CHAPTER 13 : E-BUSINESS

Learning Outcomes

1.  Compare e-commerce and e-business

2.  Compare the four types of e-business models
3.  Describe the benefits and challenges associated with e-business
4  Explain the differences among e-shops, e-mails, and online auctions

E-Business

The Internet is a powerful channel that presents new opportunities for an organization to:

1. Touch customers
2. Enrich products and services with information
3. Reduce costs

E-Commerce & E-Business

How do e-commerce and e-business differ?

• E-commerce – the buying and selling of goods and services over the Internet (online transactions)
• E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners (online transactions, serving customers and collaborating with business partner)

E-Business

Industries Using E-Business

E-Business Models
E-business model – an approach to conducting electronic business on the Internet

Business-to-Business (B2B)

- Electronic marketplace (e-marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities

Electronic marketplace (e-marketplace)

1. Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels
2. Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers
3. Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials

Business-to-Consumer (B2C)

Common B2C e-business models include:

• e-shop – a version of a retail store where customers can shop at any hour of the day without leaving their home or office
• e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops

Business-to-Consumer (B2C)

• Brick-and-mortar business- operates in a physical store without an Internet presence. Eg: Bata.
• Pure-play business- a business that operates on the Internet only without a physical store. Examples include fashionvalet.com. 
• Click-and-mortar business– a business that operates in a physical store and on the Internet .Eg: Hijabs by Hanami

Consumer-to-Business (C2B)

• Priceline.com is an example of a C2B e-business model
• The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices

Consumer-to-Consumer (C2C)

Online auctions

• Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically
• Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins
• Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid

C2C communities include:

• Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting
• Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts
• Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan

E-Business Benefits

E-Business benefits include:

- Highly accessible

• Businesses can operate 24 hours a day, 7 days a week, 365 days a year

- Increased customer loyalty

• Additional channels to contact, respond to, and access customers helps contribute to customer loyalty

-  Improved information content 

• In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and prices

- Increased convenience

• E-business automates and improves many of the activities that make up a buying experience

- Increased global reach

• Businesses, both small and large, can reach new markets

- Decreased cost 

• The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication

E-Business Challenges

 E-business challenges include:

- Identifying Limited Market Segments

• The main challenge of e-business is the lack of growth in some sectors due to product or service limitation.

- Managing Consumer Trust

• Internet marketers must develop a trustworthy relationship to make that initial sale and generate customer loyalty.

- Ensuring Consumer Protection

• Implement Internet Security, protect from misuse of customer information.

- Managing Consumer Trust

• Companies that operate online must obey a patchwork of rules about which customers are subject to sales tax on their purchase and which are not.

E-Business Benefits and Challenges

There are numerous advantages and limitations in e-business revenue models including: 

• Transaction fees
• License fees
• Subscription fees
• Value-added fees
• Advertising fees

Mashups

- Web mashup - a Web site or Web application that uses content from more than one source to create a completely new service

• Application programming interface (API) - a set of routines, protocols, and tools for building software applications
• Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups

CHAPTER 12: INTEGRATING THE ORGANIZATION FROM END TO END - ENTERPRISE RESOURCE PLANNING

Learning Outcomes

1.Describe the role information plays in enterprise resource planning systems

2.Identify the primary forces driving the explosive growth of enterprise resource planning systems

3.Explain the business value of integrating supply chain management, customer relationship management, and enterprise resource planning systems

Enterprise Resource Planning (ERP)

- At the heart of all ERP systems is a database, when a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system.

- ERP systems automate business processes

Bringing the Organization Together

- ERP – The organization before ERP

- ERP – bringing the organization together

The Evolution of ERP

Integrating SCM, CRM, and ERP

- SCM, CRM, and ERP are the backbone of e-business

- Integration of these applications is the key to success for many companies

- Integration allows the unlocking of information to make it available to any user, anywhere, anytime

- SCM and CRM market overviews 

-  General audience and purpose of SCM, CRM and ERP

Integration Tools

- Many companies purchase modules from an ERP vendor, an SCM vendor, and a CRM vendor and must integrate the different modules together

  *Middleware – several different types of software which sit in the middle of and provide connectivity between two or more software applications 

  *Enterprise application integration (EAI) middleware – packages together commonly used functionality which reduced the time necessary to develop solutions that integrate applications from multiple vendors

- Data points where SCM, CRM, and ERP integrate

Enterprise Resource Planning (ERP)

ERP systems must integrate various organization processes and be:

1. Flexible - must be able to quickly respond to the changing needs of the organization
2. Modular and open - must have an open system architecture, meaning that any module can be interface, with or detached whenever required without affecting the other modules. 
3. Comprehensive - must be able to support a variety of organizational functions for a wide range of businesses
4. Beyond the company - must support external partnerships and collaboration efforts

CHAPTER 11 : BUILDING A CUSTOMER-CENTRIC ORGANIZATION – CUSTOMER RELATIONSHIP MANAGEMENT

Learning Outcomes

1. Compare operational and analytical customer relationship management
2. Identify the primary forces driving the explosive growth of customer relationship management
3. Define the relationship between decision making and analytical customer relationship management
4. Summarize the best practices for implementing a successful customer relationship management system

Customer Relationship Management (CRM)

- CRM enables an organization to:

• Provide better customer service
• Make call centers more efficient
• Cross sell products more effectively
• Help sales staff close deals faster
• Simplify marketing and sales processes
• Discover new customers
• Increase customer revenues

Recency, Frequency, and Monetary Value

- Organizations can find their most valuable customers through “RFM” - Recency, 

Frequency, and Monetary value

§How recently a customer purchased items (Recency)

§How frequently a customer purchased items (Frequency)

§How much a customer spends on each purchase (Monetary Value)

The Evolution of CRM

- CRM reporting technology – help organizations identify their customers across other 

applications

- CRM analysis technologies – help organization segment their customers into categories 

such as best and worst customers

- CRM predicting technologies – help organizations make predictions regarding customer 

behavior such as which customers are at risk of leaving

-Three phases in the evolution of CRM include reporting, analyzing, and predicting

The Ugly Side of CRM

Customer Relationship Management’s Explosive Growth

- CRM Business Drivers

- Forecasts for CRM Spending (in billions)

Using Analytical CRM to Enhance Decisions

- Operational CRM – supports traditional transactional processing for day-to-day front

office operations or systems that deal directly with the customers

- Analytical CRM – supports back-office operations and strategic analysis and includes all 

systems that do not deal directly with the customers

- Operational CRM and analytical CRM

Customer Relationship Management Success Factors

- CRM success factors include:

1. Clearly communicate the CRM strategy
2. Define information needs and flows
3. Build an integrated view of the customer
4. Implement in iterations
5. Scalability for organizational growth

CHAPTER 10 : EXTENDING THE ORGANIZATION - SUPPLY CHAIN MANAGEMENT

Learning Outcomes

1. List and describe the components of a typical supply chain
2. Define the relationship between decision making and supply chain management
3. Describe the four changes resulting from advances in IT that are driving supply chains
4. Summarize the best practices for implementing a successful supply chain management system

Supply Chain Management

- The average company spends nearly half of every dollar that it earns on production

-In the past, companies focused primarily on manufacturing and quality improvements to 

influence their supply chains

Basics of Supply Chain

- The supply chain has three main links:

1.Materials flow from suppliers and their “upstream” suppliers at all levels

2.Transformation of materials into semifinished and finished products through the 

organization’s own production process

3.Distribution of products to customers and their “downstream” customers at all levels

- Organizations must embrace technologies that can effectively manage supply chains

 Plan

§A company must have a plan for managing all the resources that go toward meeting

customer demand for products or services.

Source

§Companies must carefully choose reliable suppliers that will deliver goods and

services required for making products. 

Make

§This is the step where companies manufacture their products or services. This can 

include scheduling the activities necessary for production, testing, packaging, and 

preparing for delivery.

Deliver (Logistic)

§Companies must be able to receive orders from customers, fulfill the orders via a 

network of warehouses, pick transportation companies to deliver the products, and 

implement a billing and invoicing system to facilitate payments.

Return

§This is typically the most problematic step in the supply chain. Companies must 

create a network for receiving defective and excess products and support customers 

who have problems with delivered products.

Information Technology’s Role in the Supply Chain

- Factors Driving SCM

          Visibility

- Visibility – more visible models of different ways to do things in the supply chain 

have emerged.  High visibility in the supply chain is changing industries, as Wal-Mart 

demonstrated

- Supply chain visibility – the ability to view all areas up and down the supply chain

- Bullwhip effect – occurs when distorted product demand information passes from 

one entity to the next throughout the supply chain

- Supply chain visibility allows organizations to eliminate the bullwhip effect

§To explain the bullwhip effect to your students discuss a product that demand does 

not change, such as diapers.  The need for diapers is constant, it does not increase at 

Christmas or in the summer, diapers are in demand all year long.  The number of 

newborn babies determines diaper demand, and that number is constant.

§Retailers order diapers from distributors when their inventory level falls below a 

certain level, they might order a few extra just to be safe

§Distributors order diapers from manufacturers when their inventory level falls below a 

certain level, they might order a few extra just to be safe

§Manufacturers order diapers from suppliers when their inventory level falls below a 

certain level, they might order a few extra just to be safe

§Eventually the one or two extra boxes ordered from a few retailers becomes several 

thousand boxes for the manufacturer.  This is the bullwhip effect, a small ripple at one 

end makes a large wave at the other end of the whip.

Consumer Behavior

- Companies can respond faster and more effectively to consumer demands through 

supply chain enhances

- Once an organization understands customer demand and its effect on the supply 

chain it can begin to estimate the impact that its supply chain will have on its 

customers and ultimately the organizations performance

- Demand planning software – generates demand forecasts using statistical tools 

and forecasting techniques

Competition

- Supply chain planning (SCP) software– uses advanced mathematical algorithms 

to improve the flow and efficiency of the supply chain

- Supply chain execution (SCE) software – automates the different steps and 

stages of the supply chain

- SCP and SCE both increase a company’s ability to compete

- SCP depends entirely on information for its accuracy

- SCE can be as simple as electronically routing orders from a manufacturer to a 

supplier

- SCP and SCE in the supply chain

Speed

- Three factors fostering speed

Supply Chain Management Success Factors

- SCM industry best practices include:

1.Make the sale to suppliers

2.Wean employees off traditional business practices

3.Ensure the SCM system supports the organizational goals

4.Deploy in incremental phases and measure and communicate success

5.Be future oriented

CHAPTER 9 : ENABLING THE ORGANIZATION - DECISION MAKING

Learning Outcomes

1. Define the systems organizations use to make decisions and gain competitive advantages
2. Describe the three quantitative models typically used by decision support systems
3. Describe the relationship between digital dashboards and executive information system
4. List and describe four types of artificial intelligence system
5. Describe three types of data-mining analysis capabilities

Decision Making

- Reasons for the growth of decision-making information systems

• People need to analyze large amounts of information
• People must make decisions quickly
• People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions
• People must protect the corporate asset of organizational information

- Model – a simplified representation or abstraction of reality

- IT systems in an enterprise

Transaction Processing Systems

- Moving up through the organizational pyramid users move from requiring transactional information to analytical information

- Transaction processing system - the basic business system that serves the operational level (analysts) in an organization

- Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

- Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

Decision Support Systems

Models information to support managers and business professionals during the decision

making process

- Three quantitative models used by DSSs include:

1.Sensitivity analysis – the study of the impact that changes in one (or more) parts of the

model have on other parts of the model.

Eg: What will happen to the supply chain if a tsunami in Sabah reduces holding inventory

from 30% to 10%?

2.What-if analysis – checks the impact of a change in an assumption on the proposed

solution.

Eg: Repeatedly changing revenue in small increments to determine it effects on

other variables.

3.Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired

level of output.

Eg: Determine how many customers must purchase a new product to increase gross profits

to $5 million.

Executive Information Systems

- A specialized DSS that supports senior level executives within the organization

-  Most EISs offering the following capabilities:

1. Consolidation – involves the aggregation of information and features simple roll-ups to

complex groupings of interrelated information. 

Eg: Data for different sales representatives can be rolled up to an office level. Then state

level, then a regional sales level.

2. Drill-down – enables users to get details, and details of details, of information.

Eg: From regional sales data then drill down to each sales representatives at each office.

3. Slice-and-dice – looks at information from different perspectives. 

Eg: One slice of information could display all product sales during a given promotion, 

another slice could display a single product’s sales for all promotions.

- Digital dashboard – integrates information from multiple components and presents it in a

unified display

Artificial Intelligence (AI)

- Intelligent system – various commercial applications of artificial intelligence

- Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

• Advantages: can check info on competitor

- The ultimate goal of AI is the ability to build a system that can mimic human intelligence

 - Four most common categories of AI include:

•                Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems. 

Eg: Playing Chess.

•            Neural Network – attempts to emulate the way the human brain works.

Eg: Finance industry uses neural network to review loan applications and create patterns or profiles of applications that fall into two categories – approved or denied.

•              Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem.

 Eg: Business executives use genetic algorithm to help them decide which combination of projects a firm should invest.

•               Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

1.                Multi-agent systems
2.             Agent-based modeling 

Eg:  Shopping bot: Software that will search several retailer’s websites and provide a comparison of each retailers’s offering including prive and availability.

Data Mining
- Data-mining software includes many forms of AI such as neural networks and expert systems

- Common forms of data-mining analysis capabilities include:

•               Cluster analysis
•               Association detection
•               Statistical analysis

Cluster Analysis

- Cluster analysis – a technique used to divide an information set into mutually exclusive 

groups such that the members of each group are as close together as possible to one 

another and the different groups are as far apart as possible

- CRM systems depend on cluster analysis to segment customer information and identify 

behavioral traits

Eg: Consumer goods by content, brand loyalty or similarity

Association Detection

- Association detection – reveals the degree to which variables are related and the 

nature and frequency of these relationships in the information

§Market basket analysis – analyzes such items as Web sites and checkout scanner 

information to detect customers’ buying behavior and predict future behavior by identifying 

affinities among customers’ choices of products and services

Eg: Maytag uses association detection to ensure that each generation of appliances is 

better than the previous generation.

Statistical Analysis

- Statistical analysis – performs such functions as information correlations, distributions, 

calculations, and variance analysis

§Forecast – predictions made on the basis of time-series information

§Time-series information – time-stamped information collected at a particular frequency

Eg: Kraft uses statistical analysis to assure consistent flavor, color, aroma, texture, and 

appearance for all of its lines of foods