ISMT 101

E-Business Model – B2B

How to prepare for exams
 Time: Mar/24, 2pm-4pm, LTA
 Attend classes
 Focused on the most important concepts and insights
 Add some intermediate and advanced topics, e.g., marginal costs,
information goods, dynamic pricing, long tail, reintermediation…
 About 80% of questions in exams are discussed in classes
 Review the quizzes
 In the midterm exam, at least 15 (out of 75) questions are from quizzes
 Read the textbook
 We will not discuss straightforward issues in classes
 If they appear in the study guide, they may appear in exams.
 Use study guide
Tailor labs to your requests…

 Google  “copy” the Internet, sorting

 Piracy  SW, intellectual property
 Programming  add a little in labs, no Java, C++
 Networking  TCP/IP, ISMT 219
 Statistics SW  learn in OM courses
 Photoshop  GIMP
Groups
 Check WebCT, contact Julia if you see incorret info
 Received grouping info. from 98% you (two sections)
 36 groups
 Groups assigned for 11 students
 5 students did not contact TA
 Groups assigned
 One point docked
 Project proposal due, March/19
Schedule updated
What is B2B

Value chain = steps required to get goods/services to consumers

B2B B2C

Transportation Manufacturing Distribution Retailing

& logistics

Raw Transportation Transportation Complementary

material & logistics & logistics services
What is B2B

 B2B is much larger than B2C

 Account for above 80% of EB markets
 US$3 trillion, increases 50% per year

 30,000 e-networks support B2B purchasing

 300,000 companies use EDI

What is B2B
Information exchange

Sell

intermediary

Procurement
B2B: information exchange

Manufacturers Retailers
Suppliers ————————
Distributors -Prod info Buyers
———————— -Orders
-Purchases -Services
-Bids …
-Capacity
- Schedule
…

Banks
——————————
-Credit cards
-Payment authorization
-Electronic fund transfer
…
B2B: Information exchange
Material flow
Financial flow
Information flow

% Rental
revenue

$0-$8

Rental
revenue
Real-time
information
exchange
B2B: Selling

 Direct sales model, direct to other businesses

B2B: Selling

 Direct sales model, direct to other businesses

B2B: Procurement—mini case study

 Needs
 10,000 items
 2,500 suppliers
 Problems
 Not efficient – departments may contact the same buyers
regarding the same products
 No scale effects – separate orders
B2B: Procurement

 Solution
 Internal buyer (dept) request purchase
 Procurement dept invites vendors to bid
 Prices/products scope stored in internal electronic catalog
 Dept can compare available alternatives in the electronic catalog
 Where is IT
 Information flow – department, procurement, vendors
 Centralized database – electronic catalog
 E-payment via MasterCard’s corporate procurement card
 Purchasing decisions are managed by internal workflow
management systems
B2B: Procurement

 Impacts
 Paperless transactions
 More efficient procurement process
 Greater discounts due to large volume

 Way to do case study:

NeedsProblemSolutionITImpacts
B2B: Intermediaries
 Match institutional buyers and sellers
B2B: Intermediaries

Tradelink initiative
 HK—one of the worldwide trading and logistics hubs
 In each year, there are 200M paper-based documents processed
 Digitization  increase efficiencies of HK’s trading services
 90% of HK companies are SMEs
 Joint venture between HK government and private sectors
 Tradelink built on DTTN
B2B: Intermediaries

Better servcies
 Centralized, Internet-based customer database, linking all call
centers in Kowloon Bay and Ngau Tau Kok
 360-degree view of customers: customer’s profile, business
relationships, history of interactions and transactions
 Proven to significantly increase biz customers’ satisfaction
B2B: Intermediaries
New business model: Amazon’s Mechanical Turk

vs.
B2B: Intermediaries
“Artificial”
artificial artificial
intelligence intelligence
Artificial intelligence
Computers and people can do different things, e.g., comparing…

Computer vs. People

The same document? The same person?

Artificial intelligence

Computer vs. People

Comparing fingerprints Comparing quality of photos

HIT
 HIT stands for Human Intelligence Task.
 Typically these tasks are extraordinarily difficult for computers,
 but simple for humans to answer
 For example a HIT might ask: "Is there a bookstore in this photo?"
Solution

 Amazon’s Mechanical Turk fulfills HITs, such as

 Choosing the best among several photos of a storefront
 writing product descriptions,
 identifying performers on music CDs
 Translating into Chinese
 …
 Amazon founder, Jeff Bezos talks Mechanical Turk
 Amazon that you know
 Amazon that you may not know
How does it work
Resource
Approve? center
Create an acct Upload

Work
EB developers

Request
Pay

Providers
Impacts
 Providing services to requesters
 Costs saving for requesters
 Oftentimes, the cost of establishing a network of skilled people
to do the work outweighs the value of completing it.
 Fixed costs  variable costs
 Automated process to combine computers’ power and
people’s intelligence
C2C: Online Garage Sale
C2C: Online auctions

 eBay
 Yahoo
Auctions
 uBid.com
A tale of two bidders
(cont’)
Same products, same seller
Auction #1: High bidder, HAC
Auction #2: High bidder, KAR
 Recap – a tale of two bidders
 Same product, same seller
 Two bidders
KAR HAC

$49.46 $55.35
Price

 Why do buyers like to pay differently?

 Why does the seller like to use dynamic pricing?
 Assume KAR and HAC are willing to pay 49.46 and 55.35, respectively.

YES
KAR
Dynamic
pricing
HAC 104.81 YES
47 49.46 52 54 55.35 58
Price

KAR
Listed
pricing
HAC
 Conclusion:
Dynamic pricing maximizes seller’s revenue.

120
Seller’s
revenue 100
Dynamic
80
pricing
60

40
Fixed
20
pricing
0
45 47 49.46 52 54 55.35 58 60

Price
E-Government
 Government-to-citizen (G2C)
 Provide government services to citizens over the Internet,
e.g., vehicle registration renewal, online voting
 Government-to-business (G2B)
 Helps government and business work together more efficiently
 Reduces paperwork and costs for business and government
Online Marketing

 We will discuss “online marketing” in the special topic

“information rules”
 Will NOT appear in midterm
E-business models
Learning goals:
In the future, when you manage your EB, you are able to

 Identify products/services that are appropriate for EB

 Understand your position in value chain
 Then, design the appropriate models (b2b or b2c)
 Manage specific issues (technologies, issues)
E-Business Technology

 Web site functionality

 Speed of loading Web pages

(joke: WWW=World Wide Wait)
 Good search feature so users can find products quickly
 Simple checkout function to close the sale e.g., one-click checkout
 Ensure security & privacy
 Declare privacy policy
 Adopt Visa’s suggestions (see slides “online payment”)
E-Payments
 Using credit card in e-business
 Send financial transaction information securely over the Internet
 Consumers may not feel comfortable giving out credit card
information to unfamiliar sites
 Individuals may not have the ability to process credit card (e.g.
eBay sellers)
 Third-party money transfer services – Paypal
http://www.paypal.com/en_US/m/demo/demo_consumer/demo_consumer.html
Source: Paypal.com
Smart card
Integrated circuit chip Magnetic strip

 Stores more information

 User IDs
 Account information
 Address
 User-specified-terms of using the
card
 Automatically filling in online
order forms
 Speed up online purchasing
Online Billing
 Customers receive their bills and make payments online
 e.g. Credit card, utilities, tax, mortgage etc.
E-Business Issues

 Intellectual property
 We will discuss in a broader setting, “S/W”
 Security
 Right data, card, users (“online payment”)
 We will discuss encryption in “managing data”
 Trust
 Security
 Information quality
 Ease of use
 Taxation, Jurisdiction – whose laws apply when a
transaction crosses many international boundaries
Summary – EB development

Realize EB
Benefits
Manage
Technologies
& Issues
Design
(4S)
Models
(b2b or b2c)
Identify Value
Chain Position
Understand EB (e.g., Disintermediation vs.
Components Reintermediation)
(Products,
Process
& Delivery)
 Business implications
Mgmt

Organizational use
Major IS (1) (1) Digital EB
Economy (7)

Technology components People

HW SW Network Internet DB
(2) (3) (5) (6) (4)