Lec5_Ecommerce1 - E-Commerce (I): The Key Components ISOM...

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Unformatted text preview: E-Commerce (I): The Key Components ISOM 101, Spring 2011 Lecture 5 HKUST Business School Recap: Nature of the Digital World Digitization of Goods Globalization NEW MARKETS E-Commerce Merger of Products and Services Speed Role of Ideas Raymond G. Sin © 2 HKUST Business School Recap: Globalization A system of interconnected economies Enablers of globalization? Silk road East India Company Today, IT IT plays a critical role Generally speaking, technology has enabled faster and more robust connectivity among people Raymond G. Sin © 3 HKUST Business School Call Center Movie: Moral of the story? In a highly globalized world, “specialization” is the name of the game … You are no longer competing with your “next door neighbors” There is no such thing as a “Chinese job”, “Korean job” or “American job” If you’re not good enough for the job, something (computer systems; as per “automation”) or someone will take your job – both at the individual employee level as well as the firm level Raymond G. Sin © 4 HKUST Business School By the End of the Day… You should ask yourself some basic questions: How will big and small firms conduct business (will firm size matter?)? Which type of economy (economies /countries) will benefit the most from the flattening world? How will people connect and collaborate? How will people buy, shop, eat, play, learn, etc. etc. etc.? Raymond G. Sin © 5 HKUST Business School “On the Internet, nobody knows you’re a dog” 6 2. Digitization of Goods HKUST Business School Suppose you are a musician You spend $1000 to produce the first copy of a CD Raymond G. Sin © 8 HKUST Business School Now you produce 10 copies of it Suppose it costs $1 to produce one more copy $1000/10+$1=$101 Your Average Cost is ______________ $1 Your Marginal Cost is ______________ Raymond G. Sin © 9 HKUST Business School Music Raymond G. Sin © 10 HKUST Business School Telephony Raymond G. Sin © 11 HKUST Business School Software Raymond G. Sin © 12 HKUST Business School News Raymond G. Sin © 13 HKUST Business School Books Raymond G. Sin © 14 HKUST Business School Many Others … • • • • • • • • Movies Postal services Radio broadcasting Photography Gaming Phone directories Stock quotes … Raymond G. Sin © 15 HKUST Business School 3. Speed Dell Production cycle (from order to delivery) used to be 6 months After implementing an information system to process supply chain information… 4 days Raymond G. Sin © 16 HKUST Business School Speed – diffusion of tech Years to reach 300M users: Radio =80 TV =50 Cable =27 Internet =5 Source: King et al. (2002) Raymond G. Sin © 17 HKUST Business School Diffusion of Knowledge: USPTO Raymond G. Sin © 18 HKUST Business School Diffusion of Knowledge: Science Raymond G. Sin © 19 HKUST Business School Diffusion of Knowledge: SSRN.com Raymond G. Sin © 20 HKUST Business School Diffusion of News: NY Times Raymond G. Sin © 21 HKUST Business School Diffusion of News: Google News Raymond G. Sin © 22 HKUST Business School Diffusion of Opinions: Rottentomatoes 23 24 HKUST Business School HKUST Business School 4. Merger of Products & Services Raymond G. Sin © 25 HKUST Business School Merger of products/services Product+Service + Raymond G. Sin © 26 HKUST Business School Mickey Mouse Raymond G. Sin © 27 Raymond G. Sin © 28 HKUST Business School HKUST Business School Product&Service: ZIP Car Raymond G. Sin © 29 Raymond G. Sin © 30 HKUST Business School HKUST Business School 5. The Role of Ideas It took a 21-year-old a few minutes to come up with an idea which has made him more than one million dollars in four months. So what's his secret? --- BBC News http://video.google.com/videoplay?docid=-1808410405919690244 Raymond G. Sin © 31 HKUST Business School How Pixels Work Raymond G. Sin © 32 HKUST Business School How Pixels Work Raymond G. Sin © 33 HKUST Business School Once Copied, Ideas Worth Nothing Raymond G. Sin © 34 HKUST Business School 6. New Markets and Pricing Digital markets have created new businesses Travel Orbitz Expedia Customer-to-customer (C2C) exchanges and auctions eBay Yahoo auctions Financial Fidelity eTrade Raymond G. Sin © 35 HKUST Business School Amazon means more choices A large bookstore 100,000 books Amazon >3,000,000 books Raymond G. Sin © 36 HKUST Business School Technologies Drive the Long Tail Supply Side Centralized inventory Reduce cost of inventory storage and distribution Eliminate limitations of shelf space Demand Side Search engines Google, Yahoo, etc Product and Price Comparison Agents Pricewatch, Expedia, Travelocity, Shopper.com, Dealtime, NexTag Online reputation systems Epinions, Bizrate, eBay seller ratings Raymond G. Sin © 37 HKUST Business School eBay Founded in 1995 Over 212 million registered users Over US$11 billion cars sold on eBay Stock market value: US$42 billion Compare that with Ford Motor’s $30 billion million Raymond G. Sin © 38 HKUST Business School eBay by the numbers 9: Number of minutes between the sale of SUVs on eBay. 95: Percentage of eBay's sellers that are individuals or small businesses. $1590: Value of goods sold on eBay every second. 573,000 : stores hosted at eBay 105 million: Number of items on the site at any given time, more than 2000 times the number of stockkeeping units in a typical Wal-Mart. 1.3 million: Sellers around the world use eBay as a primary or secondary source of income. Raymond G. Sin © 39 HKUST Business School eBay: What’s for Sale? Expensive Item Grumman Large Item World Gulfstream II jet Airplane ($4.9 million) War II submarine Unusual Items Tattoo on head for $10,000. Sports Car for £50. Raymond G. Sin © 40 HKUST Business School Key Takeaways Digitization lowers marginal costs Speed is both a driver and a result of success Products/services can be merged Ideas mean a lot, literally You are limited only by your imagination The best way to foresee the future is to create it Technology opens up new markets, creating new distribution channels and opportunities for new pricing strategies Raymond G. Sin © 41 Raymond G. Sin © 42 HKUST Business School HKUST Business School DOWNLOAD: The True Story of the Internet In the video, which 2 companies introduced the innovation that started the boom, bubble, bust and resurrection? Amazon and eBay Where is the best place to look for high-tech startups? Garage Raymond G. Sin © 43 HKUST Business School Questions Jeff Bezos or Pierre Omidyar, which one is a data junky? Who is obsessed with analysis and strategic planning? Jeff Bezos True or false: eBay and Amazon went unnoticed at the Wall street? False. Wall street paid a lot of attention to them. Raymond G. Sin © 44 HKUST Business School What is Moore’s law? Why is Moore’s law important? Computing power doubles every 18 month The Journalist mentioned frenzies introduced by railway, telegraph, canals, automobile, and eventually the Internet to make what point? Breakthroughs in technology bring financial bubble. Raymond G. Sin © 45 HKUST Business School Metcalfe’s Law The value of a communications network is proportional to the square of the number of users of the system (n2). Network Effects Now, for k nodes, how many lines are there? k*(k-1)/2 Raymond G. Sin © 46 HKUST Business School Jeff Bezos said his company has rising revenue, but also rising costs. At one point of time, his company actually made a profit for a quarter, but nobody would like to admit it, because __________. It was an accident Any chance Bezos gets a chance, he lowers the prices to boost the sales, which he summarized with 3 words _______. Get big fast Raymond G. Sin © 47 ...
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