Managing Information Technology

6th Edition
CHAPTER 8
E-BUSINESS SYSTEMS

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 E-Business Systems
E-business systems

●
● Enable the electronic transmission of business transactions or other related information
between a buyer and seller

Dot-com (pure-play)

●
● A business that conducts business solely through their Web site (single channel)

Bricks-and-clicks (click-and-mortar)

●
● A company uses Internet sales as an additional channel to an offline business
(multichannel)

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 E-Business Systems
• Explosive growth in demand for e-business
systems in the 1990s
• Forecasts predict continued growth in e-
business systems

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 E-Business Systems
• Metcalfe’s Law is a possible theoretical reason for e-business growth

Metcalfe’s Law

●
● The value of a network to each of its members is proportional to the number of
other users, expressed as (n2 - n)/2

• By this law, the network on the right has a value that is 15 times that of the network on
the left.

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 E-Business Systems
Internet

●
● A worldwide network of networks, accessible to the public, that employs the TCP/IP
protocol

Intranet

●
● A private network operating within an organization that employs the TCP/IP protocol, to provide information,
applications, and other tools (such as collaboration tools), for use by the organization’s employees

Extranet

●
● A private network that is a portion of a company’s Intranet, which is made accessible (normally
over the Internet) to business partners outside of the company (such as customers or suppliers)

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 E-Business Framework
• IT Applications and services are built upon two
types of pillars
– Legal and Regulatory Pillar
Figure 8.1
– Technology Pillar

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 E-Business Technologies

Portal, Credit
Push Card Processing
Technology,
Search Java Applets
Engines,
Web Agents
content
(without
Browser interactivity)

1994 1995 1996 1997 1998

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 E-Business Technologies

Wireless
Applications for
Broadband DSL Handhelds
and Cable
Modems
XML, Digital
Signature, Peer-
to-Peer
Customizatio
n, Tracking

1999 2000 2001 2002

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 E-Business Technologies
• Traditional B2B electronic commerce used EDI

EDI (Electronic Data Interchange)

●
● Proprietary applications for communicating with trading partners based on
agreed-upon standards for business document transmission

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 E-Business Technologies
• XML provides the opportunity of lower-cost,
flexible B2B transactions

XML (Extensible Markup Language)

●
● A standard in which additional information, such as structure, can be added to
data to data through the use of customizable elements

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 XML Example
<?xml version="1.0" ?>
<NetworkTypes>
<type visibility="public">
  <name>Internet</name>
  <definition>
A worldwide network of networks, accessible to the public, that employs the
TCP/IP protocol
</definition>
  </type>
<type visibility="private">
  <name>Intranet</name>
  <definition>
A private network operating within an organization that employs the TCP/IP protocol,
to provide information, applications, and other tools (such as collaboration tools), for use by the
organization’s employees
</definition>
  </type>
<type visibility="private">
  <name>Intranet</name>
  <definition>
A private network that is a portion of a company’s Intranet, which is made accessible
(normally over the Internet) to business partners outside of the company (such as customers or suppliers)
</definition>
  </type>
  </NetworkTypes>

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 E-Business Technologies
• While XML does provide some advantages
over traditional EDI, many large retailers are
still using EDI for business transactions
– Wal-Mart still requires suppliers to use EDI

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 E-Business Technologies
• Legal and Regulatory Environment
– Limited legal intervention
– Tax policies
• Sales taxes in US
– Privacy issues
– Antitrust laws

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 E-Business Technologies
• Digital signatures can be used to authenticate
the message sender in digital transactions,
much like an actual signature

Digital Signature

●
● A type of asymmetric cryptography that provides message authentication by
utilizing a public-private key pair

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 Strategic E-Business Opportunities (and
Threats)
• Porter’s Competitive Forces Model can be
used to assess the opportunities and threats
due to the influence of the Internet

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Figure 8.4

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 Strategic E-Business Opportunities (and
Threats)
• Opportunities due to the Internet:
– Procurement of supplies via Internet can increase
company’s power over suppliers
– Size of potential market is expanded
– Distribution channels between traditional
company and customer can be eliminated

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 Strategic E-Business Opportunities (and
Threats)
• Threats to traditional companies due to the
Internet:
– Migration to price competition – difficult to keep
offerings proprietary
– Increased number of potential competitors
– Internet reduces some traditional barriers (such as
in-person sales force)
– Customers increase their bargaining power –
Internet reduces customer’s switching costs

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 Strategic E-Business Opportunities (and
Threats)
• Since the “dot-com meltdown” e-business has
changed in many ways
Figure 8.5

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 B2B Applications
• If buyers and sellers are fragmented,
Independent Intermediaries are likely to be
successful

Figure 8.6

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 B2B Applications
• If sellers are concentrated, sellers are likely to
dominate

Figure 8.6

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 B2B Applications
• If buyers are concentrated, buyers are likely to
dominate

Figure 8.6

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 B2B Applications
• B2B Intermediaries
– Converge
– Virtual Chip Exchange
– Alibaba.com

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 B2B Applications
• Reverse Auctions
– Sellers sequentially lower their bid to provide
goods to a single buyer Figure 8.3

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 Internet Statistics

Figure 8.7

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 Internet Statistics

Figure 8.8

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 B2C Applications
• Dot-com retailers
– Amazon.com
– Netflix
• Traditional Catalog Retailers
– Dell
– Lands’ End
• Traditional Store Retailers
– Staples
– Blockbuster
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 Dot-Com Retailers
• Amazon
– Dot-com pioneer in online retailing of third-party products
– Began as bookseller competitor
– Now a multi-store, online mall
– First profitable year 2003
– Provides excellent online shopping experiences for millions
of customers

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 Dot-Com Retailers
• Netflix
– Relatively late pure-play
– Online movie rental business
– Social recommendation system

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 Catalog Retailers
• Dell
– Traditional direct seller and market leader of
made-to-order PCs
– Developed custom software to support “mass
customization” strategy
– Took advantage of early penetration of Internet
market
– Moved to multichannel (partnering with Wal-
Mart) after losing market share to HP

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 Catalog Retailers
• Lands’ End
– Traditional catalog company
– Developed capability for customers to make
orders for new custom clothing via its Web site

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 Store Retailers
• Staples
– Traditional office products retailer
– Built separate Web sites for business procurement
– Focuses on efficiency, not aesthetic appeal
– By 2006, over 25% of revenues were e-business

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 Store Retailers
• Blockbuster
– Traditional retail movie rental business
– Added online rentals like Netflix
– Late in adding multichannel
– In 2007, purchased Movielink to add online
download service

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 Dot-com Intermediaries
• eBay
– A dot-com pioneer in electronic auctions
– One of first dot-coms to achieve profitability
– Purchased PayPal in 2003 for payment capability
– Risks with transactions
– Now is a C2C, B2B, and B2C intermediary

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 Dot-com Intermediaries
• Autobytel
– A dot-com pioneer as intermediary between
automotive dealers and buyers
– Provides leads to dealerships
– Fills niche created by US state laws which prohibit
manufacturers to sell cars directly to consumers

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 Dot-com Intermediaries
• Google
– Leading online search engine
– 99% of revenue from targeted advertising
– Growing through innovation and acquisition

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Special Issue ●
What makes a good web site?

• 7 C’s
Context ●
●Site’s layout and design—functionally vs. aesthetically dominant or both (integrated)

Content Text, pictures, sound, and video that Web site contains, including dominant “store
●
●

types”

Commerce ●
●Site’s capabilities to enable commercial transactions—functional tools and pricing

Community Ways that the site utilizes user-to-user communication to enable feelings of
●
●

membership and shared common interests

Connection ●
●Extent to which the site is linked to other sites—links out and in

Customization ●
●Site’s ability to tailor itself to different users or to allow users to personalize the site

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Special Issue ●
What makes a good web site?

• Designing for mobile devices

– Smaller displays
– Limited attention of users

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Publishing as Prentice Hall

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