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Enterprise manage information systems 6th by laudon ch04

Chapter 4

Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

The Digital Firm: Electronic Business
and Electronic Commerce

4.1

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Objectives

1. How has Internet technology changed value
propositions and business models?
2. What is electronic commerce? How has

electronic commerce changed consumer
retailing and business-to-business transactions?
3. What are the principal payment systems for
electronic commerce?

4.2

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Objectives

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

4.3

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Management Challenges

1. Digitally integrating the enterprise requires a
complete change of mind-set.
2. Finding a successful Internet business model.

4.4

© 2005 by Prentice Hall



Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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
4.5

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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

4.6

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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

4.7

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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

4.8

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Business, Electronic Commerce, and the Emerging Digital Firm

The changing economics of information

Figure 4-1
4.9

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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.

4.10

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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
4.11

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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
4.12

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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

4.13

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

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”

4.14

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
The benefits of disintermediation to the consumer

Figure 4-2
4.15

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Customer-Centered Retailing

Interactive Marketing and Presentation
• Collection of customer information using Web site
auditing tools less expensive than surveys and
focus groups
• Web personalization technology customizes
content on Web site to individual’s profile and
purchase history
• Web sites and marketing shorten sales cycle and
reduce time spent in customer education
4.16

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Web site personalization

Figure 4-3
4.17

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Customer-Centered Retailing

Customer Self-Service
• Web-based responses to customer questions cost a
fraction of telephone costs for live customer
service representation
• Web-based customer self-service applications,
such as airline flight information sites
• Traditional, phone-based customer call centers
being integrated with Web
4.18

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Business-to-Business Electronic Commerce



Web, Internet streamlining procurement process



E-procurement eliminates inefficient, paperbased processes



Selling through Web sites, private industrial
networks, or Net marketplaces

4.19

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Window on Technology
Lightnin Lights Up with the Internet



What are the benefits of using Web-based order
configuration software?



How does this system provide value to Lightnin
and its customers?

4.20

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Before-after diagram of changes in Lightnin’s ordering process

Figure 4-4
4.21

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Business-to-Business Electronic Commerce

Private Industrial Network






4.22

Private exchange; typically consists of large firm
using extranet to link to its suppliers and business
partners
Permits firm and partners to share product design,
development, marketing, scheduling, inventory
management, and unstructured communication
Fastest-growing type of B2B commerce

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
A private industrial network

Figure 4-5
4.23

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
Business-to-Business Electronic Commerce

Net Marketplace





4.24

E-hub; provides single Internet-based
marketplace for many different buyers and
sellers
Industry owned or independent intermediaries
Transaction oriented; generates revenue from
purchase and sales transactions and other
services
© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

Electronic Commerce
A Net marketplace

Figure 4-6
4.25

© 2005 by Prentice Hall


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