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BUAD 683 Ch 4 & 5

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Shariq Ahmed

on 13 December 2018

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Transcript of BUAD 683 Ch 4 & 5

Network Effects
Two-sided Networks
- Users of content and suppliers of content (i.e., Adobe PDF format)
- Buyers and suppliers of goods [i.e., Online electronic marketplaces - Alibaba.com, Amazon.com]



Networks Vocabulary
Positive Feedback
- self-reinforcing mechanism - strong gets stronger, weak gets weaker
- follows the S curve
- economies of scale
- eg: small vs large car manufacturer
can raise inventory/production & increase sale volume [
GM, Toyota
]
- smaller firm: find a niche, OR become compatible [eg:
Gourmet Pizza
,
Apple & Windows OS - others?
]
Physical & Virtual Networks
Physical:
tangible - railroad, telephone - nodes are connected physically.
Info Systems for Managers
Network Economics
Chapter 4 & 5
- Instagram has approx. 1B users
- Facebook approx. 2.23B users
"The evangelist effect"
-
Group Shopping:
more buyers = lower price
the price decreases for the entire group
eg: Groupon, Living Social, Massdrop.com


The Changing Competitive Environment
Chapter 4
Value in Plentitude
Instagram - bought by FB $1B
Value: by scarcity or rarity?
Whatsapp, Twitter?
Network value determined by the # of nodes connected (plentitude vs scarcity)
How about diamonds?
Virtual:
connections between nodes is intangible or invisible.
Nodes are actually people, rather than devices.
Skype, Zoom, (VOIP), etc
Similar networks can connect with each other Eg: Skype, Zoom, GotoMeeting, MS Word, Excel, PDF?
The more the nodes the higher the value of a network.
Negative feedback
- strong gets weaker, and weak gets stronger
- after a point, increasing volume does not decrease cost
- causes increased overhead = growth hampered
Can you think of any examples?
What motivated you join a social network (Facebook, Snapchat, Twitter, Whatsapp?)
Tipping Point
- point at which a firm reaches dominance
- watershed of dominance
- tipping pt proportionate to lower cost & network effects [
Whatsapp: 1.3B users
]

Tippy Market
[
tips in favor of firm that reaches a critical mass
]
- strong positive feedback
- winner takes all
Do all Markets Tip?
Networks with two types of members, each creating value for the other
Ashley Madison site: faked its #s to reach a tipping point - did it work?
Economics Characteristics of Information
High production costs
Negligible replication costs
Negligible distribution costs
Information is not the carrier [Newspapers -> online; Video->
Netflix
]
Sunk costs [
bulk of it, can't recover
]
No natural capacity limits
Not consumed by use
Info goods = Experience good

What is data?
What is information?
What are classic information goods?
Implications of Info Goods
Info is:
customizable
reusable
time-sensitive
can produce significant profits
Richness and Reach
Richness
-
amount
of information that can be transmitted
- how
customizable
is the information
- how
interactive
is the message
Reach
-
number
of possible recipients of the message

Technology
Implications of Technology on Richness/Reach
- Cant continue 'good old ways"
Theater > Video > DVD > Blue ray > Redbox? > Streaming --- keep up!
-
Dealing directly with consumers is critical
- own the relationship, improve it - must innovate and use technology
-
Information is ubiquitous/asymmetric
carriers cant hold the information from consumers - must adapt to this model
Obstacles
-
New technology must fully replace the old
, for it to fizzle.
Do you use an e-textbook?
- New entrants face
retaliation
from incumbents [legal, legislative, hybrid offer]
-
Resistance to change
"if you build it, they may still not come".
-
Attention challenge
scarcity of attention = slow adoption rates; must introduce the product/service and educate users.

Sustaining & Disruptive Technologies
Sustaining Technology
- offers the same set of attributes
- yields better performance
- extends the useful life of the existing product
Disruptive Technology
- different attributes
- higher/better performance
- initially lesser demand than the existing technology

Is Uber a Sustaining or a Disruptive Technology?
What is an example of a Sustaining Technology?
Electronic Commerce: New Ways of Doing Business
Chapter 5
What is the Internet?
The Internet
- Network of networks.
- The Infrastructure on which many services are made available.
-
WWW
service available on the Internet, consists of resources found through Universal Resource Locators (URLs), interlinked through hypertext links
A global computer network that provides content, information,communication, and consists of interconnected networks, connected through standardized communication protocol, TCP/IP
Internet Key Elements
- 8-10 B devices (2017)
- 20 (50?) B devices (2020)
- Distributed ownership
[no one owns it -
ever

wonder why authorities cant shut down certain websites?
]
- Open standards [uses TCP/IP]
- Multiplicity of devices (IoT)
[fridge, tv, streaming device, coffee maker, Alexa, Cortana, security system, car, el switches, iRobot, what else?]
- More than a network - its the way of contemporary life.
eg: social network, online + - reviews,


E-Commerce
What is e-commerce?
Online exchange of value
The process of marketing, distributing, buying, selling, and servicing products & services on the Internet.

Enablers
- Affordable computers [41% households worldwide]
- Access to the Internet [4.1B Internet users w-wide]
- Open standards [inter-connectivity, no silos]
E-Commerce Categories
B2B
- 2+ Business entities take part in the transaction.
- one-time interactions to unique and highly tailored relationship between two firms.
Examples?

C2C
Consumers interact with each other.
Examples???
C2B
Consumers sell back to the businesses
Examples?
eGovernment
Consumers interact with the government
Examples?
by transaction type
E-Commerce Categories
by company structure
Brick & Mortar
- traditional org with a physical location
Examples?
Bricks & Clicks
- orgs with hybrid ops
Examples?
Pure Play
- operate fully online
Examples?
Examples
Amazon.com
Best Buy
Target
Kohls
Craigslist
eBay
Alibaba.com
Staples.com
Kayak.com
Spotify
DMV.ca.gov
Dell Premium
Crowdsourcing
B2B
B2C
C2C
eGovernment
Brick & Mortar
Bricks & Clicks
Pure Play


E-Commerce Revenue Models
Pay for service
Subscription
Advertisement support
Affiliate
Freemium

Spotify
Netflix
Pandora
Facebook
iTunes
Trip Advisor
Google Apps
Pinterest
Youtube
E-books
Dominant Business Models
Online Retailing
- Arranges inventory & resells at a profit
- Fulfillment is a critical capability
- Revenue model: pay for service
- Pure play or Bricks & Clicks
Amazon.com, Target.com


Content Providers
- Owned: Generated by org staff
- Not owned: User-generated
- Revenue model: ad supported, subscription, pay per download
Reuters.com, CNN.com, yelp.com, tripadvisor.com
Infomediaries
- provide specialized information on behalf of product/service providers.
- do not sell the goods and services or take ownership of inventory.
Edmunds.com, kbb.com, kayak.com

Dominant Business Models
Online Communities
- Group of people, together by a common interest
Tripadvisor.com, yelp.com, quora.com
Exchanges
- Marketplace for buyers & sellers, to transact
eBay.com, craigslist.com, autotrader.com?
Implications of eCommerce
Disintermediation
The shortening of a company's supply chain, eliminating one or more intermediaries
[
travel agents, car dealers, ticketing agents, toll booths :(
]
Reintermediation
Creation of new intermediaries due to the Internet alongside brick & mortar counterparts
[
Geico, AIS, Expedia, Kayak
]
Market Efficiency
- firms cant profit from asymmetry of information, heightened competition.
Expedia.com, Kayak.com


Implications of eCommerce
Channel Conflict
- dilemma: face disintermediation or embrace reintermediation.
Dell.com >> Compaq
Customer & Employee Self-Service
- self serv checkin, checkout, baggage check
2017: Global E-Commerce: $2.3T
Web 2.0
- Not flat or one-way, 2-way
- Free
- Easy to use
- Less structured
- More interactive

Wikis
- Enable simple co-authoring and editing of Web content
When would you use a Wiki?

Blogs
- Online journals that individuals keep and publish on the Web

Real Simple Syndication (RSS):
- Enables the creation of web feeds
- Broadcast to all subscribers once a trigger event occurs

Tags
- Short descriptors
- Used to structure and categorize user-generated content
Flickr, same principle as hashtags?

Ajax
[
Asynchronous JavaScript XML
]
- Enables the development of interactive client-side apps
Gmail - looks/behaves like a desktop software

Microblogs
Uni-directional short bursts of content, to followers
Twitter

Web 2.0 Innovation
Social Networking
FB, Twitter, Pinterest, Snapchat.....
Mashups
- Uses content from multiple sources to create a single service using Application Programming Interface (API).
Combine ArcGIS + Social Media to create a new app.

Long Tail Strategies
- Customer interests are highly varied.
- There exists demand for niche products.
Can easily sell online: not-so-popular
music/books
Crowdsourcing
- Also based on the long-tail concept
- A firm sends out a call to the crowd to conduct a certain project/task.
Examples of crowdsourcing?
Web 2.0 Innovation
"I will Skype you"
How about self-driving cars?
In-Class Activity 2
Review the minicase on Page 132
Answer questions 1-3
Part 1
In-Class Activity 2
You and your fellow group members have just completed your MBA. You do not want to look for a job after graduation, instead you would rather start a new start-up.

Required:
- Come up with a unique idea of either a disruptive or a sustaining technology- based e-Commerce venture in any field.
- Create a compelling presentation that you want to present before venture capitalists.
- Address the areas we have covered in our discussions in class (see chapters 1-5, 7-9)
- Be sure to address among other things:
- Technology used
- The e-commerce category by structure
- Category by transactions
- The business model used
Time: 1 hour to plan
10 minutes to present for each group
Gartner
https://makeawebsitehub.com/social-media-sites/
"
Can you Xerox this paper please?"
B2B
C2C
C2B
eGovernment
"Google it!"
Have you heard about these?
https://ember.com/
Full transcript