Introduction to MIS - Chapter 11: Electronic Business

Introduction to MISChapter 11Electronic BusinessElectronic BusinessLarge businessSmall business/ supplierCustomerSalespersonThe InternetOrders, Auctions, and EDISales and CRMService, orders, and informationWeb hosting and Web-based servicesOutlineForms of Electronic CommerceProduction Chain and DisintermediationDynamic PricingDistributed ServicesMarketing PhasesWeb Advertising: AdvertiserWeb Advertising: PublisherWeb Traffic AnalyzerWeb Hosting OptionsMobile CommerceEntrepreneurship: Creating a BusinessIndustry ResearchBusiness PlansForecasting Financial DataForming a CorporationFinancing a StartupE-Commerce StartupCases: Travel IndustryAppendix: Business PlansForms of Electronic CommerceBusinessConsumerBusinessB2BEDICommodity auctionsB2CConsumer-orientedSalesSupportConsumerC2BMinimal examples, possibly reverse auctions like PriceLineC2CAuction sites (eBay)But many of these are dominated by small business sales.Production ChainpartssupplierpartssupplierpartssupplierwarehousewarehousesuppliersuppliersuppliertoolmanufacturerManufacturerworkerswholesalerwholesalerdistributordistributordistributorretail storeretail storeretail storeretail storeConsumersDisintermediationManufacturerRetailerConsumerProduction ChainE-commerce websiteDynamic PricingPQDSPerfect competition pricePrice consumer is willing to payThe ultimate goal is to set individual prices for each consumer to capture the maximum price each is willing to pay. As opposed to the perfect competition price, where everyone pays the same price, and some customers gain because they were willing to pay more.Distributed ServicesCompany 1Company 2The InternetOriginaldocumentTranslateddocumentInternet Servicee.g., automated document translationXML: Extensible Markup Language13/6/2001$33.54Need immediately.30Flea Collar-Dog-Medium208$4.4227Aquarium Filter & Pump8$24.65XML In Internet ExplorerMarketing PhasesPre-PurchaseStatic data sites.Promotion.Product specifications.Pictures.Schematics.Pricing.FAQs.Interactive sites.Configuration.Compatibility.Complex pricing.PurchaseTransmission security.User identification.Product selection.Payment validation.Order confirmation.Post-PurchaseService.Problem tracking.Sales leads.Resolve problems.Answer questions.Product evaluation.Modifications.Tracking customers.Web Advertising: Advertiser PerspectiveWant viewers to see the ad.Want viewers to click through to the main site.Need to match site demographics to target audience.Monitor response rates.Cost.Web Advertising: Publisher PerspectiveIncome Cost per thousand viewings ($1 - $50)Need volume (25,000 or 1,000,000 per month)Need demographicsTasksAd rotation softwareTracking and monitoringAd sales staffBillingThird Party: DoubleClickWebsite Log AnalyzerSurfStats proWeb Hosting OptionsSimple Static HTML WebsiteMain Web PageCategoriesCategory 1Product photo Category 2Product photo Category 3Product photo Product 1DescriptionPricePhotoProduct 2DescriptionPricePhotoProduct nDescriptionPricePhotoProduct 3DescriptionPricePhotoSimple Website with Buy Me ButtonMerchant Web siteProductDescriptionPriceBuy MeShopping CartItem Price TotalCheck OutCredit Card DataNameAddressPhoneCard NumberSubmitCard Processor SiteCustomerNotification(Accept/Reject)Notify merchant AuctionsUncertain priceCan set reserve priceGood for unique itemsEfficiency depends onFull informationAdequate number of participantsAmazon.com zShops zShop ProductsCameras, Digital, BrandVendor 1Vendor 2Vendor 3Vendor TransferDescriptionPriceScanned imageContact infoConsumerProduct searchChoose vendorPay for itemTransaction ProcessingAmazon.com handles creditSends order info to merchantMerchant ships item to consumerVirtual MallsEssentially a marketing agreementThe “mall” provides a directory to merchantsThe merchant site runs on a different serverDirectory of ShopsProduct categoryVendor 1Vendor 2Merchant SiteProductsSalesWeb Commerce ServersYour Web siteProductsShopping cartSalesWeb serversDatabaseCommerce Server ShellWeb/Commerce Hosting CompanyCustomersMerchantsLoad databaseImagesDescriptionsPricesCustomize siteApplication Service ProviderBusiness Applicatione.g., AccountingStore dataAnalyze dataFacilitate companyinteractionBusinesses that lease the use of the applicationWeb Hosting QuestionsMobile CommerceFujitsu’s tablet computerAs PDAs, cell phones, and tablet computers converge; people will ultimately be able to connect to any business every place they go.Palm VII wireless PDAPrototype Nokia 3GCreating a BusinessIdeaPlanImplementationExpand Your FocuscustomersBig competitorYou might try to compete directly.It might be better to sell your innovation as a service to the dominant firm or to be an intermediary for consumers.Industry ResearchCompetitionNumberConcentration ratiosSales by firmTechnology plansSize of the marketNumber of customersAmount of revenueGrowth rateMarket comparison for substitute productsConsumer focus group interviewsProduction costsStartup/fixed costsOperating costsLegal environmentBusiness PlansExecutive SummaryStrategy, Competition, and Market AnalysisForecasts, Cash Flow, and Investment BudgetMarketingOrganization and TimetabletaskstimeForecasting Financial DataCustomers and Sales estimateInfrastructure scaleEmployeesSales revenueMarketing costsOperating and selling costsSalary costsBalance SheetIncome StatementProfit and LossCash FlowFinancial statement estimatesFinancial statements and ratiosBreakeven AnalysisRevenueCostBreakeven pointForming a CorporationState FormsArticles of IncorporationCorporate BylawsRegistered Agent (self)Business Registration FormState Employer NumberWithholding IDSales Tax IDAdditional licensesFederal FormsSS-4 Application for Employer Identification Number2553 Election by a Small Business CorporationCommercialBank AccountDUNS NumberAccounting SystemPurchase softwareHire accountantDefine chart of accountsStandardsAdditional detailDefine processesFinancing a StartupVenture CapitalAngel InvestorPartnersBecome owners with some control over management.Funding for development and operations.Successful firm IPO:Additional fundsReward to original investorsAdditional Setup Steps for E-CommerceAdditional risk and challenge of obtaining funding.Website development.Programming cost.Time and management.Purchase or lease merchant software if possible.Find a web hosting ISP.Site complexity.Internet connectivity.Costs.Host site yourself.Time to get leased line.Choose site location based on Internet access.Obtain digital security certificate (Verisign).Find bank that will provide merchant account services to accept credit card payments.Setup fee.Monthly fee.Transaction fee.Find a credit card processing firm that works with your bank and your software.Setup fee.Monthly fee.Transaction fee.Cases: Travel IndustryCases: The Sabre GroupAmerican ExpressWhat is the company’s current status?What is the Internet strategy?How does the company use information technology?What are the prospects for the industry?www.sabre.comwww.americanexpress.comAppendix: Business PlanPurposesHelp managers identify strategies and plan for futureIdentify goals and concrete objectivesProvide measurement of success and identify problemsProvide detailed information to investorsOutline budget needsBusiness Plan StructureIntroductionOutline and summary of the company and the planMarketingCompetitorsMarket analysisAdvertisingSales ManagementProduct Management: prices and costsHistoric AnalysisSales, profits, structural changesOrganizationStructure of the firm and managementFinancingDetailed cash needsProjectionsEstimates of sales, costs, growth with detailed data and forecastsMarketing PlansProductsCostsPricesProfitsCompetitionStrategySales Goals and ForecastsPromotional methodsSales ManagementDistribution and ServiceRolling Thunder Bicycles ExampleSales estimated while the firm was being formed.Rolling Thunder Bicycles Estimated SalesProjected Income StatementInterest rate on borrow 8.00%Interest rate on short term investments 3.00%Depreciation, 5 years, straight line 0.2Tools purchases $250,000 $50,000 $50,000Projected Balance SheetAssumptionsReceivables as percent of sales: 10%Payables as percent of material costs: 10%Inventory as percent of material costs: 12%Projected Cash Flow