Information Technology Foundations-BIT 112 CHAPTER 6 E-Business
and E-Commerce
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Information Technology Foundations-BIT 112 2 Chapter Outline
6.1 Overview of E-Business & E-Commerce 6.2
Business-to-Consumer (B2C) E-Commerce 6.3 Business-to-Business
(B2B) E-Commerce 6.4 Electronic Payments 6.5 Ethical and Legal
Issues in E-Business
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Information Technology Foundations-BIT 112 3 Learning
Objectives Describe electronic commerce, including its scope,
benefits, limitations, and types. Distinguish between pure and
partial electronic commerce. Understand the basics of how online
auctions work. Differentiate among business-to-consumer,
business-to- business, consumer-to-consumer, business-to-employee
and government-to-citizen electronic commerce. Describe the major
e-commerce support services, specifically payments and logistics.
Discuss some ethical and legal issues relating to e- commerce.
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Information Technology Foundations-BIT 112 4 Chapter Opening
Case P. 166 Storefront in NYC J&R Web site
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Information Technology Foundations-BIT 112 5 6.1 Overview
Electronic commerce (e-commerce, EC) Describes the buying, selling,
transferring or exchanging of products, services or information via
computer networks, including the Internet. E-business A broader
definition of EC, including buying and selling of goods and
services, and also servicing customers, collaborating with
partners, conducting e-learning and conducting electronic
transactions within an organization.
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Information Technology Foundations-BIT 112 6 Overview
(continued) The product, process, and delivery agent can be
physical or digital. In traditional commerce the three factors are
all physical. Also known as Brick-and-mortar organizations (i.e.,
organizations are purely physical organizations). Pure versus
Partial Electronic Commerce depends on the degree of digitization
involved. The extent to which the commerce has been transformed
from physical or digital. Virtual organizations companies that are
engaged only in EC. (Also called pure play) Click-and-mortar
organizations organizations are those that conduct some e-commerce
activities, yet their business is primarily done in the physical
world. i.e. partial EC.
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Information Technology Foundations-BIT 112 7 FreshDirect (ITs
About Business 6.1) P169 The following slides give you a look at
FreshDirect, which is a partial EC, or clicks-and-mortar
company.
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Information Technology Foundations-BIT 112 8
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Information Technology Foundations-BIT 112 11
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Information Technology Foundations-BIT 112 12
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Information Technology Foundations-BIT 112 13
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Information Technology Foundations-BIT 112 14 Types of
E-Commerce Business-to-consumer (B2C) Sellers are organizations and
the buyers are individuals. Business-to-business (B2B) Both sellers
and buyers are business organizations. B2B represents the vast
majority of e-commerce. Consumer-to-consumer (C2C) Individual sells
products or services to other individuals. Business-to-employee
(B2E) Organization uses e-commerce internally to provide
information and services to its employees. Companies allow
employees to manage their benefits, take training classes
electronically; buy discounted insurance, travel packages, and
event tickets. E-Government The use of Internet Technology in
general and e-commerce in particular to deliver information about
public services to citizens (called Government-to-citizen [G2C
EC]), business partners and suppliers (called
government-to-business [G2B EC]). Mobile Commerce (m-commerce)
Refers to e-commerce that is conducted in a wireless environment.
For example, using cell phone to shop over the Internet.
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Information Technology Foundations-BIT 112 15 B2B and B2C
Electronic Commerce Drawing illustrates the difference between the
two types of EC.
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Information Technology Foundations-BIT 112 16 E-Commerce
Business Models Table 6.1 P 171
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Information Technology Foundations-BIT 112 17 E-Commerce
Business Models Online direct marketing Manufacturers or retailers
sell directly to customers. Electronic tendering system Businesses
(or governments) request quotes from suppliers; uses B2B (or G2B)
with reverse auctions. Image above is the Hong Kong Governments
electronic tending system homepage. Name-your-own-price Customers
decide how much they want to pay. Find-the-best-price Customers
specify a need and an intermediary compares providers and shows the
lowest price.
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Information Technology Foundations-BIT 112 18 E-Commerce
Business Models - Affiliate Marketing Vendors ask partners to place
logos or banners on partners site. If customers click on logo, go
to vendors site, and buy, then vendor pays commission to partners.
Note the Sony logo at the top of this Web page
www.howstuffworks.com
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Information Technology Foundations-BIT 112 19 Other E-Commerce
Business Models Viral marketing Receivers send information about a
product to their friends. Group purchasing (e-coops) Small buyers
aggregate demand to get a large volume; then the group conducts
tendering or negotiates a lower price. Online auctions Companies
run auctions of various types on the Internet.
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Information Technology Foundations-BIT 112 20 Still More
E-Commerce Business Models Product customization Customers use the
Internet to self-configure products or services. Sellers then price
them and fulfill them quickly. Deep discounters Company offers deep
price discounts. Membership Only members can use the services
provided.
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Information Technology Foundations-BIT 112 21 And More
E-Commerce Business Models Bartering online Intermediary
administers online exchange of surplus products, and/or company
receives points for its contribution, and the points can be used to
purchase other needed items.
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Information Technology Foundations-BIT 112 22 A Little More
Focus on E-Commerce Auctions A competitive process in which either
a seller solicits consecutive bids from buyers or a buyer solicits
consecutive bids from sellers. Two Types Forward Auctions sellers
place items, buyers bid continuously. Reverse Auctions buyer posts
request (RFQ), sellers submit bid. In general, forward auctions
result in higher prices over time, where reverse auctions result in
lower prices over time.
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Information Technology Foundations-BIT 112 23 Forward and
Reverse Auctions Bid price Time Forward Auction Bid price Time
Reverse Auction Sellers use a forward auction as a channel to many
potential buyers. Sothebys, for example, uses forward auctions. In
reverse auctions, one buyer, usually an organization, wants to buy
a product or a service. The buyer posts a request for quotation
(RFQ) on its Web site or on a third-party Web site. The RFQ
contains detailed information on the desired purchase. Suppliers
study the RFQ and submit bids, and the lowest bid wins the
auction.
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Information Technology Foundations-BIT 112 24 Benefits of
E-Commerce Benefits to organizations Makes national and
international markets more accessible. Lowering costs of
processing, distributing, and retrieving information. Benefits to
customers Access a vast number of products and services around the
clock (24/7/365). Benefits to Society Ability to easily and
conveniently deliver information, services and products to people
in cities, rural areas and developing countries.
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Information Technology Foundations-BIT 112 25 Limitations of
E-Commerce Technological Limitations Lack of universally accepted
security standards. Insufficient telecommunications bandwidth.
Expensive accessibility. Non-technological Limitations Perception
that EC is unsecure. Unresolved legal issues. Lacks a critical mass
of sellers and buyers.
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Information Technology Foundations-BIT 112 26 6.2
Business-to-Consumer (B2C) Electronic Commerce B2B EC is much
larger in $ volume than B2C EC, but B2C EC is more complex because
it involves a larger number of buyers. Electronic storefronts
represents a single store. Electronic malls collections of
individual shops under a single Internet address.
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Information Technology Foundations-BIT 112 27 Online Service
Industries In addition to purchasing products, customers can also
access needed services via the web. e.g., buying airline tickets,
stocks, A key issue is disintermediation (middlepersons).
Intermediaries: Provide information. Perform value-added services
such as consulting.
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Information Technology Foundations-BIT 112 28 Disintermediation
Example Online diamond broker - disintermediates the diamond supply
chain.
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Information Technology Foundations-BIT 112 29 Web Enabled
Decision Support System Allows One To Specify Diamond Desired
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Information Technology Foundations-BIT 112 30 Other Online
Service Industries Cyberbanking Online securities trading Online
job market Travel services
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Information Technology Foundations-BIT 112 31 The Long Tail
Online services carry far more inventory than traditional
retailers.
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Information Technology Foundations-BIT 112 32 Issues in
Electronic Retailing (E-Tailing) Channel conflict Occurs when
manufacturers disintermediate their channel partners, such as
distributors, retailers, dealers, and sales representatives, by
selling their products directly to consumers, usually over the
Internet through electronic commerce. Multichanneling A process in
which a company integrates its offline and online channels. (e.g.,
returns of online items) Order fulfillment Involves finding the
product to be shipped; packaging the product; arrange for speedy
delivery to the customer; and handle the return of unwanted or
defective products.
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Information Technology Foundations-BIT 112 33 Channel Conflict
P. 177 ???
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Information Technology Foundations-BIT 112 34 Online
Advertising Advertising is an attempt to disseminate information in
order to influence a buyer-seller transaction. Online Advertising
methods Banners: simply electronic billboards. Pop-up ads: appear
in front of the current browser window. Pop-under ads: appear
underneath the active window. Permission marketing: asks consumers
to give their permission to voluntarily accept online advertising
and e- mail. Viral marketing: refers to online word-of-mouth
marketing.
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Information Technology Foundations-BIT 112 35 A closer look at
Online Advertising We must accept the fact that there is no mass in
mass media anymore. Jim Stengel, Global Marketing, Proctor &
Gamble. TV networks face upheaval because of ever- increasing
incursions from digital media like Internet sites. Jeff Zucker,
chief executive of the NBC Universal Television Group. We never
know where the consumer is going to be at any point in time, so we
have to find a way to be everywhere. Ubiquity is the new
exclusivity. Linda Kaplan Thuler, Chief Executive at the Kaplan
Thaler Group, a New York ad agency.
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Information Technology Foundations-BIT 112 36 Drivers of todays
online advertising The emergence of communitainment. The increasing
popularity of Usites (Web sites with primarily user generated
content). Mainstreaming of the Internet. Declining usage of
traditional media (TV, Newspapers). Fragmentation of content
consumption. Consumers are multitasking and they do not like ads.
Source: PiperJaffrey
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Information Technology Foundations-BIT 112 37 Communitainment
PiperJaffray, an investment bank, defines communitainment as the
blending of community, communication, and entertainment into a new
form of online activity driven by consumers. The bank predicts that
consumers will shift more than 50% of their content consumption
over the next decade to communitainment formats (e.g., social
networking, video, and photo sharing sites), displacing traditional
forms of media content like TV, magazines, and large Internet
sites. This trend presents a major challenge for advertisers.
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Information Technology Foundations-BIT 112 38 Fragmentation of
Content Consumption Source: PiperJaffray
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Information Technology Foundations-BIT 112 39 Andconsumers are
multitasking Source: PiperJaffray
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Information Technology Foundations-BIT 112 40 Andconsumers dont
like ADS Source: PiperJaffray
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Information Technology Foundations-BIT 112 41 Eight Types of
Web sites for Advertising 1 - Portals: most popular; best for reach
but not targeting 2 - Search: second largest reach; high
advertising value Source: PiperJaffray
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Information Technology Foundations-BIT 112 42 Eight Types of
Web sites for Advertising 3 - Commerce: high reach; not conducive
to advertising 4 - Entertainment: large reach; strong targetability
Mall of Hawaii
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Information Technology Foundations-BIT 112 43 Eight Types of
Web sites for Advertising 5 - Community: emphasize being a part of
something; good for specific advertising 6 - Communications: not
good for branding; low targetability
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Information Technology Foundations-BIT 112 44 Eight types of
sites (continued) 7-News/weather/sports: poor targetability 8 -
Games: good for very specific types of advertising
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Information Technology Foundations-BIT 112 45 What the eight
categories mean for advertisers Portals and Search have the
greatest reach. Community and Games have the highest level of
engagement. Search and News/Weather/Sports have the highest
monetization.
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Information Technology Foundations-BIT 112 46 6.3
Business-to-Business (B2B) Electronic Commerce Organizations sell
or buy their products or services to other organizations
electronically from their own Web site and/or from a third-party
Web site. Sell-side marketplace, Buy-side marketplace, &
Electronic Exchanges. Sell-side Marketplace Key mechanisms:
electronic catalogs and forward auctions Buy-side Marketplace Key
mechanism: reverse auctions
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Information Technology Foundations-BIT 112 47 Ariba (Sell-side
Marketplace)
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Information Technology Foundations-BIT 112 48 Other Sell-side
Marketplaces
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Information Technology Foundations-BIT 112 49 United Sourcing
Alliance An example of a buy-side marketplace.
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Information Technology Foundations-BIT 112 50 Electronic
Exchanges Exchanges have many buyers and many sellers.
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Information Technology Foundations-BIT 112 51 Boeing PART
Boeing PART is an example of an electronic exchange.
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Information Technology Foundations-BIT 112 52 Vertical Exchange
A type of Electronic Exchange within a specific industry. Example:
PlasticsNet - Search Jobs, Find Companies, Post Your Resume
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Information Technology Foundations-BIT 112 53 The Paper Site
(Vertical Exchange)
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Information Technology Foundations-BIT 112 54 Horizontal
Exchange A type of Electronic Exchange Horizontal exchanges connect
buyers and sellers across many industries and are used mainly for
Maintainance Repair Operations (MRO) materials.
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Information Technology Foundations-BIT 112 55 Functional
Exchange A type of Electronic Exchange Functional exchanges, needed
services such as temporary help or extra office space are traded on
an as-needed basis.
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Information Technology Foundations-BIT 112 56 6.4 Electronic
Payments Electronic checks (e-checks) are similar to paper checks
and are used mostly in B2B. Electronic credit cards allow customers
to charge online payments to their credit card account. Purchasing
cards are the B2B equivalent of electronic credit cards and are
typically used for unplanned B2B purchases. Electronic cash
Stored-value money cards allow you to store a fixed amount of
prepaid money and then spend it as necessary. Smart cards contain a
chip called a microprocessor that can store a considerable amount
of information and are multipurpose can be used as a debit card,
credit card or a stored-value money card. Person-to-person payments
are a form of e-cash that enables two individuals or an individual
and a business to transfer funds without using a credit card.
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Information Technology Foundations-BIT 112 57 6.5 Ethical and
Legal Issues Ethical Issues Privacy: ecommerce provides
opportunities for businesses and employers to track individual
activities on the WWW using cookies or special spyware. This allows
private/personal information to be tracked, compiled, and stored as
an individual profile. This profile can be used or sold to other
businesses for target marketing or by employees to aide in
personnel management decisions (i.e., promotions, raises, layoffs).
Disintermediation: causing job loss among intermediaries.
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Information Technology Foundations-BIT 112 58 Legal Issues
Specific to E-Commerce Fraud on the Internet i.e. stocks,
investments, business opportunities, auctions. Domain Names
problems with competition over a name. Cybersquatting refers to the
practice of registering domain names solely for the purpose of
selling them later at a higher price. Domain Tasting a practice of
registrants using the five-day "grace period" at the beginning of a
domain registration to profit from pay-per-click advertising. Taxes
and other Fees when and where (and in some cases whether)
electronic sellers should pay business license taxes, franchise
fees, gross-receipts taxes, excise taxes, etc. Copyright protecting
intellectual property in e-commerce and enforcing copyright laws is
extremely difficult.
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Information Technology Foundations-BIT 112 59 Chapter Closing
Case P. 195