Information Technology and Electronic Commerce
B01.2312.21 - Spring 2000
Professor F. Provost
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
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,
2. Strategies for E-commerce, New Business Models
We begin with a discussion of firm strategies and the response to
competition. Amazon.com has threatened the traditional "bricks and mortar"
business model at Barnes and Noble. Which model will be most successful?
How can Amazon.com 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. Amazon.com
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 Amazon.com. 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 Priceline.com. 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
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
Bellman, Lohse, Johnson, "Predictors of Online Buying Behavior," Communications
of the ACM, Vol. 42, No. 12, (December 1999).
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)
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.
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
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
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
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.
What (if anything) has changed to create a problem or enable a solution?
How is this related to IT?
What kind of information technology is involved in the company in the case?
What is the key technology being used?
Is IT driving the change and strategy following? Or vice versa?
How does the technology help the firm to connect with customers and/or
What kind of internal technological infrastructure exists?
What kind of business model is the firm in the case trying to develop or
Is the IT architecture appropriate for the business model?
Does this organization provide a new or innovative product or service?
What other organizations, if any, does it depend on for success?
What kind of supply chain is involved?
What is the firm's model of the market?
Does the technology target retail or the business-to-business market?
What is the firm's revenue model?
How does the firm take advantage of the Internet and Web?
Would you invest in this company?
What is your overall evaluation of the likely success of this model?
Of this firm?
What are your recommendations to management?
Class Discussion eGroup:
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