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Class 6 Systems Support to Organizational Strategy: Electronic Commerce

Asper School of Business 6150 Management of Information Systems & Technology Instructor: Bob Travica April-June 2009. Class 6 Systems Support to Organizational Strategy: Electronic Commerce. Updated May 2009. Outline. Concept of E-Commerce E-Commerce and Strategic Management

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Class 6 Systems Support to Organizational Strategy: Electronic Commerce

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  1. Asper School of Business 6150 Management of Information Systems & Technology Instructor: Bob Travica April-June 2009 Class 6 Systems Support to Organizational Strategy: Electronic Commerce Updated May 2009

  2. Outline • Concept of E-Commerce • E-Commerce and Strategic Management • Business-to-Consumer (B2C) E-Commerce • Business-to-Business (B2B) E-Commerce • Class activity: IT/IS and Strategic Advantage • Messages for Change Leadership 6150 Management of Information Systems and Technology

  3. Functionality EDI* Web Order placing & tracking x x Invoicing x x x Money transfer (e-payment) ** Proprietary technology Yes No Concept of E-commerce • Definition: E-commerce refers to performing buying and selling • operations electronically – fully or in part. • Two main domains: • - Business-to-Consumer (B2C), retail on the Internet via • Web storefronts (Chapters.com; Wine.com, music, electronics) • - Business-to-Business (B2B), buying & selling b/w firms • via e-marketplaces (Covisint; Elance.com) • directly (EDI, linking via private nets or Web; Dell-HP, • shipping industry, Cisco-UPS) * EDI = Electronic Data Interchange, technology for creating and transferring business electronic documents. ** Not as integrated function, Electronic Fund Transfer (EFT) needed.

  4. E-Commerce and Strategic Management • E-Commerce is a matter of business strategy and IS strategy as • it affects business place and scope, alignment with traditional • business, IT, management techniques, and capital investments. Buyer Organization Supplier Organization Supplier Organization Consumer = Electronic link • Supply chains turn electronic 6150 Management of Information Systems and Technology

  5. B2C E-commerce SizeP BenefitsP Costs IS Issues • Boom 1994-2000, 2001 crash; pure vs. hybrid models • 2006: 3% of all retail in U.S., 0.2% in Canada • Firm perspective benefits: • Global reach & 24/7 sales • Savings • Direct marketing & (customer profiling, personalized • Web storefronts) • Cross selling (automatic matching of customer profiles) 6150 Management of Information Systems and Technology

  6. B2C E-commerce Scope Benefits CostsP IS Issues • Firm perspective: • - Technology requirements) • - Delivery, Logistics • - Payment security • - Legal boundaries • - Competition increase • - E-branding • Consumer perspective: • - IT have-nots • - Privacy • - Payment anxiety • Recourse uncertainty 6150 Management of Information Systems and Technology

  7. B2B E-commerce ScopeP BenefitsP Costs IS Issues • Larger part of e-commerce (2006: 31% US, 1.8% CAN) • Firms’ benefits: • - Larger market • - Savings from efficiencies in supply chain (Cisco-UPS, • shipping industry, Dell-HP) • - Better coordination in supply chain • - Dynamic pricing (auctions) • 24/7 business (via e-marketplaces) 6150 Management of Information Systems and Technology

  8. Production Scheduling Inventory Buyer Supplier Purchasing Bank E-marketplace B2B E-commerce Scope Benefits Costs P IS Issues • Technology requirements (systems, links, security) Sales • Losses from increased competition & dynamic pricing • Volatile business relationships • Costs of private networks • Costs of intermediaries • Legal boundaries (e.g., anti-monopoly pressures on • buyers-driven e-marketplaces) 6150 Management of Information Systems and Technology

  9. Class Activity: IT/IS does or does not matter for strategic advantage? • To provide a competitive advantage, any technology needs to be • scarce, rare (proprietary, can’t be copied) • expensive . • Nicholas Carr (2003) claims that IT doesn’t fit either criterion but has become • a commodity as electricity, which everyone can afford. Thus, IT enables no • competitive differentiation. • Opponents argue that Carr’s analogies are false, management of IT/IS • makes a difference, historical process of learning matters, first mover • advantage still applies, affordability is not universal… • Working in teams, take • the position of Carr, or • the opponents, or • (c) the middle way, • and build your argument on any case/cases we have studied. 6150 Management of Information Systems and Technology

  10. Messages for Change Leader • Pay attention to e-commerce (B2B, B2C), which increasingly is a necessary part of business, both from the seller and buyer perspective. (Cisco-UPS, E-markets…) • Think of using IT creatively to expand the sales processes via direct sales to corporate and individual customers (Dell example). • Be flexible in managing the sales processes over time as the • market changes (Compaq added direct sales process to • its indirect channel, while Dell added indirect sales to his • direct channel). • The case of e-commerce refutes Carr’s argument by • proving that a strategic advantage can still be gained by using • commonly available IT innovatively and before others. 6150 Management of Information Systems and Technology

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