After studying this chapter you will be able to understand: How can you use information technology to improve your organization and make it better than your competitors? How competitive is your world?, What are the main factors affecting a firm’s competitive advantage? Where do you begin looking for an edge?,...
Introduction to MIS Chapter 11 Electronic Business Copyright © 1998-2002 by Jerry Post Introduction to MIS Electronic Business Small business/ supplier Orders, Auctions, and EDI Large business Sales and CRM The Internet Service, orders, and information Web hosting and Web-based services Salesperson Introduction to MIS Customer Forms of Electronic Commerce Production Chain and Disintermediation Dynamic Pricing Distributed Services Marketing Phases Web Advertising: Advertiser Web Advertising: Publisher Web Traffic Analyzer Web Hosting Options Mobile Commerce Entrepreneurship: Creating a Business Industry Research Business Plans Forecasting Financial Data Forming a Corporation Financing a Startup E-Commerce Startup Cases: Travel Industry Appendix: Business Plans Introduction to MIS Outline Forms of Electronic Commerce Business Business Consumer B2B EDI Commodity auctions B2C Consumer-oriented Sales Support Consumer C2B Minimal examples, possibly reverse auctions like PriceLine Introduction to MIS C2C Auction sites (eBay) But many of these are dominated by small business sales parts supplier parts supplier warehouse supplier supplier tool manufacturer Manufacturer wholesaler wholesaler distributor Production Chain warehouse supplier workers retail store parts supplier distributor retail store distributor retail store retail store Consumers Introduction to MIS Disintermediation Production Chain Manufacturer E-commerce website Retailer Consumer Introduction to MIS Dynamic Pricing P Price consumer is willing to pay S Perfect competition price D Q The ultimate goal is to set individual prices for each consumer to capture the maximum price each is willing to pay As opposed to the perfect competition price, where everyone pays the same price, and some customers gain because they were willing to pay more Introduction to MIS Distributed Services Original document Company The Internet Internet Service Company Translated document Introduction to MIS e.g., automated document translation XML: Extensible Markup Language 1 3/6/2001 $33.54 Need immediately. 30 Flea Collar-Dog-Medium 208 $4.42 27 Aquarium Filter & Pump 8 $24.65 Introduction to MIS XML In Internet Explorer Introduction to MIS 10 Forecasting Financial Data Balance Sheet Income Statement Profit and Loss Cash Flow Customers and Sales estimate Sales revenue Marketing costs Infrastructure scale Employees Operating and selling costs Salary costs Introduction to MIS Financial statement estimates Financial statements and ratios 29 Breakeven Analysis 1200000 Revenue 1000000 Cost 800000 600000 400000 200000 0 10000 Breakeven point Introduction to MIS 20000 30000 40000 50000 60000 S ale s 30 Forming a Corporation State Forms Articles of Incorporation Corporate Bylaws Registered Agent (self) Business Registration Form State Employer Number Withholding ID Sales Tax ID Commercial Bank Account DUNS Number Accounting System Purchase software Hire accountant Define chart of accounts Additional licenses Federal Forms Standards Additional detail Define processes SS-4 Application for Employer Identification Number 2553 Election by a Small Business Corporation Introduction to MIS 31 Financing a Startup Venture Capital Angel Investor Become owners with some control over management Partners Successful firm IPO: Funding for development and operations Introduction to MIS Additional funds Reward to original investors 32 Additional Setup Steps for E-Commerce Additional risk and challenge of obtaining funding Website development Programming cost Time and management Purchase or lease merchant software if possible Site complexity Internet connectivity Costs Host site yourself Time to get leased line Choose site location based on Internet access Introduction to MIS Obtain digital security certificate (Verisign) Find bank that will provide merchant account services to accept credit card payments Find a web hosting ISP Setup fee Monthly fee Transaction fee Find a credit card processing firm that works with your bank and your software Setup fee Monthly fee Transaction fee 33 Cases: Travel Industry Introduction to MIS 34 Cases: The Sabre Group American Express www.sabre.com www.americanexpress.com What is the company’s current status? What is the Internet strategy? How does the company use information technology? What are the prospects for the industry? Introduction to MIS 35 Appendix: Business Plan Purposes Help managers identify strategies and plan for future Identify goals and concrete objectives Provide measurement of success and identify problems Provide detailed information to investors Outline budget needs Introduction to MIS 36 Business Plan Structure Introduction Marketing Detailed cash needs Projections Structure of the firm and management Financing Sales, profits, structural changes Organization Competitors Market analysis Advertising Sales Management Product Management: prices and costs Historic Analysis Outline and summary of the company and the plan Estimates of sales, costs, growth with detailed data and forecasts Introduction to MIS 37 Marketing Plans Products Costs Prices Profits Competition Strategy Sales Goals and Forecasts Promotional methods Sales Management Distribution and Service Introduction to MIS 38 Rolling Thunder Bicycles Example Year Increase Year 10% 10% 10% 10% Hybrid Mountain 250 275 302 332 365 250 275 302 332 365 $1,000 $1,500 Hybrid Mountain $250,000 $375,000 $275,000 $412,500 $302,000 $453,000 $332,000 $498,000 $365,000 $547,500 Rolling Thunder Estimated Sales Number of Bicycles Race Road Tour 350 200 385 220 423 242 465 266 511 292 Average Sale Price of a Bicycle $2,500 $2,000 Track 350 385 423 465 511 50 55 60 66 72 $1,000 $2,000 Annual Total 1450 1595 1752 1926 2116 Estimated Sales Value Annual Sales Race Road Tour Track $2,350,000 $875,000 $400,000 $350,000 $100,000 $2,585,000 $962,500 $440,000 $385,000 $110,000 $2,839,500 $1,057,500 $484,000 $423,000 $120,000 $3,121,500 $1,162,500 $532,000 $465,000 $132,000 $3,429,000 $1,277,500 $584,000 $511,000 $144,000 Sales estimated while the firm was being formed Introduction to MIS 39 Rolling Thunder Bicycles Estimated Sales Estimated Sales $4,000,000 $3,500,000 $3,000,000 Track $2,500,000 Tour Road $2,000,000 Race $1,500,000 Mountain $1,000,000 Hybrid $500,000 $0 Year Introduction to MIS 40 Income Statement projected Sales Material Labor Lease Advertising/Promotion Tools depreciation Cost of merchandise sold Operating and Admin Expenses Operating Profit Other income (expense) Interest Income Interest Expense Shareholder related expense Earnings before income taxes Federal and state income taxes Net earnings Projected Income Statement Year $2,350,000 $2,585,000 $2,839,500 822,500 904,750 993,825 550,000 550,000 550,000 60,000 60,000 60,000 500,000 250,000 250,000 50,000 60,000 70,000 1,932,500 1,764,750 1,853,825 100,000 100,000 100,000 317,500 720,250 885,675 0 (10,000) 307,500 (123,000) $184,500 Interest rate on borrow Interest rate on short term investments Depreciation, years, straight line Tools purchases $250,000 Introduction to MIS 0 (10,000) 710,250 (284,100) $426,150 8.00% 3.00% 0.2 $50,000 93 (10,000) 875,768 (350,307) $525,461 $50,000 41 Year Balance Sheet projected at year end Assets Current Assets Cash Receivables Inventories Pepaid expenses Total Current Assets Property, Plant and Equipment Land Buildings Fixtures and Equipment Subtotal Less accumulated depreciation Net Property, Plant and Equip Total Assets Liabilities and Shareholders' Equity Current Liabilities Acccounts payable Accured payroll and benefits Income taxes payable Other current liabilities Total Current Liabilities Other Liabilities Long Term Debt Total Liabilities Shareholders' Equity Additional paid-in capital Retained earnings Total Shareholders' Equity Total Liabilities and Shareholders' Equity Money to be raised (equity or debt) Introduction to MIS ($193,550) 235,000 98,700 1,000 141,150 $3,095 258,500 108,570 1,000 371,165 $302,395 283,950 119,259 1,000 706,604 0 250,000 250,000 50,000 200,000 $341,150 0 50,000 50,000 110,000 (60,000) $311,165 0 50,000 50,000 180,000 (130,000) $576,604 82,250 (123,000) (40,750) 0 (40,750) 0 (193,550) (193,550) ($234,300) 90,475 (284,100) (193,625) 0 (193,625) 0 196,645 196,645 $3,020 99,383 (350,307) (250,925) 0 (250,925) 0 299,300 299,300 $48,375 $575,450 $308,145 $528,229 Projected Balance Sheet Assumptions Receivables as percent of sales: 10% Payables as percent of material costs: 10% Inventory as percent of material costs: 12% 42 Cash Flow projected Year Net earnings Depreciation Net (gain) loss on asset sales Other Subtotal from sales (Increase) decrease in current assets: Receivables Inventories Prepaid expenses Subtotal from assets Increase (decrease) in current liabilities Accounts payable Other current liabilities Accrued payroll Income taxes payable Total change in current liabilities Total adjustments Net cash provided by operations Cash flows from Investing: Expended for property, plant, equip Proceeds from sale of assets Net cash used in investing Cash flows from Financing: Proceeds (payments) from long-term debt Stock or Additional paid in capital Cash dividends Net cash provided by financing Net increase (decrease in cash) Cash and cash equivalents: Beginning of year End of year Introduction to MIS $184,500 50,000 0 50,000 $426,150 110,000 0 110,000 $525,461 180,000 0 180,000 (235,000) 98,700 (1,000) (137,300) (23,500) 9,870 (13,630) (25,450) 10,689 (14,761) 82,250 0 (123,000) (40,750) (128,050) 56,450 8,225 0 (284,100) (275,875) (179,505) 246,645 8,908 0 (350,307) (341,400) (176,161) 349,300 (250,000) (250,000) (50,000) (50,000) (50,000) (50,000) 0 0 (193,550) 0 0 196,645 0 0 299,300 $0 ($193,550) (193,550) $3,095 3,095 $302,395 Projected Cash Flow 43 ...Electronic Business Small business/ supplier Orders, Auctions, and EDI Large business Sales and CRM The Internet Service, orders, and information Web hosting and Web-based... Entrepreneurship: Creating a Business Industry Research Business Plans Forecasting Financial Data Forming a Corporation Financing a Startup E-Commerce Startup Cases: Travel Industry Appendix: Business Plans... Industry Appendix: Business Plans Introduction to MIS Outline Forms of Electronic Commerce Business Business Consumer B2B EDI Commodity auctions B2C Consumer-oriented Sales Support Consumer C2B