Businesses operating on the web face additional factors: (1) the web extends a company’s reach beyond traditional boundaries; (2) the web increases the speed and efficiency of business communications.
Borders and Jurisdiction
The relationship between geographic boundaries and legal boundaries in based on: power, effects, legitimacy, and notice.
Power: control over physical space and the people and objects that reside in that space. For laws to be effective a government must be able to enforce them. The ability of a government to exert control-jurisdiction.
Effects: relationship between physical proximity and the effects or impact of a person’s behaviour.
Legitimacy: the legitimate right to create and enforce laws derives from the mandate of those who are subject to those laws. Legitimacy is the idea that those subject to laws should have some role in formulating them.
Notice: People receive constructive notice that they have become subject to new laws and cultural norms when they cross an international border.
Jurisdiction on the internet
Defining, establishing, and asserting jurisdiction is more difficult on the internet-because geographic boundaries do not exist.
Subject-matter jurisdiction: a court’s authority to decide a particular type of dispute.
Personal jurisdiction: determined by the residence of the parties. A court has personal jurisdiction over a case if the defendant is a resident of the state in which the court is located. An out of state person or corporation can also voluntarily submit to the jurisdiction of a particular state court by agreeing to do so in writing or by taking certain actions in the state. Forum selection clause- contract will be enforced according to the laws of a particular state. Long arm statutes create personal jurisdiction over nonresidents who transact business or commit tortuous acts in the state.
Jurisdiction in international commerce: jurisdiction across international borders is governed by treaties between the countries. Non-US corporations and individuals can be sued in US courts if they conduct business or commit tortuous acts in the US. Foreign courts can enforce decisions against US corporations or individuals through the US court system if those courts can establish jurisdiction over the matter. Courts asked to enforce the laws of other nations sometimes follow a principle called judicial comity.
Contracting and Contract Enforcement in e-commerce
Any contract includes three essential elements: an offer, an acceptance, and consideration. On the internet – offers and acceptances can occur when parties exchange e-mail messages, engage in electronic data interchange (EDI), or fill out forms on web pages. When a seller advertises goods for sale on a web site, that seller is not marking an offer, but is inviting offers from potential buyers. When a buyer submits an order, which is an offer, the seller can accept that offer and create a contract. Written contracts on the web: certain categories of contracts aren’t enforceable unless the terms are put into writing and signed by both parties. Contracts for the sale of goods worth more than $500 and contracts that require actions that cannot be completed within one year must be created by a signed writing. A writing exists when the terms of a contract have been reduced to some tangible form.
Warranties on the web: any contract for the sale of goods includes implied warranties. A seller implicitly warrants that the goods it offers for sale are fit for the purposes for which they are normally used. Sellers can avoid some implied warranty liability by making a warranty disclaimer. A warranty disclaimer is a statement declaring that the seller will not honor some or all implied warranties.
Authority to Form Contracts: In general, courts will not hold a person or corporation whose identity has been forged to the terms of the contract; however, if negligence on the part of the person or corporation contributed to the forgery, a court may hold the negligent party to the terms of the contract.
Terms of service agreements: a site visitor is held to the terms of service even if that visitor has not read the text or clicked a button to indicate agreement with the terms.
Use and protection of intellectual property in lone business
Intellectual property –all products of the human mind.
Copyright infringement: a copyright is a right granted by a government to the author or creator of a literary or artistic work. Gives the author or creator the sole and exclusive right to print, publish, or sell the work-include virtually all forms of artistic or intellectual expression. In the US, works created after 1977 are protected for the life of the author plus 70 years. Many countries required the creator of a work to register that work to obtain copyright protection. US law still allows registration, but registration is no longer required. Most US web pages are protected by the automatic copyright provision of the law because they arrange the elements of words, graphics, and HTML tags in a way that creates an original work. The fair use of a copyrighted work includes copying it for use in criticism, comment, news reporting, teaching, scholarship, or research-provide a citation to the original work. An entity becomes liable for vicarious copyright infringement if it is capable of supervising the infringing activity and obtains a financial benefit from the infringing activity.
Patent Infringement: a patent is an exclusive right granted by the government to an individual to make, use, and sell an invention. In the US, patents on inventions protect the inventor’s rights for 20 years. A patent on the design for an invention provides protection for 14 years. To be patentable, an invention must be genuine, novel, useful, and not obvious given the current state of technology.
Trademark Infringement: a trademark is a distinctive mark, device, motto, or implement that a company affixes to the goods it produces for identification purposes. A service mark is similar to a trademark, but it is used to identify services provided.
Cybersquatting is the practice of registering a domain name that is the trademark of another person or company in the hopes that the owner will pay huge amounts of money to acquire the URL. A related problem, called name changing, occurs when someone registers purposely misspelled variations of well known domain names. Name stealing occurs when someone posing as a site’s administrator changes the ownership of the site’s assigned domain name to another site and owner. Disputes that arise when one person has registered a domain name that is an existing trademark or company name are settled by the World Intellectual Property Association. A domain name ownership change occurs when owner info maintained by a public domain registrar is changed in the registrar’s database to reflect a new owner’s name and business address.
Protecting Intellectual Property Online
Several industry trade groups have proposed solutions to the current problems in digital copyright protection, including host name blocking, packet filtering, and proxy servers. One promising technique employs steganography to create a digital watermark. The watermark is a digital code or stream embedded undetectably in a digital image or audio file. It can be encrypted to protect its contents, or simply hidden among the bits-digital info-comprising the image or recording. Copy control is an electronic mechanism for limiting the number of copies that one can make of a digital work.
Defamation
A defamatory statement is a statement that is false and that injures the reputation of another person or company. If the statement injures the reputation of a product or service instead of a person, it is called product disparagement. A person must establish that the defamatory statement caused injury. Per se defamation-a court deems some types of statements to be so negative that injury is assumed. An important exception in US law exists for statements that are defamatory-but that are about a public figure. Statements of personal opinion are true statements and thus neither defamatory nor disparaging.
Deceptive trade practices
If the objects being manipulated are trademarked, however, these manipulations can violate the trademark holder’s rights. Web sites that include links to other sites must be careful not to imply a relationship with the companies sponsoring the other sites unless a relationship exists. Trademark dilution is the reduction of the distinctive quality of a trademark by alternative uses.
Advertising Regulation
Advertising is regulated primarily by the federal trade commission – publishes regulations and investigates claims of false advertising. Bait advertising, consumer lending and leasing, endorsement and testimonials, energy consumption statements for home appliances, guarantees and warranties, prices
Online crimes
-includes online versions of crimes that have been undertaken for years in the physical world, including theft, stalking, distribution of porn, and gambling. Other crimes, such as commandeering one computer to launch attacks on other computers, are new. Law enforcement agencies - obstacle they face is the issue of jurisdiction. Another problem facing law enforcement officers is the difficulty of applying law that were written before the internet.
Ethical Issues
The Electronic Communications Privacy Act of 1986 is the main law governing privacy on the Internet today. This law was enacted before the general public began its wide use of the internet. The law was written to update existing law that prevented interception of audio signal transmissions so that any type of electronic transmissions would be given the same protections. One of the major privacy controversies in the US today is the opt in versus opt out issue. The most common policy used in US companies today is an opt out approach. In an opt out approach, the company collecting the info assumes that the customer doesn’t object to the company’s use of the info unless the customer specifically chooses to deny permission. In the less common opt in approach the company collecting the info doesn’t use the info for any other purpose unless the customer specifically chooses to allow that use.
Taxation and Electronic Commerce
Firms that engage in e-commerce must comply with these multiple tax laws from their first day of existence. Income taxes are levied by national, state, and local governments on the net income generated by business activities. Transaction taxes which include sales taxes, use taxes, excise taxes, and customer duties, are levied on the products or services that the company sells or uses. Property taxes are levied by states and local governments on the personal property and real estates used in the business. Web businesses are income taxes and sales taxes.
Nexus
A government acquires the power to tax a business when that business establishes a connection with the area controlled by the government.
US Income Taxes
A basic principle of the US tax system is that any verifiable increase in a company’s wealth is subject to federal taxation. Any company whose US based web site generates income is subject to US federal income tax. A web site maintained by a company in the US must pay federal income tax on income generated by a company in the US must pay federal income tax on income generated outside of the US.
US State Sales Taxes
Businesses that establish nexus with a state must file sales tax returns and remit the sales tax they collect from their customers. If a business ships goods to customers in other states, it is not required to collect sales tax from those customers unless the business has established nexus with the customer’s state. A use tax is a tax levied by a state on property used in that state that was not purchased in that state. Larger businesses use complex software to manage their sales tax obligation. Some purchasers are exempt from sales tax, such as certain charitable organizations and businesses buying items for resale.
EU Value Added Taxes
The Value Added Tax is assessed on the amount of value added at each stage of production-is collected by the seller at each stage of the transaction. Companies based in EU countries must collect VAT on digital goods no matter where in the EU the products are sold. Non EU companies that sell into the EU must now register with EU tax authorities and levy, collect, and remit VAT if their sales include digital goods delivered into the EU.
Thursday, February 14, 2008
Thursday, February 7, 2008
ch.6 Key Concept
Key Concept
This chapter discusses a new options brought on by the internet for supply chain management and procurement. It discusses a variety approaches that companies have taken with regards to obtaining materials and selling products online.
Origins of auctions
-earliest records of auctions-Babylon (500 BC)-men bid against each other for the women they wished to marry.
-Auctions became common activities in 17th century England (taverns held regular auctions of art and furniture)
-bids -price willing to pay for an item.
-private valuations- amounts bidders are willing to pay for the item
-Shill bidders-People employed by the seller or the auctioneer can make bids on behalf of the seller
-English auctions: bidders publicly announce their successive higher bids until no higher bid is forthcoming-item sold to the highest bidder. (aka ascending price auction, open auction). Minimum bid is the price at which an auction begins. If no bidders are willing to pay that price, the item is removed from the auction. A minimum acceptable price-reserve price.
-Yankee auctions: English auctions that offer multiple units of an item for sale and allow bidders to specify the quantity they want to buy. The highest bidder is allotted the quantity bid. If items remain after satisfying the highest bidder, remaining items are allocated to successive lower bidders. Successful bidders only pay the price bid by the lowest successful bidder.
-Dutch auctions: open auction in which bidding starts at a high price and drops until a bidder accepts the price – descending price auctions.
-First price sealed bid auctions: bidders submit bids independently and are prohibited from sharing info with each other and the highest bidder wins. Successive lower bidders are awarded the remaining items at the prices they bid.
-Second price sealed bid auctions: the highest bidder is awarded the item at the price bid by the second highest bidder. Encourages all bidders to bid the amount of their private valuations-vickrey auctions.
-Open outcry double auctions: buy and sell offers are shouted by traders standing in an area on the exchange floor called a trading pit.
-Sealed bid double auctions: buyers and sellers each submit combined price quantity bids to an auctioneer. The auctioneer matches the sellers’ offers to the buyers’ offers until all the quantities offered for sale are sold to buyers.
-Reverse (seller bid) auction: multiple sellers submit bids to a single buyer. The prices go down as the bidding continues until no seller is willing to bid lower.
Online Auctions and related Businesses
-General consumer auctions: most successful consumer auction today – eBay. Third party assurance provider- provide assurance that the privacy policies of the websites meet certain standards (ex: eTRUST). Sellers and buyers must register – sellers pay eBay a listing fee and a sliding percentage of the final selling price and buyers pay none to eBay. eBay is a computerized version of the English auction-allows the seller to set a reserve price. The main difference between eBay and a live English auction is that bidders don’t know who placed which bid until the auction is over. It has a minimum bid increment, amount by which one bid must exceed the previous bid. eBay offers a platform called eBay Stores within its auction site-sellers can establish eBay stores that show items for sale. Yahoo! success early in attracting large numbers of auction participants because it offered its auction service to sellers at no charge – less successful in attracting buyers, resulting in less bidding action. Amazon also added auctions to its list of products and services. Marketing tactics: Auctions Guarantee – addressed concerns raised in the media by eBay customers about being cheated by sellers.
Buyers of more expensive items can protect themselves by using a third party escrow service which holds the buyer’s payment until he or she receives and is satisfied with the purchased item.
-Specialty consumer auctions: identify special interest market targets and create specialized web auction sites.
-Consumer reverse auctions and group purchasing sites: visitor fills out a form that describes the item or service in which he or she is interested. The site then routes the visitor’s request to a group of participating merchants who reply to the visitor by email with offers to supply the item at a particular price.
-Group purchasing site – the seller posts an item with a price – as individual buyers enter bids on an item the site can negotiate a better price with the item’s provider. The posted price ultimately decreases as the number of bids increase.
-Business to business auctions: Large companies sometimes have liquidation specialists who find buyers for these unusable inventory items. Smaller businesses often sell their unusable and excess inventory to liquidation brokers, firms that find buyers for these items.
-Auction related services: growth of eBay auction sites has encouraged to create businesses that provide auction-related services of various kinds – these include escrow services, auction software and auction consignment services.
-Auction Escrow services: when purchasing high value items, buyers can use an escrow service to protect their interests. An independent party that holds a buyer’s payment until the buyer receives the purchased item and is satisfied that the item is what the seller represented it to be.
-Auction directory and info services: guidance for new auction participants and helpful hints and tips for more experienced buyers and sellers along with directories of online auction sites.
-Auction software: companies sell auction management software and services for both buyers and sellers. For sellers, these companies offer software and services that can help with or automate tasks such as image hosting, advertising, page design, bulk repeatable listings, feedback tracking and management, report tracking, and email management. For buyers, a number of companies sell auction sniping software. Sniping software observes auction progress until the last second and as the auction is about to expire, the sniping software places a bid high enough to win the auction. Auction consignment services take an item and create an online auction for that item, handle the transaction, and remit the balance of the proceeds after deducting a fee.
Wireless application protocol allows web pages formatted in HTML to be displayed on devices with small screens, such as PDAs and mobile phones.
Mobile Business-Revenue models for mobile business can be developed once mobile phones, notebook computers with wireless internet connections, and online marketplaces are interconnected in ways that let people switch among modes of access seamlessly. Intelligent Software Agents–programs that search the web and find items for sale that meet a buyer’s specifications. Simon is one of the best shopping agents currently available.
Virtual Communities-gathering place for people and businesses that doesn’t have a physical existence. Various forms, including Usenet newsgroups, chat rooms, and websites – offer people a way to connect with each other and discuss common issues and interests. Virtual learning community (ex: WebCT).
Early web communities-one of the first web communities was the WELL-whole earth electronic links – series of dialogs– members pay a monthly fee to participate in its forums and conferences.
Web Community Consolidation-virtual communities for consumers can succeed as money making propositions if they offer something sufficiently valuable to justify a charge for membership.
-Web log: websites that contain commentary on current events or specific issues written by individuals. Most of the early blogs were focused on technology topics or on topics about which people have strong beliefs (political or religious issues).
-Social networking websites: sole purpose of community-useful tools for persons who want to make new local friends, established acquaintances before moving to a new location, obtain advice of various kinds, or who are looking for a job.
-Idea Based Virtual Communities: Other web sites create communities based on the connections between ideas.
- Revenue Models for Web Portals and Virtual Communities-by the late 1990s, virtual communities were selling advertising to generate revenue. Beginning in 1998, a wave of purchases and mergers occurred among these sites- emerged still used an advertising only revenue generation model and included all the features offered by virtual community sites, search engine sites, web directories, and other info providing and entertainment sites.
-Advertising supported web portals and virtual communities: because web portals ask their members to provide demographic info about themselves, the potential for targeted marketing is very high. Second wave portal strategies are based less on up front site sponsorship payments and more on the generation of revenues from continuing relationships with people who use their portal sites. The larger portals that have survived are turning to mixed models.
- Monetizing refers to the conversion of existing regular site visitors seeking free info or services info fee paying subscribers or purchasers of services.
-Internal web portals and virtual communities: growing number of large organizations have built web portals to provide info to their employees. Internal web portals run on the intranet – save significant amounts of money by replacing the printing and distribution of paper memos, newsletters, and other correspondence with a web site.
Application
Hedgehog is an online company that works with e-procurement. It develops industry specific auctions and exchanges. It is a company that helps bring suppliers and buyers together and offers a variety of auctions such as: multi-format reverse auctions, Dutch auctions, and sealed bid auctions. In addition, the company provides information for businesses interested in being involved in auctions.
This chapter discusses a new options brought on by the internet for supply chain management and procurement. It discusses a variety approaches that companies have taken with regards to obtaining materials and selling products online.
Origins of auctions
-earliest records of auctions-Babylon (500 BC)-men bid against each other for the women they wished to marry.
-Auctions became common activities in 17th century England (taverns held regular auctions of art and furniture)
-bids -price willing to pay for an item.
-private valuations- amounts bidders are willing to pay for the item
-Shill bidders-People employed by the seller or the auctioneer can make bids on behalf of the seller
-English auctions: bidders publicly announce their successive higher bids until no higher bid is forthcoming-item sold to the highest bidder. (aka ascending price auction, open auction). Minimum bid is the price at which an auction begins. If no bidders are willing to pay that price, the item is removed from the auction. A minimum acceptable price-reserve price.
-Yankee auctions: English auctions that offer multiple units of an item for sale and allow bidders to specify the quantity they want to buy. The highest bidder is allotted the quantity bid. If items remain after satisfying the highest bidder, remaining items are allocated to successive lower bidders. Successful bidders only pay the price bid by the lowest successful bidder.
-Dutch auctions: open auction in which bidding starts at a high price and drops until a bidder accepts the price – descending price auctions.
-First price sealed bid auctions: bidders submit bids independently and are prohibited from sharing info with each other and the highest bidder wins. Successive lower bidders are awarded the remaining items at the prices they bid.
-Second price sealed bid auctions: the highest bidder is awarded the item at the price bid by the second highest bidder. Encourages all bidders to bid the amount of their private valuations-vickrey auctions.
-Open outcry double auctions: buy and sell offers are shouted by traders standing in an area on the exchange floor called a trading pit.
-Sealed bid double auctions: buyers and sellers each submit combined price quantity bids to an auctioneer. The auctioneer matches the sellers’ offers to the buyers’ offers until all the quantities offered for sale are sold to buyers.
-Reverse (seller bid) auction: multiple sellers submit bids to a single buyer. The prices go down as the bidding continues until no seller is willing to bid lower.
Online Auctions and related Businesses
-General consumer auctions: most successful consumer auction today – eBay. Third party assurance provider- provide assurance that the privacy policies of the websites meet certain standards (ex: eTRUST). Sellers and buyers must register – sellers pay eBay a listing fee and a sliding percentage of the final selling price and buyers pay none to eBay. eBay is a computerized version of the English auction-allows the seller to set a reserve price. The main difference between eBay and a live English auction is that bidders don’t know who placed which bid until the auction is over. It has a minimum bid increment, amount by which one bid must exceed the previous bid. eBay offers a platform called eBay Stores within its auction site-sellers can establish eBay stores that show items for sale. Yahoo! success early in attracting large numbers of auction participants because it offered its auction service to sellers at no charge – less successful in attracting buyers, resulting in less bidding action. Amazon also added auctions to its list of products and services. Marketing tactics: Auctions Guarantee – addressed concerns raised in the media by eBay customers about being cheated by sellers.
Buyers of more expensive items can protect themselves by using a third party escrow service which holds the buyer’s payment until he or she receives and is satisfied with the purchased item.
-Specialty consumer auctions: identify special interest market targets and create specialized web auction sites.
-Consumer reverse auctions and group purchasing sites: visitor fills out a form that describes the item or service in which he or she is interested. The site then routes the visitor’s request to a group of participating merchants who reply to the visitor by email with offers to supply the item at a particular price.
-Group purchasing site – the seller posts an item with a price – as individual buyers enter bids on an item the site can negotiate a better price with the item’s provider. The posted price ultimately decreases as the number of bids increase.
-Business to business auctions: Large companies sometimes have liquidation specialists who find buyers for these unusable inventory items. Smaller businesses often sell their unusable and excess inventory to liquidation brokers, firms that find buyers for these items.
-Auction related services: growth of eBay auction sites has encouraged to create businesses that provide auction-related services of various kinds – these include escrow services, auction software and auction consignment services.
-Auction Escrow services: when purchasing high value items, buyers can use an escrow service to protect their interests. An independent party that holds a buyer’s payment until the buyer receives the purchased item and is satisfied that the item is what the seller represented it to be.
-Auction directory and info services: guidance for new auction participants and helpful hints and tips for more experienced buyers and sellers along with directories of online auction sites.
-Auction software: companies sell auction management software and services for both buyers and sellers. For sellers, these companies offer software and services that can help with or automate tasks such as image hosting, advertising, page design, bulk repeatable listings, feedback tracking and management, report tracking, and email management. For buyers, a number of companies sell auction sniping software. Sniping software observes auction progress until the last second and as the auction is about to expire, the sniping software places a bid high enough to win the auction. Auction consignment services take an item and create an online auction for that item, handle the transaction, and remit the balance of the proceeds after deducting a fee.
Wireless application protocol allows web pages formatted in HTML to be displayed on devices with small screens, such as PDAs and mobile phones.
Mobile Business-Revenue models for mobile business can be developed once mobile phones, notebook computers with wireless internet connections, and online marketplaces are interconnected in ways that let people switch among modes of access seamlessly. Intelligent Software Agents–programs that search the web and find items for sale that meet a buyer’s specifications. Simon is one of the best shopping agents currently available.
Virtual Communities-gathering place for people and businesses that doesn’t have a physical existence. Various forms, including Usenet newsgroups, chat rooms, and websites – offer people a way to connect with each other and discuss common issues and interests. Virtual learning community (ex: WebCT).
Early web communities-one of the first web communities was the WELL-whole earth electronic links – series of dialogs– members pay a monthly fee to participate in its forums and conferences.
Web Community Consolidation-virtual communities for consumers can succeed as money making propositions if they offer something sufficiently valuable to justify a charge for membership.
-Web log: websites that contain commentary on current events or specific issues written by individuals. Most of the early blogs were focused on technology topics or on topics about which people have strong beliefs (political or religious issues).
-Social networking websites: sole purpose of community-useful tools for persons who want to make new local friends, established acquaintances before moving to a new location, obtain advice of various kinds, or who are looking for a job.
-Idea Based Virtual Communities: Other web sites create communities based on the connections between ideas.
- Revenue Models for Web Portals and Virtual Communities-by the late 1990s, virtual communities were selling advertising to generate revenue. Beginning in 1998, a wave of purchases and mergers occurred among these sites- emerged still used an advertising only revenue generation model and included all the features offered by virtual community sites, search engine sites, web directories, and other info providing and entertainment sites.
-Advertising supported web portals and virtual communities: because web portals ask their members to provide demographic info about themselves, the potential for targeted marketing is very high. Second wave portal strategies are based less on up front site sponsorship payments and more on the generation of revenues from continuing relationships with people who use their portal sites. The larger portals that have survived are turning to mixed models.
- Monetizing refers to the conversion of existing regular site visitors seeking free info or services info fee paying subscribers or purchasers of services.
-Internal web portals and virtual communities: growing number of large organizations have built web portals to provide info to their employees. Internal web portals run on the intranet – save significant amounts of money by replacing the printing and distribution of paper memos, newsletters, and other correspondence with a web site.
Application
Hedgehog is an online company that works with e-procurement. It develops industry specific auctions and exchanges. It is a company that helps bring suppliers and buyers together and offers a variety of auctions such as: multi-format reverse auctions, Dutch auctions, and sealed bid auctions. In addition, the company provides information for businesses interested in being involved in auctions.
Wednesday, February 6, 2008
Ch. 5 - Key Concept
Key Concept:
This chapter talks about the buying and selling between businesses online. It discusses the processes for managing the purchasing of materials, managing of inventory, creating and maintaining supplier relationships, and the production of end products. It also looks at how these areas are affected by the changes in technology and the growth of the internet.
Purchasing, logistics, and support activities
-Necessary characteristic of purchasing, logistics, and support activities is flexibility
Purchasing Activities
-Include identifying vendors, evaluating vendors, selecting specific products, placing orders, and resolving any issues (late deliveries, incorrect quantities, incorrect items, and defective items)
-Supply chain- all activities in the value chain to design, produce, promote, deliver, and support each component of a product
-Procurement includes all purchasing activities, plus the monitoring of all elements of purchase transactions-managing and developing relationship with key suppliers (supply management)
-Sourcing: identifying suppliers and determining the qualifications of those suppliers (e-sourcing) – specialized web purchasing sites
-Spend –the total dollar amount of the goods and services that a company buys during a year
-Direct materials are materials that become part of the finished product in a manufacturing process. Two types: Replenishment purchasing: (company negotiates long term contracts for most of the materials that it will need), spot market/spot purchasing (purchasing based excess demand)
-Indirect materials: are all other materials that the company purchases, including factory supplies such as sandpaper, hand tools, and replacement parts for manufacturing machinery.
-Logistics- objective to provide the right goods in the right quantities in the right place at the right time. The management of materials as they go from the raw materials through production to become finished goods is important to logistics.
-Knowledge management is the intentional collection, classification, and dissemination of info about a company, its products, and its processes. This type of knowledge is developed over time buy individuals working with a company (difficult to gather and distill).
E-Government-operate businesslike activities-employ people, buy supplies from vendors, and distribute benefit payments of many kinds. They also collect a variety of taxes and fees from their constituents
Network model of economic organization- shift from hierarchical structures towards network structures. More organizations are now giving their Procurement Departments new tools to negotiate with suppliers, including the possibility of forming strategic alliances. Supply web- networks are more flexible and can respond to changes in the economic environment more quickly
Electronic Data interchange
-Electronic data interchange is a computer to computer transfer of business info between two businesses that uses a standard format. -The business info exchanged is often transaction data but can include other info like price quotes and order status inquires.
-Emergence of large businesses in the late 1800s and early 1900s brought the need to create formal records of business transactions.
-1950s: companies began to use computers to store and process internal transaction records, but the info flow between businesses continued to be printed on paper
-1960s: exchanging transaction info on punched cards or magnetic tape.
-1960s and 1970s: Advances in data communications technology -trading partners to transfer data over telephone lines
-1968: freight and shipping companies joined together to form the Transportation Data Coordinating Committee which was charged with exploring ways to reduce paperwork. It created a standardized info set that included all the data elements commonly used.
-a set of cross industry standards for electronic components, mechanical equipment, and other widely used items was created- American National Standards Institute.
-1979: ANSI chartered a new committee to develop uniform EDI standards. This committee is called the Accredited Standards Committee X12 – the administrative body-Data Interchange Standards Association (DISA)
- mid 1980s-the United Nations Economic Commission and EDI experts worked on designing a common set of EDI standards
-1987: UN published its first standards under the title EDI for Administration, Commerce, and Transport
Value added networks
-Trading partners can implement the EDI network and EDI translation processes using one of two basic approaches:
-Direct connection EDI: requires each business in the network to operate its own on site EDI translator computer – connected directly to each other using modems and dial up telephone lines or dedicated leased lines – troublesome when located in different time zones and when transactions are time-sensitive or high in volume. The dedicated leased line option can become very expensive. -a company might decide to use the services of a value added network. A company that provides communications equipment, software, and skills needed to receive, store, and forward electronic messages that contain EDI transaction sets-a company must install EDI translator software that is compatible with the VAN. To send an EDI transaction set to a trading partner, the VAN customer connects to the VAN using a dedicated or dial up telephone line and then forwards the DEI formatted messages to the VAN. The VAN logs the message and delivers it to the trading partner’s mailbox on the VAN computer. The trading partner then dials in to the VAN and retrieves its EDI formatted messages from the mailbox-indirect connection EDI
EDI on the Internet
-The major roadblocks to conducting EDI over the internet were concerns about security and inability to provide audit logs and third party verification. As the TCP/IP structure of the internet was enhanced with secure protocols less worry of security issues.
-Nonrepudiation is the ability to establish that a particular transaction actually occurred
Open Architecture of the Internet
-Mid 1990s-a number of firms began providing EDI services on the internet. Companies that originally provided traditional VAN services now offer EDI on the internet
-Context Inspired Component Architecture –a set of standards for assembling business messages that provides a predictable structure for the content of those messages but that also provides more flexibility than EDI transaction sets.
Financial EDI
-The EDI transaction sets that provide instructions to a trading partner’s bank. When EFT’s involve two banks, they are executed using an automated clearing house system-which is a service that banks use to manage their accounts with each other. EDI capable banks are banks that are equipped to exchange payment and remittance data through VAN services for nonfinancial transactions-value added banks. Non bank VANs that can translate financial transaction sets into ACH formats and transmit them to banks that aren’t EDI capable are called financial VANS
Supply Chain Management using Internet technologies
-When companies integrate their supply management and logistics activities across multiple participants in a particular product’s supply chain, the job of managing that integration is called supply chain management
-Businesses establish long term relationships with a small number of very capable suppliers called tier one suppliers, in turn develop long term relationship with a large number of suppliers that provide components and raw materials to them. These tier two suppliers manage relationships with the next level of suppliers, tier three suppliers-that provide them with components and raw materials. The long term relationships à supply alliances
-Clear communications and quick responses to those communications are key elements of successful supply chain management. The only major disadvantage of using Internet technologies in supply chain management is the cost of the technologies.
Using Materials-tracking technologies with EDI and E-commerce
-Companies have been using optical scanners and bar codes to track the movement of materials
-Bar codes allow companies to scan materials as they are received and track them as they move
-Second wave of e-commerce-radio frequency identification devices -small chips that use radio transmissions to track inventory
-Main goals of supply chain management is to help each company in the chain focus on meeting the needs of the consumer at the end of the supply chain-ultimate consumer orientation
-The task of developing info exchange resources that can provide supplier performance summaries is one of the great challenges that B2B electronic commerce faces as it moves into its second wave
Electronic Marketplaces and portals
- info hubs for each major industry-would offer news, research reports, analyses of trends, and in depth reports on companies in the industry-offer marketplaces and auctions in which companies in the industry could contact each other and transact businesses, hubs would be vertically integrated called vertical portals/vortals-didn’t turn out to be exactly correct
Independent industry marketplaces
-The first company to launch hubs that followed the vertical portal model created trading exchanges that were focused on a particular industry- industry marketplaces (focused on a single industry, independent exchanges (not controlled by a company that was an established buyer or seller in the industry), public marketplaces (open to new buyers and sellers just entering the industry). Collectively à independent industry marketplaces
Private stores and customer portals
-As established companies in various industries watched new businesses open marketplaces, they became concerned that these independent operators would take control of transactions from them in supply chains.
-A private store has a password-protected entrances and offers negotiated price reductions on a limited selection of products-usually those that the customer has agreed to purchase in certain minimum quantities.
-Customer portal sites offer private stores along with services such as part number cross referencing, product usage guidelines, safety info, and other services that would be needlessly duplicated if the sellers were to participate in an industry marketplace.
Private company marketplaces
-E-procurement software allows a company to manage its purchasing function through a web interface. It automates many of the authorizations and other steps that are part of business procurement operations
-Include requests for quote posting areas, auctions, and integrated support for purchasing direct materials
-Companies that implement e-procurement software usually requires their suppliers to bid on their business
Industry consortia-sponsored marketplaces
-An industry consortia-sponsored marketplace is a marketplace formed by several large buyers in a particular industry
Five general forms of marketplaces that exist in B2B electronic commerce today:
-Private stores on sellers’ sites: one seller, many buyers, ex: Dell, few products, fixed pricing
-Customer portals: few sellers, many buyers, ex: Grainger, catalog based, fixed pricing
-Independent industry marketplaces: many sellers, many buyers, ex: ChemConnect, offer auctions, dynamic pricing
-Consortia sponsored marketplaces: few buyers, many sellers, Ex: Exostar, buyer control, fixed pricing
-Private company marketplaces: one buyer, many sellers, Ex: Harley Davidson, sellers bid on major buyers’ business
Application
Walmart at one time used a VAN intermediary to help manage the numerous suppliers the company has around the world. With the growth on the internet, Walmart moved online to internet EDI to help communicate with its suppliers, better manage its inventories, and increase its efficiency while reducing costs. In addition, Walmart deals with many small companies. These small companies can better afford the internet EDI system and compete with the many large companies supplying to Walmart.
This chapter talks about the buying and selling between businesses online. It discusses the processes for managing the purchasing of materials, managing of inventory, creating and maintaining supplier relationships, and the production of end products. It also looks at how these areas are affected by the changes in technology and the growth of the internet.
Purchasing, logistics, and support activities
-Necessary characteristic of purchasing, logistics, and support activities is flexibility
Purchasing Activities
-Include identifying vendors, evaluating vendors, selecting specific products, placing orders, and resolving any issues (late deliveries, incorrect quantities, incorrect items, and defective items)
-Supply chain- all activities in the value chain to design, produce, promote, deliver, and support each component of a product
-Procurement includes all purchasing activities, plus the monitoring of all elements of purchase transactions-managing and developing relationship with key suppliers (supply management)
-Sourcing: identifying suppliers and determining the qualifications of those suppliers (e-sourcing) – specialized web purchasing sites
-Spend –the total dollar amount of the goods and services that a company buys during a year
-Direct materials are materials that become part of the finished product in a manufacturing process. Two types: Replenishment purchasing: (company negotiates long term contracts for most of the materials that it will need), spot market/spot purchasing (purchasing based excess demand)
-Indirect materials: are all other materials that the company purchases, including factory supplies such as sandpaper, hand tools, and replacement parts for manufacturing machinery.
-Logistics- objective to provide the right goods in the right quantities in the right place at the right time. The management of materials as they go from the raw materials through production to become finished goods is important to logistics.
-Knowledge management is the intentional collection, classification, and dissemination of info about a company, its products, and its processes. This type of knowledge is developed over time buy individuals working with a company (difficult to gather and distill).
E-Government-operate businesslike activities-employ people, buy supplies from vendors, and distribute benefit payments of many kinds. They also collect a variety of taxes and fees from their constituents
Network model of economic organization- shift from hierarchical structures towards network structures. More organizations are now giving their Procurement Departments new tools to negotiate with suppliers, including the possibility of forming strategic alliances. Supply web- networks are more flexible and can respond to changes in the economic environment more quickly
Electronic Data interchange
-Electronic data interchange is a computer to computer transfer of business info between two businesses that uses a standard format. -The business info exchanged is often transaction data but can include other info like price quotes and order status inquires.
-Emergence of large businesses in the late 1800s and early 1900s brought the need to create formal records of business transactions.
-1950s: companies began to use computers to store and process internal transaction records, but the info flow between businesses continued to be printed on paper
-1960s: exchanging transaction info on punched cards or magnetic tape.
-1960s and 1970s: Advances in data communications technology -trading partners to transfer data over telephone lines
-1968: freight and shipping companies joined together to form the Transportation Data Coordinating Committee which was charged with exploring ways to reduce paperwork. It created a standardized info set that included all the data elements commonly used.
-a set of cross industry standards for electronic components, mechanical equipment, and other widely used items was created- American National Standards Institute.
-1979: ANSI chartered a new committee to develop uniform EDI standards. This committee is called the Accredited Standards Committee X12 – the administrative body-Data Interchange Standards Association (DISA)
- mid 1980s-the United Nations Economic Commission and EDI experts worked on designing a common set of EDI standards
-1987: UN published its first standards under the title EDI for Administration, Commerce, and Transport
Value added networks
-Trading partners can implement the EDI network and EDI translation processes using one of two basic approaches:
-Direct connection EDI: requires each business in the network to operate its own on site EDI translator computer – connected directly to each other using modems and dial up telephone lines or dedicated leased lines – troublesome when located in different time zones and when transactions are time-sensitive or high in volume. The dedicated leased line option can become very expensive. -a company might decide to use the services of a value added network. A company that provides communications equipment, software, and skills needed to receive, store, and forward electronic messages that contain EDI transaction sets-a company must install EDI translator software that is compatible with the VAN. To send an EDI transaction set to a trading partner, the VAN customer connects to the VAN using a dedicated or dial up telephone line and then forwards the DEI formatted messages to the VAN. The VAN logs the message and delivers it to the trading partner’s mailbox on the VAN computer. The trading partner then dials in to the VAN and retrieves its EDI formatted messages from the mailbox-indirect connection EDI
EDI on the Internet
-The major roadblocks to conducting EDI over the internet were concerns about security and inability to provide audit logs and third party verification. As the TCP/IP structure of the internet was enhanced with secure protocols less worry of security issues.
-Nonrepudiation is the ability to establish that a particular transaction actually occurred
Open Architecture of the Internet
-Mid 1990s-a number of firms began providing EDI services on the internet. Companies that originally provided traditional VAN services now offer EDI on the internet
-Context Inspired Component Architecture –a set of standards for assembling business messages that provides a predictable structure for the content of those messages but that also provides more flexibility than EDI transaction sets.
Financial EDI
-The EDI transaction sets that provide instructions to a trading partner’s bank. When EFT’s involve two banks, they are executed using an automated clearing house system-which is a service that banks use to manage their accounts with each other. EDI capable banks are banks that are equipped to exchange payment and remittance data through VAN services for nonfinancial transactions-value added banks. Non bank VANs that can translate financial transaction sets into ACH formats and transmit them to banks that aren’t EDI capable are called financial VANS
Supply Chain Management using Internet technologies
-When companies integrate their supply management and logistics activities across multiple participants in a particular product’s supply chain, the job of managing that integration is called supply chain management
-Businesses establish long term relationships with a small number of very capable suppliers called tier one suppliers, in turn develop long term relationship with a large number of suppliers that provide components and raw materials to them. These tier two suppliers manage relationships with the next level of suppliers, tier three suppliers-that provide them with components and raw materials. The long term relationships à supply alliances
-Clear communications and quick responses to those communications are key elements of successful supply chain management. The only major disadvantage of using Internet technologies in supply chain management is the cost of the technologies.
Using Materials-tracking technologies with EDI and E-commerce
-Companies have been using optical scanners and bar codes to track the movement of materials
-Bar codes allow companies to scan materials as they are received and track them as they move
-Second wave of e-commerce-radio frequency identification devices -small chips that use radio transmissions to track inventory
-Main goals of supply chain management is to help each company in the chain focus on meeting the needs of the consumer at the end of the supply chain-ultimate consumer orientation
-The task of developing info exchange resources that can provide supplier performance summaries is one of the great challenges that B2B electronic commerce faces as it moves into its second wave
Electronic Marketplaces and portals
- info hubs for each major industry-would offer news, research reports, analyses of trends, and in depth reports on companies in the industry-offer marketplaces and auctions in which companies in the industry could contact each other and transact businesses, hubs would be vertically integrated called vertical portals/vortals-didn’t turn out to be exactly correct
Independent industry marketplaces
-The first company to launch hubs that followed the vertical portal model created trading exchanges that were focused on a particular industry- industry marketplaces (focused on a single industry, independent exchanges (not controlled by a company that was an established buyer or seller in the industry), public marketplaces (open to new buyers and sellers just entering the industry). Collectively à independent industry marketplaces
Private stores and customer portals
-As established companies in various industries watched new businesses open marketplaces, they became concerned that these independent operators would take control of transactions from them in supply chains.
-A private store has a password-protected entrances and offers negotiated price reductions on a limited selection of products-usually those that the customer has agreed to purchase in certain minimum quantities.
-Customer portal sites offer private stores along with services such as part number cross referencing, product usage guidelines, safety info, and other services that would be needlessly duplicated if the sellers were to participate in an industry marketplace.
Private company marketplaces
-E-procurement software allows a company to manage its purchasing function through a web interface. It automates many of the authorizations and other steps that are part of business procurement operations
-Include requests for quote posting areas, auctions, and integrated support for purchasing direct materials
-Companies that implement e-procurement software usually requires their suppliers to bid on their business
Industry consortia-sponsored marketplaces
-An industry consortia-sponsored marketplace is a marketplace formed by several large buyers in a particular industry
Five general forms of marketplaces that exist in B2B electronic commerce today:
-Private stores on sellers’ sites: one seller, many buyers, ex: Dell, few products, fixed pricing
-Customer portals: few sellers, many buyers, ex: Grainger, catalog based, fixed pricing
-Independent industry marketplaces: many sellers, many buyers, ex: ChemConnect, offer auctions, dynamic pricing
-Consortia sponsored marketplaces: few buyers, many sellers, Ex: Exostar, buyer control, fixed pricing
-Private company marketplaces: one buyer, many sellers, Ex: Harley Davidson, sellers bid on major buyers’ business
Application
Walmart at one time used a VAN intermediary to help manage the numerous suppliers the company has around the world. With the growth on the internet, Walmart moved online to internet EDI to help communicate with its suppliers, better manage its inventories, and increase its efficiency while reducing costs. In addition, Walmart deals with many small companies. These small companies can better afford the internet EDI system and compete with the many large companies supplying to Walmart.
Tuesday, January 29, 2008
Chapter 4 Key Concept – Marketing on the Web
This chapter discusses the various methods that companies use to market their websites. It discusses the differences in product based and customer based marketing strategies and when each strategy is appropriate. In addition, the chapter explains the benefits and opportunities on the web for advertising and segmenting visitors. Finally, the strategies for measuring the effectiveness of ads are presented.
Web marketing strategies
-creating a marketing strategy you must consider the nature of the product and the nature of the potential customer.
-some managers think of their businesses in terms of the products they sell and makes sense when customers think of their needs in terms of product categories (ex: Staples)- product based organization (organize websites from an internal viewpoint)
-for customers looking to fulfill a specific need, companies should think as if they were the customer when designing web sites
-Customer based marketing strategies-Web creates an environment that allows firms to be flexible enough to meet the needs of many different users and companies can build sites to meet the specific needs of various types of customers
-building a customer based marketing strategy-identify groups of customers who share common characteristics
-Use of customer based marketing approaches was pioneered on B2B sites- customize product/service offerings
Communicating with different market segments
-First step: identifying groups of potential customers ; second step - selection of communication media.
-Media selection is critical for online firms because they don’t have a physical presence- only contact a customer has with firm may be the image projected through website.
Trust and media choices: the web is an intermediate step between mass media and personal contact and offers many advantages of personal contact selling and many of cost savings of mass media.
-Attempts to re-create mass media advertising on the web are likely to fail because many people ignore messages that lack content of any specific personal interest to them and mass media is more successful on passive state of minds while internet users have a more receptive state of mind and are more likely to actively evaluate messages (want to focus on trust building with the personal contact model -web log/blogs)
Market Segmentation
-Advertisers online responded to decrease in effectiveness of mass marketing by identifying specific portions of their markets and target then with specific advertising messages -micromarketing.
-the same person requires different combinations of products and services depending on the occasion-behavioural segmentation
-Online it is easier to design a single web site that meets the needs of visitors who arrive in different behavioural modes.
-usage based market segmentation-customizing experiences to match site usage behavior patterns of each visitor or type of visitor -common patterns of behaviour -categories that marketers use
1. Browsers: some visitors to a company’s web site are just surfing or browsing. Web sites intended to appeal to potential customers in this mode must offer them something that pique their interest Ex: trigger words.
2. Buyers: arrive in buyer mode are ready to make a purchase right way, offer a buyer is certainly that nothing will get in the way of the purchase transaction. The primary goal is to get the buyer to the shopping cart as quickly as possible
3. Shoppers: motivated to buy, but they are looking for more info before they make a purchase decision. A site should offer comparison tools, product reviews, and lists of features.
Customer relationship intensity and life cycle segmentation
-Good customer experiences can help create an intense feeling of loyalty. A five stage model of customer loyalty:
-Awareness: recognize the name of the company/product exists but have not had interaction with it. Advertising is highly used
-Exploration: potential customers learn more about the company or its products
-Familiarity: completed several transactions and are aware of the company’s policies regarding returns, credits, and pricing flexibility are in the familiarity stage are as likely to shop and buy form competitors as they are from the company.
-Commitment: experiencing number of highly satisfactory experiences and the customer develops a loyalty and preference and are willing to tell others about how happy they are with their interactions. Companies sometimes make concessions on price or terms.
-Separation: goal to move customers into the commitment stage at rapidly as possible and keep them there as long as possible.
Acquisition, conversion, and retention of customers
-benefits of acquiring new visitors vary depending on revenue models.
-total amount of money that a site spends to draw one visitor to the site is called the acquisition cost.
- total amount of money that a site spends, on average, to induce one visitor to make a purchase – conversion cost.
-The costs of inducing customers to return to a website-retention costs.
-The cost of acquiring a new customer is between 3 and 15 times the cost of retaining an existing customer.
-Funnel model: the wider the bottom of the funnel, the better the strategy, the more prospects are converted into loyal customers.
Advertising on the web
-Banner ads: dominant advertising format in use on the web, a small rectangular object on a web page that displays a stationary or moving graphic and includes a hyperlink to the advertiser’s website. It is a versatile advertising vehicle
-Today, a variety of animated GIFs and rich media objects created using Shockwave, Java, or Flash are used to make attention grabbing banner ads. The standard banner sizes for websites -interactive marketing unit ad formats.
-Banner ad placement: three different ways to arrange for other web sites to display their banner ads. The first is to use a banner exchange network –coordinates ad sharing so that other sites run one company’s ad while the other company’s site runs other exchange members’ ads. The exchange requires each member site to accept two ads on its site for every one of its ads that appears on another members site. The exchange then makes its profit by selling the extra ad space to other businesses. The second way that businesses can place their banner advertising is to find websites that appeal to one of the company’s market segments and then pay those sites to carry the ads. A third way to place banner advertising is to use a banner advertising network (acts as a broker between advertisers and web sites that carry ads).
Measuring Banner Ad Cost and Effectiveness
-Mass media efforts are measured by estimates of audience size, circulation, or number of addresses, Cost per thousand.
-visit occurs when a visitor requests a page form the website.
-Each page loaded by a visitor counts as a page view. If the page contains an ad, the page load is called an ad view.
-Each time the banner ad loads is an impression. If the visitor clicks the banner ad -a click or click through.
-A pop behind ad is a pop up ad that is followed very quickly of a command that returns the focus to the original browser window.
-interstitial ad- when a user clicks a link to load a page, the interstitial ad opens in its own browser window instead of the page that the user intended to load. They open in a full size browser window, offer even more space-completely cover webpage
-Rich media ads/active ads generate graphical activity over the web page itself instead of opening in a separate window and contains moving graphics, audio and video elements.
-Site Sponsorships: web sites offer advertisers the opportunity to sponsor all or part of their sites. They give advertisers a chance to promote their products, services, or brands in a more subtle way than by placing banner or pop up ads on the sites.
-Permission Marketing-conversion rates on requested email messages range from 10 percent to more than 30 percent- much higher than the click through rates on banner ads. Opt in email, permission marketing
-One strategy for getting email accepted by customers is to combine content with an advertising email message.
Technology-Enabled Customer Relationship Management
-The info that a website can gather about its visitors is called a clickstream.
-Technology enabled relationship management occurs when a firm obtains detailed info about a customer’s behaviour, preferences, needs, and buying patterns, and uses that info to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer.
Creating and Maintaining brands on the web
-Key elements of a brand are differentiation, relevance and perceived value.
-Brand is an emotional shortcut between a company and its customers. Emotional appeals are difficult to convey on the web because it is an active medium controlled to a great extent by the customer.
Marketers are attempting to create and maintain brands on the web by using rational branding. The offer to help web users in some way in exchange for their viewing an ad-cognitive appeal of the specific help offered.
-extend their dominant positions to other products and services, a strategy called brand leveraging.
-affiliate marketing one firm’s web site –affiliate firm-includes descriptions, reviews, ratings, or other info about a product that is linked to another firm’s site that offers that item for sale. For every visitor who follows a link, the affiliate site receives a commission. The affiliate site also obtains the benefit of the selling site’s brand in exchange for the referral.
-Affiliate commissions can be based on several variables: pay per click model the affiliate earns a commission each time a site visitor clicks the link and loads the seller’s page. Pay per conversion model, the affiliate earns a commission each time a site visitor is converted from a visitor into either a qualified prospect or a customer. An affiliate program broker is a company that serves as a clearinghouse or marketplace for sites that run affiliate programs and sites that want to become affiliates-often provide software, management consulting, and brokerage services to affiliate program operators.
Search engine positioning and domain names
-A search engine is a web site that helps people find things on the web. It contains three major parts:
-spider/crawler/robot is a program that automatically searches the web to find web pages that might be interesting to people. When the spider finds web pages it collects the URL of the page and info contained on the page. The spider returns this info to the second part of the search engine to be stored - the index or database (checks to see if info about the web page is already stored). The third part of the search engine is the search utility (visitors provide search terms and the search utility takes those terms and finds entries for web pages in its index that match them).
-Search engine placement brokers-companies that aggregate placement rights on search engines and sells combination packages
Web site naming issues
-URL brokers – business of selling, leasing, or auctioning domain names that they believe others will find valuable (ICANN)
-Domain name parking (aka domain name hosting) is a service that permits the purchaser of a domain name to maintain a simple website so that the domain name remains in use. The fees charged are lower than those for hosting an active website.
Application
Facebook is a social networking system that has been growing in popularity. Recently, companies have been directing efforts towards taking advantage of the opportunities available with advertising their products and services. Facebook now offers a variety of advertising options for firms that are some-what targeted. Various ads are placed on different groups and networks on Facebook to provide a more targeted segment for advertisers. Companies also have the opportunity to create their own profile. This provides an opportunity for companies to take on customer-based (personal) strategy with potential customers.
Web marketing strategies
-creating a marketing strategy you must consider the nature of the product and the nature of the potential customer.
-some managers think of their businesses in terms of the products they sell and makes sense when customers think of their needs in terms of product categories (ex: Staples)- product based organization (organize websites from an internal viewpoint)
-for customers looking to fulfill a specific need, companies should think as if they were the customer when designing web sites
-Customer based marketing strategies-Web creates an environment that allows firms to be flexible enough to meet the needs of many different users and companies can build sites to meet the specific needs of various types of customers
-building a customer based marketing strategy-identify groups of customers who share common characteristics
-Use of customer based marketing approaches was pioneered on B2B sites- customize product/service offerings
Communicating with different market segments
-First step: identifying groups of potential customers ; second step - selection of communication media.
-Media selection is critical for online firms because they don’t have a physical presence- only contact a customer has with firm may be the image projected through website.
Trust and media choices: the web is an intermediate step between mass media and personal contact and offers many advantages of personal contact selling and many of cost savings of mass media.
-Attempts to re-create mass media advertising on the web are likely to fail because many people ignore messages that lack content of any specific personal interest to them and mass media is more successful on passive state of minds while internet users have a more receptive state of mind and are more likely to actively evaluate messages (want to focus on trust building with the personal contact model -web log/blogs)
Market Segmentation
-Advertisers online responded to decrease in effectiveness of mass marketing by identifying specific portions of their markets and target then with specific advertising messages -micromarketing.
-the same person requires different combinations of products and services depending on the occasion-behavioural segmentation
-Online it is easier to design a single web site that meets the needs of visitors who arrive in different behavioural modes.
-usage based market segmentation-customizing experiences to match site usage behavior patterns of each visitor or type of visitor -common patterns of behaviour -categories that marketers use
1. Browsers: some visitors to a company’s web site are just surfing or browsing. Web sites intended to appeal to potential customers in this mode must offer them something that pique their interest Ex: trigger words.
2. Buyers: arrive in buyer mode are ready to make a purchase right way, offer a buyer is certainly that nothing will get in the way of the purchase transaction. The primary goal is to get the buyer to the shopping cart as quickly as possible
3. Shoppers: motivated to buy, but they are looking for more info before they make a purchase decision. A site should offer comparison tools, product reviews, and lists of features.
Customer relationship intensity and life cycle segmentation
-Good customer experiences can help create an intense feeling of loyalty. A five stage model of customer loyalty:
-Awareness: recognize the name of the company/product exists but have not had interaction with it. Advertising is highly used
-Exploration: potential customers learn more about the company or its products
-Familiarity: completed several transactions and are aware of the company’s policies regarding returns, credits, and pricing flexibility are in the familiarity stage are as likely to shop and buy form competitors as they are from the company.
-Commitment: experiencing number of highly satisfactory experiences and the customer develops a loyalty and preference and are willing to tell others about how happy they are with their interactions. Companies sometimes make concessions on price or terms.
-Separation: goal to move customers into the commitment stage at rapidly as possible and keep them there as long as possible.
Acquisition, conversion, and retention of customers
-benefits of acquiring new visitors vary depending on revenue models.
-total amount of money that a site spends to draw one visitor to the site is called the acquisition cost.
- total amount of money that a site spends, on average, to induce one visitor to make a purchase – conversion cost.
-The costs of inducing customers to return to a website-retention costs.
-The cost of acquiring a new customer is between 3 and 15 times the cost of retaining an existing customer.
-Funnel model: the wider the bottom of the funnel, the better the strategy, the more prospects are converted into loyal customers.
Advertising on the web
-Banner ads: dominant advertising format in use on the web, a small rectangular object on a web page that displays a stationary or moving graphic and includes a hyperlink to the advertiser’s website. It is a versatile advertising vehicle
-Today, a variety of animated GIFs and rich media objects created using Shockwave, Java, or Flash are used to make attention grabbing banner ads. The standard banner sizes for websites -interactive marketing unit ad formats.
-Banner ad placement: three different ways to arrange for other web sites to display their banner ads. The first is to use a banner exchange network –coordinates ad sharing so that other sites run one company’s ad while the other company’s site runs other exchange members’ ads. The exchange requires each member site to accept two ads on its site for every one of its ads that appears on another members site. The exchange then makes its profit by selling the extra ad space to other businesses. The second way that businesses can place their banner advertising is to find websites that appeal to one of the company’s market segments and then pay those sites to carry the ads. A third way to place banner advertising is to use a banner advertising network (acts as a broker between advertisers and web sites that carry ads).
Measuring Banner Ad Cost and Effectiveness
-Mass media efforts are measured by estimates of audience size, circulation, or number of addresses, Cost per thousand.
-visit occurs when a visitor requests a page form the website.
-Each page loaded by a visitor counts as a page view. If the page contains an ad, the page load is called an ad view.
-Each time the banner ad loads is an impression. If the visitor clicks the banner ad -a click or click through.
-A pop behind ad is a pop up ad that is followed very quickly of a command that returns the focus to the original browser window.
-interstitial ad- when a user clicks a link to load a page, the interstitial ad opens in its own browser window instead of the page that the user intended to load. They open in a full size browser window, offer even more space-completely cover webpage
-Rich media ads/active ads generate graphical activity over the web page itself instead of opening in a separate window and contains moving graphics, audio and video elements.
-Site Sponsorships: web sites offer advertisers the opportunity to sponsor all or part of their sites. They give advertisers a chance to promote their products, services, or brands in a more subtle way than by placing banner or pop up ads on the sites.
-Permission Marketing-conversion rates on requested email messages range from 10 percent to more than 30 percent- much higher than the click through rates on banner ads. Opt in email, permission marketing
-One strategy for getting email accepted by customers is to combine content with an advertising email message.
Technology-Enabled Customer Relationship Management
-The info that a website can gather about its visitors is called a clickstream.
-Technology enabled relationship management occurs when a firm obtains detailed info about a customer’s behaviour, preferences, needs, and buying patterns, and uses that info to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer.
Creating and Maintaining brands on the web
-Key elements of a brand are differentiation, relevance and perceived value.
-Brand is an emotional shortcut between a company and its customers. Emotional appeals are difficult to convey on the web because it is an active medium controlled to a great extent by the customer.
Marketers are attempting to create and maintain brands on the web by using rational branding. The offer to help web users in some way in exchange for their viewing an ad-cognitive appeal of the specific help offered.
-extend their dominant positions to other products and services, a strategy called brand leveraging.
-affiliate marketing one firm’s web site –affiliate firm-includes descriptions, reviews, ratings, or other info about a product that is linked to another firm’s site that offers that item for sale. For every visitor who follows a link, the affiliate site receives a commission. The affiliate site also obtains the benefit of the selling site’s brand in exchange for the referral.
-Affiliate commissions can be based on several variables: pay per click model the affiliate earns a commission each time a site visitor clicks the link and loads the seller’s page. Pay per conversion model, the affiliate earns a commission each time a site visitor is converted from a visitor into either a qualified prospect or a customer. An affiliate program broker is a company that serves as a clearinghouse or marketplace for sites that run affiliate programs and sites that want to become affiliates-often provide software, management consulting, and brokerage services to affiliate program operators.
Search engine positioning and domain names
-A search engine is a web site that helps people find things on the web. It contains three major parts:
-spider/crawler/robot is a program that automatically searches the web to find web pages that might be interesting to people. When the spider finds web pages it collects the URL of the page and info contained on the page. The spider returns this info to the second part of the search engine to be stored - the index or database (checks to see if info about the web page is already stored). The third part of the search engine is the search utility (visitors provide search terms and the search utility takes those terms and finds entries for web pages in its index that match them).
-Search engine placement brokers-companies that aggregate placement rights on search engines and sells combination packages
Web site naming issues
-URL brokers – business of selling, leasing, or auctioning domain names that they believe others will find valuable (ICANN)
-Domain name parking (aka domain name hosting) is a service that permits the purchaser of a domain name to maintain a simple website so that the domain name remains in use. The fees charged are lower than those for hosting an active website.
Application
Facebook is a social networking system that has been growing in popularity. Recently, companies have been directing efforts towards taking advantage of the opportunities available with advertising their products and services. Facebook now offers a variety of advertising options for firms that are some-what targeted. Various ads are placed on different groups and networks on Facebook to provide a more targeted segment for advertisers. Companies also have the opportunity to create their own profile. This provides an opportunity for companies to take on customer-based (personal) strategy with potential customers.
Wednesday, January 23, 2008
Key Concept - Chapter 3 – Selling on the web: Revenue models and building a web presence
REVENUE MODELS
1. Web Catalog Revenue Models
-Online retailers using a variation of the mail order catalog revenue model - establish a brand image, uses the strength of that image to sell products/services with product info on websites and customers can place orders through website or phone
-Types of businesses using the Web catalog sellers:
1. Computers and consumer electronics: ex: Dell creates value by offering flexibility to customers and various ways to access info
2. Books, music, and videos: most visible examples of e-commerce
3. Luxury goods: providing heavy use of graphics, animation, and info versus generating revenue
4. Clothing retailers: customers examine clothing and place orders through website. Problem: color settings on computer monitors.
5.Flowers and gifts
6.General Discounters: many new companies have started on the web with no bricks and mortar presence – capitalize on the benefits of internet and charge lower prices. Many web discount retailers originally sold advertising on sites to subsidize low product prices.
2. Digital Content Revenue Models
-Use the web as a new and efficient distribution method.
3. Advertising supported revenue models
-was declining from 2000-2002 but has started to grow at a slower pace. Successful sites attract specific groups for direct messages.
-Success hampered by: (1)no consensus on how to measure and charge; (2)Few sites have enough visitors to interest large ad firms.
-Web portals: Web directory is a listing of hyperlinks to web pages. A portal/web portal -site that people use as a launching point and often includes a web directory and search engine
-Newspaper publishers: publish print content on web-greater exposure, large audience, but can take away sales from print editions.
-Targeted classified advertising sites: sites that target niche markets have been more successful. Ex: web employment advertising.
4. Advertising subscription mixed revenue models
-subscribers pay a fee and accept a level of advertising.
-Some newspapers including The Washington Post and the Los Angeles Times use a variation of the mixed revenue model-don’t charge subscription fees for access to web sites but offer current stories free of charge, but require visitors to pay for articles retrieved from archives. In general, newspaper sites today are relying on advertising to provide revenue.
5. Fee for Transaction Revenue Models
-businesses offer services and charge a fee based on the number/size of transactions processed.
-Disintermediation: removal of an intermediary from a value chain. Re-intermediation: introduction of a new intermediary.
-Travel agent: earn commissions on each transaction. The value added by a travel agent is information consolidation and filtering. Many travel agents now charge their customers a flat fee for processing a ticket.
-Automobile sales: removes the salesperson provides an information service to car buyers – implements the fee for transaction revenue model. Locate dealers willing to sell the car specified by the buyer for a small premium over the dealer’s nominal cost.
-Stockbrokers: charge customers a commission for each trade executed. Ex: ETRADE
-Event tickets: sell tickets from one virtual location
-Real estate and mortgage loan brokers
-Online banking and financial services: important feature offered is account aggregation - ability to obtain bank, investment, loan, and financial account information from multiple web sites and display it all in one location at the bank’s website. A bill presentment service provides an electronic version of an invoice or billing statement.
6. Fee for Service Revenue Models
-Companies are offering a variety of services on the web for which they charge a fee based on the value of the service.
-Online games: many sites relied on advertising revenue in the past, a growing number now include premium games.
-Concerts/films: selling subscriptions for delivery of videos to computers through cable modem and DSL connections.
-Professional services: laws can prevent practicing professions on the web because patients/clients could be located else where
REVENUE STRATEGY ISSUES
Channel Conflict and Cannibalization
-Channel conflict: sales activities on a company’s web site interfere with its existing sales outlets-aka cannibalization because the web site’s sales consume sales that would be made in the company’s other channels.
-Giving customers access to products through coordinated channels-channel cooperation.
Strategic alliances and channel distribution management
-Strategic Alliances: 2+ firms join forces to undertake an activity over a long period -operating in the network form of organization.
-Channel distribution managers (fulfillment managers/category managers) take over responsibility for a particular product line within a retail store. They provide more knowledge about the product line.
-Mobile Commerce: capitalize on increased bandwidth of wireless devices could be successful if the audience would be willing to pay a subscription fee or view ads.
CREATING AN EFFECTIVE WEB PRESENCE
-An organization’s presence is the public image it conveys to its stakeholders.
-Stakeholders: customers, suppliers, employees, stockholders, neighbors, and the general public.
Achieving web presence goals
Effective sites create an attractive presence that meets the objectives of the business or organization. These objectives include:
1) Attracting visitors to web site
2) Making the site interesting so visitors stay and explore
3) Convincing visitors to follow site’s links
4) Creating an impression consistent with the organization’s desired image
5) Building a trusting relationship with visitors
6) Reinforcing positive images that the visitor might already have about the organization
7) Encouraging visitors to return to the site
Not for profit organizations
-Use their websites as a central resource for communications
-A key goal for the web sites is information dissemination.
-Web allows info integration and dissemination and provides a communication link
WEB SITE USABILITY
Meeting the needs of web site visitors
-Every visitor is a potential customer so there is variation in visitor characteristics.
-Visitors are connected through different channels with different bandwidths and web browsers.
–Build flexibility by offering separate versions with and without frames and give visitors the option of choosing either one
Trust and Loyalty
-Create value in a relationship with a customer by developing customers’ trust into loyalty.
-Common weak spot is the lack of integration between the companies’ call centers and web sites and Email responsiveness
Usability testing
-Learn about visitor needs, watching different customers navigate test designs-cost of testing is low compared to the total cost of site
-Putting the customer at center of site designs -customer centric approach
-Design site around how visitors will navigate, allow visitors to access information quickly, avoid using inflated statements in product descriptions, avoid jargon, build site to work for visitors using old software, be consistent in use of design features, navigation controls clearly labeled, test text visibility on smaller monitors, make sure color combinations don’t impair viewing, conduct usability tests by having potential site users navigate through versions of site
The Nature of Communication on the web
-Two approaches called communication modes: personal contact and mass media.
-Personal contact model, the firm’s employees individually search for, qualify, and contact potential customers-prospecting.
-Addressable media are advertising efforts directed to a known addressee and include direct mail, telephone calls, and email. The internet isn’t a mass medium or a personal contact tool-the web is a tool for reaching the hard middle-markets that are too small to justify a mass media campaign yet too large to cover using personal contact.
Application
There are a variety of companies using different revenue models online to generate revenues and conduct business. For example: Ikea, a traditional bricks and mortar company that also uses a catalog revenue model, has capitalized on the benefits of the internet and has brought its catalog online. The company allows customers to view the catalog online, create a shopping cart of desired products, and purchase these products directly from the website. Ikea has extended its traditional mail-order catalog model onto the web which has helped the company reduce costs and extend its customer reach. Other companies, like MaCorr Inc have incorporated a fee for service revenue model. The company conducts market research for companies and charges a fee for the service provided.
1. Web Catalog Revenue Models
-Online retailers using a variation of the mail order catalog revenue model - establish a brand image, uses the strength of that image to sell products/services with product info on websites and customers can place orders through website or phone
-Types of businesses using the Web catalog sellers:
1. Computers and consumer electronics: ex: Dell creates value by offering flexibility to customers and various ways to access info
2. Books, music, and videos: most visible examples of e-commerce
3. Luxury goods: providing heavy use of graphics, animation, and info versus generating revenue
4. Clothing retailers: customers examine clothing and place orders through website. Problem: color settings on computer monitors.
5.Flowers and gifts
6.General Discounters: many new companies have started on the web with no bricks and mortar presence – capitalize on the benefits of internet and charge lower prices. Many web discount retailers originally sold advertising on sites to subsidize low product prices.
2. Digital Content Revenue Models
-Use the web as a new and efficient distribution method.
3. Advertising supported revenue models
-was declining from 2000-2002 but has started to grow at a slower pace. Successful sites attract specific groups for direct messages.
-Success hampered by: (1)no consensus on how to measure and charge; (2)Few sites have enough visitors to interest large ad firms.
-Web portals: Web directory is a listing of hyperlinks to web pages. A portal/web portal -site that people use as a launching point and often includes a web directory and search engine
-Newspaper publishers: publish print content on web-greater exposure, large audience, but can take away sales from print editions.
-Targeted classified advertising sites: sites that target niche markets have been more successful. Ex: web employment advertising.
4. Advertising subscription mixed revenue models
-subscribers pay a fee and accept a level of advertising.
-Some newspapers including The Washington Post and the Los Angeles Times use a variation of the mixed revenue model-don’t charge subscription fees for access to web sites but offer current stories free of charge, but require visitors to pay for articles retrieved from archives. In general, newspaper sites today are relying on advertising to provide revenue.
5. Fee for Transaction Revenue Models
-businesses offer services and charge a fee based on the number/size of transactions processed.
-Disintermediation: removal of an intermediary from a value chain. Re-intermediation: introduction of a new intermediary.
-Travel agent: earn commissions on each transaction. The value added by a travel agent is information consolidation and filtering. Many travel agents now charge their customers a flat fee for processing a ticket.
-Automobile sales: removes the salesperson provides an information service to car buyers – implements the fee for transaction revenue model. Locate dealers willing to sell the car specified by the buyer for a small premium over the dealer’s nominal cost.
-Stockbrokers: charge customers a commission for each trade executed. Ex: ETRADE
-Event tickets: sell tickets from one virtual location
-Real estate and mortgage loan brokers
-Online banking and financial services: important feature offered is account aggregation - ability to obtain bank, investment, loan, and financial account information from multiple web sites and display it all in one location at the bank’s website. A bill presentment service provides an electronic version of an invoice or billing statement.
6. Fee for Service Revenue Models
-Companies are offering a variety of services on the web for which they charge a fee based on the value of the service.
-Online games: many sites relied on advertising revenue in the past, a growing number now include premium games.
-Concerts/films: selling subscriptions for delivery of videos to computers through cable modem and DSL connections.
-Professional services: laws can prevent practicing professions on the web because patients/clients could be located else where
REVENUE STRATEGY ISSUES
Channel Conflict and Cannibalization
-Channel conflict: sales activities on a company’s web site interfere with its existing sales outlets-aka cannibalization because the web site’s sales consume sales that would be made in the company’s other channels.
-Giving customers access to products through coordinated channels-channel cooperation.
Strategic alliances and channel distribution management
-Strategic Alliances: 2+ firms join forces to undertake an activity over a long period -operating in the network form of organization.
-Channel distribution managers (fulfillment managers/category managers) take over responsibility for a particular product line within a retail store. They provide more knowledge about the product line.
-Mobile Commerce: capitalize on increased bandwidth of wireless devices could be successful if the audience would be willing to pay a subscription fee or view ads.
CREATING AN EFFECTIVE WEB PRESENCE
-An organization’s presence is the public image it conveys to its stakeholders.
-Stakeholders: customers, suppliers, employees, stockholders, neighbors, and the general public.
Achieving web presence goals
Effective sites create an attractive presence that meets the objectives of the business or organization. These objectives include:
1) Attracting visitors to web site
2) Making the site interesting so visitors stay and explore
3) Convincing visitors to follow site’s links
4) Creating an impression consistent with the organization’s desired image
5) Building a trusting relationship with visitors
6) Reinforcing positive images that the visitor might already have about the organization
7) Encouraging visitors to return to the site
Not for profit organizations
-Use their websites as a central resource for communications
-A key goal for the web sites is information dissemination.
-Web allows info integration and dissemination and provides a communication link
WEB SITE USABILITY
Meeting the needs of web site visitors
-Every visitor is a potential customer so there is variation in visitor characteristics.
-Visitors are connected through different channels with different bandwidths and web browsers.
–Build flexibility by offering separate versions with and without frames and give visitors the option of choosing either one
Trust and Loyalty
-Create value in a relationship with a customer by developing customers’ trust into loyalty.
-Common weak spot is the lack of integration between the companies’ call centers and web sites and Email responsiveness
Usability testing
-Learn about visitor needs, watching different customers navigate test designs-cost of testing is low compared to the total cost of site
-Putting the customer at center of site designs -customer centric approach
-Design site around how visitors will navigate, allow visitors to access information quickly, avoid using inflated statements in product descriptions, avoid jargon, build site to work for visitors using old software, be consistent in use of design features, navigation controls clearly labeled, test text visibility on smaller monitors, make sure color combinations don’t impair viewing, conduct usability tests by having potential site users navigate through versions of site
The Nature of Communication on the web
-Two approaches called communication modes: personal contact and mass media.
-Personal contact model, the firm’s employees individually search for, qualify, and contact potential customers-prospecting.
-Addressable media are advertising efforts directed to a known addressee and include direct mail, telephone calls, and email. The internet isn’t a mass medium or a personal contact tool-the web is a tool for reaching the hard middle-markets that are too small to justify a mass media campaign yet too large to cover using personal contact.
Application
There are a variety of companies using different revenue models online to generate revenues and conduct business. For example: Ikea, a traditional bricks and mortar company that also uses a catalog revenue model, has capitalized on the benefits of the internet and has brought its catalog online. The company allows customers to view the catalog online, create a shopping cart of desired products, and purchase these products directly from the website. Ikea has extended its traditional mail-order catalog model onto the web which has helped the company reduce costs and extend its customer reach. Other companies, like MaCorr Inc have incorporated a fee for service revenue model. The company conducts market research for companies and charges a fee for the service provided.
Monday, January 21, 2008
Chapter 3 class notes: Selling on the web
REVENUE MODELS-before the sale-how is the transaction going to take place
Web Catalog (putting product info/inventory lists on the web)
Books and CDs:
Clothing and Apparel:
Computers and electronics:
Luxury goods:
Flowers and gifts:
General discounters:
Digital Content (IP) (intellectual property – stuff you own the copyright too or licensed the copyright too – you have the right to distribute)
Journal articles
Research studies
Industry reports
Advertising Supported (attach to search engines and high traffic sites)
Web directories/portals
Search engine
Shopping directories
White/yellow pages
Free email/chat rooms
Games
Calendars
Newspaper publishers (advertising appear on content pages)
Classified advertising sites
Mixed model advertising-subscription supported
-advertising fees as well as subscription fees for content products (fee for access to product – must have something to offer/sell to customers)
Fee for transaction (every single sale or transaction – a piece of the profit goes to the website or e-commerce site – getting paid based on each transaction or the number of transactions-doesn’t matter the size of the purchase at the time-flat fee)
Travel agents
Automobile sales
Insurance brokers
Stock brokers
Event tickets
Real estate brokers
Online banking
Online music
Examples
Fee for service (paying for the value of the service provided – usually professional services, etc)
Online games
Concerts and films
Professional services
Examples
Web usability
-usability tests, flow of website-easy to navigate
Web presence
Attractive and easy to use
Ranks high on stickiness (not only attracting web visitor to website but also retaining them and getting them to do further shopping - ex: having a site load quickly to ensure customers do not get frustrated and leave)
Provides quick links/content
Provides help and support
Portrays consistent image
Reinforces positive image
Builds trusting relationship ** - GOAL - meet expectations
Engages for return ability - updated content - social presence sites (forums) - have new and exciting information so people are encouraged to come back and check it out
Strategic issues – sale has already occurred – how is the transaction going to affect the back end processes/stakeholders
Channel conflict/cannibalization
Alliances/distribution management
Mobile commerce
Web Catalog (putting product info/inventory lists on the web)
Books and CDs:
Clothing and Apparel:
Computers and electronics:
Luxury goods:
Flowers and gifts:
General discounters:
Digital Content (IP) (intellectual property – stuff you own the copyright too or licensed the copyright too – you have the right to distribute)
Journal articles
Research studies
Industry reports
Advertising Supported (attach to search engines and high traffic sites)
Web directories/portals
Search engine
Shopping directories
White/yellow pages
Free email/chat rooms
Games
Calendars
Newspaper publishers (advertising appear on content pages)
Classified advertising sites
Mixed model advertising-subscription supported
-advertising fees as well as subscription fees for content products (fee for access to product – must have something to offer/sell to customers)
Fee for transaction (every single sale or transaction – a piece of the profit goes to the website or e-commerce site – getting paid based on each transaction or the number of transactions-doesn’t matter the size of the purchase at the time-flat fee)
Travel agents
Automobile sales
Insurance brokers
Stock brokers
Event tickets
Real estate brokers
Online banking
Online music
Examples
Fee for service (paying for the value of the service provided – usually professional services, etc)
Online games
Concerts and films
Professional services
Examples
Web usability
-usability tests, flow of website-easy to navigate
Web presence
Attractive and easy to use
Ranks high on stickiness (not only attracting web visitor to website but also retaining them and getting them to do further shopping - ex: having a site load quickly to ensure customers do not get frustrated and leave)
Provides quick links/content
Provides help and support
Portrays consistent image
Reinforces positive image
Builds trusting relationship ** - GOAL - meet expectations
Engages for return ability - updated content - social presence sites (forums) - have new and exciting information so people are encouraged to come back and check it out
Strategic issues – sale has already occurred – how is the transaction going to affect the back end processes/stakeholders
Channel conflict/cannibalization
Alliances/distribution management
Mobile commerce
Thursday, January 17, 2008
Chapter 2 – Technology Infrastructure
This chapter explains the origin of the internet and the events that have made the internet what it is today. The author also goes into depth about the components of the internet and the developments that have occurred over the past years to improve its efficiency. Networks, protocols, connections, e-mail, and markup languages are touched on and explained. In addition, Internet2 and the Semantic Web are discussed to present a picture of the future of e-commerce.
The Internet and the World Wide Web
A computer network -technology that allows people to connect computers to each other
Internet: connects computer networks around the world
World wide web: subset of the computers on the internet that are connected to each other
Origins of the Internet
-1960s- US Defense concerned about nuclear attacks on facilities wanted coordinated system and looked for ways to connect computers
-Defense was concerned about risk of a single telephone channel and developed a multiple channel system that allowed files to be broken into packets that were labeled electronically with codes of origin, sequences, and destinations.
-In 1969, Defense Department researchers (Advanced Research Projects Agency) connected 4 computers into a network - ARPANET.
-1972- first email system was developed by Ray Tomlinson
-1974- TCP/IP – Vint Cert known as the grandfather of the internet developed protocols (common language, rules for transferring data)
-1979- Usenet was developed to provide a news group network – email for groups
-1980s-National Science Foundation (NSF) funded by government - provide access to the resources of the government
-1991 the NSF (national science foundation) eased restrictions on commercial internet use to privatize internet completed in 1995 when NSF turned the main internet connections to a group of privately owned firms- new structure based on four network access points
-Network access providers-sold internet access to large customers and indirectly to smaller firms through internet service providers.
-Internet hosts-computers directly connected to the internet.
Emergence of the WWW
-web-software on computers connected to the internet. Two key elements of the web: hypertext and graphical user interfaces
-1945: Vannevar Bush – wrote a book that talked about a machine (Memix) that stored memory items that could be retrieved
-1960s: Tex Nelson created the term hypertext
-Hypertext: text on one page links to text on another
-1989-Tim burners-lee (father of the web) - hypertext to provide data sharing and developed a code for hypertext server-a computer that stores files written in hypertext markup language and allows computers to connect and read filesà aka web servers.
-Hypertext Markup Language (HTML): language that includes a set of codes attached to text and graphics that describe the relationships among text. Hypertext link/hyperlink points to another location in the same or another document
-Web browser: software to help read HTML documents and move among documents through text formatted with hypertext link tags. Presents HTML documents in an easy to read format.
-1993: Mosaic – first web browser
-1994: Netscape (formed by the merger of Andreesen and Clark)
Packet Switched Networks
-Local area Network: network of computers that are located close together
-Wide area Network (WAN): networks of computers connected over greater distances-early models were circuits of phone companies.
-Internet uses packet switching network to move data between two points -files are broken down (packets) labeled electronically with their origins, sequences, and destination addresses and travel along interconnected networks until they reach destinations.
Routing Packets
-Routers: decide best method to get packets to where they need to be- connect networks. Include rules called routing algorithms
-Network devices that move packets from one part of a network to another - hubs, switches, and bridges. When packets leave a network to travel on the internet they must be translated into a standard format. Routers perform this.
-Internet has routers that handle packet traffic along main connecting points- internet backbone
Internet Protocols
-A protocol -collection of rules for formatting, ordering, and error checking data sent across a network. Two main protocols: Transmission Control Protocol -controls disassembly of a file into packets before transmitted over the internet, controls reassembly of packets into original formats at destinations.
-IP specifies details for each packet, labeling each with origin and destination addresses.
o Internet Protocol version 4 (IPv4)-uses a 32 bit number to identify computers connected to the internet.
o Subnetting-stretch the supply of IP addresses-the use of reserved private IP addresses within LAN/WANs to provide additional address space. Private IP addresses-IP numbers not allowed on packets that travel on internet. Network address translation (NAT) device converts private IP addresses into normal addresses when packets travel over internet.
Domain names
-Top level domain: .com. since 1998, the internet corporation for assigned names and numbers has been responsible in managing. Sponsored top level domain: organization other than ICANN is responsible.
Web page request and delivery protocols
-Web client computers send requests for web page files to web servers which receive requests and sends files back. Web client computer’s software transform files into webpages. Purpose of a web server is to respond to requests for web pages from web clients.
-The set of rules for delivering web page files over the internet is in a protocol called the hypertext transfer protocol (HTTP). The combination of the protocol name and the domain name is called the uniform resource locator.
Electronic Mail Protocols
-Simple Mail transfer protocol specifies format of a mail message and describes how mail is administered and transmitted on internet.
-Post office protocol -tell email server to send mail to user’s computer and delete it
-Interactive Mail access protocol-newer, similar to POP but includes more features -don’t have to download messages to computer)
Markup Languages and the web
-Text markup language: specifies a set of tags inserted into text, provides formatting instructions that web software can understand to turn text in the files into web page.
-Standard Generalized Markup Language (SGML)-markup language and a meta language (language that can be used to define other languages). Used when creating documents to be printed in different formats
-Extensible Markup Language (XML) is used to mark up info that companies share with each other over the internet.
-XHTML: allows tag customization- XML differs from HTML in two ways: (1) XML isn’t a markup language with defined tags. It is a framework in which people can create their own set of tags. (2) XML tags don’t specify how text appears on a web page; the tags covey the meaning (the semantics) of the info included within them.
-HTML includes tags that define the format and style of text in an electronic document and has tags that can create relationships among text within one document or among several documents- hypertext elements.
-HTML Tags-HTML document that is interpreted by web browsers and used to format the display of text enclosed by tags.
-Cascading style sheets (CSS)-instructions-let designers define formatting styles that can be applied to multiple web pages.
Intranets and Extranets
-Intranet: interconnected network that doesn’t extend beyond the organization that created it. -Extranet: an intranet extended to outside entities-ex: suppliers. Participants have access to databases, files, etc.
-Virtual private network (VPN) extranet using public networks and protocols to send sensitive data using IP tunneling or encapsulation - (private passage that provides secure transmission with encrypted packets that are put inside another packet)
Internet Connectivity overview
-Bandwidth amount of data that can travel through a communication line per unit of time.
-Symmetric connections provide the same bandwidth in both directions. Asymmetric connections provide different bandwidths for each direction. Upstream bandwidth (also called upload bandwidth) amount of info that can travel from the user to the internet. Downstream bandwidth -amount of info that can travel from the internet to a user
-Broadband-connections that operate at speeds of greater than about 200 Kbps
-Asymmetric digital subscriber line-provide broadband range & transmission bandwidths
-DSL is a private line with no competing traffic
-Bluetooth one of the first wireless protocols for personal use over short distances
-Ultra Wideband (UWB) provides wide bandwidth connections over short distances developed for short range secure communications
-Wi-Fi (Wireless Ethernet/ 802.11b)- communicate through a wireless access point connected to a LAN to become part of the LAN.
-Wireless access point (WAP) transmits network packets between Wi-Fi computers and other devices within its range.
-Roaming shifting from one WAP to another, without requiring intervention by the user.
Internet2 and the semantic Web
-Internet2: test bed for new network technologies -high bandwidth backbone
-Semantic web-words on web pages being tagged (using XML) with their meanings. People could use intelligent programs called software agents to read the XML tags to determine the meaning of the words in their contexts.
Application
The internet has changed the way in which people communicate. The transition for web 1.0 to web 2.0 allowed us to go from just reading content passively to actually being actively involved in the creating of the content at that very instance. Rather than just sending messages back and forth through email we can now use blogs and communities to instantaneously talk back and forth. This new communicate mode provides more control over information, provides quicker and more efficient communicate and information sharing and collaboration. For businesses on line, web 2.0 can provide more information about customers and easier access to help build relationships. Ex: having a blog on a company website can help customers share information about the products and encourages feedback that can help the company better understand their customers.
The Internet and the World Wide Web
A computer network -technology that allows people to connect computers to each other
Internet: connects computer networks around the world
World wide web: subset of the computers on the internet that are connected to each other
Origins of the Internet
-1960s- US Defense concerned about nuclear attacks on facilities wanted coordinated system and looked for ways to connect computers
-Defense was concerned about risk of a single telephone channel and developed a multiple channel system that allowed files to be broken into packets that were labeled electronically with codes of origin, sequences, and destinations.
-In 1969, Defense Department researchers (Advanced Research Projects Agency) connected 4 computers into a network - ARPANET.
-1972- first email system was developed by Ray Tomlinson
-1974- TCP/IP – Vint Cert known as the grandfather of the internet developed protocols (common language, rules for transferring data)
-1979- Usenet was developed to provide a news group network – email for groups
-1980s-National Science Foundation (NSF) funded by government - provide access to the resources of the government
-1991 the NSF (national science foundation) eased restrictions on commercial internet use to privatize internet completed in 1995 when NSF turned the main internet connections to a group of privately owned firms- new structure based on four network access points
-Network access providers-sold internet access to large customers and indirectly to smaller firms through internet service providers.
-Internet hosts-computers directly connected to the internet.
Emergence of the WWW
-web-software on computers connected to the internet. Two key elements of the web: hypertext and graphical user interfaces
-1945: Vannevar Bush – wrote a book that talked about a machine (Memix) that stored memory items that could be retrieved
-1960s: Tex Nelson created the term hypertext
-Hypertext: text on one page links to text on another
-1989-Tim burners-lee (father of the web) - hypertext to provide data sharing and developed a code for hypertext server-a computer that stores files written in hypertext markup language and allows computers to connect and read filesà aka web servers.
-Hypertext Markup Language (HTML): language that includes a set of codes attached to text and graphics that describe the relationships among text. Hypertext link/hyperlink points to another location in the same or another document
-Web browser: software to help read HTML documents and move among documents through text formatted with hypertext link tags. Presents HTML documents in an easy to read format.
-1993: Mosaic – first web browser
-1994: Netscape (formed by the merger of Andreesen and Clark)
Packet Switched Networks
-Local area Network: network of computers that are located close together
-Wide area Network (WAN): networks of computers connected over greater distances-early models were circuits of phone companies.
-Internet uses packet switching network to move data between two points -files are broken down (packets) labeled electronically with their origins, sequences, and destination addresses and travel along interconnected networks until they reach destinations.
Routing Packets
-Routers: decide best method to get packets to where they need to be- connect networks. Include rules called routing algorithms
-Network devices that move packets from one part of a network to another - hubs, switches, and bridges. When packets leave a network to travel on the internet they must be translated into a standard format. Routers perform this.
-Internet has routers that handle packet traffic along main connecting points- internet backbone
Internet Protocols
-A protocol -collection of rules for formatting, ordering, and error checking data sent across a network. Two main protocols: Transmission Control Protocol -controls disassembly of a file into packets before transmitted over the internet, controls reassembly of packets into original formats at destinations.
-IP specifies details for each packet, labeling each with origin and destination addresses.
o Internet Protocol version 4 (IPv4)-uses a 32 bit number to identify computers connected to the internet.
o Subnetting-stretch the supply of IP addresses-the use of reserved private IP addresses within LAN/WANs to provide additional address space. Private IP addresses-IP numbers not allowed on packets that travel on internet. Network address translation (NAT) device converts private IP addresses into normal addresses when packets travel over internet.
Domain names
-Top level domain: .com. since 1998, the internet corporation for assigned names and numbers has been responsible in managing. Sponsored top level domain: organization other than ICANN is responsible.
Web page request and delivery protocols
-Web client computers send requests for web page files to web servers which receive requests and sends files back. Web client computer’s software transform files into webpages. Purpose of a web server is to respond to requests for web pages from web clients.
-The set of rules for delivering web page files over the internet is in a protocol called the hypertext transfer protocol (HTTP). The combination of the protocol name and the domain name is called the uniform resource locator.
Electronic Mail Protocols
-Simple Mail transfer protocol specifies format of a mail message and describes how mail is administered and transmitted on internet.
-Post office protocol -tell email server to send mail to user’s computer and delete it
-Interactive Mail access protocol-newer, similar to POP but includes more features -don’t have to download messages to computer)
Markup Languages and the web
-Text markup language: specifies a set of tags inserted into text, provides formatting instructions that web software can understand to turn text in the files into web page.
-Standard Generalized Markup Language (SGML)-markup language and a meta language (language that can be used to define other languages). Used when creating documents to be printed in different formats
-Extensible Markup Language (XML) is used to mark up info that companies share with each other over the internet.
-XHTML: allows tag customization- XML differs from HTML in two ways: (1) XML isn’t a markup language with defined tags. It is a framework in which people can create their own set of tags. (2) XML tags don’t specify how text appears on a web page; the tags covey the meaning (the semantics) of the info included within them.
-HTML includes tags that define the format and style of text in an electronic document and has tags that can create relationships among text within one document or among several documents- hypertext elements.
-HTML Tags-HTML document that is interpreted by web browsers and used to format the display of text enclosed by tags.
-Cascading style sheets (CSS)-instructions-let designers define formatting styles that can be applied to multiple web pages.
Intranets and Extranets
-Intranet: interconnected network that doesn’t extend beyond the organization that created it. -Extranet: an intranet extended to outside entities-ex: suppliers. Participants have access to databases, files, etc.
-Virtual private network (VPN) extranet using public networks and protocols to send sensitive data using IP tunneling or encapsulation - (private passage that provides secure transmission with encrypted packets that are put inside another packet)
Internet Connectivity overview
-Bandwidth amount of data that can travel through a communication line per unit of time.
-Symmetric connections provide the same bandwidth in both directions. Asymmetric connections provide different bandwidths for each direction. Upstream bandwidth (also called upload bandwidth) amount of info that can travel from the user to the internet. Downstream bandwidth -amount of info that can travel from the internet to a user
-Broadband-connections that operate at speeds of greater than about 200 Kbps
-Asymmetric digital subscriber line-provide broadband range & transmission bandwidths
-DSL is a private line with no competing traffic
-Bluetooth one of the first wireless protocols for personal use over short distances
-Ultra Wideband (UWB) provides wide bandwidth connections over short distances developed for short range secure communications
-Wi-Fi (Wireless Ethernet/ 802.11b)- communicate through a wireless access point connected to a LAN to become part of the LAN.
-Wireless access point (WAP) transmits network packets between Wi-Fi computers and other devices within its range.
-Roaming shifting from one WAP to another, without requiring intervention by the user.
Internet2 and the semantic Web
-Internet2: test bed for new network technologies -high bandwidth backbone
-Semantic web-words on web pages being tagged (using XML) with their meanings. People could use intelligent programs called software agents to read the XML tags to determine the meaning of the words in their contexts.
Application
The internet has changed the way in which people communicate. The transition for web 1.0 to web 2.0 allowed us to go from just reading content passively to actually being actively involved in the creating of the content at that very instance. Rather than just sending messages back and forth through email we can now use blogs and communities to instantaneously talk back and forth. This new communicate mode provides more control over information, provides quicker and more efficient communicate and information sharing and collaboration. For businesses on line, web 2.0 can provide more information about customers and easier access to help build relationships. Ex: having a blog on a company website can help customers share information about the products and encourages feedback that can help the company better understand their customers.
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