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Virtual Communities

Creating economic valueMembers input useful information in the form of comments, feedback, elaborating their attitudes and beliefs, and information needs of the communityThe community brings together consumers of specific demographic and interestCommunities charge members content fees for downloading certain articles, music, or pictures

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Figure 18-2Value Creation in Electronic Communities

Source: Kannen et al. “Marketing Information on the I-Way,” Communications of the ACM, June 1996. Kannen et al. © 1998 AMC, Inc. Reproduced by permission.

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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 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 personalization

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Key Strategies for Successful Online Communities (cont.)

Minimize need for participants to go elsewhere for:

Content

Service

Trading

Facilitate communication among membersKeep an open door to the outsideBuild alliances and partnerships

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Key Strategies for Successful Online Communities (cont.)

Eight principles for community success:Increase traffic and participation in communityFocus on needs of members (use facilitators and coordinators)Encourage free sharing of opinions and informationFinancial sponsorship is a must

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Key Strategies for Successful Online Communities (cont.)

Eight principles for community success (cont.):

Consider the cultural environmentCommunities are not just discussion groups; provide tools and activitiesMembers must be involved in activities and recruitingGuide discussions, provoke controversy, raise sticky issues

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Global Electronic Commerce

While geographical market boundaries may be falling, global interest-based communities will spring upMainly in support of business-to-business financial and other repetitive, standard transactions, e.g. EFT & EDIThe emergence of the Internet and the extranets resulted in an inexpensive and flexible infrastructure that can greatly facilitate global trade

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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 governmentPurchasing in local currenciesLanguage and translation

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Global Electronic Commerce

Localization—just translating from one language to another is inadequate

Localize content

Adapt local business practices

Globalization and joint venturesJoining marketplaces

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Breaking down theGlobal EC Barriers

Value the human touchBe strategicKnow your audienceBe a perfectionistRemember, it’s the Web

Integrate properlyKeep the site flexible and up-to-dateSynchronize contentOECD (oecd.org)

“Dismantling the Barriers to Global EC”

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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 financial risk tolerance than a large company

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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 businessNo 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-existentElectronic payments schema existPayment methods must be flexibleLogistical services must be quick and reliable

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Success Factors forSmall Businesses (cont.)

Web site design should follow basic principlesUnderstand your customers and their buying habits and market to proper customer segmentsPrice product or service correctlyAnticipate 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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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 translationIntegrating smart card technology with on-line and off-line payment mechanisms

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Research in EC (cont.)

Technical Issues (cont.)Integrating EC with existing corporate information systems, databases, etc.Retrieval of information from an electronic industry directoryEstablishing standards for international tradeBuilding a mobile Internet distribution command system

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Managerial Research Issues

AdvertisementMeasuring the effectiveness, integration and coordination

ApplicationsCreating a methodology of finding EC business applications

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Managerial Research Issues (cont.)

StrategyDesigning strategic advantage strategy for ECInitiating “where to market” strategyFinding way to integrate EC into organizations

ImpactsIdentify the necessary organization structure and cultureIntegration with ERP and SCM

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Figure 18-4Framework for B2C EC Research

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The Future of Electronic Commerce

Opportunities for buyingIncrease rapidly

Internet usageIncrease exponentiallyAccess via cell phones!

M-commerceNo need for a computer brings more

people to the web

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The Future of Electronic Commerce (cont.)

Purchasing incentivesIncrease buyers’ advantages

Increased security and trustSignificant improvement is expected

Efficient information handingAccessible from anywhere

Innovative organizationsRestructured and reengineered

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The Future of Electronic Commerce (cont.)

Virtual CommunitiesSpreading rapidly

Payment systemsAbility to use e-cash cards and make

micropayments is getting close to reality

Business-to-businessContinues to grow rapidly

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The Future of Electronic Commerce (cont.)

B2B exchangesProvide infrastructure

AuctionsIncreasing rapidly

Going globalMost appealing benefit of EC

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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

The future of EC is very bright, but planning is a must.