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Electronic Commerce
MIS 2101: Management Information Systems
Based on material from Information Systems Today: Managing in the Digital World, Leonard Jessup and Joseph Valacich, Pearson Prentice Hall, 2007
Also includes material by David Schuff, Paul Weinberg, and Cindy Joy Marselis.
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“There is no physical analog for what Amazon.com is becoming.”
Jeff BezosCofounder and long-time CEO of Amazon.com
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Learning Objectives
Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace
Explain the differences between:The InternetExtranetsIntranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
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Learning Objectives
Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace
Explain the differences between:The InternetExtranetsIntranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
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Electronic Commerce Online exchange of goods, services and money Second quarter of 2006
2.7% of total retail revenue $24.8 billion in revenue
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Most Common Types of E-Commerce
Business-to-consumer (B2C) A person buys a book from Amazon.com
Business-to-business (B2B) Retailer like Wal-Mart ordering from distributors
Business-to-employee (B2E) Employee uses the Web to change employee
benefits Consumer-to-consumer (C2C)
One person purchases from another on eBay
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Key Capabilities: Information Dissemination
Firms across the world have access to customers
Economical medium for marketing products and services
Increased geographical reach
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Key Capabilities:Integration
Integration of information via Web sites and other mechanisms
Integration of processes among multiple companies
Real-time access to personalized information
“Efficient Markets”
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Example: Integration
Airline reservations Make the reservation through any almost any
airline, travel agency, or online The reservation can involve multiple airlines Use a cell phone, voice, browser Change the reservation through almost any
airline, travel agency, or online
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Other examples of integration
ATMs Amazon --- purchase products from
other companies through Amazon
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Key Capabilities: Mass Customization
Meeting particular customers’ needs on a large scale
Timbuk2.com Custom Messenger
Bag Builder• Customers create a
virtual bag• Preference-tracking
helps Timbuk2 in marketing efforts
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Key Capabilities:Interactive Communication
Immediate feedback between company and customers E-mail notifications Customer service
online chat Best Buy
Geek Squad 24-hour computer
support
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Key Capabilities:Collaboration
Virgin Entertainment Group Microsoft SharePoint Managers: spend
more time selling products
Head office: more time for strategic planning
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Key Capabilities:Transaction Support
Internet and the Web: Reduced transaction
costs Enhanced
operational efficiency Dell – automated
transaction support Cost savings per
sale Disintermediation
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15Information Systems Today: Managing in the Digital World 5-15
E-Commerce Business Strategies
Differentiated based on levels of physical/virtual presence
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Learning Objectives
Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace
Explain the differences between:The InternetExtranetsIntranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
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The Internet . . . A network of networks
Computers and other devices capable of communicating
The infrastructure that connects them (fiber optics, copper, modems, routers, microwave, etc.)
The software tools and protocols that make communication possible
A set of standards It is more than the World Wide Web
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As a result of the standards
You can retrieve material using a browser from any Web Server regardless of technology or location
You can send email to any email account regardless of technology or location
Dissimilar computers at multiple locations can function together to complete a process
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Business-to-Business E-Commerce
Extranets are applications which use Internet technology to conduct business involving multiple firms (B2B)
Boeing 1,000 authorized business partners
Nearly all Fortune 1,000 companies deploy some type of B2B applications
Electronic Data Interchange (EDI) and Web Services are two technologies used for Extranets.
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Electronic Data Interchange (EDI)
Used for business to business applications prior to the introduction of Web Services
• Digital or electronic transmission of business documents between organizationso Value-added networks
(VAN)o Proprietary message
formats
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Web Services
A set of standards also used for business to business applications.
Developed by the World Wide Web Consortium Different from EDI because the message formats
are an international open standard. Messages sent in (encrypted) text, making them
easy to send and receive Any business can communicate with any other
business
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Simple Web Services Example
ProductLookup Application
Credit verification application
Stock DB
AccountDB
Shopping Application
BigStore.com
The Gap
GiantBank
“In st
ock”
confirm
ation
Credit card
confirmationClient
The BigStore.com application can check whether a product is in stock at The Gap, or the verify a customer’s credit card at GiantBank.
BigStore.com doesn’t have to know the technology in use at the Gap or at GiantBank.
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Web Services
Can they be used inside, or external to an organization?
Will industries and other groups agree on standard data definitions?
Why do you think Microsoft, IBM, and others are adopting Web Services standards
Will Web Services succeed even though Electronic Data Interchange (EDI) didn’t? Why?
Which industries are most likely to adopt this technology?
Which are not?
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Intranets
Business-to-employee (B2E) electronic commerce
Internet based private network using Web technologies
BoeingMore than 1 million pages200,000 employees
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Intranet Applications: Training
Boeing Company 200,000 employees
get trained Quality eTraining
program• Catalogue of courses• Online course content• Standardized courses
Business improvements
Cost reduction• Eliminated travel cost
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Intranet Application: Online Entry of Information
Use of Web browsers to enter information online E.g., Microsoft MSExpense
Prior to MSExpense• 136 different report templates• Outdated versions
With MSExpense• Online submission of expense records• Easy and centralized updates to templates• Savings of $4.3 million a year• Shortened period for reimbursement from 3 weeks to 3 days• Etc.
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Intranet Application: Real-Time Access to Information
Manage, update, distribute, and access corporate information Boeing
• News releases uploaded to the Intranet• Previously sent to all corporate offices as video
tapes• Reduced distribution costs
Efficient information sharing Company-wide access
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Intranet Application: Collaboration
BoeingInformation shared between
employees across the worldReduced product development cyclesAbility to stay current on projectsAbility to stay current with the
changing market conditions
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Learning Objectives
Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace
Explain the differences between:The InternetExtranetsIntranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
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Types of Consumer to Consumer (C2C) E-Commerce
17% of American adults have sold online
Forward auction Sellers post goods or
services for sale Buyers bid on these items
Reverse auction Buyers post a request for
quote (RFQ) Seller proposes a bid
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E-Auction Fraud
E-auctions marred with more fraud than any other Internet activity 42% of all Internet-fraud related complaints Average loss: $1,155
Types of e-Auction fraud Bid luring Reproductions Bid shielding Shipping fraud Payment failure Nonshipment
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Social Online Communities
Becoming increasingly powerful tools used by businesses to target customers and brand their products & services
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Self-Publishing
Consumers can voice their opinions with no editorial review
Original material by the author Traditional B2B becoming C2C Publishing from home
Print-On-DemandBlogging
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Printing-On-Demand
Customized printing Small batches Attractive for first time
authors Select providers
Lulu Blurb BookSurge
• Amazon• End-to-end service
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Blogging
WebloggingOnline text diaryChronological
entriesPower of
bloggers
VloggingVideo blogging
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M-Commerce
Electronic transactions using wireless mobile devices
Mobile networksWirelessSwitched public network
Smart phonesHigh-speed data transfer“Always-on” connectivity
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M-Commerce Applications
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Online Entertainment Industry
Digital rights management (DRM)Technological solution for control of digital
media• Restrictions
• Devices which will play it• How many times it can play
Prevention of illegal copying and distribution• Watermark – illegal copy can be traced to original
purchaser
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Learning Objectives
Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace
Explain the differences between:The InternetExtranetsIntranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
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Threats to E-Commerce
The USA PATRIOT ActIntroduced after 9/11 terrorist attacks
in 2001More power given to governmental
agencies to protect AmericansCritics – Civil Liberties Union
• Reduced checks and balances on surveillance
• Lack of focus on terrorism• Surveillance on Americans
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Internet Taxation
• The Internet Tax Freedom Act – 1998o Created as an incentive for EC businesseso Internet sales treated as mail-order sales
• No sales taxes paid in states where the company has no presence
• Problem• Loss of tax incomes• Unfair advantage for e-tailers
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Internet Taxation
• Solutions:• Use tax
oConsumers required to pay their state’s sales taxoPart of some income tax returns
• Streamlined Sales Tax ProjectoSimplification of tax codes oCollection of taxes by out-of-state sellers
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Arguments For and Against Internet Taxation
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Net Neutrality Data sent over the Internet is handled
in a neutral manner All traffic treated the same way ISPs and telephone companies argue
for prioritizationTraditional Internet traffic suffers (e-
mail) due to high bandwidth applications
Example: YouTube.com not paying their fair share, should be deprioritized
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Approaches to Net Neutrality
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Censorship
Governmental attempts to control Internet trafficLimiting citizens from viewing contentE.g., China, North Korea
• Strict guidelines on what can be viewed• Key words and topics blocked
United States• Child Online Protection Act (COPA)
• Age verification for certain content
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Cases
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eBay Under Attack
Phishing Scam artists pretending to
be eBay Ask for credit card
information and passwords eBay would never send
such an email 2006 – London
• £200,000 stolen eBay feedback scores eBay buyer insurance
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Monitoring Productive Employees
“You have zero privacy, get over it” (Scott McNeely) Use of company provided Internet connection can be
legally monitored American Management Association survey (2005)
75% of employers monitor employee’s Internet use 65% use software to block access to certain Web sites 30% monitor key strokes 50% review and retain employee e-mails 8% of the companies disclose the practices to the employees 26% fired employees for Internet misuse 25% fired employees for e-mail abuse
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Employees Using Company Networks Can Affect Liability
Illegal downloading of music and movies using company’s computer and Internet access
Star Wars Episode III: Revenge of the Sith September 2005 “Screener” version stolen and distributed
• Forensic marker revealed the identity of the thief• 3 years in prison
7 employees copied the movie• 1 year in prison and $100,000 in fines• Company not held liable
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IM at Work
Disadvantages of using public IM Security cannot be assumed Data resides on the provider’s server Access to the network cannot be blocked
IM protocols for organization’s own IM network Secure message transfer Ability to handle thousands of employee accounts Platform compatibility Access from outside of the WAN Proper access rights
IM hosting service – third alternative Data still resides on provider’s server – privacy concerns