CHAPTER 13

Chapter 13 E-Business

 

² The Internet is a powerful channel that presents new opportunities for an organization to:

ü   Touch customers

ü   Enrich products and services with information

ü   Reduce costs

E-Commerce & E-Business

Ø How do e-commerce and e-business differ?

ü ·        E-commerce – the buying and selling of goods and services over the Internet (online transactions)

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

Industries Using E-Business

 

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

Business-to-Business (B2B)

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

Electronic marketplace (e-marketplace)

ü  Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels

ü  Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers

ü  Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials

Business-to-Consumer (B2C)

Ø  Common B2C e-business models include:

ü   e-shop – a version of a retail store where customers can shop at any hour of the day without leaving their home or office

ü   Example sony.com.my

ü   e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops

ü   Example Lazada.com.my

Business types:

ü   Brick-and-mortar business- operates in a physical store without an Internet presence. Eg: Bata.

ü   Pure-play business- a business that operates on the Internet only without a physical store. Examples include fashionvalet.com.

ü   Click-and-mortar business– a business that operates in a physical store and on the Internet .Eg: SONY store online

Consumer-to-Business (C2B)

·        Priceline.com is an example of a C2B e-business model

·        The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices

Priceline.com

Agoda.com

Consumer-to-Consumer (C2C)

Online auctions

Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically

Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins

Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid

Consumer-to-Consumer (C2C)

Ø C2C communities include:

ü Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting (facebook group)

ü Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts

ü Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan (anime group)

E-Business Benefits

include:

Ø   Highly accessible

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

Ø   Increased customer loyalty

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

Ø   Improved information content

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

Ø   Increased convenience

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

Ø   Increased global reach

Businesses, both small and large, can reach new markets

Ø   Decreased cost

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

E-Business Challenges

include:

Ø   Identifying Limited Market Segments

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

Ø   Managing Consumer Trust

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

Ø   Ensuring Consumer Protection

Implement Internet Security, protect from misuse of customer information.

Ø   Managing Consumer Trust

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

E-Business Benefits and Challenges

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

ü Transaction fees

ü License fees

ü Subscription fees

ü Value-added fees

ü Advertising fees

Mashups

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

-  Application programming interface (API) - a set of routines, protocols, and tools for building software applications

-  Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups

Web mashup example: 

 

CHAPTER 12

Chapter 12 - Integrating The Organization From The End To End - Enterprise Resource Planning

Enterprise Resource Planning (ERP)

Ø It serves as the organization’s backbone in providing fundamental decision making support.

Ø It enables people in different business areas to communicate.

Ø ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.

Ø The heart of an ERP system is a central database that collects information from and feeds information into all the ERP system’s individual application components (called modules), supporting diverse business function such as accounting, manufacturing, marketing, and human resources.

Ø  ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it.

 ERP Integration Data Flow and ERP Process Flow 

Bringing the Organization Together

Ø  ERP enables employees across the organization to share information across a single, centralized database.

Ø With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the work-flow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency.

Organization before ERP

ERP- Bringing the Organization Together

The Evolution of ERP
 

Although ERP solutions were developed to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw materials, inventory, order entry, and distribution, ERP was unable to extend to other functional areas of the company such as sales, marketing, and shipping. It could not tie to any CRM capabilities that would allow organizations to capture customer-specific information, nor did it work with websites or portals used for customer service or order fulfillment

Integrating SCM, CRM, and ERP

Ø Integration of SCM, CRM, and ERP is the key to success for many companies. Integration allows the unlocking of information to make it available to any user, anywhere, anytime. 2 main competitors in ERP market:

1.    Oracle

2.    Sap

Primary Users and Business Benefits of Strategic Initiatives.

Ø  Integration Tools

ü  An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation.

ü  Integration are achieved using:  

* Middleware- several different types of software that sit in the middle of and provide connectivity between two or more software applications. It translates information between disparate systems.

* Enterprise application integration (EAI) middleware- represents a new approach to middleware by packaging together commonly used functionality, such as providing prebuilt links to popular enterprise applications, which reduces the time necessary to develop solutions that integrate applications from multiple vendors.

Ø     Integration between SCM, CRM, and ERP Applications.

Companies run on independent applications, such as SCM, CRM, and ERP. If one application performs poorly, the entire customer value delivery system is affected.

Enterprise Resource Planning’s Explosive Growth:

Ø  Reasons of ERP being proven to be such a powerful force:

ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses.

ERP addresses the need for global information sharing and reporting.

ERP is used to avoid the pain and expense of fixing legacy systems

Ø  To qualify as a true ERP solution, the system not only must integrate various organization processes, but also must be:

ü   Flexible- an ERP system should be flexible in order to respond to the changing needs of an enterprise.

ü  Modular and open- an ERP system has to have open system architecture, meaning that any module can be interfaced with or detached whenever required without affecting the other modules. The system should support multiple hardware platforms for organizations that have a heterogeneous collection of systems. It must also support third- party add-on components.

ü      Comprehensive- an ERP system should be able to support a variety of organizational functions and must be suitable for a wide range of business organizations.

ü      Beyond the company- an ERP system must not be confined to organizational boundaries but rather support online connectivity to business partners or customers.

Everyone involved in sourcing, producing, delivering the company’s product works with the same information, which eliminates redundancies, cuts wasted time, and removes misinformation.

CHAPTER 11

Chapter 11 – Building a Customer-Centric Organization – Customer Relationship Management

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

Ø CRM enables an organization to;

ü   Provide better customer service

ü   Make call centers more efficient

ü   Cross sell products more effectively

ü   Helps sales staff close deals faster

ü   Simplify marketing and sales processes

ü   Discover new customers

ü   Increase customer revenues

RECENCY, FREQUENCY AND MONETARY VALUE

Ø An organization can find its most valuable customers by using a formula that industry insiders call FRM;

ü   How recently a customer purchased items (recency)

ü   How frequently a customer purchased items (frequency)

ü   How much a customer speeds on each purchased (monetary value)

THE EVALUATION OF CRM

CRM reporting technologies help organizations identify their customers across other applications. CRM analysis technologies help organizations segment their customers into categories such as best and worst customers. CRM predicting technologies help organizations predict customer behavior, such as which customers are at risk of leaving.

 

THE UGLY SIDE OF CRM: WHY CRM MATTERS MORE NOW THAN EVER BEFORE

 

CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH

 

USING ANALYTICAL CRM TO ENHANCE DECISION

Ø   Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers

Ø   Analytical CRM – supports back-office operations and strategic analysis and includes all system that do not deal directly with the customers

CUSTOMER RELATIONSHIP MANAGEMENT SUCCESS FACTORS

Ø CRM success factors include;

ü   Clearly communicate the CRM strategy

ü   Define information needs and flows

ü   Build an integrated view of the customer

ü   Implement in iterations

ü   Scalability for organizational growth

USING ANALYTICAL CRM TO ENHANCE DECISION

Ø Operational CRM and analytical CRM

 

CHAPTER 10

Chapter 10 : Extending the Organization – Supply Chain Management

Supply Chain Management

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

Ø   In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains

Basics of Supply Chain

Ø  The supply chain has three main links:

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

ü   Transformation of materials into semi-finished and finished products through the
 organization’s own production process

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

 

Ø   Plan

ü   A company must have a plan for managing all the resources that go toward meeting customer demand for products or services.

Ø   Source

ü   Companies must carefully choose reliable suppliers that will deliver goods and services required for making products.

Ø   Make

ü   This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery.

Ø   Deliver (Logistic)

ü   Companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.

Ø   Return

ü   This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

Factors Driving SCM

 

Ø   Visibility – more visible models of different ways to do things in the supply chain have emerged.  High visibility in the supply chain is changing industries, as Wal-Mart demonstrated

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

Ø   Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

Ø   Supply chain visibility allows organizations to eliminate the bullwhip effect

ü   To explain the bullwhip effect to your students discuss a product that demand does not change, such as diapers.  The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long.  The number of newborn babies determines diaper demand, and that number is constant.

ü   Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe

ü   Distributors order diapers from manufacturers when their inventory level falls below a certain level, they might order a few extra just to be safe

ü   Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe

ü   Eventually the one or two extra boxes ordered from a few retailers become several thousand boxes for the manufacturer.  This is the bullwhip effect, a small ripple at one end makes a large wave at the other end of the whip.

 Consumer behaviour

ü  Companies can respond faster and more effectively to consumer demands through supply chain enhances

ü  Once an organization understands customers demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organization performance

ü  Demand planning software – generates demand forecast using statistical tools and forecasting techniques

Competition

ü  Supply chain planning software(SCP) – uses advanced mathematical algorithm to improve the flow and efficiency of the supply chain

ü  Supply chain execution software (SCE) – automates the different step and stages of the supply chain

ü  SCP and SCE both increase a company‘s ability to compete

ü  SCP depends entirely on information for its accuracy

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

SCP and SCE in the supply chain

 Speed

Ø   Three factors fostering speed

 

Ø   Supply Chain Management Success Factors

Ø   SCM industry best practices include:

ü   Make the sale to suppliers

ü   Wean employees off traditional business practices

ü   Ensure the SCM system supports the organizational goals

ü   Deploy in incremental phases and measure and communicate success

ü   Be future oriented

Ø   SCM Success Stories

Ø   Top reasons why more and more executives are turning to SCM to manage their extended enterprises

 

Ø   Numerous decision support systems (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains

Ø   DSSs allow managers to examine performance and relationships over the supply chain and among:

ü   Suppliers

ü   Manufacturers

ü   Distributors

ü   Other factors that optimize supply chain performance