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The Digital Firm: Electronic Business and Electronic Commerce

Chapter 4. The Digital Firm: Electronic Business and Electronic Commerce. Objectives. How has Internet technology changed value propositions and business models? What is electronic commerce? How has electronic commerce changed consumer retailing and business-to-business transactions?

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The Digital Firm: Electronic Business and Electronic Commerce

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  1. Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

  2. Objectives • How has Internet technology changed value propositions and business models? • What is electronic commerce? How has electronic commerce changed consumer retailing and business-to-business transactions? • What are the principal payment systems for electronic commerce?

  3. Objectives • How can Internet technology facilitate management and coordination of internal and interorganizational business processes? • What are the major managerial and organizational challenges posed by electronic business and electronic commerce?

  4. Management Challenges • Digitally integrating the enterprise requires a complete change of mind-set. • Finding a successful Internet business model.

  5. Electronic Business, Electronic Commerce, and the Emerging Digital Firm Internet Technology and the Digital Firm The Internet • Rapidly becoming infrastructure of choice • Universal, easy-to-use set of technologies and standards • Web sites available 24/7 • Extended distribution channels • Reduced transaction costs • Reduced network and coordination costs

  6. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions • Past: Information about products and services bundled with their physical value chain • Today: The Internet has unbundled information from traditional value chain, creating new business models

  7. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions Information Asymmetry • One party has more information essential to the transaction than the other party • The Internet shrinks information asymmetry

  8. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions Richness and Reach • Richness: depth and detail of information • Reach: how many people a business can connect with; how many products offered those people • Internet allows much richer communication with farther reach

  9. Electronic Business, Electronic Commerce, and the Emerging Digital Firm The changing economics of information Figure 4-1

  10. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions Internet Business Models • Virtual storefront: Sells physical products directly to consumers or businesses. • Information broker: Provides product pricing and availability information; generates revenue from advertising or directing buyers to sellers. • Transaction Broker: Processes online sales transactions for fee.

  11. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions Internet Business Models • Online Marketplace: Provides digital environment where buyers and sellers meet • Content Provider: Provides digital content, such as news; revenue from fees or advertising sales • Online Service Provider: Provides connectivity; revenue from fees, advertising, or marketing information

  12. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions Internet Business Models (cont.) • Virtual Community: Provides online meeting place for people of similar interests • Portal: Provides initial point of entry to the Web, along with specialized content and services • Syndicator: aggregates content or applications to resell as package to third-party Web sites

  13. Electronic Commerce Categories of Electronic Commerce • Business-to-consumer (B2C): Retailing products and services to individual shoppers • Business-to-business (B2B): Sales of goods and services among businesses • Consumer-to-consumer (C2C): Consumers selling directly to consumers

  14. Electronic Commerce Customer-Centered Retailing Direct Sales Over the Web • Disintermediation: Removal of intermediary steps in a value chain, selling directly to consumers, significantly lowers purchase transaction costs • Reintermediation: Shifting intermediary function in a value chain to a new source, such as “service hubs”

  15. Electronic Commerce The benefits of disintermediation to the consumer Figure 4-2

  16. Management Challenges and Opportunities Business Process Change Requirements • Unproven business models • Business process change requirements • Channel conflicts • Legal issues • Trust, security, and privacy

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