Period: #6 (October/November 2001)
Time: Monday/Wednesday 15:30-17:30
Location: Henry Angus Building, Room 426
 
Instructor: Prof. Werner Antweiler
Office: Henry Angus Building, Room 264
Phone: (604) 822-8484
E-mail: werner@pacific.commerce.ubc.ca

Download the course outline as a PDF file.

The material on this page was last updated . Further additions to this page will appear as the course proceeds.

Objective & Overview

This module is about formulating business strategy in the e-commerce area where transactions are conducted over the internet. The purpose of this course is to survey the various business models that have been introduced in the last few years and analyze their economic and managerial foundations. This course will also focus on the the role of information goods and digital products in the new economy. Acknowledging the importance of transaction costs in the e-business revolution, topics related to financial transactions, financial services, auctions, and on-line trading will be given time for discussion. In addition to a discussion of operative strategies for e-businesses, this course will also explore the e-business environment in particular with respect to contracting law, jurisdicational issues, intellectual property rights, and taxation. This course is designed to put participants in the role of strategic management consultants; it is not designed to dicuss technical implementation issues. In particular, this course will not discuss web programming or give you a hands-on experience at managing an e-business web server.

The module is taught using a combination of lectures, case analyses, independent reading, and team work. Small student teams will be given the opportunity to analyze e-business projects of their choice in detail and present them in class. The purpose of the group work is to explore and discuss new cutting-edge e-business approaches.

There are no particular prerequisites for this module, although it is highly beneficial if you have taken the modules on basic strategy and managerial economics concepts, as well as the applied industrial organization module BATM 502 ``Competing in High-Tech Industries'' [offered in both periods 5 and 6 this year]. Necessarily everyone taking this course must be fully "internet-literate" and ideally should have at least a basic understanding of the technical issues and constraints facing e-businesses. Great care will be aken to also illustrate the pertinent concepts through examples and (mini-) cases. Typically, cases are assigned as readings in preparation for discussion at the next meeting.

 

Readings

This course uses a reading package that can be purchased from the copy room in the basement of the Henry Angus building. It contains the following material:

  1. The Economist E-Strategy Briefs, various issues 2001; 14 pages.
  2. The Economist Survey of E-Commerce Shopping around the web, February 26, 2000; 18 pages.
  3. The Economist Survey of Business and the Internet, June 26th, 1999; 15 pages.
  4. Das Narayanda: VerticalNet, Harvard Business School Case 9-500-041.
  5. Philip B. Evans and Thomas S. Wurster: Strategy and the New Economics of Information, Harvard Business Review, September-October 1997.
  6. Indrajit Sinha: Cost Transparency: The Net's Real Threat to Prices and Brands, Harvard Business Review, March-April 2000.
  7. Article Portfolio (12 pages with a compilation of articles from the New York Times and the Wall Street Journal)
In addition to these mandatory readings, I highly recommend the following three books.
  1. Carl Shapiro and Hal. R. Varian: Information Rules: A Strategic Guide to the Network Economy, Harvard Business School Press, Boston/MA, 1999.
  2. Efraim Turban, Jae Lee, David King, and H. Michael Chung: Electronic Commerce: A Managerial Perspective, Prentice-Hall, Upper Saddle River/NJ, 2000.
  3. Jim Carroll and Rick Broadhead: Selling Online - How to Become a Successful E-Commerce Merchant in Canada, Macmillan Canada, Toronto, 1999.

The Shapiro/Varian book is worth reading from cover to cover as it is written lucidly and concisely. Written by the two most eminent economists specializing in ``internet economics,'' this book discusses management strategies based on insights into the underlying economic mechanisms. Topics covered include pricing and versioning of goods, managing copyrights, recognizing and managing lock-in, and the competitive strategies required to set technical standards by means of cooperation and technical compatibility or by means of a standards war.

The Turban et.al. book is a very comprehensive introductory text that covers the entire breadth of e-business activities, including retailing and internet advertisement, B2B, electronic payment systems, e-business environment issues, and a few select technical topics such as security. This book trades-off breadth for depth; thus I recommend it as a useful overview. The book is relatively weak on most strategic questions pertaining to business models. The e-retailing part of this book is much more in depth

The book by Carroll and Broadhead provides plenty of examples and tips which complement the more theoretical discussions of the previous two texts. The book covers issues such as marketing strategies, online security and fraud, managing credit card merchant accounts online, and also includes practical pointers for web site design (content, reliability, navigation, etc.) However, the book is neither very technical nor software implementation focused, and thus the book remains very accessible to non-technical readers.

The next four books may be useful if you are interested in more of the economic issues, issues pertaining to marketing, or applications to various industries and countries. Refer to them at your leisure.

  1. Soon-Young Choi, Dale O. Stahl, and Andrew B. Whinston: The Economics of Electronic Commerce, Macmillan Technical Publishing, Indianapolis, 1997.
  2. Ward Hanson: Principles of Internet Marketing, South-Western College, Cincinnati/OH, 1999.
  3. J. Christopher Westland and Theodore H.K. Clark: Global Electronic Commerce: Theory and Case Studies, MIT Press, Cambridge/MA, 2000.
  4. Amir Hartman and John Sifonis, with John Kador: Net Ready - Strategies for Success in the E-conomy, McGraw-Hill, New York, 2000.

The Hartman et.al book is written by two managing directors of Cisco's Internet Business Solutions Group. Hartman is also on the faculty of the Haas School of Business at UC-Berkeley. The book analyzes a variety of strategic issues surrounding net-based business models.

Minicases [access requires password, all files are in PDF]

  1. VerticalNet.Com
  2. Ricardo.de
  3. iCraveTV.com
  4. The DeCss Trial

Lecture Notes

You can access several of the overhead transparencies and notes I use during the lectures. To access the notes, you need the username and password that were announced in class. The material contained in this section is exclusively for the MBA students in BASM513. All notes are in PDF (portable document format). PDF readers are installed on the PC Lab in Henry Angus, but you can also install Adobe Acrobat Reader on your PC at home.

 

Combined Syllabus and Readings Schedule

All readings assigned below are mandatory readings. You are required to read assigned cases in advance in preparation for the next class.

# Date Readings
&Cases
Topics
1 Mon, Oct 22 Article Portfolio #1: Virtual Companies; Article Portfolio #8: Economics of Virtual Corporations (1.) Introduction & Overview: What are the Issues and Current Trends?
2 Wed, Oct 24 MiniCase: GE/GXS; MiniCase: VerticalNet (2.) Strategy Fundamentals
3 Mon, Oct 29 MiniCase: Seven Eleven; Article Portfolio #2.1,#2.2 (3.) E-Business Models
4 Wed, Oct 31 Article Portfolio: HBR article on Branding (4.) Strategic Partnering for E-Businesses
(5.) Customer Lock-In and Branding
5 Mon, Nov 5 MiniCase: Merrill Lynch (6.) Standards and Protocols; Standard Wars
(7.) On-line Banking
6 Wed, Nov 7 MiniCase: Ricardo.De
Article Portfolio #5.1
(8.) Electronic Payment Systems
(9.) Auctions and B2B Hubs
7 Wed, Nov 14 Article Portfolio #6, #3.1, #3.2, #3.3, (#7.1, #7.2 optional) (10.) Valuing E-Businesses
8 Mon, Nov 19 Minicases: iCraveTV.com and the DeCSS Trial
Article Portfolio #4.1, #4.2, #4.3
(11.) E-Business Environment
(12.) Intellectual Property Rights
9 Wed, Nov 21 - Group Presentations
Teams A-D
10 Mon, Nov 26 Final Exam

 

Grades

Your grade for this module will be the weighted average of

See below for more information on the team project and the exam. Your participation grade will primarily depend on your participation in the classroom, but you can also participate in the virtual classroom by reading and posting articles on the BASM513 bulletin board. (Click on the link to get to the bulletin board, or point your web browser to news://news.commerce.ubc.ca/ubc.commerce.baim500).

Participation marks are based on a number of contributions in class. These contributions can include: providing useful illustrations of a topic; providing motivation for a tool or technique; helpful recapitulation or summarizing; making observations that link or integrate concepts or discussions; responding to questions; playing "devil's advocate" by presenting or supporting alternative or unpopular positions. Note that being wrong with a remark in class will not decrease your mark, albeit it will not increase it either. Please be courteous to your fellow students and do not try to dominate discussions.

I expect everyone to prepare for classes because assigned cases and active participation in class discussions are vital. Please notify me in advance if you have to miss a class for pertinent reasons.

You can look up your grades at any time using the user name and password that has been assigned to you.

 

Assignment

The assignment is based on group work. Each team should have four members. During the last two sessions, each team will present its work to the class. Each presentation should take about twenty minutes, followed a question and answer period of about ten minutes. Teams will be evaluated through a combination of peer rankings and the instructor's ranking.

The project involves the development and presentation of a business plan for taking a new product or service to the web, either as a new company or a new operation of an existing brick-and-mortar company. This involves a characterization and in-depth analysis of the business plan and its strengths and weaknesses, opportunities and threats. The objective of the presentation is to convince investors (venture capitalists in the case of start-ups or the company's senior executives in the case of an existing company, rpresented by the audience in the classroom) to follow through with the project your are promoting. You are at liberty to pick a (hypothetical or real) company and a promising, novel product.

The research topics for each team are:

  1. Briefly introduce the project (product, service, etc.)
  2. Describe the business model and refer to similarities and differences with existing models.
  3. Assess the external factors which will determine the success of these strategies.
  4. In presenting your findings, keep in mind that you are promoting this product, technology, or standard. Convince the audience of its merits.

Prepare a brief handout (an executive summary) that you distribute at the beginning of your presentation.

Team Date & Time Team Members Topic
A Wed, Nov. 21
15:30-16:00
Cheryl Harris
Tanja Kristenson
Banny Lu
On-line Market for Babysitting Services
B Wed, Nov. 21
16:00-16:30
Alaa El-Fas
Ingird Kochendorfer
Chris MacArthur
Winsome Rauch
e-commerce strategy for Option-NFA (a local snowboard manufacturer)
C Wed, Nov. 21
16:30-17:00
Lori Braha
Herbert Hu
Asako Suzuki
Selina Wong
Stars.com: selling personal items of movie stars, super models, and celebrities online.
D Wed, Nov. 21
17:00-17:30
Xiaobei Shi
Qingmin Wu
Hu Ling Zhang
E-learning

Members of the audience will evaluate the presenting teams. At the end of all presentations, you are kindly requested to provide a ranking of the presentations, excluding their own presentation. These audience rankings will be combined with the instructor's ranking using preassigned weights, and then translated into a numerical score. Evaluation forms will be handed out in class. Evaluation criteria include:

  1. Quality and accuracy of the research and analysis; preparedness
  2. Managerial relevance of the suggested strategies; usefulness, credibility
  3. Form and style of the presentation; effective communication
Each of these should be given roughly equal weight.

 

Exam

There will be a 2-hour exam at the end of the module. The exam will be held in our regular classroom (HA 421) during our regular meeting time (15:30-17:30) on Monday November 26.

The final exam consists of three parts. Part 1 contains 12 multiple choice questions. Each multiple-choice question has between one and three correct responses. There are 24 correct responses in this section in total. Each correct response will receive 2 points, and if there are more than twenty responses, 2 points will be deducted for each extra response. Part 2 contains four short-answer questions, each question worth 13 points.

 

Office Hours

My office is located in room 264 of the Henry Angus building. Due to my heavy teaching load this term I only have office hours by prior appointment. Send me an e-mail if you would like to see me in person, and I will arrange a meeting at a mutually convenient time. In any case, please feel free to contact me by e-mail.

 

Announcements

Please note the unusual sequence of teaching days this semester. Because Remembrance Day falls on a Saturday this year, there will be no classes on the following Monday (November 13).

 

Useful Links

The Information Economy by Hal Varian
By far the best starting point if you are searching for e-commerce information on the internet, compiled by the foremost economist in this area.
Michael Rappa, North Carolina State University: Business Models on the Internet
My discussion of the business models is based in part on Michael Rappa's notes. These comprehensive and in-depth discussions you will find very useful for strategic considerations. Prof. Rappa's web site also contains a lot of other useful material. Defintely worth a closer look
Steven Kaplan and Mohanbir Sawhny, University of Chicago: B2B E-Commerce Hubs - Towards a Taxonomy of Business Models
This is a somewhat longer version of an HBR article.
Deloitte Consulting: Online B2B Exchanges
This web page gives access to a number of brief "white papers" which discuss key issues relating to B2B exchanges. Read these if you want a different perspective on the B2B discussion in the Kaplan/Sawhny article from the Harvard Business Review.
Jeffrey F. Rayport: The Truth about Internet Business Models: In the end, an e-business is just another business
Rayport takes a critical view of some of the hype surrounding e-business, and how to turn web site traffic into revenue. His 3-page commentary takes aim at paint-by-number business models. A useful balance to the wealth of over-enthusiastic articles by others.
Paul Timmers, European Commission Directorate-General III: Business Models of Electronic Markets, April 1998
Another useful taxonomy of e-business models, but not with much discussion.
John Hagel III and Jeffrey F. Rayport: The new infomediaries
This 18-page document published in McKinsey Quarterly 1997, no. 3, zooms in on the infomediary business model. [Note: you must first register with McKinsey Quarterly before you can access this document.]
Agorics, Inc.: Survey of Auction Types
A survey of all the different auction types along with an introduction to auctions and a discussion of auction strategies
Manoj Kumar and Stuart I. Feldman: Internet Auctions
A 12-page survey by two well-regarded e-commerce experts from IBM. [original source]
David Luckey: Auctions on the Internet: What's Being Auctioned, and How?
A somewhat lengthy survey by an economist from Vanderbilt University who provides an economic analysis of internet auctions. [original source]
Aswath Damodaran: Valuation of E-Businesses
This is a web site by a finance professor from NYU. The site contains detailed information on various valuation methods such as basic discounted cashflow, dividend discount models, FCFE/FCFF discount models, an valuing cash in a firm. The ultimate source for learning methods of financial valuation.

 


© 2000-2001 by Werner Antweiler and University of British Columbia.