Learning Objectives • Describe different Internet business models. • Contrast an electronic and traditional service. • Understand the importance of scalability to E-commerce success. • Distinguish among the E-business models.
Technology Convergence Enabling E-Business • Internet • Global telephone system • Communications standard TCP/IP (Transfer Control Protocol/Internet Protocol) • Addressing system of URLs • Personal computers and cable TV • Customer databases • Sound and graphics • User-friendly free browser
Purpose of Web-site • A retail channel (Amazon.com) • Supplemental channel (Barnes & Nobel) • Technical support (Dell Computer) • Embellish existing service (HBS Press) • Order processing (Delta Airline) • Convey information (Dr. Koop) • Organization membership (POMS.org) • Games (Treeloot.com)
E-Business Models(Weill & Vitale, Place to Space, HBS Press, 2001) • Content Provider: Reuters • Direct to Customer: Dell • Full-Service Provider: GE Supply Co. • Intermediary: eBay • Shared Infrastructure: SABRE • Value Net Integrator: Seven-Eleven Japan • Virtual Community: Monster.com • Whole-of-Enterprise: Government
Selling (providing) information Selling value-added service Selling services with goods Selling goods Used car prices Online travel agent Computer support Online retailer Kelly Blue Book Biztravel.com Everdream Amazon.com Information dominates service package Goods dominates service package Service Package and E-Service
E-Business Supply Chain (Network) Elements • Major entities including firm of interest and its customers, suppliers, and allies • Major flows of product, information, and money • Revenues and other benefits each participant receives • Critical aspects: participants, relationships, and flows Example: 7-Eleven Japan
Economics of E-Business • Sources of Revenue:- Transaction fees- Information and advice- Fees for services and commissions- Advertising and listing fees • Ownership- Customer relationship- Customer data- Customer transaction
Economics of Scalability • Information vs goods content of service package • Degree of customer contact • Standardization vs customization • Shipping and handling costs • Cost of after sales service • Why did living.com fail?
Dimensions High Scalability Low E-commerce continuum Selling information (E-service) Selling value- added service Selling services with goods Selling goods (E-commerce) Information vs. Goods Content Information dominates Goods dominate Degree of Customer Content None Need for call center Standardization vs. Customization Mass distribution Fill individual orders Shipping and Handling Costs None Yes - costs depend on item ordered Cost of After- sales service None Returns possible Example Service Used car prices Online travel agent Computer support Online retailer Example Firm Kelly Blue Book Biztravel.com Everdream Amazon.com Economics of Scalability
Topics for Discussion • Can an Internet service encounter be a memorable experience? • What is the “front-office” of an Internet service? • What is the contribution to gross national product (GNP) of “self-service” activities? • Position the following websites on the electronic services product-process matrix: cookingpost.com, chocoholic.com, peapod.com, raisinrack.com, and win.com.
Amazon.com • How would you contrast Amazon’s business design with that of Barnes & Noble before Barnes & Noble went online? • From a customer’s perspective, what are the advantages and disadvantages of each design?
Amazon.com (cont.) • Why has Amazon.com not turned a profit yet and what needs to be done to achieve profitability? • Will amazon continue to be successful against “click and mortar” competitors, such as Barnes & Nobel, which go online? • Is Amazon.com a model for the future of retailing?