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Unformatted text preview: SECTION 3.1 - BUSINESS AND THE INTERNET - This chapter focuses on the disruptive technology, the Internet, and ebusiness processes that are changing the nature of the buyerseller relationship, the role of information technology (IT), and organizational structures and tasks. Baltzan & Phillips Chapter Three Overview Disruptive Technology Evolution of the Internet Accessing Internet Information Providing Internet Information SECTION 3.2 - E-BUSINESS E-Business Basics E-Business Models – EB should be relevant to you! Organizational Strategies for E-Business Measuring E-Business Success E-Business Benefits and Challenges New Trends in E-Business: E-Government and M-Commerce
MIS 235C – Prof. Merhout 1 LEARNING OUTCOMES
1. Compare disruptive and sustaining technologies Disruptive technology – a new way of doing things that initially does not meet the perceived needs of existing customers Disruptive technologies redefine the competitive playing fields of their respective markets and tend to open new markets and destroy old ones Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies Sustaining technology – produces an improved product customers are eager to buy, such as a faster car or larger hard drive Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets and virtually never lead in markets opened by disruptive technologies 3. Explain how the Internet caused disruption among businesses Define the relationship between the Internet and the World Wide Web
MIS 235C – Prof. Merhout 2 5. LEARNING OUTCOMES
1. Describe different methods an organization can use to access information
Intranet – an internalized portion of the Internet, protected from outside access, that allows an organization to provide access to information and application software to only its employees Extranet – an intranet that is available to strategic allies (such as customers, suppliers, and partners) Portal – a Web site that offers a broad array of resources and services, such as e-mail, online discussion groups, search engines, and online shopping malls Kiosk – a publicly accessible computer system that has been set up to allow interactive information browsing Mobile devices 2. Compare the different types of service providers
MIS 235C – Prof. Merhout 3 Chapter 3 – E-Commerce & E-Business
Opening Case: How Amazon’s e-business strategy disrupted the bookselling industry
There was an interesting article in Business 2.0, July 2006 – The 50 Who Matter Now. Jeff Bezos ranked 42 out of 50. “Amazon, the "biggest store on earth," is indeed the biggest non-OEM retailer on the Net. So why does Bezos rank so much lower on the list than representatives from the rest of the Internet's so-called Big Five? As a brand, Amazon is up there with eBay, Google, Microsoft, and Yahoo. But as a business, it has yet to show an ability to keep pace with the rest. Amazon's A9 search engine has not made it a major player in search, and compared with allvirtual retail players like eBay or even Barry Diller's InterActiveCorp, Amazon's physical inventory and infrastructure look increasingly like a ball and chain. Still, Bezos is not to be underestimated. His mantra from day one: Ignore other people's expectations and create a successful business one step at a time. If Bezos has a plan to restore Amazon's reputation as an innovator, he needs to show it soon.”
MIS 235 – Prof. Merhout 4 DISRUPTIVE TECHNOLOGY How can a company like Polaroid go bankrupt? If Polaroid executives had used Porter’s Five Forces analysis would they have discovered the threat of substitute products from the digital camera? What could they have done to combat this threat? Digital Darwinism – implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction MIS 235C – Prof. Merhout 5 Disruptive versus Sustaining Technology What do steamboats, transistor radios, and Intel’s 8088 processor all have in common? Disruptive technology – a new way of doing things that initially does not meet the needs of existing customers Sustaining technology – produces an improved product customers are eager to buy MIS 235 – Prof. Merhout 6 Disruptive versus Sustaining Technology
Picture 4 Picture 3 MIS 235 – Prof. Merhout 7 Disruptive versus Sustaining Technology Innovator’s Dilemma (Clayton M. Christensen) - discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers, partners, and stakeholders Christensen believes that some companies (e.g., Xerox, IBM, Sears, and DEC) placed too great an emphasis on satisfying customers’ current needs, while forgetting to adopt new disruptive technology, that will meet customers’ future needs MIS 235 – Prof. Merhout 8 Disruptive versus Sustaining Technology
Picture 3 MIS 235 – Prof. Merhout 9 The Internet – Business Disruption One of the biggest forces changing business is the Internet Organizations must be able to transform as markets, economic environments, and technologies change Focusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technology MIS 235 – Prof. Merhout 10 The Internet – Business Disruption The Internet has had an impact on almost every industry including: Travel - Expedia.com is now the biggest leisure-travel agency, with higher profit margins than even American Express. Entertainment Electronics Financial services - Lending Tree was growing 70 percent a year. Processing online mortgage applications is now 40 percent cheaper for customers. Retail - eBay is on track to become one of the nation’s top 15 retailers Automobiles Education and training - Cisco saved $133 million by moving training sessions to the Internet
MIS 235 – Prof. Merhout 11 Evolution of the World Wide Web What is the difference between information richness and information reach? The Internet’s impact on information Easy to compile Increased richness Increased reach Improved content (e.g., dynamic relevant content) MIS 235 – Prof. Merhout 12 OPENING CASE QUESTIONS
Amazon.com – Not your average bookstore
• How has Amazon used technology to revamp the bookselling industry? Is Amazon using disruptive or sustaining technology to run its business? How is Amazon using intranets and extranets to run its business? How could Amazon use kiosks to improve its business?
MIS 235 – Prof. Merhout 13 • • • EC Infrastructure: The Internet History 1960s Started as ARPANET (Advanced Research Projects Agency) 1986 - NSFNET became internet Backbone (56Kbps) 1989 - NSFNET upgraded to T1 1.44 (Mbps) 1991 - NSFNET upgraded to T3 45 (Mbps) 1991 - First commercial traffic 1994 - First Web browser introduced (Killer App) 1995 - NAPs Replaced NSFNET 1995 - Control turned over to independent governing bodies
MIS 235 – Prof. Merhout 14 The Internet Architecture Connecting Independent Networks Routers or other internetconnecting hardware An implicit hierarchy of networks exists Backbone Regional Local Networks Packet-Switching Technology TCP/IP Transmission Control Protocol/Internet Protocol Creates and transmits IP Datagrams/packets Platform Independent MIS 235 – Prof. Merhout 15 Internet Terminology Interconnect Level Any means for for bandwidth providers to interconnect Network Access Points (NAPs) Metropolitin Area Ethernets (MAEs) Federal and Consumer Internet Exchanges (FIXs) and (CIXs) (pseudo NAPs) Replaced NSFNET (old backbone network) high-speed lines or series of connections that form the major pathways of the Internet connect up to one or more national backbone providers ISPs provide the “on ramps” National Backbone Providers Regional Networks Local Internet Service Providers (ISPs) Consumers and Businesses Servers - Contain information and are located on independent networks MIS 235 – Prof. Merhout 16 Internet Architecture
National Backbone Provider Network Access Point (NAP) Network Access Point (NAP) National Backbone Provider Regional Internet Service Provider Regional Internet Service Provider Regional Internet Service Provider Local ISP Local ISP Local ISP MIS 235 – Prof. Merhout 17 The Internet Architecture MIS 235 – Prof. Merhout 18 Internet Architecture MIS 235 – Prof. Merhout 19 Internet Access Internet Service Providers (ISP) Provide individuals and companies access to the Internet As well as other services Connection Type Bandwidth
Local telephone line Wireless 2G digital cellular 2.5G digital cellular 3G digital cellular Bluetooth Wi-Fi (802.11x) WiMAX Home satellite service DSL Cable service Leased line (T-1, T-3) Fiber optic cable 56 Kbps 19.2 Kbps 144 Kbps 2 Mbps 1 Mbps Up to 64 Mbps Up to 100 Mbps 400 Kbps 1.44 Mbps 2 to 10 Mbps 1.5 to 43 Mbps Up to 50 Gbps
20 Web hosting Storage Web development support Site registration Online Service Providers ISPs that provides additional more content based services (e.g., AOL) Provide applications over the Internet; can be “rented” (e.g., salesforce.com) Application Service providers MIS 235 – Prof. Merhout Packet Switching
Message A What makes TCP/IP so effective Break message into packets (TCP) Transmit packets independently (IP) Multiple messages share line Reassemble message at receiving end (TCP) Packet A1 Packet A2 Packet A3 Packet A3 Packet Z2 Open Packet B2 Packet A2 Packet Y3 Packet X3 Packet Z1 Packet B1 Packet A1 Packet Y2 Packet Packet Y1 Packet X2 Packet Open Open Packet X1 Packet A1 Packet A2 Packet A3 Message A MIS 235 – Prof. Merhout 21 Packet switching Packets can follow different routes to reach destination Error handling is important Packets can arrive out of order (can be reassembled) Individual packets may be lost Efficient utilization of available bandwidth Efficient error recovery Deliver the message accurately! Objectives MIS 235 – Prof. Merhout 22 IP address IP Address 32 bit number dotted decimal format…e.g., 22.214.171.124 Standards Use nslookup command from a dos prompt: e.g., nslookup www.fsb.muohio.edu will give you 126.96.36.199. Works in reverse also: nslookup 188.8.131.52 IPV4 -- current IPV6 – migration in process Internet communication requires IP address We work with Domain names Two to four words separated by dots Structured in a hierarchy easier to remember than IP address sbaoracle.sba.muohio.edu (134 = .edu; 53 = muohio; etc.) A Domain Name System (DNS) Converts domain names to IP addresses exists to enable us to use the Internet without knowing IP address
MIS 235 – Prof. Merhout 23 Internet 2 A step toward the original intent of the Internet Private alternative to the Internet Research and Education purposes only! Incredibly fast with much less traffic Playground for new technologies MIS 235 – Prof. Merhout 24 What is the World Wide Web? Software foundation layered on the Internet upon which much ECommerce(EC) and E-Business (EB) is based Global hypertext system that uses the Internet as its transport mechanism Provides standardized protocols for creating, naming, linking and accessing Internet content Based on client/server architecture Hypertext Transport Protocol (HTTP) The communication protocol for Web server/ client interaction
MIS 235 – Prof. Merhout 25 Chapter 3, Part 2 Electronic Business and Mobile Computing E-business Basics E-commerce and E-business differ? E-commerce – the buying and selling of goods and services over the Internet AND other networks, such as VPNs and VANs E-business – the conducting of business on the Internet AND other networks through any form of telecommunications and including, not only buying and selling, but also serving customers and collaborating with business partners Categories (“depends on who you ask”) Business-to-Consumer (B2C) Business-to-Business (B2B) Business-to-Employee (B2E) (also called Business-to-Enterprise and BwB) Consumer-to-Consumer (C2C) (actually is usually C2B2C) Consumer-to-Business (C2B) Government-to-Consumer (G2C) E-business is done in virtually every industry MIS 235 – Prof. Merhout 27 EB Intermediaries Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-business e.g., C2B2C (eBay is the intermediary) Disintermediation - squeezing out old members of the supply chain Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways MIS 235 – Prof. Merhout 28 C2C & B2C E-business C2C Auction sites (technically C2B2C) Communities Web 2.0 capabilities take communities to a whole new level Blogging Wikis Facebook B2C E-shop and E-malls Business types include (components of business model) Brick-and-mortar - Traditional, physical companies Pure-play or Click-only (“virtual”) companies - Online only Click-and-mortar (or “Brick & Click”) - Both physical and virtual Challenge: increased IS complexity Many strategy alternatives open up!
MIS 235 – Prof. Merhout 29 Generating Revenue in C2C & B2C
Revenue stream in a business model Charge for products Traditional products must be shipped Digitizable products can be delivered immediately Opens doors to mass customization Financial Services Charge for service Online Payments Financial cybermediary - facilitates cybermediary payments over the Internet. e.g., PayPal Electronic check; e.g., online banking Electronic bill presentment and payment (EBPP); available through local banks or online services such as Checkfree and Quicken. Digital wallet - both software and information; software provides security and the information includes payment and delivery information Stock Trades Listing fees for auctions Transaction fees Communities Subscription fees Affiliate Programs Paying royalties for sales driven from other sites
MIS 235 – Prof. Merhout 30 Generating Revenue in C2C & B2C Drive traffic to the site and charge for advertising (e.g., Google Ads) Search engine optimization (SEO) - Must be found by consumers Site Personalization – My Yahoo RSS Feeds (Really Simple Syndication) Podcasting Many types of adds a set of methods aimed at improving the ranking of a Web site in search engine listings; SEO strategies can increase the number of visitors and the quality of visitors, where quality means visitors who complete the action the site intends (e.g., purchase, sign up, learn something). Spamdexing - uses a variety of deceptive techniques in an attempt to manipulate search engine rankings (link your URL on other sites; key words) Web Advertising Pop up ads Banner ads Interstitials For more…http://www.mssem.com/library/how_to_buy_online_advertising.html more… Clickstream data provides metrics to measure the effectiveness of web sites, online ads, etc… MIS 235 – Prof. Merhout 31 Consumer Protection E-business security Encryption - scrambles information into an alternative form that requires a key or password to decrypt Secure socket layer (SSL) - 1) creates a secure and private connection between a client and server computer, (2) encrypts the information, and (3) sends the information over the Internet. Look for https and lock Secure electronic transaction (SET) - a transmission security method that ensures transactions are secure and legitimate. SET encrypts information AND enables customer authentication for credit card transaction. Endorsed by MasterCard, American Express, Visa, Netscape, and Microsoft. MIS 235 – Prof. Merhout 32 B2B Electronic Commerce The integration problem has moved from Islands (e.g., isolated departments) of Automation to Continents B2B has a much longer history than B2C Electronic Data Interchange (EDI), some historians trace B2B to post-WWII Berlin Electronic Funds Transfer (EFT) – e.g., Financial EDI Value Added Networks (VAN) Now many creative uses of newer Internet based technologies Virtual Private networks (VPN) are employed for secure use of public bandwidth such as Oracle via wireless MIS 235 – Prof. Merhout 33 E-Business Facilitating Networks Picture 4 Virtual private network (VPN) - a way to use the public telecommunication infrastructure (e.g., Internet) to provide secure access to an organization’s network Valued-added network (VAN) - a private network, provided by a third party, for exchanging information through a high capacity connection MIS 235 – Prof. Merhout 34 B2B Electronic Commerce Intranet (referred to as “an intranet”) Internal or private application of Internet and Web based technologies Use to share proprietary information not intended for public consumption Providing another alternative for integration in the value chain Often use public bandwidth to communicate between distant locations VPN for the Secure transmission of proprietary info Extranet Opening up intranet access to selected business partners Same technologies intranets and Internet; what are they??_______________________ Because companies connect using public bandwidth, one additional component: VPN for the Secure transmission of proprietary info MIS 235 – Prof. Merhout 35 Business-to-Business (B2B)
Picture 6 Electronic marketplace (emarketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities; Omnexus example Procurement Maintenance, repair, and operations (MRO) materials (also called indirect materials) – materials necessary for running an organization but do not relate to the company’s primary business activities E-procurement - the B2B purchase and sale of supplies and services over the Internet Electronic catalog - presents customers with information about goods and services offered for sale, bid, or auction on the Internet MEASURING E-BUSINESS SUCCESS Most companies measure the traffic on a Web site as the primary determinant of the Web site’s success However, a large amount of Web site traffic does not necessarily equate to large sales Many organizations with high Web site traffic have low sales volumes Revenue generated Conversion of traffic to new customers Effectiveness Web site metrics What’s a better way? Number of shopping carts _____________ E-business benefits include (note these from Hwk 1): E-BUSINESS BENEFITS AND CHALLENGES Highly accessible Increased customer loyalty Improved information content Increased convenience Increased global reach Decreased cost (recall Omnexus case, p. 9, e.g., reduced search costs) E-business challenges include: Protecting consumers Leveraging existing systems Increasing liability (see Omnexus anti-trust concerns, p. 11) Providing security Adhering to taxation rules Getting too far ahead of customers
MIS 235 – Prof. Merhout 39 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE
Picture 3 MIS 235 – Prof. Merhout 40 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE E-government - involves the use of strategies and technologies to transform government(s) at all levels by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of government C2G G2C G2B and B2G (Federal government requirements are absurd) G2G Wireless Technology & M-Commerce Wireless Technology Any device that uses wireless media to connect to a telecommunications network with a “live” connection. Mobile Technology Wireless technology that can travel with the user
Not always live? M-Commerce The ability to do E-business using Mobile technology e.g., Realtors use Palm Treo to open lockboxes digitally, write contracts e.g, applications that show a map of homes for sale that fit certain criteria e.g., MobillCash, http://www.mobillcash.com/ (see http://www.youtube.com/watch?v=Q_UDxxtdPoM) MIS 235 – Prof. Merhout 42 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE
Picture 5 Mobile commerce the ability to purchase goods and services through a wireless Internet-enabled device OPENING CASE QUESTIONS Amazon.com
• What is Amazon’s e-business model? How can Amazon use m-commerce to influence its business? Which metrics could Amazon use to assess the efficiency and effectiveness of Amazon’s Web site? What are some of the business challenges facing Amazon?
MIS 235 – Prof. Merhout 44 • • • ...
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This note was uploaded on 12/14/2008 for the course MIS 235C taught by Professor Merhout during the Fall '08 term at Miami University.
- Fall '08