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Economics and Justification of EC
Economics and Justification of EC
Economics and Justification of EC
2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.
Learning Objectives
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Learning Objectives
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Specific benefits
Cost reduction
Productivity improvement
Improved customer satisfaction
Improved staffing levels
Higher revenues
Higher earnings
Better customer
Retention
More return of equity
Faster time-to-market
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Is an EC Investment Justified?
cost-benefit
analysis
A comparison of the costs of a project
against the benefits
Business justification and business case
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Metrics in EC Justification
metric
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Metrics in EC Justification
Metrics
can:
Define
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in Measuring Productivity
and Performance Gains
Data
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in Measuring Intangible
Costs and Benefits
Tangible
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and Revenue
Generated by EC Investment
A
Aspects of Justifying
EC Investments
Types
of costs
Distinguish
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method
Payback period
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Business
ROI
Technology ROI
ROI calculator
Calculator that uses metrics and formulas to
compute ROI
Internal rate of return (IRR)
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analyses
total cost of ownership (TCO)
A formula for calculating the cost of owning,
operating, and controlling an IT system
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approaches
Multicriteria approaches
Ratio approaches
Portfolio approaches
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Examples of
E-Commerce Project Justification
E-PROCUREMENT
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Examples of
E-Commerce Project Justification
Customer
Only
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Examples of
E-Commerce Project Justification
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Examples of
E-Commerce Project Justification
Justifying
a Portal
The
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Examples of
E-Commerce Project Justification
Justifying
E-Training Projects
End-user
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Examples of
E-Commerce Project Justification
Justifying
an Investment in Mobile
Computing and in RFID
Justifying
Examples of
E-Commerce Project Justification
Justifying
Security Projects
More
Oxley Act
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Production Costs
production function
An equation indicating that for the same quantity of
production, Q, companies either can use a certain
amount of labor or invest in more automation
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Revenues
Reach
versus richness
Other ways to increase revenues
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Organizations
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Product Differentiation
product
differentiation
Special features available in products that
make them distinguishable from other
products. This property attracts customers
that appreciate what they consider an
added value
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Increases Agility
agility
An EC firms ability to capture, report and quickly
respond to changes happening in the marketplace
and business environment
Markets
versus E-Markets
of EC Companies
valuation
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of EC Success
Product
characteristics
Industry characteristics
Seller characteristics
Consumer characteristics
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Levels of EC Measurement
Metrics
individual EC customer
An EC firm
An EC-enabled process
The EC value chain
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Failures
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Successes
Strategies
for EC success
Thousands of brick-and-mortar companies
are adding online channels with great
success
Existing firms can use organizational
knowledge, brand, infrastructure, and other
morphing strategies to migrate from the
off-line marketplace to the online
marketspace
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options
A set of IT-enabled capabilities in the
form of digitized enterprise work
processes and knowledge systems
Complementary investments
Additional investments, such as training,
made to maximize the returns from EC
investments
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EC
Differences and EC
in Developing Economies
Managerial Issues
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