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Chapter 18

E-Communities, Global ECNotes modified for classJudith Molka-Danielsen

May 03, 2002

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Learning Objectives

Virtual communitiesGlobal ECImpact on small businessesBPR, knowledge managementResearch opportunities Future of EC

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Virtual Communities

Types of Virtual CommunitiesTransactions – buy and sellInterest –topic, virtually closeRelations (practice) - experiencesFantasy – games and entertainment

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Virtual Communities (cont.)

Communities of transactions

Facilitate buying and sellingEvineyard.com

Sells wineProvides expert information on winesProvides chat room

Communities of interest

Place for people to interact with each other on a specific topicMotley fool (fool.Com)

Forum for individual investors

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Virtual Communities (cont.)

Communities of relations (practice)

Be organized around certain life experiencesPlasticsnet.com used by thousands of engineers in the plastics industry

Communities of fantasy

Place for participants to create imaginary environmentsESPNet participants create competing teams and “play” with Michael Jordan

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Figure 18-1Virtual Community Categorization Scheme

Source: Schubert and Ginsburg (2000).

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Virtual communities (questions)

What is the difference between and e-mall and a physical mall?What does the virtual community of an e-mall offer? How do you get people to visit, stay, spend money? What is the revenue model?

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Virtual Communities (cont.)

commerce site:Understand niche industry

The information needsAnd how they gather needed information.

Build a site that provides valuable information

from partnerships or independentlyMatch the users info-gathering stepsSite should be used for decision supportSell products that match the decision support process

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Virtual Communities (cont.)

The Expected Payback (you hope)Customer loyalty increasesIncreased salesCustomer participation and feedback increasesIncreased repeat traffic to siteDrive new traffic to the site

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Virtual Communities (cont.)

Creating economic valueMembers input information - needs of the communityThe community brings together consumers of specific demographic and interestCommunities charge members content fees

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Virtual Communities (cont.)

Financial viability of communitiesBased on sponsorship and advertisementExpenses are very high because of the need to provide:

Fresh contentFree servicesFree membership

This (revenue) model did not work well, many companies sustained heavy losses in 2000-2001; too few members, too few purchases

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Key Strategies forSuccessful Online Communities

Be member-centric from the startDefine community’s focusInvolve community membersWeigh internal staffing and outsourcingBuying vs. building technologiesProvide personalizationMinimize participants going elsewhere: Content, Service, TradingFacilitate communication among membersKeep an open door to the outside – for inputBuild alliances and partnerships

But esociety.com went out of exisitance.

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Key Strategies for Successful Online Communities (cont.)

Eight principles for community success Arther Andersen:1. Increase traffic and participation in community2. Focus on needs of members (use facilitators &

coordinators)3. Encourage free sharing of opinions and information4. Financial sponsorship is a must 5. Consider the cultural environment6. Communities- not just discussion groups; tools

and activities7. Members must be involved in activities and

recruiting8. Guide discussions, provoke controversy, raise sticky

issues

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Global Electronic Commerce

Global interest-based communities will spring upMainly in support of B2B & repetitive, standard transactions, e.g. EFT & EDIInternet technologies facilitate global trade.

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Barriers to Global Electronic Commerce

Legal Issues – local barriers often outweigh international policies for cooperationMarket Access Issues

need to evaluate bandwidth needs, the data required, time constraints, access demands, and user technology limitations (need for standards)

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Barriers to Global Electronic Commerce (cont.)

Financial IssuesCustoms and taxationElectronic payment systems

Other IssuesIdentification of buyers and sellersTrustSecurity (for example, viruses)

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Barriers to Global Electronic Commerce (cont.)

Other Issues (cont.)Cultural diversityInternational agreements (multi-lateral agreements)Role of government – minimal involvementPurchasing in local currenciesLanguage and translation

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Global Electronic Commerce

Localization—just translating from one language to another is not enough

Localize content

Adapt local business practices

Globalization and joint venturesJoining marketplaces

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Culture

Different marketing approaches (Japanese customers like mascots, symbols, or characters. Products they like include gourmet-cooking items.)Credit cards are widely used in the U.S., (but not in China)Many European and Asian customers complete transactions with off-line payments (Maybe before. Now you might get a paper invoice and pay it by net-banking.)

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Culture (cont.)

Small, seemingly insignificant details make a difference

ColorsFormattingSymbolsNavigation Fonts

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Breaking down theGlobal EC Barriers

Value the human touch – human translators – be perfectBe strategic – don’t expand too fast, one country at a timeKnow audience, keep current

Integrate properlyKeep the site flexible and up-to-dateSynchronize content with info on other sitesOECD (oecd.org)

“Dismantling the Barriers to Global EC”Major report on all issues in this chapter

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The Opportunities for Small Businesses

InexpensiveSource of informationWay of advertisingWay of conducting market researchWay to build (or rent) a storefrontWay of providing catalogsWay to reach worldwide customers

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The Opportunities for Small Businesses (cont.)

Lower transaction costNiche market, specialty products (cigars, wines, sauces) are the best place to beImage and public recognition can be accumulated fast

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Risks and Disadvantagesfor Small Businesses

Inability to use EDI, unless it is EDI/InternetLack of resources to fully exploit the WebLack of expertise in legal issues, advertisementLess risk tolerance than a large company (less liquidity – finances to last out hard times)

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Risks and Disadvantagesfor Small Businesses (cont.)

Disadvantage when a commodity is the product (for example, CDs)No more personal contact, which is a strong point of a small business – cut a unique communication channelNo advantage to being in a local community

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Success Factors for Small Businesses

Niche products Low volumeNot carried by regular retail stores

Small volumeE.g., special books

Oldtechnical

International productsNot easily available to off-line customers

InformationGartnerGroup provides access to online research material by subscriptionSmaller companies may provide specialized information (home and gardening)

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Success Factors forSmall Businesses (cont.)

Capital investment must be smallInventory should be minimal or non-existentSupport Electronic payments schemaPayment methods must be flexibleLogistical services must be quick and reliable, and least costAdvertise: Be on search engines, do banner exchangeWeb site functional for customers, Other: know customers buying habits, price products correctly, anticipate cash flow needs.

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Success Factors forSmall Businesses (cont.)

Monitor your:CompetitionTechnologyMarketplace changes

Keep growth slow and steadyDelegateDevelop good internal communications

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Business Process Reengineering (BPR)

Redesign of the enterprise process and BPRRestructure processes, then automate. – fit to standards of e-marketplacesChange processes to fit commercially available softwareNeed Fit between systems and processes of different companiesAdjust procedures and processes to align with available services

LogisticsPaymentsSecurity

Changes to assure flexibility and scalability

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Figure 18-3Software Cybermall in Korea

Source: Publicly distributed governmental documents in Korea.

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Knowledge Management (KM)

Knowledge is recognized as the most important asset in any organizationKM activities:

Capturing or creating knowledgeStoring and protecting knowledgeUpdating it constantlyUsing it whenever necessary

Collected from internal and external sourcesIntegrated with EC and/or BPR

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Knowledge Management (cont.)

Knowledge base—database containing knowledge or organization’s know-how

Used for knowledge sharing

Knowledge management promotes integrated approach to processing knowledge:

IdentifyingCapturingRetrievingSharingEvaluating

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Research in EC

Behavioral IssuesConsumer behavior Building consumers behavioral profiles and identify ways to utilize themSeller’s behavior and motivation Issue-oriented research (e.g., trust, intermediaries)Internet usage pattern and willingness to buyMental model of consumer product search process, comparison process, and negotiationHow to build trust in the e-marketspace

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Research in EC (cont.)

Technical IssuesMethods that help customers find what they wantModels for extranet design and managementNatural language processing and automatic language translationMatching smart card technology with payment mechanismsKnowledge Management Integrating EC with existing corporate information systems, databases, etc.Retrieval of information from an electronic industry directoryEstablishing standards for international trade

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Managerial Research Issues

AdvertisementMeasuring the effectiveness, integration and coordination

ApplicationsCreating a methodology of finding EC business applications

StrategyDesigning strategic advantage strategy for ECFind “where to market” strategy & integrate

ImpactsId organization structure and cultureIntegration with ERP and SCM

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Figure 18-4Framework for B2C EC Research

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The IS World Survey

Major areas for research findings:Strategic issues, theory, methodologyAssessment valuation, marketing, CRMOrganizational transformation and societal issuesTechnology adoption issuesSecurity and legal issuesLogistics/operations

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The Future of Electronic Commerce

Opportunities for buying – easy payment methods, more on-line products.Internet usage – still growing, m-access more common Purchasing incentives – more choices and prices for buyersIncreased security and trust - improvingEfficient information handing – more info goes along with the productsInnovative organizations – restructured, flatterB2B – functions growing

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The Future of Electronic Commerce (cont.)

E-government--comprehensiveGovernment-to-consumers (G2C)Government-to-government (G2G)Government-to-business (G2B)Government-to-employees (G2E)

Intrabusiness ECImproving internal supply chain

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Managerial Issues

Finding a community that matches your businessGoing global

Threats—difficult to accomplish, especially on large scaleOpportunities—create collaborative projects with partners in other countries (last a long time)

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Managerial Issues (cont.)

Small can be beautifulCompeting on commodities with the big guys is very difficult (especially in cyberspace)Finding niche markets is advisableMore opportunities in providing support services than in trading

Restructuring may be required for most businesses; examine processes in the future use of EC.