Exploring Electronic Commerce: Trends and Strategies for the 21st Century

1. IS4838 Fundamentals of Electronic Commerce Robert Davison http://www.is.cityu.edu.hk/staff/isrobert

2. Aims • How new information technologies and networks will affect the exchange of goods and services between buyers and sellers in the 21st century– in Hong Kong and globally

3. Objectives • Assessment and understanding of… • Technologies - Internet, interactive television, virtual reality, digital cash, etc. • Business strategies and initiatives • Contextual issues – politics, economics, consumer psychology and global forces

4. Syllabus • Impact of emerging national and global information superhighways on the way goods and services are transacted • Stakeholder issues • Transaction types – advertising, purchasing, customer service • Critical evaluation of business strategies

5. Syllabus • Models of web-based business • E-Commerce developments in China • Effectiveness of web sites for commerce • Legal and ethical issues • Practitioner Perspectives – guest lectures • …

6. 1 – Introduction 2 – Infrastructure 3 – Regulatory Framework 4 – Virtual Teams 5 – B2B 6 – B2C 7 - Trust 8 – Internet Marketing 9 – EC in China Guest Speaker 10 – M-Commerce, L-Commerce & U-Commerce 11 – B2C Guest Speaker 12 – To be decided 13 – Revision Week by Week

7. Cultural Perspectives Legal Issues Ethical Concerns Privacy Matters Local Examples Global Perceptions E-everything? Virtual Teams Virtual Organisations The Social Dimension Political Realities Psychological Differences Week by Week

8. Teaching Methods • Lectures – concepts, models, examples • Tutorials – a mixture of lab and discussion • case studies of successful (and unsuccessful) instances of EC • problems in EC – for discussion • critical analyses

9. Assessment • Exam (2 hours) – 50% • Coursework – 50% • Coursework • One group, virtual team project (40%) • Participation in tutorial classes (10%) • Questions, answers, ideas, willingness to be involved – there will be many opportunities!

10. Set Texts • Farhoomand, A. and Lovelock, P. (2001) Global E-Commerce, Prentice Hall: 0-13-061229-4 • Turban, E., Lee, J., King, D. and Chung, H.M. (2002) Electronic Commerce: A Managerial Perspective, Prentice Hall: 0-13-975285-4

11. Flavour of IS4838 • Primarily looking at consumer and organisational perspectives of electronic commerce. • Less attention to systems analysis/design and developmental issues – this is not intended to be a technical course (the only prerequisite is FB2500 – which itself is essentially non-technical) !

12. The Marketspace Ecosystem • A virtual location on the web where transactions take place • A location that is defined and governed by information • Reliable, quality information is of paramount importance – for effective decision making by all stakeholders • A new ecosystem – with new objects and relationships, models and dynamics

13. Spaces • Buying/selling - Marketspace • Working - Workspace • Info-/Enter- tainment – Infospace • There is an almost unlimited variety of spaces for different purposes, where many different types of digitised information products can be transacted… much more cheaply than in the physical marketplace

14. Documents Data (inc. statistics) Dictionaries/Encyc. Investments Bookings and tickets News Musical performance Images Video (inc. TV, VC) info~, enter~, edu~ ~tainment Money - digicash Insurance Software Weather forecasts etc. Products

15. E.g.: Financial Products/Services • Teller-based transaction costs ~$10 • Internet-based transaction costs ~$0.1 • Travel reservation through an agent ~$80 • Travel reservation through the Internet ~$16 • Stock purchase through an agent ~$500 up • Stock purchase on the Internet ~$0 up

16. Marketplace vs. Marketspace • In the transition from place to space, information is a critical strategic resource • Adding efficiency – and adding value. • Linking businesses, partners, customers … ever more dynamically into a virtual value chain • The vast majority of companies operate in both space and place – few are space only.

17. Mixing and Matching • In the marketspace, we can mix and match product and infrastructure characteristics so as to add value • Building relationships with non-traditional partners • Identifying new customers • Personalisation is a major part of this new wave of mix 'n' match

18. Personalisation • Content: online information in online stock trading • Context: development of customer loyalty – e.g. Amazon,… • Infrastructure – searching for products, 'test-driving' new products, customisation of products, e.g. ABEBooks, Dell,

19. Marketspace Types I • Seller-controlled: Cisco – www.cisco.com • On-line ordering, customisation, documentation • Buyer-controlled: JAL – www.jal.co.jp • On-line procurement to search for suppliers • Buyer intermediaries: Freemarkets – www.freemarkets.com • act as agents or aggregators, identifying a pool of competitive suppliers

20. Marketspace Types II • Neutral: auction houses and other third-party intermediaries • FastParts – www.fastparts.com • anonymous spot market for trade in electronics components • eBay – www.ebay.com • Red Dots – www.red-dots.com • consumer-consumer trading • IceRed – www.icered.com • consumer-consumer conversations

21. Marketspace Themes I • EC is changing the importance of time. 24-hour communication; continuous buying and selling • EC is diminishing the importance of geographical boundaries – anytime, anyplace transactions, but… • legal issues? logistics? finance/payment? security/jurisdictions? culture?

22. Marketspace Themes II • EC is changing the character of intermediation • HK has traditionally built much of its wealth out of intermediating trade between China and the outside • Intermediation functions still exist, but they look different – with disintermediation and reintermediation

23. Marketspace Themes III • EC is premised on technical and philosophical openness • The Internet is fundamentally open and non-proprietary • Customers can be partners – a new open strategic approach • Major implications for CRM, social transformations, transparency and privacy

24. Marketspace Themes IV • EC acts as a catalyst to many other changes in economics, politics and organisational structures, including globalisation • EC produces synergies, with multiple winners and win-win scenarios

25. Virtual Value Chains • The value chain is a model that describes how value is added to a product as it progresses from raw materials through design, production and out to the customer. • Producer > Wholesaler > Retailer > Consumer $200 • Producer > Retailer > Consumer $145 • Producer > Consumer $88 • IT enables the producer to disintermediate the wholesaler and retailer

26. Infomediaries I • New entrants can disintermediate existing relationships – online travel agents, stock brokers, etc. • Established organisations can reintermediate or reinvent existing markets, creating new value for customers • Both practices come from the emergence of information as a critical strategic resource.

27. Infomediaries II • An infomediary (information intermediary) derives its primary or only source of revenue from consumer information and profiling – for use by (selected) third-party vendors • Infomediaries negotiate with consumers for their information • Analysis of website visitors: www.doubleclick.net

28. Summary • In the shift from marketplace to marketspace, there are fundamental business and economic changes. • New business models emerge. • Information is a source of value, not just a supporting element. • Sustainability in the longer term depends on building and maintaning a critical mass of consumers, stable networks, trust, security, standardisation and compelling content.