Management Information Systems:

Managing the Digital Firm

E-commerce: Digital Markets, Digital

Goods

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E-commerce Today
• E-commerce: Use of the Internet and Web to transact business
• Began in 1995 and grew exponentially; still stable even in a recession
• Companies that survived the dot-com bubble now thrive
• The new e-commerce: social, mobile, local
• Move from desktop to smartphone
Figure 10.1 The Growth of E-commerce
Why E-commerce is Different (1 of 2)
• Ubiquity
– Marketspace is virtual
– Transaction costs reduced
• Global reach
– Transactions cross cultural and national boundaries
• Universal standards
– One set of technology standards: Internet standards
• Richness
– Supports video, audio, and text messages
Why E-commerce is Different (2 of 2)
• Interactivity
• Information density
– Greater price and cost transparency
– Enables price discrimination
• Personalization/customization
– Technology permits modification of messages, goods
• Social technology
– Promotes user content generation and social
networking
Key Concepts in E-commerce –
Digital Markets and Digital Goods in a
Global Marketplace
• Internet and digital markets have changed the way companies conduct
business
• Information asymmetry reduced
• Menu costs, search and transaction costs reduced
• Dynamic pricing enabled
• Switching costs
• Delayed gratification
• Disintermediation
Figure 10.2 The Benefits of
Disintermediation to the Consumer
Digital Goods
• Goods that can be delivered over a digital network
• Cost of producing first unit is almost entire cost of product
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly variable
• Industries with digital goods are undergoing revolutionary
changes (publishers, record labels, etc.)
Types of E-commerce
• Three major types
– Business-to-consumer (B2C)
 Example: Amazon.com
– Business-to-business (B2B)
 Example: Elemica
– Consumer-to-consumer (C2C)
 Example: eBay
• E-commerce can be categorized by platform
– Mobile commerce (m-commerce)
E-commerce Business Models
• Portal
• E-tailer
• Content provider
• Transaction broker
• Market creator
• Service provider
• Community provider
E-commerce Revenue Models
• Advertising
• Sales
• Subscription
• Free/Freemium
• Transaction fee
• Affiliate
Interactive Session: Technology: Small
Business Loans from a FinTech App
• Class discussion
– What distinguishes the FinTech services described in
this case from traditional banks. Explain your answer.
– How do the financial services described here use
information technology to innovate?
– What are the advantages and disadvantages of small
business obtaining loans from FinTech services?
– If you were a small business, what factors would you
consider in deciding whether to use a FinTech service?
How Has E-commerce Transformed
Marketing? (1 of 2)
• Internet provides new ways to identify and communicate
with customers
• Long tail marketing
• Different marketing and advertising formats
– Search
– Display ads
– Video and rich media
– Email
How Has E-commerce Transformed
Marketing? (2 of 2)
• Behavioral targeting
– Tracking online behavior of individuals
– On individual websites/apps and across advertising
networks
• Programmatic ad buying
• Native advertising
Figure 10.3 Website Visitor Tracking
Figure 10.4 Website Personalization
Figure 10.5 How an Advertising
Network Works
Social E-commerce and Social
Network Marketing (1 of 2)
• Social media one of fastest growing branding and marketing methods
• Social e-commerce based on digital social graph
• Features
– Newsfeed
– Timelines
– Social sign-on
– Collaborative shopping
– Network notification
– Social search (recommendations)
Social E-commerce and Social
Network Marketing (2 of 2)
• Social network marketing
– Seeks to leverage individuals’ influence over others
– Targeting a social network of people sharing interests and
advice
– Facebook’s “Like” button
– Social networks have huge audiences
• Social shopping sites
• Wisdom of crowds
• Crowdsourcing
Interactive Session: Management: Engaging
“Socially” with Customers
• Class discussion
– Assess the management, organization, and technology issues for
using social media technology to engage with customers.
– What are the advantages and disadvantages of using social
media for advertising, brand building, market research, and
customer service?
– Give an example of a business decision in this case study that
was facilitated by using social media to interact with customers.
– Should all companies use social media technology for customer
service and marketing? Why or why not? What kinds of
companies are best suited to use these platforms?
How Has E-commerce Affected
Business-To Business Transactions?
• U.S. B2B trade in 2020 estimated at about $14.5 trillion
– U.S. B2B e-commerce in 2020 estimated at $6.7 trillion
• Internet and networking helps automate procurement
• Variety of Internet-enabled technologies used in B2B
– Electronic data interchange (ED I)
– Private industrial networks (private exchanges)
– Net marketplaces
– Exchanges
Electronic Data Interchange (ED I)
• Computer-to-computer exchange of standard transactions
such as invoices, purchase orders
• Major industries have EDI standards
– Define structure and information fields of electronic
documents
• More companies are moving toward web-enabled private
networks
– Allow them to link to a wider variety of firms than EDI
allows
– Enable sharing a wider range of information
Figure 10.6: Electronic Data
Interchange (ED I)
New Ways of B2B Buying and Selling
• Private industrial networks
– Private exchanges
– Large firm using a secure website to link to suppliers and partners
• Net marketplaces (e-hubs)
– Single digital marketplace for many buyers and sellers
– May focus on direct or indirect goods
– May be vertical or horizontal marketplaces
• Exchanges
– Independently owned third-party Net marketplaces for spot
purchasing
Figure 10.7 A Private Industrial Network
Figure 10.8 A Net Marketplace
What is the Role of M-commerce in
Business, and What are the Most
Important M-commerce Applications?
• M-commerce in 2020 is about 45 percent of all e-commerce
• Fastest growing form of e-commerce
– Growing at 20 percent or more per year
• Main areas of growth
– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, TV, etc.)
– In-app sales to mobile devices
Figure 10.9 Mobile Retail Commerce
Revenues
Location-Based Services and
Applications
• Used by 74 percent of smartphone owners
• Based on G PS map services
• Geosocial services
– Where friends are
• Geo advertising
– What shops are nearby
• Geo information services
– Price of house you are passing
Other Mobile Commerce Services
• Financial account management apps
– Banks, credit card companies
• Mobile advertising market
– Google and Facebook are largest markets
– Ads embedded in games, videos, and mobile apps
• Over 45 percent of top retailers have m-commerce
websites
• Virtually all large traditional and online retailers have m-
commerce apps.
Mobile App Payment Systems
• Three main types
– Near Field Communication (NFC)
 Apple Pay, Google Pay, Samsung Pay
– QR Code
 Starbucks, Walmart, Target, Dunkin Donuts
– Peer-to-peer (P2P) payment systems
 Venmo, Zelle
What Issues Must Be Addressed When
Building an E-commerce Presence?
• Most important management challenges
– Developing clear understanding of business objectives
– Knowing how to choose the right technology to achieve
those objectives
• Develop an e-commerce presence map
– Four areas: websites, e-mail, social media, offline media
• Develop a timeline: milestones
– Breaking a project into discrete phases
Figure 10.10 E-commerce Presence
Map