MIS CHAPTER 8 ECOMMERCE Hossein BIDGOLI MIS Chapter

MIS CHAPTER 8 E-COMMERCE Hossein BIDGOLI MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 1

Chapter 8 E-Commerce learning outcomes LO 1 Define e-commerce and describe its advantages, disadvantages, and business models. LO 2 LO 3 Explain the major categories of e-commerce. LO 4 Summarize the major models of business-tobusiness e-commerce. LO 5 Describe mobile- and voice-based e-commerce. Describe the business-to-consumer e-commerce cycle. MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 2

Chapter 8 E-Commerce l e a r n i n g o u t c o m e s (cont’d. ) LO 6 Explain two supporting technologies for ecommerce. MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 3

Chapter 8 E-Commerce Defining E-Commerce • E-business – Activities a company performs for selling and buying products and services, using computers and communication technologies • E-commerce – Buying and selling goods and services over the Internet – Builds on traditional commerce by adding the flexibility that networks offer and the availability of the Internet MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 4

Chapter 8 E-Commerce Defining E-Commerce (cont’d. ) • Business applications that use the Internet: – – – – Buying and selling products and services Collaborating with other companies Communicating with business partners Gathering business intelligence on customers and competitors Providing customer service Making software updates and patches available Offering vendor support Publishing and disseminating information MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 5

Chapter 8 E-Commerce The Value Chain and E-Commerce • Value chain – Michael Porter – 1985 – Series of activities designed to meet business needs by adding value (or cost) in each phase of the process • Supporting activities: – Organizational infrastructure, human resource management, technological development, and procurement MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 6

Exhibit 8. 1 MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning Michael Porter’s Value Chain 7

Chapter 8 E-Commerce The Value Chain and E-Commerce (cont’d. ) • Primary activities: – – – Inbound logistics Operations Outbound logistics Marketing and sales Service • The Internet – Increases the speed and accuracy of communication between suppliers, distributors, and customers – Low cost means companies of any size can participate in value chain integration MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 8

Chapter 8 E-Commerce versus Traditional Commerce • Internet and telecommunication technologies play major role • No physical store • Click-and-brick e-commerce – Mix of traditional and e-commerce MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 9

Chapter 8 E-Commerce Twitter Helps Businesses to Find Customers • Twitter can be used by businesses as a promotional tool and as a way to find sales leads • Boloco, a burrito restaurant chain, posted a photo of a coupon on Twitter and invited customers to bring in any image of the coupon -- a photocopy, a printout, or even an image on a mobile phone -- to get the discount • The promotion was a big success, given that 900 customers redeemed the coupon (including by bringing their mobile phones) as opposed to the usual 350 MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 10

Chapter 8 E-Commerce Advantages and Disadvantages of ECommerce • Advantages: – Better relationships with suppliers, customers, business partners – Price transparency – Round the clock and globe operations – More information on potential customers – Increasing customer involvement – Improving customer service – Increasing flexibility and ease of shopping MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 11

Chapter 8 E-Commerce Advantages and Disadvantages of ECommerce (cont’d. ) – Increasing the number of customers – Increasing opportunities for collaboration with business partners – Increasing return on investment because inventory needs are reduced – Offering personalized services and product customization – Reducing administrative and transaction costs MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 12

Chapter 8 E-Commerce Advantages and Disadvantages of ECommerce (cont’d. ) • Disadvantages: – – Bandwidth capacity problems Security issues Accessibility Acceptance MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 13

Chapter 8 E-Commerce Business Models • E-commerce companies focus their operations in different parts of the value chain • Types: – – – Merchant Brokerage Advertising Mixed Informediary Subscription MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 14

Exhibit 8. 3 Business-to-Consumer E-Commerce Major Categories of E-Commerce Business-to-Consumer E-Commerce MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 15

Chapter 8 E-Commerce Business-to-Consumer E-Commerce (cont’d. ) • Companies sell directly to consumers • Examples: – Amazon. com – Barnesandnoble. com – Onsale. com • Types: – Pure-play – Brick and mortar stores with virtual storefronts MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 16

Chapter 8 E-Commerce Business-to-Business E-Commerce • Involves electronic transactions between businesses • Electronic data interchange (EDI) and electronic funds transfer (EFT) • Fastest growing segment of e-commerce • Uses: – Purchase orders, invoices, inventory status, shipping logistics, business contracts, and other operations • Example: – Walmart MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 17

Chapter 8 E-Commerce Consumer-to-Consumer E-Commerce • Involves business transactions between users • Online classified ads: – Craigslist. org • Online auction sites: – e. Bay. com MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 18

Chapter 8 E-Commerce Consumer-to-Business E-Commerce • Involves people selling products or services to businesses • Example: – Creating online surveys • Search for sellers of a product and services – Priceline. com MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 19

Chapter 8 E-Commerce Government and Nonbusiness E-Commerce • E-government applications • Categories: – – Government-to-citizen (G 2 C) Government-to-business (G 2 B) Government-to-government (G 2 G) Government-to-employee (G 2 E) MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 20

Chapter 8 E-Commerce Government and Nonbusiness E-Commerce (cont’d. ) • Nonbusiness organizations: – Universities – Nonprofits – Political and social organizations MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 21

Chapter 8 E-Commerce Organizational or Intrabusiness ECommerce • Involves e-commerce activities that take place inside an organization • Can include: – Exchange of goods, services, or information among employees – Conducting training programs and offering human resource services • Supporting activities in Porter’s value chain MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 22

Chapter 8 E-Commerce A B 2 C E-Commerce Cycle • Major activities: – – – Information sharing Ordering Payment Fulfillment Service and support MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 23

Exhibit 8. 3 MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning Major Activities in B 2 C E-Commerce 24

Chapter 8 E-Commerce B 2 B E-Commerce: A Second Look • B 2 Bs use these additional technologies extensively: – – – Intranets Extranets Virtual private networks Electronic data interchange (EDI) Electronic funds transfer (EFT) • Lowers production costs and improves accuracy – By eliminating many labor-intensive tasks MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 25

Chapter 8 E-Commerce Major Models of B 2 B E-Commerce • Three major types of B 2 B e-commerce models, based on who controls the marketplace: – Seller – Buyer – Intermediary (third-party) • Fourth model called trading partner agreements MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 26

Chapter 8 E-Commerce Seller-Side Marketplace • Most popular B 2 B model • Sellers who cater to specialized markets come together to create a common marketplace for buyers • E-procurement – Enables employees in an organization to order and receive supplies and services directly from suppliers – Can also automate some buying and selling activities • Major vendors of e-commerce and B 2 B solutions include I 2 Technologies, IBM, Oracle, and SAP MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 27

Chapter 8 E-Commerce E-Procurement at Schlumberger • Schlumberger – Oil field services provider • E-procurement system for order processing – Has reduced the cost per order by streamlining paperwork – Replaced a centralized electronic data interchange (EDI) procurement system – Easy-to-use interface MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 28

Chapter 8 E-Commerce Buyer-Side Marketplace • Buyer, or a group of buyers, opens an electronic marketplace – Invites sellers to bid on announced products or requests for quotation (RFQs) • Buyers can: – Manage the procurement process more efficiently – Lower administrative costs – Implement uniform pricing • Large corporations, such as General Electric or Boeing MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 29

Chapter 8 E-Commerce Third-Party Exchange Marketplace • Controlled by a third party • Marketplace generates revenue from the fees charged for matching buyers and sellers • Usually active in vertical or horizontal market • Offers suppliers a direct channel of communication to buyers through online storefronts MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 30

Chapter 8 E-Commerce Worldbid. com: A Third-Party Exchange Marketplace • International marketplace • Designed to help small to mid-sized companies buy and sell products or services domestically or internationally • Provides: – Trade leads – Request for proposals for private and government organizations worldwide MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 31

Chapter 8 E-Commerce Trading Partner Agreements • Automate negotiating processes and enforce contracts between participating businesses • Business partners can send and receive bids, contracts, and other information needed when offering and purchasing products and services • Enables customers to submit electronic documents via the Internet that previously required hard copies with signatures – Using XML MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 32

Chapter 8 E-Commerce Mobile and Voice-Based E-Commerce • Mobile commerce (m-commerce) – Based on Wireless Application Protocol (WAP) – Using handheld devices, such as smart phones or PDAs, to conduct business transactions • Supporting technologies: – Wireless wide-area networks and 3 G networks – Short-range wireless communication technologies • Examples: – i. Phone apps – Internet Explorer Mobile – Google mobile MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 33

Chapter 8 E-Commerce Mobile and Voice-Based E-Commerce (cont’d. ) • Voice-based e-commerce – Rely on voice recognition and text-to-speech technologies – Can conduct business using e-wallets – Security features • Call recognition, voice recognition, fixed shipping address MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 34

Chapter 8 E-Commerce Supporting Technologies • Electronic payment systems • Web marketing • Search engine optimization MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 35

Chapter 8 E-Commerce Electronic Payment Systems • Electronic payment – Money or scrip that is exchanged only electronically • Payment cards: – Credit, debit, charge, and smart cards • Smart cards – Credit card sized – Contain an embedded microprocessor chip storing important financial and personal information MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 36

Chapter 8 E-Commerce Electronic Payment Systems (cont’d. ) • Other types of payments: – – – E-cash E-check E-wallets Pay. Pal Micropayments MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 37

Chapter 8 E-Commerce Web Marketing • Uses the Web and its supporting technologies to promote goods and services • Terms: – – – – Ad impression Banner ads Click Cost per thousand (CPM) Cost per click (CPC) Click-through rate (CTR) Cookie MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 38

Chapter 8 E-Commerce Web Marketing (cont’d. ) – – – – Hit Meta tag Page view (PV) Pop-up ads Pop-under ads Splash screen Spot leasing MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 39

Chapter 8 E-Commerce Search Engine Optimization • Method for improving the volume or quality of traffic to a Web site • Some companies offer SEO service – Editing a site’s contents and HTML code to increase its relevance to specific keywords • Recommendations for optimizing a Web site: – Keywords – Page title – Inbound links MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 40

Chapter 8 E-Commerce Summary • Michael Porter’s value chain, compared ecommerce with traditional commerce • Major e-commerce business models • Main categories of e-commerce • B 2 C e-commerce business cycle • B 2 B e-commerce business models • Mobile and voice e-commerce • Supporting technologies MIS, Chapter 8 © 2011 Course Technology, a part of Cengage Learning 41