The major electronic commerce (EC) activities, processes and the mechanisms. E-marketplaces, their components and the major types. Electronic catalogs, search engines, and shopping carts. The major types of auctions and their characteristics. The benefits, limitations, and impacts of auctions. BISCompetition Department, 2015: BIS 312in E- the digital economy. Page 1 EC Mechanisms: An Overview EC activities and mechanisms
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Page 3 EC Mechanisms: An Overview Sellers, buyers, and transactions
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Page 4 EC Mechanisms The purchasing process
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Page 5 Electronic Markets E-marketplace An online market, in which buyers and sellers exchange goods or services. Changed the processes in trading & supply chain: a)Greater information richness of the transactional & relational environment b)Lower information search costs for buyers c) Diminished information asymmetry between sellers & buyers d)Less time between purchase & possession of physical products e)Greater temporal proximity between time of purchase & time of possession of digital products f) The ability of buyers, sellers, and the virtual market to be in different BIS Department, 2015: BIS locations 312 E- Page 7 E-Marketplace Components & Participants Customers Look for bargains, customized items, collectors items, entertainment, socialization, etc.. Search for detailed information, compare, bid, and negotiate. Sellers Stores owned by companies, government agencies, or individuals. Products and Physical products, digital products. services Infrastructure Electronic networks, hardware, software, etc.. Front end The sellers portal, electronic catalogs, a shopping cart, a search engine, an auction engine, a payment gateway. Back end Order aggregation & fulfillment, inventory management, purchasing from suppliers, accounting & finance, insurance, payment processing, packaging, delivery. Intermediarie Help match buyers & sellers, provide some s infrastructure services, help customers and/or sellers institute, complete transactions. BIS Department, 2015: BIS 312 E- Page 8 Other E.g. Shippers use the Internet to collaborate along the Types of E-Marketplaces 1.Private e-marketplaces Owned & operated by a single company. a)Sell-side e-marketplace A private e-marketplace in which one company sells either standard and/or customized products to individuals (B2C) or to business (B2B). b)Buy-side e-marketplace A private e-marketplace in which one company makes purchases from invite suppliers (B2B). 2.Public e-marketplaces (exchanges) Owned by a 3rd party / by a group of buying/selling companies. Serve many sellers & many buyers. E.g. Stock exchange. BIS Department, 2015: BIS 312 E- Open to the public, regulated by the government / the Page 9 Customer Interaction Mechanisms: Storefronts, Malls, and Portals Electronic storefronts (E.g. dell.com, walmart.com) A single companys Web site where products and services are sold. Mechanism: Electronic catalog, search engine, electronic cart, e-auction facilities, payment gateway, shipment court, customer services. Electronic malls (online mall) An online shopping center where many online stores are located. BIS Department, 2015: BIS 312 E- Page1 Customer Interaction Mechanisms: Storefronts, Malls, and Portals Types of stores & malls General stores/malls Large marketspaces that sell all kinds of products, e.g. amazon.com, choicemall.com, walmart.com, yahoo.com, aol.com, msn.com. Specialized Sell only one / a few kinds of products, e.g. stores/malls books, flowers, wine, cars, pet toys. Regional versus global Serve customers that live nearby, e.g. stores parknshop.com. Pure-play online E.g. amazon.com; walmart.com. organizations versus click-and-mortar stores
BIS Department, 2015: BIS 312 E-
Page1 Web (Information) Portals A single point of access, through a Web browser, to critical business information located inside and outside (via Internet) of an organization. Types of portals Commercial (public) portals E.g. yahoo.com, msn.com Corporate portals Provide organized access to rich content within (enterprise portals / relatively narrow corporate & partners enterprise information communities. portals) Publishing portals For communities with specific interests. Personal portals Target specific filtered information for individuals. Offer narrow content, very personalized. Mobile portals Accessible from mobile devices. Voice portals With audio interfaces, can be accessed by a standard telephone / a cell phone, by using both speech recognition & text-to-speech technologies. BIS Department, portals Knowledge 2015: BIS 312 E- Enable access to knowledge by knowledge Page1 Intermediaries in E-Marketplaces 2 types of online intermediaries 1.Brokers A company that facilitates transactions between buyers & sellers. 2.Infomediaries Electronic intermediaries that provide and/or control information flow in cyberspace, often aggregating information, and selling it to others. Distributors in B2B: e-distributor An e-commerce intermediary that connects manufacturers with business buyers (customers) by aggregating the catalogs of many manufacturers in one place -- the BIS Department, 2015: BIS 312 E- intermediarys Web site. Page1 Electronic Catalogs (E-Catalogs) The presentation of product information in an electronic form; the backbone of most e-selling sites. 3 dimensions of e-catalogs: 1.The dynamics of the information presentation. Motion pictures, videos, animation, with supplemental sound. Real time, changing frequently. 2.The degree of customization. Content, pricing, display are tailored to the characteristics of specific customers. 3.Integration with business processes. Order taking & fulfillment; electronic payment systems; intranet workflow software & systems; inventory BIS Department, 2015: BIS& accounting 312 E- systems; suppliers / Page1 Online Catalogs Versus Paper Catalogs Type Advantages Disadvantages Paper Easy to create without high technology Difficult to update changed catalog Reader is able to look at the catalog product information promptly s without computer system Display a limited number of More portable than electronic products Limited information through photographs & textual description is available No possibility for advanced multimedia. Online Easy to update product information Difficult to develop catalogs, large catalog Can integrate with the purchasing fixed cost s process Need for customer skill to deal Good search & comparison capabilities with computers & browsers. Provide timely, up-to-date product information Provide globally broad range of product information Can add voice & animated pictures Long-term cost savings BIS Department, 2015: BIS 312 E- Easy to customize Page1 EC Search Activities, Types, Engines Types of EC searches 1. Internet/Web search 2. Enterprise search (within an organization) The practice of identifying and enabling specific content across the enterprise to be indexed, searched, and displayed to authorized users. 3. Desktop search (e.g. Web browser histories, e-mail archives) Search tools that search the contents of a users or organizations computer files, rather than searching the Internet. Search engines, e.g. Google A computer program that can access databases of Internet resources, search for specific information or keywords, and report the results. Software BIS Department,(Intelligent) 2015: BIS 312 E- agents Page1 Shopping Carts Electronic shopping cart An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop. Select items review what has been selected make changes finalize the list. Product configuration Support the acquisition of customer requirements while automating the order-taking process. E.g. Apple. Allow customers to configure their products by specifying their technical requirements. BIS Department, 2015: BIS 312 E- Page1 Auctions A competitive process in which a seller solicits consecutive bids from buyers (forward auctions) or a buyer solicits bids from sellers (backward auctions). Prices are determined dynamically by the bids. Limitations of traditional offline auctions Bidder Seller Last only a few minutes/seconds, Last only a few minutes/seconds, for each item sold May not get for each item sold May not get what they really want, pay too the highest possible price. much for the item. Difficult to move goods to an Do not have much time to examine auction site. the goods. Commissions are high (rent, Difficult to know about auctions, advertising, labor). cannot compare what is offered at each location. Must physically present at auctions. BIS Department, 2015: BIS 312 E- Page1 Auctions Innovative auctions E.g. JetBlue airlines started to auction flights in September 2008 on eBay. Initial offer: 300 flights + 6 vacation packages, with opening bids set (5 - 10). The 3-, 5-, and 7-day auctions included 1- and 2- person roundtrip, weekend flights in September from cities including Boston, Chicago, New York, Orlando, and Southern California. Although no one was lucky enough to get a flight for 5/10 cents, many auctions gave the winners a flight that was 10% to 20% cheaper than regular prices. Dynamic pricing Prices that change based on supply and demand BIS Department, 2015: BIS 312 E- Page1 Auctions 4 categories of auctions: 1. One buyer, one seller Use negotiation, bargaining, bartering. The resulting price: determined by each partys bargaining power, supply & demand in the items market, business environment factors. 2. One seller, many potential buyers Forward auction An auction in which a seller entertains bids from buyers. Bidders increase price sequentially. 3. One buyer, many potential sellers Reverse auction (bidding/tendering system) Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid 2015: BIS Department, wins;BISprimarily 312 E- a B2B or G2B mechanism. Page2 Auctions 4. Many sellers, many buyers (Double auction) An auction in which multiple buyers and their bidding prices are matched with multiple sellers and their marking price, based on the quantities on both sides.
BIS Department, 2015: BIS 312 E-
Page2 Benefits of E-Auctions Sellers Buyers E-Auctioneers Increased revenues: Opportunities to find Higher repeat broader bidder base, unique items & purchases. shorter cycle time, sell collectibles. Higher stickiness to globally. Entertainment. the Web site. Opportunity to bargain: Convenience: buyers Easy expansion of the sell any time, conduct bid anywhere; do not auction business. frequent auctions. have to travel to an Optimal price setting auction place. determined by the Anonymity. market. Possibility of finding Gain more customer bargains. dollars by offering items directly (no intermediaries). Liquidate large quantities quickly. BIS Department, 2015: BIS 312 E- Improved customer Page2 Limitations of E-Auctions 1.Minimal security Some auctions are done in an unencrypted environment. 2.Possibility of fraud Buyers may get defective products (since they cannot see the items). Buyers may receive goods/services without paying for them. 3.Limited participation Some auctions are by invitation/dealers only. BIS Department, 2015: BIS 312 E- Page2 Impacts of Auctions 1.Auctions as a coordination mechanism Establish price equilibrium. 2.Auctions as a social mechanism to determine a price For fine arts / rare item, attracts potential buyers & experts. With enough exposure of purchase & sale orders, an optimal price can be determined. 3.Auctions as a highly visible distribution mechanism (e.g. Cathay Pacific) Auctions off a limited number of items gain attention attract those customers. 4.Auctions as an EC component Combine with other e-commerce activities. 5.Auctions for profit for individuals BIS Department, 2015: BIS 312 E- Page2 Bartering and Negotiating Online Online bartering Bartering The exchange of goods and services. E-bartering is done in a bartering exchange A marketplace in which an intermediary arranges barter transactions. Process: 1. The company tells the bartering exchange what it wants to offer. 2. The exchange assesses the value of that products/services, offers it certain points/ bartering dollars. 3. The company can use the points to buy the things it needs from a participating member in the exchange. Online negotiating BIS Department, 2015: BIS 312 E- Deals with pricing and/or nonpricing terms (payment method Page2 Competition in the Internet Ecosystem Competitiveness factors EC competition is very intense because online transactions enable: Lower search Customers can find less expensive products Sellers reduce costs for buyers prices, improve customer service. Speedy Customers can find products quickly. comparisons Lower prices Low costs of operation (e.g. no physical facilities, minimum inventories, etc.) Customer service Amazon.com provides superior customer service. Barriers to entry Setting up a Web site is easy, fast, inexpensive Dont need are reduced sales force & brick-and-mortar stores. Virtual Easy access to the Web + Share production & sales information partnerships easily Creation of virtual partnership increases dramatically. multiply Market niches No limits imposed by the physical storefronts No. of business abound opportunities is as large as the Web. Differentiation To provide a product/service that is not available elsewhere. E.g. Amazon.com provides customers with information such as BIS Department, 2015:communication BIS 312 E- with authors, almost real-time book review, Page3 Competition in the Internet Ecosystem Customization and personalization Customization Creation of a product or service according to the buyers specifications. Personalization (E.g. Google will e-mail all news regarding certain topics to a user) The ability to tailor a product, service, or Web content to specific user preferences. Impact on competition Competition between companies Competition between networks The company with better communication networks, online advertising capabilities, relationships with other Web 2015: BIS Department, companies BIS 312 E- (e.g. Google, Amazon.com) has a Page3 The Analysis-of-Impacts Framework
BIS Department, 2015: BIS 312 E-
Page3 Improving Marketing and Sales Old model - New model - Mass & segmented marketing One-to-one & customization Relationships with Customer is a passive recipient Customer is an active coproducer customers Customer needs Articulated Articulated, inferred Segmentation Mass market + target Segmented targets, 1:1 targets segments Product & service Product line extensions & Customized products, services, marketing; offerings modification personalization New product Marketing + R&D R&D develops the platforms consumers development customize based on their inputs Pricing Fixed prices + discounting Customer influence pricing; e-auctions, e- negotiations Communication Advertising + PR Integrated, interactive, customized marketing communication, education, entertainment; avatars Distribution Traditional retailing + direct Direct (online) distribution + 3rd-party logistics marketing services Branding Traditional branding + Customers name as the brand cobranding Basis of Marketing power Marketing finesse + customer as partner while competitive integrating marketing, operations, R&D, advantage information BIS Department, 2015: BIS 312 E- Communities Discount to members in Discounts to members of e-communities, Page3 social Transforming Organizations To survive, companies learn & adapt new technologies quickly. New products, services, business models Strategic & structural changes. The changing nature of work E.g. Reduce the no. of employees to a core of essential staff Outsource work Create new opportunities & risks New jobs, careers, salaries. Disintermediation Elimination of intermediaries between sellers and buyers. E.g. Many airlines require customers to pay $5/more per ticket if they buy a ticket from an agent. Reintermediation Disintermediated entities/newcomers take on new intermediary roles. BIS E.g. Brokers Department, who 2015: BIS 312 E-manage electronic intermediation, like Page3 Redefining Organizations New & improved product capabilities Customer profiles & preferences, can be used as a source of information for improving products / designing new ones. Mass customization A method that enables manufacturers to create specific products for each customer based on the customers exact needs. E.g. Nike, Lego, T-shirt, ... Build-to-order (pull system). BIS Department, 2015: BIS 312 E- Page3 Redefining Organizations
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Page3 Redefining Organizations Improving the supply chain Self-service Transfer some activities to customers, employees. In call centers (e.g. track your package), with self- configuration of products, customers using FAQs, allowing employees to update data online. Saves money, increases data accuracy & accountability. Impacts on manufacturing From mass-production lines to demand-driven, just-in-time manufacturing. E.g. Using Web-based ERP systems, customer orders can be directed to designers, to the production floor within seconds. Production cycle time can be cut 50%, even if production is done in a different country. BIS Department, 2015: BIS 312 E- Page3 Redefining Organizations