1. shopping
2. auctions

Chapter 5
E-Commerce: Selling and Buying in Private EMarkets
Class Exercises
Jason Chou-Hong Chen, Ph.D.
Professor of MIS
Graduate School of Business, Gonzaga University
Spokane, WA 99223 USA
chen@jepson.gonzaga.edu
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Prentice Hall & Dr. Chen, Electronic Commerce
EC Application Case 5.4: How the State of
Pennsylvania Sells Surplus Equipment (p.233)
•
•
•
•
#1 Why is heavy equipment amenable to such
auctions?
It is high value, with potential buyers that are
physically distant or unable to attend a specific
time auction.
#2 Why did the state generate 20 percent more
in revenues with the online auction?
By allowing a larger potential market, the price
of the items increased.
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Prentice Hall & Dr. Chen, Electronic Commerce
• #3. Why do you need an intermediary to
conduct such an auction?
• The intermediary may help increase the
potential market pool as well as supplying
the needed technical infrastructure.
• #4. Comment on the number of bidders and
bids as compared with off-line auctions.
• The numbers increase as more buyers have
access.
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Prentice Hall & Dr. Chen, Electronic Commerce
EC Application Case 5.6: Reverse Auctions
Become a Diplomatic Tool (E-Tendering case)
(p.241)
• #1. List the drivers of the application.
• The system attempts to reduce costs, time spent
and vendor alienation.
• #2. What is the role of the intermediary? (See
fedbid.com.)
• The intermediary provides the IT systems and
conducts the auction.
• #3. What are the success factors in this case?
• Success factors include cost savings, a reduction
in time used in the process and an understanding
of the fairness of the system.
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Prentice Hall & Dr. Chen, Electronic Commerce
Discussion Board Questions
• **4. Discuss and compare all the mechanisms that
aggregators of group purchasing can use (name an
application) (GPO)
• Companies can use the internal aggregation and external
aggregation.
• Internal aggregation relies on the company to create a critical
mass of purchases across several operating divisions to make
group purchasing worthwhile. This system provides a
company with a large degree of control over when purchases
are made and the specific items purchased.
– This system only works for very large firms.
• External aggregation allows smaller firms to work with
others to create a critical mass for purchases. This system
relies on several independent firms, and therefore the
individual firms may not have the level of control that one
large internal aggregator would have.
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Prentice Hall & Dr. Chen, Electronic Commerce
• 1. Explain how a catalog-based sell-side emarketplace works and discuss its benefits.
• Sell-side catalog-based marketplaces are very
similar to business-to-consumer catalog-based
marketplaces. They provide a service that allows
buyers to easily select and purchase products from
a catalog of potential goods provided by the seller.
• Sellers are able to easily display a large variety of
items to their potential buyers.
• Buyers are able to make their purchases easily
through this online system.
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Prentice Hall & Dr. Chen, Electronic Commerce
• 2. Discuss the advantages of selling through
online auctions over selling from catalogs. What
are the disadvantages?
• Selling through auctions has several advantages
including low overhead and operational costs if a
third-party auction is used, the ability to sell oneof-a-kind items easily, the ability to sell at the
prevailing market price, and the ability to change
products and pricing quickly.
• Disadvantages might include limited selling times
and reduced control over price.
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Prentice Hall & Dr. Chen, Electronic Commerce
• 3. Discuss the role of intermediaries in
B2B.
• Intermediaries in business-to-business
electronic commerce generally perform
some sort of value-added operation.
• These intermediaries provide value through
their ability to move goods through the
value chain in a manner that assists both
those upstream and downstream. (see next
slides)
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Prentice Hall & Dr. Chen, Electronic Commerce
Striving for Competitive Advantage
• Firm level: Industry & Competitive Analysis
– Competitive Forces Model
– Competitive Strategy
• Business level
– Value-Chain Analysis
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Prentice Hall & Dr. Chen, Electronic Commerce
PORTER’S FIVE COMPETITIVE FORCES MODEL
NEW
MARKET
ENTRANTS
•Switching cost
•Access to
distribution channels
•Economies of scale
THE FIRM
INDUSTRY
COMPETITORS
•Cost-effectiveness
•Market access
•Differentiation of
product or service
•Selection of suppler
•Threat of backward
integration
SUPPLIERS
SUBSTITUTE
PRODUCTS
& SERVICES
Threats
Bargaining power
•Redefine products
and services
•Improve
price/performance
•Buyer selection
•Switching costs
•Differentiation
CUSTOMERS
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Prentice Hall & Dr. Chen, Electronic Commerce
Dr. Chen, The Trends of the Information Systems Technology
N
TM -10
The Five Forces Model and IS
• The Five Forces Model provides a way to think
about how information resources can create
competitive advantage.
• Using Porter’s Model, General Managers can:
– Identify key sources of competition they
face.
– Recognize uses of information resources to
enhance their competitive position against
competitive threats
– Consider likely changes in competitive
threats over time
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Prentice Hall & Dr. Chen, Electronic Commerce
N
Porter’s Five Forces Model and Value Chain
• The value chain model highlights specific
activities in the business where competitive
strategies can be best applied and where
information systems are most likely to have a
strategic impact.
• Therefore, the value chain model can be
employed to identify specific, critical leverage
points where a firm can use IT most effectively
to enhance its competitive position.
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Prentice Hall & Dr. Chen, Electronic Commerce
Figure 1.6 (2.4) Process View of the Firm: The Value
Chain
(Value)
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N
Using Information Resources to Alter the
Value Chain
• The Value Chain model suggest that competition
can come from two sources:
– Lowering the cost to perform an activity and
– Adding value to a product or service so buyers
will be willing to pay more.
• Lowering costs only achieves competitive
advantage if the firm possesses information on the
competitors’ cost structure
• Adding value is a strategic advantage if a firm
possesses accurate information regarding its
customer such as: which products are valued?
Where can improvements be made? When to …
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Prentice Hall & Dr. Chen, Electronic Commerce
N
The Value System:
Interconnecting relationships between organizations
Upstream
value
Firm
value
Downstream
value
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N
Business Strategies
and its Competitive Advantage
Lower Cost
Position
Industry
wide
(Broad
Target)
Particular
Segment
only
(Narrow
Target)
Uniqueness
Perceived by
Customer
Cost
Leadership
Differentiation
Cost Focus
Differentiation
Focus
Industrial economy
Competitive Mechanism
Prentice Hall & Dr. Chen, Electronic Commerce
Dr. Chen, The Trends of the Information Systems Technology
Knowledge-based
economy
16 N
TM -16
Internet Exercise
#5. Visit supplyworks.com and procure.com.
Examine how each company streamlines the
purchase process. How do these companies
differ from ariba.com?
• These firms provide software solutions that
automate Supplier Resource Management. The
solutions allow tighter integration and lower
transaction costs between buyers and sellers.
The concentration is on solutions for the supplyside. While ariba.com provides similar solutions,
they also focus on buy-side and complete supply
chain integration.
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Prentice Hall & Dr. Chen, Electronic Commerce
Real-World Case: Eastman Chemical
Makes Procurement a Strategic Advantage
(p.256)
#1. Enter perfect.com and find information about the
capabilities of PerfectPicture. Write a report.
• Answers will vary.
#2. Why did Eastman Chemical start first with eprocurement rather than with the sell-side? You
may want to visit eastman.com to learn more
about the company.
• The company was focused on reducing the cost of
MRO purchases to make operations more
efficient.
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Prentice Hall & Dr. Chen, Electronic Commerce
#3. In July 2000, Eastman Chemical introduced an
EC project that enables buyers to participate in
Eastman’s private online price negotiations using
LiveExchange from Moai (moai.com). Explain
how the software works and why it is referred to as
“dynamic commerce.”
• The software allows different groups to participate
in product negotiation. It is “dynamic commerce”
because the addition of new purchasers can
dramatically affect pricing and availability for
products.
#4. Which of the problems cited in this case can be
solved by other EC applications? Relate your
answer to Ariba products (ariba.com).
• Answers will vary.
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