Electronic Commerce: Business Models, Strategies, Investment and Implementation in the Network Economics Fall 2010Internet: The Virtual Network & Internal StructureE-Commerce NetworkDomain NameElectronic Commerce: IntroductionSlide 6The Low-Friction MarketEC Business OpportunitiesThe Cycle of Electronic CommerceEC and Business ProcessesChanges in the Net EconomyNetwork and Information EconomyPopularity Adds Value in a NetworkChallengeMoving Your Business OnlineBusiness Models Based on the Value Chain in the Market PlaceBusiness-to-Business vs. Business-to-ConsumerBusiness Channel: Multi-Channel PresenceEC Strategies: 4 CsCustomersSelf Assessment: Customer CaringIs EC Appropriate for You?Technology-Fit: Customer and ProductVirtual Communitieswww.parentsoup.comRevenue StreamsMultifaceted Model for Web-Based EC DesignSlide 28EC Site Life CycleOpening Online BusinessEC HostingWeb Site Architecture Design ExampleSite ElementsCross-Selling and Up-SellingPersonalizationThe Evolution of EC ImplementationFuture EC TrendsElectronic Commerce: Business Models, Strategies, Investment and Implementation in the Network EconomicsFall 2010 Minder Chen, Ph.D.Associate Professor of Management Information SystemsE-Mail: [email protected] site: http://faculty.csuci.edu/minder.chen/EC - 2 © Minder Chen, 1996-2010Internet: The Virtual Network & Internal StructureComputerRouterA Regional NetworkInternetNAPISPLANNAP: National Access Point ISP: Internet Service ProviderTelephone CompanyT1, T3ISDNADSLCable ModemEC - 3 © Minder Chen, 1996-2010E-Commerce NetworkEC - 4 © Minder Chen, 1996-2010Domain Name•DNS (Domain Name Server): Mapping the 32-bit numeric IP address (such as 217.156.3.14) to a name such as vax.cs.uiuc.edu. The formats of a domain name and its corresponding IP address are unrelated. •The master registrar DNS database is managed by Network Solutions at www.networksolutions.com•Register a domain (e.g., GoDaddy.com)edu uiucgmucsvaxThe name of a host computer with an IP addresscsvaxEC - 5 © Minder Chen, 1996-2010Electronic Commerce: IntroductionE-BusinessE-CommerceInternet CommerceCommerceTravelocityMicrosoft expediaPriceline.comEC - 7 © Minder Chen, 1996-2010The Low-Friction Market "[The Internet] will carry us into a new world of low friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low."-- Bill Gates, The Road Ahead"Where there is a friction, there is opportunity!" -- Net Ready.EC - 8 © Minder Chen, 1996-2010EC Business OpportunitiesNew business models and ideas are driving EC initiatives. Internet technologies are enablers. Innovative Ideas, Business models, and Business strategiesFundingBusiness and technical talentsTechnological enablersEC - 9 © Minder Chen, 1996-2010The Cycle of Electronic CommerceCustomersOnline Ads Online OrdersStandard OrdersAccessSearchesQueriesSurfingDistributionOnline: soft goodsDelivery: hard goodsElectronic Customer SupportFollow-on SalesEC - 10 © Minder Chen, 1996-2010EC and Business Processes SellerCustomerCorporate DatabasesProvide InfoGet customerProvide infoFulfill orderSupportIdentify needFind source Evaluate offeringsPurchaseOperate, Maintain, RepairPhone, fax, e-mailWeb siteNewsgroupsNet communitiesWeb siteEDIWeb site, phone, fax, e-mail, e-mailing listCredit cards, e-cashP.O.sDemos, reviewsSend infoData sheets, catalogs, demosRequest infoWeb surfingWeb searches, web adsDeliver soft goods electronicallySelling ProcessProcurement ProcessEC - 11 © Minder Chen, 1996-2010Changes in the Net Economy •Business environment –Local / Physical  Global /Virtual•Business assets –Tangible  Intangible•Business change –Periodic  Continuous•Business production–Mass Production  Mass Customization Mass Personalization•Customization is under direct user control: the user explicitly selects between certain options (a "portal" site with headlines from the New York Times or from the Wall St. Journal; enter ticker symbols for the stocks you want to track). •Personalization is driven by the computer which tries to serve up individualized pages to the user based on some form of model of that user's needs.-- http://www.useit.com/alertbox/981004.htmlEC - 12 © Minder Chen, 1996-2010Network and Information Economy•Information is costly to produce but cheap to reproduce. –Price information according to its value not its cost. •Managing intellectual property. –Maximize the value of your intellectual property, not the terms and conditions that maximize the protection.•Information as an “experience good”–Consumers must experience it to value it. –Brand and trust building is critical. •The economics of attention–A wealth of information creates a poverty of attention. Source: Information RulesEC - 13 © Minder Chen, 1996-2010Popularity Adds Value in a NetworkValue to UserNumber of Compatible UserVicious cycleVirtuous cycleNetworks•Real: LAN, Internet, Fax •Virtual: Virtual community, Chat room, Instant messenger, Skype, social networkPositive Network ExternalityEC - 14 © Minder Chen, 1996-2010Challenge•Consumers: Everything on the Internet should to be free.•Merchant: How can I make a profit if everything is free. •Examples: –Free web browsers: Netscape Communicator and Internet Explorer–Free email: Juno, mail.yahoo.com and hotmail.com –Free Internet Access: Freeserve in Britain –Free PC: eMachine and CompuServe; Free-PC–Free web hosting: Geocities, Angelfire, Zoom–Free ...PriceYear$250$019301999Cost of a 3-minute Long Distance CallGilder's LawAll tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve. Anticipate this cheapness in your pricing strategy and product/service development strategyAll tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve. Anticipate this cheapness in your pricing strategy and product/service development strategyEC - 15 © Minder Chen, 1996-2010Moving Your Business Online•Companies are motivated by either fear or greed to move to their businesses to the net. •To .com your company is becoming an imperative. •They have to obsolete their current business models and work very hard to search a new business model. •Be aware of internet tax law and interstate/international commerce laws. –http://en.wikipedia.org/wiki/Internet_taxes Your