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Business Driven Information Systems 2e
CHAPTER 3
EBUSINESS
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
3-2
Chapter Three Overview
• SECTION 3.1 - BUSINESS AND THE INTERNET
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Disruptive Technology
Evolution of the Internet
Accessing Internet Information
Providing Internet Information
• SECTION 3.2 - EBUSINESS
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Ebusiness Basics
Ebusiness Models
Organizational Strategies for Ebusiness
Measuring ebusiness Success
Ebusiness Benefits and Challenges
New Trends in Ebusiness: Egovernment and Mcommerce
SECTION 3.1
BUSINESS AND THE
INTERNET
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
3-4
LEARNING OUTCOMES
1. Compare disruptive and sustaining
technologies
2. Explain how the Internet caused
disruption among businesses
3. Define the relationship between the
Internet and the World Wide Web
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LEARNING OUTCOMES
4. Describe the different methods an
organization can use to access
information
5. Compare the three different types of
service providers
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DISRUPTIVE TECHNOLOGY
• How can a company like Polaroid go
bankrupt?
• Digital Darwinism – implies that
organizations which cannot adapt to the
new demands placed on them for
surviving in the information age are
doomed to extinction
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Disruptive versus Sustaining Technology
• What do steamboats, transistor
radios, and Intel’s 8088 processor all
have in common?
– Disruptive technology – a new way of doing
things that initially does not meet the needs of
existing customers
– Sustaining technology – produces an
improved product customers are eager to buy
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Disruptive versus Sustaining Technology
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Disruptive versus Sustaining Technology
• Innovator’s Dilemma - discusses how
established companies can take
advantage of disruptive technologies
without hindering existing relationships
with customers, partners, and
stakeholders
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Disruptive versus Sustaining Technology
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The Internet – Business Disruption
• One of the biggest forces changing business is
the Internet
• Organizations must be able to transform as
markets, economic environments, and
technologies change
• Focusing on the unexpected allows an
organization to capitalize on the opportunity for
new business growth from a disruptive
technology
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The Internet – Business Disruption
Estimates predict more than 3 billion Internet users by 2010
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The Internet – Business Disruption
Estimates predict more than 3 billion Internet users by 2010
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The Internet – Business Disruption
• The Internet has had an impact on almost
every industry including:
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Travel
Entertainment
Electronics
Financial services
Retail
Automobiles
Education and training
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EVOLUTION OF THE INTERNET
• The Internet began as an emergency
military communications system operated
by the Department of Defense
• Gradually the Internet moved from a
military pipeline to a communication tool
for scientists to businesses
– Internet
– Protocol
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Evolution of the World Wide Web
• World Wide Web (WWW) – a global
hypertext system that uses the Internet as
its transport mechanism
• Hypertext transport protocol (HTTP) –
the Internet standard that supports the
exchange of information on the WWW
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Evolution of the World Wide Web
• Reasons for growth of the WWW
– Microcomputer revolution
– Advancements in networking
– Easy browser software
– Speed, convenience, and low cost of email
– Web pages easy to create and flexible
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Evolution of the World Wide Web
• The Internet’s impact on information
– Easy to compile
– Increased richness
– Increased reach
– Improved content
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Evolution of the World Wide Web
• File formats offered over the WWW
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Evolution of the World Wide Web
• The Internet makes it possible to perform
business in ways not previously
imaginable
• It can also cause a digital divide
– Digital divide – when those with access to
technology have great advantages over those
without access to technology
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WEB 2.0
• Web 2.0 - a set of economic, social, and
technology trends that collectively form the
basis for the next generation of the Internet
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WEB 2.0
Timeline of Web 1.0
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Mashups
• Web mashup - a website or web
application that uses content from more
than one source to create a completely
new service
– Application programming interface (API) a set of routines, protocols, and tools for
building software applications
– Mashup editor - WSYIWYGs (What You See
Is What You Get) for mashups
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THE FUTURE – WEB 3.0
• Semantic web encompasses the
following:
1. Transforming the web into a database
2. An evolutionary path to artificial
intelligence
3. The realization of semantic web and
SOA
4. Evolution toward 3D
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ACCESSING INTERNET INFORMATION
•
Four tools for accessing Internet information
1. Intranet – internalized portion of the
Internet, protected from outside access, for
employees
2. Extranet – an intranet that is available to
strategic allies
3. Portal – website that offers a broad array
of resources and services
4. Kiosk – publicly accessible computer
system that allows interactive information
browsing
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PROVIDING INTERNET INFORMATION
•
Three common forms of service providers
1. Internet service provider (ISP) –provides
individuals and other companies access to the
Internet
2. Online service provider (OSP) – offers an
extensive array of unique Web services
3. Application service provider (ASP) – offers
access over the Internet to systems and related
services that would otherwise have to be located in
organizational computers
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PROVIDING INTERNET INFORMATION
• Common ISP services include:
– Web hosting
– Hard-disk storage space
– Availability
– Support
• Service level agreements (SLA) - define
the specific responsibilities of the service
provider and sets customer expectations
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PROVIDING INTERNET INFORMATION
Wireless Internet service provider (WISP)
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OPENING CASE QUESTIONS
Amazon
1. How has Amazon used technology to revamp
the bookselling industry?
2. Is Amazon using disruptive or sustaining
technology to run its business?
3. How is Amazon using intranets and extranets
to run its business?
4. How could Amazon use kiosks to improve its
business?
SECTION 3.2
EBUSINESS
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
3-31
LEARNING OUTCOMES
6. Compare the four types of ebusiness models
7. Describe how an organization’s marketing,
sales, accounting, and customer service
departments can use ebusiness to increase
revenues or reduce costs
8. Explain why an organization would use metrics
to determine a website’s success
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LEARNING OUTCOMES
9. Describe ebusiness along with its
benefits and challenges
10. Define mcommerce and explain how an
egovernment could use it to increase its
efficiency and effectiveness
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EBUSINESS BASICS
• How do ecommerce and ebusiness differ?
– Ecommerce – the buying and selling of
goods and services over the Internet
– Ebusiness – the conducting of business on
the Internet including, not only buying and
selling, but also serving customers and
collaborating with business partners
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EBUSINESS BASICS
Industries Using Ebusiness
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EBUSINESS MODELS
• Ebusiness model – an approach to
conducting electronic business on the
Internet
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EBUSINESS MODELS
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EBUSINESS MODELS
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Business-to-Business (B2B)
• Electronic
marketplace
(emarketplace) –
interactive business
communities
providing a central
market where
multiple buyers and
sellers can engage
in ebusiness
activities
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Business-to-Consumer (B2C)
• Common B2C ebusiness models include:
– Eshop – a version of a retail
– Emall – consists of a number of eshops
• Business types include:
– Brick-and-mortar business
– Pure-play business
– Click-and-mortar business
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Consumer-to-Business (C2B)
• Priceline.com is an example of a C2B
ebusiness model
• The demand for C2B ebusiness will
increase over the next few years due to
customer’s desire for greater convenience
and lower prices
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Consumer-to-Consumer (C2C)
• Online auctions
– Electronic auction (eauction) - sellers and
buyers solicit bids and prices are determined
dynamically
– Forward auction - a selling channel to many
buyers and the highest bid wins
– Reverse auction - buyers use to purchase a
product or service, selecting the seller with
the lowest bid
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Consumer-to-Consumer (C2C)
• C2C Communities
– Communities of interest - People interact with each
other on specific topics, such as golfing and stamp
collecting
– Communities of relations - People come together
to share certain life experiences, such as cancer
patients, senior citizens, and car enthusiasts
– Communities of fantasy - People participate in
imaginary environments, such as fantasy football
teams and playing one-on-one with Michael Jordan
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ORGANIZATIONAL STRATEGIES FOR EBUSINESS
• Primary business areas taking advantage
of ebusiness include:
– Marketing/sales
– Financial services
– Procurement
– Customer service
– Intermediaries
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Marketing/Sales
• Generating revenue on the Internet
– Online ad (banner ad) - box running across a web
page that contains advertisements
– Pop-up ad - a small web page containing an
advertisement
– Associate program (affiliate program) - businesses
generate commissions or royalties
– Viral marketing - a technique that induces websites
or users to pass on a marketing message
– Mass customization - gives customers the
opportunity to tailor products or services
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Marketing/Sales
• Generating revenue on the Internet (cont.)
– Personalization - occurs when a website can fashion
offers that are more likely to appeal to that person
– Blog - website in which items are posted on a regular
basis and displayed in reverse chronological order
– Real simple syndications (RSS) - a web feed format
used for web syndication of content
– Podcasting - the distribution of audio or video files,
such as radio programs or music videos, over the
Internet to play on mobile devices
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Marketing/Sales
• Generating revenue on the Internet (cont.)
– Search engine optimization (SEO) - a set of
methods aimed at improving the ranking of a website
in search engine listings
– Spamdexing - uses a variety of deceptive
techniques in an attempt to manipulate search
engine rankings, whereas legitimate SEO focuses on
building better sites and using honest methods of
promotion
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Financial Services
• Online business payments
include:
–Electronic data interchange (EDI)
• Value-added network (VAN)
–Financial EDI (financial electronic
data interchange)
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Financial Services
• Electronic trading network
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Procurement
• Maintenance, repair, and operations (MRO)
materials (also called indirect materials) –
materials necessary for running an organization
but do not relate to the company’s primary
business activities
– Eprocurement - the B2B purchase and sale of
supplies and services over the Internet
– Electronic catalog - presents customers with
information about goods and services offered for
sale, bid, or auction on the Internet
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Customer Service
• Customer service is the business process
where the most human contact occurs between
a buyer and a seller
• Ebusiness strategists are finding that customer
service via the Web is one of the most
challenging and potentially lucrative areas of
ebusiness
• The primary issue facing customer service
departments using ebusiness is consumer
protection
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Consumer Protection
• Issues for consumer protection
– Unsolicited goods and communications
– Illegal or harmful goods, services, and
content
– Insufficient information about goods
– Invasion of privacy
– Cyberfraud and cybercrime
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Consumer Protection
• Ebusiness security
– Encryption
– Secure socket layer (SSL)
– Secure electronic transaction (SET)
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Intermediaries
• Intermediaries – agents, software, or
businesses that bring buyers and sellers
together that provide a trading
infrastructure to enhance ebusiness
• Reintermediation – using the Internet to
reassemble buyers, sellers, and other
partners in a traditional supply chain in
new ways
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MEASURING EBUSINESS SUCCESS
• Most companies measure the traffic on a
website as the primary determinant of the
website’s success
• However, a large amount of website traffic does
not necessarily equate to large sales
• Many organizations with high website traffic
have low sales volumes
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MEASURING EBUSINESS SUCCESS
• Website traffic analysis can include:
– Cookie
– Click-through
– Banner ad
– Interactivity
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Website Metrics
• Clickstream data tracks the exact pattern of a
consumer’s navigation through a website
• Clickstream data can reveal:
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Number of pageviews
Pattern of websites visited
Length of stay on a website
Date and time visited
Number of customers with shopping carts
Number of abandoned shopping carts
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Website Metrics
• Website metrics include:
– Visitor metrics
– Exposure metrics
– Visit metrics
– Hit metrics
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EBUSINESS BENEFITS AND
CHALLENGES
• Ebusiness benefits include:
– Highly accessible
– Increased customer loyalty
– Improved information content
– Increased convenience
– Increased global reach
– Decreased cost
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EBUSINESS BENEFITS AND
CHALLENGES
• Ebusiness challenges include:
– Protecting consumers
– Leveraging existing systems
– Increasing liability
– Providing security
– Adhering to taxation rules
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EBUSINESS BENEFITS AND
CHALLENGES
• There are numerous advantages and
limitations in ebusiness revenue models
including:
– Transaction fees
– License fees
– Subscription fees
– Value-added fees
– Advertising fees
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NEW TRENDS IN EBUSINESS:
EGOVERNMENT AND MCOMMERCE
• Egovernment - involves the use of
strategies and technologies to transform
government(s) by improving the delivery
of services and enhancing the quality of
interaction between the citizen-consumer
within all branches of government
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NEW TRENDS IN EBUSINESS:
EGOVERNMENT AND MCOMMERCE
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NEW TRENDS IN EBUSINESS:
EGOVERNMENT AND MCOMMERCE
• Mobile commerce the ability to
purchase goods and
services through a
wireless Internetenabled device
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OPENING CASE QUESTIONS
Amazon
5. What is Amazon’s ebusiness model?
6. How can Amazon use mcommerce to
influence its business?
7. Which metrics could Amazon use to assess
the efficiency and effectiveness of Amazon’s
website?
8. What are some of the business challenges
facing Amazon?
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CLOSING CASE ONE
eBay – The Ultimate ebusiness
1.
eBay is one of the only major Internet “pure plays” to
consistently make a profit from its inception. What is
eBay’s ebusiness model and why has it been so
successful?
2.
Other major websites, like Amazon.com and Yahoo!,
have entered the emarketplace with far less success
than eBay. How has eBay been able to maintain its
dominant position
3.
eBay has long been an emarketplace for used goods
and collectibles. Today, it is increasingly a place
where major businesses come to auction their wares.
Why would a brand name vendor set up shop on
eBay?
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CLOSING CASE ONE
eBay – The Ultimate ebusiness
4. What are the three different types of online
auctions and which one is eBay using?
5. What are the different forms of online payment
methods for consumers and business? How
might eBay’s customers benefit from the
different payment methods?
6. Which metrics would you use if you were hired
to assess the efficiency and effectiveness of
eBay’s website?
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CLOSING CASE TWO
EBIZ
1. What other ways could you use the Internet to
raise money?
2. What types of businesses could benefit from
trading on the Internet?
3. Can you think of any other disruptive or nontraditional ways that you could use the
Internet?
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CLOSING CASE THREE
How Do You Value Friendster?
1.
How could you use ebusiness metrics to place a value on
Friendster?
2.
Why would a venture capital company value Friendster at $53
million when the company has yet to generate any revenue?
3.
Why would Google be interested in buying Friendster for $30
million when the company has yet to generate any revenue
4.
Identify Friendster’s ebusiness model and explain how the
company can generate revenue
5.
Explain the ebusiness benefits and challenges facing Friendster
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BUSINESS DRIVEN BEST
SELLERS
• The Innovator’s Solution, by Clayton
Christensen and Michael Raynor
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BUSINESS DRIVEN BEST
SELLERS
• Purple Cow, by Seth Godin