Suffolk University Sawyer School of Management MBA Program Cape Cod Campus

Electronic Commerce Concepts CIS 826

Professor Joan Donovan

Course Description CIS 826

Elements of course:

The framework for understanding of e-commerce

 

Strategy formulation and execution process Four key infrastructures 1. Technology 2. Capital 3. Media 4. Public Policy

Grading Criteria: Final grades will be determined with the following approximate weights:

Individual

Points

Research Report Research Presentation Final Class participation & Attendance

20 10 20 10

Group

In class exercises (8 @ 5 pts each)

40

Total

100

How Do We Define e-Commerce?

Technology-mediated exchanges between parties as well as electronically-based intra- or inter-organizational activities that facilitate such exchanges

Table 1- 1: Four

Categories of e-Commerce Business originating from . . .

Business Consumers

Business And selling to . . . Consumers

B2B B2B

C2B C2B

B2C B2C

C2C C2C

Exhibit 1- 2: Classical Framework for Strategic Management

Mission Mission

Objectives Objectives Internal Internal (Company) (Company) Analysis Analysis

External External Analysis Analysis

Strategy Strategy Formulation Formulation

   

Corporate Business Unit Functional Operating

Implementation Implementation

Control Control and and Monitoring Monitoring

3

Three Approaches to Strategy

Position approach: Where should we be vs. our competition? Resources approach: What resources should we possess? Simple rules approach: What processes should we follow?

Factors of Consumer Behavior in the Online Environment The 2 key factors that are of paramount importance in the online environment are: Customization: This refers to the personalization of communications between users and a website. Interactivity: This is defined as the users ability to conduct two-way communications. This includes use to user and firm to user communication.

The Strategy Formulation Process

There are six interrelated, sequential decisions to strategy:

1. Market opportunity analysis 2. Business Model 3. Customer interface 4. Market communications and branding 5. Implementation and 6. Evaluation

The Context of Strategy Formulation: The Four Infrastructures

Technology Infrastructure: This is both an enabler and driver of change.The hardware backbone of computers, routers, servers, fiber optics, cables, modems, etc. provide half of the technology equation.The other half includes the software and communication standards including the core protocols for the www. Capital Infrastructure: Deals with getting the money to launch new businesses and finding the right people to build the business plan and seek funding sources.

The Context of Strategy Formulation: The Four Infrastructures(contd) Media Infrastructure: The e-commerce managers must make choices about the types of media employed(e.g., print, audio , video), the nature of the media and editorial policy(including style, content, look and feel). Public Policy Infrastructure: All the decisions related to strategy, technology, capital and media are influenced by laws and regulation, i.e., public policy decisions. It not only affects specific business but also direct and indirect competitors.

What Are the Roles and Responsibilities of a Senior e-Commerce Manager?

Senior managers need to have the basic business skill set of traditional managers but must also incorporate new knowledge, skills and capabilities. Required Skills:  Cross Discipline, Integrative  Entrepreneurial  A strategic decision maker.  Trained in a variety of disciplines including marketing, logistics, accounting finance, tech. sophistication and media knowledge.

Exhibit 1- 5: Relevant Disciplines for a Senior e-Commerce Executive

Strategic Strategic Management Management

Finance Finance

Marketing Marketing

Entrepreneurship Entrepreneurship Accounting Accounting Operations Operations and Logistics and Logistics

Technology Technology

New Media New Media

Note: Shaded boxes reflect new capabilities

7

Exhibit 1-6: A Flow Diagram of the Strategic Responsibilities

Set Vision Set Vision

Establish Goals Establish Goals

Formulate Strategy Formulate Strategy

Drive Drive Implementation Implementation

Be Accountable Be Accountable for Performance for Performance

What Are the Roles and Responsibilities of a Senior e-Commerce Manager?(contd)

Drive implementation: Strategy implementation is about making the right choices related to people, structure, systems and processes to execute the strategy. Accountable for performance: The senior manager is responsible for the performance of the organization.

Networking Software

 The two most well-known pieces of internetworking software are the TCP and IP  IP software set rules of data transfer over the network  TCP software ensures the safe and reliable transfer of data  With open system nature of TCP/IP development, software development and computer companies could more easily build TCP/IP compliant software and hardware  TCP/IP standard network protocol laid the groundwork that enabled the deep internetworking that made internet possible

How the Internet Works(contd)

Packet Switching To remedy delays associated with unequally sized data transfers, instead of transferring files in their entirety, whole files are broken up into data packets before being transferred over the network. Routing Routers are dedicated, special-purpose computers which serve as an intermediary between networks. They route packets efficiently through networks. Routers are building blocks of the internet.

How the Internet Works (contd)

Reliability and Transmission control Protocol

IP software handles packet deliveries and TCP handles safe delivery of packages.

Standardization
Without the TCP/IP standardization, there would have been many negative tradeoffs, such as inflexibility and increased functional and switching costs.

TCP Standardization Networking technologies are not inherently compatible. Before the development of internetworking technology an organization with networks had two options:

 One Alternative- allow groups to have network  Other alternative have a standard

technology best suited to them, which was not flexible

Functions of TCP/IP

Prevents loss of data Checks packets Eliminates duplicate packets Sends confirmation when the packet is received If confirmation is not received, then the packet is
retransmitted

Enables reliable and error-free communication over

the net

What Web Pages Are Made Of

The entire Web is built upon three concepts:  Web pages (documents seen on the browser)  Links (connecting one web page to another)  Servers (storing and transmitting the information to the browsers for display) No special software is required to create a web page  Majority of pages are created using Hyper Text MarkUp Language(HTML)

Exhibit 2-10

Components of a URL

The name of the computer The name of the computer being accessed (could also use being accessed (could also use this computers IP address this computers IP address which is 208.178.40.89) which is 208.178.40.89)

The name of the The name of the file you want to view file you want to view

http://www.monitor.com/cgi-bin/templates/index.html
Indicates browser should use Indicates browser should use HyperText Transfer Protocol HyperText Transfer Protocol for server access for server access The directory The directory that contains the file you want that contains the file you want to view to view

Adapted from Comer fig. 22.7, p. 203

1 0

Factors Behind the Growth of the Net

Ease of content consumption Browser versatility and convenience Speed Easy to download Platform independence Ease of content creation Standards

Framework for Diagnosing Market Opportunity

Seed Opportunity in Existing or New Value System

Uncover Opportunity Nucleus: Identify Unmet and Underserved Needs

Identify Target Segments

Declare Companys Resource-Based Opportunity for Advantage

Assess Competitive, Technical and Financial Opportunity Attractiveness

Make Go / No Go Assessment

Requirements of an Effective Segmentation

In order for a customer segmentation to be effective, it must be meaningful, actionable, measurable and substantial


Meaningful

Customers must demonstrate needs, aspirations or behavioral patterns that are similar within a segment and different across segments A distinction between a price sensitive and a quality seeking segment is meaningful, since the two segments demonstrate distinguishable sets of needs

Actionable

A company must be able to reach customers within each segment through effective and targeted marketing programs A customer segment consisting of customers with blue eyes is not actionable, since it is very hard to identify and reach only customers with blue eyes

Substantial

Segments must be large and profitable enough to make the investment in serving them worthwhile myCFO.com is targeted towards high net worth individuals, helping them manage their portfolios. Even though the number of those individuals is small, the $ amount managed is sizeable, thus constituting a substantial segment

Measurable

Key characteristics of the segments (e.g. size and spending patterns) must be easy to measure

Source: Philip Kotler, Marketing Management, 1997 (Chapter 9, page 269)

Exhibit 31: Components of a Business Model

Developing a business model in the networked economy requires four key choices on the part of the senior management:

Value Cluster

Specify the value proposition or the value cluster for the business

Marketspace Offering

Articulate the online product, service and information offer

Resource System

Define how the company needs to align its resources to deliver the value proposition

Financial Model

Define and select the most appropriate revenue model to pursue

Exhibit 36: Scope of the Offering

The scope of the offering refers to the number of categories of products and services offered on the site:

Continuum of Scope
Category-Specific Dominance Focus on one product category

Cross-Category Dominance Focus on a large number of categories

Secondspin.com (used CDs) PremiumOrchids.com (orchids) Peapod (online grocery)

Dealtime (electronics and other goods) 1-800-Flowers (flowers) Streamline* (online grocery, dry cleaning service, etc.)

* Streamline closed down in 2000

Exhibit 38: Customer Decision Process

The second step in the construction of the online offering is the articulation of the customer decision process for the various product categories:
Flowers Example Problem Recognition Prepurchase Information Search


Need recognition, potentially triggered by a holiday, anniversary or everyday events Search for ideas and offerings, including: Available online and offline stores Gift ideas and recommendations Advice on selection style and match Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc. Purchase decision Message selection (medium and content) Post-sales support Order tracking Customer service Education on flowers and decoration Post-sale perks

Evaluation of Alternatives Purchase Purchase Decision

 

Satisfaction Postpurchase

Loyalty

 

Disposal

Exhibit 310: Egg Diagram for 1-800-Flowers.com

    

Care and handling Do it yourself Special events and educational workshops held at stores

Product Offering
 

Gift reminder service Holiday specials Ideas and Information Everyday celebrations  Floral ideas  Garden ideas suggestions  Home ideas Special occasion suggestions  Gift ideas  Gourmet ideas Need  Store locator Recognition  Recommendations by budget  Bestsellers

Education on Flowers and Decoration

 

Post-Sale Support Order receipt e-mail eQ&A online customer service FAQ Customer service inquiry form Perks


Search for Ideas and Offerings

Post-Sale Support and Perks

Flower / Gift Decision Process

Gift Recommendations  Gift guru  Favorite gifts  Gift frequency  Gift impossible  Gift baskets  Corporate gift services

Evaluation of Alternatives

    

 

Miles earned with flower purchases Free gifts Discounts at AOL & BN.com with flower purchases Member specials

Product price Product picture Product description Delivery information Delivery availability

Message Selection


Purchas e Decision
  

Gizmo fully-animated greeting cards Physical cards in gifts

Shopping basket E-commerce transaction Special shopping features Delivery outside US 1-800-lasfloras.com

Exhibit 328: Rayport, Jaworski and Siegal Model

Key concepts: Introduces a 2x2 table to categorize businesses based on the Source of Content Origination and the Focus of Strategy The matrix categorizes four pure-play approaches, and a number of hybrid approaches
Source of Content Origination

Single Brand Demand-Side Supply-Side

Multiple Brand

Forward-Integrated Producer (Walmart.com) Backward-Integrated User (Dellonline.com) Hybrid Integrator (Cisco.com)

Supply-Side Aggregator (Surplusdirect.com) Demand-Side Aggregator (Accompany.com) Hybrid Aggregator (Amazon.com)

Focus of Strategy

The 7Cs of the Customer Interface

Context
Sites layout and design

Content
Text, pictures, sound and video that web pages contain

Commerce
Sites capabilities to enable commercial transactions

Community
The ways sites enable user-touser communication

Connection
Degree site is linked to other sites

Customization
Sites ability to self-tailor to different users or to allow users to personalize the site

Communication
The ways sites enable site-touser communication or two-way communication

Building Fit and Reinforcement

Fit extent each of 7Cs individually support the business model Reinforcement aesthetic context of the site

Aesthetic and Tips Aesthetic  Color scheme  Visual themes Usability Tips and Tricks  Quick  Easy  Search capability  Get outside opinion  Clear categories  Clear product names

Context archetypes

Broad, generic approaches to context design New technologies introduce new techniques, introduce new aesthetics Aesthetically dominant look-and-feel, high form, low function

Functionally dominant low form, high function  Integrated - balance of form and function

Five Content Archetypes

Content  Dimensions to Content  Offering mix product, information, and/or services  Appeal mix promotional and communication messaging  Multimedia mix text, audio, image, video, and graphics choices  Content type time-sensitivity

A Community

Community A feeling of membership Strong sense of involvement User-to-user communication

Elements of a community

Cohesion Effectiveness Help Relationship Language Self-regulation

Types of communities

Just friends Enthusiasts Friends in need Players Traders

Customization Types

Personalization by user  Consciously articulated  Acted upon preferences Tailoring by site  Reconfigure past behavior  Reconfigure by other users of similar profiles

Types of Communication a Firm Can Maintain with its Customer Base

Communication Dimensions of communication Broadcast Mass mailings FAQ E-mail newsletters Content-update reminders Broadcast events

A Firms Connection with Other Businesses

Connection Degree site is able to link to other sites Embedded, links maybe on serve or another server Dimensions of connection  Links to sites  Home site background  Outsourced content  Percent of home site content  Pathway of connection Pathway of connection

Connection archetypes

Destination site  site generated with few links Hub site  combination of site-generated and links to selective sites Portal site  absolute links to large numbers of other sites Affiliate program  direct users through links or site banners or other ads Outsourced content  generated by third parties Meta-software  utility and plug-in software application creation

Commerce Archetypes

Catalog pricing  preset by the seller Auction pricing  highest bidder wins Reverse auction pricing  sellers bid against each other Demand aggregation pricing  buyer demand is aggregated to achieve economies of scale Haggle pricing  users and site negotiate over price

Four Categories of Market Communication

Offline communications Television Advertising Promotions Sales calls  Types General on-line Personalized online Traditional mass media Direct communications


Four Categories of Communications

General Online Approaches Banner ads Impressions gross exposures or ad views Leads viewer takes action Sales commissions to host

The Four Categories of Communications

Direct
  

Personalized
     

Sales force Retail sales Customer service reps

Permission Marketing Personalized Recommendations Personalized Advertisements Personalized Web Pages Personalized Upsell Personalized E-commerce

Traditional Mass Marketing

    

General Approaches
       

Television Radio Print Billboards Superior Customer Service

Banner Ads E-Mail Viral Marketing Portal Sponsorship/Exclusive Agreements Associate Programs On-line and Off-line Partnerships Provide Information to Entice Customer Purchases /Leverage Customer Base

Three basic parts

Brand Customer responses awareness and associations Benefits firm and target customers

Two Integral Components of Implementation

Objectives  Deliver the promised customer experience

 Turn

strategic intent / concepts into results

Build the infrastructure to deliver on the brand promise

Innovate / Renew the customer experience

Objectives  Maintain fit between Marketspace evolution and the companys delivery system and product offering

Source: Monitor Analysis

Introducing the Performance Dashboard

Steps of Strategy: Market Opportunity Business Model Customer Interface Implementation and Branding Evaluation

Performance Dashboard: Market Opportunity Business Model Implementation & Branding Customer Financial

Areas Addressed:  Size of market opportunity

 Attractiveness

 Uniqueness

of value proposition of offering

 Branding  Technology

 Customer

acquisition
 Changes

 Revenue  Profit  Cost  Balance

of target segments landscape

 Attractiveness

infrastructure
 Internal

in

 Competitive

 Firm

capabilities relative to competition of competitive position

organization
 Relationship

customer behavior
 Site

 Sustainability

with suppliers and partners capability

experience and usability

sheet

 Fulfillment

Components of the Performance Dashboard



Opportunity Metrics Ability to discern unfulfilled needs in the market place is critical Market-opportunity metrics asses the degree to which the firm can accurately gauge the market opportunity Business-model Metrics Capture subcomponents of the business model: egg diagram, resource systems, financial metrics Value Proposition or Cluster Benefits Metrics  target segments, benefits offered, capabiliti4s that drive benefits  focus on customers perceptions  performance relative to the competitors benefits

Life Cycle of a Company

 Four

stages of development of the life cycle of a company Startup/Beta emphasis on market opportunity metrics Customer accusation emphasis on customer acquisition and financial Monetization Maturity customer retention and cost control

What are the three sources of metrics information that firms can use to chart their progress?
 Industry  Metrics  Benchmark

standard

values

Metrics for Seamless On-line / Off-line Customer Purchase Process

 Awareness

AWARENESS Pre-Purchase

of off-line offer vs awareness of on-

line offer

KNOWLEDGE

 Perceived

benefits of web vs off-line offer

EVALUATION OF ALTERNATIVES Purchas e

Information  Available offering information on-line vs off-line  Currency of information on-line vs off-line
 Security

PURCHASE

and privacy associated with purchasing

SATISFACTION Post-Purchase

Customer service  Response time on-line vs off-line

LOYALTY

 Customer

loyalty incentive programs on-line vs

off-line DISPOSAL
 Exchange

policies on-line vs off-line

Metrics for Seamless Internal Business Processes and Operations

 Ability

to open accounts on-line and off-

Information Sharing

line
 Ability

to access accounts on-line and off-line customer databases

 Integrated

Fulfillment Systems

Seamless Seamless Integrated

order processing order tracking inventory keeping

Four Stages to the Evolution of B2B Capabilities

Broadcast
 From

the organization to the customer flows both ways (Example..CRM)

Interact
 Information

Transact
 Take,

manage and support customer transactions inter-enterprise functionality for the organization and trading partners

Collaborate
 Provide

Exhibit 10-1: The B2B Sell-Side Solutions Activities

B2B Sell-Side Solution

Provided buyers with product and service information and to place orders.

Exhibit 10-2: Indirect e-Procurement Activities

Indirect E-Procurement

Provided Web enabled buying with e-procurement capabilities.

Exhibit 10-3: Net Marketplace and Net Exchange Activities

Provide Web-based capabilities to facilitate he interaction and exchange of commerce transactions among buyers, sellers and other trading partners

Exhibit 10-4: The Evolved Sell-Side Solutions Activities

Any organization can begin at any of the four stages

Exhibit 10-5: Indirect or MRO e-Procurement

Designed to facilitate the catalog management and transaction processing functions of the purchasing process

Privacy Overview


The Code of Fair Information Practices, drafted by the Nixon administration, was never enacted The government originally expected the industry to regulate itself, but dot-coms are using their customer databases as tradable assets

Intellectual Property Current Status  Three main aspects of copyright laws affect the Internet: The Copyright Act of 1976 - Gives owner of the copyright the ability to replicate & distribute the work The Fair Use Doctrine - Gives the public the right to fair use of the work The Digital Millennium Copyright Act  Prohibits the circumvention of copyright protection system  Protects ISPs from being liable if subscribers infringe copyright laws

Taxation Current Status  The Internet Tax Freedom Act (enacted in 1998) restricts changes to current laws and limits new taxes from being imposed on ecommerce purchases  Offline stores have begun to protest that their online competitors do not have to charge sales tax as they do  Governments are generally against extending the tax moratorium because of the lost tax revenue

Taxation (Contd)
Proposed Legislation


The House Committee studying the problem recommended that the Internet Tax Freedom Act be extended until 2005 Whether or not that occurs remains to be seen

Impact


Preliminary evidence suggests that the Internet sales tax would have minimal impact on consumption The biggest impact would be felt by those States who stand to loose considerable amounts of money if sales tax law is not passed

Gambling (Contd) Proposed Legislation



The Internet Gambling Prohibition Act, which would have made it a crime to operate a website that accepts wages from Americans, was defeated in the House in July 2000. Chances are there will be more bills to follow

Gambling (Contd) Impact



Gambling is currently the fourth largest offline leisure activity Gambling laws will have a significant impact on revenue distribution between casinos and online gambling sites If government continues to be noncommittal about online gambling, casinos will loose their revenues to foreignrun gambling sites

Free Speech Overview  Free speech is one of the most protected rights is the U.S.  Individuals must face the consequences of how their opinions are received by others  The lack of borders makes it difficult to determine whose free speech rules to use