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E-Commerce and Web 2.0

David Kroenke

Using MIS 3e

Chapter 8

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Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-2

Chapter has two major themes: e-commerce and Web 2.0.

1. E-commerce: Begin by discussing how companies use e-

commerce and survey important e-commerce technology.

Conclude by discussing the role of e-commerce in supply chain

management.2. Web 2.0: What it means, and what capabilities does it provide?

How do businesses use social networking, including groups and

applications. Well discuss three primary uses for Twitter in

commerce. After that, well investigate user generated content

and discuss some of the risks of it and social networking as well.

Finally, well wrap up with 2020.

Chapter Preview

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Study Questions

Q1 How do companies use e-commerce?Q2 What technology is needed for e-commerce?

Q3 How can information systems enhance supply chain

performance?

Q4 Why is Web 2.0 important to business?Q5 How can organizations benefit from social networking?

Q6 How can organizations benefit from Twitter?

Q7 What are the benefits and risks of user-generated content

(UGC)?

Q8 2020?

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How Do Companies Use

E-commerce? E-commerce is buying and selling goods and services over public

and private computer networks.

Merchant companies take title to the goods they sell.

Nonmerchant companies arrange for purchase and sale of goods

without owning or taking title to those goods.

Types of merchant and nonmerchant companies

Fig 8-1 E-Commerce Categories

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Types of Merchant E-Commerce

Companies

Fig 8-2 Example of Use of B2B, B2G, andB2C

1. B2C transactions occur between a supplier and retail customer.

The supplier generally uses a Web storefront.

2. B2B transactions occur between companies.

3. B2G transactions occur between companies and governmental

organizations.

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Types of Nonmerchant

E-commerce Companies1. Auctions match buyers and sellers using the e-commerce

version of standard auction where auction company

receives a commission on each product sold. eBay.com is

the best-known example.

2. Clearinghouse provides goods at a stated price, arranges

for delivery but never takes title to the goods. Company

receives a commission on each product sold. Amazon.com

is the best-known example.

3. Electronic exchanges are a type of clearinghouse similar

to a stock exchange. Company matches up buyers and

sellers and a transaction occurs. Exchange takes acommission. Priceline.com is the best-known example.

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How Does E-Commerce Market

Efficiency? E-Commerce improves market efficiencies in a variety of ways,

as this figure shows. Customers benefit from the first two,

disintermediation and increased price information. Businesses

benefit from increasing their knowledge of price elasticity.

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What Economic Factors Disfavor

E-Commerce?1. Channel conflict

Occurs when a manufacturer competes with its traditional retail

outlets by selling directly to consumer

2. Price conflict

Occurs when a manufacturer sells directly to consumers and

undercuts retailers prices

3. Increased logistics expenses

Occurs when a manufacturer must process thousands of small-

quantity orders rather than a few large-quantity orders

4. Increased customer-service expenses

Occurs when a manufacturer must begin dealing directly with

customers rather than relying on retailers direct relationships with

customers

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Study Questions

Q1 How do companies use e-commerce?

Q2 What technology is needed for e-commerce?


performance?



Q7 What are the benefits and risks of user generated content

(UGC)?

Q8 2020?

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Three-tier Architecture

Each tier relates to a particular class of computers

1. User tier uses personal computers and browser software

that requests and processes Web pages. Web page

documents are coded in HTML and are transmitted using

HTTP protocols.2. Server tier uses Web server computers and processes

application programs that help manage HTTP traffic

between Web servers and users.

3. Database tier uses computers that run a DBMS to

process SQL requests for retrieving and storing data.

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Commerce server is part of server tierAn application program that receives

requests from users via a Web server.

When the program receives a request, it

takes some action, like coordinating acustomer checkout process, and thenreturns a response to the user via a Webserver.

A Web farm is a facility that houses numerousWeb server computers.

Commerce Server and Web Farm
http://technet.microsoft.com/en-us/commerceserver/default.aspxhttp://technet.microsoft.com/en-us/commerceserver/default.aspx

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How Three-tier Architecture

Operates

Fig 8-5 Three-Tier Architecture

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Fig 8-6(a) Sample of Commerce ServerPages

Sample of Commerce Server

Pages: Product Offer Pages Examples of Web pages on an e-commerce Web site

Fig 8-6(b) Shopping Cart Page

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Hypertext Markup Language

(HTML) Language used to structure the layout of Web pages

HTML includes these elements:

Tagsnotation that defines a data element

and are tags that indicates that text will be

formatted as a level two heading.

Hyperlinks

Serve as pointers to other Web pages. They include a URL

for another document within same Web site or a different

Web site.

http://www.prenhall.com/kroenke is a hyperlink to another

Web site. Attributes provide properties for tags. In the sample HTML

document on the next slide, the attribute href= provides the

value of the hyperlink that follows.
http://en.wikipedia.org/wiki/Htmlhttp://www.prenhall.com/kroenkehttp://www.prenhall.com/kroenkehttp://en.wikipedia.org/wiki/Html

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HTML Document (Left) Rendered

(Right) Using Internet Explorer

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eXtensible Markup Language

(XML)

HTML is workhorse for Web pages and

e-commerce sites.

HTML is effective when one party is human.

But what if two computer programs want toexchange data?

HTML has major disadvantages that are

overcome with a different markup language

called XML.

XML tutorial
http://en.wikipedia.org/wiki/Xmlhttp://www.w3.org/standards/xml/http://www.w3.org/standards/xml/http://en.wikipedia.org/wiki/Xml

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Whats Wrong with HTML?

1. HTML tags have no consistent meaning,

therefore are used inconsistently.

2. HTML has a fixed number of tags and no

way for users to define new ones.3. HTML mixes format, content, and structure

rather than separating them.

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How Does XML Fix These

Problems?

Provides superior means for computer programs to exchangedocuments

Requires content, structure, and format be separated into

different documents

Document designers can create custom tags and specify

arrangement of tags in metadata.

Metadata stored in XML schema document

A computer program can read content document to find data

to process, it can reference a metadata document to verify

that content is correct and complete, and it can use aformatting document to transform content into a particular

form that it needs.

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How Can Suppliers Use XML?

Improve efficiency of operations of distributors and

suppliers

REI prepares inventory count document according

to its own design. Browser checks design against

its XML Count_schema.

REI shares its XML schema with its suppliers.

Suppliers can use Count_schema to validate

orders are from REI.

Automates process of sending, receiving, andvalidating order data

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How Can Industries Use XML?

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How Can Industries Use XML?

New Figure 8-8 here

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Study Questions



Q3 How can information systems enhance

supply chain performance?




(UGC)?

Q8 2020?

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Generic Supply Chain

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REI Supply Chain Example

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Four Drivers of Supply Chain

Performance: Facilities, Inventory,

Transportation, and Information

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Information Influences Supply

Chain Performance Three Ways:

1. Purpose: transactional or informational?

2. Availability: ways in which information is shared

3. Means: methods used to transmit information

E-commerce systems commonly use three-tier

architecture with HTML and XML. Increasingly such

systems are using SOA standards as means as well.

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How Does Supply Chain

Profitability Differ from

Organizational Profitability? Supply chain profitability is determined by calculating the

difference between revenue generated by a supply chain and

costs that all organizations in supply chain incur to obtain that

revenue.

Maximum profit to a supply chain will notoccur if each

organization in a supply chain maximizes its own profits in

isolation from other participants in supply chain.

Usually, profitability of supply chain increases if one or more

organizations operate at less than its own maximum

profitability.

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What Is the Bullwhip Effect?

Bullwhip effect occurs when variability in size and timing of orders increases ateach stage up chain.

Distributors, manufacturers, and suppliers must carry larger inventories than

necessary to meet real demand because of large fluctuations in orders.

Reduces overall profitability of supply chain

Can be eliminated by giving all supply chain participants consumer-demand

information directly from retailers through interorganizational informationsystems

Fig 8-13 The Bullwhip Effect
http://en.wikipedia.org/wiki/Bullwhip_effecthttp://en.wikipedia.org/wiki/Bullwhip_effect

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Study Questions




performance?




(UGC)?

Q8 2020?

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What Is Web 2.0?

Specific meaning ofWeb 2.0 is hard to pin down. Generally refers to a loose grouping of capabilities,

technologies, business models, and philosophies.

Comparison of Web 2.0 to traditional processing

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Software as a (Free) Service

(SaaS)

Software as a Service, part of the Web 2.0 movement, changestraditional thinking about how software is created, provided to

users, and used to create value.

Its characteristics include:

Uses thin-client programs in browsers

Bulk of processing occurs on servers throughout the Internet

Companies rely on advertising or revenue rather than license fees.

Perpetual beta software because features and functions constantly

changing

SaaS companies clash with traditional software vendors that rely on

traditional software programs to provide the bulk of their revenue.

Relies on viral marketing. Users spread word about its virtues rather

than the company that provides it.

More a Web 2.0-based site is used, the more value it attains
http://en.wikipedia.org/wiki/Software_as_a_Servicehttp://en.wikipedia.org/wiki/Software_as_a_Service

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Other Characteristics of Web 2.0

Value of site increases with users and use

Organic user interface and mashups

Participation and ownership differences

Traditional Web sites are about publishing

Web 2.0 is about participation

Traditional Web site lock down all legal rights to

content

Web 2.0 sites lock down only some rights
http://en.wikipedia.org/wiki/Mashupshttp://en.wikipedia.org/wiki/Mashups

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How Can Businesses Benefit from

Web 2.0?

Advertising is specific to user interests. Two popular programs fromGoogle are:

AdWords in which advertisers pay for particular search words.

AdSense in which Google inserts ads on a Web site that match

content on site. When someone clicks on the ad, Google pays

site owner a fee. Providing social networking services that connect people with similar

interests

Providing mashups between a business and its partners which

combine content of their products. Watch a movie, see a piece of

jewelry you like, click on a link, and purchase the product.
http://www.masteringadwords.com/http://adsense.blogspot.com/http://adsense.blogspot.com/http://www.masteringadwords.com/

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Study Questions




performance?

Q4 Why is Web 2.0 important to business?

Q5 How can organizations benefit from social

networking?



(UGC)?

Q8 2020?

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Fundamentals of Social

Networking

Social networking (SN)interaction ofpeople connected by friendship, interests,

business association, or other common trait

and supported by Web 2.0 technology

SN support N:M communication and social

collaboration

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Viral Marketing with SN

Traditional marketing at MRV

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News About You Registering for

MRV Trip Broadcast to Your

Friends

Social Network Marketing

at Majestic River Ventures

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You, Your Friends, Their Friends,

and so on Form a Relationship

with MRVs SN

Viral Social Network

Marketing Possibility

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Figure CE15-6

Sample Viral Social Network

Marketing Outcome

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How Can Businesses Utilize

Social Networking Groups?

Types of SN groups

1. Publicanyone can find the group by

searching and anyone can join it.

2. Invitationanyone can find the group by

searching, but he or she must be invited to join.

3. Privatethe group cannot be found by

searching, and members must be invited to

join.

Businesses can use SN groups to strengthenrelationships among customers and to create

possibility of viral marketing.

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Social Networking Groups? Traditional business communication is unreliable.

SN communication is more reliable.

Viral messaging reaches more people, faster,cheaper, and more personal.

MRV could expand its viral marketing by inducing

(viral hook) customers to get their friends to form a

relationship with MRV.

Finding proper viral hook is critical

Common ways companies form SN relationships

with customers are groups and applications.

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Strengthening Relationships

Among Customers to Create Viral

Marketing Opportunities

Invitation or private group

MRV could invite the customer to group for each river trip.

Place photos and videos of prior trips on Web site

Provide equipments lists, advice tips, weather forecasts

Start discussion lists among guides and group members before

trips

Members could post pictures, videos, documents, reflections

Create pubic version for alumni to share with friends

Management use of SN: Groups of employees use SN to

build cohesion with their teammates.

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Strengthening Ties with

Social Networking

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Social Networking Applications?

Social networking application A computer program that interacts with and

processes information in a social network

Examples: Survey Hurricane, a Facebook application created by

Infinistorm (www.infinistorm.com). Users who install that application on their page can

survey their friends on topics of interest.

New York Times quiz

Applications for buying and selling items, comparingmovies, and so on
http://www.infinistorm.com/http://www.facebook.com/apps/application.php?id=4996223070&b&ref=pdhttp://www.facebook.com/apps/application.php?id=4996223070&b&ref=pdhttp://www.facebook.com/apps/application.php?id=4996223070&b&ref=pdhttp://www.facebook.com/apps/application.php?id=4996223070&b&ref=pdhttp://www.infinistorm.com/

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SN Applications Run on Servers

When you run an application on a Facebook page,Facebook passes your application request, via a

service, to application vendors server.

Application service issues callbacks to Facebook

(or other SN vendors) to create friend requests,

find your existing friends, generate email, make

requests, poke your friends, or take other actions.

Can collect data about you and your friends forindividualized marketing or for data mining

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MRV SN Application

Figure 8-19

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SN Application vs. Web Sites

Share many features and functions

Why have SN?

Depends on degree to which the application

requires a social graph Does application use or benefit from N:M

communication?

Is there a need for social collaboration?

Is there a need for feedback and iteration?

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Study Questions




performance?


Q5 How can organizations benefit from social networking?



(UGC)?

Q8 2020?

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Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall8-49

Microblogs

Hundreds of businesses are now using Twitter forlegitimate business purposes.

Twitter is a microbloga Web site where users

can publish their opinions.

More people microblog than blog because it is lessintimidating. You dont have space to spell well or

write a well constructed paragraph.

Microblog competitors to Twitter are emerging.
http://en.wikipedia.org/wiki/Microbloghttp://en.wikipedia.org/wiki/Microblog

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We Are All Publishers Now

Microblogs make everyone a publisher.Anyone can join, for free, and immediately

publish ideas, worldwide.

Microblogging enables two-way publishing,worldwide.

Microblogging enables users with like

minded interests to find one another.

H C B i B fit f

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Microblogging?

Three business applications have emerged so far:

1. Public Relations

Product manager whos excited about a

new use for his product. He can publish the

idea and a summary of instructions.

Coaches can increase fan awareness by

blogging with insider details, how the

practice went, comments about the recent

game, and so forth. New public relations capability are

stressing existing institutions.

H C B i B fit f

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Microblogging?

2. Relationship Sales Pure sales pitches are ineffective when

microblogging. People stop following sources

that only publish ads and sales pitches. Instead,

people look for tweeters who offer somethingthey value such as advice, links to resources,

and interesting and thought-provoking opinions.

Twitter Revolution: How Social Media and

Mobile Marketing is Changing the Way We DoBusiness and Market Online. Warren Whitlock

and Deborah Micek. Xeno Press, 2008.

H C B i B fit f

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Microblogging?

3.Market Research

Want to know what people think of

your product? Search Twitter to

find out.

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Study Questions



performance?




Q7 What are the benefits and risks of user

generated content (UGC)?

Q8 2020?

C T f UGC d

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Common Types of UGC and

Discusses Their Business

Applications

Ratings and surveys

Opinions

Customer stories

Discussion groups

Wikis

Blogs Video

Crowdsourcing specialty (Spore-create creator)
http://en.wikipedia.org/wiki/Crowdsourcinghttp://en.wikipedia.org/wiki/Crowdsourcing

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Benefits of UGC

SN users are three times more likely to trust peersopinions over advertiser claims.

Increases loyalty to company site and brand loyalty

Increases brand involvement, interaction, intimacy,

influence

Discussion groups share advice and assistance.

Provides useful information for product marketing

and development

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UGC Applications

Figure 8-21

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Crowdsourcing

Crowdsourcing organizations involve their users in the designand marketing of their products.

For example, as shown in Figure 8-24, shoe startup company

RYZ (ryzwear.com) sponsors shoe design contests to help it

understand which shoes to create and how to market those

designs. Crowdsourcing combines social networking, viral marketing,

and open-source design, saving considerable cost while

cultivating customers.

With crowdsourcing, the crowd performs classic in-house

market research and development and does so in such a waythat customers are being set up to buy.

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Design by Crowdsourcing

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UGC Videos

YouTube is famous for hosting UGC videosprovided as bait for advertising. Finally,

some sites include UGC as part of the

product. The magazines Fine Woodworking

and Wooden Boatboth include UGC video

as part of their product offerings

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Impact of UGC

Increases conversion rates

Conversion rates are higher for products with less-

than-perfect reviews than for products with no

reviews at all.

UGC to post answers to questions, articles, bestpractices, blogs, code samples, and other

resources

Return rates fall dramatically as number of product

reviews increases Videos provide bait for advertising

Some sites include UGC as part of the product

Risks of Using Social Networking

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Risks of Using Social Networking

and User-Generated Content?

Junk and crackpots

Inappropriate content

Unfavorable reviews

Mutinous movements Dependency on SN vendor

Vulnerable to reliability and performance

Vendor may own content

Vendor may remove site

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Study Questions



performance?





(UGC)?

Q8 2020?

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2020?

Expect that technology will enable voice and videoto be integrated into social networking.

Speak your tweets and have a program translate

your voice message into text? Jott.com already

offers a limited version of that service. Tweet your video? 12Seconds.TV

What will social networking do to management?

What will microblogging do to employee evaluation

and compensation?

What will happen to language? Writing skills?
http://jott.com/http://12seconds.tv/http://12seconds.tv/http://jott.com/

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Ethics Guide: Hiding the Truth?

Is it unethical to post a false picture or false information aboutyourself on Facebook?

Is it unethical for you to encourage your employees to write

positive reviews about MRV?

One of those clients writes a poor review of your firm because

of a bad experience. Is it ethical for you to delete that reviewfrom your site?

You think you were wrongly terminated by MRV. To get even,

you use Facebook to spread rumors to your friends (many of

whom are river guides) about the safety of MRV trips. Are

your actions unethical? Are they illegal?

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One employee invites his MySpace friends to aparty at which he shows photos of prior rafting

trips. On the way to the party, one of the friends

has an automobile accident and dies. His spouse

sues Majestic. Should you be held accountable?Does it matter if you knew about the presentation?

Would it matter if you had not encouraged your

employees to be creative?

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You create a Facebook account for someoneyouve known for many years and have dozens of

photos of, some of which were taken at parties and

are unflattering and revealing. You post those

photos along with critical comments that she made

about clients or employees. Most of the commentswere made when she was tired or frustrated, and

they are hurtful, but because of her wit, also

humorous. You send friend invitations to people

whom she knows, many of whom are the target ofher biting and critical remarks. Are your actions

unethical?

Guide: Blending the Personal and

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Guide: Blending the Personal and

the Professional

Many businesses are beginning to use social networkingsites like Facebook, MySpace, and Twitter for professional

purposes.

Every business social function is a business function, so even

sharing photos and pages of work softball team begins to blur

the personalprofessional boundary. Our work is portable and always onand judged by results,

not hours logged. In a work universe like that, the lines sort of

slowly and inevitably blur

You should be careful if youre in the introductory months of a

new job.

GUIDE Interorgani ational Information

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GUIDE: Interorganizational Information

Exchange

Basic guidelines for participating in business meetings withpeople in other firms:

Apply stronger limits on your conversation than when you

meet with employees in your own firm

Assume that whatever you say to an employee of another

company could be general knowledge in your industry thenext day

Reveal exactly what you must and no more

Have a clear and common understanding of the purpose

of the meeting

Understand your organizations policy concerning

nondisclosure agreements before the meeting starts


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Exchange

Stick to the purpose of the meeting. Avoid conversationsabout your company or about third parties that do not

relate to the meeting topic.

There is simply no reason, other than carelessness or

stupidity, to discuss topics with another company that do

not relate to the matter at hand. Dont embarrass yourself or the employees of the other

company by discussing in a public place anything other

than the weather

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Active Review



performance?





(UGC)?

Q8 2020?

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Case Study 8: You, Inc.

Interorganizational information systems enable smallbusinesses to avoid time and expense of building

infrastructure, thus reducing capital requirements and

shortening time to market.

People often pay more for new items on eBay than they

would pay if they shopped for bargains on Internet. There is often an inefficiency in flow of price information

among eBay users.

Using the Internet, you find sources for motorcycle parts.

Sourcing is a typical supply-chain activity; and by using the

Internet, you have avoided hiring someone else to do thiswork for you.

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You search for sites that offer products you want, have freeshipping, and (if possible) you do not need to pay taxes.

When you find an item offered at a bargain price, you set up

an auction for that item on eBay.

You have not yet purchased the item; you just know where

you can buy it. Set a price and terms of auction so whatever price the item

sells, you will make some profit

You download pictures of item from your vendor and copy

those photos into your auction.

Your only financial exposure if the item does not sell is the

cost of the auction.

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The item sells. You then buy it from the vendor.

Pay for it using PayPal or a credit card

Have vendor ship the item directly to your customer, a

process called drop shipping.

If you pay with a credit card, it is possible you will receive

payment from your customer before you pay for the item you

sold.

Because the item is new, and because you sell only high-

quality items, all service and support are handled by

manufacturer.

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Review This Scenario in Terms of Porters Value Chain Model

Primary value chain activities

You did market research, but you outsourced all of the data-gathering

activities to eBay, PriceGrabber, and so on.

Set up the auction on eBay, and thus outsourced the sales infrastructureto eBay

Did product-sourcing yourself with considerable help from the Internet

Outsourced all inventory, operations, and shipping activities to vendor

If customer pays before you pay your credit card, you can even earn

interest on customers money. Outsourced service and support to manufacturer

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Support activities

Avoided building infrastructure, you have only one part-time

employee, yourself; you have no payroll or other

compensation needs.

Want insurance? If you sell enough using eBay you can buy

life and medical insurance from eBay at attractive terms.

Accounting: eBay, PayPal, credit card company, and vendor

do most of the work. All you do is maintain records to track

your income for tax reporting. You can even pay your taxes

online.

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retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written

permission of the publisher. Printed in the United States of America.

Copyright 2011 Pearson Education, Inc.Publishing as Prentice Hall

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