What is e-commerce

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					       e-commerce
           Chapter 1
Overview of e-commerce Framework
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                                         Questions




                           What is e-commerce?
                           What are the distinct categories of e-
                        commerce?
                           How is e-commerce different from traditional
                        commerce?
                           Why study e-commerce?
                           What is the e-commerce decision-making
                        process?




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                                 Strategic Framework




                        e-commerce Strategy Process

                           Framing the market
                           Defining the business model
                           Customer interface
                           Market communications
                           Branding, implementation, and evaluation




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                         Strategic Framework




                        e-commerce Platforms

                           Network infrastructure
                           Convergence of media




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                                    What is e-commerce?




                           Exchanged of digitized information

                           Technology-enabled transactions

                           Technology-mediated relationships

                           Intra- and Inter-organizational activities




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                                     Definition



        e-commerce can be formally
        defined as…


         technology-mediated
        exchanged between parties
        (individuals, organizations,
        or both) as well as the
        electronically based intra- or
        inter-organizational activities
        that facilitate such
        exchanges.



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                            Distinct Categories
                                    B-2-B




                           Business-to-Business (B-2-B)

                           New cooperation, merger,
                            consortiums




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                                 Distinct Categories
                                          B-2-C




                           Business-to-Consumer (B-2C)


                           Front office frequently tracked




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                                Distinct Categories
                                       C-2-C




                           Consumer-to-Consumer (C-2-C)

                           Between and among

                           Auction exchanges




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                               Distinct Categories
                                       C-t-B




                           Consumer-to-Business (C-2-B)

                           Economically motivated or social

                            advocacy




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                                    Four Categories of e-commerce


                                                  Business
                                             originating from...
                                            Business       Consumers




                        Business             B2B              C2B

 And
selling
 to...
                        Consumers            B2C              C2C




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                             e-commerce / Traditional Commerce




                  Core strategic decisions
                   are technology-based



                  Real-time competitive
                   responsiveness



                  24 X 7




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                              Technology-Based
                              Customer Interface




                           Screen-to-face interaction

                             – Monitors

                             – ATMs

                             – PDAs

                             – WAP




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                                                  Technology-Based
                                                  Customer Interface




                           Screen-to-face interaction

                             –  sales

                             – costs

                             – organizational and

                               technology costs




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                                 Customer Interaction




                        Customer

                            Time controlled by customer

                        Seller

                            Entices, influences, and targets

                            Uses history and demographics




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                                               Customer Behavior




                       Third-party measurement firms


                       Extensive tracking capabilities


                       Real-time financial estimates




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                                                 Network
                                            Economics




                        Metcalf’s Law

                            the value of a network is “n” squared being the

                             number of nodes on the network

                        Network economics

                            positive feedback

                            increased returns




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                                 Nontraditional Performance Metrics
                                   and Emergent Valuation Models




                           No widely acceptable methods to measure e-
                            commerce business performance



                           Historic measurements not full measurements



                           Some new methods are being devised




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        Point Counterpoint: Valuations - Do they or don’t they make sense?
                                                             Point — Counterpoint

                                   Valuations Make Sense                          Valuations Do Not Make Sense


                           Increased focus on path to profitability          Uncertainty leading to wide fluctuations
                            and revenue

                                                                              Many companies do not demonstrate
                           Techniques such as real options                    profits for a long period of time

                            valuation yield observed valuations               There is an inconsistency in the valuation
                                                                               of on-line and off-line companies
                           Investors are investing on valuations

                           Network economics and information

                            economics create highly profitable                Can be a “bending” of the accounting
                                                                               rules by on-line companies
                            companies                                         Valuations are based the assumption that
                                                                               the economics of “monetizing” them will
                                                                               remain favorable
                                                                              Many stocks tend to be moved by
                                                                               momentum



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                               Growth in Number of Internet Users


                                       U.S. Online Population Forecasts by Researcher

                        200
                              CommerceNet / Nielsen
                              Cyber Dialogue (Aggressive)
                              Cyber Dialogue (Conservative)
                              International Data Corp.
                        150
                              Jupiter / NFO
          Population
           (Millions)




                        100




                        50
                              1999                2000        2001        2002          2003




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        Growth in Number of Internet Users
                                                                   U.S. Online Population Forecasts by Researcher
                            200
                                                  CommerceNet / Nielsen
                                                  Cyber Dialogue (Aggressive)
                                                  Cyber Dialogue (Conservative)
                            150                   International Data Corp.
                                                  Jupiter / NFO
              Population
               (Millions)

                            100




                            50
                                              1999                    2000                  2001            2002    2003



                                                           1999         2000        2001           2002     2003

                                  CommerceNet /
                                                           83.0         102.4       N/A            N/A      N/A
                                  Nielsen

                                  Cyber Dialogue           77.9          90.2       103.0          115.9    130.2

                                  Cyber Dialogue
                                                           74.5          83.0       90.5           99.1     109.4
                                  (Aggressive)
                                  Cyber Dialogue
                                                           74.5          83.0       90.5           99.1     109.4
                                  (Conservative)
                                  International
                                                           82.0         109.0       131.0          154.0    179.0
                                  Data Corp.

                                  Jupiter / NFO            100.1        115.6       129.8          144.2    156.7




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                                Impact 1: Economics of Growth




                           Increasing “speed of adoption”

                           Far outdistances other technology growth

                           Scale and velocity reshapes economic growth




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                              Impact 2: Blurring of Industry Boundaries




                  NAICS codes suffer from a blurring of boundaries.


                  Old categories breaking down


                  “Last mile” to consumer homes see a blur of alternative telecommunications
                   networks




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                        Impact 3: Transformation of Social Structure and Society



                                                     Transforming

                                                          – learning

                                                          – group communications

                                                          – scientific interchange

                                                          – how society functions

                                                     Ubiquitous Website addresses




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                                     Opportunities for Wealth Creation




                           Enormous market
                            capitalization for several
                            New economy players
                             – consumer products
                             – financial markets
                             – middleware enabling
                                commerce
                             – services
                             – advertising




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        Exhibit 1-2
        Business-to-Business e-Commerce Projections


                                    1200

                                    1000

                                    800
                        $Billions




                                    600

                                    400

                                    200

                                      0
                                                  1999                    2003

                                                         US       World

        Source: International Data Corporation.




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   Business-to-Business e-commerce Projections, In Millions (1996-2000)




                                                    B-to-B figures are generated by
                                 IDC                  combining small, medium and
                                                        large business as well as
                         U.S. 1999: $50 billion                                        Data gathered from the online
                                                       government and education.
                                                                                       buyers’ perspective with local
                        U.S. 2003: $634 billion      Includes products and services
                                                                                         analysts forecasting in 30
                        World 1999: $80 billion        purchased for business end-
                                                                                                 countries
                                                    use. Counts EDI if the front-end
                        World 2003: $1.1 trillion   uses a Web gateway (5 percent
                                                          to 10 percent of EDI)




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          Business-To-Business E-commerce Projections, In Millions (1996-2000)




                                                             500
                          eStats
                                                                                   140,000

                                                     210
                             IDC                                                    153,000     1996
                                                                                                2000
                                                   125
          Yankee Group                                                             134,000

                                                             600
                        Forrester                                              66,470

                                    1   10   100             1,000   10,000   100,000   1,000,000




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                          Internet Adoption Rates Versus Other Mediums



                                                    Internet as Mass Medium — North American Adoption Curves
                        120


                        100


                         80                                                                      TV

                                                                                        Radio
 North American 60                          50 Million Users /                                                                  Cable                    Commercial
     Users /                                  Households                                                                                                    Internet
  Households
      (MM)      40


                         20


                          0
                                                                                                                                                                                 Years to Reach
                                                          Radio: 38 years                                                                         Commercial
                                                                                                                                                                                  50 MM Users
                                                                                         TV: 13 years                   Cable*: 10 years          Internet: 5 years
                        -20
                              1922

                                     1926

                                            1930

                                                   1934

                                                            1938

                                                                   1942

                                                                          1946

                                                                                 1950

                                                                                          1954

                                                                                                 1958

                                                                                                        1962

                                                                                                               1966

                                                                                                                      1970

                                                                                                                             1974

                                                                                                                                    1978

                                                                                                                                           1982

                                                                                                                                                  1986

                                                                                                                                                           1990

                                                                                                                                                                  1994

                                                                                                                                                                         1998E
* Launch of HBO in 1976 used to estimate the beginning of cable as an entertainment / advertising medium

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                        Estimated Savings from e-commerce




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                           E-Commerce Decision-making Process


          Identify:
             Customer groups to serve
             Compelling set of benefits, differentiating “value proposition”
             Communication effectiveness
             Content
                – Look and feel
                – Level of community
                – Personalization
             Organization structure
                – Business services
                – Application services
             Potential partners
                – Capabilities
             Shareholders
             Metrics


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                             E-Commerce Strategy




                        Managerial task of e-commerce strategy

                          Framing the market opportunity
                          Business model
                          Customer interface
                          Market communications and branding
                          Implementation
                          Metrics
                          Valuation




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       Exhibit 1-5: Where to Play On-Line and Off-Line




                                      On-line                Off-line



                        Customer           Yahoo!
                        Interface




                                                                        McDonalds
                                                 BN.com



                        Fulfillment
                         Systems
                                                Amazon.com




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                               Market Infrastructure




                        Opportunities and constraints
                          Network infrastructure

                          Media infrastructure

                          Two Forms of Convergence

                          Publics and Policies




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        Exhibit 1-6: Media Convergence to a Digital Platform



                   Network                                         Media
                Infrastructure                                 Infrastructure

                                                          Print
        Telephone/DSL                                     (Newspapers and Magazines)


        Cable                                             Television



        Broadcast Radio & TV                              Radio
                                   Digital
                                 Convergence
        Satellite                                         Music


        Wireless                                          Motion Pictures




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                                A Framework for Electronic Commerce




                                                                                 Evaluation:
                Framing the                          Market
                            Business   Customer                                    Metrics     e-commerce
                  Market                         Communications Implementation
                             Model     Interface                                    and          Strategy
                Opportunity                       and Branding
                                                                                  Valuation




                                           Media Infrastructure

                                          Network Infrastructure                                   Market
                                                                                               Infrastructure
                                           Publics and Politics




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        Point Counterpoint: Who will win? Online vs. Offline

                                                           Point — Counterpoint

                                      On-line Will Win                                    Off-line Will Win


                           Off-line companies can’t easily                   Schwab has become a leading player in
                            cannibalize their own businesses                   the on-line brokerage industry
                           Off-line companies stock does not allow           Companies with established market
                            them to adequately incentivise key new             leadership have key assets such as
                            economy talent                                     relationships with customers, suppliers,
                           Off-line companies move too slowly                 deep industry knowledge and
                           Key elements of business (e.g. business            experienced management
                            design, strategy, value proposition) are          Established companies have deep
                            different in the New Economy                       pockets
                           “innovator’s Dilemma”: Focusing on                Off-line companies have established and
                            current customer needs causes                      trusted brands
                            companies to divert focus from new                Off-line companies can create spin-out
                            technologies                                       businesses with new culture, processes,
                           Market will not tolerate blue chip                funding, etc.been other technology
                                                                               There have
                            companies running loss-making                      revolutions
                            businesses                                           – From 1894 to 1903, there were 20,000
                           Off-line companies may face a channel                  telephone companies that started in
                            conflict                                               the U.S.




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                                  “The Rest...of the Story”



          Chapter 2                Chapter 3                Chapter 4
          Framing the Market       Business Models          The Customer Interface
          Opportunity



          Chapter 5                Chapter 6                Chapter 7
          Market Communications    Implementation           Metrics
          and Branding



          Chapter 8                Chapter 9                Chapter 10
          Valuation                Network Infrastructure   Media Convergence




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