Transcript Chapter 1

Chapter 1:
Introduction To E-business
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 1
Learning Objectives (1)
• Be able to explain what a business model is
and how it is used.
• Gain insight into the technologies that are
being used to foster e-business.
• Determine the size of the Internet economy.
• Recommend how a business can use ebusiness techniques to develop long term
marketing relationships.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 2
Learning Objectives (2)
• Identify the components of a marketing
system.
• Identify the components of an e-business
based marketing system.
• Understand how and why businesses need
to evolve and change to maintain
competitiveness.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 3
Vignette: Dell Computer Company
(1)
Figure 1.1: Dell’s Business Model
Suppliers linked
through Extranet
deliver just-in-time.
Dell manufactures
customized PC and
sell at low price.
Product delivered
through independent
shippers such as UPS.
Web page
provides
information and
ordering.
Customer gathers
information and
purchases through
Web page.
Payments are made
by online through
Web page.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 4
Vignette: Dell Computer Company
(2)
• Thinking Strategically
– Determine if Dell has an advantage over
traditional computer sales businesses.
– Decide if they have an advantage over other online sellers.
– Consider what you would want if you were to
purchase a computer.
– Explain would you feel it is necessary to talk to
a “living” person.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 5
Vignette: Dell Computer Company
(3)
• Thinking Strategically
– Evaluate the Dell Web site (www.dell.com).
Determine if this site provides all of the information
necessary for you to buy.
– Determine the importance of the Dell brand name.
– Explain if the business system that Dell has
developed will work for other types of businesses.
– Explore how Dell develops and maintains
relationships between themselves and their
customers.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 6
Changing Nature of Marketing
• Capture data electronically at the point of sale and route
that information from the retailer to the supplier and/or the
manufacturer.
• Electronically linked distribution systems are speeding
products through the channel of distribution and helping to
forge strong relationships between firms.
• The World Wide Web is allowing businesses to reach
customers around the world rather than just local markets.
• Information on the customer’s shopping behavior is being
stored in databases to profile individuals for targeted
promotions and customized products.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 7
Business Models
• New information technologies are allowing
businesses to redesign business models and
change business practice
– A business model, or commerce model, is the basic
process flow indicating how a business operates. It
indicates how business functions are linked together.
• Internet based business models requires fewer
hard assets (bricks and mortar assets)
– Brick and mortar businesses have tangible physical
assets such a factory, office building, warehouses, etc.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 8
Case 1.1: From Egghead
to Egghead.com
• Thinking Strategically
– Consider the alternative outlets for software, where
would look if you were going to purchase software?
– Determine what is most important to you, the store, the
brand name, or the price.
– Evaluate the Egghead software site (www.egghead.com).
– Determine if this the type of company you would
consider purchasing from.
– Evaluate the Amazon.com site (www.amazon.com).
– Decide if you would rather use this brand name site.
Determine why you would make that decision.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 9
What is E-Business
E-business, or electronic business,
systems use a number of information
technology-based business practices
to enhance relationships between the
business and the customer. Ebusiness includes changes in
marketing communication, distribution
systems, and business models.
www.ibm.com/e-business/
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 10
What is E-Commerce
• E-Commerce: consists of using
electronic information based systems
to engage in transactions or commerce
online. This includes automating
purchasing through Web sites.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 11
Table 1.1: E-Business Industry Terms (1)
• Internet: A global network of computer networks
that use a common interface for communication.
• World Wide Web: A graphically based Internet
standard that allows easy access to information
from around the world.
• E-Business: This is the process of using
information technology (IT) to support a fuller
operation of a business.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 12
Table 1.1: E-Business Industry Terms (2)
• E-Commerce: Uses electronic information based
systems to engage in transactions or commerce
online.
• Extranet: An Internet based connection between a
business and its suppliers, distributors, and
partners. This is not open to the general public.
• Intranets: Internal private network that use the
same types of hardware, software, and connections
as the Internet.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 13
Table 1.2: E-Business
Growth and Projections
• How big is the Internet: 195 million
worldwide - 2005 expected 350 million.
• How much will consumers spend online:
18 billion - 2002: 180 billion.
• How much will businesses spent online:
180 billion - 2004: 7.3 trillion.
http://www.nua.ie/surveys/how_many_online/index.html
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 14
Marketing
• Marketing is the process of planning and
executing the conception, pricing,
promotion, and distribution of ideas, goods,
and services that create exchanges that
satisfy individual and organizational needs.
• Relationship marketing implies that
business undertake strategies that will hold
desirable customers over a long time period.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 15
A Systems Approach (1)
• Helps decision-makers look at how all
aspects of a strategic business unit
(SBU) interact with each other.
• Systems are seen as being organic in
that they must change in response to
their environment or face the
possibility of becoming extinct.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 16
A Systems Approach (2)
• All of the components of a business
must work in unison to allow the
marketing system to operate in its
environment.
• This system must organize itself and
find an advantage over its competitors
to ensure long-term sustainability.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 17
The Traditional Business System
Distribution
Flow
Product
Price
Communication
Target
Customers
Information Flow
Payment Flow
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 18
Figure 1.2:The Traditional
Marketing System
Strategic
Plan
Strategic
Goal
Environment:
Supply
Chain
Technological
Competitive
Political and Legal
Social
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 19
What Are The Business’ Goals?
• Pure Play Internet?
– Communicate or Sell?
• Multi-Channel Sales Approach?
• Support Brick and Mortar?
– Hold Current Customers?
• Enhance Relationship Development?
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 20
E-Business Systems
E-Business Systems are fostering a number
of changes to the marketing system:
– Customized production.
– Increasing price pressure resulting in lowering prices.
– Shorter channels of distribution dominated by
facilitators.
– Non-linear promotions.
– Electronic transfer of funds.
– Database information management systems.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 21
E-Business Systems
Shorter Channels
Dominated by
Facilitators
Customized
Production
Dynamic
Pricing
Customized
Non-Linear
Promotion
Market-of-One
Customer
Knowledge Management
& Data Warehousing
Electronic Payments
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 22
The E-Business System
Strategic
Plan
Extranet
Supply
Chain
Strategic
Goal
Environment:
Constant Technological Change
Increased Competitive Pressure
Weakened Political and Legal Influence
Greater Social Acceptance of Change
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 23
Levels of E-Commitment
• Brochure Sites
Costs
– Sets up a Web page to promote a business. This can
also allow contacts through email and simple product
ordering.
• E-Commerce
Costs
– Allows for purchasing online with automated credit
card clearance and links to inventory through databases.
• E-Business
Costs
??
– Refocuses business practice to take advantage of new
technologies to lower costs, improve value, and respond
quickly to environmental change.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 24
Table 1.3: Components of an
E-Business System (1)
• Chapter 2: Technological Environment
– Primer on the technology behind the Internet and the
World Wide Web.
• Chapter 3: Communication
– How communication is changing over the Internet.
• Chapter 4: Distribution
– Looks at the dynamics of change in distribution systems.
• Chapter 5: Business Models
– Explores the current business models that are being used
on the Internet.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 25
Table 1.3: Components of an
E-Business System (2)
• Chapter 6: Customers
– Diffusion of innovations and online communities.
• Chapter 7: Data Collection and Use
– The collection and use of information to gain competitive
advantages.
• Chapter 8: Strategy
– Innovative approaches to strategy through e-business
value chains.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 26
Table 1.3: Components of an
E-Business System (3)
• Chapter 9: Management
– This chapter explores the change in management that is
required to operate in a dynamic and technical
environment.
• Chapter 10: Political, Legal, and Ethical Issues
– Explores the changing relationship between businesses,
the government, and the individual and the worldwide
concerns over privacy, fraud, pornography, and free
speech.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 27
Case 1.3: From Computers to Cars (1)
Consumer Automotive Business Models
Traditional Car Sales
• Dealer advertises locally to
bring in the customer and
attempts to close the sale.
• Customer endures sales
pitches, salesperson talking to
the manager, and then must
arrange insurance and
financing if they wish to
purchase.
www.carsdirect.com
CarDirect Sales Model
• Use Internet for information
and offers prices in the lowest
10% of national averages.
• Customers research cars and
contact CarDirect online.
• CarDirect contacts dealers to
negotiate sale. When price is
obtained, CarDirect can
arrange for insurance,
financing, and delivery.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 28
Case 1.3: From Computers to Cars (2)
Thinking Strategically
• Would you rather purchase cars at a local dealership or
online?
• Why should a dealership sell through CarsDirect.com and
not some other online sales system?
• Why can't a local dealer sell online?
• What would happen if the auto manufacturers decided to
sell online?
• Take a look at CarsDirect.com (www.carsdirect.com) and
then GM's Buy Power site (www.buypower.com). Which
site would you most likely to purchase a car from?
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 29
ALE 1.1: Imaging the Future
• Imagine if the telephone and television were invented within
the last ten years.
• Decide how companies would need to change to use these
new tools.
• Determine if they would be able to use the same techniques
to promote and sell their products.
• Decide if they would use the same outlets to distribute goods
and services.
• Speculate on whether the relationships between suppliers
and producers would be handled in the same way.
• Decide if companies could be managed in the same manner.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 30
ALE 1.2: Checking Buyer Behavior (1)
Shopping Activity
1: Like the most # of local
(Examples)
5: Like the least outlets
Shopping for specialty
clothing.
Shopping for groceries.
Shopping for specialty items
and gifts.
Shopping for computers and
software.
Shopping for cars.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 31
ALE 1.2: Checking Buyer Behavior (2)
• Explain how the e-business techniques outlined in this
chapter would effect the shopping activities outlined above.
• Indicate how this would effect the way you would make
your purchases.
• Determine if a smaller number of local outlets make it more
likely that you would shop online.
• Decide which of these businesses are likely to have links to
their suppliers.
• Explain which of these industries will face the greatest
amount of change.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 32
ALE 1.3: Proposed E-Business Model
• Draw a business model that would use the
components of the e-business system
indicated in the chapter.
• Use the Dell vignette as an example.
Include the products and services you plan
to offer and how those would be delivered.
• Explain how that business model works to
develop relationships with customers.
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 33
ALE 1.4: Existing Business Model
• Outline a business model for an existing business.
• Indicate how it meets the needs of it’s customers, obtains it
supplies, etc.
• Then draw out how you think this business model should
operate using the e-business techniques outlined in this
chapter.
• Explain how you think the business could make the
transition from the old business model to the new.
• Are there any environmental drivers leading this business
model to change?
• What could hinder the move to e-business?
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 34
ALE 1.5: Who is Under Threat?
Wholesaling: Traditional wholesalers that rely upon
sales reps to maintain contact.
Travel Agents: Airlines are cutting commissions.
Insurance: Customers are able to obtain information
online, and will soon be able to compare prices.
Car Dealerships: Customers are using the Internet
to become informed about their car purchases.
What business would you add and why?
For use with Strategic Electronic Marketing:
Managing E-Business
Copyright 2001 South-Western College Publishing
Chapter 1 Slide: 35