Download 17 Minder Chen, 1996-2010

Electronic Commerce:
Business Models, Strategies, Investment and
Implementation in the Network Economics
Fall 2010
for
MIS 310
Minder Chen, Ph.D.
Associate Professor of Management Information Systems
E-Mail: [email protected]
Web site: http://faculty.csuci.edu/minder.chen/
Internet: The Virtual Network & Internal Structure
NAP
Computer
Router
A Regional Network
Internet
Telephone Company
ISP
T1, T3
ISDN
ADSL
Cable
Modem
LAN
NAP: National Access Point ISP: Internet Service Provider
© Minder Chen, 1996-2010
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E-Commerce Network
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Domain Name
• DNS (Domain Name Server): Mapping the 32-bit numeric IP address
(such as 217.156.3.14) to a name such as vax.cs.uiuc.edu. The
formats of a domain name and its corresponding IP address are
unrelated.
• The master registrar DNS database is managed by Network Solutions
at www.networksolutions.com
• Register a domain (e.g., GoDaddy.com) The name of a host
computer with an IP address
edu
uiuc
cs
vax
gmu
cs
vax
© Minder Chen, 1996-2010
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Electronic Commerce: Introduction
E-Business
E-Commerce
Commerce
Internet
Commerce
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Travelocity
Microsoft expedia
Priceline.com
The Low-Friction Market
"[The Internet] will carry us into a
new world of low friction, lowoverhead capitalism, in which market
information will be plentiful and
transaction costs low."
-- Bill Gates, The Road Ahead
"Where there is a friction,
there is opportunity!"
-- Net Ready.
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EC Business Opportunities
Innovative Ideas, Business models,
and Business strategies
Funding
Business and technical talents
Technological enablers
New business models and ideas are
driving EC initiatives.
Internet technologies are enablers.
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The Cycle of Electronic Commerce
Access
Searches
Queries
Surfing
Customers
Online Ads
Follow-on Sales
Online Orders
Standard Orders
Distribution
Online: soft goods
Delivery: hard goods
Electronic Customer Support
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EC and Business Processes
Customer
Seller
Selling Process
Send info
Phone,
fax, e-mail
Request info
Procurement Process
Provide
Info
Identify
need
Corporate Databases
Data sheets,
catalogs, demos
Get
customer
Web surfing
Web searches,
web ads
Web site
Find
source
Newsgroups
Provide
info
Demos,
reviews
Fulfill
order
Evaluate
offerings
Net
communities
Web site
P.O.s
Credit cards, e-cash
EDI
Deliver soft goods electronically
Support
© Minder Chen, 1996-2010
Purchase
Web site, phone,
fax, e-mail, emailing list
Operate,
Maintain,
Repair
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Changes in the Net Economy
• Business environment
– Local / Physical

Global /Virtual

Intangible

Continuous
• Business assets
– Tangible
• Business change
– Periodic
• Business production
– Mass Production

Mass Customization
Mass Personalization
•
Customization is under direct user control: the user explicitly selects between
certain options (a "portal" site with headlines from the New York Times or from
the Wall St. Journal; enter ticker symbols for the stocks you want to track).
•
Personalization is driven by the computer which tries to serve up individualized
pages to the user based on some form of model of that user's needs.
-- http://www.useit.com/alertbox/981004.html
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Network and Information Economy
• Information is costly to produce but cheap to
reproduce.
– Price information according to its value not its cost.
• Managing intellectual property.
– Maximize the value of your intellectual property, not the
terms and conditions that maximize the protection.
• Information as an “experience good”
– Consumers must experience it to value it.
– Brand and trust building is critical.
• The economics of attention
– A wealth of information creates a poverty of attention.
Source: Information Rules
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Value to User
Popularity Adds Value in a Network
Positive
Network
Externality
Networks
• Real: LAN, Internet, Fax
• Virtual: Virtual community, Chat
room, Instant messenger,
Skype, social network
Number of Compatible User
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Challenge
• Consumers: Everything on the Internet should to be free.
• Merchant: How can I make a profit if everything is free.
• Examples:
–
–
–
–
–
–
Free web browsers: Netscape Communicator and Internet Explorer
Free email: Juno, mail.yahoo.com and hotmail.com
Free Internet Access: Freeserve in Britain
Free PC: eMachine and CompuServe; Free-PC
Free web hosting: Geocities, Angelfire, Zoom
Free ...
Gilder's Law
$250
Cost of a 3-minute
Long Distance Call
$0
1930
Year
© Minder Chen, 1996-2010
All tangible and intangible items that
can be copied adhere to the law of
inverted pricing and become cheaper
as they improve.
Anticipate this cheapness in your
pricing strategy and product/service
development strategy
1999
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Moving Your Business Online
• Companies are motivated by either fear or greed to
move to their businesses to the net.
• To .com your company is becoming an imperative.
• They have to obsolete their current business
models and work very hard to search a new
business model.
• Be aware of internet tax law and
interstate/international commerce laws.
– http://en.wikipedia.org/wiki/Internet_taxes
Your competitor is just
one-click away
© Minder Chen, 1996-2010
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Business Models Based on the Value Chain in the Market Place
Raw
material
producer
Exchange
• Independent
market
operators
• Consortia
Manufacturer
Distributor
C2B
New
Middleman
Retailer
B2C
Examples:
• B2B: alibaba.com
• B2C: Amazon.com
• C2B: Priceline.com
• C2C: eBay.com,
craiglist.com
© Minder Chen, 1996-2010
Service Providers:
• Logistics
• Financial
Consumer
B2C
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C2C
Business-to-Business vs. Business-to-Consumer
Business-to-Consumer
•
•
•
•
•
•
•
No vendor loyally
No switching costs
Time-insensitive
Short-term
Casual
Many vendors
Products differentiated
on price, image
© Minder Chen, 1996-2010
<
Business-to-Business
•
•
•
•
•
•
•
Relationship-based
Very high switching costs
Extremely time-sensitive
Long-term
Mission-critical
Few partners
Partners differentiated on
reliability, flexibility
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Buyer
• Brick-and-mortar
– Face-to-Face
• Mail order
– Mail
– Printed catalog
• Phone order
– Telex
– Phone
– Fax
Click and Mortar
Business Channel: Multi-Channel Presence
Seller
• Electronic commerce
• EDI
• Email
Pure Play
• Web
Multi-channel plays will have extraordinary power if companies
elegantly blend and synchronize those channels.
© Minder Chen, 1996-2010
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EC Strategies: 4 Cs
Customers
Commerce
Content Community
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Customers
• Obsess over your customers
• Remember that the Web is an infant
– What do you have to offer that the physical world
cannot in order to attract customers?
• If you make one customer unhappy, he won't
tell five friends -- he'll tell 5,000 on newsgroups,
list servers, and so on.
– "Word of mouth" (WOM) factor
gets amplified on the Net
• The shifts of balance of power away from
business and toward customer.
- Jeff Bezos
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Self Assessment: Customer Caring
What do your customers need?
What requests do they make of you?
How do you respond to customer’s requests?
What kind of information can they get from you?
What process do they go through?
How do you produce and distribute it to them?
What are the steps that your customers have to take
to complete a purchase transactions?
How do they get shipment status?
How are exceptions handled?
What do you need from customer?
What do you know about customer preferences?
What information could you use to better target your
product and service offerings?
What to build relationships?
How can you engage customers in an ongoing dialog?
How can you continue to provide information, products,
and services to reinforce your ongoing relationships?
© Minder Chen, 1996-2010
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Is EC Appropriate for You?
Industries who set up
virtual storefronts
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High
Low
Customer Need for Product Information
Technology-Fit: Customer and Product
Second Wave
Earlier Adopter
Jenny Craig
Chrysler
AA
FedExp
Microsoft
Web Laggards Second Wave
Tide
Denny's
Nike
Pepsi
Customer Demographics Match
Poor
High
Source: Forrester Research
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Virtual Communities
• Money
• Content
• Demographics
•
•
•
•
Virtual
Community
Content
Hard goods
Games
Services
Providers
Users
• Advertising
Advertisers
© Minder Chen, 1996-2010
Other
Websites
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www.parentsoup.com
http://parenting.ivillage.com/ -- Community Web Site
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Revenue Streams
• Advertising / Sponsorship
• Transaction
• Subscription / Listing Fee
• Value-added services
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Multifaceted Model for Web-Based EC Design
• ATTRACT: Hits
–
–
–
Communities of interest
Changing topics for repeat customers
Features that encourage customers to explore
• ENGAGE: Leads
–
Special areas encourage customer to register (i.e. selection of
articles customized for visitors interests)
• PARTICIPATE: Sales revenue
–
Free download (video, audio, & software)
– Shopping
–
–
Attract
Jump
Chat and News
Subscription
Engage
Participate
• JUMP: Advertising revenue
– Other products of interest to customer
–
Other sites of interest to customer
© Minder Chen, 1996-2010
Adapted from Netscape Communications Inc., 1996.
EC - 27
Objectives Of An eCommerce Site
Advertising
Customer
service
Lead generation
Fulfillment
Merchandising
Payment
© Minder Chen, 1996-2010
Order processing
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EC Site Life Cycle
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Opening Online Business
• Identify a need and a niche
• Determine what you have to offer
(products/services)
• Set your business goals
• Design your EC architecture
• Assemble your EC teams
• Build your web site
• Set up a system to handle sales
• Provide customer services
• Advertise/promote your online business (online
and offline)
• Evaluate site performance & improve continuously
© Minder Chen, 1996-2010
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EC Hosting
• Yahoo!Small Business
– http://smallbusiness.yahoo.com/ecommerce/
• Ebay
– http://pages.ebay.com/help/sell/sell-getstarted.html
• Amazon Marketplace
– http://www.amazon.com/gp/help/customer/display.htm
l?nodeId=1161232
• Drupal.org
– http://drupal.org/hosting
© Minder Chen, 1996-2010
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Web Site Architecture Design Example
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Site Elements
• Home page
–
–
Menu-driven, News-oriented
Source:
Path-based, Splash screens or image maps
Web Style Guide
• Graphics and texts
• Submenus pages and subsites (alternative home pages for special
audiences)
• Tables of contents, site indexes, site maps
• Product/service/information pages
• "What's new" pages
• Search features
• Contact information
–
•
•
•
•
Street address, phone number, fax numbers, maps, travel directions,
parking information
User feedback and victual community pages
Bibliographies and appendixes
FAQ (Frequently Asked Questions) pages
Customized server error pages
© Minder Chen, 1996-2010
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Cross-Selling and Up-Selling
Amazon’s Collaborative Filtering/Recommendation system
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Personalization
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The Evolution of EC Implementation
Extension
eCRM
eProcurement / SCM
eMarketplace / Auction
Functionality
Process Integration
Fulfillment
Settlement
Workflow
Web-based Transaction
Product database queries / Search
Electronic Payments
Fund transfer
Real-time
organizations
Communities of
Interests
Marketplace creator
1:1 Relationship
Customer Interactivity
Registration / Forms
Email
Games / Chat room / eForum
Publishing (Brochure-ware)
Advertising
Marketing
Information
Maturity
© Minder Chen, 1996-2010
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Future EC Trends
•
Broadband internet connection: I.e., ADSL, Cable modem
•
Streaming media and web-based learning
•
More interactive virtual community
•
Customization and personalization
•
Mini-portal and corporate portal
•
Affiliate partner
•
Multiple-channel integration
•
E-commerce is driving E-business
•
Affordable EC software and hosting service for smallmedium-size companies
•
Emerging standards such as XML to enable Business-toBusiness electronic commerce
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