Electronic Commerce MIS 2101: Management Information Systems Based on material from Information Systems Today: Managing in the Digital World, Leonard Jessup

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





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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

15Information Systems Today: Managing in the Digital World 5-15

E-Commerce Business Strategies

Differentiated based on levels of physical/virtual presence

16Information Systems Today: Managing in the Digital World 5-16

Learning Objectives





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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





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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

Facebook

Twitter

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





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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

Documents

Electronic Commerce MIS 2101: Management Information Systems Based on material from Information Systems Today: Managing in the Digital World, Leonard Jessup