1. Chapter 5
E-Business and E-
Commerce
Information Technology For Management 6 th Edition
Turban, Leidner, McLean, Wetherbe
Lecture Slides by L. Beaubien, Providence College
John Wiley & Sons, Inc.
Chapter 5 1
2. Learning Objectives
• Describe electronic commerce, its scope, benefits,
limitations, and types
• Understand auctions and bartering
• Describe the major applications of business-to-consumer
commerce, including service industries, and major issues
faced by e-tailers
• Describe business-to-business applications
• Describe emerging EC applications such as intrabusiness 2
and B2E commerce 5
Chapter
3. Learning Objectives (Continued)
• Describe e-government activities and consumer-to-consumer
e-commerce
• Describe the e-commerce support services, specifically
payments and logistics
• Discuss the importance and activities of online advertising
• Discuss some ethical and legal EC issues
• Describe EC failures and strategies for success
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4. 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
• Identify and give examples of several key factors
and Web store requirements need to succeed in
e-commerce
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5. Learning Objectives
• Identify and explain the business value of several
types of e-commerce marketplaces
• Discuss the benefits and trade-offs of several
e-commerce clicks and bricks alternatives
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7. Introduction to e-Commerce
• Electronic commerce encompasses the entire
online process of
• Developing
• Marketing
• Selling
• Delivering
• Servicing
• Paying for products and services
• It relies on the Internet and other information
technologies to support every step of the process
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12. Access Control and Security
• E-commerce processes must establish mutual
trust and secure access between parties
• User names and passwords
• Encryption key
• Digital certificates and signatures
• Restricted access areas
• Other people’s accounts
• Restricted company data
• Webmaster administration areas
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13. Profiling and Personalizing
• Profiling gathers data on you and your website
behavior and choices
• User registration
• Cookie files and tracking software
• User feedback
• Profiling is used for
• Personalized (one-to-one) marketing
• Authenticating identity
• Customer relationship management
• Marketing planning
• Website management
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14. Search Management
• Search processes help customers find the specific
product or service they want
• E-commerce software packages often include
a website search engine
• A customized search engine may be acquired
from companies like Google or Requisite
Technology
• Searches are often on content or by parameters
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15. Content and Catalog Management
• Content Management Software
• Helps develop, generate, deliver, update, and
archive text and multimedia information at
e-commerce websites
• Catalog Management Software
• Helps generate and manage catalog content
• Catalog and content management software works
with profiling tools to personalize content
• Includes product configuration and
mass customization
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16. Workflow Management
• E-business and e-commerce workflow manage-
ment depends on a workflow software engine
• Contains software model of business processes
• Workflow models express predefined
• Sets of business rules
• Roles of stakeholders
• Authorization requirements
• Routing alternative
• Databases used
• Task sequences
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18. Event Notification
• Most e-commerce applications are event driven
• Responds to such things as customer’s first
website visit and payments
• Monitors all e-commerce processes
• Records all relevant events, including problem
situations
• Notifies all involved stakeholders
• Works in conjunction with user-profiling
software
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19. Collaboration and Trading
• Processes that support vital collaboration
arrangements and trading services
• Needed by customers, suppliers, and other
stakeholders
• Online communities of interest
• E-mail, chat, discussion groups
• Enhances customer service
• Builds loyalty
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20. Electronic Payment Processes
• Complex processes
• Near-anonymous and electronic nature
of transactions
• Many security issues
• Wide variety of debit and credit alternatives
• Financial institutions may be part of the process
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21. Electronic Payment Processes
• Web Payment Processes
• Shopping cart process
• Credit card payment process
• Debit and other more complex processes
• Electronic Funds Transfer (EFT)
• Major payment system in banking, retail
• Variety of information technologies capture
and process money and credit card transfers
• Most point-of-sale terminals in retail stores
are networked to bank EFT systems
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23. Securing Electronic Payments
• Network sniffers easily recognize credit card
formats
• Encrypt data between customer and merchant
• Encrypt data between customer and financial
institution
• Take sensitive information off-line
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24. Components of EC (Continued)
To execute these applications, companies need the right
information, infrastructure, and support services. As
shown:
People: Sellers, buyers, intermediaries, information systems
specialists and other employees, and any other participants
Public policy: Legal and other policy and regulating issues, such as
privacy protection and taxation
Marketing and advertising: Like any other business, EC usually
requires the support of marketing and advertising
Support services: Many services are needed to support EC. They
range from payments to order delivery and content creation
Business partnerships: Joint ventures, e-marketplaces, and
partnerships are some frequently occurring relationships in e-
business 24
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25. Auctions
The major mechanism for buying and selling on the
Internet is the electronic catalog. Common mechanisms
used in its implementation: electronic auctions
Electronic Auctions (e-Auctions): A market mechanism by
which sellers place offers and buyers make sequential bids
Forward auctions are auctions where sellers place items at
sites for auction and buyers bid continuously for the items.
Reverse auctions, have one buyer, usually an organization,
that wants to buy a product or a service. Suppliers are invited
to submit bids.
Auctions are used in B2C, B2B, C2B, e-government, and
C2C commerce
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26. Developing a Web Store
• Build a website
• Choose or set up web hosting
• Use simple design tools and templates
• Include a shopping cart and payment support
• Market the website
• Include Web page and e-mail advertising
and promotions
• Exchange advertising with other Web stores
• Register with search engines and directories
• Sign up for affiliate programs
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27. Serving Your Customers
• Convert visitors into loyal customers
• Develop one-to-one relationship with customers
• Create incentives to encourage registration
• Use Web cookies to identify visitors
• Use tracking services to record and analyze
website behavior and customer preferences
• Create an attractive, friendly, efficient store
• Offer fast order processing and payment
• Notify when orders are processed and shipped
• Provide links to related websites
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28. Managing a Web Store
• Manage both the business and the website
• Record and analyze traffic, inventory, sales
• Use CRM features to help retain customers
• Link sales, inventory data to accounting systems
• Operate 24 hours a day, seven day a week
• Protect transactions and customer records
• Use security monitors and firewalls
• Use redundant systems and power sources
• Employ passwords and encryption
• Offer 24-hour tech support
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29. Seven Design Elements
of Customer Interface
• Context
• Functional look and feel
• How it is presented
• Content
• What is presented
• Community
• Consumers and firm
• Consumers to consumers
• Chat room and message board
• Customization
• Ability to modify itself
• Communication
• Dialog between website and its users
• Connection
• Links between the site and other sites
• Commerce
• Transactional capacity
30. The 7Cs of Customer Interface
Context Content
Site’s layout and design Text, pictures, sound, and video
that webpages contain
Commerce Community
Site’s capabilities to enable Site’s ability to enable user-to-
commercial transactions user communication
Connection Customization
Degree to which a site is linked Site’s ability to self-tailor to
to other sites different users or to allow users
to personalize the site
Communication
The ways sites enable site-to-
user communication or two-way
communication
31. Individualizing a Website: Customization
Commonly used customization features:
• E-mail accounts: Users can send and receive e-mail from the site, using a
free, unique e-mail address
• Content and layout configuration: Users can design their own homepage,
within limits, by choosing background colors, layout design, and content
sources
• Storage: Users can store e-mail, URLs, favorite content, or items they want
to buy
• Agents: Computer programs can perform simple tasks upon request, such as
notifying a user via e-mail when a product is in stock
38. Keeping in Touch with Users:
Communication
Communication Archetypes
• One-to-Many, Non-Responding User: Site messages are
announcements that users receive without needing to respond
• One-to-Many, Responding User: Site messages are invitations to
users to submit their comments and responses
• One-to-One, Non-Responding User: User receives personalized
messages to address specific interests or needs without a need to respond
• One-to-One, Responding User: User responds to personalized
messages sent by the site
39. B2B E-Commerce
• B2B is the wholesale and supply side of
the commercial process
• Businesses buy, sell, or trade with other
businesses
• Relies on multiple electronic information
technologies
• Catalog systems
• Trading systems
• Data interchange
• Electronic funds transfers
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40. E-Commerce Portals
• B2B e-commerce portals offer multiple
marketplaces
• Catalogs
• Exchanges
• Auctions
• Often developed and hosted by third-party
market-maker companies
• Infomediaries serve as intermediaries in
e-business and e-commerce transactions
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41. Market Research for EC
market segmentation
The process of dividing a consumer market into logical
groups for conducting marketing research, advertising, and
sales
• Segmentation is done with the aid of tools such
as data modeling and data warehousing
42. Market Research for EC
• Tracking Customer Movements
transaction log
A record of user activities at a company’s Web
site
clickstream behavior
Customer movements on the Internet
Electronic Commerce
43. Market Research for EC
Web bugs
Tiny graphics files embedded on e-mail messages
and in Web sites that transmit information about
the users and their movements to a Web server
spyware
Software that gathers user information over an
Internet connection without the user’s knowledge
44. Market Research for EC
• Limitations of Online Market Research
• Too much data may be available
• To use data properly, it should be organized, edited, condensed,
and summarized
• The solution to this problem is to automate the process by using
data warehousing and data mining
• Some of the limitations of online research methods are:
• Accuracy of responses
• Loss of respondents because of equipment problems
• The ethics and legality of Web tracking
• Lack of representativeness in samples of online users
45. Web Advertising
• Some Internet Advertising Terminology
ad views
The number of times users call up a page that has a banner on it
during a specific time period; known as impressions or page views
Button
Page
click (click-through or ad click)
A count made each time a visitor clicks on an advertising banner to
access the advertiser ’s Web site
Electronic Commerce
46. Web Advertising
CPM (cost per thousand impressions)
The fee an advertiser pays for each 1,000 times a
page with a banner ad is shown
conversion rate
The percentage of visitors who actually make a
purchase
click-through rate (or ratio)
The percentage of visitors that are exposed to a
banner ad and click on it
47. Web Advertising
click-through ratio
The ratio between the number of clicks on a banner ad and
the number of times it is seen by viewers; measures the
success of a banner in attracting visitors to click on the ad
hit
A request for data from a Web page or file
visit
A series of requests during one navigation of a Web site; a
pause of a certain length of time ends a visit
48. Web Advertising
unique visit
A count of the number of visitors to a site,
regardless of how many pages are viewed per visit
stickiness
Characteristic that influences the average length
of time a visitor stays in a site
Electronic Commerce
49. Web Advertising
• Why Internet Advertising?
• Television viewers are migrating to the Internet
• Advertisers are limited in the amount of
information they can gather about the television
and print ads
• Other reasons why Web advertising is growing
rapidly:
• Cost
• Richness of format
• Personalization
• Timeliness
• Location-basis
• Digital branding
Electronic Commerce
50. Advertising Methods
• Banners
banner
On a Web page, a graphic advertising display linked to the
advertiser’s Web page
keyword banners
Banner ads that appear when a predetermined word is
queried from a search engine
random banners
Banner ads that appear at random, not as the result of the
user’s action
Electronic Commerce
51. Advertising Methods
• Benefits of Banner Ads
• By clicking on them users are transferred to an
advertiser’s site, and frequently directly to the
shopping page of that site
• The ability to customize them for individual
surfers or a market segment of surfers
• Viewing of banners is fairly high because “forced
advertising” is used
• Banners may include attention-grabbing
multimedia
52. Advertising Methods
• Limitations of Banner Ads
• Cost
• A limited amount of information can be placed on
the banner
• Viewers have become somewhat immune to
banners and simply do not notice them as they
once did
Electronic Commerce
54. Advertising Methods
pop-up ad
An ad that appears in a separate window before,
during, or after Internet surfing or when reading e-
mail
pop-under ad
An ad that appears underneath the current browser
window, so when the user closes the active
window, he or she sees the ad
interstitial
An initial Web page or a portion of it that is used
to capture the user’s attention for a short time
while other content is loading
Electronic Commerce
55. Advertising Methods
• E-Mail Advertising
• E-Mail Advertising Management—Four
guidelines that marketers should consider to
leverage customer insights throughout the e-mail
marketing campaign lifecycle:
1. Thinking about customer experience;
2. Making privacy protection a part of their brand
promise;
3. Ensuring their recipients know about their privacy
protection; and
4. Measuring impact.
56. Advertising Strategies
and Promotions Online
affiliate marketing
A marketing arrangement by which an organization
refers consumers to the selling company’s Web site
viral marketing
Word-of-mouth marketing by which customers promote
a product or service by telling others about it
Electronic Commerce
58. E-Commerce Strategy Checklist
• Questions to ask and answer
• What audiences are we attempting to reach?
• What action do we want those audiences to take?
• Who owns the e-commerce channel within the
organization?
• Is the e-commerce channel planned alongside
other channels?
• Is there a process for generating, approving,
releasing, and withdrawing content?
• Will our brand translate to the new channel?
• How will we market the channel itself?
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59. Managerial Issues
Managing resistance to change. Electronic commerce can result in a
fundamental change in how business is done. Resistance to change from
employees, vendors, and customers may develop. Education, training,
and publicity over an extended time period offer possible solutions to the
problem.
Integration of e-commerce into the business environment. E-
commerce needs to be integrated with the rest of the business. Integration
issues involve planning, competition for corporate resources with other
projects, and interfacing EC with databases, existing IT applications, and
infrastructure.
Lack of qualified personnel and outsourcing. Very few people have
expertise in e-commerce. There are many implementation issues that
require expertise, such as when to offer special promotions on the
Internet, how to integrate an e-market with the information systems of
buyers and sellers, and what kind of customer incentives are appropriate
under what circumstances. For this reason, it may be worthwhile to
outsource some e-commerce activities.
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60. Managerial Issues (Continued)
Alliances. It is not a bad idea to join an alliance or consortium of
companies to explore e-commerce. Alliances can be created at any time.
Some EC companies (e.g., Amazon.com) have thousands of alliances.
The problem is which alliance to join, or what kind of alliance to form and
with whom.
Implementation plan. Because of the complexity and multifaceted nature
of EC, it makes sense to prepare an implementation plan. Such a plan
should include goals, budgets, timetables, and contingency plans. It
should address the many legal, financial, technological, organizational,
and ethical issues that can surface during implementation.
Choosing the company’s strategy toward e-commerce. Generally
speaking there are three major options: (1) Lead: Conduct large-scale
innovative e-commerce activities. (2) Watch and wait: Do nothing, but
carefully watch what is going on in the field in order to determine when EC
is mature enough to enter it. (3) Experiment: Start some e-commerce
experimental projects (learn by doing).
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61. Managerial Issues (Continued)
Privacy. In electronic payment systems, it may be necessary to protect
the identity of buyers. Other privacy issues may involve tracking of Internet
user activities by intelligent agents and cookies, and in-house monitoring
of employees’ Web activities.
Justifying e-commerce by conducting a cost-benefit analysis is very
difficult. Many intangible benefits and lack of experience may produce
grossly inaccurate estimates of costs and benefits. Nevertheless, a
feasibility study must be done, and estimates of costs and benefits must
be made.
Order fulfillment. Taking orders in EC may be easier than fulfilling them.
Managing the impacts. The impacts of e-commerce on organizational
structure, people, marketing procedures, and profitability may be dramatic.
Therefore, establishing a committee or organizational unit to develop
strategy and to manage e-commerce is necessary.
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