Ex-facebook Legitimate power : reflects the way in which consumers are increasingly able to shape price and goods to their individual preferences.

Types of online search costs


the cost of locating an appropriate seller the cost of obtaining price information, and the cost of obtaining product information.

Example: moneysupermarket.com

E-business economic effects on individuals