Manajemen Keuangan dan Teknologi E-Bisnis

1. Manajemen Keuangan dan Teknologi E-Bisnis

2. Significance of ecommerce • U.S Census Bureau estimates that there was $6.373 billion retail in 3rd quarter 2000 • 15.3 percent increase from 2nd quarter 2000 • Over 100 Ecommerce businesses closed shop in 2000 • 0.78 % of total retail sales • During the same quarter total retail declined 0.4% Introduction Benefits of ecommerce • Access to global markets • Lower cost of business • Convenience to the customer

3. Continued Growth • Hosts: 36,739,000 (7/98); 16,729,000 (7/97) • .com: 10,301,570 • .net: 7,054,863 • .edu: 4,464,153 • Web servers: 3.35M (10/98); 130% Introduction • Bill Goffe, Univ. of Southern Mississippi • Bob Parks, Washington University • George Greenwade, Sam Houston State University

4. Introduction

5. Introduction

6. Introduction

7. Introduction

8. The Imperatives of Technology • Applications of technology require precise subdivision and coordination of activities. • Large-scale subdivision generates complexity which must be comprehended and managed. • Complexity extends production processes in time and space. • Spatial extension through the supply chain • Temporal extension through component fabrication and assembly IT and Bussiness

9. The Imperatives of Technology • Microeconomic Consequences: • Large overhead costs. • Significant economies of scale and scope. • Multi-dimensional product characteristics. • Consequences for Industrial Organization • Strategic rather than competitive environment. • Non-price competition (branding and product differentiation). IT and Bussiness

10. Information and the Economic Landscape • What is the role of information in the economic landscape? • The Hayek model: Competitive paradigm • Prices are sufficient statistics for information about the state of the market. • Competitive markets aggregate economic information. • Decentralized decision-making requires only prices as inputs to decision processes. IT and Bussiness

11. Information and the Economic Landscape • Strategic distortions of the competitive model: • Information is internalized in the supply chain and through long-term contracting relationships between firms. • Market segmentation and price discrimination mask information content of prices. • Product differentiation fragments information. • Strategic interactions (pricing and marketing) entangle information through versioning and bundling decisions. IT and Bussiness

12. The Internet and the New Economy • Information technology is simultaneously intensifying the strategic features of the economic landscape, while making it more competitive. • Strategic Intensification • Greater scope for both B2B and B2C commercial interactions • Tightening of existing supply chains through internet data transfer protocols • Dis- and re-intermediation of consumer sales. IT and Bussiness

13. The Internet and the New Economy • Intensification of competition • Digital goods and services are the most extreme examples of the technological imperative: All costs are fixed costs -- marginal cost is zero. • Wide-spread adoption of information technology puts zero cost production (copying) capabilities in everyone’s hands. • Wide-spread adoption of technology gives economic agents vastly expanded access to information about products and prices. IT and Bussiness

14. Traditional vs electronic transaction IT and Bussiness

15. What is the Internet? The Internet is a world-wide network of computer networks that use a common communications protocol, TCP/IP (Transmission Control Protocol/Internet Protocol). TCP/IP provides a common language for interoperation between networks that use a variety of local protocols (Ethernet, Netware, AppleTalk, DECnet and others). Where did it come from? Concept of Internet In the late sixties, the Advanced Research Projects Administration (ARPA), a division of the U.S. Defense Department, developed the ARPAnet to link together universities and high-tech defense contractors. The TCP/IP technology was developed to provide a standard protocol for ARPAnet communications. In the mid-eighties the NSF created the NSFNET in order to provide connectivity to its supercomputer centers, and to provide other general services. The NSFNET adopted the TCP/IP protocol and provided a high-speed backbone for the developing Internet.

16. What do people do on the Internet? Probably the most frequent use is electronic mail (e-mail). After that are file transfer (moving data from one computer to another) and remote login (logging into a computer that is running somewhere else on the Internet). In terms of traffic volume, as of December 1994 about 32% of total traffic was file transfer, 16% was World Wide Web (WWW), 11% was netnews, 6% was email, 4% was gopher, and the rest was for other uses [Merit Statistics]. People can search databases (including the catalogs of the Library of Congress and scores of university research libraries), download data and software, and ask (or answer) questions in discussion groups on numerous topics (including economics research). How big is the Internet? Concept of Internet From 1985 to December 1994, the Internet grew from about 200 networks to well over 45,000 and from 1,000 hosts (end-user computers) to over four million. About 1,000,000 of these hosts are at educational sites, 1,300,000 are commercial sites, and about 385,000 are government/military sites, all in the U.S. Most of the other 1,300,000 hosts are elsewhere in the world [Network Wizards]. NSFNET traffic grew from 85 million packets in January 1988 to 86 billion packets in November 1994. (Packets are variable in length, with a bimodal distribution. The mean is about 200 bytes on average, and a byte corresponds to one ASCII character.) This is more than a six hundred-fold increase in only six years. The traffic on the network is currently increasing at a rate of 6% a month. (NSFNET statistics are available at Merit’s Network Information Center1.)

17. Types of ecommerce • Business to business • Example ESIP 1 to ESIP 3 ecommerce • Business to consumer • Distributing data products to non ESIP customers. • Both types have different needs and resources. • Both types of customers can be served Type&Model of E-bussiness

18. Barriers to success in ecommerceSurvey from commerce.net • Top Ten Barriers to ecommerce, 2000 • Security and encryption • Trust and risk • Lack of qualified personnel • Lack of business models • Culture • User authentication and lack of public key infrastructure • Organization • Fraud and risk of loss • Internet/Web is too slow and not dependable • Legal issues Type&Model of E-bussiness

19. Business Models • The method of doing business by which a company can generate revenue. • The business model spells-out how a company makes money by specifying where it is positioned in the value chain. Ecommerce Models Type&Model of E-bussiness • There are many models being talked about, so it depends on who you are asking. • Useful Categories • Transplanted real world business models • Native internet business models

20. Internet economics is different from real world economics • Real World • It is based on supply and demand • Value comes from a scarcity of goods and services. • Internet • Scarcity doesn’t exist on the web. There is almost no cost to replicate data. • The economics of abundance makes attention valuable. Type&Model of E-bussiness

21. Native Internet Models Type&Model of E-bussiness

22. High Level Models Type&Model of E-bussiness

23. Brokerage Examples Type&Model of E-bussiness

24. Advertising Examples Type&Model of E-bussiness

25. Infomediary Examples Type&Model of E-bussiness

26. Merchant Example Type&Model of E-bussiness

27. Perspective on Market Transactions (Dholakia et all) Economic Framework

28. Economic Effects of Internet and Impacts on Marketing (Dholakia et all) Economic Framework

29. Economic Effects of Internet and Impacts on Marketing (Dholakia et all) Economic Framework

30. Measuring The Internet Economy (O’Donnel) Four Layer (CREC Univeristy of Texas) • Internet Infrastructure : including Telecommunication Company, Internet Backbone Providers, Internet Service Provider • Internet application infrastructure: principally, software required for internet services, but also consulting and service company hired to build web sites • Internet Intermediary • Internet Commerce Economic Framework

31. Economic Framework

32. Economic Framework

33. Four Common Topics in Economics • Cost • Price • Demand • Substitutes and Complements • Externalities Cost

34. Cost • Phone Service • Movies • Music • Stock Quotes • Magazines • Producing • Duplicating • Distributing • Capacity Limits Cost Internet

35. The Cost of Information • The cost of producing the first unit of a digital good is generally not small, and can be substantial. • As we have seen, the indestructibility and reproducibility of digital goods means that the marginal cost of producing an additional unit of the good is close to zero. • Because the cost of storing and transmitting stored information is cheap (and continues to get cheaper), there are also no effective capacity constraints on the production of digital goods. Cost

36. HOW IS INTERNET ACCESS PRICED? What other types of pricing have been considered? There are three main elements of network costs: The cost of connecting to the net, The cost of providing additional network capacity, and The social cost of congestion. To reduce congestion Peer pressure and user ethic Quee and priority Overprovisioning Cost

37. Cost Issues • In typical networks, most of the cost of building and operating the network is fixed, with the marginal cost of providing network services (transportation, communication, transactions) generally small. • This implies that as the network increases in size, the average cost of providing network services decreases. • Hence, there are natural incentives with networked technologies for firms that operate the technology to grow in size. Cost

38. Pricing of Access to The Internet • Flat Pricing • Auction Approach • Static Priority Pricing • Dynamic Priority Pricing • PMP Approach Pricing Pricing of Goods and Services on The Internet ?

39. Price • Value not cost • Segment • Personalize • Bundle • Movie Theaters • Airlines • Books • Printers • Lexis-Nexis • Amazon.com • Super Markets Online Pricing Internet

40. Microsoft vs. Britannica • Pre-internet: 32 volume set of Encyclopedia Britannica cost $1600 in hardback. • Microsoft’s strategy for marketing electronic encyclopedic services: • purchase Funk & Wagnalls Encyclopedia • use the content of F&W to produce a CD with multimedia enhancements and a user friendly search facility • market the result as MS Encarta for $49.95 Pricing

41. Microsoft vs. Britannica • Result: • Britannica loses significant market share to the search features and multimedia enhancements of Encarta and other electronic encyclopedia’s. • Britannica fights back: • Online version for libraries (cost: $2000) • But households, smaller schools and libraries continue to defect to cheaper electronic encyclopedias and online encyclopedia services • Britannica offers an online subscription for individuals for $120/yr and CDROM for $200. • Households still not willing to pay 4 times the cost of Encarta Pricing

42. The Basic Rule for Profit-Maximization • (Price - Marginal Cost)/Price = 1/-Ed • Not an operational decision rule - a statement of the condition required for maximum profit • Can be re-stated in an “average cost plus margin” format Pricing and Market Structures • Under perfect competition, firms are price-takers • Under monopoly, firms are price-makers (but still constrained by the requirement to make maximum profit) • Under monopolistic competition, prices settle at the ‘excess capacity’ level where P=AC Pricing Price Discrimination • Price discrimination exists when the same product is sold for different prices, that are not attributable to differences in the cost of supply • Two conditions are needed: • the market must be divisible into sub-markets between which there cannot be any arbitrage • demand conditions (elasticity) must be different in the sub-markets

43. Third Degree Price Discrimination • A number of sub-markets, each containing a number of potential customers • These markets may be separated by: • distance ( car prices differ between Europe and the UK - but is it really price discrimination?) • time (for non-storable commodities) - peak versus off-peak journeys • age and status - Student Railcards, Old Person Railcards Second Degree Price Discrimination • Customers are charged one price for the first block of units they purchase, then a different price for the second block • electricity, water, gas tariffs • the producer appropriates part of the consumer surplus Pricing First Degree Price Discrimination • Every buyer is charged the maximum they are willing to pay (the demand curve becomes the marginal revenue curve) • Can be difficult to evaluate willingness to pay but first degree discrimination may be possible in personal, household or commercial services • Note that the socially optimal level of output will be produced but all the surplus accrues to the producer

44. Market Stucture The Market

45. Market Structure Issues • The decreasing cost structure and incentives for firms to grow will typically lead to market structures which are not competitive • Rather, they are characterized by the emergence of monopolies or oligopolistic industry structures, with substantial degrees of both upstream (supply chain) and downstream (distribution network) integration. • One focus of the course, then, will be to examine issues of industrial organization in networked economic environments. The Market

46. Market Structure Issues • Positive Feedback • The larger the network, the greater the incentive to join • Example: Wintel network • Within the network, don’t need adapters for file sharing or communication • Outside the network, these activities become expensive • When positive feedback effects are strong, it can lead to market tipping, with the largest component of the network growing at the expense of competiting networks. The Market

47. Market Strategy Issues • The nature of the demand for networked goods, and the underlying technology involved in the supply of networked goods determines the optimal strategy for providing such goods • Strategic dimensions include: • Compatibility or incompatibility • Cooperation or competition • Degree and mix of quality provided The Market • Dynamics and feedback effects in market organization • Technology dictates standards and decision on whether or not to provide compatibility across different products • These decisions determine the way industry structure will evolve (monopoly, oligopoly, monopolistic competition, competition) • Market structure then determines pricing and profit margins • Hence, anticipations about the evolution of market structure are important inputs into the decision on standard setting • Example: Microsoft’s recent negotiations with AOL over standards for Windows XP

48. What will be the market structure of the information highway? One interesting question is the interaction between pricing schemes and market structure. If competing backbones continue to offer only connection pricing, would an entrepreneur be able to skim off high-value users by charging usage prices, but offering more efficient congestion control? Alternatively, would a flat-rate connection price provider be able to undercut usageprice providers, by capturing a large share of low-value "baseload’’ customers who prefer to pay for congestion with delay rather than cash? The Market

49. Internet Market Segment The Market

50. Measurement of digital economy Indonesia ?