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Enabling Commerce Online: Key Capabilities and Business Strategies

Learn about the different types of e-commerce, key capabilities of the web, and various business strategies for success in the online marketplace.

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Enabling Commerce Online: Key Capabilities and Business Strategies

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  1. Chapter 5 Enabling Commerce Using the Internet “…[W]e can hardly keep up with the Fortune 500 companies who are contacting us.” Sibley Verbeck, CEO and founder of the Electric Sheep Company

  2. Learning Objectives 5-2

  3. Learning Objectives 5-3

  4. Electronic Commerce • Online exchange of goods, services, and money • 2007: • 3.4 percent of total retail revenue • $136.4 billion in revenue

  5. Most Common Types of E-Commerce • Business-to-consumer (B2C) • A person buys a book from Amazon.com • Business-to-business (B2B) • Retailer like Wal-Mart ordering from distributors • Business-to-employee (B2E) • Employee uses the Web to change employee benefits • Consumer-to-consumer (C2C) • One person purchases from another on eBay

  6. Other Types of E-Commerce • Government-to-citizen (G2C) • A person filing income taxes online • Government-to-business (G2B) • Government purchases supplies using Internet-enabled procurement system • Government-to-government (G2G) • Foreign government accessing U.S. federal regulations

  7. Key Capabilities of the Web

  8. Information Dissemination • Firms across the world have access to customers • Economical medium for marketing products and services • Increased geographical reach

  9. Integration • Integration of information via Web sites • Real-time access to personalized information • No time lag between company decisions and customers’ ability to access these

  10. Example: Integration • Alaska Airlines customers can access their mileage program any time • Real-time link between company database and customer

  11. Mass Customization • Meeting particular customers’ needs on a large scale • Timbuk2.com • Custom Messenger Bag Builder • Customers create a virtual bag • Preference-tracking helps Timbuk2 in marketing efforts

  12. Interactive Communication • Immediate feedback between company and customers • E-mail notifications • Customer service online chat • Best Buy • Geek Squad • 24-hour computer support

  13. Transaction Support • Internet and the Web: • Reduced transaction costs • Enhanced operational efficiency • Dell—automated transaction support • Cost savings per sale • Disintermediation • Reintermediation • Reintroduction of middlemen • E.g., Orbitz.com

  14. E-Commerce Business Strategies • Differentiated, based on levels of physical/virtual presence

  15. Brick-and-Mortar Business Strategy • Physical locations only • Traditional stores • Cons: Limited geographical reach

  16. Click-Only Business Strategy • Business conducted in cyberspace—no physical location • Virtual companies • Cons: Customers uncomfortable with online transactionsNo face-to-face interaction with customers

  17. Click-and-Mortar Business Strategy • Bricks-and-clicks business strategy • Hybrid strategy • Cons: Added complexity combining two different environments

  18. Example: Click-and-Mortar Company

  19. Components of a Business Model • A plan of how to achieve EC success

  20. Typical Revenue Models for EC • Most important ingredient of business model • How will the firm earn revenue?

  21. Learning Objectives 5-21

  22. Business-to-Business E-Commerce • Extranet • Enables firms to do business together (B2B) • One of best ways for organizations to gain return on technology-based investments • Boeing • 1,000 authorized business partners • Nearly all Fortune 1,000 companies deploy some type of B2B applications

  23. Electronic Data Interchange (EDI) • Used prior to the introduction of the Internet • EDI used for B2B systems • However: • Costly • Need for dedicated telecommunications networks

  24. Extranets • New, more affordable alternative to EDI • Advantages • Improved timelines and accuracy of information • Cost effective • Central management of documents • Technology integration • Cross-platform nature • Low cost-High Value • No specific user training required • Positive impacts on a company’s bottom line

  25. Extranet System Architecture • Internet-based application • Use of firewalls and Virtual private networks (VPN) to secure information transmission • Used to manage supply chains

  26. Intranets • Business-to-employee (B2E) electronic commerce • Internet based private network using Web technologies • Used to facilitate secured transmission of proprietary information within companies • Intranets offer similar benefits as extranets • Boeing • Intranet serves more than 200,000 employees • More than 1 million pages

  27. Intranet System Architecture • Internet-based application • Use of firewalls and Virtual private networks (VPN) to secure information transmission

  28. Intranet: Training • Boeing Company • 200,000 employees get trained • Quality eTraining program • Catalogue of courses • Online course content • Standardized courses • Business improvements • Cost reduction • Eliminated travel cost

  29. Intranet: Personalized Intranet Pages 5-29 • Customized pages for different employees • Same look and feel • Pages draw on same underlying data • Customization depending on job function or geographical location • Employees have only access to the information they need • Sometimes customized according to user’s language

  30. Intranet: Application Integration • Information from separate applications can be consolidated and presented to the user • Netegrity SiteMinder

  31. Intranet: Online Entry of Information • Use of Web browsers to enter information online • Example: Microsoft MSExpense • Prior to MSExpense • 136 different report templates • Outdated versions • With MSExpense • Online submission of expense records • Easy and centralized updates to templates • Savings of $4.3 million a year • Shortened period for reimbursement from 3 weeks to 3 days

  32. Intranet: Real-Time Access to Information • Manage, update, distribute, and access corporate information • Boeing • News releases uploaded to the Intranet • Previously sent to all corporate offices as videotapes • Reduced distribution costs • Efficient information sharing • Company-wide access

  33. Intranet: Collaboration • Boeing • Information shared between employees across the world • Reduced product development cycles • Ability to stay current on projects • Ability to stay current with the changing market conditions

  34. Learning Objectives 5-34

  35. Use of Internet Technologies • Characteristics of the Internet, intranet and extranet • B2B, B2E rely on extranet and intranet • Internet provides an opportunity for B2C commerce

  36. Stages of B2C E-Commerce • Web sites range from passive to active

  37. E-Tailing • Selling goods and services online • Click-and-mortar • Walmart.com • Click only • Amazon.com • Virtual company • Priceline.com • Reverse pricing vs. menu-driven pricing

  38. E-Tailing Benefits • Product benefits • Unlimited number and variety of products • Easier comparison shopping • Examples: AllBookstores, BizRate, or SideStep • Place benefits • Anywhere, anytime • Purchasing on global scale • Price benefits • Higher inventory turnover rate • No expenditures for physical retail space

  39. The Long Tail • Traditional stores • Focus on mainstream needs • Target the average customer • Example: Blockbuster • E-Tailers • Can focus on niche markets • Example: Netflix

  40. E-Tailing Drawbacks • Product delivery drawbacks • Delay between product order and delivery • Except for products that can be downloaded • Direct product experience drawbacks • Lack of sensory information • Smell, taste, feel • Lack of the social element • Cannot replace going to the mall with friends

  41. Attracting and Retaining Online Customers • Basic rule of commerce • Offer valuable products/services at fair prices • Additional e-commerce rules • The Web site should offer something unique. • The Web site must be aesthetically pleasing. • The Web site must be easy to use and fast. • The Web site must motivate people to visit, stay, and return. • You must advertise your presence on the Web. • You should learn from your Web site.

  42. Web Site Rules: Rule 1 • Offer something unique • Offer hard-to-find goods • Global audience • Reasonable prices

  43. Web Site Rules: Rule 2 • Web site must be aesthetically pleasing • Use of color schemes, backgrounds, high quality images • Clear, concise, and consistent layout • Increases chances of return • Can separate a Web site from the competition

  44. Web Site Rules: Rule 3 • Web site must be easy to use and fast • Easy navigation • Fast download speed • Average user will wait only a couple of seconds for a Web site to download • Present brief summary information with hyperlinks • Allows users to “drill down”

  45. Web Site Rules: Rule 4 • Web site must motivate people to visit, stay, and return • Create a community • BMW Car Club of America (BMWCCA) • Users share tips on maintenance, repair, and other items, and follow electronic links to other BMW resources. • Buy from each other

  46. Web Site Rules: Rule 5 • Advertise your presence on the Web • Pull marketing • A passive method of attracting to a specific site • Include the Web site address on all promotional materials • Advertise your Web site on other sites

  47. Web Site Rules: Rule 5 (cont’d) • Advertise your presence on the Web (cont’d) • Pay-per-click • Only pay for advertising when user clicks on it • Click-through rate • Conversion rate • Affiliate marketing—Website owners post ads on their site • Money earned fro referrals or ensuing sales • Problem: click fraud—artificially clicking on ads to create revenue • Network click fraud • Competitive click fraud

  48. Web Site Rules: Rule 6 • Learn from your Web site • Who are your customers? • What are they doing? • Web analytics • Analyze behavior of visitors • Path the visitors take • Length of the visit • Number of pages viewed • Page from which they exit

  49. Search Marketing • Strategies to enhance visibility in search engines’ results • Paid inclusion • Fee paid to the search engine to appear in the results • Cannot influence order, thus companies may use: • Search engine advertising • Search engine optimization

  50. Search Advertising • Sponsored search • Pay to ensure a spot on top of search results page • E.g., AdWords • Bid for being listed in sponsored search results • Placement depends on relevance • Pay-per-click • Can get costly

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