E-Commerce

853-05
Professor Mary Cronin
October 22, 2005

Agenda for Today

Overview of course structure and objectives

E-Commerce: Past, Present, Future
Class introductions and personal objectives
Syllabus, assignments and group projects
Group formation and lunch (at last) with group discussion
Best Practices preview

Best Practices Preliminary Summary

Case Study Companies
CSN Stores
Body1--Guest Speaker: Kerri Lis
Group assignments

E-Business Hype Cycle Discussion

Drivers and barriers to growth
Balancing technology and strategy

Wrap up, questions and preview of coming attractions

Course Structure
Intensive interaction and multi-mode learning
Each session will include lectures, guest speakers,
small group interactions and discussion of readings
Real time case studies are linked to local companies
with challenging issues in e-commerce
Individual assignments include one case analysis and
an end of term research paper on a student-selected
company
Small group assignment is one real time case project
and presentation
Details of assignments and chance for questions
coming before lunch!

Framework for Course Discussions and

Readings
Strategic Context

Best Practices

New Trends

Real Time Cases

Industry Impact

Competitive Advantage

E-Commerce Evolution
Success/Failures

E-Com Infrastructure
and Business Models

Lessons Learned

(B2B, B2C, B2E)

Current Threats

E-Commerce Is Back in the Headlines

Defining E-Commerce and E-Business

E-Commerce
The use of the Internet and the web to transact business
Digitally enabled commercial transactions between and among
organizations and individuals
The exchange of value on the Internet or the web

How about E-Business?

Strategic use of the Internet for all processes and transactions within a
firm
The entire world of internal and external electronic and Internet-based
activities related to an enterprise or organization, including E-Commerce
For this course, we will accept the broadest definitions and focus on the
impact of using the Internet and the web to transact business in different
types of companies and different industry sectors

E-Commerce Expectations in the

1990s
Interactive, One-to-One Marketing as Driver
Personalized and customized design and delivery would drive
profitable traffic to sticky web sites
Me-Business and The Experience Economy

Disintermediation of bricks and mortar and online

aggregation into a few online Megastores
Malls and brand-name storefronts would be Amazoned
Manufacturers would sell direct to consumers bypassing stores and
traditional channels

Frictionless transactions and fulfillment

Online interactive support systems, bolstered by virtual
communities, would transform the sales process
Proactive supply chains would enable dynamic pricing options
The web would become a transparent global E-marketplace
Traditional business models were doomed to failure

The dot.com Bust Made E-Commerce

Synonymous With Bad Business
Spilt Milk: WebVan burned
through $1.2 billion in two years
from launch to shutdown

Scary: Boo.com spent

over $1 million per
week in burning up
$135 million VC
investment

Was e-commerce
completely overhyped or was
something else at
fault?

Dead Dog:
Pets.com had $82
million IPO then
shut down

Some Perspective on E-Commerce

Past and Future
New and revolutionary technologies typically go through
a cycle of rapid growth and adoption (with many
competing business models and providers) followed by
shake out and consolidation
Think about electricity, telephone, automobile and
computer adoption cycles
The strongest impact and the lasting value emerge AFTER the
shake out phase
Many early predictions about these once-emerging technologies
never came to pass and countless business models failed in the
process of mass adoption in the late 19th and early 20th century

Gartner Research has characterized this predictable

process as the technology hype cycle

The e-Business Hype Cycle

e is Best
European IPOs
1999

Dot.Com
Share Fallout
Investor
Disillusionment

U.S. Christmas
1998

Dot.Com
Shakeout

U.S. IPOs
1997/1998

U.S. IPOs
2004

Publicized
e-Failures
Search for True
e-Business

Dot.Com
Begins

Optimized
e-Business

Business
Disillusionment

20
10

20
09

Plateau of
Profitability

20
08

20
07

20
06

20
05

20
04

Trough of
Slope of
Disillusion Enlightenment
20
03

20
01

20
00

19
99

19
98

Peak of Inflated
Expectations

19
90
-

19
97

Technology
Trigger

20
02

Internet
Web

19
96

Post-Net
Businesses

Source: The Gartner Group

The More Pervasive the Technology

Becomes, the Higher the Final Plateau
Why Did The Internet as a Trigger Technology
Have Such a Huge Impact?
Open, dynamic standards
Global, decentralized, scalable
Continual innovation and evolution (http, ssl, xml, etc.)

Worldwide deployment of each wave of functionality into

new business as well as existing systems and platforms
Low barriers to entry
Users also became developers and e-commerce entrepreneurs
Proliferation of start ups and spin offs in all sectors
Low costs of implementation and distribution for enterprise and
individuals combined with a large and rapidly growing market

Abundant opportunities for increasing productivity and

reducing cost of doing business across all sectors

Framework for E-Commerce Today

B2C (and C2C)

Interactive marketing using search as a driver

Online sales and efficiencies in distribution
Customized service, self-service and support via the web
Online user community and peer-to-peer communication recognized as a
powerful force

B2B
Online supply chain management is a given
Online procurement in place in the majority of companies

E-marketplaces survivors are well established and (mostly) profitable

Radically distributed organizations are common

B2E
E-knowledge management and decentralized, online communications are
the norm
E-Learning is pervasive
Employee training, simulations, regulatory compliance and productivity support

Enterprise B2C and B2B Drivers

Have Evolved Along With the Net
Web Presence Is Now a Competitive Necessity
Where the Customer Is
Majority of customers (both consumer and enterprise) research
online then buy through traditional channels

Intrinsic to a multi-channel sales and marketing strategy

Supports new customer acquisition through search terms and
online advertising

All Companies Are Striving to Lower Costs of Customer

Support and Procurement
E-Commerce supplements or substitutes for traditional support
systems
Self service online

eCRM to enhance customer loyalty

Encourage repeat business

eProcurement and Supply Chain Management

More efficient and cost-effective relationships with suppliers,
vendors and distributors online

What Does It Mean for Todays

Enterprise?
Customer Expectations
Impossible to attract and retain customers without using the
Internet in some way

Channel Ubiquity
Creates new marketing, sales, support and distribution channels
and alters structure of market by adding transparency across
borders and organizations; increases market size but requires
new differentiation strategies

Cycle Compression
Constant innovation and improvements in core products with
outsourcing of non-core areas; shorter learning curves,
development and product cycles

Cost and Pricing Pressures

Must squeeze costs out of supply chain and internal processes to
compete in more open markets

E-Commerce Evolution:
Whats Next?
Short term:
New round of consolidation at the top driving industry
convergence and more start ups leveraging
community, peer interactions and e-marketplaces
Enterprise focus on integration with existing IT
solutions and increasing ROI
More attention to applying best practices and
analytics to gain customer loyalty and competitive
advantage
Migration to online-only options

Ups and Downs in the Internets

Competitive Landscape
Bargaining Power

Number of Players

Threat of Substitute

of Buyers

Competition

Products and Services

Each industry sector has a different balance of factors

and pace of e-business adoption

Bargaining Power
of Suppliers

Barriers to Entry

Bargaining Power of
Channels

Continuing E-Commerce Challenges

Security
Trust and privacy
Stability and robustness under attack (virus,
spam)
Internal enterprise integration of Internet and ECommerce implementation
Channel conflict and fear of cannibalization
Sorting out the truly valuable from the easily
possible

E-Commerce Reality Check

Market Hype

E-Business Rules

Are we here?
Dot-com failures &
share fallout

E-Tailing
Investor
disillusionment

Business
disillusionment

Dot-com
starts

E-Business subsumed
into corporate DNA
Optimized E-Business
True E-Business
emerges

Interne
t
WWW

Technology
Trigger

Peak of Inflated
Expectations

Trough of
Disillusionment

Slope of
Enlightenment

Plateau of
Productivity

1990-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year