Management Information System

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Management Information System
7

• Electronic Commerce

Judi Prajetno Sugiono jpsugiono_at_gmail.com (2008)
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Learning Objectives

• Identify the major categories and trends of
  e-commerce applications.
• Identify the essential processes of an e-commerce
  system, and give examples of how they are
  implemented in e-commerce applications.

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Learning Objectives (continued)

• Identify several key factors and Web store
  requirements needed to succeed in e-commerce.
• Identify the business value of several types of
  e-commerce marketplaces.

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Learning Objectives (continued)

• Discuss the benefits and trade-offs of several
  e-commerce clicks and bricks alternatives.

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Section I

• Electronic Commerce Fundamentals

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Electronic Commerce Fundamentals (continued)

• Few concepts have revolutionized business more
  profoundly than e-commerce. E-commerce is
  changing the shape of competition, the speed of
  action, and the streamlining of interactions,
  products, and payments from customers to
  companies and from companies to suppliers.

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Electronic Commerce Fundamentals (continued)

• E-commerce
• The online process of developing, marketing,
  selling, delivering, servicing, and paying for
  products services transacted on internetworked,
  global marketplaces of customers, with the
  support of a worldwide network of business
  partners.

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The Scope of e-Commerce

• Three Basic Categories
• Business-to-Consumer (B2C)
• Business-to-Business (B2B)
• Consumer-to-Consumer (C2C)

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Scope of e-Commerce (continued)

• Electronic Commerce Technologies
• The Internet, intranets, and extranets are the
  network infrastructure or foundation
• Customers must be provided with a range of secure
  information, marketing, transaction processing,
  and payment services

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Scope of e-Commerce (continued)

• Electronic commerce technologies (continued)
• Trading and business partners rely on the
  Internet and extranets to exchange information
  and accomplish secure transactions
• Company employees depend on a variety of Internet
  and intranet resources to communicate and
  collaborate

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Scope of e-Commerce (continued)

• Electronic commerce technologies (continued)
• IS professionals and end users can use a variety
  of software tools to develop and manage the
  content and operations of the websites and other
  e-commerce resources

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Essential e-Commerce Processes

• Nine key components of an e-commerce process
  architecture
• Access control and security
• Profiling and personalizing
• Search management
• Content management
• Catalog management

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Essential e-Commerce Processes (continued)

• Key components (continued)
• Payment
• Workflow management
• Event notification
• Collaboration and training

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Essential e-Commerce Processes (continued)

• Access control and security
• Processes MUST establish mutual trust and secure
  access
• Authenticating users
• Authorizing access
• Enforcing security features
• Must protect the resources of e-commerce sites
  from threats
• Hackers
• Theft of passwords or credit card numbers
• System failures

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Essential e-Commerce Processes (continued)

• Profiling and personalizing
• One-to-one marketing strategy
• Personalized view of the website
• Based on
• Personal data
• Website behavior and choices
• Used to help authenticate your identity for
  account management and payment purposes

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Essential e-Commerce Processes (continued)

• Search management
• Helps customers find the specific product or
  service they want
• Software may include a search engine component or
  a company may acquire a customized e-commerce
  search engine

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Essential e-Commerce Processes (continued)

• Content and catalog management
• Content management software helps companies
  develop, generate, deliver, update, and archive
  text data and multimedia information
• Frequently takes the form of multimedia catalogs
  of product information
• Works with profiling tools to personalize the
  content of the website

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Essential e-Commerce Processes (continued)

• Content and catalog management (continued)
• May be expanded to include product configuration
  processes that support mass customization of a
  companys products

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Essential e-Commerce Processes (continued)

• Workflow management
• Workflow software engine
• Predefined sets of business rules
• Roles of stakeholders
• Authorization requirements
• Routing alternatives
• Databases used
• Sequence of tasks

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Essential e-Commerce Processes (continued)

• Workflow management (continued)
• Workflow systems ensure that..
• Proper transactions, decisions, work activities
  are performed
• Correct data and documents are routed to the
  right employees, customers, suppliers, and other
  business stakeholders

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Essential e-Commerce Processes (continued)

• Event notification
• Most applications are event driven
• New customers first visit
• Payment and delivery processes
• Customer relationship supply chain management
  activities
• Notifies those concerned when an event occurs
  that might affect their status in a transaction

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Essential e-Commerce Processes (continued)

• Collaboration and training
• Supports the collaboration arrangements trading
  services needed by customers, suppliers, other
  stakeholders
• May be provided by Internet-based trading services

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Electronic Payment Processes

• Processes are complex
• Near anonymous nature of transactions
• Security issues
• Wide variety of debit and credit alternatives
• Wide variety of financial institutions and
  intermediaries

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Electronic Payment Processes (continued)

• Web payment processes
• Credit cards
• Purchase orders
• Electronic shopping cart

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Electronic Payment Processes (continued)

• Electronic funds transfer (EFT)
• Uses a variety of IT to capture and process money
  and credit transfers between banks and businesses
  and their customers
• ATMs
• Pay-by-phone
• Web-based
• PayPal Bill Point (cash transfers)
• CheckFree and PayTrust (automatic bill paying
  services)

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Electronic Payment Processes (continued)

• Electronic funds transfer (continued)
• Electronic bill payment
• Point-of-sale terminals linked to bank EFT systems

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Electronic Payment Processes (continued)

• Secure electronic payments
• Addresses vulnerability to network sniffers
• Encrypt data passing between customer and
  merchant
• Encrypt the data passing between the customer and
  the company authorizing the credit card
  transaction
• Secure Socket Layer (SSL)
• Digital Wallet
• Secure Electronic Transaction standard

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Section II

• E-Commerce Applications and Issues

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e-Commerce Application Trends

• E-commerce is here to stay. The Web and
  e-commerce are key industry drivers. Its
  changed how many companies do business. Its
  created new channels for our customers.
  Companies are at the e-commerce crossroads and
  there are many ways to go.

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e-Commerce Application Trends (continued)
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e-Commerce Application Trends (continued)

• E-commerce Sectors
• Six major e-commerce sectors
• Infrastructure
• Applications
• Portals
• Content
• Services
• Exchanges

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Business-to-Consumer e-Commerce

• Location is not a factor
• Must build customer satisfaction, loyalty,
  relationships

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Business-to-Consumer e-Commerce (continued)

• Success factors
• Selection and value
• Offer a good selection of attractive products and
  services
• Build a reputation for high quality, guaranteed
  satisfaction, and top customer support

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Business-to-Consumer e-Commerce (continued)

• Success factors (continued)
• Performance and service
• Site must be efficiently designed for ease of
  access, shopping, and buying
• Service must be friendly and helpful
• Products should be available in inventory

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Business-to-Consumer e-Commerce (continued)

• Success factors (continued)
• Look and feel
• Attractive storefront, shopping areas, and
  multimedia product catalogs

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Business-to-Consumer e-Commerce (continued)

• Success factors (continued)
• Advertising and incentives
• Targeted, personalized ads
• Incentives include
• Coupons
• Discounts
• Special offers
• Vouchers for other web services

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Business-to-Consumer e-Commerce (continued)

• Success factors (continued)
• Personal attention
• Encourages customers to buy and make return
  visits
• Welcomed by name
• Greeted with special offers
• Guided to the parts of the site that you are most
  interested in
• Relationship building

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Business-to-Consumer e-Commerce (continued)

• Success factors (continued)
• Community relationships
• Giving customers with special interests a feeling
  of belonging to a unique community
• Virtual communities
• Discussion forums
• Newsgroups
• Chat rooms
• Message boards
• Cross-links to related web communities

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Business-to-Consumer e-Commerce (continued)

• Success factors (continued)
• Security and reliability
• Customers must feel confident regarding the
  security of their
• Credit card
• Personal information
• Transaction details

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Business-to-Consumer e-Commerce (continued)

• Success Factors (continued)
• Must feel that you are dealing with a trustworthy
  business.
• Reliability
• Orders filled and shipped as you requested
• Orders shipped in the timeframe promised
• Good customer support

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Web Store Requirements

• Developing a Web Store
• Build
• Website design tools
• Site design templates
• Custom design services
• Website hosting

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Web Store Requirements (continued)

• Developing a web store (continued)
• Market
• Web page advertising
• E-mail promotions
• Web advertising exchanges with affiliated sites
• Search engine registrations

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Web Store Requirements (continued)

• Serving Your Customers
• Serve
• Personalized web pages
• Dynamic multimedia catalog
• Catalog search engine
• Integrated shopping cart

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Web Store Requirements (continued)

• Serving your customers (continued)
• Transact
• Flexible order process
• Credit card processing
• Shipping and tax calculations
• E-mail order notifications

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Web Store Requirements (continued)

• Serving your customers (continued)
• Support
• Website online help
• Customer service e-mail
• Discussion group and chat rooms
• Links to related sites

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Web Store Requirements (continued)

• Managing a Web Store
• Manage
• Website usage statistics
• Sales and inventory reports
• Customer account management
• Links to accounting system

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Web Store Requirements (continued)

• Managing a web store (continued)
• Operate
• 24/7 website hosting
• Online tech support
• Scalable network capacity
• Redundant servers and power

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Web Store Requirements (continued)

• Managing a web store (continued)
• Protect
• User password protection
• Encrypted order processing
• Encrypted website administration
• Network fire walls and security monitors

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Business-to-Business e-Commerce

• The wholesale and supply side of the commercial
  process
• Businesses buy, sell, or trade with other
  businesses
• Includes
• Electronic catalog systems
• Electronic trading systems
• Electronic data interchange
• Electronic funds transfer

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e-Commerce Marketplaces

• One-to-Many
• Sell-side. Host one major supplier who dictates
  product catalog offerings prices.
• Many-to-One
• Buy-side. Attract many suppliers that flock to
  these exchanges to bid on the business of a major
  buyer.

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e-Commerce Marketplaces (continued)

• Some-to-Many
• Distribution marketplaces. Unite major suppliers
  who combine their product catalogs to attract a
  larger audience of buyers.
• Many-to-Some
• Procurement marketplaces. Unite major suppliers
  who combine their purchasing catalogs to attract
  more suppliers.
• More competition, lower prices

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e-Commerce Marketplaces (continued)

• Many-to-Many
• Auction marketplaces. Used by many buyers and
  sellers that can create a variety of buyers or
  sellers auctions to dynamically optimize prices.

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Clicks and Bricks

• Alternatives
• E-Commerce Integration
• E-commerce is integrated into the traditional
  business operations of a company.
• Business case for integration
• Capitalizing on unique strategic capabilities
  that exist in a companys traditional business
  operations

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Clicks and Bricks (continued)

• Alternatives (continued)
• Gaining strategic benefits such as..
• Sharing established brands
• Sharing key business information
• Joint buying power
• Distribution efficiencies

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Clicks and Bricks (continued)

• Alternatives (continued)
• Partial e-commerce integration using joint
  ventures and strategic partnerships
• Complete separation via the spin-off of an
  independent e-commerce company

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Clicks and Bricks (continued)

• E-Commerce Channel Choices
• An e-commerce channel is the marketing or sales
  channel created by a company to conduct and
  manage its chosen e-commerce activities

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Clicks and Bricks (continued)

• Revenue-generating alternatives
• Additive channel
• New offer channel
• Subscription
• Advertising
• Sponsorship
• Licensing
• Portaling
• Commission
• Tolling

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Discussion Questions

• Do you agree that most businesses should engage
  in electronic commerce on the Internet?
• Are you interested in investing in, owning,
  managing, or working for a business that is
  primarily engaged in electronic commerce on the
  Internet?

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Discussion Questions (continued)

• Why do you think there have been so many business
  failures among dot-com companies that were
  devoted only to retail e-commerce?
• Do the e-commerce success factors discussed in
  the chapter guarantee success for an e-commerce
  business venture?
• What else could go wrong how would you confront
  those challenges?

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Discussion Questions (continued)

• If personalizing a customers website experience
  is a key success factor, then electronic
  profiling processes to track visitor website
  behavior are necessary. Do you agree? What are
  the ethical implications?
• All corporate procurement should be accomplished
  in e-commerce auction marketplaces, instead of
  using B2B websites that feature fixed-price
  catalogs or negotiated prices. Do you agree?

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Discussion Questions (continued)

• If you were starting an e-commerce web store,
  which of the business requirements listed in this
  chapter would you primarily do yourself, and
  which would you outsource to a Web development or
  hosting company?
• Which of the e-commerce clicks and bricks
  alternatives discussed in this chapter would you
  recommend to Barnes Noble? Amazon.com?
  Wal-Mart? Any business?

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Real World Case 1 Yahoo, Inc.

• How is Yahoo doing financially right now?
• Is Yahoo making the right moves toward continuing
  e-commerce profitability?

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Real World Case 1 (continued)

• What are several other things Terry Semel could
  do to make Yahoo more successful?
• Will Yahoo be able to compete successfully with
  AOL and MSN as an online service and e-commerce
  portal?

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Real World Case 2 ChemConnect Heritage
Services

• What are the business benefits and limitations of
  using public B2B exchanges like ChemConnect?
• What is the business value of private B2B
  exchanges for a company?

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Real World Case 2 (continued)

• Should a small business use public or private B2B
  exchanges, or should they use exchanges like
  eBay, that attract both consumers and small
  businesses?

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Real World Case 2 (continued)

• How can ChemConnect broaden its customer base?

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Real World Case 3 Staples, Steelcase,
Countrywide, HSN

• Does the fact that customers who shop online and
  in other channels generate more sales, as Staples
  and HSN have found, mean that most companies
  should have an e-commerce website?

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Real World Case 3 (continued)

• Do you agree with Steelcase that it is better for
  people to get product information online than
  from a salesperson?

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Real World Case 3 (continued)

• Do the Steelcase and Countrywide websites do a
  good job of encouraging customers and visitors to
  buy their products and use their services?

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Real World Case 4 eBags, Economy.com,
Classmates Online

• Do you feel that eBags will be able to sustain
  its recent profitability?
• How else could Economy.com increase its products,
  markets, and profitability?

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Real World Case 4 (continued)

• How could other kinds of businesses use the
  Classmates Online business model to help
  strengthen their e-commerce success?

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Real World Case 5 Office Depot, Lands End,
Others

• Which website, Office Depot or Lands End, does a
  better job of helping users find the products
  they want?

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Real World Case 5 (continued)

• When comparing the business value of the
  integration of customer information at Martha
  Stewart, retailer information at Panasonic, and
  inventory information at NextWine, which
  capability is of greatest importance to the
  success of an e-commerce business?

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Real World Case 5 (continued)

• Which website capability or feature would you
  most like to see added to e-commerce websites?