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Electronic Commerce
Chapter 5
History
Began in the early 1970s
innovations such as electronic transfer of funds (EFT)
were limited to large corporations and a few daring
small businesses
Electronic Data Interchange (EDI)
added other kinds of transaction processing and
extended the types of participating companies
ANSI X.12 standardized in 1983
EDIFACT standardized in 1986-87
Over the last five years
innovative applications, from advertisement to auctions
and procurement
fueled by the internet
Types of Electronic Commerce
Business-to-consumer EC (B2C)
companies sell directly to consumers over the Internet
Business-to-business EC (B2B)
two (or more) businesses make transactions electronically
More than $7.3 trillion volume by 2004
15x volume of B2C
Mostly done by EDI – 95% of EC is EDI!
Consumer-to-consumer (C2C)
E.g. E-bay, Classifieds
Government-to-citizens (G2C) and to others
Doing taxes online etc.
Mobile commerce (m-commerce)
Wireless commerce. E.g. Using cell phone to pay for gas
Supply Chain Management
Value Chains in E-Commerce
Conversion to e-commerce supply chain
management provides businesses with an
opportunity to:
increase revenues or decrease costs by eliminating
time-consuming and labor-intensive steps throughout
the order and delivery process
improve customer satisfaction by enabling customers to
view detailed information about delivery dates and
order status
reduce inventory including raw materials, safety stocks,
and finished goods
Product and Information Flow for
HP Printers Ordered Over the Web
E-Commerce Applications
Retail and Wholesale
Cybermall
Electronic exchange
Manufacturing
Marketing
Investment and Finance
On-line Stock Trading
On-line Banking
Electronic Retailing
Solo storefronts
Examples: walmart.com, buy.com
Can use services like http://store.yahoo.com
Cybermalls
Examples Cybermall.com, Shopnow.com
Stores give up some freedom to be part of the mall
Some malls are just fancy directories of stores
Some solo stores expand to become malls
Amazon.com, Buy.com
Some malls are more like intelligent agents for
comparing prices (pricegrabber.com)
Issues in E-tailing
Channel conflict
Lego.com: Keeping consumers and retailers happy (very
small percent of revenue from online sales)
Order fulfillment
Shipping small quantities to many customers. How to handle
returns?
Incorrect revenue models
Until 2000 (dot-com bubble), profit was old-fashioned in ecommerce
You can’t have low prices and expect to make it up in
advertising.
Today: All is based on profit, not revenue!
B2B E-commerce
Sell-side marketspaces
One company trying to sell its goods to many
companies
Customized catalogs, auctions
Buy-Side marketspaces / E-procurement
One large buyer, many smaller suppliers
Examples: Supermarket chains, Ford, Boeing
Alternative: Group procurement (e.g. shop2gether.com)
Electronic Exchanges
Many sellers and many buyers
An Electronic Exchange
Key Technical Components
•Catalog Management
•Product Configuration
•Shopping Cart
•E-commerce Transaction
Processing
•Web Site Data Analysis
•Linux
•Unix
•Windows
Electronic Payment Systems
•Credit cards, smart cards
•Digital certificate
•Electronic cash
•Electronic wallet
•P2P payment (PayPal)
Decision: Develop or outsource?
•Apache Web server
•Oracle
•Web construction
•PC
•Mainframe
•Mid-range
Strategies for Successful ECommerce
Developing an effective Web presence
Putting up a Web site
Web Site Hosting Services
Storefront Brokers
Building Traffic to your Web Site
Advertising
Advertising Issues:Attracting
Visitors to a Site
Making the top list of a search engine
the search engine’s spider crawls through the
submitted site, following and indexing all
related content and links
a company can get to the top of a search
engine’s list by adding, removing, or changing
a few sentences
or by paying for the service!
Paid search is a very effective advertising method
Google Adwords: www.google.com/ads
Check Google Toolbar for IE (PageRank)
Security
Most Americans are concerned about
Internet security; 74% are worried about
their personal info
Most (64%) people don’t pay attention to
privacy policies (3% read them carefully).
Authentication
the buyer, the seller, and the paying institutions must be assured
of the identity of the party with whom they are dealing
Integrity
data and information transmitted in EC, must not be accidentally
or maliciously altered or destroyed during transmission
Non-repudiation
merchants need protection against the customer’s unjustifiable
denial of placing an order; buyer needs protection against the
vendor denial of shipment, or sending wrong order
Privacy
many customers want their identity to be undisclosed
Safety
customers want to be sure that it is safe to provide a credit card
number on the Internet
Advertising Online
Advertisement
an attempt to disseminate information in order to
attract buyers
Internet Advertisement
can be updated any time at a minimal cost and
therefore can always be timely
can reach very large numbers of potential buyers, all
over the world
can be cheaper
can efficiently use the convergence of text, audio,
graphics, and animation
can be interactive and targeted to specific interest
groups and/or individuals
Advertising
Methods: Banners
the most commonly used form of advertising on the
Internet, links to advertiser's site
contains a short text or graphical message to promote a
product or a vendor
Keyword banners
appear when a predetermined word is queried from the search
engine
effective for companies who want to narrow their target to
consumers interested in particular topics
Example: Google.com (text-only),
Random banners
appear randomly
might be used to introduce new products to the widest possible
audience, or to keep a well-known brand in the public memory
Example: Cnet.com (few, but large banner ads)
Related: Pop-up windows (pop-over and pop-under)
Advertising Methods: Email
Emerging as an Internet advertising and
marketing channel that permits cost-effective
implementation and a better and quicker response
rate than other advertising channels
Viral marketing
A fine line between email marketing and spam!
Typically works best where consumers sign up to
receive specific information
But apparently spam works, or 38% of all email
wouldn’t be spam! (Business 2.0, November 2002, p. 64)
Ethical and Legal Issues of Ecommerce
Privacy
most electronic payment
systems know who the buyers
are; therefore, it may be
necessary to protect the
buyers’ identity
Web Tracking
by using sophisticated
software it is possible to track
individual movements on the
internet
Domain Names
several companies that have
similar or same names (in
different countries) compete over
a domain name that is not a
registered trademark
Domain names have been ‘stolen’
by cybersquatters
Verisign had taken control of all
unassigned domain names
Taxes and Other Fees
particularly complex for interstate
and international commerce (A
tax moratorium in the US – but
not in EU)
Copyright
intellectual property is protected
by copyright laws and cannot be
used freely
Transaction Processing Information
Systems
What is a transaction?
Grocerystore purchase, airline ticket reservation,
deposit money to an account.
Something is exchanged (money, goods, ...)
What data is collected?
What transactions did you take part in yesterday?
Transaction Processing
major business processes
provide the mission-critical activities
transaction may generate additional transaction
Transaction Processing System (TPS)
computerized information system
supports the transaction processes
Critical to the well-being of the organization!!
Characteristics of TPS
Large amounts of data are processed
The TPS processes information on a regular basis
High level of detail in data
Low complexity of calculations
Systems must be very reliable
Large storage (database) capacity is required
Need lots of processing speed due to the high volume
Input and output data are structured
Need high level of accuracy, data integrity, and security
Must allow for queries of data
Transaction Processing Overview
Transaction Processing Systems
Batch Processing System
Transactions are accumulated over time and processed
in a single group
On-line Transaction Processing (OLTP)
Each transaction is processed immediately
Examples?
Does anyone use a batch processing system?
Know of one?
Heard of one?
Batch versus On-line Processing
Data
Processing
Activities
Transaction Processing Activities
Data Collection
Source data automation makes it easier
Data Editing
Check for validity and completeness
Data Correction
Re-enter invalid data
Data Manipulation
Simple calculations
Data Storage
Update databases
Document Production
Business documents and Reports
Example: Point-of-Sale System
Order Processing Systems
Systems that process order
entry, sales configuration,
shipment planning, shipment
execution, inventory control,
invoicing, customer
interaction, and routing and
scheduling
Systems that Support Order
Processing
Integration of
TPSs
TPS, MIS/DSS, and AI/ES
Enterprise Resource Planning
Provide real-time monitoring of business functions
Permits timely analysis of issues such as quality, availability,
customer satisfaction, performance, and profitability.
Combines TPS and MIS (among other things)
Advantages
Elimination of costly, inflexible legacy systems
Improvement of work processes
Increase in access to data for operational decision making
Upgrade of technology infrastructure
Disadvantages
Expense and Time in Implementation
Difficulty Implementing Change
Difficulty Integrating with Other Systems
Risks in Using One Vendor
Coming Up…
Thursday
Rest of Lecture
Due: Lab 5
Tuesday
Chapter 6