Chapter 1 Overview of e-commerce Framework e-commerce

Chapter 1

Overview of e-commerce Framework

e-commerce

CAS-COD-Prez-Date-CTL

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Questions

What is e-commerce? What are the distinct categories of e-commerce? How is e-commerce different from traditional commerce? Why study e-commerce? What is the e-commerce decision-making process?


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Strategic Framework

e-commerce Strategy Processe-commerce Strategy Process

Framing the market Defining the business model Customer interface Market communications Branding, implementation, and evaluation


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Strategic Framework

e-commerce Platformse-commerce Platforms

Network infrastructure Convergence of media


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What is e-commerce?

Exchanged of digitized information

Technology-enabled transactions

Technology-mediated relationships

Intra- and Inter-organizational activities


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Definition

e-commerce can be formally e-commerce can be formally defined as…defined as…

technology-mediated exchanged between parties (individuals, organizations, or both) as well as the electronically based intra- or inter-organizational activities that facilitate such exchanges.


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Distinct Categories

B-2-B

Business-to-Business (B-2-B)

New cooperation, merger, consortiums


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Distinct Categories

B-2-C

Business-to-Consumer (B-2C)

Front office frequently tracked


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Distinct Categories

C-2-C

Consumer-to-Consumer (C-2-C)

Between and among

Auction exchanges


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Distinct Categories

C-t-B

Consumer-to-Business (C-2-B)

Economically motivated or social

advocacy


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Four Categories of e-commerce

B2B

B2C

C2B

C2CConsumers

Business

And selling

to...

Business originating from...

Business Consumers


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e-commerce / Traditional Commerce

Core strategic decisions

are technology-based

Real-time competitive

responsiveness

24 X 7


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Technology-Based

Customer Interface

Screen-to-face interaction

– Monitors

– ATMs

– PDAs

– WAP


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Technology-Based

Customer Interface

Screen-to-face interaction

sales

costs

– organizational and

technology costs


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Customer Interaction

Customer

Time controlled by customer

Seller

Entices, influences, and targets

Uses history and demographics


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Customer Behavior

Third-party measurement firms

Extensive tracking capabilities

Real-time financial estimates


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Network

Economics

Metcalf’s Law

the value of a network is “n” squared being the

number of nodes on the network

Network economics

positive feedback

increased returns


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Nontraditional Performance Metrics

and Emergent Valuation Models

No widely acceptable methods to measure e-

commerce business performance

Historic measurements not full measurements

Some new methods are being devised


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Point Counterpoint: Valuations - Do they or don’t they make sense?

Point — CounterpointPoint — Counterpoint

Valuations Make SenseValuations Make Sense Valuations Do Not Make SenseValuations Do Not Make Sense

Increased focus on path to profitability and revenue

Techniques such as real options

valuation yield observed valuations

Investors are investing on valuations

Network economics and information

economics create highly profitable

companies

Uncertainty leading to wide fluctuations

Many companies do not demonstrate

profits for a long period of time

There is an inconsistency in the valuation

of on-line and off-line companies

Can be a “bending” of the accounting rules by on-line companies

Valuations are based the assumption that the economics of “monetizing” them will remain favorable

Many stocks tend to be moved by momentum


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Growth in Number of Internet Users

U.S. Online Population Forecasts by Researcher

Population (Millions)


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Growth in Number of Internet Users

U.S. Online Population Forecasts by Researcher

Population (Millions)

1999 2000 2001 2002 2003

CommerceNet /Nielsen

83.0 102.4 N/A N/A N/A

Cyber Dialogue 77.9 90.2 103.0 115.9 130.2

Cyber Dialogue(Aggressive)

74.5 83.0 90.5 99.1 109.4

Cyber Dialogue(Conservative)

74.5 83.0 90.5 99.1 109.4

InternationalData Corp.

82.0 109.0 131.0 154.0 179.0

Jupiter / NFO 100.1 115.6 129.8 144.2 156.7


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Impact 1: Economics of Growth

Increasing “speed of adoption”

Far outdistances other technology growth

Scale and velocity reshapes economic growth


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Impact 2: Blurring of Industry Boundaries

NAICS codes suffer from a blurring of boundaries.

Old categories breaking down

“Last mile” to consumer homes see a blur of alternative telecommunications

networks


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Impact 3: Transformation of Social Structure and Society

Transforming

– learning

– group communications

– scientific interchange

– how society functions

Ubiquitous Website addresses


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Opportunities for Wealth Creation

Enormous market capitalization for several New economy players

– consumer products

– financial markets

– middleware enabling commerce

– services

– advertising


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0

200

400

600

800

1000

1200

1999 2003

$Bill

ion

s

US World

Exhibit 1-2Business-to-Business e-Commerce Projections

Source: International Data Corporation.


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IDC

U.S. 1999: $50 billion

U.S. 2003: $634 billion

World 1999: $80 billion

World 2003: $1.1 trillion

B-to-B figures are generated bycombining small, medium and

large business as well asgovernment and education.

Includes products and servicespurchased for business end-

use. Counts EDI if the front-enduses a Web gateway (5 percent

to 10 percent of EDI)

Data gathered from the onlinebuyers’ perspective with local

analysts forecasting in 30countries

Business-to-Business e-commerce Projections, In Millions (1996-2000)


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66,470

134,000

153,000

140,000

600

125

210

500

1 10 100 1,000 10,000 100,000 1,000,000

Forrester

Yankee Group

IDC

eStats

1996

2000

Business-To-Business E-commerce Projections, In Millions (1996-2000)


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-20

0

20

40

60

80

100

12019

22

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

E

Internet as Mass Medium — North American Adoption Curves

North American Users /

Households (MM)

* Launch of HBO in 1976 used to estimate the beginning of cable as an entertainment / advertising medium

Radio

TV

Cable CommercialInternet

50 Million Users / Households

Years to Reach50 MM Users

Radio: 38 yearsTV: 13 years Cable*: 10 years

Commercial Internet: 5 years

Internet Adoption Rates Versus Other Mediums


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Estimated Savings from e-commerce


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E-Commerce Decision-making Process

Identify: Customer groups to serve Compelling set of benefits, differentiating “value proposition” Communication effectiveness Content

– Look and feel

– Level of community

– Personalization Organization structure

– Business services

– Application services Potential partners

– Capabilities Shareholders Metrics


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E-Commerce Strategy

Managerial task of e-commerce strategy

Framing the market opportunity Business model Customer interface Market communications and branding Implementation Metrics Valuation


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Exhibit 1-5: Where to Play On-Line and Off-Line

Fulfillment Systems

CustomerInterface

On-line Off-line

Yahoo!

Amazon.com

BN.com

McD

on

ald

s

Eg

gh

e ad


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Market Infrastructure

Opportunities and constraints Network infrastructure Media infrastructure Two Forms of Convergence Publics and Policies


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Exhibit 1-6: Media Convergence to a Digital Platform

Telephone/DSL

Cable

Broadcast Radio & TV

Satellite

Wireless

Print (Newspapers and Magazines)

Television

Radio

Music

Motion Pictures

DigitalConvergence

DigitalConvergence

NetworkInfrastructure

NetworkInfrastructure

MediaInfrastructure

MediaInfrastructure


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A Framework for Electronic Commerce

Framing the Market

Opportunity

BusinessModel

Implementation

Evaluation:Metrics

and Valuation

Media Infrastructure

Network Infrastructure

e-commerceStrategy

Market Infrastructure

CustomerInterface

Publics and Politics

Market Communications

and Branding


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Point Counterpoint: Who will win? Online vs. Offline

Point — CounterpointPoint — Counterpoint

On-line Will WinOn-line Will Win Off-line Will WinOff-line Will Win

Off-line companies can’t easily cannibalize their own businesses

Off-line companies stock does not allow them to adequately incentivise key new economy talent

Off-line companies move too slowly Key elements of business (e.g. business

design, strategy, value proposition) are different in the New Economy

“innovator’s Dilemma”: Focusing on current customer needs causes companies to divert focus from new technologies

Market will not tolerate blue chip companies running loss-making businesses

Off-line companies may face a channel conflict

Schwab has become a leading player in the on-line brokerage industry

Companies with established market leadership have key assets such as relationships with customers, suppliers, deep industry knowledge and experienced management

Established companies have deep pockets

Off-line companies have established and trusted brands

Off-line companies can create spin-out businesses with new culture, processes, funding, etc. There have been other technology revolutions

– From 1894 to 1903, there were 20,000 telephone companies that started in the U.S.


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“The Rest...of the Story”

Chapter 2Framing the MarketOpportunity

Chapter 3Business Models

Chapter 4The Customer Interface

Chapter 5Market Communicationsand Branding

Chapter 6Implementation

Chapter 7Metrics

Chapter 8Valuation

Chapter 9Network Infrastructure

Chapter 10Media Convergence

Documents

Chapter 1 Overview of e-commerce Framework e-commerce