Information Technology and Electronic Commerce
B01.2312.21 - Spring 2000

Professor F. Provost
MW 8:30am-9:50am

Information technology (IT) makes it possible to undertake initiatives that were inconceivable a few years ago. Technology, especially the Internet, provides unprecedented connectivity, access to information, coordination and communications on a worldwide scale. IT enables electronic commerce, which is changing the nature of markets and industries. This same technology transforms the structure and operations of organizations.

The purpose of this course is to discuss the effects on modern business of the widespread application of information technology, including the evolution of new business models.  We focus on electronic commerce as a highly visible example of the impact of information technology on business.

1. Introduction


The theme of the course is that electronic commerce is changing the nature of markets, industries and businesses. It enables new business models for e-commerce as well as all other activities.  We focus on "what's new?"; how are things different today?  How does e-commerce differ from traditional commerce. This class also introduces some of the technology that is essential for e-commerce.                     Read: Kambil, A., "Doing Business in the Wired World," IEEE Computer, May,

2. Strategies for E-commerce, New Business Models


We begin with a discussion of firm strategies and the response to competition. has threatened the traditional "bricks and mortar" business model at Barnes and Noble. Which model will be most successful? How can protect its new business model from imitation? What is the role of a firm's resources in sustaining a competitive advantage?

Read: Mata, F, W. Fuerst, and J. Barney, "Information Technology and Sustained Competitive Advantage: A Resource-Based Analysis, MISQ, Vol. 19, No. 4, (December, 1995)

                    Case: Leadership On-Line: Barnes and Noble vs.

 3. Technology Architecture I


Sun Microsystems manufactures computer systems known as "servers."  Your personal computer connects to servers like these over the Internet when you order a book from Sun's computers run the Unix operating system.  The case presents the long running conflict between Sun and Microsoft, and Sun's battle with Microsoft's NT operating system for the server market. Sun practices its own preaching that "the network is the computer," which contrasts with Microsoft's approach of a "fat client." The case provides a number of opportunities to explore and understand the underlying technology of e-commerce, including hardware, software, operating systems, and databases.                     Case: Sun Microsystems and the N-tier Architecture

4. Technology Architecture II


In this session we continue our discussion of Sun and information technologies that enable new business models. In particular we present the basics of telecommunications and discuss the architecture of the Internet and the World Wide Web. What are the features that make the Net and Web possible? What is responsible for their rapid growth?

Web log analysis in class.

Assignment: E-mail URL of your Home Page to your TA

5. Electronic Markets I


Electronic commerce brings new forms of markets to the consumer and to industry. Through the connectivity provided by the Internet, it is feasible to sell thousands of products at auction as the technology brings buyers and sellers together regardless of their physical location. The Web is responsible for new kinds of markets, for example, the price aggregation model of This class reviews different types of markets and the firms that are taking advantage of them.

Related topics  include transactions cost economics, disintermediation, intermediation, Bertrand competition, the one-price law, auctions, demand aggregation, network externalities, critical mass, and utility theory.

Read: Bakos, Y, "The Emerging Role of Electronic Marketplaces on the Internet,"

Communications of the ACM, (August 1998)

6. Retail Internet Marketing Opportunities


Past forms of advertising might best be likened to a blunt instrument. A marketer could purchase a list of individuals owning one product and advertise a product they thought might also be appealing, like an expensive stereo system to Mercedes owners. You could advertise in regional publications, or send mailings to selected zip codes. The Web allows an unprecedented ability to learn about and target customers. Broadvision and Firefly present two contrasting approaches to marketing on the Web.

Read: Gillensen, Sherrell and Chen, "Information Technology as the Enabler of One-to-One Marketing, " Communications of AIS, Vol. 2 Article 18, 1999.

Bellman, Lohse, Johnson, "Predictors of Online Buying Behavior," Communications of the ACM, Vol. 42, No. 12, (December 1999).

Cases: Broadvision and Firefly (note two cases)

7. Electronic Markets II


The Internet makes it possible for people all over the world to participate in the same auction. Onsale is one of the first companies offering refurbished and new goods via auction on the Web. How do you convince consumers used to buying goods for a fixed price in a store to participate in an electronic auction? How do you keep this format interesting over time so you can go beyond the novelty effect?

Read: Lee, "Do Electronic Marketplaces Lower the Price of Goods? Communications of the ACM, Vol. 41, No. 1, January 1998

Maruca, "Retailing: Confronting the Challenges that Face Bricks-and-Mortar Stores," Harvard Business Review (July-August 1999)

Case: Onsale

8. Business-to-Business (B-to-B) Internet Marketing


We are familiar with retail commerce because we experience it regularly. The biggest impact of the Internet, however, may well be business-to-business e-commerce. Freemarkets brings together corporate buyers and suppliers, enabling them to exchange goods. The case discusses the firm's revenue model and the issues in operating a successful intermediary on the Net.

Read: Evans and Wurster, "Getting Real about Virtual Commerce," Harvard Business Review (November-December 1999)


9. Design of E-commerce Applications


Systems analysis and design has been a consistent, underlying paradigm of the information systems field. Some individual or group designed all applications of IT; people develop systems, not some mysterious natural force! You must design e-commerce applications including web pages, the user interface, the mechanism for processing all associated transactions, data storage and retrieval and communications with other parties. You also have to decide between internal development and outsourcing. AXI presents the issues American Express faced in developing a b2b travel site, and how it implemented its approach.

Stauffer, "Sales Strategies for the Internet Age," Harvard Business Review, (July 1999)

                    Case: B2B - AXI Travel (American Express)

10. Transforming Organizations with IT


The cases and companies we have discussed to this point in the course illustrate two types of firms: the traditional company learning to take advantage of the Web (American Express and AXI travel, Barnes and Noble), and the startups that begin with a new business model (Onsale, Freemarkets, Optimark). We have seen that IT transforms existing organizations, and that it enables new kinds of businesses to form. The biggest challenge may be for the existing firm whose business model is threatened rather than for the Internet entrepreneur. In this class we discuss Merrill Lynch's response to the threat of on-line trading on the Internet. The company moved from resisting the on-line trend to a reluctant embrace. In the process it is making the most significant change to its business and revenue models in the history of the firm.

Read: "The E-Corporation, Fortune (December 7, 1998)

Useem, "Internet Defense Strategy: Cannibalize Yourself," Fortune September 6, 1999)

Bakos, Lucas, Oh, Simon, Viswananthan and Weber, "Electronic Commerce in the Retail Brokerage Industry: Trading Costs of Internet Versus Full Service Firms," Stern Working Paper, 1999

Case: Merrill Lynch

Group project: consulting report for Merrill Lynch

11. Accessing Knowledge on the Web


Before the Internet became available for profit-making activities, and long before e-commerce, the Net was a repository of knowledge. The Web made it much easier to find information and to extract knowledge from it. A tradition arose of "free access" to information on the Web. E-commerce companies would like to sell information for a profit, but how do you provide value that customers will pay for? Internet Securities is an information broker: it collects and stores data that companies need to operate. The case describes the development of the company and the business model for selling information on the Web.

Read: Hansen, M., N. Nohria and T. Tierney, "What's Your Strategy for Managing Knowledge?" Harvard Business Review, March-April 1999.

Case: Internet Securities

12. Changing Securities Markets


It is estimated that by the end of 2000, 49% of retail stock trades will take place over the Internet (Business Week, 11/15/99). If correct,  electronic commerce will have achieved its highest market share in retail brokerage!  Technology is forcing full service brokers to rethink their business models, and we see one broker after another providing on-line trading. Optimark aims at the institutional trader rather than the retail investor. The company uses the Web to create a new market, with what the founder hopes will be more liquidity than other markets. Traders indicate their preference for different kinds of transactions, and a "supercomputer" crosses trades, trying to find as many matches as possible.

Case: Optimark

13. Course Summary and E-Commerce Forecast


In this class we summarize the key issues in the course and outline the kinds of decisions managers have to make about electronic commerce and information technology. We also point out other courses at Stern which allow you to further explore the topics introduced in the core course. We conclude with a forecast of the future of e-commerce, and the way firms will look and operate in the future.

Read: Malone and Laubacher, "Dawn of the E-Lance Economy," Harvard Business Review, (Sept-Oct, 1998).

                    Assignment: Group Project Design of a New Business on the Internet

14. E-commerce in Manufacturing and the Value Chain


This class is a joint session with your OM instructor for the second half of the semester. We have focused on electronic commerce and new business models, and have looked at several traditional firms as they develop e-commerce and Internet strategies. One of the keys to success in e-commerce is being able to deliver, which raises the issue of supply chain management. Ford's chairman is embracing the Internet; this case, combined with recent developments at Ford, reinforces that e-commerce is more than ordering merchandize on the Internet. To be successful, electronic business must diffuse through the entire organization.

Read: "The Power of Virtual Integration: An Interview with Dell Computer's Michael Dell," Harvard Business Review, (March-April 1998)

Case: Ford Motor Co.: Supply Chain Strategy

One plenary session with distinguished outside speaker


1. Creation of a home page on the Web (ungraded)

2. Write up of two cases 40%

3. Group project 1: Consulting report for Merrill Lynch,  25%

4. Group project 2: Design a new business for the Internet, 25%

    (or propose an Internet business for an existing firm)

5. Class participation 10%

Assignments in Detail

1. Creation of a home page on the Web. You will receive handouts on how to create a home page on the Stern server if you do not have one already. Teaching Assistants will be available to help you complete this assignment.

2. Write up of two cases. Please sign up for two cases you would like to write up during the term. The write-ups are due at the start of the class when the case is discussed, and a brief email with five issues/points of discussion should be mailed to the instructor by noon of the day prior to the class.  Write-ups should be a maximum of five double-spaced pages, (minimum 12 point font).  Part of the assignment is to be present in class and to participate in the case discussion.

Please analyze the case and make recommendations; do not turn in a summary of the case. What are the reasons for the events described in the case? Does the case show provide positive or negative lessons? What should be done differently? What was done well? What recommendations to you have to offer management?

3. Group consulting report to Merrill Lynch. You will receive a more detailed assignment that includes a charge to your group by Merrill executives. The paper should consist of Powerpoint slides and speaker's notes, and should be no more than 15 pages in length.

4. Group project to design a new business for the Internet. Your group should design a new business for the Internet. Alternatively, you can present a plan for moving an existing business onto the Web. Your plan should discuss the business model, plans to generate revenue, a few Web pages to illustrate your business, and a discussion of how you plan to create and operate the business. For example, will you have an internal IT staff or outsource development and operations? The paper should consist of Powerpoint slides and speaker's notes, and should be no more than 15 pages in length.

Prof. Stohr as posted some helpful guidelines.

Case Write-ups and Questions

The case write-ups are individual assignments, although you are welcome to discuss them with your groups.  Your are limited to 5 double-spaced pages.  The paper should focus on information technology and management issues and should comprise analysis; do not summarize or review the case.  Reason from the evidence presented in the case to understand cause and effect relationships.  What are the underlying causes of the problems presented in a case? What evidence supports your position?  If the company has done exceptionally well, why was it successful?  As a consultant to management, what actions do you recommend?

You are expected to visit the company's web site and to conduct research on the company beyond what may be found in the case and in any assigned readings for the session.

This is a course on information technology and electronic commerce, and your analysis should address both technology and management issues.  As you prepare cases, some of the following questions may help.

Class Discussion eGroup:

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Lecture Notes:

Lecture 1 (Wed. 1/19/2000)
Lecture 2 (Mon. 1/24/2000)
Lecture 3/4 (Wed. 1/26/2000)
Lecture 5 (Wed. 2/1/2000)
Course Summary, Etc.

Additional Material:

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