1 -

BU

S 3

11

– F

all 2

00

3

Electronic CommerceElectronic Commerce

Chapter 5

2 -

BU

S 3

11

– F

all 2

00

3

HistoryHistory

Began in the early 1970sinnovations 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 companiesANSI X.12 standardized in 1983EDIFACT standardized in 1986-87

Over the last five yearsinnovative applications, from advertisement to auctions and procurementfueled by the internet

3 -

BU

S 3

11

– F

all 2

00

3

Types of Electronic CommerceTypes 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 electronicallyMore than $7.3 trillion volume by 200415x volume of B2CMostly 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

4 -

BU

S 3

11

– F

all 2

00

3

Supply Chain ManagementSupply Chain Management

5 -

BU

S 3

11

– F

all 2

00

3

Value Chains in E-CommerceValue 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 processimprove customer satisfaction by enabling customers to view detailed information about delivery dates and order statusreduce inventory including raw materials, safety stocks, and finished goods

6 -

BU

S 3

11

– F

all 2

00

3

Product and Information Flow for Product and Information Flow for HP Printers Ordered Over the WebHP Printers Ordered Over the Web

7 -

BU

S 3

11

– F

all 2

00

3

E-Commerce ApplicationsE-Commerce Applications

Retail and WholesaleCybermallElectronic exchange

ManufacturingMarketingInvestment and Finance

On-line Stock TradingOn-line Banking

8 -

BU

S 3

11

– F

all 2

00

3

Electronic RetailingElectronic Retailing

Solo storefrontsExamples: walmart.com, buy.comCan use services like http://store.yahoo.com

CybermallsExamples Cybermall.com, Shopnow.comStores give up some freedom to be part of the mallSome malls are just fancy directories of storesSome solo stores expand to become malls

Amazon.com, Buy.comSome malls are more like intelligent agents for comparing prices (pricegrabber.com)

9 -

BU

S 3

11

– F

all 2

00

3

Issues in E-tailingIssues in E-tailing

Channel conflictLego.com: Keeping consumers and retailers happy (very small percent of revenue from online sales)

Order fulfillmentShipping small quantities to many customers. How to handle returns?

Incorrect revenue modelsUntil 2000 (dot-com bubble), profit was old-fashioned in e-commerceYou can’t have low prices and expect to make it up in advertising. Today: All is based on profit, not revenue!

10

- B

US

31

1 –

Fall 2

00

3

B2B E-commerceB2B E-commerce

Sell-side marketspacesOne company trying to sell its goods to many companiesCustomized catalogs, auctions

Buy-Side marketspaces / E-procurementOne large buyer, many smaller suppliersExamples: Supermarket chains, Ford, BoeingAlternative: Group procurement (e.g. shop2gether.com)

Electronic ExchangesMany sellers and many buyers

11

- B

US

31

1 –

Fall 2

00

3

An Electronic ExchangeAn Electronic Exchange

12

- B

US

31

1 –

Fall 2

00

3

Key Technical ComponentsKey Technical Components

Decision: Develop or outsource?

•Catalog Management•Product Configuration•Shopping Cart•E-commerce Transaction Processing•Web Site Data Analysis

Electronic Payment Systems•Credit cards, smart cards•Digital certificate•Electronic cash•Electronic wallet•P2P payment (PayPal)

•Apache Web server•Oracle•Web construction

•Linux•Unix•Windows

•PC•Mainframe•Mid-range

13

- B

US

31

1 –

Fall 2

00

3

Strategies for Successful E-Strategies for Successful E-CommerceCommerce

Developing an effective Web presencePutting up a Web site

Web Site Hosting ServicesStorefront Brokers

Building Traffic to your Web SiteAdvertising

14

- B

US

31

1 –

Fall 2

00

3

Advertising Issues:Attracting Advertising Issues:Attracting Visitors to a SiteVisitors to a Site

Making the top list of a search enginethe search engine’s spider crawls through the submitted site, following and indexing all related content and linksa company can get to the top of a search engine’s list by adding, removing, or changing a few sentencesor by paying for the service!

Paid search is a very effective advertising methodGoogle Adwords: www.google.com/ads

Check Google Toolbar for IE (PageRank)

15

- B

US

31

1 –

Fall 2

00

3

SecuritySecurity

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

Most Americans are concerned about Internet security; 74% are worried about their personal infoMost (64%) people don’t pay attention to privacy policies (3% read them carefully).

16

- B

US

31

1 –

Fall 2

00

3

Advertising OnlineAdvertising Online

Advertisementan attempt to disseminate information in order to attract buyers

Internet Advertisementcan be updated any time at a minimal cost and therefore can always be timelycan reach very large numbers of potential buyers, all over the worldcan be cheapercan efficiently use the convergence of text, audio, graphics, and animationcan be interactive and targeted to specific interest groups and/or individuals

Online Ad Spending in US To Hit $8 billion in 2002(http://www2.cio.com/metrics/

2002/metric339.html)

17

- B

US

31

1 –

Fall 2

00

3

Advertising Advertising Methods:Methods: Banners Banners

the most commonly used form of advertising on the Internet, links to advertiser's sitecontains a short text or graphical message to promote a product or a vendorKeyword banners

appear when a predetermined word is queried from the search engineeffective for companies who want to narrow their target to consumers interested in particular topicsExample: Google.com (text-only),

Random bannersappear randomlymight be used to introduce new products to the widest possible audience, or to keep a well-known brand in the public memoryExample: Cnet.com (few, but large banner ads)

Related: Pop-up windows (pop-over and pop-under)

Banner ads remain most popular

online, claiming a 50% share of

all online ads. (March 7, 2002) Jupiter Media Metrix

18

- B

US

31

1 –

Fall 2

00

3

Advertising Methods: EmailAdvertising 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 channelsViral marketingA fine line between email marketing and spam!Typically works best where consumers sign up to receive specific informationBut apparently spam works, or 38% of all email wouldn’t be spam! (Business 2.0, November 2002, p. 64)

19

- B

US

31

1 –

Fall 2

00

3

Ethical and Legal Issues of E-Ethical and Legal Issues of E-commercecommerce

Privacymost electronic payment systems know who the buyers are; therefore, it may be necessary to protect the buyers’ identity

Web Trackingby using sophisticated software it is possible to track individual movements on the internet

Domain Namesseveral companies that have similar or same names (in different countries) compete over a domain name that is not a registered trademarkDomain names have been ‘stolen’ by cybersquatters Verisign had taken control of all unassigned domain names

Taxes and Other Feesparticularly complex for interstate and international commerce (A tax moratorium in the US – but not in EU)

Copyrightintellectual property is protected by copyright laws and cannot be used freely

20

- B

US

31

1 –

Fall 2

00

3

Transaction Processing Transaction Processing Information SystemsInformation 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 Processingmajor business processesprovide the mission-critical activitiestransaction may generate additional transaction

Transaction Processing System (TPS)computerized information systemsupports the transaction processes

Critical to the well-being of the organization!!

21

- B

US

31

1 –

Fall 2

00

3

Characteristics of TPSCharacteristics of TPS

Large amounts of data are processedThe TPS processes information on a regular basisHigh level of detail in dataLow complexity of calculationsSystems must be very reliableLarge storage (database) capacity is requiredNeed lots of processing speed due to the high volumeInput and output data are structuredNeed high level of accuracy, data integrity, and security Must allow for queries of data

22

- B

US

31

1 –

Fall 2

00

3

Transaction Processing OverviewTransaction Processing Overview

23

- B

US

31

1 –

Fall 2

00

3

Transaction Processing SystemsTransaction Processing Systems

Batch Processing SystemTransactions 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?

24

- B

US

31

1 –

Fall 2

00

3

Batch versus On-line ProcessingBatch versus On-line Processing

25

- B

US

31

1 –

Fall 2

00

3

Data Data Processing Processing ActivitiesActivities

26

- B

US

31

1 –

Fall 2

00

3

Transaction Processing ActivitiesTransaction Processing Activities

Data CollectionSource data automation makes it easier

Data EditingCheck for validity and completeness

Data CorrectionRe-enter invalid data

Data ManipulationSimple calculations

Data StorageUpdate databases

Document ProductionBusiness documents and Reports

27

- B

US

31

1 –

Fall 2

00

3

Example: Point-of-Sale SystemExample: Point-of-Sale System

28

- B

US

31

1 –

Fall 2

00

3

Order Processing SystemsOrder Processing SystemsSystems that process order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer interaction, and routing and scheduling

29

- B

US

31

1 –

Fall 2

00

3

Systems that Support Order Systems that Support Order ProcessingProcessing

30

- B

US

31

1 –

Fall 2

00

3Integration of Integration of TPSsTPSs

31

- B

US

31

1 –

Fall 2

00

3

TPS, MIS/DSS, and AI/ESTPS, MIS/DSS, and AI/ES

32

- B

US

31

1 –

Fall 2

00

3

Enterprise Resource PlanningEnterprise Resource Planning

Provide real-time monitoring of business functionsPermits 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 systemsImprovement of work processesIncrease in access to data for operational decision makingUpgrade of technology infrastructure

DisadvantagesExpense and Time in ImplementationDifficulty Implementing ChangeDifficulty Integrating with Other SystemsRisks in Using One Vendor

33

- B

US

31

1 –

Fall 2

00

3

Coming Up…Coming Up…

ThursdayRest of LectureDue: Lab 5

TuesdayChapter 6