Principles of Information Systems

Chapter 8

Electronic and Mobile Commerce

2

Principles and Learning Objectives

• Electronic commerce and mobile commerce are evolving, providing new ways of conducting business that present both opportunities for improvement and potential problems– Describe the current status of various forms of e-

commerce, including B2B, B2C, and C2C– Outline a multistage purchasing model that

describes how e-commerce works– Define m-commerce and identify some of its unique

challenges

3

Principles and Learning Objectives (continued)

• E-commerce and m-commerce can be used in many innovative ways to improve the operations of an organization– Identify several e-commerce and m-commerce

applications– Identify several advantages associated with the use

of e-commerce and m-commerce

4

Why Learn About Electronic and Mobile Commerce?

• Most organizations have an Internet presence– Sales/marketing manager involved with e-commerce– Customer service employees help develop the Web

site– Human resource or public relations manager may

provide Web content for employees and investors

• Must learn about e-commerce and m-commerce

5

An Introduction to Electronic Commerce

• Electronic commerce: conducting business activities electronically over computer networks

• Types of business activities that are strong candidates for conversion to e-commerce– Paper based– Time-consuming– Inconvenient for customers

6

Business-to-Business (B2B) E-Commerce

• Subset of e-commerce

• All the participants are organizations

• Useful tool for connecting business partners in a virtual supply chain to cut resupply times and reduce costs

7

Business-to-Consumer (B2C) E-Commerce

• Form of e-commerce in which customers deal directly with an organization and avoid intermediaries– Squeezes costs and inefficiencies out of supply

chain– Can lead to higher profits– Can lead to lower prices for consumers

• E-commerce via the Internet– Many goods and services are cheaper online– The Internet allows consumers to easily compare

prices, features, and value

8

Consumer-to-Consumer (C2C) E-Commerce

• Subset of e-commerce that involves consumers selling directly to other consumers

• Example: eBay– Customers buy and sell items directly to each other

through the site– 181 million users buy and sell items valued at more

than $44 billion

• Other popular online auction Web sites: Craigslist, uBid, Yahoo! Auctions, Onsale, and WeBidz

9

E-Government

• Use of information and communications technology to simplify the sharing of information, speed formerly paper-based processes, and improve the relationship between citizen and government

• Forms of eGovernment– Government-to-consumer (G2C)– Government-to-business (G2B)– Government-to-government (G2G)

10

Multistage Model for E-commerce

Figure 8.1: Multistage Model for E-Commerce (B2B and B2C)

11

Multistage Model for E-commerce (continued)

Figure 8.2: Product and Information Flow for HP Printers Ordered over the Web

12

E-Commerce Challenges

• Defining an effective e-commerce model and strategy– Community, content, and commerce

• Changing distribution systems and work processes to manage shipments of individual units directly to consumers– B2C systems must be able to handle split-case

distribution

• Integrating Web-based order processing with traditional systems

13

E-Commerce Challenges (continued)

Figure 8.3: Three Basic Components of a Successful E-Commerce Model

14

E-Commerce Challenges (continued)

Figure 8.4: Web-Based Order Processing Must Be Linked to Traditional Back-End Systems

15

An Introduction to Mobile Commerce

• Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business

• Handset manufacturers are working with communications carriers to develop appropriate wireless devices, related technology, and services

• Content providers and mobile service providers are working together more closely than ever

16

Mobile Commerce in Perspective

• Only 12 to 14 percent of the world’s 1.8 billion mobile phone users have ever used the Web from their phones

• Internet Corporation for Assigned Names and Numbers (ICANN) created a .mobi domain to help attract mobile users to the Web

• Market for m-commerce in North America is maturing much later than in Western Europe and Japan

17

Technology Needed for Mobile Commerce

• Improved interface between the wireless device and its user

• Improved network speed

• Security– Encryption, digital certificates

• Web applications that are accessible for handheld users

18

Technology Needed for Mobile Commerce (continued)

• Wireless application protocol (WAP): standard set of specifications for Internet applications that run on handheld, wireless devices

– Effectively serves as a Web browser for such devices

– Uses the Wireless Markup Language (WML), which is designed for effectively displaying information on small devices

19

Electronic and Mobile Commerce Applications

• Many B2B, B2C, C2C, and m-commerce applications are being used in:– Retail and wholesale– Manufacturing– Marketing– Investment and finance– Auction arenas

20

Retail and Wholesale

• Electronic retailing (e-tailing): direct sale from business to consumer through electronic storefronts– Electronic storefronts are typically designed around

an electronic catalog and shopping cart model

• Cybermall: single Web site that offers many products and services at one Internet location

• Manufacturing, repair, and operations (MRO) goods and services

21

Manufacturing (continued)

Figure 8.5: Model of an Electronic Exchange

22

Investment and Finance

• Online stock trading– Online tools for doing research and analysis

• Online banking– Customers can check account balances, transfer

money among accounts, pay bills, etc.– Electronic bill presentment

23

Auctions

• eBay– Has become synonymous with online auctions– Customer complaints: increased fees and problems

with unscrupulous buyers– Constantly trying to expand and improve its services:

Skype, Verisign

• Hundreds of other online auction sites– Example: Priceline.com

24

Anywhere, Anytime Applications of Mobile Commerce

• M-commerce devices are ideal for accessing personal information and receiving targeted messages for a particular consumer

• Through m-commerce, companies can establish one-to-one marketing relationships with individual consumers anytime and anywhere

• The most successful m-commerce applications suit local conditions and people’s habits and preferences

• Examples: banking, stock trading, information services, retail, advertisements

25

Advantages of Electronic and Mobile Commerce

• Global reach: helps reduce gap between rich and poor countries

• Reduces costs: increases speed and accuracy

• Speeds the flow of goods and information

• Increases accuracy: eliminates human data-entry error

• Improves customer service: information about delivery status and ability to meet customer demand

26

Threats to Electronic and Mobile Commerce

• Businesses must ensure that e-commerce and m-commerce transactions are safe and consumers are protected

• Number of threats to the continued growth of e-commerce and m-commerce– Security, theft of intellectual property, fraud, invasion

of privacy, lack of Internet access, return on investment, legal jurisdiction, taxation

27

Security

• Methods to increase security– Payment Card Industry security standard– Address Verification System– Card Verification Number technique– Visa’s Advanced Authorization process– Federal Financial Institutions Examination Council’s

“Authentication in an Internet Banking Environment” guidelines

– Biometric technology

28

Theft of Intellectual Property

• Intellectual property: works of the mind that are distinct somehow and are owned or created by a single entity– For example: books, films, music, processes, and

software

• Copyright law protects authored works such as books, film, images, music, and software from unauthorized copying

• Patents can protect software, business processes, formulae, compounds, and inventions

29

Lack of Internet Access

• Digital divide: difference between people who do and people who don’t have access or capability to use high-quality, modern information and communications technology to improve their standard of living

– Exists between:• More and less developed countries• Economic classes• The educated and uneducated• Those who live in cities and those who live in rural

areas

30

Legal Jurisdiction

• When conducting e-commerce, sales must not violate county, state, or country legal jurisdictions

• Examples– Selling stun guns and similar devices– Selling cigarettes or alcohol to underage customers

31

Strategies for Successful E-Commerce

• Companies must develop effective Web sites that include the following characteristics:

– Easy to use– Accomplish the goals of the company– Safe and secure– Affordable to set up and maintain

32

Establishing a Web Site

• Web site hosting companies– Allow you to set up a Web page and conduct e-

commerce within a matter of days– Little up-front cost

• Storefront broker: companies that act as middlemen between your Web site and online merchants that have the products and retail expertise

33

Building Traffic to Your Web Site

• Obtain and register a domain name

• Make your site search-engine-friendly– Meta tag: special HTML tag that contains keywords

representing your site’s content• Keywords are used by search engines to build

indexes pointing to your Web site

• Web site traffic data analysis software

• Adapting Web site design for global consumers

34

Technology Infrastructure Required To Support E-commerce and

M-commerce

• Successful implementation of e-business requires significant changes to existing business processes and substantial investment in IS technology

• Poor Web site performance drives consumers to abandon some e-commerce sites in favor of those with better, more reliable performance

35

Technology Infrastructure Required To Support E-commerce and M-commerce (continued)

Figure 8.6: Key Technology Infrastructure Components

36

Hardware

• Storage capacity and computing power required of the Web server depends on:– Software that will run on the server– Volume of e-commerce transactions

• E-commerce solutions should be designed to be highly scalable

37

E-Commerce Software

• E-commerce software tools– Catalog management: provides standard format– Product configuration: build product online to meet

user needs– Shopping cart facilities– Transaction processing– Web traffic data analysis– Web services: software modules supporting specific

business processes that users can interact with over a network as needed

38

E-Commerce Software (continued)

Figure 8.7: Electronic Shopping Cart

39

Electronic Payment Systems

• Digital certificate: attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site

• Certificate authority (CA): trusted third party that issues digital certificates

• Secure Sockets Layer (SSL): communications protocol used to secure sensitive data

• Electronic cash: amount of money that is computerized, stored, and used as cash for e-commerce transactions

40

Electronic Payment Systems (continued)

• Credit card

• Charge card

• Debit card – (bank card or check card)

• Smart card: a credit card–sized device with an embedded microchip to provide electronic memory and processing capability

Debit Card Charge Card Credit Card

41

Summary Summary

• Electronic commerce (or e-commerce): conducting business activities electronically over computer networks

• Types of e-commerce: business-to-consumer (B2C), business-to-business (B2B), and consumer-to-consumer (C2C)

• E-Government: use of information and communications technology to simplify the sharing of information, speed formerly paper-based processes, and improve the relationship between citizen and government

42

Summary (continued) Summary (continued)

• Multistage model for e-commerce: includes search and identification, selection and negotiation, electronic purchasing, delivery, and after-sales service

• Mobile commerce (m-commerce): uses wireless devices to place orders and conduct business

• B2B, B2C, C2C, and m-commerce applications are being used in retail and wholesale, manufacturing, marketing, investment and finance, and auction arenas

43

Summary (continued)

• Issues affecting growth of e- and m-commerce: security, theft of intellectual property, fraud, invasion of consumer privacy, lack of Internet access, return on investment, legal jurisdiction, and taxation

• An effective Web site should be easy to use, accomplish the goals of the company, be safe and secure, and be affordable to set up and maintain

• Successful implementation of e-business requires significant changes to existing business processes and substantial investment in IS technology