5-1 management information systems for the information age chapter 5 electronic commerce strategies...

5-5-11 Management Information Systems Management Information Systems

for the Information Agefor the Information Age

Chapter 5Chapter 5

Electronic CommerceElectronic Commerce

Strategies for the New EconomyStrategies for the New Economy



Presentation OverviewPresentation Overview The Growth of E-CommerceThe Growth of E-Commerce The Advantages of Business To The Advantages of Business To

Consumer E-CommerceConsumer E-Commerce Keys To Success in Business To Keys To Success in Business To

Consumer E-CommerceConsumer E-Commerce Business To Business E-CommerceBusiness To Business E-Commerce The Role of E-GovernmentThe Role of E-Government E-Commerce Payment SystemsE-Commerce Payment Systems



Opening Case StudyOpening Case StudySodas and Snack Food on the WebSodas and Snack Food on the Web

Soda and snack foods are one of the last Soda and snack foods are one of the last things we would consider buying online things we would consider buying online because they are available on nearly because they are available on nearly every street corner.every street corner.

How can products that are easily available How can products that are easily available take advantage of generating sales on the take advantage of generating sales on the Internet?Internet?



The Growth of E-CommerceThe Growth of E-Commerce



E-commerce – E-commerce – is commerce, but it is is commerce, but it is commerce accelerated and enhanced by commerce accelerated and enhanced by IT, in particular the Internet.IT, in particular the Internet.

Demand aggregation – Demand aggregation – combines combines purchase requests from multiple buyers purchase requests from multiple buyers into a single large order, which justifies a into a single large order, which justifies a discount from the business.discount from the business.

The Growth of E-CommerceThe Growth of E-Commerce



The Growth of E-Commerce The Growth of E-Commerce Global E-commerce Growth ProjectionsGlobal E-commerce Growth Projections



The Growth of E-Commerce The Growth of E-Commerce The Digital DivideThe Digital Divide

Digital divideDigital divide - expresses the fact that different - expresses the fact that different peoples, cultures, and areas of the world or peoples, cultures, and areas of the world or within a nation do not have the same access to within a nation do not have the same access to information and telecommunications information and telecommunications technologies. technologies.

Global digital divideGlobal digital divide - - specifically describes the specifically describes the differences in IT access and capabilities differences in IT access and capabilities between different countries or regions of the between different countries or regions of the world. world.



The Advantages of Business The Advantages of Business To Consumer E-CommerceTo Consumer E-Commerce

The Internet’s most prominent advantages are:The Internet’s most prominent advantages are:1.1. Shopping can be faster and more convenient.Shopping can be faster and more convenient.

2.2. Offerings and prices can change instantaneously.Offerings and prices can change instantaneously.

3.3. Call centers can be integrated with the Web site.Call centers can be integrated with the Web site.

4.4. Broadband telecommunications will enhance the Broadband telecommunications will enhance the buying experience.buying experience.



The Advantages of Business To The Advantages of Business To Consumer E-CommerceConsumer E-Commerce

Shopping Can Be Faster and More ConvenientShopping Can Be Faster and More Convenient E-tailerE-tailer - an Internet retail site. - an Internet retail site.

Pure playsPure plays - - Internet retailers such as Internet retailers such as Amazon.com that have no physical stores.Amazon.com that have no physical stores.

Clicks–and-mortarClicks–and-mortar retailers, retailers, (also called (also called “bricks–and-clicks”), are like Nordstrom, “bricks–and-clicks”), are like Nordstrom, which has both an Internet presence and which has both an Internet presence and one or more physical stores. one or more physical stores.




Shopping Can Be Faster and More ConvenientShopping Can Be Faster and More Convenient




Shopping Can Be Faster and More ConvenientShopping Can Be Faster and More Convenient

M-commerceM-commerce - - describes e-commerce describes e-commerce conducted over a wireless device such as conducted over a wireless device such as a cell phone or personal digital assistant a cell phone or personal digital assistant (PDA). (PDA).




Offerings and Prices Can Change Offerings and Prices Can Change InstantaneouslyInstantaneously

E-tailers can change E-tailers can change product offerings and product offerings and prices instantaneously prices instantaneously in response to changes in response to changes in customer demand.in customer demand.

On Your Own

B2C Services(p. 250)(p. 250)




Call Centers Can Be Integrated With the Call Centers Can Be Integrated With the Web SiteWeb Site

Interactive chatInteractive chat - - lets you engage in real-time lets you engage in real-time typed exchange of information between you and typed exchange of information between you and one or more other individuals over the Internet. one or more other individuals over the Internet.

Internet telephonyInternet telephony - - a combination of hardware a combination of hardware and software that uses the Internet as the and software that uses the Internet as the medium for transmission of telephone calls in medium for transmission of telephone calls in place of traditional telephone networks.place of traditional telephone networks.



The Advantages of Business The Advantages of Business To Consumer E-CommerceTo Consumer E-CommerceBroadband Telecommunications Will Broadband Telecommunications Will

Enhance The Buying ExperienceEnhance The Buying Experience Purchase a full-length feature film and download it in Purchase a full-length feature film and download it in

minutes.minutes.

Travel sites will offer full-motion video tours of vacation Travel sites will offer full-motion video tours of vacation destinations.destinations.

Automobile buying sites will be able to offer virtual test Automobile buying sites will be able to offer virtual test drives to let you narrow down your choices before you drives to let you narrow down your choices before you take the time to visit an auto dealership.take the time to visit an auto dealership.



The Advantages of Business The Advantages of Business To Consumer E-CommerceTo Consumer E-CommerceBroadband Telecommunications Will Broadband Telecommunications Will

Enhance The Buying ExperienceEnhance The Buying Experience

Team Work

Broadband Services:Where Do You Place Your Bets?

(p. 251)(p. 251)



Keys To Success In Business Keys To Success In Business To Consumer E-CommerceTo Consumer E-Commerce

Important lessons include:Important lessons include:1.1. Commoditylike items work best.Commoditylike items work best.

2.2. Digital products are the best of all.Digital products are the best of all.

3.3. Attracting and retaining customers.Attracting and retaining customers.

4.4. Remember the importance of Remember the importance of merchandising.merchandising.

5.5. You must execute well.You must execute well.

6.6. Watch the competition.Watch the competition.




Commoditylike Items Work BestCommoditylike Items Work Best

People tend to be more comfortable People tend to be more comfortable buying items on the Internet that are buying items on the Internet that are commoditylike, that is, uniform. commoditylike, that is, uniform.

People tend to be less comfortable buying People tend to be less comfortable buying “high touch” items on the Internet such as “high touch” items on the Internet such as furniture. furniture.




Digital Products Are the Best of AllDigital Products Are the Best of All

The reasons digital products are best suited for The reasons digital products are best suited for B2C e-commerce are the following:B2C e-commerce are the following:

1.1. They are commoditylike products.They are commoditylike products.

2.2. They can be mass-customized and personalized.They can be mass-customized and personalized.

3.3. They can be delivered at the time of purchase.They can be delivered at the time of purchase.

4.4. They foster disintermediation.They foster disintermediation.

5.5. They have global reach.They have global reach.




Digital Products Are the Best of AllDigital Products Are the Best of All

Micro-paymentsMicro-payments - techniques to facilitate - techniques to facilitate the exchange of small amounts of money the exchange of small amounts of money for an Internet transaction. for an Internet transaction.



Keys To Success In Business Keys To Success In Business To Consumer E-CommerceTo Consumer E-Commerce Attracting and Retaining CustomersAttracting and Retaining Customers

Marketing mixMarketing mix - the set of marketing tools that the firm - the set of marketing tools that the firm uses to pursue its marketing objectives in the target uses to pursue its marketing objectives in the target market.market.

Additional techniques for attracting Internet customers Additional techniques for attracting Internet customers include:include:1.1. Registering with search enginesRegistering with search engines2.2. Online adsOnline ads3.3. E-Mail and viral marketingE-Mail and viral marketing4.4. Affiliate programsAffiliate programs5.5. Selling to existing customersSelling to existing customers




1.1. Registering with Search EnginesRegistering with Search Engines Meta tagsMeta tags - part of a Web site text not displayed to - part of a Web site text not displayed to

users but accessible to browsers and search users but accessible to browsers and search engines for finding and categorizing Web sites.engines for finding and categorizing Web sites.

2.2. Online AdsOnline Ads Many Web sites use banner ads, a small ad on one Many Web sites use banner ads, a small ad on one

Web site that advertises the products and services Web site that advertises the products and services of another business, usually another dot-com of another business, usually another dot-com businessbusiness




3.3. E-Mail and Viral MarketingE-Mail and Viral Marketing SpamSpam - - unsolicited e-mail. unsolicited e-mail. Viral marketingViral marketing – – encourages users encourages users

of a product or service supplied by a of a product or service supplied by a B2C company to ask friends to join in B2C company to ask friends to join in as well. as well.




4.4. Affiliate ProgramsAffiliate Programs Affiliate programsAffiliate programs - - arrangements made arrangements made

between e-commerce sites that direct users between e-commerce sites that direct users from one site to the other. from one site to the other.

Click-throughsClick-throughs - - a count of the number of a count of the number of people who visit one site, click on an ad, and people who visit one site, click on an ad, and are taken to the site of the advertiser. are taken to the site of the advertiser.




5.5. Selling to Existing CustomersSelling to Existing Customers One of the keys to success in the B2C One of the keys to success in the B2C

space is to encourage customers to space is to encourage customers to continue to buy from you. continue to buy from you.

Conversion rateConversion rate - the percentage of - the percentage of customers who visit the site who actually customers who visit the site who actually buy something. buy something.




Remember the Importance of Remember the Importance of MerchandisingMerchandising

A B2C business must do an effective job A B2C business must do an effective job of merchandising. of merchandising.



Keys To Success In Business Keys To Success In Business To Consumer E-Commerce To Consumer E-Commerce

You Must Execute WellYou Must Execute Well Executing well simply means that when a Executing well simply means that when a

customer places an order on your Web site, you customer places an order on your Web site, you have to follow through and execute the have to follow through and execute the necessary business processes to get the right necessary business processes to get the right item to the customer in a timely fashion. item to the customer in a timely fashion.

A good B2C site immediately sends an e-mail A good B2C site immediately sends an e-mail acknowledgement of the order, containing all of acknowledgement of the order, containing all of the order details and an estimated ship date. the order details and an estimated ship date.



Keys To Success In Business Keys To Success In Business To Consumer E-Commerce To Consumer E-Commerce

Watch the CompetitionWatch the Competition Retaining customers is one of the keys to Retaining customers is one of the keys to

e-commerce success.e-commerce success.

Spend time on the Web surfing around Spend time on the Web surfing around seeing what’s going on in your competitive seeing what’s going on in your competitive space by looking at the Web sites of space by looking at the Web sites of known competitors.known competitors.




Watch the CompetitionWatch the Competition

Team Work

Evaluating CompetingWeb Sites

(p. 258)(p. 258)



Business to Business Business to Business E-CommerceE-CommerceValue NetworksValue Networks

IntermediariesIntermediaries - specialist companies that - specialist companies that provide services better than their client provide services better than their client companies can themselves. companies can themselves.

ComplementorsComplementors - - provide products and provide products and services that complement the offerings of services that complement the offerings of the enterprise and thereby extend its value-the enterprise and thereby extend its value-adding capabilities to its customers. adding capabilities to its customers.



Business to Business Business to Business E-CommerceE-Commerce Value NetworksValue Networks

Value networkValue network - all of the - all of the resources behind the resources behind the click on a Web page that click on a Web page that the customer doesn’t see, the customer doesn’t see, but that together create but that together create the customer relationship the customer relationship – service, order – service, order fulfillment, shipping, fulfillment, shipping, financing, information financing, information brokering, and access to brokering, and access to other products and offers.other products and offers.



Business to Business Business to Business E-CommerceE-Commerce

Corporate Purchasing SegmentsCorporate Purchasing Segments

Purchasing applications are usually Purchasing applications are usually divided into three segments:divided into three segments:

1.1. Purchasing of direct materialsPurchasing of direct materials

2.2. Purchasing of indirect materials (MRO)Purchasing of indirect materials (MRO)

3.3. Purchasing of servicesPurchasing of services





Direct materialsDirect materials - - materials that are used in materials that are used in production in a manufacturing company or are production in a manufacturing company or are placed on the shelf for sale in a retail placed on the shelf for sale in a retail environment. environment.

Indirect materialsIndirect materials - materials that are - materials that are necessary for running a modern corporation, but necessary for running a modern corporation, but do not relate to the company’s primary business do not relate to the company’s primary business activities. activities.




Corporate Purchasing SegmentsCorporate Purchasing Segments Electronic data Electronic data

interchange (EDI)interchange (EDI) - the - the direct computer-to-direct computer-to-computer transfer of computer transfer of transaction information transaction information contained in standard contained in standard business documents business documents such as invoices and such as invoices and purchase orders, in a purchase orders, in a standard format. standard format.




Corporate Purchasing SegmentsCorporate Purchasing Segments Virtual private Virtual private

network - network - uses uses software to establish software to establish a secure channel on a secure channel on the Internet for the Internet for transmitting data. transmitting data.





XML (eXtensible Markup Language)XML (eXtensible Markup Language) - - a a coding language for the Web that lets coding language for the Web that lets computers interpret the computers interpret the meaningmeaning of of information in Web documents. information in Web documents.




Corporate Purchasing SegmentsCorporate Purchasing Segments ebXML -ebXML - a set of technical specifications for a set of technical specifications for

business documents built around XML designed business documents built around XML designed to permit enterprises of any size and in any to permit enterprises of any size and in any geographical location to conduct business over geographical location to conduct business over the Internet.the Internet.

Web ServicesWeb Services - - software applications that talk to software applications that talk to other software applications over the Internet other software applications over the Internet using XML as a key enabling technology. using XML as a key enabling technology.





On Your Own

A Range of PossibilitiesFor Next-Generation EDI

(p. 265)(p. 265)



Business to Business Business to Business E-CommerceE-CommerceB2B MarketplacesB2B Marketplaces

B2B marketplacesB2B marketplaces - - Internet-based services Internet-based services that bring together buyers and sellers.that bring together buyers and sellers.

Reverse auctionReverse auction - - the process in which a buyer the process in which a buyer posts its interest in buying a certain quantity of posts its interest in buying a certain quantity of items, and sellers compete for the business by items, and sellers compete for the business by submitting successively lower bids until there is submitting successively lower bids until there is only one seller left. only one seller left.




Intranets and ExtranetsIntranets and Extranets

IntranetIntranet - an internal organizational - an internal organizational Internet that is guarded against outside Internet that is guarded against outside access by a special security feature called access by a special security feature called a firewall (which can be software, a firewall (which can be software, hardware, or a combination of the two).hardware, or a combination of the two).





ExtranetExtranet - an intranet that is restricted to - an intranet that is restricted to an organization and certain outsiders, an organization and certain outsiders, such as customers and suppliers. such as customers and suppliers.





Customer relationship management Customer relationship management (CRM) systems - (CRM) systems - use information about use information about customers to gain insights into their needs, customers to gain insights into their needs, wants, and behaviors in order to serve wants, and behaviors in order to serve them better. them better.



The Role Of E-GovernmentThe Role Of E-Government

E-GovernmentE-Government - describes the application - describes the application of e-commerce technologies in of e-commerce technologies in governmental agencies.governmental agencies.



E-Commerce Payment SystemsE-Commerce Payment Systems

Financial EDI (FEDI) - Financial EDI (FEDI) - the use of EDI for the use of EDI for payments. payments.



E-Commerce Payment Systems E-Commerce Payment Systems

Credit Cards and Smart CardsCredit Cards and Smart Cards

Smart cardsSmart cards - - plastic cards the size of a plastic cards the size of a credit card that contain an embedded chip credit card that contain an embedded chip on which digital information can be stored. on which digital information can be stored.



E-Commerce Payment Systems E-Commerce Payment Systems Financial CybermediariesFinancial Cybermediaries

Financial cybermediariesFinancial cybermediaries - Internet- - Internet-based companies that make it easy for based companies that make it easy for one person to pay another person over the one person to pay another person over the Internet. Internet.



E-Commerce Payment Systems E-Commerce Payment Systems Electronic Bill Presentment and PaymentElectronic Bill Presentment and Payment

Electronic Bill Presentment and Electronic Bill Presentment and Payment (EBPP)Payment (EBPP) systems - send us our systems - send us our bills over the Internet and give us an easy bills over the Internet and give us an easy way to pay them if the amount looks way to pay them if the amount looks correct. correct.



Closing Case Study OneClosing Case Study OneeBags: An E-Commerce Success StoryeBags: An E-Commerce Success Story

While many pure play e-commerce sites While many pure play e-commerce sites have fallen by the wayside, eBags is not have fallen by the wayside, eBags is not only surviving, it is thriving.only surviving, it is thriving.

How has eBags gained a competitive How has eBags gained a competitive advantage over traditional bricks-and-advantage over traditional bricks-and-mortar retailers of bags and accessories?mortar retailers of bags and accessories?



Closing Case Study TwoClosing Case Study TwoMaking Toyota’s Vision a RealityMaking Toyota’s Vision a Reality

Toyota Motor Corporation has plans to Toyota Motor Corporation has plans to build an IT system that will fabricate build an IT system that will fabricate digitally designed cars and build them in digitally designed cars and build them in digitally designed factories.digitally designed factories.

What advantages will Toyota gain by What advantages will Toyota gain by implementing this system?implementing this system?



Summary Summary Student Learning OutcomesStudent Learning Outcomes

1.1. Describe the four main perspectives of e-Describe the four main perspectives of e-commerce, its current status, and the commerce, its current status, and the global growth expected in the next few global growth expected in the next few years.years.

2.2. Identify the advantages of business to Identify the advantages of business to consumer (B2C) e-commerce.consumer (B2C) e-commerce.

3.3. Describe the techniques that lead to Describe the techniques that lead to success in B2C e-commerce ventures.success in B2C e-commerce ventures.



SummarySummary Student Learning OutcomesStudent Learning Outcomes

4.4. Describe the variety of ways that business to Describe the variety of ways that business to business (B2B) e-commerce technologies are business (B2B) e-commerce technologies are being used, and describe next generation being used, and describe next generation models which may widen the adoption of models which may widen the adoption of global B2B e-commerce.global B2B e-commerce.

5.5. Identify the unique aspects of e-government Identify the unique aspects of e-government applications.applications.

6.6. Describe the status and options for e-Describe the status and options for e-commerce payment systems.commerce payment systems.



Summary Summary Assignments & ExercisesAssignments & Exercises

1.1. Developing m-commerce scenarios for Developing m-commerce scenarios for GPS cell phonesGPS cell phones

2.2. Dealing with the global digital divideDealing with the global digital divide

3.3. Alternatives for personalized digital Alternatives for personalized digital musicmusic



Visit the Web to Learn MoreVisit the Web to Learn Morewww.mhhe.com/haagwww.mhhe.com/haag

Competitive intelligenceCompetitive intelligence Storefront softwareStorefront software Hosting servicesHosting services Marketing the siteMarketing the site B2B marketplacesB2B marketplaces

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