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Chapter 5 Powerpoint Slides
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  • 1. 5- 5 Chapter Enabling Commerce Using the Internet “ There is no physical analog for what Amazon.com is becoming.” Jeff Bezos Cofounder and long-time CEO of Amazon.com
  • 2. Learning Objectives 5-
  • 3. Learning Objectives 5-
  • 4. Electronic Commerce
    • Online exchange of goods, services and money
    • Second quarter of 2006
      • 2.7% of total retail revenue
      • $24.8 billion in revenue
    5-
  • 5. Most Common Types of E-Commerce
    • Business-to-consumer (B2C)
      • A person buys a book from Amazon.com
    • Business-to-business (B2B)
      • Retailer like Wal-Mart ordering from distributors
    • Business-to-employee (B2E)
      • Employee uses the Web to change employee benefits
    • Consumer-to-consumer (C2C)
      • One person purchases from another on eBay
    5-
  • 6. Other Types of E-Commerce
    • Government-to-citizen (G2C)
      • A person filing income taxes online
    • Government-to-business (G2B)
      • Government purchases supplies using Internet-enabled procurement system
    • Government-to-government (G2G)
      • Foreign government accessing U.S. federal regulations
    5-
  • 7. Key Capabilities of the Web 5-
  • 8. Information Dissemination
    • Firms across the world have access to customers
    • Economical medium for marketing products and services
    • Increased geographical reach
    5-
  • 9. Integration
    • Integration of information via Web sites
    • Real-time access to personalized information
    • No time lag between company decisions and customers’ ability to access these
    5-
  • 10. Example: Integration
    • Alaska Airlines customers can access their mileage program any time
      • Real-time link between company database and customer
    5-
  • 11. Mass Customization
    • Meeting particular customers’ needs on a large scale
    • Timbuk2.com
      • Custom Messenger Bag Builder
        • Customers create a virtual bag
        • Preference-tracking helps Timbuk2 in marketing efforts
    5-
  • 12. Interactive Communication
    • Immediate feedback between company and customers
      • E-mail notifications
      • Customer service online chat
    • Best Buy
      • Geek Squad
      • 24-hour computer support
    5-
  • 13. Collaboration
    • Virgin Entertainment Group
      • Microsoft SharePoint
      • Managers: spend more time selling products
      • Head office: more time for strategic planning
    5-
  • 14. Transaction Support
    • Internet and the Web:
      • Reduced transaction costs
      • Enhanced operational efficiency
    • Dell – automated transaction support
      • Cost savings per sale
    • Disintermediation
    5-
  • 15. E-Commerce Business Strategies
    • Differentiated based on levels of physical/virtual presence
    5-
  • 16. Brick-and-Mortar Business Strategy
    • Physical locations only
    • Traditional stores
    • Cons: Limited geographical reach
    5-
  • 17. Click-Only Business Strategy
    • Business conducted in cyberspace - no physical location
    • Virtual companies
    • Cons: Customers uncomfortable with online transactions No face-to-face interaction with customers
    5-
  • 18. Click-and-Mortar Business Strategy
    • Bricks-and-clicks business strategy
    • Hybrid strategy
    • Cons: Added complexity combining 2 different environments
    5-
  • 19. Example: Click-and-Mortar Company 5-
  • 20. Ingredients of a Business Model
    • A plan of how to achieve EC success
    5-
  • 21. Common Revenue Models for EC
    • Most important ingredient of business model
    • How will the firm earn revenue?
    5-
  • 22. Learning Objectives 5-
  • 23. Business-to-Business E-Commerce
    • Extranet
      • Enables firms to do business together (B2B)
      • One of best ways for organizations to gain return on technology-based investments
      • Boeing
        • 1,000 authorized business partners
      • Nearly all Fortune 1,000 companies deploy some type of B2B applications
    5-
  • 24. Electronic Data Interchange (EDI)
    • Used prior to the introduction of the Internet
    • EDI used for B2B systems
    5-
    • Digital or electronic transmission of business documents between organizations
      • Value-added networks (VAN)
      • Dedicated circuit between companies
  • 25. Advantages and Disadvantages of EDI
    • Advantages
      • Streamlining business processes
      • Reduction of error rates
    • Disadvantages
      • Costly
      • Mid-size and small companies disadvantaged
    5-
  • 26. Extranets
    • New, more affordable alternative to EDI
    • Advantages
      • Improved timelines and accuracy of information
      • Central management of documents
      • Cross-platform nature
      • Low cost of adoption
      • No specific user training required
    5-
  • 27. Extranet System Architecture
    • Internet-based application
    • Virtual private network (VPN) used to secure information transmission
    • Used to manage supply chains
    5-
  • 28. Intranets
    • Business-to-employee (B2E) electronic commerce
    • Internet based private network using Web technologies
    • Boeing
      • More than 1 million pages
      • 200,000 employees
    5-
  • 29. Intranet System Architecture
    • Internet-based application
    • Firewalls used for security
      • Software placed between LAN and the Internet
    • VPN used to access intranet from remote locations
    5-
  • 30. Intranet: Training
    • Boeing Company
      • 200,000 employees get trained
      • Quality eTraining program
        • Catalogue of courses
        • Online course content
        • Standardized courses
      • Business improvements
      • Cost reduction
        • Eliminated travel cost
    5-
  • 31. Intranet: Application Integration
    • Information from separate applications can be consolidated and presented to the user
    • Netegrity
    • SiteMinder
    5-
  • 32. Intranet: Online Entry of Information
    • Use of Web browsers to enter information online
    • E.g., Microsoft MSExpense
      • Prior to MSExpense
        • 136 different report templates
        • Outdated versions
      • With MSExpense
        • Online submission of expense records
        • Easy and centralized updates to templates
        • Savings of $4.3 million a year
        • Shortened period for reimbursement from 3 weeks to 3 days
        • Etc.
    5-
  • 33. Intranet: Real-Time Access to Information
    • Manage, update, distribute, and access corporate information
      • Boeing
        • News releases uploaded to the Intranet
        • Previously sent to all corporate offices as video tapes
        • Reduced distribution costs
    • Efficient information sharing
    • Company-wide access
    5-
  • 34. Intranet: Collaboration
    • Boeing
      • Information shared between employees across the world
      • Reduced product development cycles
      • Ability to stay current on projects
      • Ability to stay current with the changing market conditions
    5-
  • 35. Learning Objectives 5-
  • 36. Use of Internet Technologies
    • Characteristics of the Internet, intranet and extranet
    • B2B, B2E rely on extranet and intranet
    • Internet provides an opportunity for B2C commerce
    5-
  • 37. Stages of B2C E-Commerce
    • Websites range from passive to active
    5-
  • 38. E-Tailing
    • Selling goods and services online
    • Click-and-mortar
      • Walmart.com
    • Click only
      • Amazon.com
    • Virtual company
      • Priceline.com
        • Reverse pricing vs. menu-driven pricing
    5-
  • 39. E-Tailing Benefits
    • Product benefits
      • Unlimited number and variety of products
      • Easier comparison shopping
        • E.g., AllBookstores, BizRate, or SideStep
    • Place benefits
      • Anywhere, anytime
      • Purchasing on global scale
    • Price benefits
      • Higher inventory turnover rate
      • No expenditures for physical retail space
    5-
  • 40. The Long Tail
    • Traditional stores
      • Focus on mainstream needs
      • Target the average customer
      • E.g., Blockbuster
    • E-Tailers
      • Can focus on niche markets
      • E.g., Netflix
    5-
  • 41. E-Tailing Drawbacks
    • Product delivery drawbacks
      • Delay between product order and delivery
        • Except for products that can be downloaded
    • Direct product experience drawbacks
      • Lack of sensory information
        • Smell, taste, feel
      • Lack of the social element
        • Cannot replace going to the mall with friends
    5-
  • 42. Attracting and Retaining Online Customers
    • Basic rule of commerce
      • Offer valuable products/services at fair prices
    • Additional e-commerce rules
      • The Web site should offer something unique
      • The Web site must be aesthetically pleasing
      • The Web site must be easy to use and fast
      • The Web site must motivate people to visit, stay and return
      • You must advertise your presence on the Web
      • You should learn from your Web site
    5-
  • 43. Web Site Rules: Rule 1
    • Offer something unique
      • Offer hard-to-find goods
        • Global audience
        • Reasonable prices
    5-
  • 44. Web Site Rules: Rule 2
    • Website must be aesthetically pleasing
      • Use of color schemes, backgrounds, high quality images
      • Clear, concise and consistent layout
        • Increases chances of return
        • Can separate a Web site from the competition
    5-
  • 45. Web Site Rules: Rule 3
    • Website must be easy to use and fast
      • Easy navigation
      • Fast download speed
        • Average user will wait only a couple of seconds for a website to download
      • Present brief summary information with hyperlinks
        • Allows users to “drill down”
    5-
  • 46. Web Site Rules: Rule 4
    • Web site must motivate people to visit stay and return
      • Create a community
        • GardenWeb
          • Users share tips
          • Buy from each other
    5-
  • 47. Web Site Rules: Rule 5
    • Advertise your presence on the Web
      • Pull marketing
        • A passive method of attracting to a specific site
        • Include the Web site address on all promotional materials
        • Advertise your Web site on other sites
    5-
  • 48. Web Site Rules: Rule 5
    • Advertise your presence on the Web (II)
      • Pay-per-click
        • Only pay for advertising when user clicks on it
        • Affiliate marketing – Web site owners post ads on their site
        • Problem: click fraud – artificially clicking on ads to create revenue
          • Network click fraud
          • Competitive click fraud
    Information Systems Today: Managing in the Digital World 5- 5-
  • 49. Web Site Rules: Rule 6
    • Learn from your Web site
      • Who are your customers?
      • What are they doing?
    • Web analytics
      • Analyze behavior of visitors
        • Path the visitors take
        • Length of the visit
        • Number of pages viewed
        • Page from which they exit
    5-
  • 50. Search Engine Marketing
    • Paid inclusion
      • Fee paid to the search engine to appear in the results
      • Cannot influence order, thus companies may use:
        • Search engine advertising
        • Search engine optimization
    5-
  • 51. Search Engine Advertising
    • Sponsored search
      • Pay to ensure a spot on top of search results page
      • Company in control of ad positioning
      • Pay-per-click
      • Can get costly
    5-
  • 52. Search Engine Optimization
    • Position within search results based on complex formula
    • Site owner has no control over the position of the ad
    • Optimization based on
      • Web site updates
      • Use of key terms
      • Unethical “tricks”
    5-
  • 53. Securing Payments in the Digital World
    • 90 % of users have changed online behavior because of fear of identity theft
    • 1/3 of online purchasers cut back on the volume of purchasing
    • More than 1/2 of shopping carts are abandoned
    • Need for secure forms of online payment
    5-
  • 54. Credit and Debit Cards
    • Customer Verification Value (CVV)
      • Three-digit code on the back of a card
      • Added to combat fraud in online purchases
      • Not included in the
      • magnetic strip
      • information
      • Code used for
      • authorization by bank
    5-
  • 55. Conducting Safe Transactions Online
    • Use a secure browser with the latest encryption capabilities
    • Check the site’s privacy policy
    • Read and understand refund and shipping policies
    • Keep personal information private
    • Give payment information only to those you know and trust
    • Keep records of online transaction
    • Review your monthly credit card and bank statements
    5-
  • 56. Payment Services
    • Online transactions without sharing private information with actual seller
      • PayPal (owned by eBay)
        • Can send and receive money if you have an e-mail account
      • Google Checkout
        • Linked with Google search
        • Users can see if merchants offer this option
      • E-Gold
        • Service backed by real gold
    5-
  • 57. Example: Payment Services
    • e-Gold
    • Backed by real gold
    • Person-to-person transfer
    5-
  • 58. Managing Financial Transactions in the Digital World
    • Financial institutions now offer:
      • Online banking
        • Management of credit card, checking and savings accounts
      • Electronic bill pay
        • Bill payment online
      • Online investing
        • Growing in popularity
    5-
  • 59. Learning Objectives 5-
  • 60. Types of C2C E-Commerce
    • C2C commerce has always been present
    • 17% of American adults have sold online
    • C2C relationships characterized by
      • Number of buyers
      • Number of sellers
    5-
  • 61. Opportunities and Threats of C2C E-Commerce 5-
  • 62. E-Auctions
    • Forward auction
      • Sellers post goods or services for sale
      • Buyers bid on these items
      • Highest bid wins
    • Reverse auction
      • Buyers post a request for quote (RFQ)
      • Seller proposes a bid
      • Lowest seller bid wins
      • Used frequently in B2B e-commerce
    5-
  • 63. E-Auctions (II)
    • eBay
      • Transaction fee-based revenue system
      • 2006 revenue - $6 billion
      • Mostly forward auctions
    5-
  • 64. E-Auction Fraud
    • E-auctions marred with more fraud than any other Internet activity
      • 42% of all Internet-fraud related complaints
      • Average loss: $1,155
    • Types of e-Auction fraud
      • Bid luring
      • Reproductions
      • Bid shielding
      • Shipping fraud
      • Payment failure
      • Nonshipment
    5-
  • 65. Social Online Communities
    • MySpace.com
      • 4.5% of all Internet site visits in mid 2006
      • Over 100 million users
      • About 230,000 new users a day
      • Original purpose – social network based on music interests
      • 2005 – purchased by NewsCorp for $580 million
      • Income from targeted ads
        • $2.17 per user per year
    5-
  • 66. Cyworld
    • Successful social online community
    • Asian market
    • South Korea – Cyworld’s per capita penetration greater than MySpace in the US
    • Sale of virtual items
      • $7 per user per year
    5-
  • 67. Self-Publishing
    • Consumers can voice their opinions with no editorial review
    • Original material by the author
    • Traditional B2B becoming C2C
    • Publishing from home
      • Print-On-Demand
      • Blogging
    5-
  • 68. Printing-On-Demand
    • Customized printing
    • Small batches
    • Attractive for first time authors
    • Select providers
      • Lulu
      • Blurb
      • BookSurge
        • Amazon
        • End-to-end service
    5-
  • 69. Blogging
    • Weblogging
      • Online text diary
      • Chronological entries
      • Power of bloggers
        • “ Rathergate”
    • Vlogging
      • Video blogging
    5-
  • 70. M-Commerce
    • Electronic transactions using wireless mobile devices
    • Mobile networks
      • Wireless
      • Switched public network
    • Smart phones
      • High-speed data transfer
      • “ Always-on” connectivity
    5-
  • 71. Popular Technologies for M-Commerce 5-
  • 72. M-Commerce Applications 5-
  • 73. Location-Based M-Commerce
    • Highly personalized mobile services
    • Based on location
      • GPS functionality
      • Bluetooth
    • Pull-based – consumers seeking information
    • Push-based – companies sending (unrequested) information to the consumer
    5-
  • 74. Enhanced 911 and Phone Locator
    • e911
      • Federal mandate
      • Correct routing of emergency calls
      • GPS specifies location within 50 meters
    • Phone locator
      • Location of family members’ cell phones
      • Alerting system when child leaves a certain area
    5-
  • 75. Location-Based Services
    • Next thing: cell phone social networking
    5-
  • 76. Key Drivers of M-Commerce
    • General interest in adoption of the Internet and e-commerce
    • Real-time transfer of data over 3G and 4G cellular networks
      • “ Always-on” connectivity
    • Growth in mobile telephony
    • 2007 M-commerce market: $250 billion
    5-
  • 77. Crowdsourcing
    • Use of everyday people as cheap labor force
    • iStockphoto.com
      • Amateurs take pictures
      • Cost of picture $1 - $5
      • Revenue shared with the photo creator
    • Eli Lilly – InnoCentive
      • Companies post scientific problems
      • Anyone can try to solve them
      • Reward paid to a successful solver
      • Decreased R&D costs
    • E-lancing
    5-
  • 78. Online Entertainment Industry
    • Digital rights management (DRM)
      • Technological solution for control of digital media
        • Restrictions
          • Devices which will play it
          • How many times it can play
      • Prevention of illegal copying and distribution
        • Watermark – illegal copy can be traced to original purchaser
    5-
  • 79. Slingbox
    • Acts as a personal media server
    • “ Placeshifts” television content to any Internet-enabled device
      • Television signal received at the user’s house
      • Relayed over the Internet to be accessed from anywhere
    5-
  • 80. Learning Objectives 5-
  • 81. E-Government
    • Providing information about public services
      • To citizens
      • To organizations
      • To other governmental agencies
    • 1998 – Government Paperwork Elimination Act
    5-
  • 82. Government-to-Citizens
    • Interactions between the government and its constituents
      • IRS – e-filing
      • Grants.gov
      • e-voting initiatives
    5-
  • 83. Government-to-Business
    • Relationships between businesses and the government
      • E-procurement
      • Forward auctions
        • Businesses buy surplus government equipment
        • Auctionrp.com
      • Online application for export licenses
    5-
  • 84. Government-to-Government
    • Interactions between countries
      • Regulations.gov
      • Export.gov
    • Interactions between different levels of government
    5-
  • 85. Threats to E-Commerce
    • The USA PATRIOT Act
    • Taxation
    • Net Neutrality
    • Censorship
    5-
  • 86. Threats to E-Commerce
    • The USA PATRIOT Act
      • Introduced after 9/11 terrorist attacks in 2001
      • More power given to governmental agencies to protect Americans
      • Critics – Civil Liberties Union
        • Reduced checks and balances on surveillance
        • Lack of focus on terrorism
        • Surveillance on Americans
    5-
  • 87. Examples of Provisions Allowed by the USA PATRIOT Act 5-
  • 88. Internet Taxation 5-
    • The Internet Tax Freedom Act – 1998
      • Created as an incentive for EC businesses
      • Internet sales treated as mail-order sales
        • No sales taxes paid in states where the company has no presence
    • Problem
      • Loss of tax incomes
      • Unfair advantage for e-tailers
  • 89. Internet Taxation (II) Information Systems Today: Managing in the Digital World 5-
    • Solutions:
      • Use tax
        • Consumers required to pay their state’s sales tax
        • Part of some income tax returns
      • Streamlined Sales Tax Project
        • Simplification of tax codes
        • Collection of taxes by out-of-state sellers
    5-
  • 90. Arguments For and Against Internet Taxation 5-
  • 91. Net Neutrality
    • Data sent over the Internet is handled in a neutral manner
    • All traffic treated the same way
    • ISPs and telephone companies argue for prioritization
      • Traditional Internet traffic suffers (e-mail) due to high bandwidth applications
      • Example: YouTube.com not paying their fair share, should be deprioritized
    5-
  • 92. Approaches to Net Neutrality 5-
  • 93. Censorship
    • Governmental attempts to control Internet traffic
      • Limiting citizens from viewing content
      • E.g., China, North Korea
        • Strict guidelines on what can be viewed
        • Key words and topics blocked
      • United States
        • Child Online Protection Act (COPA)
          • Age verification for certain content
    5-
  • 94. End of Chapter Content 5-
  • 95. Opening Case: Managing in the Digital World: eBay Under Attack
    • Phishing
      • Scam artists pretending to be eBay
      • Ask for credit card information and passwords
      • eBay would never send such an email
      • 2006 – London
        • £ 200,000 stolen
    • eBay feedback scores
    • eBay buyer insurance
    5-
  • 96. Monitoring Productive Employees
    • “ You have zero privacy, get over it” ( Scott McNeely)
    • Use of company provided Internet connection can be legally monitored
    • American Management Association survey (2005)
      • 75% of employers monitor employee’s Internet use
      • 65% use software to block access to certain Web sites
      • 30% monitor key strokes
      • 50% review and retain employee e-mails
      • 8% of the companies disclose the practices to the employees
      • 26% fired employees for Internet misuse
      • 25% fired employees for e-mail abuse
    5-
  • 97. Employees Using Company Networks Can Affect Liability
    • Illegal downloading of music and movies using company’s computer and Internet access
    • Star Wars Episode III: Revenge of the Sith
      • September 2005
      • “ Screener” version stolen and distributed
        • Forensic marker revealed the identity of the thief
        • 3 years in prison
      • 7 employees copied the movie
        • 1 year in prison and $100,000 in fines
        • Company not held liable
    5-
  • 98. IM at Work
    • Disadvantages of using public IM
      • Security cannot be assumed
      • Data resides on the provider’s server
      • Access to the network cannot be blocked
    • IM protocols for organization’s own IM network
      • Secure message transfer
      • Ability to handle thousands of employee accounts
      • Platform compatibility
      • Access from outside of the WAN
      • Proper access rights
    • IM hosting service – third alternative
      • Data still resides on provider’s server – privacy concerns
    5-
  • 99. E-Business is BIG Business
    • Growing numbers of online consumers
      • 2005 revenues - $176.4 billion
      • 2006 expected revenue – $211.4 billion
    5-
  • 100. Photonic Crystal Fibers
    • New type of fiber-optic cable
      • Based on characteristics of photonic crystals
        • Larger data carrying capacity
        • Photonic crystals allow the fiber to contain light in a hollow core
        • No need for cladding
        • Higher-powered lasers can be used
        • Data speeds greater than 1,000 times the current fiber capacity
        • Can be connected to any fiber-optic equipment
    5-
  • 101. Meg Whitman, President and Chief Executive Officer, eBay, Inc.
    • Princeton – Undergrad
    • Harvard – MBA
    • Worked for
      • Hasboro Inc.
      • FTD
      • Stride Rite Corporation
      • Walt Disney Company
      • Procter & Gamble
    5-
    • eBay
      • 53 country specific sites
      • Purchase of Skype
  • 102. Online Travel
    • Online travel agencies
      • Expedia, Travelocity, Orbitz
      • 75% of surveyed travelers visit online travel sites before booking travel
    • Direct customer relationships
      • JetBlue, InterContinental Hotels
      • Customers purchase services directly
    • Travel search engines
      • Kayak, SideStep, Mobissimo, Yahoo!’s FareChase
        • Link to suppliers’ Web sites
    5-

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