Chapter 9 Electronic Commerce Systems

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Chapter 9 Electronic Commerce Systems

• James A. O'Brien, and George Marakas. Management
  Information Systems with MISource 2007, 8th ed. 
  Boston, MA McGraw-Hill, Inc., 2007.  ISBN 13
  9780073323091

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Learning Objectives

• Identify the major categories and trends of
  e-commerce applications
• Identify the essential processes of an e-commerce
  system, and give examples of how they are
  implemented in e-commerce applications
• Identify and give examples of several key factors
  and Web store requirements need to succeed in
  e-commerce
• Identify and explain the business value of
  several types of e-commerce marketplaces
• Discuss the benefits and trade-offs of several
  e-commerce clicks and bricks alternatives

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Introduction to e-Commerce

• Electronic commerce encompasses the entire online
  process of
• Developing
• Marketing
• Selling
• Delivering
• Servicing
• Paying for products and services
• It relies on the Internet and other information
  technologies to support every step of the process

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Case 1 eBay, Running the Right Play

• eBay is one of the fastest-growing companies in
  history, and business is surging
• 31 sites around the world
• 1.1 billion in international sales in 2004, and
  growing twice as fast as the domestic market
• Half of their 125 million registered users are
  outside of the United States
• eBay keeps a playbook
• Several hundred pages of wisdom collected from
  worldwide managers

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Case Study Questions

• Why has eBay become such a successful and diverse
  online marketplace?
• What do you think of eBays playbook concept?
• Why do they call it a playbook?
• Is eBays move into the international arena a
  good long-term strategy?

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The Scope of e-Commerce
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E-Commerce Technologies
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Categories of e-Commerce

• Business-to-Consumer
• Virtual storefronts, multimedia catalogs,
  interactive order processing, electronic payment,
  online customer support
• Business-to-Business
• Electronic business marketplaces, direct links
  between businesses, auctions and exchanges
• Consumer-to-Consumer
• Online auctions, posting to newspaper sites,
  personal websites, e-commerce portals

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Essential e-Commerce Architecture
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Access Control and Security

• E-commerce processes must establish mutual trust
  and secure access between parties
• User names and passwords
• Encryption key
• Digital certificates and signatures
• Restricted access areas
• Other peoples accounts
• Restricted company data
• Webmaster administration areas

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Profiling and Personalizing

• Profiling gathers data on you and your website
  behavior and choices
• User registration
• Cookie files and tracking software
• User feedback
• Profiling is used for
• Personalized (one-to-one) marketing
• Authenticating identity
• Customer relationship management
• Marketing planning
• Website management

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Search Management

• Search processes help customers find the specific
  product or service they want
• E-commerce software packages often include a
  website search engine
• A customized search engine may be acquired from
  companies like Google or Requisite Technology
• Searches are often on content or by parameters

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Content and Catalog Management

• Content Management Software
• Helps develop, generate, deliver, update, and
  archive text and multimedia information at
  e-commerce websites
• Catalog Management Software
• Helps generate and manage catalog content
• Catalog and content management software works
  with profiling tools to personalize content
• Includes product configuration and mass
  customization

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Workflow Management

• E-business and e-commerce workflow management
  depends on a workflow software engine
• Contains software model of business processes
• Workflow models express predefined
• Sets of business rules
• Roles of stakeholders
• Authorization requirements
• Routing alternative
• Databases used
• Task sequences

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Example of Workflow Management
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Event Notification

• Most e-commerce applications are event driven
• Responds to such things as customers first
  website visit and payments
• Monitors all e-commerce processes
• Records all relevant events, including problem
  situations
• Notifies all involved stakeholders
• Works in conjunction with user-profiling software

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Collaboration and Trading

• Processes that support vital collaboration
  arrangements and trading services
• Needed by customers, suppliers, and other
  stakeholders
• Online communities of interest
• E-mail, chat, discussion groups
• Enhances customer service
• Builds loyalty

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Electronic Payment Processes

• Complex processes
• Near-anonymous and electronic nature of
  transactions
• Many security issues
• Wide variety of debit and credit alternatives
• Financial institutions may be part of the process

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Electronic Payment Processes

• Web Payment Processes
• Shopping cart process
• Credit card payment process
• Debit and other more complex processes
• Electronic Funds Transfer (EFT)
• Major payment system in banking, retail
• Variety of information technologies capture and
  process money and credit card transfers
• Most point-of-sale terminals in retail stores
  are networked to bank EFT systems

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Electronic Payment Example
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Securing Electronic Payments

• Network sniffers easily recognize credit card
  formats
• Encrypt data between customer and merchant
• Encrypt data between customer and financial
  institution
• Take sensitive information off-line

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E-Commerce Application Trends
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Case 2 Battle for e-Commerce Supremacy

• eBay commands more than 90 percent of the online
  auction market
• Growth is at least 40 percent per year
• CraigsList is an online classifieds meeting place
• Buying and selling, but no payment system
• Online classifieds growing faster than auctions
• Google and Microsoft entering the market with
  added features
• Search by zip code, online maps, free listings

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Case Study Questions

• Do you agree with Google and Microsoft that eBay
  is now vulnerable to their assaults via Google
  Base and Windows Live Expo?
• What are the major advantages and limitations of
  Google Base and Windows Live Expo?
• Which do you prefer, or would you use both?
• Are eBays development of Kijiji, acquisition of
  Skype, alliance with Yahoo, and other
  acquisitions enough to ward off the competitive
  assaults of Google and Microsoft?

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E-Commerce Success Factors

• Some of the success factors in e-commerce
• Selection and value
• Performance and service
• Look and feel
• Advertising and incentives
• Personal attention (one-to-one marketing)
• Community relationships
• Security and reliability

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Differences in Marketing
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Web Store Requirements
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Developing a Web Store

• Build a website
• Choose or set up web hosting
• Use simple design tools and templates
• Include a shopping cart and payment support
• Market the website
• Include Web page and e-mail advertising and
  promotions
• Exchange advertising with other Web stores
• Register with search engines and directories
• Sign up for affiliate programs

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Serving Your Customers

• Convert visitors into loyal customers
• Develop one-to-one relationship with customers
• Create incentives to encourage registration
• Use Web cookies to identify visitors
• Use tracking services to record and analyze
  website behavior and customer preferences
• Create an attractive, friendly, efficient store
• Offer fast order processing and payment
• Notify when orders are processed and shipped
• Provide links to related websites

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Managing a Web Store

• Manage both the business and the website
• Record and analyze traffic, inventory, sales
• Use CRM features to help retain customers
• Link sales, inventory data to accounting systems
• Operate 24 hours a day, seven day a week
• Protect transactions and customer records
• Use security monitors and firewalls
• Use redundant systems and power sources
• Employ passwords and encryption
• Offer 24-hour tech support

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B2B E-Commerce

• B2B is the wholesale and supply side of the
  commercial process
• Businesses buy, sell, or trade with other
  businesses
• Relies on multiple electronic information
  technologies
• Catalog systems
• Trading systems
• Data interchange
• Electronic funds transfers

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E-Commerce Marketplaces

• One to Many
• Sell-side marketplaces
• One supplier dictates product offerings and
  prices
• Many to One
• Buy-side marketplaces
• Many suppliers bid for the business of a buyer
• Some to Many
• Distribution marketplaces
• Unites suppliers who combine their product
  catalogs to attract a larger audience

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E-Commerce Marketplaces

• Many to Some
• Procurement marketplaces
• Unites major buyers who combine purchasing
  catalogs
• Attracts more competition and thus lower prices
• Many to Many
• Auction marketplaces
• Dynamically optimizes prices

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E-Commerce Portals

• B2B e-commerce portals offer multiple
  marketplaces
• Catalogs
• Exchanges
• Auctions
• Often developed and hosted by third-party
  market-maker companies
• Infomediaries serve as intermediaries in
  e-business and e-commerce transactions

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B2B E-Commerce Web Portal
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Clicks and Bricks

• Success will go to those who can integrate
  Internet initiatives with traditional operations
• Merging operations has trade-offs
• See Figure 9.18

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E-Commerce Integration

• The business case for merging e-commerce with
  traditional business operations
• Move strategic capabilities in traditional
  operations to the e-commerce business
• Integrate e-commerce into the traditional
  business
• Sharing of established brands
• Sharing of key business information
• Joint buying power and distribution efficiencies

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Other Clicks and Bricks Strategies

• Partial e-commerce integration
• Joint ventures and strategic partnerships
• Complete separation
• Spin-off of an independent e-commerce company
• Barnes and Nobles experience
• Spun off independent e-commerce company
• Gained venture capital, entrepreneurial culture,
  and flexibility
• Attracted quality management
• Accelerated decision making
• Failed to gain market share

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E-Commerce Channel Choices

• An e-commerce channel is the marketing or sales
  channel created by a company for its e-commerce
  activities
• There is no universal strategy or e-commerce
  channel choice
• Both e-commerce integration and separation have
  major business benefits and shortcoming
• Most businesses are implementing some measure of
  clicks and bricks integration

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E-Commerce Strategy Checklist

• Questions to ask and answer
• What audiences are we attempting to reach?
• What action do we want those audiences to take?
• Who owns the e-commerce channel within the
  organization?
• Is the e-commerce channel planned alongside other
  channels?
• Is there a process for generating, approving,
  releasing, and withdrawing content?
• Will our brand translate to the new channel?
• How will we market the channel itself?

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Case 3 Yahoo and Flickr

• Flickr is a photo sharing site
• 14,000 images per hour are uploaded
• There are 1.5 million users
• 80 percent of the 60 million photos are public
• More than half have user-created labels that
  make them searchable
• Yahoo purchased Flickr
• The user-generated content (social media) will
  be used in the war against Google
• It would like to apply the same concept to web
  content as well

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Case 3 Yahoo and Flickr

• Google takes an automated approach to searches
• Armies of Ph.D.s and servers
• Creates more relevant searches by using
  algorithms
• Yahoos strategy
• Also uses algorithms, but not as well
• Is gambling that the collective intelligence of
  its audience will produce more relevant search
  results

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Case Study Questions

• How does the Web foster the growth of social
  media and social networking?
• What business benefits does Yahoo hope to gain
  from its acquisition of Flickr and drive to
  Flickize its business?
• How realistic are such planned benefits?
• Can social media and networking serve as a
  strategic competitive differentiator that enables
  Yahoo to overtake Google in the
  multibillion-dollar targeted search ads market?

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Case 4 Todays Web Anything but Usual

• Customers arent just reading these days
• Theyre writing and watching as well
• Community features
• Interactive webcasts
• Newsgroups
• Online chat forums
• Customer-to-customer interactions help Microsoft
  learn which product features work, and which dont

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Case 4 Todays Web Anything but Usual

• Federated will be using FedAd software to
• Coordinate the efforts of 4,000 marketing
  staffers in six divisions
• Buy and publish the companys newspaper, radio,
  and TV ads
• Pay invoices
• Ship ads to publications
• Manage marketing expenses against the companys
  budget

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Case 4 Todays Web Anything but Usual

• Dells initiatives
• Redesign of its website to make it easier to use
• Make IT costs smaller by being more efficient
• Combine the website re-launch with an e-commerce
  consolidation

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Case Study Questions

• What is the primary driver behind the Web upgrade
  activities of Microsoft and Dell?
• What is the business value of Microsofts
  Web-based, live-feedback program?
• What lessons on developing successful e-commerce
  projects can be gained from the information in
  this case?