Chapter 4.pptx

Copyright © 2018, 2016, 2014 Pearson Education, Ltd. All Rights Reserved
Information Systems Today
Eighth Edition, Global Edition
Chapter # 4
Enabling Business-to-
Consumer Electronic
Commerce

Learning Objectives
• 4.1 Describe different approaches to competing in cyberspace as well as
different forms of electronic government and e-finance.
• 4.2 Describe business-to-consumer electronic commerce strategies.
• 4.3 Understand the keys to successful electronic commerce websites and
explain the different forms of Internet marketing.
• 4.4 Describe mobile commerce, consumer-to-consumer electronic commerce,
and consumer-to-business electronic commerce.
• 4.5 Describe how to conduct financial transactions and navigate the legal issues
of electronic commerce.

Electronic Business: E-Commerce and
E-Government
• Learning Objective: Describe
different approaches to
competing in cyberspace as well
as different forms of electronic
government and e-finance.
• Types of Electronic Commerce
• E-finance

E-Commerce (EC) Defined
• The exchange of goods, services, and money among
firms, between firms and their customers, and between
customers, supported by communication technologies and,
in particular, the Internet

Types of Electronic Commerce (Table 4.1)
Type of EC Description Example
Business-to-
consumer (B2C)
Transactions between
businesses and their
customers
A person buys a book from
Amazon.com
Business-to-
business (B2B)
Transactions among
businesses
A manufacturer conducts
business over the Web with its
suppliers
Consumer-to-
business (C2B)
customers and businesses
A person offers his
photography at shutterstock
.com
Consumer-to-
consumer (C2C)
people not necessarily
working together
A person purchases some
memorabilia from another
person via eBay.com
All of the above types of EC are in the private sector

E-Government
• Government-to-
Citizens (G2C)
• Government-to-
Business (G2B)
• Government-to-
Government (G2G)

E-finance
• E-finance is the use of information systems to
provide financial services and markets
• E-finance consists of:
– E-banking and online brokerage
 Paying bills online using electronic bill pay
 People can turn to multiple sites to get the latest information
about stock prices
• Fintech
– Refers to technologies that support activities in the
financial sector.

Business-To-Consumer E-Commerce
• Learning Objective:
Describe business-to-
consumer electronic
commerce strategies.
• E-tailing: Capabilities and Opportunities
• Benefits of E-tailing
• Drawbacks of E-tailing

EC Business Strategies

E-tailing: Capabilities and Opportunities
(1 of 2)
• Firms from across the world can effectively compete
for customers and gain access to new markets
• Disintermediation
– Cutting out the “middleman” and reaching customers
more directly and efficiently
• The Long Tail refers to the ability to cater to niche
markets instead of selling mainstream products
• Mass Customization
– Firms can tailor their products and services to meet a
customer’s particular needs

E-tailing: Capabilities and Opportunities
(2 of 2)
• Group Buying
– If enough people agree to purchase the product or service,
they get significant discounts
• New Revenue and Pricing Models
– Companies can earn revenues not only through traditional
sales, but also through subscription, licensing, or transaction
fees
– Companies and individuals can earn money through Web
advertising or affiliate marketing
• Social Commerce
– Utilizing social networks to build lasting relationships and
advertise products

Mass Customization
Mass customization
generates additional
value for customers and
profits for producers

New Revenue and Pricing Models
Priceline.com lets consumers name
their own price for travel-related
services.
Reverse pricing
“Name your
own price”

Benefits of e-Tailing
• Product benefits: With no store size and shelf
space restrictions, companies can sell a far wider
variety of goods
• Place benefits: Internet storefronts are available
on almost every computer connected to the
Internet
• Price benefits: Online retailers are efficient, with
high volumes and low overhead that allow for very
competitive pricing

Drawbacks of E-tailing
• Trust
– This is especially a concern for new online businesses
without a proven track record
• Direct Product Experience
– E-tailing doesn’t provide sensory information
• Product Delivery and Returns
– Except for direct downloads, e-tailing requires
additional delivery time for products
– Returns may also be a hassle, compared to just going
to the store

Electronic Commerce Websites and Internet
Marketing
• Learning Objective: Understand
the keys to successful electronic
commerce websites and explain
the different forms of Internet
marketing.
• Designing Websites to Meet Online Consumers’ Needs
• Internet Marketing

Designing Websites to Meet Online
Consumers’ Needs
• Structural Firmness
– No bad links, understandable error messages,
privacy/security, speed
• Functional Convenience
– Ease of use, simple navigation, user feedback, help
features, on-click ordering, flexible payment, order
tracking
• Representational Delight
– Aesthetically pleasing, professional look and feel,
color/font/images, consistent layout, no clutter

Different Websites Focus on Different Needs

Internet Marketing
• If you build it, they
won’t come unless
you market it
• Research firm, Forrester, estimates that by
2019, companies will spend 35% of their
advertising budget on Internet marketing

Search Engine Optimization (SEO)
• SEO attempts to
improve a page’s
ranking in search
engines like
Google
• Techniques include
having other pages
link to the page,
keeping content
updated, and
including key
words

Paid Search
• Paid Search is a way to ensure that your
company’s page appears on the first page users
see
• Paid Inclusion is where some search engines
offer to elevate a page’s position in the organic
results after paying a fee
• Google is paid on a pay-per-click basis which can
become very expensive

Mobile Commerce, Consumer-To-Consumer
EC, and Consumer-To-Business EC
mobile commerce, consumer-to-
consumer electronic commerce,
and consumer-to-business
electronic commerce.
• C2C EC
• C2B EC

Mobile EC
• Location-Based M-Commerce
– Services can be offered tailored to a person’s needs
based on their current location
• Information on the Go
– Customers can get further information about a product
wherever they are, including in the store, but this can
lead to “showrooming”
• Product and Content Sales
– Consumers use mobile apps to make purchases while
on the go

C2C EC
• When building a marketing app, businesses
must decide if the platform they build will be
scalable

Opportunities and Threats of C2C EC
(Table 4.3)
Opportunities Threats
Consumers can buy and sell to
broader markets
No quality control
Eliminates the middleman that
increases the final price of products
and services
Higher risk of fraud
Always available for consumers,
24/7/365
Harder to use traditional
payment methods (checks,
cash, ATM cards)
Market demand is an efficient
mechanism for setting prices in the
electronic environment
Increases the numbers of buyers and
sellers who can find each other

E-Auctions and Online Classifieds
• E-Auctions
– Individual sellers can sell or barter items at online auctions
– Consumers place bids
– Examples: eBay.com and swap.com
– Revenue model based on small transaction fees, highly
profitable
• Online Classifieds
– Just advertising, no online transactions
– Freecycling
– Examples: craigslist.com

C2B EC
• Relatively new phenomenon, consumers can sell small
pieces of work (e.g., photos) or services to businesses
• It might argued that anyone who made a living doing this is
actually in business for themselves

Securing Payments and Navigating Legal
Issues in EC
mobile commerce, consumer-
to-consumer electronic
commerce, and consumer-to-
business electronic commerce.
• Securing Payments in the Digital World
• Legal Issues in EC

Securing Payments in the Digital World
• Must be sure that online transactions are secure
• Issues related to different forms of online
payments are:
1. Payment Services—involves the use of independent
payment services such as PayPal, Google Wallet
2. Cryptocurrencies—involves the use of a non-banking
currency such as Bitcoin.
3. Managing Risk—businesses are financially liable for
fraudulent transactions, thus have to look for these
and sometimes have to reject risky transactions

Bitcoins
How bitcoins are
exchanged

Ways to Protect Yourself When Shopping
Online
• Use a secure browser
• Check the site’s privacy
policy
• Read and understand
the refund and shipping
policies
• Keep your personal
information private
• Give payment information
only to businesses you
know and trust
• Keep records of your
online transactions and
check your e-mail
• Review you monthly
credit card and bank
transactions
Source: Based on Privacy Rights Clearinghouse (2016)

Possible Indicators of Fraud
• Email
addresses
• Shipping and
billing
addresses
• Transactions
patterns

Legal Issues in EC
• Taxation
– Sales taxes
– Internet Freedom Act: Internet sales are treated like mail-
order sales
• Digital Rights Management
– Preventing unauthorized duplication
– Restrict which devices can play media
– Limit number of times media can be played
• Net Neutrality
– Should the Internet be open? Or should Internet access
come first to the highest bidder?

END OF CHAPTER CONTENT

Managing in the Digital World:
Taobao and the World of E-commerce
• Taobao is the largest digital marketplace in China
– By 2011 more registered users (370 million) than the
population of the United States
– Online marketplace for multiple companies
– Online consumer-to-consumer sales, much like eBay
– Notorious for piracy and counterfeit goods
• 360buy new-fast growing competitor
– Not on the list of notorious markets
• Sales in China pose huge logistics headaches
– Widely varying population densities
– No “overnight-shipping” infrastructure

Coming Attractions:
The AI Hedge Fund
• In the past hedge fund and money managers have relied
on mathematical and statistical models
• Now AI is used to emulate human intelligence in making
trading decisions
• Machine learning algorithms are able to bring together
data from many sources to improve these models
• Critics doubt the AI approach will be any better than the
existing players in the future
• If AI succeeds and everyone has the same programs
how will one be competitive over another?

Ethical Dilemma:
The Ethics of Reputation Management
• Online reviews can be critical to a customer’s buying
decision
• Biased and fake reviews can affect a business’s
profitability, or even survival
• Owners are tempted to post fake positive reviews
• Competitors are tempted to post fake negative
reviews
• Reputation management can help offset negative
biased reviews, but poses ethical dilemmas

Security Matters:
Too Small to Be Hacked?
• Cybercriminals steal data that can be converted into
cash (credit card numbers, personal info)
• They now have begun to take a users data hostage by
encrypting it
– Demands ransom payment to unlock data
– If paid, will the data be released?
• Experts recommend paying a 3rd party to maintain
system security
• Technology alone cannot protect a business if the
system user is the weak link

When Things Go Wrong:
Buying Likes
• Many businesses entice users to “like” their
business page on Facebook, Twitter, or other
social media sites for some reward
• Campaigns and contests can be deeply biased by
automated “like” and votes, giving unfair
advantage to users who game the system
• Social media platforms try to suppress this type of
devious behavior, but it can be a cat-and-mouse
game

Green IT:
Green Online Shopping
• Fossil fuel requirements
– Retail shopping—use cars to drive to many stores in different
locations
– Online shopping—most of the fuel use is by delivery vehicles
• Carnegie Mellon study revealed a purchase of a thumb drive
from an online retailer and shipped directly to the customer
can result in 35% savings
• Primary drivers of energy consumption for online shopping is
the packaging (boxes) and fuel for delivery of packages
• Research suggests the online shopping might not be that
green after all, due to increase in particulate matter emissions

Who’s Going Mobile:
Mobile Payments
• Electronic funds transfer (EFT) technologies are
paving the way for cashless societies
• The smartphone is becoming a natural payment
companion
• Near field communication (NFC) allows for simply
waving an NFC-enabled phone in front of a
reading device to make a payment
• Potential problems: merchant costs, privacy
concerns

Industry Analysis:
Retailing
• Retailing has embraced new technologies
– Barcode scanning for price, inventory
management, self-checkout
– RFID functions like a barcode bus uses wireless
technologies, and can be integrated with other
information technologies
– New forms of electronic payment, whether by pin,
phone barcode, near-field communications (NFC)
technologies, or fingerprint, are gaining traction

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