The Internet

Information Superhighway
 The world wide web (www) is a system of internet
servers that support specially formatted documents.
Most documents on the web are formatted in HTML
(hypertext markup language) that supports links to
other documents, as well as graphics, audio, and
video files.
 Website: A group of documents accessed from the
same base web address. A website is given in the
format of universal resource locator (URL). E.G
http://www.strathmore.edu.
 Browsers: are interface programs that assist to
view the internet. The most widely used
browsers are Microsoft internet explorer and
Netscape navigator.
 The Transmission Control Protocol/Internet
Protocol (TCP/IP) sets the standards on how
computers communicate as well as a set of
conventions for interconnecting networks and
routing packets
Definition
 The internet is a global network
connecting millions of computers.
 The Internet is a collection of computers
joined together via telephone lines,
satellites and high speed data lines
 A Global Network of Networks
URL Explanation
Element
http:// ‘http’ tells the browser to use the
Hypertext Transfer Protocol when
retrieving the document from the
internet server. The two forward
slashes after the colon introduces a
host name such as www.
www Stands for World Wide Web. As noted
before, to put it simply the web (via its
use of HTML) is what makes the
internet user friendly.
Barclays This is the domain name of the organisation
or individual whose site is located at this URL

co This indicates the type of org’n concerned, in this

case a company. Other designation include:
.com Commercial
.edu educational
.org Usually non-commercial institution
.net Inconsistent, an ‘overflow’ from
.com and .org
.mil military
.gov government agencies

Ke Indicates that the org’n is located in Kenya.

Hypertext
 Is an approach to information mngt that stores
“chunks” of information in nodes (frames)
connected by meaningful links.
 A node may contain a unit of textual knowledge.
 Hypermedia: broader implementation of
hypertext.
 Nodes contain: text, graphics, sound, full motion
video.
 Current Uses of the Internet
 Dissemination of information.
 Product/service development - through almost
instantaneous test marketing.
 Transaction processing – both business-business
(B2B) and business to consumer (B2C).
 Relationship enhancement – between various
groups of stakeholders, e.G between consumers and
product/service suppliers.
 Recruitment and job search - involving
organisations worldwide.
 Entertainment – including music, humour, games,
and some less wholesome pursuits.
Intranet
 An internal network based on internet and
world wide web technology and standards.
Its to serve internal needs of a company
using the web concept and tools.
OR A private network that uses internet
protocols to securely share business
information amongst various organisation’s
departments.
Extranet
 A network that links selected resources of
a company with its customers, suppliers,
and other business partners, using the
internet or private networks to link the
organisations’ intranets.
 Services Provided by the
Internet
 e-mail: to exchange messages
 Messages are basically made up of text
 Messages can also contain attachments (binary
files)
 File Transfer capabilities using FTP
 Access to hundreds of file libraries
Services Provided by the Internet

 Telnet: Allows you to remotely access

another computer
 You can run programs, access databases,
computerised library card catalogues, weather
reports and other information services
 Usenet: Public News groups or
International, Conferences
Services Provided by the Internet
 The World Wide Web (WWW) or simply the
Web
 IRC: Internet Relay Chat
 Lets
you have live keyboard chats with people
around the world
 E-Mail to Fax Services
 Phone and Paging Services
 TV, Radio and Video on demand
 Teleconferencing
Technologies used in the
Internet
 Packet Switching
 TCP/IP: Transmission Control
Protocol/Internet Protocol
 Open Architecture
 Client - Server Technology
 Packet Switching
 It allows several messages to share the same
transmission line (data highway)
 Messages are broken into smaller packets
 Each packet contains a number and the address of
its destination
 Packets may follow different paths from source to
destination
 All packets are re-assembled at the destination in
the correct order
 Packets that are lost or corrupted are re-
transmitted
Types of Access Sys to the Internet
 Off-line (Indirect) Access
 You are not directly connected to the Internet
(stand-alone system)
 Your computer is just a terminal
 The connection is normally done through an
Internet Service Provider (ISP)
Types of Access Sys to the
Internet
 The connection is through a modem (dialup)
using SLIP (Serial Line Protocol) or PPP (Point to
Point Protocol) to an ISP
 Your local computer (client) only displays the
information it receives from a server
 You only connect to the Internet when you require
the service
 Cheaper than Direct Access
Off-line (Indirect) Access
Internet

Modem

Normal Phone
Line

ISP
Types of Access Systems
to the Internet
 On-line (Direct) Access
 Mainly used to connect LAN’s to the Internet
 You require a dedicated phone line (analogue or,
preferably, digital) to an ISP
 The connection is done via a special modem
(analogue) or a router (digital)
 Your proxy-server is a node in the Internet (Server)
and it is always connected to the Internet
Types of Access Systems
to the Internet
 Your server has its own IP (Internet Protocol)
address
 You can have a Web Server thus providing
content to other Internet users
 Security is normally implemented using
Firewalls
 Workstations connect to the Internet via the
proxy server
On-line (Direct) Access
Local Area Network (LAN)
Internet

Router

Dedicated Digital
Line

ISP

Router
How Do You Get Connected?
 Equipment:
A computer (Intel 486 or higher, Macintosh or
UNIX based; preferably, a Pentium)
 A modem (33.3 Kbps or 56 Kbps
recommended)
 A telephone line (dedicated or non-dedicated)
 An Internet Service Provider (ISP)
How Do You Get Connected?
 The right software
 Operating systems such as Windows, UNIX,
Linux already include communications
software
 Web browsers are also included in some
operating (Windows) or are easy to obtain as
they can be distributed for free
 Other communications software might be
provided by the ISP
Properties of Internet
 Mediating technology: Internet facilitates
exchange relationships among parties
distributed in time and space
4 types of interconnection:
 B2B: Business-to-business
 B2C: Business-to-consumer

 C2C: Consumer-to-consumer

 C2B: Consumer-to-business
Properties of Internet
 Universality: anybody anywhere in the
world can potentially make his
products available to anyone else in the
world.

 Network externalities: the more people

connected to Internet, the more
valuable it is.
Properties of Internet
 Distribution channel: Internet allows to
distribute music, news, video,
software, tickets, and so on.

 Time moderator: Internet makes

possible to obtain information 24
hours a day.
Properties of Internet
 Information Asymmetry Shrinker: Internet
reduces the difference of information
available to parties.

 Infinite virtual capacity: using the advances to

storage and network technologies,
customers feel that Internet has infinite
capacity to serve them.
Properties of Internet
 Low cost standard: everybody uses the
same protocol. As there is only one
standard, costs for users are lower.

 Creative: the low entry costs,

flexibility and unlimited possibilities
allow entrepreneurs to create new
businesses.
Properties of Internet
 Transaction-cost reducer: Internet
reduces the costs of searching for
sellers and buyers, collecting
information on products, negotiating
contracts and transportation.
 Properties of Internet have a huge
impact on the 5 main activities that rest
on information exchange: coordination,
community, content communication and
commerce:
 Impact on Coordination
 Internet reduces the cost of transactions
 Internet improves product-service features
and quality
Impact of the Internet on the 5-Cs

 Impact on Community
 Internet redefines communities, making
them larger and much more valuable
 Distance and time are no drawbacks to
join a community
Impact of the Internet on the 5-Cs
 Impact on Content
 Information,entertainment and other
products are delivered over the Internet to
more people
 Impact on Communication
 People can exchange electronic messages
real-time, to many people and with high
content
 Every user has the capacity to broadcast
messages
Impact of the Internet on the 5-Cs
 Impact on Commerce
 B2B:businesses buy and sell goods and
services to and from each other.
 Internet provides access to sellers and buyers
from all over the world
 Internet can create B2B hubs, to provide a central

where sellers and buyers can go to find each

other
 B2C: businesses sell to consumers.
 Access to e-shops 24 hours a day
 Almost no limit to the number of goods an online
retailer can display
 Firms can collect data and offer personalised
service
 Some goods can be received instantaneously

 When the cost of finding a seller is high, the

exchange can involve an intermediary (e.g.
Amazon.com)
 C2C: consumers sell to other consumers.
 Usually, this involves an intermediary, such as an
action house.
 C2B: consumers state their price, and firms either
take it or leave it.
 Usually, intermediaries play an important role
Limitations to Transactions over
the Internet
 Internet cannot transmit tacit
knowledge (that is, knowledge uncoded
and nonverbalised).
 Individuals and organisations are
cognitively limited. So, they may not be
able to encode their knowledge into a
form that can be transmitted over the
Internet.
Definitions
An Internet business model is a set of
Internet and non-Internet-related
activities – planned or evolving – that
allows a firm to make money using the
Internet and to keep the money coming.
Definitions
A business model should include answers
to a number of questions:
 What value offer to customers?
 Which costumers to provide the value to?
 How to price the value?
 Who to charge for it?
 What strategies to undertake in providing
the value?
 How to provide the value?
 How to sustain any advantage from
providing the value?
A Taxonomy of Business Models
 Brokerage: firms act as market makers
who bring buyers and sellers together
and charge a fee for the transaction they
enable.
 Examples: travel agents, online brokerage
firms, online auction houses.
 Advertising: the owner of a website
provides some content and services
that attract visitors, and makes money
by charging advertisers fees.
 Examples: Yahoo, Altavista.

 Infomediary model: a firm collects

information on consumers and their
buying habits and sells it to firms.
 Merchant: wholesalers and retailers sell
goods and services over the Internet.

 Manufacturer: manufacturers try to reach end

users directly through the Internet.

 Affiliate: a merchant has affiliates whose

websites have click-through to the
merchant, which pays a fee to the affiliates
each time a visitor to an affiliate’s site clicks
through to the merchant’s site and buys
something.
 Community: users have invested in
developing relationships with members
of their community and are likely to visit
the website frequently.
 Example: iVillage
 Subscription: members pay a
subscription price and receive high-
quality content.
 Utility: users pay for the services they
consume.
Elements of a Business Model
 Customer value
Customers would buy a product from a
firm only if the product offers them
something competitors’ product do not.
This something can take the form of
differentiated or low cost product.
 Differentiation:
a firm can differentiate its
products in eight different ways:
 Product features
 Being the first to introduce it

 Ease of access to the products

 Service

 Product mix

 Association with another firm

 Brand-name reputation

 Lowcost: products or services cost

customers less than those of its
competitors
 Scope
Scope deals with:
 Market segments or geographic areas to
which the value should be offered
 How many types of products that embody
versions of this value should be sold
 Revenue sources
Determination of the sources of a firm’s
revenues and profits.
 It allows to make better strategic decisions
 Price
To profit from the value that firms offer
customers, they have to price it properly

Types of pricing:
 Menu pricing: sellers sets a price and
buyers can take or leave it.
 One-to-one bargaining: seller negotiates
with a buyer to determine at what point the
buyer considers the price appropriate for
the value he is getting.
 Auction: seller solicits bids from many
buyers and sells to the buyer with the best
bid.
 Reverse auction: sellers decide whether to
fulfil the orders of potential buyers.
 Barter: swap of goofs for goods, or goods
for services.
 Connected activities
A firm must perform the activities that
underpin the value (value chain).

 The activities should be consistent with the

value the firm is offering, reinforce each
other, take advantage of industry success
drivers and make the industry more
attractive to the firm.
 Theactivities a firm performs are a
function of where the technology is in that
industry’s life cycle, the technological
evolution of the customers and what
competitors are doing.
 Implementation
The way of carrying out the decisions
depends on several factors:
 Structure of a firm.
 Systems that allow information flow in the
shortest time to the right target for
decision making.
 Motivation of employees, and capability of
making the right decisions with the
available information.
 Recognizing the potential of an innovation.
 Organisational culture.
 Capabilities
 Firms need resources to perform the
activities
 Firms need the capacity to turn the
resources into customer value and profits:
competence.
 The competitive advantage allows the firm to
offer its customers better value than
competitors.
 Sustainability
To sustain a competitive advantage a
firm can pursue some subset of three
generic strategies:
 Blockstrategy: a firm tries to erect barriers
around its business model to prevent
others from imitating it.
 Run strategy: a firm must keep innovating its
business model.
 Team-up strategy: a firm can pool others’
resources to strengthen its business model.