e-commerce mis ch 10

7/28/2019 E-commerce Mis Ch 10

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2001 Business & Information Systems 2/e 1

Chapter 10

Electronic Commerce and the

Strategic Impact ofInformation Systems


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Electronic Commerce SystemsE simply means anything done via the internet and

commerce means buying and selling products,services and information.

So, E Commerce refers to the process of buying andselling or exchanging of products, services, orinformation via computer networks including interne

An Electronic Commerce System is an information

system that provides e-commerce capabilities for anorganization.

Electronic commerce is the use of network,especially the internet to promote and sell goods and

services.


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Hardware and Software Requires the business have a web site.

The web software runs on a web serverwhich has special e-commerce software thatprovides electronic commerce function.

A customer in e-commerce by using abrowser which is the beginning page for

information. Business may use intranet or extranet for e-

commerce with other business


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How does an e-commerce site work?

Graph for e-commersite


CustomerComputer

with Browsersoftware

Web servercomputer withe-Commerce

software

Database servercomputer with

database software

& database

Requestfor data

DataInformation

Request forinformation


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Figure 10-2

The typical distribution channel has several intermediary layers, each of which adds to thefinal cost of a product, such as a sweater. Removing layers lowers the final cost to theconsumer.

The Benefits of Disintermediation to theConsumer

Management Information SystemsChapter 10 E-Commerce: Digital Markets, Digital Goods

Electronic Commerce and the Internet


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Benefits of E-Commerce For Consumers

Reduced Prices Global marketplace 24 hour access Larger Purchase per transaction Reduced time

For Business

Increased potential market share

Easier entry to new market Low cost advertisement

Low barriers to entry

Improved customer relation


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For Consumer

Unable to examine products personally

Security

Credit card fraud

Trust

For Business

Hardware and software

Maintenance of Website Intellectual property

Taxation

Training and maintenance


Disadvantages of E-Commerce


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Key concepts in e-commerce (cont.)

Digital goods

Goods that can be delivered over a digital network

E.g., Music tracks, video, software, newspapers, books

Cost of producing first unit almost entire cost of product:marginal cost of producing 2nd unit is about zero

Costs of delivery over the Internet very low

Marketing costs remain the same; pricing highly variable

Industries with digital goods are undergoing revolutionarychanges (publishers, record labels, etc.)


Electronic Commerce and the Internet


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Difference between Digital goods and Traditional goods



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EC Business Models Business model: Business model is a method of doing business by

which a company can generate revenue to sustain itself.

A business model describes the rationale of how an organization

creates, delivers, and captures value (economic, social, or otherforms of value). The process of business model construction is part ofbusiness strategy

Business models are a subset of a business plan or a business case.

It is a set of planned activities designed to result in a profit in a

marketplace. E-commerce business model is a business model that aims to use and

leverage the unique qualities of the internet and the world wide web.


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EC Business Models Revenue Models

Description how thecompany will earn

revenue, produceprofits, and produce asuperior return oninvested capital.

How will you earn

money?

Major revenuemodels Sales Transaction fees Subscription fees Advertising fees Affiliate fees Other revenue

sources

Value Proposition: Defines how a companysproduct or service fulfills the needs of customers.

Why should the customer buy from you?


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E-Commerce Business Model Bricks and clicks business model: Business model by which a company

integrates both offline (bricks) and online (clicks) presences. It already hasan established brand name and it can use it physical store to promote thewebsite One example of the bricks-and-clicks model is when a chain ofstores allows the user to order products online, but lets them pick up theirorder at a local store.

Storefront Model: The business provides a website with productinformation, a shopping cart and a online ordering mechanism. User selectthe product they want to buy and place an order through the shoppingcart. The product price is usually fixed but can be negotiable. Fit forphysical goods and services.e.g amazon.com,Redenvelop.com

Built order merchant model:A manufacturer such as computer vendorcan use this model by offering goods and services and ability to ordercustomized versions. This provides added value to consumers and allowsthe manufacturer to create only those products that will be sold.e.gdell.com
http://en.wikipedia.org/wiki/Bricks_and_clickshttp://en.wikipedia.org/wiki/Bricks_and_clicks


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E-Commerce Business Model Service provider model:A pizza delivery service can operate on pay

per item basis but many Internet-based services cannot easily operatethis way.e.g googlemap,u tube.com,xdrive.com

Subscription based access model: Visitors pays a fixed fee per month

or a year in return for unlimited access to the services. Access beyonda certain limit is subject to a surcharge .e.g online article, news games

Prepaid Access model: User pay a certain amount for access to theservices for a certain time period or content. It is similar to prepaidtelephone card and it use smart card.

Broker model :Broker are market maker. They bring buyer and sellertogether and facilitates transaction between them. Makes money bycharging a fee on every facilitated transaction or percentage of price.

a. transaction broker e.g etrade.com,expedia.com,paypal.com

b.Information broker e.g edmunds.com, realtor.com, kbb.com


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E-Commerce Business Model Advertisers model:A site offers free access to something and showsadvertisement on every page. A user clicks on an advertisement andgoes to an advertisers page. The advertisers pays the site operatorseither eyeballs or click through.e.g bdjobs.com

a. Targeting advertiser: related to the topic at hand on the site gets

higher exposure and click through.b. Updating advertisers: To present users fresh advertisement

periodically. Portal site model : A portal offers one stop access to specific content

and services like news, stock information or chat. It targets its adbased on the personalization. e.g yahoo.com, my.cnn.com

Free access model: Users are given something for free, but withadvertisement. A free web space provider typically provides advertisingbanners at the top or bottom of its sites.

Virtual mall model: It is a hosting site that hosts many merchants,service providers, brokers and other business. The virtual mall can actas an intermediary between customers and the business it hosts by

facilitating payment and guaranteeing a full refund if a merchant doesnot deliver in time. E.g kids and lover


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E-Commerce Business Model Virtual Community Model: A website that attracts a group of users with acommon interest who work together on the site. It requires registration andfee for access to the site. Unregistered visitors are often attracted by offeringteasers to entice registration. e.g largest virutal community is Slashdot,usenet newsgroups.

Infomediary model: Collects, evaluates and sell information on consumersand their buying behavior to other parties who want to reach thoseconsumers. A visitors is offered something for free which allows infomediaryto monitor the visitors online activities. A simple way to achieve this torequire registration to access to the site.

Direct sales model Direct selling is marketing and selling products to consumers directly, away

from a fixed retail location. Sales are typically made through party plan, oneto one demonstrations, and other personal contact arrangements. A textbook definition is: "The direct personal presentation, demonstration, and saleof products and services to consumers, usually in their homes or at theirjobs.

Freemium business model: Business model that works by offering basic Web services, or a basic

downloadable digital product, for free, while charging a premium foradvanced or special features.
http://en.wikipedia.org/wiki/Direct_sellinghttp://en.wikipedia.org/wiki/Freemiumhttp://en.wikipedia.org/wiki/Freemiumhttp://en.wikipedia.org/wiki/Freemiumhttp://en.wikipedia.org/wiki/Freemiumhttp://en.wikipedia.org/wiki/Direct_selling


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Types of Electronic Commerce Business-to-consumer (B2C)

Business-to-business (B2B)

Consumer-to-consumer (C2C) Intraorganizational


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Business-to-Consumer Business-to-consumer (B2C) involves a business

selling its products or services electronically to thefinal consumer, which is usually an individual.

It involves commercial interaction between abusiness entity and an individual consumer, where abusiness sells to a consumer for example, acustomer buying a shirt from a retailer through the

Internet. Munshigi.com, bengalcommerc.com,bajna.com and e-bangla.com are the most popularB2C e-commerce in Bangladesh. www.amazon.com,www.dell.com, www.walmart.com
http://www.amazon.com/http://www.dell.com/http://www.walmart.com/http://www.walmart.com/http://www.dell.com/http://www.amazon.com/


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Business-to-Consumer B2C companies operate in several ways:

E-tailers: sell the products they produce

Called direct marketers & provides after salesservice information as well as return and exchangeoptions. Some e-tailers specialize in a certainproduct and others provide a wide a range ofproduct for customers

Using others e-companies to sell their products Called indirect marketers

Sell their products electronically

Called full cybermarketers


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Business-to-Consumer

(contd.) Selling through traditional means as well as

electronically

Called partial cybermarketers Filling orders for their own stock

Called electronic distributor

Send orders they receive to manufacturersor wholesalers that fill the orders

Called electronic brokers

i i


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Business-to-Business(B2B)

Business-to-business (B2B): Salesof goods and services to other businesses

(Grainger.com, Ariba.com) www.cisco.comwww.fedex.comwww.procurenet.com

Business-to-business applications of E-commerce involve electronic catalog,

exchange, and auction marketplaces that useInternet, intranet, and extranet websites andportals to unite buyers and sellers.
http://www.cisco.com/http://www.fedex.com/http://www.procurenet.com/http://www.procurenet.com/http://www.procurenet.com/http://www.procurenet.com/http://www.procurenet.com/http://www.procurenet.com/http://www.fedex.com/http://www.fedex.com/http://www.fedex.com/http://www.fedex.com/http://www.fedex.com/http://www.cisco.com/http://www.cisco.com/http://www.cisco.com/http://www.cisco.com/http://www.cisco.com/


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Business-to-Business Three main types of B2B e-commerce: Supplier-oriented marketplace supplier company provides e-

commerce capabilities for other businesses to order its products.As like B2C other companies place order.

Buyer-oriented marketplacebusiness that want to purchaserequests quotations or bids from other companies electronically.Interested parties place order and buyer selects the winningsupplier from the submitted bids

Intermediary-oriented marketplace acts as an intermediary

between buyer and seller.provides the business capabilities forsupplier and buyers to identify each others

One company may involve two or more B2B business

Use public internet or private extranet set up by company.

Extranet is more secure than internet.


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Consumer-to-Consumer In consumer-to-consumer (C2C) electronic

commerce, one consumer sells a product or

service to another consumer usually throughan intermediary e-commerce business.

It involves commercial interaction betweentwo private individualsfor example, auction

sites. If a person wants something to sale,then he can get it listed at an auction site,and others can bid for it.


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Intrabusiness Intrabusiness, or organizational,

electronic commerce involves

transactions between departments,regions, subsidiaries, or other units of abusiness.

Transaction takes place over thebusiness intranet.


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Other types of e-commerce

Types of E-services

Government- to- citizen(G2C)

Government-to-Business(G2B)

Government-to-Employee (G2E)

Government-to-Governement(G2G)


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Interorganizational

Information Systems An InterOrganizational System (IOS) is an information system sharedby one or more suppliers and customers.

In manyB2B situation business uses the same supplier repeatedlyand establish a relationship in advance with supplier and is called IOS

Traditionally IOS use VAN for network but now Internet, Extranet isused

IOS transmit data in specific format and special protocol is used fordata encryption.

The most familiar example of IOSs are Electronic Data Interchange(EDI) systems which provide for the transfer of data betweenbusinesses.

Electronic Funds Transfer (EFT) systems provide for the transfer ofmoney between financial institutions.


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Business Alliances Businesses coordinate some of their operations or linksome of their resources to form business alliances,which serve the interests of all businesses in thealliance.

Types of alliances

Between a business and a competitive business e.g.Bank for ATM 7& insurance company to share risk

Between a business and a noncompetitive businessfor promoting & selling the product or services. e.g.Bank form alliance with airlines company.

Between a business and its suppliers and customers


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Characteristics of

Interorganizational Systems Businesses are involved in

InterOrganzational Systems (IOS) as

either: Sponsors a business that sets up and

maintains an IOS e.g. Airline that sets up

an airline reservation systems Participant a business that uses an IOS

e.g an airline agent uses an airlinereservation systems


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Characteristics of Interorganizational

Systems (contd.) Business can participate in an IOS in several ways:

A business simply enters input and receives output byusing an IOS sponsored by another business.

A business accesses data storage or processingcapabilities of another business in the IOS. E.g. asupplier can check the inventory database of customercalled supplier or vendor managed inventory.

A business can participate in an IOS by using thecapabilities of the IOS received from the sponsor formanaging internal operations. e.g an IOS for pharmacyused to order drugs, manage inventory and prepare ofF/S.the last function involves the internal operation


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Electronic Data Interchange

Systems An Electronic Data Interchange (EDI) system

provides for electronic communication of databetween businesses.

Types of data sent include Purchase order data

Shipping data

Invoice data Product description data

Price list data

Insurance data


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How does EDI Systems work

Product specification

Req Request for quotation Price Request

Quotation

Purchase order price List

Purchase order acknowledgement Customer order

Shipping Notification Order acknowledgement

Invoice Bill

Supplier

Business Customer


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How does EDI Systems work Data sends in EDI represnts transaction

Output for one business andinput for

another e.g. purchase order, invoicedata

TPS of two business communicate with

each other

Not all data sent in EDI representtransactions



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Traditional versus

Internet EDI An EDI system, like all IOSs, requires a data

communications link between businesses.Traditionally use VAN

Internet EDI systems require special software to sendencrypted standardized data.

EDI data is generally input directly into the system

by the receiving business. Some EDI invoice data in input to an accounts

payable systems that generates a payment

Some data may read by people most entered into thesystems


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EDI Benefits and Problems Benefits of EDI

Speed that saves time

Data entry errors are reduced

Reduce the cost of transaction

Problems with EDI

Organizational participation

Technical problems must be solved

Can be expensive

M t I f ti S t


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M-Commerce

M-commerce services and applications

Wireless mobile devices are starting to be used for purchasing goods andservices.

Although m-commerce represents small fraction of total e-commercetransactions, revenue has been steadily growing.Mcommerce applicationis applicable where time critical and people on the move

Location-based services: verizons Vz navigator, MeetMoi,Smater Agent enable user with GPS to find apartment.

Banking and financial services: City Bank,bank ofAmerica,Islami bank,dutch bangla bank

Wireless Advertising:yahoo mobile home page,MSN mobileportal,Google mobile version search engine

Games and entertainments:Myspace with vohone,Film

companies,mobiTV offered by sprint &cingular


Management Information Systems


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Limitations in mobiles access of Webinformation

Data limitations: Untill 3G broadbrand comes it impossible

Small display screens

Wireless portals (mobile portals)

Major search provider GOOGLE,Yahoo,MSN introduce search services formobile phone

Feature content and services optimized for mobile devices to steer users toinformation they are most likely to need

Google mobile service remember recent place name searches,so that userinitiate a search for movies it return a list of local movies and purchaseticket.

Microsoft Tellme service allow user speak into their phones to search

movie listing, stock quotes, news and other informaiton on mobile screen


M-Commerce


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Payment Systems

In order to understand e-commerce payment systems, you firstneed to be familiar with the various types of generic paymentsystems. There are five main types of payment systems:

Cash

Checking transfer

Credit cards

Stored value

Accumulating balance

Cash: Cash is legal tender defined by a nationalauthority to represent value.


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Payment Systems

Checking transfer: Funds transferred directly via a signed draftor check from a consumers checking account to a merchant orother individual.

Credit cards: Represents an account that extends credit to

consumers, permits consumers to purchase items while deferringpayment, and allows consumers to make payments to multiplevendors at one time.

Stored value: Account created by depositing funds into anaccount and from which funds are paid out or withdrawn asneeded.

Accumulating balance: enable user to make micropaymentAccount that accumulates expenditure and to which consumersmakes periodic payments.

Digital checking:Extend functionality of existing checkingaccounts to be used for online payments


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Payment Methods

Stored-Value Cards: In this method, a consumer can purchase acard with a specific amount of value stored in it. The card can thenbe used to buy certain goods or services from the Internet, andproportionate amount gets deducted each time a purchase is

made. Digital wallet: It is a software that stores credit card and owner

identification information and provides this data automaticallyduring electronic commerce purchase transactions by eliiminatingrepeatative informaiton.

Smart card: It is a credit card size plastic card that stores digitalinformation and that can be used for electronic payments in placeof cash.

Electronic billing presentment and payment systems: It isused for paying routine monthly bills. They allow users to viewtheir bills electronically and pay them through electronic fund

transfers from bank and credit cards accounts.


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Management Information Systems


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Digital payments systems for m-commerce

Three types of mobile payment systems

in use in Japan Stored value system charged by credit cards

or bank accounts

Mobile debit cards

Mobile credit cards

In the U.S., the cell phone has not yetevolved into a mobile payment system


Electronic Commerce Payment Systems


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Global Information Systems Though the business operate within a countryincreasingly business engage in activities that extendbeyond the national boarder

An international business may produce its products inseveral countries and sell them in many countries.

Domestic information systems : Business operates onlyin a single country. e.g payroll systems

Global (international) information systems provide

communication between business locations around theworld, transfer of data between international locations,and use of system functions at different locationsworldwide. E.g. order entry systems


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Global Electronic Commerce Global e-commerce systems should: Offer sites in several languages, with a feature that

allows the user to select the preferred language.

Allow customers to pay in several different currencies&provide conversion between the currencies

Be sensitive to cultural differences in various countries.

Must deal with different laws

Canbe interorganizational systems

global EDI,Global EFT transfer fund internationlly.

An internationl business may be sponsor or participantin global IOS

e-commerce mis ch 10

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