DRAFT
 

MW 11-12:15
Professor Ken Laudon
KMEC 9-66
Tel: 212-998-0815
Fax: 212- 995-4228
Klaudon@stern.nyu.edu

Course Objectives

The purpose of this course is to provide an understanding of e-commerce and its impact on firms, industries, and markets. In a few short years, since 1993, the Web has already had a large impact on how we shop, read, conduct business, learn, and consume information like music and art. The fundamental architecture of information processing within the firm is changing as new Internet technologies appear. Internet technologies are also having a broad impact on the management of firms. How well firms are able to master these new technologies and business models is having an important impact on their overall success. The course will document these changes in firm, industry and societal behavior, seek to understand the forces which bring about these changes, and where possible extrapolate to the next five years. What will the economy and society be like in 2005?

We use a number of concepts drawn from economics and sociology as tools to understand the impacts of e-commerce. Among the concepts we use are efficient markets, information asymmetries, transaction costs, agency costs, switching costs, marginal costs, and network externalities, organizational isomorphism, environmental carrying capacity, organizational ecologies, first-mover advantages, organizational adaptation, management strategy, industry and firm value chain intermediation, complementary assets, appropriability of innovations, and business models.

The course is divided into five sections. Section I describes the basic technologies of the Internet and the Web, and how they are used in e-commerce. Section II examines generic business models and strategies used on the Internet. Section III describes the use of the Web for marketing and advertising. Section IV examines specific e-commerce applications in retail, banking, publishing, music, and other areas. Section V examines e-commerce issues such as privacy, intellectual property rights management and valuation of Internet companies.

The main term-ending assignment is to build a business plan for a .Com company that reflects the reading and discussion in the class.
 
 
 
 
 
 

Course Organization

The course consists of classroom discussion of reading assignments and cases, the development of an in-class group presentation, a mid-term exam, a final Quiz, and the preparation of a term paper business plan. The classroom is where we have the chance to present papers, discuss, and debate. To participate in this process it is vital that you do the reading before class. We will have several in-class unannounced quizzes to ensure you do the reading on time. Attendance and participation will be a part of your grade and will be recorded for each class session.
 
 

Course Materials

A reading packet is available in the book store. Note that both articles and cases are included in the packet, roughly in the order they will be used in class. Because the Web and e-commerce changes daily, many articles will be handed out in class. Other materials may be downloaded from the Web.

Web Sources:

The following Web sites may be referred to during the class. Several listed articles are available at these sites:

InformationWeek www.informationweek.com/

CIO Magazine www.cio.com/

CIO/ WebBusiness Magazine www.webbusiness.cio.com/

ComputerWorld www.computerworld.com

The Economist Magazine www.economist.com

Business Week www.businessweek.com

Upside www.upside.com
 
 

Assignments

(1) Be prepared! Since the course emphasizes class discussion and the analysis of cases, your first and most important assignment is to come to class prepared to discuss the assigned readings and cases. Chances are very good you will be called upon in class.

(2) Practicums. The class will be divided into Project Teams of two students each. Each Team will prepare an analysis of the topic for the day, review the readings and/or case, and present there analysis to the class. The Team Reports should also address the question of the day printed at the bottom of each class meeting description. with examples drawn from the Web and presented in class. Each class session has a single question that we will focus upon. In general, you will be asked to explore a new area of technology, or to compare and contrast e-commerce applications of competing firms. For example, one assignment will ask students to compare the e-commerce sites of e-trade.com and schwab.com, another assignment will involve a review of electronic payment schemes. For help and assistance consult the professor one week prior to your report.

Each Practicum Team will be given a maximum of twenty minutes to present before class. A hard copy of the report must be handed in on that day, and it should be about five pages long with tables and figures. The in-class Practicum Team Presentation should have no more than five slides and should include a Web-based demonstration or illustration. The Team report will be graded in part based on the innovative use of outside sources of information such as site visits, the Internet, SEC EDGAR database, and background research.

All team assignments are made by the professor. Switching groups and topics requires prior approval.

Using Web prose in the body of your papers and reports without citation is plagiarism and perhaps a violation of copyright protections, e.g., theft. If the professor believes you have taken substantial portions of your paper(s) from the Web without citation, you will be asked to give an oral report to the professor. Failing this report will result in your suspension from this class.

(3) Mid Term Exam. There will be a multiple choice and fill-in mid-term exam that covers the reading and class discussion to this point in the class.

(4) Final Quiz. There will be a short-essay examination that covers the reading after the mid-term.

(5) Term paper. Working alone or with at most one other student, students will submit a term paper no longer than fifteen pages on the day a final exam is scheduled for this class. The term paper assignment is to create a business plan for a Web-based company or a company that plans to develop an e-commerce capability. The paper should be written to potential investors and discuss the following issues: the firm, the product/service, the business model, the market, competition and strategy, development plan, marketing plan, and five year financial projections (a simple profit/loss statement). A sample outline will be handed out in class.

The paper is intended to demonstrate your command of the material that has been covered. The paper will be graded in part based on your demonstrated knowledge—including citations-- of the articles and cases discussed in class. The term paper must be original and copy that originates on the Web is not acceptable. You may of course use citations to Web-based materials.

The following criteria that will be used to judge your paper are:

• How credible is the business model?
• Will you be able to produce the product or service?
• Has this firm ever satisfied a customer? Who?
• Will you be able to ramp up production?
• How will you deal with the competition?
• Does your paper reflect a sophisticated understanding of the class material?

Grading

The assignments and their weights will be:

Team Project 20%

Mid Term Exam 20%

Final Quiz 20%

Term Paper 30%

Class attendance and participation 10%

Attendance will be taken at most classes. Your participation grade is a function of your attendance, meaningful contribution to class discussion, ability to listen and respond to other students, and professional decorum.

All assignments are due as noted. Team Reports are due on the same day as case is presented in class. The term paper is due on the day final exams for the class are scheduled.

Class Behavior

You are expected to conduct yourself in a professional manner when attending class. Notwithstanding other considerations of professionalism, you are expected to enter the classroom on time, address and listen to other students respectfully, and be prepared to discuss the day’s reading. Caps of any sort, as well as taking of notes with laptop computers, use of recording devices, and the like, are not allowed during class.
 
 

Class Materials

Required: Reading Packet: in bookstore. Assigned as noted.

In-Class Hand out: Supplemental Reading Package

Additional Recommended Reading

Clayton Christianson, Innovators Dilemma. Harper Collins, 2000. Why existing firms have difficulties adopting new disruptive technologies, and as a result, have such short lives.

Philip Evans and Thomas Wurster, Blown to Bits. Harvard Business School Press, 2000. Why existing firms have such a hard time holding it all together in the Internet age.

Carl Shapiro and Hal R. Varian, Information Rules. Harvard Business School Press, 1999. Rules of the road for Internet drivers. A study of network and Web economics. Sensible and insightful.

John Hagel III and Marc Singer, Net Gain. Harvard Business School Press, 1997. Two McKinsey consultants argue for the economic value of network communities.
 
 
 
 

Week 1

Introduction

Week 1

1. Electronic Commerce and Electronic Business

9/6

Overview of the course

Basic terms: commerce, e-commerce, and e-business

B2B ands B2C

Infrastructure plays

Economics and digital economics

Week 2

I. Internet Technologies

2. Technological Foundations

9/11

Background: Internet I and the Web

Intranets and Extranets

Web traffic control: Inktomi and Akamai

Microsoft’s New Web Platform

Reading: "A Note on the Internet, GSB Stanford University S-OIT-15

Fisher, "2 Companies Take Separate Paths to Speed Delivery of Web Pages," NYT 4/17/00

Buckman and Clark, "Microsoft Announces Internet Platform," WSJ 6/23/00

Markoff, "Critic Sees Flaws in Microsoft’s Strategy," NYT 6/19/00

Team 1

Question: Is the Web an operating system? (Why is Bill worried?)

3. New Technologies: the Future of the Internet

9/13

Internet II: Big Bandwidth

X technologies

Week 3

4. New Technologies: Changing Hardware Fundamentals

9/18

Trends in hardware: PDAs, PCS, NetPCs, Netpliances

Trends in bandwidth: Its optic and wireless; bigger and better

Wireless Web: iMode and WAP

DSL vs Cable

S. Schiesel, "The Outlook for Cable Access," NYT August 9, 1999

"The Triumph of Bandwidth," WSJ 1/12/00

Question: How will we use the Internet in 2005?

Team 3
 
 

5. Security and Encryption

9/20

Encryption, firewalls, and digital certificates

Reading: Charles C. Mann, "The Mole in the Machine," NYT July 25, 1999

"EBay Site Was Raided by Rival, FTC Says," WSJ 1/7/00

Question: Is "technology" the answer to security issues?

Team 4

Week 4

6. Payments in an Electronic Environment

9/25

Credit cards forever: why Digicash failed

Digital wallets

Electronic Bill Presentment and Payment Systems (EBPP)

7. How to Build a Modest E-commerce Site: Getting Started

9/27

Domain registration

Communications links

Web servers

Database servers

Ad servers

Week 5

8. Application Service Providers: Web-based applications

10/2

Software: from product to service

Enterprise ASPs

Consumer ASPs

Limitations and risks of ASPs

Sites: SmartOnline.com

Desktop.com

MyWebOS.com

salesforce.com

9. New technologies: Interactive Multimedia Applications

10/4

Web-based broadband media technology: pumping pictures and sound

What is "interactivity?"

Software and hardware requirements

In class demonstrations

Sites: dpec.com; learn2.com;

II. E-Commerce/E-Business Models and Corporate Strategy

Week 6

10. Internet Business Models

10/9

Deconstructing Value Chains and Other People’s Business Models

Review of Internet Business Models

Team 9
 
 

11. First Mover Advantages and Increasing Returns to Scale

10/11

Week 7

12. Using the Net to Produce Value: The Virtual Value Chain Model

10/16

13. The Retail Model

10/18

Return of the Middleman vs. Direct Sales

Week 8

14. Supplying the Tools and the Highways: the Gold Rush Model

10/23

Supplying the Gold Rush

TeleWeb/TeleCom Providers

Control Over Mass Media

Who will own the set top? Who will own the wires or spectrum?

Telcos vs. Cable vs. Satellite

Team 13
 
 
 
 
 
 

15. Mid Term Examination

10/25

Week 9

III. Internet Marketing

16. Direct and Affiliate Marketing

9/30

Case: Firefly Network (A) OIT 22A

Firefly Network (B) OIT 22B

17. Advertising on the Web

11/1

Types of Web advertising

Effectiveness of Web advertising models

Advertising Networks: DoubleClick

Team 15
 
 

Week 10

18. Building Brands on the Web

11/6

What are brands?

How long does it take to build a brand

Team 16
 
 

19. Target Marketing: Fine-grained decision making

11/8

Case: Broad Vision Stanford # S- OIT-21

Question: How about shopping for someone else (another’s set of preferences?) Team 17

Week 11

20. Market Efficiency and Consumer Behavior on the Web

11/13

Are brands still important--Where are people clicking?

Is the Web really a more efficient market? Or simply a loss leader?

Reading:

Team 18

21. Traditional Retailing and the Web

11/15

Team 19
 
 

Week 12

22. Auctions

11/20

Types of Auctions

Are Auctions More Efficient Markets?

Team 20

23. Retail Financial Services

11/22

Reading

"Should You Get a Mortgage Online?" WSJ June 11, 1999

24. Media: Music, Books and Newspapers

11/27

E-books

Reading

"The Death of Old Media," WSJ 1/11/00

White, "Here’s a Web Trend Publishers Don’t Want to Follow," WSJ,6/21/00

Case: Encyclopedia Britannica HBS #9-396-051

Question: What is the future of books? (Why aren’t your textbooks on line?)

Will there be newspapers in 2005?

Team 22

Music: Redistributing Sounds

25. Distance Learning and Community: Breaking Out of Location

11/29

Distance learning models

Tradeoffs: access vs. media richness

Davis, "Internet in Schools: A National Crusade Backed by Scant Data," 6/19/00

Building Profitable Communities on the Web

GeoCities and iVillage

Team 25
 
 

Week 14

IV. E Commerce Issues

26. Protecting Intellectual Property on the Web

12/4

Deep links, piracy, and organized theft on the Web: Creators of content vs. Users

Fair Use

Secure lock techniques for distributing copyrighted material

Question: Why isn’t all information free on the Web?

Team 26

Week 15

27. Protecting Privacy on the Web

12/6

Building Trust Online

Technical solutions: digital passports and portfolios under user control

Policy solutions: regulation and personal information markets

28. Finding the Value of a Web Company

12/11

Valuing Web companies

29. Business Plan Presentations

12/13

Business plan presentations

Q&A

Wrap up

Class Party!

Final Quiz

Term Paper: Business Plan
 
 
 
 

C20.0038 Electronic Commerce

Reading Packet

Fall 2000

MW 11-12:15

Professor Ken Laudon

MEC 9-66 998-0815

Department fax 995-4228

Klaudon@stern.nyu.edu
 
 

Case and Readings Packet
 
 

Cases:

1. "Sun Microsystems and the N-tier Architecture," HBS 9-399-037. Sun and Microsoft battle for the server marketplace. (Session 7)

2. Edmund’s--www.edmunds.com HBS 9-397-016 (Session 11)

3. "Leadership Online: Barnes & Noble vs. Amazon.com," HBS 9-798-063 12/9. (Session 13)

4. Firefly Network (A) OIT 22A & Firefly Network (B) OIT 22B (Session 16)

5. Case: Drugstore.Com. HBS 9-300-036. 1999. (Session 17)

6. Broad Vision Stanford # S- OIT-21 (Session 19)

7. Encyclopedia Britannica HBS #9-396-051Edmund’s ( Session 24)
 
 

Readings:

1. Electronic Commerce and Electronic Business

2. Technological Foundations

Reading: "A Note on the Internet, GSB Stanford University S-OIT-15

Fisher, "2 Companies Take Separate Paths to Speed Delivery of Web Pages," NYT 4/17/00

Buckman and Clark, "Microsoft Announces Internet Platform," WSJ 6/23/00

Markoff, "Critic Sees Flaws in Microsoft’s Strategy," NYT 6/19/00

3. New Technologies: the Future of the Internet

S. Schiesel, "The Outlook for Cable Access," NYT August 9, 1999

"The Triumph of Bandwidth," WSJ 1/12/00

5. Security and Encryption

Reading: Charles C. Mann, "The Mole in the Machine," NYT July 25, 1999

"EBay Site Was Raided by Rival, FTC Says," WSJ 1/7/00
 
 

6. Payments in an Electronic Environment

8. Application Service Providers: Web-based applications

9. New technologies: Interactive Multimedia Applications

10. Internet Business Models

11. First Mover Advantages and Increasing Returns to Scale

2/15
 
 

13. The Retail Model

14. Supplying the Tools and the Highways: the Gold Rush Model

III. Internet Marketing

16. Direct and Affiliate Marketing

17. Advertising on the Web

18. Building Brands on the Web

20. Consumer Behavior on the Web

Reading:

IV. E-Commerce Applications

Week 11

21. Traditional Retailing and the Web

"Should You Get a Mortgage Online?" WSJ June 11, 1999

Reading

"The Death of Old Media," WSJ 1/11/00

White, "Here’s a Web Trend Publishers Don’t Want to Follow," WSJ,6/21/00

Music: Redistributing Sounds

25. Distance Learning and Community: Breaking Out of Location

Davis, "Internet in Schools: A National Crusade Backed by Scant Data," 6/19/00

Building Profitable Communities on the Web

26. Protecting Intellectual Property on the Web

27. Protecting Privacy on the Web