Strategies in Response to the Potential of Electronic Commerce

Chapter 12

Jatinkumar Shah

About this chapter

• Focus on Business Strategies rather than IT Strategies

• 4 similar cases to explain how they pursue target benefit and deal with barriers

Market-making firms

CALM

IA

AUCNET

CATS

Market-making firms

• Social institutions in which a large number of commodity exchanges of a specific type regularly take place, facilitated and structured by institutional rules governing the exchange.

Why deal via market-making firms?

• Costs of obtaining relevant information are reduced since market-making firms help publicize prices as well as other relevant information

• Easier to find preferable trading counterparts

• Bargaining costs can be reduced as market-making firms help establish procedures and conventions for reaching a bargain

• Policing and enforcement costs can be reduced because market-making firms bring norms of conduct and codes of practice for buyers or sellers.

Difference between internet shopping

• Sellers are price takers, not price makers, although they have a certain level of reserve prices.

• Buyers who purchase goods are not end consumers but typically wholesalers or retailers

• Institutional rules established to reduce transaction uncertainties and to protect member traders against transaction conflicts.

• Agreement over the governing rules can be facilitated because the members meet frequently and deal in a restricted range of goods. It is possible to enforce the rules because the opportunity to trade on the exchange itself is of great value

Business process redesign (BPR)

• BPR requires a firm to step back from current business processes to consider its overall business objective

• Information technology is usually a necessary but insufficient factor in achieving BPR. Successful reengineering is not an IT initiative but, rather, a business initiative

Decoupling of product flows

Opportunities and challenges of electronic market adoptions

Increased efficiency & effectiveness in:

•Information gathering•Contract formation•Trade settlement

Adoption barriers resulting from:

•Increased transaction risks and uncertainties•Lack of power to enforce the change

Economic gains Challenges

Increased efficiency & effectiveness in:

•Information gathering•Contract formation•Trade settlement

Adoption barriers resulting from:

•Increased transaction risks and uncertainties•Lack of power to enforce the change

Economic gains

Increased efficiency & effectiveness in:

•Information gathering•Contract formation•Trade settlement

Adoption barriers resulting from:

•Increased transaction risks and uncertainties•Lack of power to enforce the change

ChallengesEconomic gains

Increased efficiency & effectiveness in:

•Information gathering•Contract formation•Trade settlement

Adoption barriers resulting from:

•Increased transaction risks and uncertainties•Lack of power to enforce the change

Four cases

Observed economic gains

Adoption barriers and tactics to overcome

Concerned points

• Electronic product description• Thin market• Resistance to change• Standard product quality rating

and inspection• Quick achievement of critical

mass• Preparation for resistance and

retaliation

Conclusion

• IT-enabled reengineering increases market efficiency as well as barriers

• By examining the barriers and facilitators of success in the case studies presented, market makers can be better prepared to design electronic markets that increase market efficiency and overcome barriers to adoptions

My experience

• Toshiba Global One system• Building a system that Converts

Distributor’s forecast into orders• Building a system that helps

customers to download engineering specification information

Question?