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Chapter 12

Electronic Commerce and the Strategic Impact of

Information Systems

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Providing a Strategic Impact Information systems that have a

strategic impact on a business help create a competitive advantage for the business.

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Main Approaches for Gaining a Competitive Advantage Cost leadership – having lower

production and operating costs than the competitors.

Differentiation – providing products or services that are unique so the customer wants to purchase from the business.

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Other Strategic challenges

Focus – focusing on a niche to provides products or services designed for a specific segment of the market.

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Electronic Commerce Systems An Electronic Commerce System is

an information system that provides e-commerce capabilities to an organization.

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The Strategic Impact of Electronic Commerce

Electronic commerce can have a strategic impact on business by: Providing an innovative approach for

conducting business. Providing a reduction in the cost of

transactions. Providing unique, customized products for its

customers. Providing customer access 24 hours every day.

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Types of Electronic Commerce Business-to-consumer (B2C) Business-to-business (B2B) Consumer-to-consumer (C2C) Intraorganizational

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Business-to-Consumer Business-to-consumer (B2C)

involves a business selling its products or services electronically to the final consumer (end-user), which is usually an individual.

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Business-to-Consumer B2C refers to a company that sells

(retails) product and/or services through electronic means.

An electronic retailer (B2C) is also referred to as e-tailer company that sells its products and/or services electronically.

An e-tailer that sells only through electronic means is called full cybermarketer.

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Business-to-Consumer cont’d.)

An e-tailer that also has some physical locations (retail stores) or other traditional means is called partial cybermarketer.

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Business-to-Consumer (cont’d.)

A company that sells its products and/or services through its own e-tailing operations to end-users is called a direct marketer.

A company that sells its products and/or services through other independent cybermarketers is called indirect marketer.

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Business-to-Consumer (cont’d.)

Filling orders from their own stock Called electronic distributor

Send orders they receive to manufacturers or wholesalers that fill the orders

Called electronic brokers

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Business-to-Business Three main types of B2B e-commerce:

Supplier-oriented marketplace – supplier company provides e-commerce capabilities to buyers to order its products.

Buyer-oriented marketplace – buyer company provide e-commerce capabilities for suppliers to provide quotations or bids.

Intermediary-oriented marketplace – a third company provide e-commerce capabilities to both buyer or/and seller.

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Consumer-to-Consumer In consumer-to-consumer (C2C)

electronic commerce, one consumer sells a product or service to another consumer usually through an intermediary e-commerce business.

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Intrabusiness Intrabusiness, or organizational

electronic commerce involves transactions between departments, regions, subsidiaries, or other units of a business.

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Capabilities of Electronic Commerce Systems Product presentation

Electronic catalog Order entry

Electronic shopping cart Payment

Electronic payment

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Capabilities of Electronic Commerce Systems (cont’d.) Product distribution Customer service Product support Data acquisition

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Business Alliances Businesses coordinate some of their operations

or link some of their resources to form business alliances, which serve the interests of all businesses in the alliance.

Types of alliances Between a business and a competitive business Between a business and a noncompetitive business Between a business and its suppliers and customers

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Interorganizational Information Systems

An InterOrganizational System (IOS) is an information system shared by one or more supplier (s) and customer (s) of the company.

The most familiar example of IOSs are Electronic Data Interchange (EDI) systems which provide for the transfer of data between businesses.

Electronic Funds Transfer (EFT) systems provide for the transfer of money between financial institutions.

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The Strategic Impact of Interorganization Systems Interorganizational systems (ISO)

provide for the sharing of information and processing between businesses in a business alliance.

Ordering products electronically with and EDI system is less expensive than ordering other ways.

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Characteristics of Interorganizational Systems Businesses are involved in

InterOrganzational Systems (IOS) as either: Sponsors – a business that sets up

and maintains an IOS Participant – a business that uses an

IOS

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Characteristics of Interorganizational Systems (cont’d.)

A business can participate in an IOS in several ways: A business simply enters input and receives

output by using an IOS sponsored by another business.

A business accesses data storage or processing capabilities of another business in the IOS.

A business can participate in an IOS by using the capabilities of the IOS received from the sponsor for managing it’s own internal operations.

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Electronic Data Interchange Systems An Electronic Data Interchange (EDI)

system provides for electronic communication of data between businesses.

Types of data sent include Purchase order data Shipping data Invoice data Product description data Price list data

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Traditional versusInternet EDI

An EDI system, like all IOSs, requires a data communications link between businesses.

Internet EDI systems require special software to send encrypted data.

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EDI Benefits and Problems Benefits of EDI

Speed Data entry errors are reduced

Problems with EDI Organizational participation Technical problems must be solved Setup and maintenance cost can be

expensive

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International Business Businesses engage in international

activities for several reasons. International sales International production International product development

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International Business (cont’d.) International businesses generally

follow one of several basic strategies. Multinational strategy – the business

allows its foreign operations to function largely independently.

GM, DaimlerChrysler Global (domestic exporters) strategy –

the central headquarters coordinates the activities of the foreign operations closely. Caterpillar Corporation

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International Business (cont’d.)

International (franchisers) strategy – involves transferring knowledge and skills from the central headquarters to the foreign operations.

McDonald,s, Kentucky fried Chicken Transnational strategy – involves using

knowledge and skills from both the central headquarters and the foreign operations. Resembles federal structure.

Sony, Ford

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Characteristics of Global Information Systems (cont’d.)

Businesses that follow a multinational strategy tend to have decentralized, or independent, IS for their central headquarters and different foreign operations.

Businesses that follow a global strategy tend to have highly centralized IS determined by the central headquarters.

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Characteristics of Global Information Systems (cont’d.)

Businesses that follow an international strategy tend to have distributed IS in which systems in the central headquarters are connected to those in the foreign operations.

Business that follow the transnational strategy require complex, integrated (networked) IS in which the central headquarters and all the foreign operations participate equally.

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Global Electronic Commerce Global e-commerce systems should:

Offer sites in several languages, with a feature that allows the user to select the preferred language.

Allow customers to pay in several different currencies.

Be sensitive to cultural differences in various countries.

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Strategic Information Systems A Strategic Information System

(SIS) affects the way a business competes with other businesses, thus giving it an advantage over its competitors.

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Identifying Strategic Information Systems Opportunities

Look at the business’s value chain. Primary activities

Creating product Selling product Servicing product

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Identifying Strategic Information Systems Opportunities (cont’d.)

Primary Activities Inbound logistics Operations Outbound logistics Marketing and Sales Service

Support Activities Procurement Human resource management Technology development Firm Infrastructure