Transcript Chapter2: Understanding E

Chapter 1:
Introduction To E-business
Chapter 1 Slide: 1
Learning Objectives (1)
• Explain what a business model is and how it is
used.
• List the technologies that are being used to foster
e-business.
• Recommend how a business can use e-business
techniques to develop long term marketing
relationships.
• Identify the components of a marketing system.
Chapter 1 Slide: 2
Learning Objectives (2)
• List the components of an e-business based
marketing system.
• List the components of an e-business value chain.
• Explain how and why businesses need to evolve
and change to maintain competitiveness.
• Explain the importance of evaluating the ethical
practices of a business and outline an ethical
framework for e-business.
For use with Strategic Electronic Marketing:
Managing E-Business, 2e
Copyright 2003 South-Western College Publishing
Chapter 1 Slide: 3
Vignette: General Electric
www.GE.com
Suppliers linked
through Extranet
deliver just-in-time.
Supplies bid online.
Product shipped
from inventory or
order is routed to
factory.
(1)
Consumer product
delivered through
distributors or shippers.
Web page
provides
information and
ordering.
Customer gathers
information and
purchases through
Web page.
Database monitors equipment
Payments are made by online
through Web page.
For use with Strategic Electronic Marketing:
Managing E-Business, 2e
Copyright 2003 South-Western College Publishing
Chapter 1 Slide: 4
Vignette: GE
(2)
• Thinking Strategically
– Explain why Jack Welch would see e-business as
important for GE.
– Consider where e-business could have a bigger impact
for GE, in the business-to-business arena or the
business-to-consumer arena.
– List reasons why GE has been able to implement a new
e-business model so quickly.
– Visit the GE website (www.ge.com). Speculate on the
advantages of using a Website to develop and maintain
customer relationships.
Chapter 1 Slide: 5
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.
Chapter 1 Slide: 6
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.
Chapter 1 Slide: 7
What is E-Business
E-business, or electronic business, systems
use a number of information technologybased business practices to enhance
relationships between the business and the
customer. E-business includes changes in
marketing communication, distribution
systems, and business models.
www.ibm.com/e-business/
Chapter 1 Slide: 8
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.
Chapter 1 Slide: 9
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.
Chapter 1 Slide: 10
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.
Chapter 1 Slide: 11
Four Layers Of The Internet Economy
• Layer one: Internet Infrastructure Layer
– Includes companies with products and services that help create an
IP based network infrastructure.
• Layer two: Internet Applications Layer
– Builds off of layer one and includes the products and services that
make it technologically feasible to perform business activities
online.
• Layer three: Internet Intermediary Layer
– Allows the investments in infrastructure to turn into business
transactions by facilitating the meeting of buyers and sellers over
the Internet.
• Layer four: Internet Commerce Layer
– Includes the sales of products and services to consumers or
businesses over the Internet.
Chapter 1 Slide: 12
Table 1.2: E-Business
Growth and Projections
• How big is the Internet: 500 million
users worldwide - 2005 expected 1
billion.
• How much will consumers spend online:
1.8 billion - 2005: 16 billion.
• How much will businesses spent online:
1.3 trillion - 2005: 4.3-8 trillion.
Chapter 1 Slide: 13
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.
Chapter 1 Slide: 14
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.
Chapter 1 Slide: 15
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.
Chapter 1 Slide: 16
The Traditional Business System
Distribution
Flow
Product
Price
Communication
Target
Customers
Information Flow
Payment Flow
Chapter 1 Slide: 17
Figure 1.2:The Traditional
Marketing System
Strategic
Plan
Strategic
Goal
Environment:
Supply
Chain
Technological
Competitive
Political and Legal
Social
Chapter 1 Slide: 18
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?
Chapter 1 Slide: 19
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.
– Extranet-enhanced supply chain management.
– Non-linear promotions.
– Electronic transfer of funds.
– Database information management systems.
Chapter 1 Slide: 20
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
Chapter 1 Slide: 21
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
Chapter 1 Slide: 22
E-Business Value Chain (1)
E-business value chains view information technology as
part of a business’ overall value chain adding to the
competitive advantages of a business
Distribution
Inbound
Logistics
Extranets:
Lowers costs
increase
speed
(Ch 4)
Value
Production
Differential
Advantages
Customization
Dynamic
Pricing
(Ch 5)
Marketing/
Sales
E-commerce:
Lower costs,
new market
entry.
(Ch 6)
E-business
Promotion
(Ch 7)
Customer
(Ch 8)
Targeting &
Support
Databases
and
CRM
(Ch 9)
Management
(Ch 10)
Leadership:
Management
Intranets: Lower
costs, better
communication.
Innovativeness:
Speed,
flexibility, new
product ideas
Competitive
Advantage
Through
Stronger
Customer
Relationships
(Ch 11
Strategy and
Business
Models)
E-Business Communication Platforms (Ch 3)
E-Business Technological Infrastructure (Ch 2)
Chapter 1 Slide: 23
International E-business
• The United States is expected to account for only
half of the expected global $7 trillion in ebusiness-facilitated transactions.
• Markets outside of the United States are expected
to grow the fastest in areas such as wireless and
HDTV delivery of Internet content.
• Cultural barriers to seamless global e-business:
– Language differences, currency conversions, shipping
problems, a lack of global brand recognition, differing
legal and ethical standards, and a lack of trust in foreign
markets.
Chapter 1 Slide: 24
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.
Chapter 1 Slide: 25
Political, Legal, and
Ethical Environments
• The political and legal environment:
– Represents the rules by which businesses and
society operates.
– Social goal is to increase the overall economic
welfare or the net benefits an economic system
provides to a society.
• Ethics
– The study of how individuals or businesses make
decisions given the consequences of those decisions
Chapter 1 Slide: 26