Week 2 - Digital Business Flashcards
Define Digital Business
- Creation of New Business Design by Blurring the Digital and Physical Worlds
“New business designs” - new Kinds of Products and Services etc
“Blurring the Digital and Physical Worlds” - Physical Products becoming Smart and Connected
- Technologies No Longer just Enabling Doing the Same Things Faster and Cheaper but Changing the Very Way we Conduct Business
Explain concept - Waves of Business Digitisation
- ‘digitisation’ Originated in late 90’s, when Companies Started to Use the Web to Sell Online - subsequent Rise of E-commerce
- in 2000s, Web Continued to Transform Business
Web 2.0, social media etc : users went From being Content Consumers To Content Creators - 2010’s have seen : Digital Devices Extending to Mobile and Everyday Devices. New Digital Extrants such as uber, airbnb are Shaking Up Existing Business Sectors
Define E-Commerce
Process of Buying and Selling Goods and Services Electronically
- Any Electronic Means, Not Just the Internet
- 2 Sides to Consider for a Company : Buying From Suppliers and Selling to Customers
Define E-Business
E-Commerce + the Use of Internet or Other Digital Technologies for Performing (internal) Business Processes and Coordinating with Suppliers and Partners
State and Explain the CATEGORIES Of E-COMMERCE In TERMS of NATURE Of PARTICIPANTS
- Business-to-Consumer (B2C) : Retailing Products and Services to Individual Shoppers
- Business-to-Business (B2B) : Sales of Goods and Services Among Businesses
- Consumer-to Consumer (C2C) : Consumer Selling to Consumer
State and Explain the CATEGORIES Of E-COMMERCE In TERMS of BUYER’S CONNECTION
- Through a Desktop Computer or Laptop
- Mobile Commerce (m-commerce) : using Handheld Devices (e.g. smartphone or tablet)
- Location-based Commerce (I-Commerce) : M-Commerce Transactions Targeted to Individuals in Specific Locations, at specific times
Explain ELECTRONIC DELIVERY in terms of SUPPLY Of SERVICES and SUPPLY Of PRODUCTS
SUPPLY Of SERVICES
- can Often be Done 100% electronically, with Considerable Cost Reduction Potential
- examples : Electronic Banking, Online Securities Trading, Online Job Markets, Travel Services etc
SUPPLY Of PRODUCTS
- a Few “Digitised” products : mp3s, e-books etc
- for Other Types of Products, a Reliable, Cost Effective Physical Delivery Strategy is a Key Issue
Define ORDER FULLFILMET
- all of the Activities Needed to Provide Customers with Ordered Goods and Services, Including Related Customer Servies
Define Logistics
- the Operations Involved in the Efficient and Effective Flow and Storage of Goods, Servies and Related Information from Point of Origin of Point of Conumsption
- Traditonal Logistics : Large Amounts of Mateirals to a Few Destinations
- “e-logistics” typically small parcels Sent to Many Home (in B2C)
Explain the following Types of Companies in the “New Economy” : Bricks and Mortar, Pure-Play, Clicks and Mortar
- BRICKS and MORTAR : Traditional Companies Based in the Physical World Only
- PURE-PLAY : Organisations are Companies that are Engaged Only in Electronic Commerce
- CLICKS and MORTAR - Organisations are Those that Conduct Some E-commerce Activities, yet their Primary Business is Done in the Physical World
State 5 Advantages of E-Commerce
- may Eliminate Need for Maintaining Physical Shop Front
- Reduced Transaction Costs ; Increased Transaction Speed
- Ease of Crossing Geographical Boundaries
- Websites available 24/7
- Ease of Updating Existing and Distributing New Information
State 5 Barriers to E-Commerce
- SMEs’ Digital Readliness
- Regulatory Barries
- Suitabilitty of Product - ‘feel and touch’
- Trust and Fraud Issues
- Digital Divide
Explain the Impact of the Internet on Digital Business - CHANGING ECONOMIC OF INFORMATION
Interent has Changed the Economic of Information by :
- Shrinking Information asymmetry
Easier for Customers to Obtain and Compare Pricing and Other Info
- Extending both Richness and Reach of Information Provision
Digital Channels capable of Reach of Information Provision
Opportunities for Mass Personalisation (cf. richness of information
Explain the Impact of the Internet on Digital Business - REDUCING TRANSACTION COSTS
Internet Potenitally Reduces Transaction Costs :
- Finding Buyers : No Mass-Mailing of Expensive Brochurs, or Expensive TV and Radio ads
- Fully automatic Collection of Payment
- (in some cases) Delivering Product (e.g. digitised products)
- Support : email, online FAQs, user forums instead of person to person, chatbots
Explain the Impact of the Internet on Digital Business - IMPACT on (Industry) VALUE CHAIN
from impacting the value chain
- Tradionally, ICT were First Introduced to Support and Streamline Organisation’s Interval Value Chain Activities
to impacting the Value System
- the Intenet Offers a New Distribution Channel
- Allows Businesses to Coordinate More Closely with value Chain Partners (e.g. enabling data to flow between them)
- has Transformed many Industry Value Chains
Disintermediation : cutting out the “middleman”
Reintermediation : new types of middleman appearing instead
What is DISINTERMEDIATION?
- removal of Intermdiary Steps in a Value Chain e.g. Selling Directly to Consumers
–> lower purchase transaction costs
–> potential price advantage
Explain CHANNEL CONFLICT
Tension Among Different Distribution Chains for the Same Product or Service
- Channel Member Perceiebes Anther Channel to be Engaged in Behaviour that Prevents or Impeds it from Achieving its Own Goals
- e.g. web based direct sales channel
–> Risk of Alienating Traditonal Sales Reps (internal conflicts) or distributors (external conflicts)
–> Threats may Inlcude Lockouts or even Lawsuits by Distributors
- Disintermediation is Usually Not Instaneous
Explain what REINTERMEDIATION is
shifting of the Intermediary Function in a Value Chain to a New Source
- e.g. for Delivery now Need a Third Party Logistics Provider such a Royal Mail, Parcelforce, UPS
- New Intermediaries : transaction brokers, e-marketplaces, price comparison sites etc
Explain the Impact of the Internet on Digital Business - THE INTERNET & PORTER’S COMPEITIVE FORCES
- 5 Major Forces of Competition Determine Industry Structure and How Economic Value is Divided Among the Industry Players in an industry
- Porter noted - for Many Firms, the Internet has Intensified Most of these Forces
Explain the Impact of the Internet on Digital Business - ECONOMIC IMPACT OF DIGITITISATION
- But the Internet (and more recently mobile) also Create New Markets for Purely Digital Products and Services
- Digital Products Markerts have a Different Cost Structure
Strategies to Avoid Downward Price Spiral :
- Patenting
- Versioning
- Creating a Network Effect and Deriving Extra Value from it
- Product bundling and Cross-Subsidisation
Explain the Impact of the Internet on Digital Business - NON DIGITAL vs DIGITIAL PRODUCTS
for Traditional Industries with Tagible Proudcts:
- Marginal Costs (i.e. Cost of producing an Extra Product, e.g. assembling an Extra Car) Increases as Production Capacity becomes Stretched
- Each Competitor Makes Maximum Profit when they Set their Production Output to Level where Marginal Costs Meets Marginal Revenue (i.e. Market Price )
In Contrast, in Markets for Digital Products or Services such as Software, Music streaming etc
- Near-zero marginal cost (i.e. Cost of an Extra Downlaoded or Copy is Neglible ; Most of the Costs are Fixed Costs Incurred Early
- Creates Incentive to Undercut Prices of Competitors in Attempt to Grab the Market
Explain Platforms and Sharing Economy - GIVING RISE TO THE SHARING ECONOMY
- a Company may Not Make or Own Products at All
- Internet has Enabled the Growth of what Some Refer to As the ‘Sharing Economy’
- Original Intention : Internet-enabled Sharing
Use of Tech Platforms to Allow Consumers to Make Unused Resources (Temporarily) Avaliable to Other Consumers - People Said to Value “access over ownership”
- Claimed benefits
Save Money, earn income
Rediuce Carbon Footprints
Strenghten Community Ties - Definition Increasingly Blurred
Not just Proudcts but Also Services (e.g. Ride Hailing - Uber) - Increased Supply of Otherwise Unused Resources presents Growing Challenge to Sector Incumbents
Airbnb vs Hotels
Uber v Taxi Industry
Explain the Impact of the Internet on Digital Business - SHARING ECONOMY CRITICSMS
- Increasingly Monopolistic Platforms
- On-demand Services fueling Worker Exploitation
often not employing workers but self-emploted ‘partners’ paid per job - Unfair Practises
Airbnb - Does the Platform do Enough to Prevent Users from Circumventing Planning Restrictions, Local Taxes etc
UberX - concerns about Driving Vetting, reports of Incidents led to temporary Loss of Licence to Operate in London
