E-Commerce Management

46-870

Summer 2002

Tridas Mukhopadhyay

tridas@cmu.edu

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

Course Goals

Primary Goal:

• Develop a managerial foundation for

Electronic Commerce

• Secondary Goals:

• Study E-Commerce Applications

• Impact of the Internet on Management

What’s a Business Model?

Major Components Key Question

Value Proposition Why would customers buy from you?

Revenue Model How do you make money?

Market Opportunity What is your marketspace?

Competitive Environment Who are the competitors?

Competitive Advantage How do you absorb value?

Market Strategy How do you attract customers?

Organizational Development What type of organizational structure?

Management Team What type of leaders?

Topics• Strategy Fundamentals

• Strategic Analysis

• Re-engineering; Change Management

• Economics of Digital Products

• e-Retailing

• e-Service

• Business-to-Business E-C

• Supply Chain Management

• Strategies for E-Commerce

Grading

• 2 Exercises

• Class Participation

• 3 Case Reports

• 1 Case Report

• Team Presentation

• Final Exam

• 20 (Individual)

• 10 (Individual)

• 30 (Team)

• 10 (Individual)

• 10 (Team)

• 20 (Individual)

Pedagogy

Professor / TA Students

Lecture & Discussion Participation

Case Analysis (4) Report & Discuss

Exercise (2) Solve & Submit

Team Project Study & Present

Final Exam Solve & Submit

Team PresentationAnalyze an on-line business

• Business model

• Competitive structure

• Value chain / creation

• Strengths/Weaknesses/Opportunities/Threats

• IT Use

1. Business Model. What are the products/services of the chosen business? Which markets? What are the sources and magnitudes of revenue? What are the major cost categories?2. Competitive Structure. Who are the competitors? Which competitors tend to dominate the marketplace? Are new entrants or substitute products/services likely in the competitive arena? What are the powers of buyers and suppliers?3. Value Chain. What are the primary and secondary activities of this business? Which of them are critical? How does it create value for its customers? What role does the Internet play? 4. SWOT. What are the critical success factors for this business? What are its strengths? What are its weaknesses? What are the future opportunities and threats?5. IT. How does it use IT today? What is distinctive about its IT use? How can it use IT as a strategic lever? What would be the possible risks and benefits?

Team Presentation

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

What is Electronic Commerce?

•

•

•

Use the Internet, Web or any electronic means to do the following

E-Commerce: Alternate Perspectives

Is eCommerce = eBusiness?

Is eCommerce = dot-coms?

Is eCommerce = e-tailing?

Is eCommerce = B2B exchanges?

Does Southwest Airline fit this mold?

• Search and reserve flights

• Click ‘N Save Internet specials

• Special Double Credit for Internet buyers

• Transport passenger reliably

• Receive itinerary and specials by e-mail

Direct Selling

Has the Web affected the value chain?

Has the Web changed industry structure?

• Web revenue 40%, over $2.1 billion

• Web tickets costs $1, traditional ticket $10

• Over 3 million customers have signed up

• Online competitors began the web selling method

• Web accounts for $26 billion of industry sales!

• Customers have changed their expectations

How about edmunds.com?

edmunds.com

• Online catalog of new and used cars

• Specs and invoice prices

Transfer to autobytel.com

• Fill in your choice

• A near-by dealer offers you a deal

Intermediaries

Has the Web affected the value chain?

• New intermediaries (edmunds, autobytel, …)

• On-line info, ordering, financing, insurance, warranty

• Auto exchange Covisint to redefine supply chain

Has the Web changed industry structure?

• Majority of new car buyer first go to Web, save $400

• FordDirect.com to include Ford products, 4200 dealers

• GM to include all brands

Business-to-Business +

Business-to-Government

Business-to-Consumer +

Consumer-to-Consumer

Intra-Organizational

Types of Electronic Commerce

P2P Commerce?

M-Commerce?

Business Customers vs. Consumers

Electronic efficiency

Number of customers

Volatility of relationship

Rational

Price sensitivity

Transaction value

Percentage on-line

ConsumerBusinessCharacteristic

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

Why Electronic Commerce?

• World Wide Web (Ease, ubiquity, platform independence)

• Internet Explosion (Commercial and residential)

• Huge Market (Retail, commercial, providers)

• Competitive Pressure (Lower entry barrier)

World Wide Internet Users by Regions (in millions)

0

100

200

300

400

500

600

700

800

900

1998 2000 2001 2002 2003 2004 2005

source: eMarketer 2001

Middle East/Africa

Latin America

Asia Pacific

Europe

North America

How are Internet users different from general population?

• Household Income (Mean $52k vs. $42k)

• Education (College grad 30.5% vs. 27%)

• Gender (Female 51.3% vs.Male 48.7%)

• High Growth Rate

Source:e Marketer 2002

US B2C revenues (in Billions)

1841 62

95135

185

255

050

100150200250300

1999 2000 2001 2002 2003 2004 2005

source:IDC 2001

revenues

US B2B e-Commerce Revenues (in Billions)

43 80 110200

375

610

1000

1550

0

200

400

600

800

1000

1200

1400

1600

1800

1998 1999 2000 2001 2002 2003 2004 2005

source: IDC 2001

revenues

World B2B e-Commerce Revenues (in Billions)

149226

448

841

1541

0

200

400

600

800

1000

1200

1400

1600

1800

1999 2000 2001 2002 2003

source: eMarketer 2001

revenues

Possible Benefits of E-Commerce

Business-to-Business• Lower Sales and Marketing

Costs

• Lower Purchasing Cost

• Better Customer Service

• Reduced Inventory

• Lower Cycle Times

• New Sales Opportunities

Business-to-Consumer• Lower Sales and

Marketing Costs

• Lower Purchasing Cost

• Lower Operating Costs

• Lower Capital and Distribution Cost

• New Services

• One-to-one Marketing

So, Why Did the Dot-Coms Crash?

•

•

•

•

Introduction

• Course Introduction

• What is E-Commerce?

• Why E-Commerce?

• E-Commerce Framework

Internet Milestones

• 1970: ARPANET established

• 1974: TCP/IP introduced

• 1980: US Dept of Defense adopts TCP/IP

• 1984: TCP/IP diffuses abroad

• 1988: Internet opened to commercial world

• 1991: WWW introduced

• 1993: Mosaic introduced

Evolution of E-Commerce

• Inter-Organizational Systems (American Hospital Supply)

• Airline Reservation Systems (Sabre and Apollo)

• Electronic Data Interchange (Fortune 1000 companies)

• The Web and the Internet (Universal)

Business,

Public

policy,

legal &

privacy

issues

Technicalstandards

for documents,

security,and

networkprotocols

Applications

• Supply Chain / Procurement

• Online Marketing / Home Shopping

Infrastructure

Security, Authentication, Directories /

catalogs, Electronic Payment

Message Transfer

EDI, e-mail, HTTP

Content & Publishing

HTML, XML, JAVA, Web

Networking

Telecom, Cable, Wireless, Internet, VAN

A Framework for Electronic Commerce

Barriers (?): TECHNOLOGICAL

•

•

•

•

•

•

•

•

•

•

•

•

Barriers (?): BUSINESS

Barriers (?): LEGAL AND EDUCATIONAL

•

•

•

•

•

•

E-Commerce: Business Requirements• Security

• Reliability

• Electronic Payment

• Ubiquity

• Speed

• Ease of Use

Key Points

• We’ve only seen the tip of the iceberg

• Some barriers are moving targets

• Back to business fundamentals!