Transcript DBA Work in progress May 2003

Introduction to e-Commerce
Web Markets
Dr. Michael D. Featherstone
Spring 2011
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Web Markets
Companies must adopt electronic markets now
if they hope to compete in the future.
Kambil and Heck “Making Markets” Harvard Business Press
What is a Market?
A market is a mechanism which allows people to trade, normally governed by the theory
of supply and demand, allocating resources through a price mechanism and bid and ask
matching so that those willing to pay a price for something meet those willing to sell for it.
In some fields of study, a market is assumed to be only this mechanism.
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Web Markets
Village
County
PHYSICAL
Country
International
Global
Electronic
VIRTUAL
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Web Markets
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Web Markets
The "virtual" part eliminates the market-friction caused by the barriers
of:
• time (a customer can buy products 24 hours a day, 365 days a year)
• geographic location (from anywhere in the world)
• form (for a growing list, atoms can be replaced by bits in delivering goods
and services).
• No longer does a company need to have a physical presence to enter a new
market.
• No longer are customers required to do business during normal business
hours.
• Products often can make the leap from atoms (a compact disk, a software
program, a bank statement, a check, or an airline ticket) to bits (MP3 audio,
downloadable software programs, online financial statements and payments,
or e-tickets).
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Web Markets
WHAT IMPACT WILL E-MARKETS HAVE
ON THESE MARKET ATTRIBUTES?
Price elasticity
Price Transparency
Search cost
Customer Switching cost
Cost Barriers to Market Entry
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Web Markets
WHAT IMPACT WILL E-MARKETS HAVE
ON THESE MARKET ATTRIBUTES?
Price elasticity
Price elasticity of demand (PED) is an elasticity used to show the responsiveness of the quantity
demanded of a good or service to a change in its price. More precisely, it gives the percentage change in demand one might
expect after a one percent change in price. It was devised by Alfred Marshall.
Price Transparency The ability of economic agents to compare the price of given products in different countries
Search cost
Rational consumers will continue to search for a better product or service until the marginal cost of
searching exceeds the marginal benefit. Search theory is a branch of microeconomics that studies decisions of this type.
Customer Switching cost
The costs incurred in changing from one provider of a product or service to
another. Switching costs may be tangible or intangible costs incurred due to the change of this source.
Cost Barriers to Market Entry Barriers to entry are those things that make it difficult for a new company
to compete against companies already established in the field. Examples include such things as patents, trademarks,
copyrighted technology, and a dominant brand.
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This Concludes the Web Markets Presentation
Thank you for your attention
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