This document discusses electronic commerce and how organizations use information technology to engage in e-commerce. It defines key terms like electronic commerce, business-to-consumer, business-to-business, and mobile commerce. The benefits of e-commerce include improved customer service and relationships. Constraints include costs and security concerns. Interorganizational systems and strategies like extranets are discussed as ways for businesses to collaborate electronically. The growth of mobile commerce using devices like smartphones is also summarized.

1. MANAGEMENT
INFORMATION SYSTEM
Chapter 3
Using Information Technology to Engage in
Electronic Commerce
1

2. OVERVIEW
 Electronic Commerce
 E-Commerce beyond boundaries of the firm
 E-Commerce Benefits
 E-Commerce Constraints
 E-Commerce Scope
 External Databases
 Search Engines
 E-Commerce Strategy
 Interorganizational Systems (IOS)
 B2C Strategies for E-Commerce
 Mobile Commerce
 Internet World Wide Web (WWW) 2

3. ELECTRONIC COMMERCE
E-commerce
refers to a business transaction that uses
network access, computer-based systems,
and a Web browser interface.
3

4. TYPES OF E-COMMERCE
 Business-to-consumer (B2C)
 refers to transactions between a business and
the final consumer of the product.
 Business-to-business (B2B)
refers to transactions between businesses in
which neither one is the final consumer.
 Electronic Government (E-gov)
 refers to transactions between a government
agency and typically a citizen.
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5. BENEFITS OF E-COMMERCE
 Main benefits to firms:
Improved customer service before, during, and
after the sale
Improved relationships with suppliers and the
financial community
Increased economic return on stockholder and
owner investments
5

6. E-COMMERCE (CONT’D)
 Main constraints to firms:
High costs
Security concerns
Immature or unavailable software
 Scope of E-commerce
WWW.CENSUS.GOV
Link to the E-stats Web page to find the most
current e-commerce figures.
6

7. E-COMMERCE SALES
7

8. BUSINESS INTELLIGENCE
 Business Intelligence (BI)
 is the activity of gathering information about the
elements in the environment that interacts with the firm.
 External databases
 are commercial databases that, usually for a fee,
provide information and analyses on virtually any
subject.
 Firms use these databases to gather BI because it
is faster and less expensive than trying to
research a wide array of information sources.
 Government databases
 offer a wide range of topics for researchers in many
fields. 8

9. BUSINESS INTELLIGENCE (CONT’D)
 Firms are more inclined to initiate their own
external searches for market intelligence.
 Search engines are the most popular means for
people to obtain information available from the
Web.
 Search engine
 is a special computer program that asks a user for a
word or group of words to be found.
 Searches the content of web sites on the Internet to see
if the word or words are on any Web sites.
 Makes it possible to scan large volumes of information
quickly, easily, and thoroughly.
9

10. SEARCH ENGINES
EXPLORE THE INTERNET TO FIND SITES
CONTAINING INFORMATION YOU SEEK
10

11. E-COMMERCE STRATEGY AND
INTERORGANIZATIONAL SYSTEMS
 Interorganizational system (IOS)
 is the strategy in which a firm is linked with
transmissions of electronic data with other
firms so that all of the firms work together as
a coordinated unit, achieving benefits that
each could not achieve alone.
 Participating firms are called trading
partners, business partners, or a business
alliance.
11

12. E-COMMERCE STRATEGY AND
INTERORGANIZATIONAL SYSTEMS
E-commerce is fundamental to IOSs.
Electronic data interchange (EDI) is
a means for achieving an IOS; a
subset.
Extranets are another alternative.
12

13. IOS BENEFITS
 Comparative Efficiency:
 is obtained by the IOS because the trading
partners can produce their goods and services
with greater efficiency and provide their goods
and services at lower costs to their customers.
(price advantage over competitors)
 Internal efficiency within the firm’s own
operations.
Gather and analyze data quickly.
Make decisions faster. 13

14. IOS BENEFITS (CONT’D)
 Interorganizational efficiency gained by
working with other firms.
Offer more products and services.
Serve more customers.
Shift certain work to suppliers or customers.
Gather environmental data more easily.
 Bargaining Power
 is the ability of a firm to resolve disagreements
with its suppliers and customers to its own
advantage.
14

15. BARGAINING POWER
IMPROVEMENTS
 Unique product features enable firms
to offer better service to their customers in
the form of easier ordering, quicker
shipments, and faster response times to
requests for information.
This better service becomes a feature of the
firm’s products, making them more appealing
than similar products offered by competitors.
15

16. BARGAINING POWER
IMPROVEMENTS (CONT’D)
 Reduced search-related costs can
reduce the firm’s “shopping” cost that its
customers incur in searching for a
supplier, identifying alternative products,
and getting the lowest price.
The firm is a customer of its suppliers, the
firm can realize the same shopping-cost
reductions when ordering from its suppliers.
16

17. BARGAINING POWER
IMPROVEMENTS (CONT’D)
 Increased switching costs is when a
firm makes it more expensive, in cost
and/or convenience, for customers to
switch to a competitor.
Providing customers with such information
resources as hardware, software, and data
communications channels that would have to
be replaced if products were purchased from
another firm.
17

18. IOS EXPANSION
 Vendor stock replenishment is a
special type of IOS in that the customer
trusts the supplier enough to allow the
supplier to access its computer-based
inventory system.
The supplier initiates the replenishment
process by electronically monitoring the firm’s
inventory levels.
Wal-Mart uses the IOS strategy extensively.
18

19. EDI
 EDI consists of direct computer-to-computer
transmissions of data in a machine-readable,
structured format.
 Older technology, but majority of B2B commerce
use
 Enables data to be transmitted and received
without rekeying
19

20. EDI (CONT’D)
 Equipment (communications lines, hardware,
etc.) and support services provided by telephone
companies (AT&T, MCI, et al.)
 Value-added network (VAN) is when the
services that operate and manage the
communications line (circuit) are provided in
addition to the line itself.
20

21. EDI (CONT’D)
 EDI is the dominant implementation of an IOS.
 More that two-thirds of e-commerce is conducted
using EDI compared to other alternatives.
 More costly: $5,000-$30,000 per year with a single
vendor or customer
 More bulky than newer IOS systems
21

22. EXTRANET
 Extranets enable the sharing of sensitive
computer-based information with other
firms using information technology over
the internet.
Used in collaboration with trusted suppliers
and large customers
Security and privacy are serious concerns, so
extranets are generally secured behind a
firewall and use encryption such as Pretty
Good Privacy (PGP).
22

23. EXTRANET (CONT’D)
 Firewall permits only authorized users to access
the firm’s information.
 Extranets allow for the same type of data
exchange as EDI.
 Extranets incorporate the common protocols and
communication networks of the Internet, which
results in a great cost savings (EDI is costly to
use).
23

24. IOS ADOPTION INFLUENCES
 Proactive and reactive business partners
 Adoption influences
Competitive pressures (HIGH, firm is reactive
in adopting IOS, usually EDI)
Exercised power (powerful firm is proactive in
adopting/demanding IOS)
Internal need (firms see participation as a way
to improve)
Top management support (ALWAYS influences
the decision)
24

25. FIGURE 3.2 INTERNAL AND
ENVIRONMENTAL INFLUENCES
ON IOS ADOPTION
25

26. IOS BENEFITS
 Direct benefits
Reduced data entry errors
Lower costs
Increased operational efficiency
 Indirect benefits
Increased ability to compete
Improved relationships with trading partners
Better customer service
26

27. FIGURE 3.3 IOS DIRECT AND
INDIRECT BENEFITS
27

28. B2C STRATEGIES FOR E-COMMERCE
 Important to understand B2C Strategies
More products and services are becoming
available for digital delivery.
More consumers are overcoming their
reluctance to purchase using the Web.
Higher communication speeds in homes has
made delivery of digital products practical.
Fear of information theft has been replaced
with acceptance.
28

29. DIGITAL PRODUCTS
 Entertainment–songs, albums, movies,
etc. WWW.SONY.COM
 Computer programs and updates–virus
protection software, tax software, etc.
 Services–WWW.LENDINGTREE.COM
 Can be consumed as soon as they are
downloaded
 Purchasers incur a substantial cost of the
transaction in terms of computer cost,
online connection fees, storage media, and
so on.
29

30. PHYSICAL PRODUCTS
 Items must be transported to the consumer.
 Shipment has to be arranged.
 Traditional delivery methods are slow.
 Faster delivery time options are costly.
 Mail/shipping companies offer services such as
online tracking that allows more information and
control over delivery.
30

31. VIRTUAL VS. HYBRID SALES
 Virtual sales are those made by a firm
that does not operate a physical
storefront.
Customer can’t enter and purchase the
product.
 Hybrid sales occur when firms have both
a physical storefront and a Web site
where customers can purchase products.
Brick-and-click operations
31

32. VIRTUAL SALES CHALLENGES
 Provide necessary product information without
overwhelming the customer.
 Communicating image files from the Web site to
the customer’s computer can take time.
 Payment over the Internet has suffered bad
press–credit card fraud.
32

33. HYBRID SALES
 Most firms had storefronts before sales over the
Internet were possible.
 Both a physical storefront and the Internet are
necessary to their business plans.
 Stores act as showcases for products.
 Customers enjoy convenience of shopping over
the Web.
 B2C sales means less inventory at its store; more
sales floor space.
33

34. VIRTUAL SALES
 Limit images displayed response time,
WWW.OFFICEDEPOT.COM.
 Secure data transfer of credit card information.
 VeriSign
 PayPal
34

35. THE NEXT STEP FOR E-COMMERCE
 Mobile commerce (m-commerce) is the
use of cell phones and personal digital
assistants (PDAs) to engage in wireless
e-commerce.
 Third generation (3G)
telecommunications is data-capable
wireless technologies.
Europe purchased 3G licenses in 2000; United
States in 2004.
$40 billion per year global industry by 2009.
35

36. M-COMMERCE
 Early applications included news services,
financial information alert/transactions, and
banking.
 Movie ticket purchases, parking payments, etc.
gaining acceptance.
 Japan is 1st
country to have a 3G carrier (almost
all Japanese have a cell phone).
 United States-only about 40% have a cell phone.
36

37. THE NEXT STEP … (CONT’D)
 Wireless Internet Hot spots are created
using a wired connection (for high
communications speed) and then
broadcast via a wireless access point to an
area approx. 100 meters; Starbucks.
 Business-class wireless computing
would provide fast wireless
communication everywhere over the same
communications carrier as cell phones;
Verizon. 37

38. USING THE INTERNET
 The origin of the Internet can be traced to 1969,
when the U.S. government established a network
called ARPANET.
 ARPANET demonstrated that it was possible for
a person to request and receive data over a
complex network that included many computers
and network connections.
38

39. WORLD WIDE WEB
 World Wide Web (WWW)
efforts began in 1989 when Tim Berners-Lee
came up with a idea for physicists to
communicate.
 Hypertext
electronic documents that are linked together.
 Physicists
would be able to click on words or phrases
displayed on their computer screens and
retrieve the hypertext. 39

40. WORLD WIDE WEB (CONT’D)
 Hypertext
 became a reality in 1992.
 Hypermedia
 is the transmission of multimedia consisting
of text, graphics, audio, and video over the
WWW.
 WWW (Web)
 is information accessible via the Internet
whereby hypermedia documents (computer
files) are stored and then retrieved by means
of a unique addressing scheme.
40

41. WORLD WIDE WEB TERMS
 Web site
 collection of Web pages
 Hypertext link
 pointer (text or a graphic) used to access hypertext
stored at a Website
 Web page
 hypermedia file stored at a unique Web site address
 Home page
 first page of a Web site
 Browser
 software designed to find and read files on the
Internet written in hypertext markup language.
41

42. WORLD WIDE WEB TERMS (CONT’D)
 Uniform resource locator (URL)
 unique address of a Web page
 Protocol
 set of standards that govern communication of data
(HTTP, FTP, URL)
 Domain name
 address of the website where a Web page is stored
 Path
 certain directory/subdirectory and file at the Web site
 File Transfer Protocol (FTP)
 users can copy files onto their computers from any
Web site.
42

43. WORLD WIDE WEB
TERMINOLOGY
43

44. UNDERSTANDING THE
DIFFERENCE
 The Internet
 is a global communications network that
connects millions of computers.
Provides the network architecture
 The Web
 is a collection of computers acting as content
servers that host documents formatted to
enable viewing of text, graphics, and audio as
well as allowing linkages to other documents
on the Web.
Provides the method for storing and retrieving
its documents 44

45. CYBERSPACE AND THE
INFORMATION SUPERHIGHWAY
 Cyberspace1
: a society that had become a slave
to technology.
 Information Superhighway describes a
positive force that gives everyone access to the
wealth of information that exists in modern
society.
1
Term coined in 1984, author William Gibson Neuromancer 45

46. INTERNET STANDARDS
 Internet Society (1992) promotes commercial
Internet use.
 Internet Engineering Task Force (IETF)
responsible for Internet standards.
 World Wide Web Consortium (W3C)
responsible for Web standards.
46

47. E-COMMERCE AND HOSPITAL
SUPPLY CHAIN MANAGEMENT
 Hospitals conduct most of their purchases online.
 Only 5 % benefit compared to manual purchasing.
 Hospitals can use a standard protocol such as the
Internet to replace EDI.
 Global Healthcare Exchange (WWW.GHX.COM) help
hospitals implement clinical commercial exchange
 Hospitals have hundreds, sometimes thousands, of
vendors; the savings is substantial.
 Speed and ease of connection to a new vendor for
e-commerce is a strong incentive for change.
 Analyze purchase requests.
 Find less expensive substitute or less costly vendor.
47

48. BUSINESS APPLICATIONS OF THE
INTERNET
 Retailing Operations
 Most of the large retail chains have established a Web
presence.
 Retailers make their home pages directly accessible
through the Web.
 Virtual mall combine with other stores in a
collection sites.
48

49. SUGGESTIONS FOR SUCCESSFUL
INTERNET USE
 Make sure your Web site is robust.
 Make sure your browser and database structure
are both flexible and intuitive.
 Emphasize content.
 Update often.
 Look beyond customers.
 Target content to specific users’ needs.
 Make the interface intuitive.
 Be in the right Web location.
 Create a sense of community.
 Get help if you need it.
49