Retailer Industry Porters Five Forces by hou57928

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									       Chapter 8

E-commerce and Supply Chain
•   Porters Five Competitive Forces Model
•   E-commerce
•   E-commerce and Market Efficiency
•   E-commerce Economics
•   Commerce Servers
•   Supply Chain
    –   Structure
    –   Performance
    –   Profitability
    –   Bullwhip Effect
• Supplier Relationship Management
• Data Exchange
    – EDI
    – XML
• Discussion and Case Study
  Porters Five Competitive Forces
• Five competitive forces for profitability
  – Bargaining power of suppliers
  – Bargaining power of customers
  – New entrants to the market
  – Rivalry among firms
  – Threats of substitutions for products or
Porter’s Model of Industry Structure
• Buying and selling of goods and services
  over public and private computer networks
• Definition of the U.S. Census Bureau
  – Merchant companies as those that take title to
    the goods they sell
  – Nonmerchant companies as those that
    arrange for the purchase and sale of goods
    without ever owning or taking title to those
      E-commerce – Merchant
• B2C (business-to-consumer): sales between a
  supplier and a customer
  – A Web-based application or Web storefront where
    customers enter and manage their orders such as,, and
• B2B (business-to-business): sales between
  – Suppliers, distributors, and retailers
• B2G (business-to-government): sales between
  companies and government organizations
E-commerce: B2B, B2G, and B2C
  E-commerce – Nonmerchant
• Auction: match buyers and sellers and
  support goods for sales through a
  competitive bidding process such as e-Bay
• Clearinghouses (exchanges): provide
  goods and services at a stated price, and
  arrange for the delivery of the goods but
  they never take title such as Amazon and
  electronic exchanges
E-Commerce Category
E-commerce – Market Efficiency
• Disintermediation: the elimination of
  middle layers in the supply chain (direct
  sales form manufacturer to consumer)
• Flow of price information: product price
  comparison by consumer
• Price elasticity: price change based on the
  consumer demand
• Market efficiency as a whole
       E-commerce Economics
•   Channel conflict
•   Price conflict
•   Logistic expense
•   Customer service expense
               Commerce Server
• A computer using Web-based programs to support Web
   –   Display products
   –   Support online ordering
   –   Process payments
   –   Interface with inventory-management
• Web technology
   – SMTP (Simple Mail Transfer Protocol), FTP (File Transfer
   – HTML (Hypertext Markup Language)
   – Hyperlink
   – URL (Uniform Resource Locator)
   – Web server: Apache of Linux and IIS (Internet Information
   – Web browser (Netscape Navigator, Internet Explorer, and
     Mozilla’s FireFox)
Internet Protocols and Users
   Commerce Server: Three-Tier
• Three different classes of computers
• User tier: browser to request and process
  Web pages
• Server tier: generating Web pages for
  requests from browsers
  – Web farm (a set of Web servers) to minimize
    customer delays for load balancing
• Database tier: processing SQL requests to
  retrieve and store data
Three-Tier Architecture
       Supply Chain - Structure
• Definition: a network of organizations and
  facilities to transform raw materials into products
  and deliver products to customers
• Entity: customer, retailer, distributor,
  manufacturer, supplier, transportation company,
  and warehouse
• Relationship
   – Each organization connected to just one level up (toward the
     supplier) and one level down (toward the customer)
   – An organization can work with many organizations
     both up and down at each level
Supply Chain Relationships
   Supply Chain - Performance
• Facilities: location, size, and operations
• Inventory (raw materials, in-process work, and
  finished goods): size and management
• Transportation (movement of materials): in-
  house/outsourced, mode, and routing
• Information (request, respond, and inform one
  another): purpose, availability, and means
    Supply Chain - Profitability
• The difference between the sum of the
  revenue generated by the supply chain
  and the sum of the costs that all
  organizations in the supply chain incur to
  obtain that revenue
• The maximum profit to the supply chain
  will not occur if each organization in the
  supply chain maximizes its own profits in
 Supply Chain – Bullwhip Effect
• Definition:
   – The variability in the size and timing of orders
     increase at each stage up the supply chain (from
     customer to supplier)
   – Not related to erratic consumer demand
   – Reduce the overall supply chain profit
• Elimination:
   – Every participant in the supply chain has access to
     consumer-demand information from the retailer
   – An inter-organizational information system for sharing
Supplier Relationship Management
• SRM: a business process for managing all
  contracts between an organizational and
  its suppliers for supplies, materials, or
• Three basic processes: source, purchase,
  and settle
             SRM - Source
•   Find vendors
•   Assess capabilities
•   Negotiate terms and conditions
•   Formalize those terms and conditions
•   Make contract
          SRM - Purchase
• Request information, quotations, and
  proposals from would-be suppliers
• Approve purchase
• Create an order
               SRM - Settle
•   Receive goods and services
•   Resolve receivables to order
•   Pay according to terms and policy
•   Cash management
Summary of SRM Processes
  Integration of CRM and SRM
• SRM examines inventory, determines
  required items, and automatically creates
  the order via its connection to the
  supplier’s CRM
• Supplier’s CRM application interfaces with
  the purchaser’s SRM application to
  perform the ordering process as cheaply
  and efficiently as possible
Relationship between CRM and SRM
           Data Exchange
• Telephone call for message
• Fax, postal mail, email for message and
• Electronic Data Interchange (EDI)
• eXtensible Markup Language (XML)
• A standard of formats for electronically
  exchanging common business documents
  – Number of data fields
  – Sending sequence
  – Number of characters in each data field
• Standards with various versions
• Point-to-point network, value-added
  network, or Internet
• A new markup language by World Wide
  Web Consortium (W3C)
• A superior means for organizations to
  exchange documents for computer
• XML schema
  – Service description
             XML Web Services
• Purpose: a standard way for programs to access one
  another remotely
   – Use service description to obtain details of programs existing
     on another computer and how to communicate with those
   – Service user uses the information of service description to
     invoke the service
   – XML format for all service data
• Benefit
   – The automation of supply chain interactions
• Development tool
   – Microsoft .Net
   – IBM J2EE
Web Services for Sharing Sales Data
• Problem Solving (235a-b)
   – State the basic rules to prepare an employee for attending an
     inter-organization negotiation or collaboration meeting.
• Ethics (247a-b)
   – State the basic ethic rule to prepare employees for the supply
     chain information sharing.
• Security (251a-b)
   – State the solution and associated reasons to handle the
     installation of another company’s programs in your organization.
• Reflections (253a-b)
   – State your recommendations to the future business plan for
     Oracle and IBM related to the fate of relational database, SQL,
     and XML five years later.
             Case Study
• Case 8-1 (258 – 260) questions 2, 3 and 5
               Points to Remember
•   Porters Five Competitive Forces Model
•   E-commerce
•   E-commerce and Market Efficiency
•   E-commerce Economics
•   Commerce Servers
•   Supply Chain
    –   Structure
    –   Performance
    –   Profitability
    –   Bullwhip Effect
• Supplier Relationship Management
• Data Exchange
    – EDI
    – XML
• Discussion and Case Study

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