1 Chapter 5 EC in Service Industries FEB EBS 2053 (E-Commerce) Lecturer: Puan Asleena Helmi

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Chapter 5EC in Service Industries

FEBEBS 2053 (E-Commerce)

Lecturer: Puan Asleena Helmi

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Learning Objectives

• Understand how broker-based services are performed online

• Describe online travel tourism services and their benefits

• Discuss the impact of EC on the travel industry• Describe the online job market, its drivers and

benefits

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• Discuss cyberbanking, its drivers and capabilities• Discuss implementation issues of online financial

services and its future• Describe some innovative applications in the

service industries• Discuss the future of intermediaries and their role

in cyberspace

Learning Objectives (cont.)

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Broker-Based Services• Brokers work as intermediaries between buyers and

sellers• Agents basically make the markets• Agents provide many services• Most of the value-added tasks of brokers can be

automated• Major electronic agent-based services

– travel– employment– real estate– stocks - electronic auctions

- at-home banking- insurance

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• Service Industries Vs. Manufacturing and Product’s Retailing

Broker-Based Services (cont.)

Service Industries pure EC substantially reduced costbank and brokerage houses

possible digitization of the entire processtravel and real estate agents

viewing an online video clip or seeing photos of a hotel or a house for sale

Manufacturing and Product’s Retailingphysical delivery cost may be high

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Travel and Tourism Services

• By the year 2000, close to 25 percent of all business-to customer Internet commerce will be related to tourism

• The Internet is an ideal place to plan, explore, and arrange almost any trip

• IBM’s vision of seamless electronic travel using smart cards

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• Services Provided

Information and booking of airlines, hotels, cars, and even golf courses

Fare comparisons

360 degree video tours of top destinations

Electronic Travel magazine

Tips provided by people that experienced certain situations (like a visa problem)

Pictures of major attractions

Providing maps

Information about entertainment and ticket purchasing (such as www.ticketmaster.com)

Converting 200 currencies

Travel and Tourism Services (cont.)

Worldwide business and places locator

E-mail to intermediary

Chat rooms and bulletin boards

Major international news

Weather watchExperts’ options

Shopping for travel accessories and books

Special interest vacations

Current status of flights

(real time)

Fare tracker (free e-mail alerts on low fares)

Bed and breakfast recommendations

Restaurant reviewsSpecial discount information

Frequent flier deals

Travel news

Driving directions in the US


8© Prentice Hall, 2000

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• Benefits and Limitations

LimitationsNot all people use the InternetIt may take a long time to find what you wantPeople are still reluctant to provide credit card numbers

BenefitsFree information is tremendousFree information is accessible anytimeSubstantial discounts


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• Corporate Travel: New Business Model

• The Impact of EC on the Travel Industry– Porter’s framework of competitive

advantage (the five forces)– Focus:

•environment•competitive responses•firm’s strategy

– The industry is clearly transformed– Taking away some functions traditionally

performed by travel agents


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• Impacts on the industry


Multimedia helps customers understand the productsOffering of lower-cost tripsProviding a more personalized serviceSaving money in a paperless environmentIncreasing the convenience of getting information at homeSupporting a customer-focused strategy (such as targeted advertisement and integration of products); push information to customers

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• Travel agencies, as we know them today, will disappear

• Only their complex value-added activities will not be automated

• These complex activities will be performed by a new breed of intermediates


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• The Future


Collaborative organizational process performed by multiple organizational intelligent agentsActing autonomouslyWork cooperativelyWork collectively to achieve the collective goalExample — How will your next vacation be planned, booked and paid for?

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The Employment Placement Market

• Job markets

Employers are looking for employees with specific skills, and individuals are looking for a jobVery volatile marketMoved to the InternetMillions of job seekers, hundred of thousands of jobs

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• Shortcomings of the Non-Internet Job Market

The Employment Placement Market (cont.)

Classified ads are expensive.Unless renewed, at an additional cost, the life of the ads is only days or weeks.Most ads are local. Nationwide ads are very expensive. International ads are even more expensive.Because of the high cost, the information provided is minimal and may not appeal to some job seekers.It is very time consuming for individuals to find all relevant newspapers. A trip to a library results in finding only major out of town newspapers.

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– Finding applicants— Most job seekers, in the pre Internet era, did not place ads about their availability. Some sent unsolicited letters with resumes. This situation made it difficult for companies to find employees with special skills. They had to use employment agencies and pay them high commissions.

– Matching— It was difficult to match candidates to open jobs as well as to match supply and demand.

– Lost and dated material— Some applications or letters of response tended to get lost, or arrive late. A letter in a big city may travel two weeks to arrive at a distance of a few blocks.

– Speed— Communication by mail is slow and so is the processing of a large number of applications. Frequently, employers lose good employees, since by the time the application is processed, the applicant had taken another job. Similarly, applicants accept less desirable jobs because they are afraid to wait too long.


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• The Internet Job Market


The Internet offers a perfect environment; it is especially effective for technology-oriented jobs.

Job seekersJob offerersRecruiting firmsGovernment agencies and institutions

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• The Advantage of the Electronic Job Market


For job seekersAbility to find very detailed and timely information on a large number of jobs world-wideAbility to quickly communicate with potential employersAbility to post resumes for large-volume distributionAbility to search for jobs quickly from any place at any timeObtain several support services at no cost

writing resume career development how to interviewFind employer profile & industry guides

www.valuereports.com

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– For employers• Ability to advertise to a large number of job seekers• Ability to save on advertisement costs• Lower the cost of processing (using electronic application

forms)• Ability to provide greater ‘equal opportunity’ for job seekers• Ability to find highly skilled employees• Ability to conduct tests quickly, online• Ability to change and update ads quickly• Ability to fill up positions rapidly• Interviewing from distance


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• The Limitations of the Electronic Job Markets


Many people do not use the InternetSecurityPrivacyLack of face-to-face contact

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• Major Services Available on the Net– Finding a job– Writing and posting resumes– Career planning– Newsgroups

• The Intranet Job Market– Most companies organize an internal

electronic job market– Openings are posted for employees to look

at, and search engines enable managers to identify talents even if the people were not actively looking for a job change


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Cyberbanking and Personal Finance

• Electronic banking

Saves time and money for usersOffers an inexpensive alternative to branch bankingExample: Southern Bank Bhd (Malaysia)

http://www.sbbgroup.com.my/

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• Implementation Issues in Banking and Online Trading

Cyberbanking and Personal Finance (cont.)

Encrypted SSL Session & Digital Certificate Verification Initiated

External Firewall

B of AWeb Server

Internal Firewall

B of A Application

Server

Bank of America Security System

Logon Screen•User ID•User Password

B of AWeb Site

Customer’sComputer

Securing Financial TransactionsApplication Case: Security at NationsBank

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– Using the Extranet– Imaging Systems– Pricing Online Vs. Offline Services– The Future of Banking

• building alliances quickly with banks, and software vendors, and information providers

• effective outsourcing without neglecting to build in-house skills, particularly with respect to customer information systems

• focusing on the profitable customers to provide broad channels for services and products

• keeping a central role in the payment environment

Cyberbanking and Personal Finance (cont.)

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Alternative Strategies for Banking

– Customers’ Agents— banks unable to achieve economies of scale

• Offer customers the widest possible choices, including products from multiple sources, and provide the customers with integrated information services

– Product Manufacturers— banks able to achieve economies of scale

• It will strengthen a trend that can already be seen in a number of product segments and in core processing services for small and medium sized institutions

– Integrated Players— banks with a strong brand and position from manufacturing to delivery• Many banks will adopt a hybrid strategy, but every player needs to

make crucial decisions about which areas are strategically too risky to outsource and which capabilities need to be built up in-house

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Billing Online• Automatic transfer of mortgages

– This method has existed for several years. The payer authorizes its bank to pay the mortgage, including tax escrow payments.

• Automatic transfer of funds to pay monthly utility bills– As of fall 1997, the city of Long Beach has allowed its

customers to pay their gas and water bills automatically form their bank accounts.

– In 1999, many utility companies worldwide, including those in Hong Kong, allow customers to pay from bank accounts, or ATMs.

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• Paying bills from online banking account

Billing Online (cont.)

Consumer

Bill Consolidator Billers

Phone

Credit Card

Utility

Such payments can be made into any bank account. Many people pay their monthly rent and other bills directly into the payee’s bank accounts.

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• A merchant-to-customer direct billing


Under this model, a merchant like American Express posts bills on its Web site, where customers can view and pay them . This means that the customers have to go to many Web sites to pay all their bills. Several utilities in Los Angeles allow customers to pay bills on the utilities’ Web site, charging customers 20 cents per transaction, which is less than the price of a postage stamp.

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• Using an intermediary– According to this model, a third party like

MSFDS (Microsoft and First Data Corporation) consolidates all bills related to each customer in one site, and in a standard format. Collecting a certain commission, this intermediary makes it convenient both for the payee and payer to complete transactions. This model is of interest to vendors such as E*Trade, and Intuit.

• Personal finance online– Available from many banks and other financial

institutions, frequently free of charge.


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Online Publishing

• The electronic delivery of newspapers, magazines, news, and other information through the Internet

• Online Publishing Today and Tomorrow– Today— mainly used for disseminating

information and for conducting sales transactions interactively

– Tomorrow— include more customized material that the reader will receive free, or will pay for

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• Publishing Modes– newspapers, magazines, news, textbooks, music,

artwork, video clips, and movies• Publishing Methods

– online archive approach— a digital archive such as library catalogs and bibliographic databases

– new medium approach— add extra comprehensiveness to any issue or topic

– publishing intermediation approach— an online directory for news services

– dynamic or just-in-time approach— create content in real-time and transmitted on the fly

Online Publishing (cont.)

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• Virtual Teaching and Universities

Knowledge Dissemination

Many universities are offering limited courses and degrees but use innovative teaching methods and multimedia supportMBA program in Hong Kong

lectures are delivered as an interactive TV (iTV)students can decide what and when they want to ‘attend’ the lecturelecture, support material, exercises etc. are provided on the Web

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• Online Consulting

Knowledge Dissemination (cont.)

Medical advice— provide consultation with top expertsManagement consulting— provide accumulated expertise from knowledge basesLegal advice— delivery of legal consultation services to business has considerable prospectsFinancial advice— offer extensive financial adviceOther service online

insurance, healthcare, future exchanges, matchmaking, venture capital, finding a college, digital delivery of documents, and electronic stamps

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The Impact on Intermediaries and Their Changing Roles

• Change the role of agents to :

Assist in comparison shopping from multiple sourcesProviding total solutions by combining services from several vendorsProviding certifications and trusted third party control and evaluation systems

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• Issues that could impact the future of the intermediaries

The Impact on Intermediaries and Their Changing Roles (cont.)

The success of intelligent agents— In addition to the travel intelligent agents, there are agents to support job matching and to interpret resumes. The more intelligent the software agents will be, the less you will need human agents.Customer attitudes and behavior are important— If you have good experience with online insurance or stock purchasing, or with virtual travel agencies would you ever return to use a human agent?

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• New roles of electronic marketing intermediaries

The Impact on Intermediaries and Their Changing Roles (cont.)

To extend what we are familiar with in physical markets to the virtual world (e.g., search services and electronic malls)To extend payment clearing functions into the Internet (e.g. electronic cash and digital credit card services)

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Managerial Issues

• Out-of-town recruitment : Important source for hiring skilled people. Job interviews via video teleconferencing.

• Privacy : As applicants information travels over the Net, security and privacy becomes more important. Management’s job to secure applicant info.

• International Legal Issues: The validity of contracts signed in different countries needs to be checked with legal experts.

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Managerial Issues (cont)

• Ethics: In traditional systems agents play an important role in assuring ethical behavior of buyers & sellers. Will the etiquette rule be sufficient? Only time will tell.

• The Intermediaries and their role : It will take a few years to stabilize the new role and fees of intermediaries.

Documents

1 Chapter 5 EC in Service Industries FEB EBS 2053 (E-Commerce) Lecturer: Puan Asleena Helmi