I ch12


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I ch12

  2. 2. Learning Objectives <ul><li>Describe electronic commerce, its dimensions, benefits, limitations, and process </li></ul><ul><li>Describe the major applications of electronic commerce, both business-to-customer and business-to-business </li></ul><ul><li>Discuss the importance and activities of market research and customer service </li></ul><ul><li>Describe the electronic commerce infrastructure and support services </li></ul><ul><li>Compare the various payment systems and describe the role of smart cards </li></ul><ul><li>Discuss legal and other implementation issues </li></ul>
  3. 3. Case : Intel Corporation Embracing the Web <ul><li>The Business Problem </li></ul><ul><ul><li>Intense competition in the ICs market </li></ul></ul><ul><li>The Solution </li></ul><ul><ul><li>E-customer service </li></ul></ul><ul><ul><li>E-selling </li></ul></ul><ul><ul><li>E-purchasing </li></ul></ul><ul><ul><li>E-business programs using extranet and EDI </li></ul></ul><ul><ul><li>Orders from thousands of customers, </li></ul></ul>distributors and business partners worldwide were received by fax and phone; errors, delays, high cost
  4. 4. <ul><li>The Results </li></ul>Case (continued…) <ul><ul><li>Enhances competitive advantage by giving customers better tools for managing transactions </li></ul></ul><ul><ul><li>The system brings substantial saving to Intel </li></ul></ul><ul><li>What have we learned from this case?? </li></ul><ul><ul><li>Demonstrates that electronic commerce involves not just selling electronically, but also providing customer service and improving organization’s internal business processes </li></ul></ul><ul><ul><li>Illustrates a new and effective way for conducting business </li></ul></ul>
  5. 5. Definitions <ul><li>Business-to-business EC </li></ul><ul><ul><li>two (or more) businesses make transactions electronically </li></ul></ul><ul><ul><li>major benefits include: reduced cost, reduced cycle time, increased customer base and sales, and improved customer service </li></ul></ul><ul><li>Business-to-consumer EC </li></ul><ul><ul><li>companies sell directly to consumers over the Internet </li></ul></ul><ul><ul><li>major benefits include increased revenues, the creation of new sources of revenues, and the elimination of costly intermediaries </li></ul></ul><ul><li>Intrabusiness </li></ul><ul><ul><li>transactions take place within an organization </li></ul></ul><ul><ul><li>major benefits include increased productivity, speed, and quality and reduced cost </li></ul></ul>
  6. 6. Definitions (continued…) <ul><li>Electronic Business (E-business) </li></ul><ul><ul><li>a broad definition of EC, not just buying and selling, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization </li></ul></ul><ul><ul><li>all about time cycle, speed, globalization, enhanced productivity, reaching new customers, and sharing knowledge across institutions for competitive advantage </li></ul></ul><ul><ul><li>a very diverse and interdisciplinary topic, with issues ranging form technology, addressed by computer experts, to consumer behavior, addressed by behavioral scientists and marketing research experts </li></ul></ul>
  7. 7. History and Scope <ul><li>History </li></ul><ul><ul><li>Began in the early 1970s </li></ul></ul><ul><ul><ul><li>innovations such as electronic transfer of funds (EFT) </li></ul></ul></ul><ul><ul><ul><li>were limited to large corporations and a few daring small businesses </li></ul></ul></ul><ul><ul><li>Electronic Data Interchange (EDI) </li></ul></ul><ul><ul><ul><li>added other kinds of transaction processing and extended the types of participating companies </li></ul></ul></ul><ul><ul><li>Over the last five years </li></ul></ul><ul><ul><ul><li>innovative applications, from advertisement to auctions and procurement </li></ul></ul></ul><ul><li>Scope </li></ul><ul><ul><li>home banking, shopping in electronic stores and malls, buying stocks, finding a job, conducting an auction, collaborating electronically with business partners around the globe, and providing customer service </li></ul></ul>
  8. 8. A Framework for EC Electronic Commerce Applications • Direct Marketing • Stocks, Jobs • On-line banking • Procurement and purchasing • Malls • Procurement • Auctions • Travel • On-line publishing • Customer Services • Intrabusiness Transactions People : Buyers, Sellers, Intermediaries, Services, IS People and Management Public Policy : Taxes, Legal, Privacy Issues, Regulations, and Technical Standards Marketing and Advertisement: Market Research, Promotions, and Web content Supply Chain: Logistics and Business Partners Infrastructure (1) Common business services infrastructure (security, smart cards/authentication electronic payments, directories/catalogs (2) Messaging and information distribution infrastructure (EDI, e-mail, Hyper Text Transfer Protocol, Chat Rooms) (3) Multimedia content and network publishing infrastructure (HTML, JAVA, World Wide Web, VRML) (4) Network infrastructure (Telecom, cable TV wireless, Internet) (VAN, WAN, LAN, Intranet, Extranet) Access (cell phones) (5) Interfacing infrastructure (The databases, logistics, customers, and applications) Management
  9. 9. Benefits of EC to Organizations <ul><ul><li>Expands a company’s marketplace to national and international markets </li></ul></ul><ul><ul><li>Allows a vendor to reach a large number of customers, anywhere around the globe, at a very low cost </li></ul></ul><ul><ul><li>Enable companies to procure material and services from other companies, rapidly and at less cost </li></ul></ul><ul><ul><li>Shortens or even eliminates marketing distribution channels; marketing products cheaper and vendors’ profits are higher </li></ul></ul><ul><ul><li>Decrease the cost of creating, processing, distributing ,storing, and retrieving paper-based information </li></ul></ul><ul><ul><li>Allows lower inventories by facilitating “pull”-type supply chain management, which starts from customer orders and uses just-in-time production and delivery processing </li></ul></ul><ul><ul><li>Reduces the time between the outlay of capital and the receipt of products and services </li></ul></ul><ul><ul><li>Lowers telecommunications costs because the Internet is much chapter than value-added networks (VANs) </li></ul></ul><ul><ul><li>Helps small businesses compete against large companies </li></ul></ul><ul><ul><li>Enables very specialized markets (e.g. www. dogtoys .com ) </li></ul></ul>
  10. 10. Benefits of EC to Consumers <ul><ul><li>Frequently provides less expensive products and services by allowing consumers to shop in many places and conduct online quick comparisons </li></ul></ul><ul><ul><li>Gives consumers more choices - they can select from many vendors and many more products than they could locate otherwise </li></ul></ul><ul><ul><li>Enables customers to shop or make other transactions 24 hours a day, year round, from almost any location </li></ul></ul><ul><ul><li>Delivers relevant and detailed information in seconds, rather than in days or weeks </li></ul></ul><ul><ul><li>Enables consumers to get customized products, from PCs to cars, at competitive or bargain prices </li></ul></ul><ul><ul><li>Makes possible virtual auctions, in which consumers can find unique products and collectors’ items that might otherwise require them to travel long distances to a particular auction place at a specific time </li></ul></ul><ul><ul><li>Allows consumers to interact with other consumers in electronic communities and to exchange ideas as well as compare experiences </li></ul></ul>
  11. 11. Benefits of EC to Society <ul><ul><li>Enables more individuals to work at home and to do less traveling, resulting in less traffic on the roads and lower air pollution </li></ul></ul><ul><ul><li>Allows some merchandise to be sold at lower prices, so less affluent people can buy more and increase their standard of living </li></ul></ul><ul><ul><li>Enables people in less developed countries and rural areas to enjoy products and services that otherwise are not available to them </li></ul></ul><ul><ul><li>Facilitates delivery of public services, such as government entitlements, reducing the cost of distribution and fraud, and increasing the quality of the social services, police work, health care and education </li></ul></ul>
  12. 12. Technical Limitations of EC <ul><ul><li>Lack of universally accepted standards for quality, security, and reliability </li></ul></ul><ul><ul><li>Insufficient telecommunications bandwidth </li></ul></ul><ul><ul><li>Still-evolving software development tools </li></ul></ul><ul><ul><li>Difficulties in integrating the Internet and EC software with some existing (especially legacy) applications and databases </li></ul></ul><ul><ul><li>There is a need for special Web servers in addition to the network servers (added cost) </li></ul></ul><ul><ul><li>Internet accessibility is still expensive and/or inconvenient for many people </li></ul></ul>
  13. 13. Non-Technical Limitations of EC <ul><ul><li>Many legal issues are yet unresolved </li></ul></ul><ul><ul><li>Lack of national and international regulations and standards for many circumstances </li></ul></ul><ul><ul><li>Difficulty in measuring benefits of EC, such as Web advertising. Lack of mature methodologies for justifying EC </li></ul></ul><ul><ul><li>Distrust of the new: Many sellers and buyers are waiting for EC to stabilize before they take part </li></ul></ul><ul><ul><li>Customer resistance to the change from a physical to virtual stores </li></ul></ul><ul><ul><li>Perception that electronic commerce is expensive and unsecured, so many do not want even to try it </li></ul></ul><ul><ul><li>Insufficient number (critical mass) of sellers and buyers which needed for profitable EC operations </li></ul></ul>
  14. 14. Electronic Retailing and Malls <ul><ul><li>Electronic Commerce enables consumers to buy from home 24 hours a day, 7 days a week </li></ul></ul><ul><ul><li>Electronic Commerce offers consumers a wide variety of products and services, including the most unique items, usually at lower prices </li></ul></ul><ul><ul><li>Consumers can easily search for what they really want to buy, not just what is shown on television or in paper catalogs </li></ul></ul><ul><ul><li>Consumers can get very detailed information on products, in seconds, and can easily search for and compare competitors’ products and prices </li></ul></ul><ul><ul><li>Consumers can reduce (or eliminate) the pile of paper catalogs </li></ul></ul>
  15. 15. Electronic Retailing <ul><ul><li>Direct sale (business to consumers) through electronic storefronts or malls, usually designed around an electronic catalog format </li></ul></ul><ul><ul><li>Solo storefronts </li></ul></ul><ul><ul><ul><li>maintain their own Internet name and Web site </li></ul></ul></ul><ul><ul><ul><li>may or may not be affiliated with electronic malls </li></ul></ul></ul><ul><ul><ul><li>may be extensions of a physical store, or it is a new businesses started by entrepreneurs who saw a niche on the Web </li></ul></ul></ul><ul><ul><ul><li>can be found easily on the Internet - directories and hyperlinks from other Web sites and intelligent agents </li></ul></ul></ul>
  16. 16. Electronic Malls (Cybermall) <ul><li>A collection of individual shops under one Internet address </li></ul><ul><li>Vendors that locate in brick-and-mortar shopping malls, or locate themselves in a virtual mall, give up a certain amount of independence </li></ul><ul><li>Success depends on the popularity of the entire collection of stores as well as on its own efforts </li></ul><ul><li>Malls generate streams of prospective customers who otherwise might never have stopped at the store </li></ul>
  17. 17. The Process of Electronic Shopping Introduction to Information Technology Turban, Rainer and Potter Chapter 12 Electronic Commerce  A user gains access to an online service or the internet and goes to a merchant’s Web site. He may know the address, find it in another Web site (refer to it by a search engine), or find it by browsing.  At any time, the user can review the items in the shopping cart and change quantities or delete items, This review continues until a final selection is made.  The user enters the merchant’s storefront and goes to the product displays.  If the user does not find anything of interest, or want to do more shopping he or she may browse some additional merchant storefronts to search for the desired products or services.  When the user does find something of interest, he or she may elect to purchase it online. To finalize the decision, the user may need more information that can be found on the Web pages or obtained by e-mail.  The item is typically stored in a shopping cart. This allows the user to continue looking through this store, or even to visit other merchants, before paying for the items.  When the user is ready to pay he is advised about the payment options the user makes a section and provides payment information (e.g., the credit care number)  The payment authorization is either approved or denied. If denied, the user is prompted for another form of payment .If approved, the transaction is executed.  Shipment is made, if needed, or permission to download products from the Internet is granted. Warranty is established.  Customer service is established. Product may be returned or exchanged, for example maintenance information may be found on the Web site as needed.
  18. 18. <ul><li>Advertisement </li></ul><ul><ul><li>an attempt to disseminate information in order to attract buyers </li></ul></ul><ul><li>Internet Advertisement </li></ul><ul><ul><li>can be updated any time at a minimal cost and therefore can always be timely </li></ul></ul><ul><ul><li>can reach very large numbers of potential buyers, all over the world </li></ul></ul><ul><ul><li>can be cheaper </li></ul></ul><ul><ul><li>can efficiently use the convergence of text, audio, graphics, and animation </li></ul></ul><ul><ul><li>can be interactive and targeted to specific interest groups and/or individuals </li></ul></ul>Advertising Online
  19. 19. <ul><li>Banners - Electronic Billboards </li></ul><ul><ul><li>the most commonly used form of advertising on the Internet, links to advertiser's site </li></ul></ul><ul><ul><li>contains a short text or graphical message to promote a product or a vendor </li></ul></ul><ul><ul><li>Keyword banners </li></ul></ul><ul><ul><ul><li>appear when a predetermined word is queried from the search engine </li></ul></ul></ul><ul><ul><ul><li>effective for companies who want to narrow their target to consumers interested in particular topics </li></ul></ul></ul><ul><ul><li>Random banners </li></ul></ul><ul><ul><ul><li>appear randomly </li></ul></ul></ul><ul><ul><ul><li>might be used to introduce new products to the widest possible audience, or to keep a well-known brand in the public memory </li></ul></ul></ul>Advertising Methods
  20. 20. <ul><li>E-mail - emerging as an Internet advertising and marketing channel that permits cost-effective implementation and a better and quicker response rate than other advertising channels </li></ul><ul><ul><li>marketers develop or purchase a list of e-mail addresses </li></ul></ul><ul><ul><li>marketers employing e-mail must take a long-term view and work towards the goal of motivating consumers to continue to open and read messages they receive </li></ul></ul><ul><ul><li>marketers must decide what portion of their target market can be reached by e-mail and must supplement existing database information with data relevant to e-mail campaigns </li></ul></ul><ul><ul><li>marketers should integrate inbound customer service e-mail with their outbound marketing efforts </li></ul></ul><ul><ul><li>marketers must develop e-mail-specific editing skill and the ability to deliver multimedia-rich e-mail </li></ul></ul>Advertising Methods (continued …)
  21. 21. <ul><li>Customizing Ads - Filtering the Irrelevant Information </li></ul><ul><ul><li>BroadVision : One-to-One system/ads </li></ul></ul><ul><ul><ul><li>allows the rapid creation of secure Web sites that are visitor-friendly, using a customer database, with registration data and information gleaned from site visits </li></ul></ul></ul><ul><ul><li>Webcast : push technology </li></ul></ul><ul><ul><ul><li>delivers only the information users want or need </li></ul></ul></ul><ul><ul><ul><li>users get the information they want; at the same time they also get the banner ads related to that information </li></ul></ul></ul><ul><ul><ul><li>marketers will get a more customized audience if they place banners on a system that delivers via push technology </li></ul></ul></ul>Advertising Issues
  22. 22. <ul><li>Attracting Visitors to a Site </li></ul><ul><ul><li>Making the top list of a search engine </li></ul></ul><ul><ul><ul><li>the search engine’s spider crawls through the submitted site, following and indexing all related content and links </li></ul></ul></ul><ul><ul><ul><li>a company can get to the top of a search engine’s list by adding, removing, or changing a few sentences </li></ul></ul></ul><ul><ul><li>Online events, promotions, and attractions </li></ul></ul><ul><ul><ul><li>people generally like the idea of something funny or something free (or both) </li></ul></ul></ul><ul><ul><ul><li>contests, quizzes, coupons, and free samples are an integral part of Internet commerce as much, or even more than, they are of offline commerce </li></ul></ul></ul><ul><ul><ul><li>designed to attract visitors and to keep their attention </li></ul></ul></ul>Advertising Issues (continued …)
  23. 23. <ul><li>Attracting Visitors to a Site (CONT’) </li></ul>Advertising Issues (continued …) ATTRACTION HOW IT WAS USED Give away games and discount contests. Also, games sponsored by multiple companies Yoyodyne Inc. sponsors games and contests to get users to read product information of advertisers, ranging form Major League Baseball to Sprint Communication. In one contest, tax-preparer H&R Block paid $20,000 towards the winner’s federal taxes. Free Internet access Netzero and other offer this in exchange for viewing ads Personal, nonautomated selling www.egghead.com uses real people to help you online. www.lucent.com connects a sales rep with a customer over the phone and then “pushes” material and ads to your computer Monetary payment Cybergold (www.cybergold.com), Goldmine (www.goldmine.com), and others connect users with advertisers who pay them real money to read ads and explore the Web Sweepstakes Netstakes runs sqeepstakes that requires no skills. Users register only once and can randomly win prizes in different categories (see http://webstakes.com). The site is divided into channels, and each channel has several sponsors. The sponsors pay Netstakes to send traffic. Netstakes runs online ads, both on the Web and in many email lists that people request to be on.
  24. 24. <ul><li>Profiling Customers Using Intelligent Agents </li></ul><ul><ul><li>Product brokering </li></ul></ul><ul><ul><ul><li>some companies collect information about consumers for the purpose of creating a customer’s profile </li></ul></ul></ul><ul><ul><ul><li>with this profile, the company can tailor ads to the specific customers, or offer them product information </li></ul></ul></ul><ul><ul><li>Example - Fujitsu’s agents profile consumers : </li></ul></ul><ul><ul><ul><li>is using a new agent-based technology called Interactive Marketing Interface (iMi) that allows advertisers to interact directly with targeted customers </li></ul></ul></ul><ul><ul><ul><li>personal profiles submitted to iMi by consumers </li></ul></ul></ul><ul><ul><ul><li>product announcements, advertisements, and marketing surveys are sent to customers via e-mail based on their profiles </li></ul></ul></ul><ul><ul><ul><li>by answering marketing surveys or acknowledging receipt of advertisements, consumers earn iMi points, redeemable for gift certificates and phone cards </li></ul></ul></ul>Advertising Issues (continued …)
  25. 25. <ul><li>On CD-ROM and On the Web </li></ul><ul><ul><li>can be searched quickly with the help of special search engines </li></ul></ul><ul><ul><li>effective comparisons involving catalog products </li></ul></ul><ul><ul><li>customized catalogs </li></ul></ul><ul><ul><ul><li>a catalog assembled specifically for a company, usually for a regular customer of the catalog owner </li></ul></ul></ul><ul><ul><ul><li>can be tailored to individual consumers </li></ul></ul></ul><ul><ul><ul><li>let the system automatically identify customer characteristics based on their transaction records </li></ul></ul></ul><ul><ul><ul><li>involve cookie technology and data mining technology </li></ul></ul></ul>Electronic Catalogs
  26. 26. <ul><li>Interactive Advertising and Marketing </li></ul><ul><ul><li>advertisers present customized, one-on-one advertising, which is followed by sales </li></ul></ul><ul><ul><li>interactive : the ability to address an individual, to gather and remember that person’s response, and to serve that customer based on his or her previous, unique responses </li></ul></ul><ul><li>Coupons Online </li></ul><ul><ul><li>consumers can gather any discount coupons they want by accessing sites like www. hotcoupons .com or www.supermarkets.com , selecting the store where they plan to redeem the coupons </li></ul></ul>Advertising Online
  27. 27. Services Online <ul><li>Cyberbanking </li></ul><ul><ul><li>names : electronic banking, virtual banking, home banking, and banking online </li></ul></ul><ul><ul><li>capabilities ranging form paying bills to securing a loan </li></ul></ul><ul><ul><li>for customers : saving time and convenience </li></ul></ul><ul><ul><li>for banks : offering an inexpensive alternative to branch banking and a chance to enlist remote customers </li></ul></ul>
  28. 28. <ul><li>Cyberbanking (CONT’) </li></ul><ul><ul><li>SFNB puts security first </li></ul></ul><ul><ul><ul><li>www. sfnb .com </li></ul></ul></ul><ul><ul><ul><li>the first virtual bank </li></ul></ul></ul><ul><ul><ul><li>offering secure banking transactions on the Web </li></ul></ul></ul><ul><ul><li>Hong Kong Bank grows without branches </li></ul></ul><ul><ul><ul><li>www. hongkongbank .com </li></ul></ul></ul><ul><ul><ul><li>using HEXAGON, the bank has leveraged its reputation and infrastructure in the developing economies of Asia to become a major international bank rapidly </li></ul></ul></ul><ul><ul><li>Mark Twain supports foreign currency trading </li></ul></ul><ul><ul><ul><li>www. marktwain .com </li></ul></ul></ul><ul><ul><ul><li>using electronic cash to support trading in 20 foreign currencies </li></ul></ul></ul>Services Online (continued…)
  29. 29. Services Online (continued…) <ul><li>Online Stock Trading </li></ul><ul><ul><li>an online trade typically costs between $5 and $30, compared to an average fee of $100 from a full-service broker and $25-50 from a discount broker </li></ul></ul><ul><ul><li>no waiting on busy telephone lines </li></ul></ul><ul><ul><li>small chance of making mistakes which are made in oral communication </li></ul></ul><ul><ul><li>orders can be placed from anywhere, any time </li></ul></ul><ul><ul><li>can find considerable amount of information regarding investing in a specific company or in a mutual fund </li></ul></ul>
  30. 30. Services Online (continued…) <ul><li>The Online Job Market </li></ul><ul><ul><li>Job seekers </li></ul></ul><ul><ul><ul><li>can reply to employment ads online </li></ul></ul></ul><ul><ul><ul><li>can take the initiative and place resumes on their own home pages or on others’ Web sites, send messages to members of newsgroups asking for referrals, and use recruiting firms </li></ul></ul></ul><ul><ul><li>Job offerers </li></ul></ul><ul><ul><ul><li>advertise openings on their Web site </li></ul></ul></ul><ul><ul><ul><li>use sites ranging form Yahoo!, to online services, bulletin boards, and recruiting firms </li></ul></ul></ul><ul><ul><li>Recruiting firms </li></ul></ul><ul><ul><ul><li>use their own Web pages to post available job descriptions and advertise their services in electronic malls and in other Web sites </li></ul></ul></ul><ul><ul><li>Newsgroups </li></ul></ul><ul><ul><ul><li>jobs in a certain category or location are posted, discussions are conducted, and resumes can be sent </li></ul></ul></ul>
  31. 31. Services Online (continued…) <ul><li>Travel </li></ul><ul><ul><li>Internet is an ideal place to plan, explore, and arrange almost any trip </li></ul></ul><ul><ul><li>potential savings are available through special sales, auctions, and the elimination of travel agents </li></ul></ul><ul><ul><li>allows to purchase airline tickets, reserve hotel rooms, and rent cars </li></ul></ul><ul><ul><li>supports an itinerary-based interface ,including a fare-tracker feature </li></ul></ul><ul><ul><li>links to weather sites, currency converters, adventure magazines, and chat forums, where users can share travel tips </li></ul></ul><ul><ul><li>allows to set a price that people are willing to pay for an airline ticket or hotel accommodations, and the company then attempts to find a vendor for that price ( www. priceline .com ) </li></ul></ul>
  32. 32. Services Online (continued…) <ul><li>Real Estate </li></ul><ul><ul><li>consumers can view many properties on the screen, saving time for themselves and the brokers </li></ul></ul><ul><ul><li>consumers can sort and organize properties according to their criteria and preview the exterior and interior designs of the properties, shortening the search process </li></ul></ul><ul><ul><li>consumers can find detailed information about the properties and frequently get even more details than brokers usually provide </li></ul></ul><ul><ul><li>homebuilders now use virtual reality technology on their Web sites to demonstrate three-dimensional floor plans to potential home buyers </li></ul></ul>
  33. 33. Services Online (continued…) <ul><li>Auctions </li></ul><ul><ul><li>Specialized auction sites ( www. onsale .com ) </li></ul></ul><ul><ul><li>Auctioning cars to dealers ( www. manheim .com ) </li></ul></ul><ul><ul><li>Art auctions ( www. onlineart .com & www.auctions-on-line.com ); collectors’ items ( www. ebay .com ) </li></ul></ul><ul><ul><li>Airlines ( www. americanair .com & www. cathey . usa .com ) </li></ul></ul><ul><li>Bartering </li></ul><ul><ul><li>the exchange of goods and/or services without a monetary transaction ( www. barterbrokers .com ) </li></ul></ul>
  34. 34. Business-to-Business Applications <ul><li>Product - specifications, prices, sales history </li></ul><ul><li>Customer - sales history and forecasts </li></ul><ul><li>Supplier - product line and lead times, sales terms and conditions </li></ul><ul><li>Product process - capacities, commitments, product plans </li></ul><ul><li>Transportation - carriers, lead times, costs </li></ul><ul><li>Inventory - inventory levels, carrying costs, locations </li></ul><ul><li>Supply chain alliance - key contracts, partners’ roles and responsibilities, schedules </li></ul><ul><li>Competitor - benchmarking, competitive product offerings, market share </li></ul><ul><li>Sales and marketing - point-of-sale (POS), promotions </li></ul><ul><li>Supply chain process and performance - process descriptions, performance measures, quality, delivery time, customer satisfaction </li></ul>
  35. 35. Seller-Oriented Marketspace <ul><li>Organizations attempt to sell their products (services) to other organizations electronically (e-selling) </li></ul><ul><li>The buyer is expected to visit the seller’s site or a mall, view catalogs, and place orders </li></ul><ul><li>The buyer is an organization that may be a regular customer of the sellers </li></ul><ul><li>Key Mechanisms : electronic catalog that can be customized for each large buyer, the ordering system, the payment system, and the integration of the incoming orders with the vendor’s logistics system </li></ul><ul><li>EC is used to increase sales, reduce selling expenditures, increase delivery speed, and reduce administrative costs </li></ul>
  36. 36. Buyer-Oriented Marketspace <ul><li>EC technology is used to reduce both the cost of items purchased and the administrative cost of procurement </li></ul><ul><li>Request For Quotation (RFQ) on Buyer’s Web Site </li></ul><ul><ul><li>businesses submit bids electronically, and the bids are routed via the buyer’s intranet to the engineering and finance departments for an evaluation </li></ul></ul><ul><ul><li>clarifications are made via e-mail </li></ul></ul><ul><ul><li>the winner is notified electronically </li></ul></ul><ul><ul><li>saves 10-15 percent on the cost of the items placed for bid </li></ul></ul><ul><ul><li>saves up to 85 percent on the administrative cost </li></ul></ul><ul><ul><li>saves about 50 percent on cycle time </li></ul></ul><ul><ul><li>known as e-purchasing or e-procurement </li></ul></ul>
  37. 37. Intermediary-Managed Marketspace <ul><li>Electronic Intermediaries </li></ul><ul><ul><li>A link between buyers and sellers </li></ul></ul><ul><ul><li>Main function : market making </li></ul></ul><ul><ul><li>PART - about 300 parts suppliers and dozens of airlines participate (by Boeing Aircraft Corp.) </li></ul></ul><ul><ul><li>ProcureNet - more than 150,000 products, known as MROs (maintenance, repairs, and operations) </li></ul></ul><ul><ul><li>Some of the online services make money, some of them only improve service for customers </li></ul></ul>
  38. 38. Customers and Their Behavior <ul><li>Examples of the importance of learning about customers </li></ul><ul><ul><li>Peapod providing supermarket products online </li></ul></ul><ul><ul><ul><li>the company was still incurring losses in 2000 </li></ul></ul></ul><ul><ul><ul><li>problems : </li></ul></ul></ul><ul><ul><ul><ul><li>small customer base </li></ul></ul></ul></ul><ul><ul><ul><ul><li>customers like to see and feel items before they buy them </li></ul></ul></ul></ul><ul><ul><li>Amazon selling books published by others </li></ul></ul><ul><ul><ul><li>assesses the potential customers’ reaction, and correctly predicts books to be a desirable items for online sale </li></ul></ul></ul>
  39. 39. Market Research : Behavioral Model Decision Making Process Personal Characteristics Age, Gender, Ethnicity, Education, Lifestyle, Psychological, Knowledge, Values, Personality Environmental Characteristics Social, Family, Communities Vendors’ Controlled Systems Logistic Support Payments, Delivery Technical Support Web Design, Intelligent Agents Customer Service FAQs, E-mail, Call Centers, One-to-One Buyers’ Decisions Buy or Not What to Buy Where (Vendor) When How Much to Spend Repeat Purchases Stimuli Marketing Price Promotion Product Quality Others Economical Technology Political Cultural
  40. 40. Market Research (continued …) <ul><li>To find out what motivates consumers to buy </li></ul><ul><li>To developed models that explain consumer behavior regarding purchasing decisions </li></ul><ul><li>To identify new markets </li></ul><ul><li>To investigate competitors and their products </li></ul><ul><li>To test consumer interest in new products </li></ul><ul><li>To help one-to-one marketing (allows one-to-one personal contact with customers, and provides marketing organizations with greater ability to understand consumers, the market, and the competition) </li></ul>
  41. 41. Market Research (continued …) <ul><li>Asking Customers What They Want </li></ul><ul><ul><li>interacting directly with consumers </li></ul></ul><ul><ul><li>filling in electronic questionnaires </li></ul></ul><ul><ul><ul><li>vendors need to use inducements to motivate consumers to participate and be honest </li></ul></ul></ul><ul><ul><ul><li>learning what consumer want from the directly obtained answers </li></ul></ul></ul><ul><ul><ul><li>trying to infer from consumers’ preferences on other preferences </li></ul></ul></ul>
  42. 42. Market Research (continued …) <ul><li>Tracking Customer Activities on the Web </li></ul><ul><ul><li>observing consumers’ behavior on the internet </li></ul></ul><ul><ul><li>site-tracking services, based on cookies or other approaches </li></ul></ul><ul><ul><li>one of the most interesting tools for tracking customers on the Internet as well as helping them to shop with intelligent agents </li></ul></ul><ul><ul><li>possible invasion of privacy </li></ul></ul>
  43. 43. Electronic Commerce Agents <ul><li>Intelligent agents </li></ul><ul><ul><li>computer programs that conduct routing tasks, search and retrieve information ,support decision making, and act as domain experts </li></ul></ul><ul><ul><li>sense the environment and act autonomously without human intervention </li></ul></ul><ul><li>Software agents </li></ul><ul><ul><li>with no intelligence </li></ul></ul><ul><li>Learning agents </li></ul><ul><ul><li>exhibit some intelligent behavior </li></ul></ul>
  44. 44. EC Agents (continued …) <ul><li>Intelligent agents for information search and filtering </li></ul><ul><ul><li>help to determine what to buy to satisfy a specific need </li></ul></ul><ul><ul><li>Personalogic uses filtering process - consumers specify requirements and constraints, and the system returns a list of products that best meet the desired product </li></ul></ul><ul><ul><li>Firefly used (until recently) a collaborative filtering process that can be described as “word of mouth” to build the profile (not available any more) </li></ul></ul><ul><ul><ul><li>its Passport generates a customer’s personal profile </li></ul></ul></ul>
  45. 45. EC Agents (continued …) <ul><li>Intelligent agents for Product and Vendor Finding </li></ul><ul><ul><li>help consumers decide where to buy by comparing merchants’ offers </li></ul></ul><ul><ul><li>Bargainfinder from Andersen Consulting queried the price of a specific CD from a number of online vendors and returned the list of vendors and prices (Not in use any longer) </li></ul></ul><ul><ul><li>Jango form NetBot/Excite originates the requests form the user’s site instead of Jango’s, so vendors can not block it </li></ul></ul><ul><ul><li>Kasbah from MIT Laboratories allows users who want to sell or buy a product, assign the task to an agent that is sent out to actively seek buyers or sellers </li></ul></ul>
  46. 46. EC Agents (continued …) <ul><li>Negotiation Agents </li></ul><ul><ul><li>help to take away some of the frustration some customers experience in the negotiating process and the technical limitations of being in different locations </li></ul></ul><ul><ul><li>AuctionBot allows users create auction agents by specifying a number of parameters that vary depending on the type of auction selected </li></ul></ul><ul><ul><li>Kasbah allows users create agents for the purpose of selling or buying process </li></ul></ul><ul><ul><li>Tele-@-tete uses a number of different parameters: price, warranty, delivery time, service contracts, return policy, loan option, and other value-added services </li></ul></ul>
  47. 47. Organizational Buyers <ul><li>Make purchase decisions in business-to-business situations </li></ul><ul><li>More formalized purchasing decision </li></ul><ul><li>The purchasing process may be more important than advertising activities in swaying purchase decisions </li></ul><ul><li>Decisions may be made by a group </li></ul>
  48. 48. Customer Service <ul><li>Phases in the Customer Service Life Cycle </li></ul><ul><ul><li>Phase 1 : Requirements </li></ul></ul><ul><ul><ul><li>assisting the customer to determine needs </li></ul></ul></ul><ul><ul><li>Phase 2 : Acquisition </li></ul></ul><ul><ul><ul><li>helping the customer to acquire a product or service </li></ul></ul></ul><ul><ul><li>Phase 3 : Ownership </li></ul></ul><ul><ul><ul><li>supporting the customer on an ongoing basis </li></ul></ul></ul><ul><ul><li>Phase 4 : Retirement </li></ul></ul><ul><ul><ul><li>helping the client to dispose of a service or product </li></ul></ul></ul>
  49. 49. Customer Service (continued …) <ul><li>Facilitating Customer Service </li></ul><ul><ul><li>Personalized Web pages - customers build individualized pages at the vendor’s site </li></ul></ul><ul><ul><li>Chat rooms - customers can interact with each other and with vendor’s personnel who monitor the chat room </li></ul></ul><ul><ul><li>E-mail - send confirmations, product information, and instructions to customers </li></ul></ul><ul><ul><li>FAQs - provide online answers to questions customers ask most </li></ul></ul><ul><ul><li>Tracking capabilities - enable customers to track the status of their orders, services, or applications </li></ul></ul><ul><ul><li>Web-based call centers - a comprehensive communication center takes customers’ inquiries in any form they come and answers them quickly </li></ul></ul>
  50. 50. EC Infrastructure COMPONENT DESCRIPTION AND ISSUES Networks A shift from VANs to the Internet. Increased use of VPNs (virtual private networks) to enhance security and capabilities over the Internet. Web severs Special Web servers are usually superior to dual-purpose servers. Available for rent. The interface to legacy systems may be a problem Web server support and software 1. Web site activity tracking. 2. Database connectivity. 3. Software for creating electronic forms. 4. Software for creating chat rooms and discussion groups. Electronic catalogs Product description, multimedia use, customized catalogs, inclusion in Web site design and construction, templates for construction. Web page design and construction software Web programming languages (HTML, JAVA, VRML, XML) Transactional software 1. Search engines for finding and comparing, products. 2. Negotiating software. 3. Encryption and payment. 4. Ordering (front office) inventory and back office software. Internet access components TCP/IP package, Web browsers, remote access server, client dial-in software, Internet connection device, leased line connection, connection to leased line, Internet kiosks Others Firewalls, e-mail, HTTP (transfer protocols), smart cards
  51. 51. Electronic Payment Systems <ul><li>Electronic credit cards </li></ul><ul><ul><li>Payments using unencrypted credit card </li></ul></ul><ul><ul><ul><li>the buyer e-mails her or his credit card number to the seller on the Internet </li></ul></ul></ul><ul><ul><ul><li>risk here is that hackers will be able to read the credit card number </li></ul></ul></ul><ul><ul><li>Encrypted payments </li></ul></ul><ul><ul><ul><li>using public/private key encryption, credit card details can be encrypted for better security </li></ul></ul></ul><ul><ul><ul><li>this can be done by simply using the SSL protocol in the buyer’s computer </li></ul></ul></ul>
  52. 52. Electronic Payment Systems (continued …) <ul><li>Electronic checks </li></ul><ul><ul><li>secured by public-key cryptography and may be suitable for some micropayments </li></ul></ul><ul><ul><li>Step 1 : the customer establishes a checking account with a bank </li></ul></ul><ul><ul><li>Step 2 : the customer contacts a seller, buys a product or a service, and e-mails an encrypted electronic check signed with a digital signature </li></ul></ul><ul><ul><li>Step 3 : the merchant deposits the check in his or her account: money is debited in the buyer’s account and credited to the seller’s account </li></ul></ul>
  53. 53. Electronic Payment Systems (continued …) <ul><li>Electronic cash in your PC </li></ul><ul><ul><li>Step 1 : the customer opens an account with a bank and receives special software for his or her PC </li></ul></ul><ul><ul><li>Step 2 : the customer buys “electronic money” from the bank by using the software </li></ul></ul><ul><ul><li>Step 3 : the bank sends an electronic money note to this customer, endorsing it with a digital signature </li></ul></ul><ul><ul><li>Step 4 : the money is stored on the buyer’s PC and can be spent in any electronic store that accepts e-cash </li></ul></ul><ul><ul><li>Step 5 : the software is also used to transfer the e-cash from the buyer’s computer to the seller’s computer </li></ul></ul><ul><ul><li>Step 6 : the seller can deposit the e-cash in a bank, crediting his or her regular or electronic account, or use the e-cash to make a purchases elsewhere </li></ul></ul>
  54. 54. Electronic Payment Systems (continued …) <ul><li>Electronic payment cash (Smart Cards) with e-cash </li></ul><ul><ul><li>credit cards using magnetic strips contain only limited information , such as the card’s ID number </li></ul></ul><ul><ul><li>cards to pay photocopies in the library, or to pay telephone calls storing a fixed amount of prepaid money </li></ul></ul><ul><ul><li>card used by New York Metropolitan Transportation Authority (MTA) in buses, trains, interstate toll bridges, and tunnels </li></ul></ul><ul><ul><li>cards containing microprocessor storing a considerable amount of information (more than 100 times more than a regular credit card) and allowing money to be stored in quantities that can be decreased as well as increased </li></ul></ul>
  55. 55. Security <ul><li>Security Requirements </li></ul><ul><ul><li>Authentication - the buyer, the seller, and the paying institutions must be assured of the identity of the party with whom they are dealing </li></ul></ul><ul><ul><li>Integrity - it is necessary to assure that data and information transmitted in EC, such as orders, reply to queries, and payment authorization, are not accidentally or maliciously altered or destroyed during transmission </li></ul></ul><ul><ul><li>Non-repudiation - merchants need protection against the customer’s unjustifiable denial of placing an order; buyer needs protection against the vendor denial of shipment, or sending wrong order </li></ul></ul><ul><ul><li>Privacy - many customers want their identity to be undisclosed </li></ul></ul><ul><ul><li>Safety - customers want to be sure that it is safe to provide a credit card number on the Internet </li></ul></ul>
  56. 56. Security (continued …) <ul><li>Security Protection </li></ul><ul><ul><li>Encryption - a process of making messages indecipherable except by those who have an authorized decryption key </li></ul></ul><ul><ul><ul><li>Single-key encryption </li></ul></ul></ul><ul><ul><ul><ul><li>the sender of the electronic message (or payment) encrypted the information with a key </li></ul></ul></ul></ul><ul><ul><ul><ul><li>the receiver used an identical key to decrypt the information to a readable form </li></ul></ul></ul></ul><ul><ul><ul><ul><li>the same code had to be in the possession of both the sender and the receiver </li></ul></ul></ul></ul><ul><ul><ul><ul><li>problems : if a key were transmitted and intercepted illegally, it could be used to read all encrypted messages or to steal money </li></ul></ul></ul></ul>
  57. 57. Security (continued …) <ul><li>Security Protection : Encryption (continued …) </li></ul><ul><ul><li>Public/private key encryption </li></ul></ul><ul><ul><ul><li>uses two different keys - public key and private key </li></ul></ul></ul><ul><ul><ul><li>several authorized people may know the public key, but only its owner knows the private key </li></ul></ul></ul><ul><ul><ul><li>every person has one private key and one public key </li></ul></ul></ul><ul><ul><ul><li>encryption and decryption can be done with either key </li></ul></ul></ul><ul><ul><ul><li>if encryption is done with the public key, the decryption can be done only with the private key and vice versa </li></ul></ul></ul>
  58. 58. Security (continued …) <ul><li>Security Protection :Encryption (continued …) </li></ul><ul><ul><li>Public/private key encryption </li></ul></ul>Message Text Message Text Sender Receiver Encryption Decryption Public Key of Recipient Private Key of Recipient Signature Signature Private Key of Sender Public Key of Sender Ciphered Text
  59. 59. Security (continued …) <ul><li>Security Protection : Protocols </li></ul><ul><ul><li>Secure Socket Layer (SSL) </li></ul></ul><ul><ul><ul><li>the most common protocol used in EC </li></ul></ul></ul><ul><ul><ul><li>main capability is to encrypt messages </li></ul></ul></ul><ul><ul><li>Secure Electronic Transaction Protocol (SET) </li></ul></ul><ul><ul><ul><li>the major proposed standard for credit card processing </li></ul></ul></ul><ul><ul><ul><li>allows consumers to shop anywhere as conveniently and securely as possible by incorporating digital signatures, certification, encryption, and an agreed-upon payment gateway </li></ul></ul></ul>
  60. 60. Market Practices <ul><li>Fraud on the Internet </li></ul><ul><ul><li>internet fraud and its sophistication have grown as much and even faster than the Internet itself </li></ul></ul><ul><ul><li>stocks manipulations, selling bogus investments and phantom business opportunities </li></ul></ul><ul><ul><li>examples: </li></ul></ul><ul><ul><ul><li>stock promoters falsely spread positive rumors about the prospects of the companies they touted </li></ul></ul></ul><ul><ul><ul><li>the information provided might have been true, but the promoters did not disclose that they were paid to promote the companies </li></ul></ul></ul>
  61. 61. Buyer Protection <ul><li>Tips for safe electronic shopping include: </li></ul><ul><ul><li>look for reliable brand names at sites like Wal-Mart Online, Disney Online, and Amazon.com </li></ul></ul><ul><ul><li>search any unfamiliar selling site for company’s address and phone and fax number </li></ul></ul><ul><ul><li>check out the seller with the local Chamber of Commerce and/or Better Business Bureau </li></ul></ul><ul><ul><li>investigate how secure the seller’s site is by reading the posted privacy notice, and evaluate how well the site is organized </li></ul></ul><ul><ul><li>examine the money-back guarantees, warranties, and service agreements </li></ul></ul><ul><ul><li>compare prices to those in regular (suspect the too cheap sites) </li></ul></ul><ul><ul><li>ask friends what they know about the vendor </li></ul></ul><ul><ul><li>find out what your rights are in case of a dispute </li></ul></ul><ul><ul><li>consult the National Fraud Information Center </li></ul></ul><ul><ul><li>check www. consumerworld .org for a listing of useful resources </li></ul></ul>
  62. 62. Seller Protection <ul><li>Be protected against consumers who refuse to pay or pay with bad checks and buyers’ claims that the merchandise did not arrive </li></ul><ul><li>Be protected against the use of their name by others as well as use of their unique words and phrases, slogans and Web address </li></ul><ul><li>Have legal recourse against customer who download copyrighted software and/or knowledge and sell it to others </li></ul>
  63. 63. Ethical Issues <ul><li>Privacy </li></ul><ul><ul><li>most electronic payment systems know who the buyers are; therefore, it may be necessary to protect the buyers’ identity </li></ul></ul><ul><li>The Human Element </li></ul><ul><ul><li>the technology is new to many IS directors and employees and so many require new sets of skills </li></ul></ul><ul><li>Web Tracking </li></ul><ul><ul><li>by using sophisticated software it is possible to track individual movements on the internet </li></ul></ul><ul><li>Disintermediation </li></ul><ul><ul><li>the use of EC may result in the elimination of some of a company’s employees as well as brokers and agents </li></ul></ul>
  64. 64. Legal Issues <ul><li>Domain Names </li></ul><ul><ul><li>several companies that have similar or same names (in different countries) compete over a domain name that is not a registered trademark </li></ul></ul><ul><li>Taxes and Other Fees </li></ul><ul><ul><li>particularly complex for interstate and international commerce (A tax moratorium until October 2001) </li></ul></ul><ul><li>Copyright </li></ul><ul><ul><li>intellectual property is protected by copyright laws and cannot be used freely </li></ul></ul>
  65. 65. <ul><li>For Accounting </li></ul><ul><ul><li>The implications of replacing paper documents by electronic may impact many of the accountants’ tasks, especially the auditing of EC activities and systems </li></ul></ul><ul><li>For Finance </li></ul><ul><ul><li>The world of banking ,stocks, and commodities markets, and other financial services are being reengineered due to EC </li></ul></ul><ul><li>For Marketing </li></ul><ul><ul><li>The revolution is affecting many marketing theories, ranging form consumer behavior to advertisement strategies </li></ul></ul>What’s in it for Me?
  66. 66. What’s in IT for Me? (continued …) <ul><li>For Production/Operations Management </li></ul><ul><ul><li>EC is changing the manufacturing system form a product-push mass production to an order-pull mass customization </li></ul></ul><ul><li>For Human Resource Management </li></ul><ul><ul><li>Modern HRM has tremendous opportunities to exploit Internet capabilities to improve the productivity of HRM personnel, recruit and maintain top employees , and increase job satisfaction to very high levels </li></ul></ul>