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7/30/2019 Chapter 5 : Electronic Commerce in Service Industries
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1
Chapter 5
Electronic Commerce in
Service Industries
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Opening Vignette:
Ordering Journals Electronically
How a large university automated thepurchasing of magazines and journals,saving $365,000/year
Direct E-Marketing: Buyer-to-seller; ordersand payments
Market maker charges $5/transaction vs.
about $32 (conventional agents)Ordering time reduced by up to 80%
Rowe.comInternet IPO that survived thestock market in the industry
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Broker-Based Services
Brokers work as intermediaries between buyers andsellers
Agents basically make the markets
Agents provide many services
Most of the value-added tasks of brokers can beautomated
Major electronic agent-based servicesTravel
Employment
Real estate
Stocks
Electronic auctions
At-home banking
Insurance
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Broker-Based Services (cont.)
Service Industries vs. Manufacturing and Product Retailing
Service Industries
Pure EC: substantially reduced cost
Bank and brokerage housesPossible digitation of the entire process
Travel and real estate agents
Viewing an online video clip or seeing photos of ahotel or a house for sale
Manufacturing and product retailing
Physical delivery cost may be highwww.prestonians.webnode.com
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Travel and Tourism Services
Any experienced traveler knows that goodplanning and shopping around can savemoney
The Internet is an ideal place to plan,explore, and arrange almost any trip
Travel-related information available at many
sites including:Expedia.com Travelweb.com
Travelocity.com Trip.com
Asiatravel.com Priceline.com
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Travel and Tourism Services (cont.)
Information andbooking of airlines,
hotels, cars, and evengolf courses
Fare comparisons360 degree video toursof top destinations
Electronic Travelmagazine
Converting 200currencies
Providing maps
Pictures of major
attractionsInformation aboutentertainment andticket purchasing(ticketmaster.com)
Tips provided by peoplethat experienced certainsituations (like a visaproblem)
Services provided:
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Travel and Tourism Services (cont.)
Special discountinformation
Chat rooms and bulletinboardsShopping for travelaccessories and books
Experts optionsFrequent flier deals
Restaurant reviewsCurrent status of flights(real time)Driving directions in theUS
Travel news
Fare tracker (free e-mailalerts on low fares)
Major international news
Worldwide business andplaces locator
Special interest vacationsBed and breakfastrecommendationsE-mail to intermediary
Weather watch
Services provided:
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Travel and Tourism Services (cont.)
Auctions, bids, and special salesAmerican airlines (aa.com) auctions ticketsduring low-volume seasons
Cathay (cathaypacific.com) auctions tickets oncompetitive routes
Aer Lingus (aerlingus.ie) auctions tickets thatexpire in 1 or 2 weeks
Priceline (priceline.com) asks consumers tospecify the price they are willing to pay
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Travel and Tourism Services (cont.)
Special servicesWireless services
Direct marketing
Alliances and consortia
Other servicesInteractive kiosks in hotels
Internet access in hotels
Benefits
Free information istremendousFree information isaccessible anytimeSubstantial discounts
LimitationsNot all people usethe InternetIt may take a longtime to find whatyou want
People are stillreluctant to providecredit cardnumbers
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Corporate Travel: New Business Model
The Impact of EC on the Travel Industry
Porters framework of competitive advantage(the five forces)
Focus:
Environment
Competitive responsesFirms strategy
The industry is clearly transformed
Taking away some functions traditionally
performed by travel agents
Travel and Tourism Services (cont.)
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Impacts on the industryMultimedia helps customers understand the products
Offering of lower-cost trips
Providing a more personalized service
Saving money in a paperless environment
Increasing the convenience of getting information athome
Supporting a customer-focused strategy (such astargeted advertisement and integration of products);push information to customers
Travel and Tourism Services (cont.)
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Travel agencies, as we know them today, willdisappear
Only their complex value-added activities will
not be automatedThese complex activities will be performedby a new breed of intermediaries
Survival strategyMinor improvements due to process changes
BPR with significant improvements
Organizational transformation
Travel and Tourism Services (cont.)
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Figure 5-2
The Travel Industry Chain
Source: Block and Segev The Impact of Electronic Commerce on the Travel Industry Proceedings, HICSS 31, Hawaii
1997 IEEE.
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Travel and Tourism Services (cont.)
Intelligent agentsStep 1: turn on PC and enter
Desired destinationDates
Available budgetSpecial requirementsDesired entertainment
Step 2: computer dispatches an intelliget agen thatshops aroundStep 3: agent attempts to match your requirements
with what is available, negotiates with vendorsStep 4: agent returns within minutes with suitablealternatives, modifies as per your wishes, books thevacation
Voice communication with agent
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The Employment Placement:
Deficiencies of Manual Market
Job markets
Employers are looking for employees with
specific skills, and individuals are looking forjobs
Very volatile market
Moved to the Internet
Millions of job seekers, hundreds of thousandsof jobs
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Driving forces of electronic job marketCostclassified ads are expensive
Life cyclethe life of the ads is only days orweeks
Placemost ads are local; nationwide andinternational ads are more expensive
Minimum informationbecause of the high cost,the information provided is minimal
SearchTime consuming for individuals to find allrelevant newspapers
The Employment Placement:
Deficiencies of Manual Market (cont.)
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market (cont.)Finding applicantsduring pre-Internet era, job seekers did
not place ads about their availability making it difficultfor companies to find employees with special skills
Matchingit was difficult to match candidates to openjobs, supply and demand
Lost and dated materialsome applications or letters ofresponse tended to get lost, or arrive late
Speedcommunication by mail and processing of a largenumber of applications is slow; employers lose goodemployees, the applicant had taken another job beingafraid to wait too long
Comparisonsdifficult for job seekers to comparemonetary value of available positions
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The Employment Placement:
Deficiencies of Manual Market (cont.)
The Internet Job Market
The Internet offers a perfect environment; it
is especially effective for technology-orientedjobs
Job seekers
Job offerers
Recruiting firms
Government agencies and institutions
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Find very detailed andtimely information on alarge number of jobsworld-wide
Quickly communicate with
potential employersPost resumes for large-volume distribution
Search for jobs quickly fromany place at any time
Obtain several supportservices at no cost
Find employer profile &
industry guides(valuereports.Com)
The Advantage of the Electronic Job Market
For job seekers
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Advertise to a large
number of job seekersSave on advertisementcosts
Lower the cost ofprocessing (usingelectronic applicationforms)
Provide greater (equalopportunity) for job
seekers
Find highly skilled
employeesConduct tests quickly,online
Change and update ads
quicklyFill up positions rapidly
Interviewing fromdistance
The Advantage of the Electronic Job Market
For employers
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The Employment Placement:
Deficiencies of Manual Market (cont.)
The Limitations of Electronic Job MarketsMany people do not use the InternetSecurityPrivacyLack of face-to-face contact
Examples of online job servicesLocating jobs
Writing and posting resumesCareer planningNewsgroups
Examples of career services on the Internet
Recruiters online network
StaffNET
Global employment networkEmployment opportunities
Intranet job market
Intelligent agents
Intelligent agents for job seekers (jobsleuth.com)
Intelligent agents for employers (resumix.com)
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Real Estate
You can view many properties on the screen
You can sort and organize properties
You can find detailed information about theproperties
You can search, compare and apply for loans
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Real Estate Applications (cont.)The National Association of Realtors, realtor.com has links to
property listings in all major US citiesTo find how much house you can afford, consult:replace.com
Mortgage brokers can pass on loan applications over the Netand receive bids from lenders that want to issue themortgagesTo find mortgage interest rates online use:
Lendingtree.comEloan.com
Homeside.com.auInsuranceauto, home life, health at substantial discountInsureate.comOrder.comQuotesmith.com
Real Estate (cont.)
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Investing and Trading Stocks Online
Online stock trading
Costs between $7 and $29 per transaction (vs.$10 - $35 in traditional brokerage)
No waiting on busy telephone linesNo oral communication, less chance for errors
Place orders from anywhere, any time, day ornight
No biased broker to push you
Considerable amount of free information
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Trading Stocks Online (cont.)
Initial public offerings(IPOs)
Spring Street Brewing
Offers initial andsecondary securitiestrading over theInternet
See ipo.comGlobal stock exchangesaround-the-clock globaltrading
Related markets
Financial derivatives
Commodities
Mutual funds
Individual investors andday trading
Electronic trading ofinterest rate derivatives
Swapswire.com
Forbes.com
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Cyberbanking and Personal Finance
Electronic banking
Saves time andmoney for users
Offers aninexpensivealternative tobranch banking
Application Case:Cyberbanking at WellsFargo
Capabilities of homebanking
Get current accountbalances any time
Obtain charge and creditcard statements
Pay bills
Download accounttransactions
Transfer money betweenaccounts
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Cyberbanking and Personal Finance
International and multiple-currency bankingSome international retail purchasing can be done bycredit card
Other transactions may require international bankingsupport
Hong Kong Banks HEXAGON provides e-bankingin Asia
Mark Twain Bank in the U.S. uses e-cash to
support trading in 20 foreign currenciesBank of America and other banks offer:
International capital raising
Cash management
Other services on an international levelwww.prestonians.webnode.com
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Implementation issues in banking and onlinestock trading
Securing financial transactions
Application case: Bank of America OnlineUsing the extranet
Banks provide large business customerswith personalized service by allowing them
access to the banks intranetAccess accounts
Historical transactions
Intranet-based decision-support applications
Cyberbanking and Personal Finance (cont.)
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Cyberbanking and Personal Finance (cont.)
Imaging systemsallow customers to viewimages of all:
Incoming checks
InvoicesOther related online correspondence
Pricing online vs. off-line services
Some banks offer free services (fee per
check or transfer)
Some banks charge $5 to $10
Risksespecially in international banking
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Banking: 4 scenariosBuilding alliances quickly with banks, softwarevendors, and information providers
Effective outsourcing without neglecting tobuild in-house skills (customer informationsystems)
Focusing on the profitable customers to
provide broad channels for services andproducts
Keeping a central role in the paymentenvironment
Cyberbanking and Personal Finance (cont.)
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The Future of Online Banking
Three core strategies to pursue1. Customers Agentsbanks unable to achieve economies of
scale
Offer customers the widest possible choices
Include products from multiple sourcesProvide the customers with integrated informationservices
2. Product Manufacturers banks able to achieveeconomies of scale
Strengthen a trend that can already be seen in anumber of product segments
In core processing services for small and medium-sizedinstitutions
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The Future of Online Banking (cont.)
Three core strategies to pursue (cont.)
3. Integrated Playersbanks with a strong brand
and position from manufacturing to deliveryMany banks will adopt a hybrid strategy
Every player needs to make crucial decisionsabout which areas are strategically too risky:
To outsourceWhich capabilities need to be built up in-house
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The Future of Online Banking (cont.)
Personal finance onlineBill paying and e-checks
Tracking bank accounts etc.
Portfolio managementInvestment tracking
Quotes and prices (past and current)
Budget organization
Record keepingTax computations
Retirement goals, planning and budgeting
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Billing Online
Automatic transfer ofmortgages
This method has
existed for severalyears
The payerauthorizes its bankto pay themortgage, includingtax escrowpayments
Automatic transfer offunds to pay monthlyutility bills
Since1997, the city ofLong Beach hasallowed its customersto pay their gas andwater bills from their
bank accountsMany utilitycompanies worldwideprovide this option
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Billing Online (cont.)
Paying bills from online banking account
Can be made into any bank account
Monthly rent and other bills paid directly intothe payees bank accounts
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Billing Online (cont.)
A merchant-to-customer direct billing
A merchant posts bills on its Web site
Customers can view and pay their billCustomers have to go to many Web sites topay all their bills
Several utilities in Los Angeles allow customersto pay bills on the utilities Web site (20 centsper transaction )
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Billing Online (cont.)
Using an intermediary
A third party consolidates all bills related to eachcustomer in one site in a standard format
Collects a certain commissionMakes it convenient to complete transactions
E*Trade and Intuit
ISPs services
Trying to sell customized solutionsDo not have adequate billing platforms
See moneymain.com
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Online Publishing
The electronic delivery of newspapers,magazines, news, and other informationthrough the Internet
Online Publishing Today and TomorrowToday mainly used for disseminatinginformation and for conducting salestransactions interactively
Tomorrow include more customized materialthat the reader will receive free, or will pay for
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Online Publishing (cont.)
Publishing Modes
Newspapers
Magazines
News
Textbooks
Music
ArtworkVideo clips
Movies
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Online Publishing (cont.)
Publishing Methods
Online archive: digital archive (librarycatalogs, bibliographic databases)
New medium: extra comprehensiveness toissue or topic
Publishing intermediation: online directoryfor news services
Dynamic or just-in-time: create content inreal-time and transmit on the fly
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Online Publishing (cont.)
Publishing music, videos, and games
Major issue is payment of intellectual propertyfees
People-to-people (P2P) modelpeople swapfiles
3rd-party organizer may be in violation of
copyright laws (Napster)
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Online Publishing (cont.)
Digital delivery of documentssecureenvironment
U.S. Postal Service, UPS, E-parcel.com
Encryption
Software for digital signature
AuthenticationNotarization
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Online Publishing (cont.)
Edutainmentcombination of:Education
EntertainmentGames
Goal: encourage students to becomeactive learners
Managerial issuesEducational games delivered as CD-ROMs
Distance-learning format
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Online Publishing (cont.)
Electronic booksFrequent updates possible
Contain up-to-the-minute informationSpecial eBook device necessary to view books
See:
Wizap.com
Ebookconnections.comNetlibrary.com
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Knowledge Dissemination
Virtual teaching and online universitiesDistance learning and virtual universitiesMany universities offer limited courses anddegrees, but use innovative teaching methods
and multimedia support
MBA program in Hong KongLectures delivered on interactive TV(iTV), now on the WebStudents decide what and when theyattend the lectureLecture, support material exercises, etc.,provided on the Web
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Knowledge Dissemination (cont.)
Online advice and consulting
Medical adviceprovide consultation with top
expertsManagement consultingprovide accumulatedexpertise from knowledge bases
Legal advicedelivery of legal consultationservices to business has considerableprospects
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Knowledge Dissemination (cont.)
Online advice and consulting (cont.)
Financial advice offer extensive financialadvice
Other service online
Healthcare
MatchmakingElectronic stamps
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Disintermediation and
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Disintermediation and
Reintermediation
Change the role of agents to:
Assists in comparison shopping from multiplesources
Providing total solutions by combining servicesfrom several vendors
Providing certifications and trusted third partycontrol and evaluation systems
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Disintermediation and
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Disintermediation and
Reintermediation (cont.)
Issues impacting future of intermediariesThe success of intelligent agents
Travel intelligent agentsAgents that support job matching
Agents that interpret resumesThe more intelligent the software agents become,the less human agents will be needed
Customer attitudes and behavior are importantGood experience with online agencies means
fewer customers use human agentsInsurance purchasingStock purchasing
Virtual travel agencies
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Disintermediation and
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Disintermediation and
Reintermediation (cont.)
New roles of electronic marketingintermediaries
To extend what we are familiar with inphysical markets to the virtual world (e.g.,search services and electronic malls)
To extend payment clearing functions into theInternet (e.g., electronic cash and digitalcredit card services)
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Disintermediation and
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Disintermediation and
Reintermediation (cont.)
Disintermediation in B2B
Exchanges decrease number of calls a sales rep pays onpurchasing managers
Reengineering marketing and sales organizations is
necessary
Cybermediation
Electronic intermediary (rowe.com)Affects most market functions
Hypermediationhuman/electronic intermediation;may profit greatly from EC
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Managerial Issues
Effectiveness of out-of-town recruitment
Privacy may be in danger
International legal issues may impact servicesmore than products
Ethical issues are prevalent in services
The intermediaries and their roles are changingAlliances for online initiatives are spreadingrapidly