E-Bus e0Commerce Ch 4 ALL

8/21/2019 E-Bus e0Commerce Ch 4 ALL

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Management Information Systems

Chapter 4The Digital Firm:

Electronic Business

&Electronic Commerce

Kenneth C. Laudon

Jane P. Laudon

9thedition PEARS!

Prenti"e #a$$ %&&'

(((.prenha$$."om)$audon

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http://www.prenhall.com/laudonhttp://www.prenhall.com/laudon


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*he +igita$ ,irm- E$e"troni" usinessand E$e"troni" Commer"e

/0e"ti1esAfter completing this chapter, you will be able to:

1. Analyze how Internet technology has changed value propositions and business models.2. Define electronic commerce and describe how it has changed consumer retailing and

business-to-business transactions.3. ompare the principal payment systems for electronic commerce.!. "valuate the role of Internet technology in facilitating management and coordination of

internal and interorganizational business processes.

#. Assess the challenges posed by electronic business and electronic commerce andmanagement solutions.

+is"ussion 2uestions-

1. $se your imagination and come up with an idea of how your organization or companycan use an intranet or e%tranet.

2. &ollowing up on 'uestion 1( what current processes will you have to change toincorporate your idea)

3. Access the*taples.com +eb siteand research the business services they offer. +hat type

of ,2, e%change would this site be classified as) +hat advantages would a businesse%perience by using the *taples.com ,2, e%change)!. *elect any ,2 +eb site and describe its richness and reach.#. +hat are some of the management issues involved with e-commerce( and how would you

resolve them)

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http://www.staples.com/http://www.staples.com/http://www.staples.com/http://www.staples.com/


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*he +igita$ ,irm- E$e"troni" usinessand E$e"troni" Commer"e

2! / the tune of the digital firm. +hether it0s buying( selling( gathering information( managing(or communicating( the driving force behind the evolutionary and revolutionary business is theInternet and its technological advances.

4.1 Electronic Business, Electronic Commerce, and the EmergingDigital Firm

About 1# years ago( the lines between an organization and its customers( suppliers( and partnerswere clear. A business wasn0t e%pected to mae very much( if any( information available toanyone else outside the corporation. "ven the lines separating divisions within an organizationwere clear and understood. roduction was totally separate from finance( and the human

resources department wasn0t directly connected to manufacturing. hat is no longer the case intoday0s business world. In order to remain competitive( businesses are e%pected( if not re4uired(to mae most( if not all( information available across all divisions and to the outside world.

Internet *e"hno$ogy and the +igita$ ,irm

he Internet has proved to be the perfect vehicle for the new information infrastructure re4uiredby the digital firm because of its open standards and structure. 5o other methodology ortechnology has proven to wor as well as the Internet for distributing information and bringingpeople together. It0s cheap and relatively easy to use the Internet as the conduit for connectingcustomers( suppliers( and employees of a firm. 6ery few products have been created that allow

an organization to erase the lines between divisions and disseminate information to anyone andeveryone as the Internet.

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Table 4-1 shows the drastic reduction in transaction coststhat the Internet can provide to thedigital firm. he challenge to businesses is to mae the transactions not 7ust cheaper forthemselves but also easier and more convenient for customers and suppliers. 8ou may have useda company0s +eb site to help troubleshoot a problem you were having with one of its products.If the site is easy to maneuver through and find the answer to your problem( you are more lielyto use it as a source of first choice in the future. 9owever( if the site was frustrating to use and

you felt you spent too much time clicing around( you probably longed for the good ol0 days oftaling to a real person on the other end of the phone.

Again( it0s more than 7ust posting a nice looing +eb site with lots of cute animations ande%pecting customers and suppliers to figure it out from there. +eb-based solutions must beeasier to use and more convenient than traditional methods if a company hopes to morph intobeing a true digital firm.

!e( usiness Mode$s and 3a$ue Propositions

5ew technologies should introduce new methodologies in the digital firm. If the Internet allows

a firm to produce and distribute information cheaper( easier( and faster( then people must adaptto that. Information producers must learn and adopt new techni4ues. 5ew distribution channelsshould bring a change to the way information is stored and distributed. In many cases( thebusiness model organizations used ten years ago has become outmoded and can actuallystrangle the firm.

ustomers and suppliers are learning how to use the new technologies to gather informationabout the firm0s products or services and compare them to the competition. It0s easier and fasterthan ever before. herefore( any business wishing to stay ahead of the game needs to appreciatethat fact and change their processes and methodologies. If they don0t( they may not be in businessmuch longer.

*he Changing E"onomi"s of Information

:et0s say you0re getting ready to buy a new car. 8ou0ve already checed out the prices andinformation on the various +eb sites and have managed to get a pretty good deal because of theinformation you gathered. ,ut now you need a loan and insurance for the new car. 8our banwill give you a loan with a .# percent interest rate. 8ou thin that0s a little high. 8ou call yourinsurance agent and she tells you the going rate is ;1(#


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had( you were able to get better rates. he demise of information asymmetry is a phenomenonthat is occurring in many consumer and business transactions and is directly attributable to theInternet.

he richnessof information that the insurance +eb site provided to you( coupled with theinformation they were able to collect about you( is opening up new opportunities for both

businesses and consumers. 8ou get more information than was previously available and thebusiness collects more information than they were previously able to. he reachof the financial+eb site offering the loan is far greater than previously possible. hin about that for a minute.If you wanted a loan in the past( usually your only option was to visit the local ban. 8ou werestuc with whatever terms and rates they happened to be offering. 5ow you can apply for theloan at financial companies all across the country via the +eb and select the best rates and terms.8ou are no longer limited to the ones in your neighborhood. onversely( the financialinstitutions offering loans can now reach out to thousands and millions more potential customersthan was ever possible before.

he Internet has also allowed businesses and consumers to establish new types of relationshipsnot previously possible. &D.com( the flower +eb site( offers you the opportunity to storebirthdays( anniversaries( and other special occasions on their computer. A few days before theevent( &D.com will send you an e-mail reminder to order flowers. 8ou simply clic on the +ebsite $=: in the e-mail( select the flowers you want sent( and enter your credit card information.he whole transaction taes less than ten minutes and the recipient will love you for being sothoughtful. hat0s richness and reach that neither the consumer nor the business was ever able toestablish before the Internet.

+ithin a company( the Internet offers richness and reach that was difficult at best to establishand maintain prior to the Internet. *ome e%perts have attributed the rise of the globalconglomerate and global economy directly to the Internet. It allows managers to reach worerswherever they are in the world. It allows worers to collaborate with others anywhere( anytime.Information about products or services can be posted to the company0s intranet and allowemployees( customers( and suppliers to access the information whenever they want.

Internet usiness Mode$s

Table 4-2, page 118 in the te%t shows some of the new business models the Internet hasenabled digital firms to undertae. >any of these businesses simply would not be possiblewithout the technologies offered by the Internet. "-,ay is called the ?biggest garage sale in theworld.? It would be impossible for this type of dynamic pricingbusiness to e%ist without theInternet. Interesting to note is the fact that e-,ay is one of a handful of pure-play Internetcompanies to consistently show a profit. As we found out through the dot.com bust( profits arestill an important part of a business0s success.

@ust as magazines and newspapers can0t e%ist without advertising( so too with many +eb sites.,ut unlie traditional print media( banner adsallow more targeted advertising. 9owever( manycompanies are realizing that banner ads are not as effective as they once were because most +ebusers have learned to ignore them. op-up and pop-under ads are now being used( although theytoo are often ignored by consumers. op-up ads are displayed over a +eb page as you0reperusing the site pop-under ads are displayed in a separate browser window beneath your mainbrowser window and remain there until you close them. +hat we0re seeing now is a whole new

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line of consumer products that help prevent this type of advertising from reaching your computerscreen.

Table 4-2 Internet Business Models

Category Description Eample

6irtual *torefront *ells physical products directly to consumers or toindividual business.

Amazon.com

Information,roer

rovide product( pricing( and availability informationto individual and businesses. Benerate revenue fromadvertising or from directing buying.

"dmond.com

Cbb.com

Insweb.com

ransaction

broer

*aves users money and time by processing online

sales transactions( generating a fee each time atransaction occurs. Also provides information.

"trade.com

"%pedia.com

Enline maretplace

rovide a digital environment where buyers andsellers can meet( search for products( displayproducts( and establish prices for those products. anprovide online auction or reverse auctions in whichbuyers submit bids to multiple sellers to purchase at abuyer-specific price as well as negotiated or fi%edpricing. an serve consumers or ,2, ep3.com

Enline serviceprovider

rovide online service for individuals and businesses.Benerate revenue from subscription or transactionfees( from advertising or from collecting maretinginformation from users.

Fdrive.com

"mployease.com

*alesforce.com

6irtualcommunity

rovide an online meeting place where people withsimilar interest can communicate and find usefulinformation.

>otocross.com

&riendster.com

Ivilage.com

*ailnet.com

ortal rovide initial point of entry Ggateway or doorwayH to8ahoo.com


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the web along with specialized content and otherservices.

>*5.com

*tarmedia.com

If you use a portal+eb site such as 8ahoo.com as the first site up on your browser( they cantrac your preferences through software and determine that you much prefer music sites insteadof gardening sites. herefore( the ads that appear will usually direct you to the latest offerings ofmusic and not maple trees. *ome sites gather information from various sources and offer it toyou in a consolidated format. hese on-line syndicatorsrelieve you from having to access manydifferent sites to get the information you want.

he Internet allows pure-playor clic!s-and-mortarbusiness models to offer richness and reachin ways never before possible. It0s up to the business to adapt to the new technologies andmethodologies offered to remain competitive and profitable.

"ottom #ine$ The emerging digital firm now has more opportunities to reach customers,

suppliers, and partners through %nternet channels& The new technology allows a digital

firm to deepen its richness of information and reach& The %nternet has also gi'en digital

firms the opportunity to create new business models or reshape their current model&


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4&2 Electronic Commerce

+hen you thin of Internet-based business( you probably thin of businesses selling toindividual customers. It may surprise you to learn that business-to-business e-commerce is the

fastest growing area of e-commerce and outpaces consumer retailing by millions of dollars.

8ou may also be under the impression that e-commerce is dead because of all the bad publicityabout the dot-com bust in 2

:et0s compare that to the 3rd4uarter 2


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he fact of the matter is e-commerce is growing by leaps and bounds because of the newopportunities offered by Internet-based applications that simply weren0t possible 1< or 1# yearsago.

Categories of E$e"troni" Commer"e

"-commerce is divided into three ma7or categories to mae it easier to distinguish between thetypes of transactions that tae place.

,usiness-to-consumer G,2HJ >ost visible.

,usiness-to-business G,2,HJ Breatest dollar amount of transactions.

onsumer-to-consumer G2HJ Breater geographic reach.

As you now( there are many products and services offered through traditional +eb sites. ,ut aswe continue to e%pand the reach of the Internet to wireless devices( businesses are figuring outhow to offer more products and more services through new channels dubbed mobile commerceor m-commerce. 5ot only can you purchase your airline ticet through a traditional +eb site but

you can instantly find out about flight delays or cancellations through your cell phone or hand-held computer as you travel to the airport. $sing your hand-held computer you can purchase anddownload an electronic boo to read while you wait for the airplane to tae off.

CustomerCentered Retai$ing

*ome of the most successful consumer e-commerce companies have found that it isn0t enough toset up a +eb site to sell their productsJ consumers want information about the productsthemselves and how to integrate the products into their lives.

+ire"t Sa$es o1er the 5e/

Disintermediation( removing the middleman( has allowed many companies to improve theirprofits while reducing prices. 5ow we0re starting to see a phenomenon called reintermediation(the process of creating new middlemen. >any people are concerned about selling productsonline because of the possibility of fraud. herefore( new businesses are springing up offeringreintermediation services that help the buyer and seller coordinate transactions in a more securemode.

:et0s say you want to sell an anti4ue car through your +eb site. A stranger in Ehio e-mails youwith an offer of ;1


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1. #ands( End #i'e$all a phone number and a real( live person will assist you in findingwhat you0re looing for on the +eb site.

2. )y *irtual )odel$*ubmit your body measurements and other personal information.8ou can ?try on? clothes on the +eb site before you purchase them. 8ou can even chechow items coordinate in color and style.

3. +artorial rigins$Discover the >yth of the +hite *ale.

!. +hop with a riend$ wo people can log on and shop together. urchases can beconsolidated into one shopping cart with one payment.

Ether companies are finding that the +eb offers e%cellent customer service tools( which savethem money in personnel costs and gives customers what they want( when they want it. $*offers online pacage status checing by updating its computers within minutes every time apacage passes each checpoint. he sender and recipient can trac the pacage through the+eb and now its whereabouts instantaneously. 5ow that0s fast( customer-oriented( informationservice.

.eb personali/ation allows companies to create one-to-one relationships with customers andsuppliers that simply aren0t possible outside Internet-enabled transactions. he cost of gatheringmareting information in traditional channels is e%tremely high and the data gathered may notyield as much information as a company would hope. ,ut with the Internet( companies cangather information that gives them a truer picture of what the customer is actually purchasing orlooing for.

Amazon.com( probably the most taled-about consumer retail +eb site( doesn0t 7ust sell boosand Ds. It also offers boo reviews from other customers( lins to other boos related to theone they0re purchasing( and the opportunity to purchase gifts for friends and relatives that arethen gift-wrapped and sent out for them. Amazon.com is moving into other marets such asonline auctions and now offers many different services( such as travel through a partnership with"%pedia.comRand a baby registry through ,abies-=-$sR. his is 7ust one e%ample of how theInternet allows companies to use collaborative filtering software to offer customerpersonalization that simply isn0t available through any other channel.

"logs( short for +eblog( have burst onto the scene in the last year thans to the presidentialelection in 2ore valuable thanthat( she receives feedbac from those outside the company and can use the information to helpimprove how the company meets its customer demands.

A useful feature that has been coupled with blogs is that of =eal *imple *yndication or =** forshort. he process allows you to place a small program on your computing device that alerts youto new information posted to web sites you0ve mared. +hen a blogger posts a new entry to yourfavorite site( you receive an alert and can immediately clic on the =** feed to review theposting. =** can also be used on a variety of news-related web sites to help you eep current onbreaing headlines.

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Customer Se$fSer1i"e

If you0re having trouble using a new software program( your first thought may be to call thecompany that produced the program. 8ou first have to find the number( and then are put on holdfor a long time. +hen you finally get through to a customer service technician( he directs you tothe company0s +eb site containing &A's G&re4uently Ased 'uestionsH about the software. 8ou

find the answer to your 4uestion plus more information about other features you didn0t evennow about. 8ou could have saved yourself a lot of time and effort by first accessing thecompany0s +eb site.

he :ands0 "nd +eb site we showcased earlier is an e%cellent e%ample of how businesses areadapting their call centerswith Internet technologies. If you can0t find what you want on the site(you can call :ands0 "nd and a customer service technician will help guide you through the site.*he will even post pictures right on your computer of products you may be interested in.

>any companies now provide self-service +eb sites in order to save money for them and timefor the customer. *o before you pic up the phone ne%t time( log on to the +eb and see what0s

available. 8ou may be pleasantly surprised.

usinesstousiness E$e"troni" Commer"e- !e( Effi"ien"ies andRe$ationships

,efore the Internet( transactions between businesses were based on long-term relationships andgeographic restrictions. It wasn0t practical or cost efficient to search out buyers or suppliersnationwide. hat0s all changed thans to new technologies made available through electronicdata interchangesG"DIH and the Internet. "DI processes allow companies to connect theirinformation systems to each other and mae transactions flow seamlessly between the systems.It0s faster( cheaper( and less error-prone.

It0s also cheaper and easier through on-line echangesfor the buyer to find the cheapest pricesand the seller to find new customers. 5either buyers nor sellers are restricted to doing businesswith one or two partners in a particular geographic area.

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&igure !- shows the relationships between buyers and sellers in on-line e%changes.

,usinesses and both buyers and sellers are en7oying tremendous cost savings by using netmar!etplaces or e-hubs. ,2, e-commerce is reducing the buyers0 costs by allowing them toshop around for the lowest prices. ,2, e-commerce is reducing the sellers0 costs by allowingthem to automate the purchasing transaction and reach a greater number of potential buyers.

he types of echangesavailable for ,2, e-commerce include the followingJ

*ertical$*pecific industries.

0ori/ontal$6arious functions across all industries. "randed$rivate e%changes across a broad range of industries.

"%changes also allow businesses to offer a broader range of services to other businesses thatsimply wasn0t possible before the Internet. *taples( the office supply store( was restricted tooffering in-store purchases of paper( pencils( and other supplies to other businesses. he buyerhad to physically go to the store and wander through the aisles. rice comparison was limited atbest to guessing whether *taples had the lowest price. *taples now offers an online e%changefrom which other businesses can not only order office supplies but also use business servicessuch as payroll pricing( human resources management( legal and insurance services( and manyothers that weren0t profitable or possible in the past. *taples.com is able to provide these online

services by partnering with others to create new efficiencies and relationships through theInternet.

+hile the burst in the dot-com bubble has caused some companies to slow their e-commerceefforts( hardly any of them are totally abandoning Internet integration altogether. he benefitfrom the dot-com fiasco is that companies are planning their e-commerce efforts better andmaing their systems more stable and secure.

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The .indow on Technology$ *ol!swagen e's p %ts "2" 3et )ar!etplace see p& 128 of the tet5

describes how the automobile manufacturer created more efficient relationships with its suppliers

and reduced the cost of its paper-based procurement processes& ather than use an open %nternet-

based system, it created a pri'ate industrial networ! to optimi/e its own business processes&

E$e"troni" Commer"e Payment Systems

6arious forms of electronic payment systems are taing shape to mae Internet-basedpurchases easier and more secure. >any of us don0t want to use credit cards on Internet sitesbecause we don0t trust the technology. Er( we simply can0t bring ourselves to give someone ourcredit card information sight unseen. >any bans( credit card companies( and merchants areworing very hard to devise new technologies to mae it safer and more secure to shop on theInternet by developing systems such as digital credit card payment systems. Digital walletsoffer convenience to buyers and sellers by storing information accessible only to thoseauthorized.

*ometimes it costs more to process a transaction than the monetary value of the transaction.hat0s one of the big issues facing some online merchants. &or instance( if you want to purchase7ust one song from your favorite D( you may be willing to spend only #S for the song. hecredit card transaction may cost the merchant ;1. It stands to reason that not many merchants aregoing to loo favorably on that deal. $sing micropayment systemsmaes it more palatable tothe merchant. 5ot many online sites are currently using this form of payment( but it holds muchpromise for smaller transactions on the Internet.

+hen the credit card was introduced years ago( many people simply refused to believe thatproducts and services could be purchased without cold hard cash. 5ow they are as ubi4uitous asthe greenbac. In our new electronic world( various online payment systems such as electronic

cash e-cash5, accumulated balance digital payment systems, digital credit card paymentsystems, and stored 'alue payment systemsare 7ust a few more ways the computer industryand merchants worldwide will continue to mae it easier and safer to mae purchases online.

+mart cardshaven0t become as popular in the $nited *tates as they are in "uropean and Asiancountries. In addition to storing personal information( you can also use them in place of coinsand bills. he first ma7or e%periment with them in the $nited *tates was at the 1MM AtlantaElympics. here( people didn0t have to use typical currency at all if they wanted a oe( theyswiped their smart card through the machine0s reader and out popped a can. If they wanted anewspaper( they used their smart card instead of half a dozen coins. he prepaid phone cards youcan buy almost anywhere are the most popular form of monetary smart cards in America.

As customer-to-customer G2H e-commerce continues to grow( a secure( trustworthy( paymentsystem is re4uired. hat0s where peer-to-peer payment systemssuch as ayalcome in. heir+eb site e%plains( ?ayal is the preferred payment service for online auctions( and for onlinecommunity and group +eb sites. ayal0s service( free to consumers( can be used from s or+eb-enabled mobile phones.?

A couple more fast-growing payment services offered on the Internet are digital chec!ingandelectronic bill presentment and payment systems. he latter is gaining popularity as people

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become more used to our wired world. "ven though most bill payment systems cost e%tramoney( users find it worth it because they don0t have to worry about overdue bills and charges.5ot only do most ma7or bans offer this service but so does the $.*. ostal *ervice.

able !-3 is a synopsis of the various electronic payment systems available on the Internet. imesavings( convenience( and cost containment are behind the growing popularity of these systems.

Ene of the drawbacs to all these various forms of payment systems is the lac ofstandardization. As with any emerging technology or service( each company is vying to be theindustry leader. ,ut having so many different systems and methodologies leads to confusion bythe consumer and e%tra e%pense by the merchant. Another problem with micropayment systemsis that the average consumer is reluctant to go through the hassle re4uired to mae purchases forminiscule amounts of money. he music industry has tried to set up a system buyers can use topurchase 7ust one song from an album instead of the whole album. *o far( most potentialcustomers aren0t inclined to mae purchases for 7ust MMS. he industry promises a shae-out inthe ne%t few years and eventually we will have fewer( thus more efficient( payment systems.

"ottom #ine$ The three categories of e-commerce, "2C, "2", and C2C, offer businesses

endless possibilities for epanding their products and ser'ices& Customers ha'e far more

opportunities through customer-centered retailing and interacti'e mar!eting and

personali/ation to gather information and ma!e more economical and con'enient

purchases& Electronic commerce payment systems offer safe and efficient methods of

payments for e-commerce sites&

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4&6 Electronic "usiness and the Digital irm

=ather than create your own networing software from scratch( you can use Internet protocolswith their easy-to-use interfaces to put a front on your e%isting systems. 8ou0ll have to create a

software connection between the two but often it0s cheaper to do it this way than to start buildinga whole new information system from scratch.

&or instance( you use a database software system as your main information system to supportproduction and manufacturing. 8ou have a second separate database software system that youuse in advertising and mareting. 8ou could spend a lot of money to create one big databasesystem that combines the two or you can build an interface that maes it appearas though thetwo are one.

The .indow on rgani/ations$ C7E(s 0umanitarian %ntranets see p& 162 of the tet5

describes how the organi/ation is supplying its wor!ers with information andcommunication capabilities they need through intranet portals& %nformation is a'ailable

worldwide and in multiple language 'ersions&

#o( Intranets Support E$e"troni" usiness

,ecause the technology has already been created by others( a company can avoid much of thedesign and development costs by using an intranet. Intranets don0t re4uire specialized e4uipment7ust standard destop clients and servers appropriate to the amount of traffic e%pected. Any indof data can be accessible to users without specialized programs. It0s a cheap( relatively fast(commonplace technology to increase communications and collaboration within a company.

wo benefits of using intranets that stand out are the low start-up costs and the easy-to-use(universal +eb browser interface. *mall and large businesses can defray lots of the cost ofestablishing an intranet because they don0t have to create the interface programs for the users.he content can be created using simple( off-the-shelf software programs that help the companydesign( develop( and maintain the site. he company isn0t limited to 7ust te%t( but can includeaudio and video files that employees can use for training or communicating with distantcolleagues and customers. *imply put( the possibilities are endless.

Intranets are especially useful for allowing geographically separated collaborative teams to wortogether. As long as you0re careful to use firewalls to secure your intranet from outside

interference( it is a cheaper( 4uicer method of sharing data and files between many worers. obe sure( you still need face-to-face interaction( but you can get more wor done cheaper this way.

A very nice feature of intranets in organizations is their ability to connect different types ofcomputers with different operating systems. :et0s say that one department has a base of Applecomputers and 7ust loves the way they wor. Another department has s that it refuses to giveup. 8et another department uses a closed mainframe system for its computing needs. It0svirtually impossible to get all the different platforms taling to one another e%cept through theuse of intranets. 5ow it doesn0t matter what type of computer hardware or operating system is

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being usedJ they can all communicate through +eb sites. he company doesn0t have to buy newhardware and the software cost is restricted to a browser application.

Intranet App$i"ations for E$e"troni" usiness

All functional areas of an organization can benefit from using intranets to help manage business

processes faster( cheaper( and more efficiently. "ach area has its own particular needs and wantsthat can be met through intranets. 8et( each can benefit from having access to information fromthe others.

&igure !-N gives you an idea of how your business can incorporate an intranet to improve yourfunctional applications.

usiness Pro"ess Integration

An intranet can drastically reduce an organization0s supply chain costs and management throughimproved coordination between various departments. It0s possible that the production andshipping departments are located in one building( with the engineering department located acrosstown. he engineers can waste a lot of time traveling bac and forth across town or simply fail tocoordinate with production altogether. An intranet offers much improved coordination betweenthese departments.

+e0re pretty sure that when im ,erners-:ee invented the +orld +ide +eb in the early 1MM


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suppliers can start maing parts right away. hat puts inventories on a bread-and-waterdiet. he 5et also can automate interactions with customersJ About !< of Dow hemicalo.0s GDE+H customers reorder chemicals without human intervention when sensors intheir storage tans signal they0re running dry.? ,usiness+ee( Enline( >arch 2( 2


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=emember these factsJ

It0s not cheap.

It0s not easy.

It0s not fast.

rgani7ationa$ Change Cha$$enges

+e said earlier that you can0t 7ust throw a +eb site up on the Internet and e%pect it to be anovernight success story. *ure( we0ve all heard of the 1N-year-old millionaire. ,ut the real story isthat most sites don0t mae it. +hy) here are lots of reasons( but one of the most common is thatbusinesses simply fail to change their internal processes to meet the new demands of e-commerce.

*rust8 Se"urity8 and Pri1a"y

onsumers and Internet users are starting to get 4uite vocal over privacy issues. ompanies rely

on the information they gather from site visitors to help plan their mareting efforts. If they can0tuse this information or sell it to other companies( then perhaps they will no longer find e-commerce an advantage. >any companies post privacy statements on their +eb sites but changethem without specific notification to the users. *ome sites mae it very difficult for a visitor tosay no to the distribution of personal information.

5o one nows how many corporate sites have been haced into and information compromisedbecause companies don0t want to publicize their vulnerability. o be sure( security is a big issue.9ow do you loc out hacers and still let in customers) +hat about competitors that access yoursite 7ust to get the lowdown on your products andor prices) Ef course( they can often do thatwithout the Internet.

So$ution uide$ines

here are a lot more issues regarding e-commerce than what ind of graphics to display on a+eb site. *ome of the issues we0ve discussed in this chapter should give you an idea of the typeof the 4uestions you should as of your organization before you begin the comple% tas ofcreating an Internet presence for e-commerce.

8ou need to analyze what you want the mission of the +eb site to be. Are you going to have a+eb site that simply offers information about your company and its products) Are you going tosell only to consumers and if so( what impact will that have on your current retail outlets) 9ow

are you going to get people to your +eb site in the first place) 9ow are you going to eep themcoming bac) If you sell business-to-business( do you have the bac-end processes in place tohandle the increased sales) +ho will host the +eb siteJ your company internally) A +ebhosting service) +ho0s going to create the +eb site( what services will you offer on it( and howare you going to eep your information secure)

If you decide to sell your products directly online( are you going to as your traditional retailoutlets how they feel about it) 8ou might want to. ompa4 omputers( prior to its merger with9ewlett-acard( decided to emulate Dell omputers and set up an online maretplace. Its retail

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distributors threatened to 4uit selling ompa4 products and boycott the company. ompa4 didn0tthin the online sales would cut into its traditional outlets( but the retailers were well aware ofthe channel conflict. ompa4 had to pull bac after spending a few million dollars on itscyberspace efforts.

,arnes T 5oble0s e-commerce effort hasn0t been as successful as Amazon.com0s. Ene of the

reasons is that Amazon.com never had to consider taing sales from traditional bric-and-mortarretailer operations( because they never had them to begin with. ,arnes T 5oble( on the otherhand( has hundreds of traditional boostores that were concerned about declining sales if thecompany +eb site grew too prominent. Ene way ,arnes T 5oble has met this challenge was toplace ioss inside its physical store locations and allow customers to order boos that are notstoced in the storefront. ,arnes T 5oble has increased sales both in its retail stores and its +ebsite.

here are still lots of legal and public policy issues to wor through. &or instance( even thoughdigital signatures are now legal( there are still many side issues about them left to resolve. Andsome people don0t want to use the technology. 9ow do we wor around these issues) >any stategovernments are trying to ta% commerce on the Internet. If they are successful( some of theadvantages of e-commerce will disappear.

It0s important to remember that the legal issues confronting the digital firm include varying statelaws throughout the $nited *tates( as well as federal laws and may e%tend to the laws of foreigncountries.

he5orthern alifornia Association of :aw :ibraries G5EA::H +eb site www.nocall.orghas compiled dozens of lins to +eb sites offering the latest in Internet legal issues. 6isit it soyou can learn the latest in this uncharted area.

Another security issue that turns off many consumers when it comes to e-commerce is areluctance to enter personal information or credit card numbers. It is actually harder to intercepta credit card number on the Internet than it is to steal it in a traditional retail transaction( butpeople are still afraid. ,usinesses can help overcome this fear by using a technology called*ecure *ocet :ayers( which protects data as they are transmitted through the various media.

"ottom #ine$ 9ou are a part of the most re'olutionary time in business& )any companies

are struggling with all the changes and trying desperately to figure out their role in the new

world& 9ou can help yourself and your organi/ation tremendously by understanding the

issues in'ol'ed and de'eloping inno'ati'e strategies to resol'e the problems&

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http://www.nocall.org/http://www.nocall.org/http://www.nocall.org/http://www.nocall.org/

Documents

E-Bus e0Commerce Ch 4 ALL