Electronic Commerce

1. Electronic Commerce By Khalil Matta Executive Certificate Program Oct 31, 2001

2. Understanding eBusiness The conduct of any business interaction ortransaction on an electronic network between the firm and its customers, trading partners, external constituents, and employees. What More than transactions Who More than customers Why More than efficiency

3. Internet Impact • Ability to enlarge the world - namely customer and supply chain • Ability to shrink the world – make local talent available anywhere • Ability to enlarge time by making service, products and information available 24/7 • Ability to shrink time by making information available instantaneously

4. Other Internet Properties • Distribution Channel • Transaction Cost Reducer • Creative Destroyer

5. Business Models&Web Strategies

6. Business Models • Brokerage • Advertising • Infomediary • Merchant • Manufacturer • Subscription

7. BrokerageMarket Makers • Buy/Sell fulfillment: eTrade and CarsDirect • Charge buyer or seller a transaction fee • Auction: ebay, AuctionNet • fee scaled with the value of transaction • Reverse Auction: priceline, MyGeek.com • fee based on the spread between bid and ask price • Search Agents: MySimon, RoboShopper, CareerCentral • referral charge

8. Advertising Model • Portals: Yahoo, Excite, AOL • Success depends on volume (eg. # of eyeballs!!) • Attention/Incentive Marketing: CyberGold, NetCentives • pay customers for viewing content or filling forms • Free Model: FreeMerchant, BlueMountain • offer customers something for free to increase volumes • Bargain Discounter: Buy.com • Sell at or below cost to attract shoppers

9. Infomediaries • Consumer Info: eMachines, NetZero • Sell customer info to merchants (offer consumers freebees) • Merchant Info: Gomez • Sell website info to customers • Recommender System: Deja.com, ePinions • Monitor user habits and give feedback to merchants • Registration Model: NYTimes.com • track user navigation and habits for targeted advertising

10. Merchant Model • Virtual Merchant: Amazon, OnSale • sell list price or auction. Make money on margins • Catalog Merchant: Chef’s Catalog • mail order to Web order • Surf and Turf: Gap, B&N, Borders, Wal*Mart • Channel conflicts or opportunities??

11. Manufacturer • Dell, Cisco • Compress the distribution channel by eliminating the middle man • enhance customer service • faster response time • more efficient supply chain • better customer knowledge • GE • E-procurement • Creative Business Destruction • B to E • Partner Support • Ford • Product Development • Auto Hub

12. Subscription Model • Wall Street Journal, Consumer Reports, The Street.com, Forrester Research • Consumers pay to access the site • AOL

13. The Web as a Mediating Technology Interconnecting: • Business-to-Business • Business-to-Consumer • Consumer-to-Consumer • Consumer-to-Business • Company-to-Employee

14. Two Different Approaches • Business-to-Customer • Aggressive industry player. Primarily retail. • Gain market and mind share using Internet and Portals • Primarily Focused on seller-side of supply chain. • Large scale, mass-market appeal. • Brand recognition. • High availability. • Business-to-Business • Aggressive industry player. Gain market and mind share. • Using the Internet and Extranets to capture business community. • Many business models. • Security intensive. • Typically targeted at an industry segment. Best in Class Do Both!!

15. On-line Retailing • Advantages to leverage • Offer the best products and services • Ability to offer a larger selection • Reduced search costs • Convenience of 24x7 • Personalized shopping experience • Availability of product information • Targeted selling & promotions • Buyer rewards/loyalty program • Interaction with others who share common interests • Sales tax savings • Challenges to address • Inability to ‘try before you buy’ • Delivery delays • Shipping charges • Customer Service Challenges • Requires computer and Web access

16. Products on Line • Purchase decision is information- intensive • Product demonstration and atmospherics are unimportant • Selection is vast and stores carry limited selection • Prices and selection change frequently • Retail buying experience is unpleasant • Logistically efficient (volume and value) • Non- perishable • Delayed gratification acceptable • Gift- oriented

17. Quantifying vulnerability:Four dimensions of “E- suitability” • Information- intensity : How much information does the • consumer need to gather in the entire buying process? • Multisensory appeal : To what extent does the product • evaluation require consumers to engage the senses of • smell, taste, and touch? • Atmospherics : How important is the role of the • physical store environment and the interaction with the • salesperson in the purchase process? • Logistical efficiency : How efficiently can the product • be packed and shipped to individual consumers?

18. Channel outcomes of E-commerce Brand Augmentation High Channel Augmentation • Grocery products • Garden products • Footwear • Apparel • Consumer electronics • Appliances/white goods • Automobiles • Home furnishings Richness of physical interactionsin buying Process Channel Disintermediation Channel Proliferation • Books • Music and videos • Videos • Office Supplies • Travel • Computer hardware/software • Personal investing • Prescription drugs Low High Low Intensity of information in buying process

19. Applying the “E-radar” Sensoryfit Books Apparel Atmosphericsfit Logisticalfit Informationalfit

20. The promise of online shopping… • Convenience • Choice • Control • Customization • Context • Community

21. The Challenges of B2C • Getting customers to visit your site • Enticing site visitors to buy things • Building customer loyalty • Fulfillment • Generating Profits

22. Whatever happened to: • Amazon? • Priceline? • E-bay? • Yahoo? • AOL?

23. The promise of B to B e-commerce • Managing inventory more efficiently • Adjusting more quickly to customer demand • Getting products to market faster • Cutting the cost of paperwork • Reigning in rogue purchases • Obtaining lower prices on some supplies

24. Example – IBM as an eBusiness e-commerce $15b sold over the web in 1999, run rate of $40/day. e-procurement $13 billion procured over Web, saving $750m in costs. e-supply chain management Supply/demand planning time – 45 days to 20 days, order cycle time 27-44 days to 2-23 days, rapid response (QuickShip and Custom QuickShip) revenues from 0 to $1.3b. e-customer relationship management 52, inquiries handled on Web, saving $750m in support e-partner relationship management PartnerCommerce allows 45,000 partners to order, track status, and get financing and credit online through IBM

25. Example – IBM as an eBusiness e-external relationship management Tailored web sites for press, IT consultants, financial analysts and shareholders. Investor page – 300,000 page views/month. e-learning Online management development programs, learning simulators and training tools. Savings of $200 million in 1999. e-product development Centralized part descriptions for vendors. Collaborative design tools for software developers. Savings of $175m in 1999. e-employee relations IBM intranet gets 11m hits per day, 87% of IBM employees use the intranet every day. Employee directory, customized news delivery, performance scorecard for IMB vis-à-vis competitors.

26. Example: e-Business at Ford Motor Company New Product Development Supply Chain Management • Build cars with”digital dashboards” – Net access, location-based GPS services. Generate ISP, commerce and subscription fees. Employees Offer 350,000 employees computers and web access for $5 per month. Move B2E transactions to the Net. • Auto-exchange web site with Oracle/Cisco for online purchasing from 30,000 suppliers. Save $8.9b in purchasing. Generate $3b in exchange fees. Marketing • Team up with portal sites to sense buying preferences. • Move Ford Credit to web-based model. Save 15% in costs. Procurement • OwnerCommection web site for online help, warranty service management, financing status. Cut customer interaction costs. Sales • BuyerConnection and MSN CarPoint for web-based lead generation and “pull” model of ordering cars. Save $650/car in selling costs. Customer Service

27. B2B efforts require: • Negotiation haggling over prices, delivery and product specifications. Not so with most consumer sales. • Integration Retailers don't have to integrate with their consumer customers‘ systems. Most companies selling to businesses do integrate because their systems have to be able to communicate with those of their customers without human intervention.

28. The ladder of E-business evolution Challengers Transformation • New businesses • Industry-level impact • CEO as leader Integration • Process redesign • Extended enterprise • Strategic (VP, E-Biz) Incumbents Exploration • Process automation • Department level • Tactical/in-house Presence • Basic web site • Information-only • Tactical/outsourced

29. Business to Business E-commerce (B2B) • Procurement • Supply Chain Management • Customer Relations Management • Product Development • Employee Relationship • PR

30. Information infrastructure for e-Business Suppliers (direct and Indirect materials) Supplier-facing Applications (SCM and ORM) ERP Backbone Partner-facing Applications (PRM) Employee-facing Applications (ERM) Employees Resellers and Partners Customer-facing Applications (CRM) Customers and Influencers

31. E-procurement • Increase # of suppliers • Aggregate buying activity • Standardize buying process • Reduce transaction costs • Increase competition

32. E-procurement mechanisms • Auctions – Force suppliers to bid for your business • Reverse Auctions – name your price and see if anyone is willing to take your business for that price • Catalogues – Have agents search the web for the product you want • Hubs – e-marketplaces GE

33. Open Exchange Demand collaboration Inventory reduction Transaction efficiency Private Exchange Hosted demand and inventory planning Inventory pooling Procurement efficiency Excess inventory reduction Procurement Supplier Exchange Customer Exchange S:GELOGO/File.ppt

34. Evolution of B2B e-Commerce Infrastructure/Standards Closed (EDI) Open (Web-based) eMarkets(many to many) Many-to-many(Mediated) Hub Nature of transactions EDI(1 to 1) Dell, Cisco(1 to many) One-to-one(Direct)

35. Enter the eMartplace (eHub) • Electronic hubs (eHubs) are third-party Internet-based intermediaries that specialize in specific vertical markets or specific functional processes, host electronic marketplaces, and enable many-to-many transactions among businesses. • Sources of value creation: • – Reduced transaction costs • – Buyer and seller aggregation • – Improved marketplace liquidity • – Improved marketplace information • – Redesigned workflow Auto-Xchange

36. Supply Chain Management • Provide a single view of customer • Just-in-time buying • Eliminate steps in the buying/selling process • Increase response time • Reduce delivery cost • Increase flexibility • Increase information flow • Better management of cash flow Dell

37. Suppliers Customers Transportation Manufacturing Distribution The Vision Moving to one integrated Supply Chain for whole business... • Demand Management • Planning & Scheduling • Logistics Information Material/products Supply Chain Management Changes the DNA of the Business • Will drive huge impact . . . Real game changers . . . • Integrated demands, consolidated planning and logistics • Higher service levels with lower working capital • Automated processes drive big productivity • The engine behind e-Business Huge Opportunity to Reinvent The Business

38. Customer Relations Management • Improve Customer Satisfaction • 24/7 availability • Multi-service capability • Web • Telephone • Personal • Improve response time • More accurate response • Reduce cost • Help groups • Bulletin boards • Most frequent questions • Eliminate steps in the process • Outsource Harrah Entertainment – Walgreens

39. Spare Parts Features: • Price & Availability • Order Information • Saved Parts Lists • Advanced Searching • Order Status Benefits: • Most recent prices, availability and status information • Monitor/track all orders, Personalized product information • Enhanced accuracy, consistency, and 24 x 7 support

40. Product Development • Remove geographic constraints • Use Best-in-class capability • Focus on core competencies – increase outsourcing – reduce costs • Better information flow • Eliminate redundancies • Reduce time to market • Better after development service Charles Schwab

41. B to E e-commerce • HR - benefits management • Expense reporting • Communications tool • Knowledge Management Health Canada

42. Competitive Portal Overview Future eStrategy Technical Publications Features: • Illustrated Parts Catalog • Engine Service Manuals • Online Service Bulletins and eMail Notifications • Fleet Highlites Benefits: • Search thousands of pages within seconds • Immediate desktop access and custom searches • Visual drill-down of diagrams in Illustrated Parts Catalog Benefit: Engineers spend an hour each day searching through books & CDs--the CWC does it in seconds

43. Public Relations • News Releases • Product Developments • How to • Financial Reporting • Advertising Abbott Labs

44. The builders of e-architecture • Enterprise Management ERP applications (SAP, Peoplesoft) • Procurement ORM applications (Ariba, Commerce One) • Supply Chain Management SCM applications (i2 Technologies) • Customer Relationship Management CRM applications (Siebel, Silknet) • Marketing EMA applications (MarketFirst, Rubric, Annuncio) • Sales Sell-side e-commerce applications (Broadvision, OpenMarket) • Enterprise Applications Integration EAI applications (BEA Systems, TIBCO, Crossworlds, etc.)

45. Challenges facing Suppliers • Determining core competency – willing to outsource the rest • Differentiation • Low cost producer • Creative Business destruction/creation • Thinking Globally vs. Regionally • How much info to share with customers and suppliers • Proactive vs. reactive web strategies

46. New E-Business Reality Use e-commerce to focus on and fortify your core competencies!!!

47. Design Issues of Virtual Sites

48. Checklist for an e-business case • Outline the business problem that will be solved • Identify the business process that will be targeted • Profile the audiences who will be affected • Estimate the business impact (ROI/NPV) that is expected • Create metrics for measuring this impact • Select technology, vendors, and implementation partners • Organize the team and define roles • Develop milestones and prototyping/validation strategy • Address implementation hurdles and contingency plans

49. Architecture: Challenges • What are the key challenges facing organizations designing web sites today? • Time to market • Creating a reliable, maintainable site • Creating scalable site that can easily grow with demand • Creating a dynamic site with data driven content • Integrating data from external systems • Security • Privacy • technology choice

50. What is Scalability? • The ability to accommodate more and more users simply by adding resources to the system.