CGMS550 W11 Week 12 - Justification of Electronic Commerce

CGMS550 W11 Week 12 - Justification of Electronic Commerce...

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12 Economics and Justification of Electronic Commerce CGMS 550 B2B E-Commerce
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15-2 Learning Objectives 1. Describe the need for justifying EC investments, how it is done, and how metrics are used to determine justification. 2. Understand the difficulties in measuring and justifying EC investments. 3. Recognize the difficulties in establishing intangible metrics and describe how to overcome them. 4. List and briefly describe traditional and advanced methods of justifying IT investments. 9. Understand how e-CRM, e-learning, and other EC projects are justified. 10. Understand how product, industry, seller, and buyer characteristics impact the economics of EC. 11. Recognize key factors in the success of EC projects
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Class discussion § Give 4 reasons why it is necessary for companies to justify their investment in E-Commerce. § Give 4 reasons why it is not necessary for companies to justify their investment in E- Commerce.
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15-4 Increased Demand for Financial Justification § IT executives feel the demand for financial justification and planning from executives but: l 65% of companies lack the knowledge or tools to do ROI calculations l 75% have no formal processes or budgets in place for measuring ROI l 68% do not measure how projects coincide with promised benefits six months after completion
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15-5 Other reasons why EC justification is needed § Companies realize that EC is not necessarily the solution to all problems § A formal evaluation of requests for funding is mandated § Companies need to assess the success of EC projects after completion, and later on a periodic basis § The success of EC projects may be assessed in order to pay bonuses
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15-6 EC Investment Categories and Benefits
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15-7 Specific benefits of E-Commerce Investments § Cost reduction § Productivity improvement § Improved customer satisfaction § Improved staffing levels § Higher revenues § Higher earnings § Better customer retention § More return of equity § Faster time-to-market
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How is E-Commerce Investment Justified 1. Cost-benefit analysis l A comparison of the costs of a project against the benefits 2. Business justification and business case § Using 15-8
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15-9 In what cases might a formal evaluation may not be needed § When the value of the investment is relatively small for the organization § When the relevant data are not available, are inaccurate, or are too volatile § When the EC project is mandated
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§ What do you need to know in order to reach a specific target that you set out be accomplished? § For example: you want to loose 20 pounds in 2 weeks?
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CGMS550 W11 Week 12 - Justification of Electronic Commerce...

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