Internet Technology and

The Digital Firm

Internet rapidly becoming the
infrastructure of choice for ecommerce and e business

E-Commerce & E-Business

It offers businesses an easier way to

link with other businesses and
individual with a very low cost

Zaldy Adrianto
zaldy.adrianto@unpad.ac.id

Internet Technology
and The Digital Firm
Direct communication between trading
partners: Disintermediation removes
intermediate layers, streamlines
process
Round-the-clock service: Web sites
available to consumers 24 hours a day

How internet reduces transaction

costs
Transaction

Traditional

Internet

Checking a Bank Account

1.08

0.13

Answering a Customer
question

10 - 45

0.10 - 5

Trading 100 shares of stock

100

9.95

Correcting an employee
record

128

2.32

Sending an advertising
Brochure

0.75 - 10.00

0 - 0.25

Paying a Bill

2.22 - 3.32

0.65 - 1.10
Source : Laudon, 2006

Internet Technology
and The Digital Firm
Extended distribution channels:

Outlets created for attracting customers who

otherwise would not patronize

Distribution of information based

products : Software, Music,Video with a very low
cost.

Reduced transaction costs: Costs of

searching for buyers, sellers, etc. reduced

New Business Models

and Value Propositions
Business Model:
Defines an enterprise
Describes how the enterprise delivers a
product or service
Shows how the enterprise creates wealth

Carsdirect

The Changing Economics

of Information
Internet shrinks information asymmetry
Information asymmetry: One party
in a transaction has more
information than the other
Increases richness: Depth and detail
of information
Increases reach: Number of people
contacted

The Changing Economics

of Information

Internet Business Model

Virtual storefront: Sells goods directly
to consumer.
Amazon.com, Bhinneka.com
Transaction broker: Buyers view rates,
terms from various source.
E*Trade.com, expedia.com

Amazon.com

Etrade

Internet Business
Model

iTunes

Online Marketplace: Concentrates information from

several providers. Buyer and seller can meet, search for
product, display product, and establish prices for those
products.
eBay.com, Priceline.com
Content provider: Creates revenue through providing
client digital content such as news, music, Photos, etc for a
fee, or revenue generating from advertising
WSJ.com, CNN.com, MP3.com, iTunes,
GettyImages.com

Internet Business
Model
On-line service provider: Provides
service, support for hardware, software
products. Generates revenue from
subscription or transaction fees, from
advertising or from collecting
marketing information.

Getty Images

Salesforce.com

Xdrive.com, salesforce.com

Internet Business
Model
Virtual community: Chat room, online meeting place
Facebook.com, Friendster.com,
iVillage.com
Portal: Initial point of entry to Web,
specialized content, services
Yahoo.com, MSN.com, Detik.com

Digitalization degree
Brick-and-mortar (or old-economy), Refer
to pure physical organization (enterprise).
Virtual (or pure-play) organizations,
businesses which are based purely on the
internet
Click-and-mortar (or click-and-brick)
organizations, businesses which are
represent a hybrid model.

Categories of Electronic
Commerce
Business-to-customer (B2C): Retailing
of products and services directly to
individual customers
Business-to-business (B2B): Sales of
goods and services among businesses
Consumer-to-consumer (C2C):
Individuals use Web for private sales or
exchange

Business-To-Consumer

Business-To-Consumer

Customer-centered retailing: Closer,

yet more cost-effective relationship
with customers

Disintermediation: The removal of

organizations or business process
layers responsible for certain
intermediary steps in a value chain

Web sites: Provide information on

products, services, prices, orders

Benefits of Disintermediation
to the Consumer

Reintermediation: The shifting of the

intermediary role in a value chain to a
new source

Business-To-Consumer
Interactive Marketing and Web
personalization:
Interactive Marketing, Marketers use
interactive features of the web pages to hold
consumers attention or to capture detailed
information about consumer tastes and interest.
Clickstream Tracking, collect data on
customers activities at website and store them
in the log.

Business-To-Consumer

web personalization

Web personalization
Benefits of using individual sales
people
Form lasting relationship with
consumers
Dramatically lower costs
Amazon.com : Customer who bought
this book also bought...

Web personalization:

Business-To-Consumer
Blogs
Popular terms for Weblog
Informal yet structured web site where
individuals can publish stories, opinions,
and links to others website
Another promising web-based tools for
marketing

Business-To-Business
Electronic Commerce
80 % of B2B e-commerce is based on
proprietary system for Electronic Data
Interchange (EDI).
Companies are increasingly turning to
the internet because it provides a much
more flexible and low cost platform.

Business-To-Business
Electronic Commerce
For example Procurement Process
Businesses can now use internet to
locate the most low cost supplier,
search online catalog, negotiate with
suppliers, place orders, etc
E-procurement over the internet
provides new opportunity for lowering
cost.

Business-To-Business
Electronic Commerce

A Private Industrial
Network

Automation of purchase, sale transactions

from business to business
Private industrial networks (private
exchanges): Coordination between companies
for efficient supply chain management and
collaborative activities
Net marketplaces: On-line marketplaces,
point-to-point connections, integrated
information

www.VWGroupSupply.com

A Net Marketplace

Examples: exostar, chemconnect,

transora.com and foodtrader.com.

Exostar

exostar customer

Electronic Commerce
Payment Systems
Payment System

Description

Digital Credit Card Payment

Secure services for credit card payment on internet

Digital Wallet

Software stores card and other information

Accumulated Balance Payment

System

Accumulates micropayment purchases as debit balance to be

paid periodically
Enables consumers to make instant payments based on the value
stored in digital account

Stored value payment system

Digital Cash

Digital Currency used for micropayments or larger purchases

Peer to peer payment system

Sends money via web to persons or vendors not set up to

accept credit card payments

Digital Checking

Provides electronics check with secure digital signature

Electronic Billing presentment and

payment

Support electronic payment for online and physical store

purchases

ELECTRONIC BUSINESS
AND THE DIGITAL FIRM
How Intranets Support Electronic
Business

Rekber KASKUS

Functional Applications
of Intranet
Finance and accounting

Benefits

Human resources

Group collaboration

Sales and marketing

Functional applications

Manufacturing and production

Supply chain management

Functional Applications
of Intranet

Finance and Accounting

General ledger reporting
Project costing
Annual reports
Budgeting

Human Resources
Company
On-line publishing of corporate policy
Job postings and internal job transfers
Company telephone directories, and
training
Employees
Healthcare
Employee savings
Competency tests

Manufacturing and
Production
Quality measurements
Maintenance schedules
Design specifications
Machine outputs

Sales and Marketing

Competitor analysis
Price updates
Promotional campaigns
Sales presentations
Sales contracts

Business Process
Integration
Intranets to improve coordination
among internal business process
Extranets to coordinate process shared
with customers, business partners, and
other organizations.

Order tracking

Internet and
collaborative commerce
Use of digital technologies to enable
multiple organizations to design,
develop, move and manage product
collaboratively.
A firms engaged in collaborative
commerce with its supplier and
customers can achieve a new level of
efficiency

Collaborative
Commerce

collaborative
commerce

http://ecommerce.typepad.com

Management
Challenges

Management Opportunities,
challenge, and solution

Opportunities

Firms are using internet and

intranet technology to create :

New products and services

New channels for sales and

Finding a successful internet business

model

Organizational change challenges

Trust, Security and Privacy

marketing

Entirely new business

Management Solutions
Determining how Internet technology can

Recent Development
Web 2.0
Collaboration and sharing.
Wikis, Blogging, tagging, syndication,
decentralization etc.

provide value for business

Managing Business Process Changes

Safeguarding Security and Privacy
HTTP://BLOGS.VOICES.COM/THEBIZ/
2006/09/WEB_20_DEFINITION.HTML

Web 2.0

yahoofinance

HTTP://WWW.E-VETSUISSE.UZH.CH

http://webanywhere.co.uk

HTTP://ROSSDAWSONBLOG.COM

widgets

Future Development
Web 3.0

web 3.0 (semantic web)

Web 3.0 is going to be like having a personal
assistant who knows practically everything
about you and can access all the information
on the Internet to answer any question.

Semantic web

HTTP://COMPUTER.HOWSTUFFWORKS.COM/WEB-302.HTM

a group of methods and technologies to

allow machines to understand the meaning or "semantics" - of information on the World
Wide Web
http://www.w3.org/2001/sw/SW-FAQ

VISIT: HTTP://WWW.W3.ORG/STANDARDS/SEMANTICWEB/
AND
HTTP://ALLTHINGSD.COM/20090526/WELCOME-TO-WEB-30/