Lec6_ECommerce2v2

Lec6_ECommerce2v2 - E-Commerce(II Keys to a Successful...

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Unformatted text preview: E-Commerce (II): Keys to a Successful Online Business ISOM 101, Spring 2011 Lecture 6 HKUST Business School Overview What is “E-Commerce”? How is it different from traditional commerce and what is the significance of these differences? What are the pros and cons of E-Commerce? Raymond G. Sin © 14 HKUST Business School The E-Business Ladder Realize EB Benefits Design Models (b2b or b2c) Understand EB Components (Products, Process & Delivery) Manage Technologies & Issues (payment…) Identify Value Chain Position (e.g., Disintermediation vs. Reintermediation) Raymond G. Sin © 15 HKUST Business School What is E-Commerce? Broadly speaking… conducting commercial transactions with the help of telecommunications systems Question: did “E-Commerce” exist before the WWW and the Internet as we know it today? Raymond G. Sin © 16 HKUST Business School Early forms of E-Business (1) Electronic data interchange (EDI) Direct computer-to-computer transfer of business information Transfer of commonly used business documents in electronic form using a standard format e.g. purchase orders and invoices Electronic funds transfer (EFT) Sending money through electronic networks directly from one bank account to another e.g. direct deposit of salary Raymond G. Sin © 17 HKUST Business School Early forms of E-Business (2) The good: 1. cost savings (eliminates paperwork) 2. more reliable and standard format of documentation (cut down errors due to illegible hand-writing and lost forms, etc.) 3. Efficiency gain – much faster response time between partners in a supply chain 4. Information sharing (e.g. between retailers and suppliers) to deal with changes in the market Raymond G. Sin © 18 HKUST Business School Early forms of E-Business (3) The bad: 1. EDI provides direct connection between only two companies Not 2. good enough to improve overall supply chain planning Little room for customization Cannot be tailored to meet the specific needs of different industries/companies 3. EFT: Good for repeated transactions between the same parties; troublesome and costly to set up for one-time transactions, lacks robustness Raymond G. Sin © 19 HKUST Business School E-Business took off in 1990s with the rise in popularity of the Internet and WWW Who pioneered the WWW idea and who created the graphical user interface? WWW has enabled new forms of business on the Internet Raymond G. Sin © 20 HKUST Business School “N-to-N”, Plug-and-Play Transactions on the Internet Some new forms of business on the Internet requires the capability to process complicated transactions across multiple parties and incorporation of dynamic pricing same company operating multiple websites (e.g.?), different companies selling through the same site (e.g.?), same consumers visiting multiple sites (from same/different companies), different consumers visiting different sites Raymond G. Sin © 21 HKUST Business School The Need for New Forms of Electronic Payments E-Payments (B2C, C2C) Other reasons for the emergence of new forms of electronic transactions? Send financial transaction information securely over the Internet Consumers may not feel comfortable giving out credit card information to unfamiliar sites -> trusted third party Individuals may not have the ability to process credit card Mechanisms for electronic payments Money transfer services – Paypal.com, e-Check (safer than giving out credit card info online - why?) Digital wallet – Microsoft Passport Smart cards – can store much more than a magnetic stripe Online billing Customers receive their bills and make payments online e.g. Credit card, utilities, tax, mortgage etc. Raymond G. Sin © 22 HKUST Business School Differences between “E” and “nonE” Commerce (1) 1. The ability to tap into global marketplace Firms are no longer bounded by physical locations 2. Consumers can become sellers Ability for individuals to set up a “store” in much lesser time and less costly 3. Business is open 24/7 Without the need to hire staff or security guards 4. Increased transaction and search speed More businesses can be conducted in a smaller amount of time 5. Convenience Shop from home Raymond G. Sin © 23 HKUST Business School Differences between “E” and “nonE” Commerce (2) 6. The ability to offer customized products more easily Digital vs. physical 7. Increased product variety Much products lower inventory costs 8. Improved customer service Individual addressability Quality of interactions (increases or decreases?) Raymond G. Sin © 24 HKUST Business School E-business benefits Global marketplace Convenience Search & transaction speed Consumers Become sellers Customization Better service 24/7 Variety Raymond G. Sin © 25 HKUST Business School Benefits: The ability to tap into global marketplace Products Raymond G. Sin Raymond G. Sin © 26 HKUST Business School Benefits: The ability to tap into global marketplace Services Raymond G. Sin © 27 HKUST Business School Benefits: Business is open 24/7 Raymond G. Sin © 28 HKUST Business School Benefits: Increased transaction and search speed 107 106 105 1000 30 minutes 1 hour 1 2 minutes second Airline reservation Find a book (email) 10 seconds 15 minutes 3 hours 10 30 seconds One day (mail) One month 100 Document transfer 1 minute Banking BTO Dell PC Raymond G. Sin © 29 HKUST Business School Benefits: Increased transaction and search speed Raymond G. Sin © 30 HKUST Business School Where is this? Raymond G. Sin © 31 Raymond G. Sin © 32 HKUST Business School HKUST Business School Benefits: Convenience Raymond G. Sin © 33 Raymond G. Sin © 34 HKUST Business School HKUST Business School Benefits: Customization http://www.dell.com/html/us/products/purely_you/ Raymond G. Sin © 35 Raymond G. Sin © 36 HKUST Business School HKUST Business School Benefits: Customization The ability to offer customized /personalized products easily Design your own outwear Raymond G. Sin © 37 HKUST Business School Benefits: Customization The ability to offer customized /personalized products easily Design your own outwear Build-to-order PC My Virtual Model Raymond G. Sin © 38 Raymond G. Sin © 39 HKUST Business School HKUST Business School Benefits: Reduced Cost Banking Costs of one transaction (USD) Teller assisted (labor, paperwork,…) 10.00 ATM 0.50 Internet 0.01 40 HKUST Business School Benefits: Improved customer service Raymond G. Sin © 41 HKUST Business School Improved customer service Raymond G. Sin © 42 HKUST Business School Benefits: Consumers can become sellers Raymond G. Sin © 43 HKUST Business School Consumers can become sellers Key to success – good reputation Reputation can become “real” asset eBay sued Amazon’s trying to “borrow” the reputation scores 44 HKUST Business School Consumers can become sellers Consumers’ behavior on ebay start as buyers, build reputation Raymond G. Sin © 45 HKUST Business School Consumers can become sellers % of transactions as sales # Weeks on ebay Source: Cabral and Hortacsu (2006) Raymond G. Sin © 46 HKUST Business School Benefits: Increased Variety Anheuser-Busch, Inc Raymond G. Sin © 47 HKUST Business School Ecommerce = Increased Variety Product Category Books Typical Large Store Amazon.com 40,000-100,000 3,000,000 10,000 250,000 1,500 18,000 Digital Cameras 36 213 Portable MP3 Players 16 128 Scanners 13 171 CDs DVDs Brynjolfsson et al. (2003) Raymond G. Sin © 48 HKUST Business School The “Long Tail” book 49 HKUST Business School Increased variety: “long tail” % Sales Best-seller Before ( inventory in physical stores) Long tail in cyber space Anthropology History Mythology Art Biography Archaeology… Popularity 50 HKUST Business School Increased variety: “long tail” Before Long tail Like best-seller Don’t like best-seller, Don’t buy Like best-seller Don’t like best-seller, still buy Don’t like best-seller, find others Raymond G. Sin © 51 HKUST Business School E-Business Benefits Global marketplace Convenience Search & transaction speed Consumers Become sellers Customization Better service PC, Clothing, Consumer Electronics, Services… Google Map Dell, etc. 24/7 Variety Long tail Zipcar Airline Reservation Doc Transfer Raymond G. Sin © 52 HKUST Business School Drawbacks of E-Commerce 1. Security 2. Privacy Difficult to quantify (investments on equipments, R&D vs. rent paid for an office) 4. Changing consumers’ habits of touch and feel Analogy: someone following you throughout your shopping trip at ParkN’Shop (will discuss in detail in “IT and Society (1)”) 3. Return on investment (ROI) Hackers, viruses, etc. Again, digital vs. physical 5. Inability to reach consumers who do not have Internet access/shop online (Digital Divide) Who are likely to be these customers? Raymond G. Sin © 53 HKUST Business School Concerns: Security Raymond G. Sin © 54 HKUST Business School Visa’s suggestion for coping with fraud Verified-by-Visa Card verification value 2 (CVV2) Raymond G. Sin © 55 HKUST Business School Visa’s suggestion for coping with fraud 2. Request verification 1. Click “buy” online 3. “verified by Visa” screen Automatically appears On the cardholder’s PC 4. Enter password to verify identity Raymond G. Sin © 56 HKUST Business School Visa’s suggestion for coping with fraud Raymond G. Sin © 57 HKUST Business School Even CVV can fail to protect, when… This is your assignment Raymond G. Sin © 58 HKUST Business School Concerns: Changing consumers’ habits of touch and feel Apple Experience Center in Chicago Raymond G. Sin © 59 HKUST Business School Apple Experience Center in Boston Raymond G. Sin © 60 HKUST Business School Apple Experience Center in San Francisco Raymond G. Sin © 61 HKUST Business School Digital Divide The gap between people with effective access to digital and information technology and those with very limited or no access at all. -Prof. Z Raymond G. Sin © 62 Raymond G. Sin © 63 HKUST Business School HKUST Business School Mini Case: echoupal “it has long been dependent on a static, archaic system: Farmers sold to village traders or went to government markets, settling for whatever price was offered… http://tw.youtube.com/watch?v=-RH8Xl1C8eE http://tw.youtube.com/watch?v=QMlR1ulX9jI The idea of the e-choupals was to allow the company to buy more directly from farmers; echoupals allow farmers to check prices the night before, and then decide whether they want to sell directly to the company the next day.” --New York Times Raymond G. Sin © 64 HKUST Business School $100 Laptop Nicholas Negroponte Mesh Network Raymond G. Sin © 65 ...
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