Define and discuss the advantages and disadvantages for providing effective e-business insights or strategic recommendations, using ONE (1) only of th

Define and discuss the advantages and disadvantages for providing effective e-business insights or strategic recommendations, using ONE (1) only of the following models or approaches:

A traditional marketplace is a physical place where buyers and sellers meet. Today in this age of technology, buyers and sellers now dont have to meet face to face and they meet in marketspace instead of marketplace.
Hence marketplace refers to the digital equivalent of the physical world marketplace. Hence the success of transactions depends on how screens and computers interact with each other and manage customer's expectations. Due to the shift from activities and capabilities in the physical world to a combination of marketplace and marketspace activities, resource systems for many companies are now modiefied to a combination of physical and virtual assets.
Marketplace differs from marketspace in the following manner:

Content - The physical product has now changed to product information
Context - An electronic screen, replaces the face to face transaction.
Infrastructure - Computers and computer lines replace retailers.
In marketspace, members of the value chain are able to manage their relationships more directly and the following acitivities identified by Turban et al (2002) takes place

Customers can search for detailed information on the internet, in just a matter of seconds, at any time of the day and are able to compare products.
Sellers can use websites or marketspaces to provide, update, sell and receive information. Sellers can sell directly from their websites or use electronic retailers
Intermediaries, serve as the middle man between the transactions of buyers and sellers. Each of them facilitate each other to perform the transaction.
Infrastructure companies generally provide hardware, software, security for the marketspace operations.
Content creators create and maintain the websites.
Business partners collaborate on the internet through supply chain.
Competition on marketspace differs from that of Marketplace. There are a number of sellers present. The cost of searching information is very low or nearly negligible. Marketspace allows differentiation and personalization.

There are number of advantages of having a marketspace:

Lower costs: attributed by manufacturer, supplier partnerships and enhanced value chain
Convinience: Information is available to subscriber at all locations at any point in time.
Ubguity: All subscribers can log on anytime, anyone can register and purchase, open to all.
Reach: Greater numbers of buyers are present at one point in time, and the seller can command a 6-7% markup over the price they would get at a physical auction.




• Virtual Value Chain (VVC)

A simple value chain describes a series of value-adding activities connecting a company’s supply side (raw materials, inbound logistics and production processes) with its demand side (outbound logistics, marketing and sales). By analysing the stages value chain managers have been able to redesign their internal and external processes to improve efficiency and effectiveness.

The value chain model treats information as a supporting element of the value adding process, not as a source itself. For eg. Managers often use information that they capture on inventory, production or logistics to help monitor or control those processes, but they rarely use information itself to create new value for the customer.

To create value with information, managers must look to the marketspace. The value adding processes that company must employ to turn raw information into new marketspace services and products are unique to information world. In other words, the value adding steps are virtual in that they are performed through and with information.

The economic logic of the two chins is different: A conventional understanding of economies of scale and scope does not apply to the Virtual Value chain in the same way as it does to the physical value chain.

Companies adopt value adding information processes in three stages:
Visibility: companies acquire an ability to “see” physical operations more effectively through information. Managers use large scale information technology systems to coordinate activities in their physical value chains and in the process lay the foundation for a virtual value chain.
Mirroring Capability: Companies substitute virtual activities for physical ones and they begin to create a parallel value chain in the marketspace. Once companies have established necessary infrastructure for visibility, they can do more than just monitor value adding steps. They can begin to manage operations or even to implement value adding steps in the marketspace ; faster, better, with more flexibility, at lower cost.
New Customers Relationships: Finally businesses use information to establish new customer relationships. At this stage managers draw on the flow of information in their virtual value chain to deliver value to customers in new ways.

Visibility Eg: Frito lay – underlying the manufacture and distribution of a variety of Frito-brand snack foods is an efficient information system that gives managers the ability to visualize nearly every element of the company’s value chain as a part of an integrated whole. Frito’s employees collect information on the sales of products daily store by store across the nation and feed it elecetroniacally to the company. The employees also collect information about the sales and promotions of competing producs or about new products launched by competitors in select locations.

Mirroring Capabilty eg: Boeing 737 and Virtual wind tunnel.

New Customer Relationships eg: DEC (Digital Equipment Corporation) and Oracle now sell and promote their products online, so that they can attract new customers and serve existing ones better.


Creating value in any stage of a virtual value chain involves a sequence of five activities:
Gathering
Organizing
Selecting
Synthesizing
Distributing information.


Advantages:

Law of Digital Assets: Digital assets, unlike physical ones are not used up in their consumption. Companies that create value with digital assets may be able to reharvest them through potentially infinite number of transactions, thus changing the competitive dynamics for industries.
New Economies of Scale: VVC redefines economies of scale, allowing small companies to achieve low uni cots for products and services in markets dominated by big companies. Eg: fed-ex has built technology to track products and hence, built a post office at every home.
Transaction Cost compression: Transaction costs along the VVC are lower than PVC. They continue to decline sharply as the processing capacity per unit of cost for microprocessors doubles every 18 months.
New economies of scope: Businesses can redefine economies of scope by drawing on a signle set of digital assets to provide value across many different and disparate markets.
Rebalancing supply and Demand: Combining the above axioms creates a fifth. Business increasingly demands a shift from supply-side to demand-side thinking.

Disadvantages:

Expensive














• Virtual Integration (The DELL Direct Model)

Virtual integration harnesses the economic benefits of two very different business models. It offers advantages of a tightly coordinated supply chin that have traditionally come through vertical integration. At the same time it benefits from the focus and specialization that drive virtual corporations.

Model is based on direct sales and built to order production.

Direct Sales: The direct sales approach is built on two key elements: direct customer relationships, and products and services targeted at distinct customer segments. Direct sales means that Dell must reach out to potential customers, either through its own sales force or through advertising and other marketing efforts. Dell segments its customers into Relationship, Transaction, and Public/International customers.

Build-to-order: Dell’s production system applies principles of lean manufacturing and just-in-time production. These principles aim to minimize parts inventories by requiring suppliers to restock parts only as they are needed, and often to maintain ownership of parts until they are used.

Direct Distribution:


Business Strategy

Performance Effects
Direct Sales




Accurate forecasting of demand
Segmentation of demand
Early indication of shits in demand
Build-to-order




Better control of operations
Reduced inventory and transit points
Better communication during build process
Improved monitoring and evaluation of production and superior quality.

Direct Distribution



Accelerated outbound logistics
No inventory
Optimization of production, quality and distribution globally and locally.






• The Navigation Approach (Evans And Wurster)
On the internet, navigation and selection occur independently of physical warehousing and distribution. Physical shop keepers who used to exert enormous influence over consumer choice, no longer enjoy special advantages. Product suppliers can sell directly to consumers. Electronic retailers can focus on navigation and outsource fulfilment. Pure navigators like Yahoo! Can organize information help people make sense of it without being party to the transaction at all. Many people continue to view Amazon.com as an online bookseller, but its true business is navigation. It has rapidly broadened its offerings from books and CDs to movies, drugs and toys.

Evans and Wurster (1999) have argued that there are three aspects of navigation that are key to achieving competitive advantage online. These are:

• Reach. This is the potential audience of the e-commerce site. Reach can be increased by moving from a single site to representation with a large number of different intermediaries. Allen and Fjermestad suggest that niche suppliers can readily reach a much wider market due to search engine marketing.

• Richness. This is the depth or detail of information which is both collected about the customer and provided to the customer. This is related to the product element of the mix.

Two factors limit rich consumer information. First is privacy constraints, which require that consumers be informed of, and agree to any exchanges of data. The second factor is consumers’ option to search and organize information for themselves.
For eg: CDNOW solicits information about which recording artists its customers like the most. The company relates that information to the individuals’ actual music purchase and then supplies a statistical matching technology, created by Net Perceptions, to identify a universe of people with similar tastes.

• Affiliation. This refers to whose interest the selling organization represents – consumers or suppliers. This particularly applies to retailers. It suggests that customers will favour retailers who provide them with the richest information on comparing competitive products. The player in the worst position to exploit affiliation is the product supplier because the supplier has an interest in the transaction that is different from the consumer’s.

Dell has currently extraordinarily service with a much broader configuration and retailing service. It matches the reach of current computer retailers, and provides comprehensive navigation to products it does not make, and preserves the option to promote its own product.




Syndicate model:

Syndicate involves the sale of the same good to many customers who then integrate it with other offerings and redistribute it.

With syndication, there are three roles that a business can play.
Originators create original content.
Syndicators package that content for distribution and integrate the content from originators.
Distributes deliver the goods to consumers.

Syndication has traditionally been rare in the business world for three reasons. (Disadvantages)
First, syndication works only with information goods: information is never consumed; infinite number of people can use the same information. That’s not the case with physical products.
Syndication requires modularity: While a syndicated good can have considerable value in and of itself, it does not normally constitute an entire product; in old physical economy, modularity was rare. Boundaries between products, supply chains and companies tended to be clearly demarcated and impermeable.
Syndication requires many independent distribution points. There’s little to be gained by creating different combinations and configurations of content if there’s only one distributor, or if every distributor is controlled by a content creator.

Sydnication with E-business: (Advantages)

With the internet, information goods, modularity and fragmented distribution becomes not only possible but essential.
Everything that moves on the internet takes the form of information.
Hyperlinked architecture of Web is modular in nature.
Because anyone can start a website, there are literally millions of different distribution points for users. In such environment syndication becomes inescapable.

Eg: Amazon in 1996, launched an aggressive affiliate program called Amazon.com Associates. Instead of relying solely on attracting customers to its site, Amazon can use this program to take its site to where customers already are. There are more than 400,000 sites that have signed u to be affiliates; each provide their own visitors with hyperlinks that enable them to make purchases through Amazon. In effect Amazon is syndicating its store to other locations. While Amazon loses some control over merchandising and has to pay out 5 to 15% commissions on revenues generated by affiliates, the benefits far exceed costs.Amazon puts itself in front of more potential customers than it could attract directly, especially in niche categories.

Advantages of Syndication over outsourcing:

Because syndication deals with information rather than physical resources, a company can syndicate the same goods or services to an almost infinite number of partners without incurring much additional cost. A physical call centre outsourcer must hire more people, lease office space, etc. E-commerce originator doesn’t have to invest in more people, money and machinery, as software particularly scales for free.
Online syndication can be automated and standardized in a way that physical outsourcing cant. An important feature of syndication relationships is that business rules, such as usage rights and payment terms can be passed between companies along with syndicated asset or service