Copyright 2010 John Wiley & Sons, Inc. Turban and Volonino Chapter 6 E-Business and E-Commerce Information Technology for Management Improving Performance in the Digital Economy 7th edition John Wiley & Sons, Inc. Slides contributed by Dr. Sandra Reid Chair, Graduate School of Business & Professor, Technology Dallas Baptist University Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Chapter Outline 6.1 Overview of E-Business and E-Commerce 6.2 Major EC Mechanisms 6.3 Business-to-Consumer Applications 6.4 Business-to-Business Applications 6.5 Major Models of E-Business: From E-Government to C2C Copyright 2010 John Wiley & Sons, Inc.

Chapter Outline (cont’d) 6.6 E-Commerce Support Services: Payment and Order Fulfillment 6.7 Ethical and Legal Issues in E-Business 6.8 Managerial Issues Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Learning Objectives Describe electronic commerce, its scope, benefits, limitations, and types. Explain how online auctions and bartering work. Understand the major applications of business-to-consumer commerce, including service industries and the major issues faced by e-tailers. Describer business-to-business applications. Explain why intrabusiness and B2E are considered e-commerce. Copyright 2010 John Wiley & Sons, Inc.

Learning Objectives cont’d 6. Describe e-government activities and consumer-to-consumer e-commerce. Identify the e-commerce support services, specifically payments and logistics. Understand the importance and activities of online advertising. Identify and describe ethical and legal issues relating to e-commerce. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Problem – Leader & target for Compaq. Losses exceed $100 million. Solution – Rapid expansion with selling via online. Result – Leading systems provider in US; second worldwide. Fortune’s top 5 “Most Admired” companies since 1999. By-product – sell refurbished Dell computers. Click images for homepage. Copyright 2010 John Wiley & Sons, Inc.

Dell’s Vast Customer Base Business-to-Business What is B2B? Why/how is B2B an important strategy in meeting Dell’s performance goals? It is a much bigger market than B2C. They could expect higher revenue as business would tend to purchase in greater numbers & more often than the individual consumer. According to Wikipedia: Business-to-business (B2B) is a term commonly used to describe commerce transactions between businesses, as opposed to those between businesses and other groups, such as business-to-consumers (B2C) or business-to-government (B2G). More specifically, B2B is often used to describe an activity, such as B2B marketing, or B2B sales, that occurs between businesses and other businesses. The volume of B2B transactions is much higher than the volume of B2C transactions. The primary reason for this is that in a typical supply chain there will be many B2B transactions involving subcomponent or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windshields, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction. Hot link to good articles for further discussion enhancement. Dell becomes British Airways' preferred partner Intel invests $23 million in three Indian firms Copyright 2010 John Wiley & Sons, Inc.

Dell’s Vast Customer Base – cont’d How Dell Does IT: Order Management Online self-learning about Dell products along with IT & management topics Training services Click hot link to article for discussion & homepage for training services offered by Dell. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. 6.1 Overview of E-Business and E-Commerce E-Business / E-Commerce Compare eBusiness to eCommerce. Provide examples. eBusiness is using internet technology for entire business operations: marketing, financial, distribution, etc. eCommerce is using the technology for sales. Click businesses that come from brick & mortar businesses may be good examples of eCommerce…businesses with only web presence may be good examples of eBusiness. Hot link to interesting article for possible discussion. According to Wikipedia: Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily since the spread of the Internet. A wide variety of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail as well. A large percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web. More…. http://en.wikipedia.org/wiki/Electronic_commerce Copyright 2010 John Wiley & Sons, Inc.

e-commerce e-business or e-business E-commerce describes the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, including the Internet. E-business refers to a broader definition of e-commerce, not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, conducting e-learning, and processing electronic transactions.

E-Business: degree of digitization Electronic commerce can take several forms depending on the degree of digitization (the transformation from physical to digital). The degree of digitization relates to: the product (service) sold the process the delivery agent (or intermediary). Partial vs. pure Electronic Commerce Buying books from Amazon

Click-&-mortar vs Brick-&-mortar organizations More shoppers proceed to checkout online………… Click images for homepages. Travelocity, Clogwild, Expedia are just e-businesses while Williams-Sonoma & Wells Fargo have also physical location options for their customers. Hot link to article. Copyright 2010 John Wiley & Sons, Inc.

E-commerce in our company The objective of eCommerce is to automate as many of the business processes as possible. This would be a good exercise for students to review within their own organizations to propose possible change. Anything that really does not need human intervention should be automated to the extent possible leaving available resources for customer service and/or other things that really does require a human. (Source: Drawn by E. Turban) Copyright 2010 John Wiley & Sons, Inc.

Online Advertisers, Marketers & Students Click images for homepages. Examples provided here for quick discussion that support A Closer Look, 6.1. Powerstudents.com Copyright 2010 John Wiley & Sons, Inc.

E-Business – Transaction Types E-commerce transactions can be done between various parties. Business-to-business (B2B): Both the sellers and the buyers are business organizations Collaborative commerce (c-commerce): In c-commerce, business partners collaborate electronically Business-to-consumers (B2C): The sellers are organizations, and the buyers are individuals (e-tailing) Consumers-to-businesses (C2B): Consumers make known a particular need for a product or service, and suppliers compete to provide it

E-Business – Transaction Types (Continued) Consumer-to-consumer (C2C): Individuals sell products or services to other individuals Intrabusiness (intraorganizational) commerce: An organization uses EC internally to improve its operations. A special case is known as B2E (business to its employees) Government-to-citizens (G2C): A government provides services to its citizens via EC technologies, or to other government units (G2G) or to businesses (G2B) Mobile commerce (m-commerce): When e-commerce is done in a wireless environment

E-commerce business models Affiliate marketing Bartering online and e-classifieds (e.g. craigslist.com) Deep Discounters Electronic marketplaces and exchanges Electronic tendering systems Use the mechanism of reverse auctions Find-the-best-price / Name-your-own price Online auctions Group purchasing (e-co-ops) Information brokers Membership Online direct marketing Direct selling to customers; most efficient for digital products Product customizations (build-to-order) Supply-chain providers / improvers Value chain integrators / service providers Social commerce (e.g. Google APIs )

A framework for E-commerce Open for discussion on possibilities for expansion in EC in the future. Home security for keyless entry such as available for cars today. (Source: Drawn by E. Turban) Copyright 2010 John Wiley & Sons, Inc.

EC: benefits and limitations Benefits to Organizations: Expands marketplace Efficient procurement Eliminates marketing costs Decrease the cost of digital products and services Reduces inventory costs (pull system) Enables niche markets Benefits to Consumers: Less expensive products More choices Shop from anywhere, anytime Customized products Work and study from home Interact and exchange ideas Technological limitations: Lack of universally accepted standards for quality and security Telecommunication bandwidth Integration (legacy applications) Accessibility Other limitations: Legal and regulatory issues Measurement inability Lack of trust to faceless transactions Lack of critical mass

Copyright 2010 John Wiley & Sons, Inc. 6.2 IS Major EC Mechanisms Copyright 2010 John Wiley & Sons, Inc.

EC mechanisms Electronic market (e-marketplace) Electronic catalogs Consist of a product database, a directory, search capabilities, presentation function. An electronic catalog can be static or dynamic, standard or customized. Electronic auctions (e-Auctions) Forward auctions: Items are placed at sites for auction and buyers bid continuously for the items (e.g. eBay.com). Reverse auctions: Suppliers are invited to submit bids. Auctions are used in B2C, B2B, C2B, e-government, and C2C commerce Bartering online Electronically supported exchange of goods without monetary transactions

Copyright 2010 John Wiley & Sons, Inc. Electronic Catalogs All of Your Suppliers’ Products in One Online Catalog What is the difference between purely e-market companies versus those with physical & virtual presence? Online catalogs, Catalogs.com, CollegeSource- are only click businesses while the others have a brick & mortar along with web presence. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. E-Auctions What are some benefits to business of online auctions? They can sell overstock inventory. Can get a premium for something unique/high demand item. eBay conducts mostly forward auctions. What are the 2 types of forward auctions? See IT at Work, 6.1. In reverse auctions, there is one buyer, usually an organization, that wants to buy a product or service. This prompts a request for quote (RFQ). This is an example of a reverse auction. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. E-Classifieds stores eBay case study Discuss how these businesses, and those within them, have been formed. PayPal formed because customers did not want to purchase online unless they could be guaranteed security. For more, see link to eBay case study. Does eBay’s 2003 change of business model, from pure auctions to adding classifieds and e-tailing make sense? Yes, it is a normal business evolution. Why are wireless auctions promoted? Definitely most cost effective. business Copyright 2010 John Wiley & Sons, Inc.

Bartering & Negotiations The New Age of Bartering Click images to homepages. Interesting video for discussion. Will these types of businesses have more/less opportunity for success depending upon the state of the economy? It depends. A good marketer will promote the “experience” rather than the process…making it broader application. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. 6.3 Business-to-Consumer Applications Copyright 2010 John Wiley & Sons, Inc.

Business-To-Consumer – B2C Electronic retailing (e-tailing) is the direct sale of products through electronic storefronts or electronic malls, usually designed around an electronic catalog format and/or auctions. Electronic Storefronts. Hundreds of thousands of solo storefronts can be found on the Internet, each with its own Internet name and EC portal, such as Home Depot, The Sharper Image, or Wal-Mart. Electronic mall, also known as a cybermall or e-mall, is a collection of individual shops under one Internet address. The basic idea of an electronic mall is the same as that of a regular shopping mall—to provide a one-stop shopping place that offers many products and services.

Customer Service Life Cycle Phase 1: Requirements Assist customer determine needs Phase 2: Acquisition Help customer acquire product or service Phase 3: Ownership Support customer (e.g. newsletters, online subscription renewal) Phase 4: Retirement Help client dispose of product

Electronic Storefronts Click images for homepages. May be used by retailers…business to consumer….but also by B2B-Dell is an example with a B2B application. They sell to both B2C & B2B. Individual store versus electronic malls which is a collection of individual shops under one Internet address. Task students to find examples of both B2C & B2B electronic storefronts. Perhaps ones they would like to introduce? Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Electronic Malls shopping Click images for hot links to home pages. Stores under “one” Internet address. Copyright 2010 John Wiley & Sons, Inc.

Amazon – King of E-Tailing Jeff Bezos: The Wizard Of Web Retailing Last Founder Standing The Future of Reading America's Best Leaders: Jeff Bezos, Amazon.com CEO The founder of the massive online retailer is a true Internet pioneer After reading these articles, answer the following questions: What are the critical success factors for Amazoon.com? Great inventory. One stop shopping. Convenience. Reviews. Reasonable $. What does it have over its competition? Recent product reviews. Reasonable $. Convenience. What is the purpose of the alliances Amazon.com has made? Customer loyalty. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Online Job Market Discuss the huge function that these types of sites provide. Not just for those who are unemployed, but also for the recruiters who must fill openings, too. These provide tremendous opportunity to sort through applicants quickly based upon a predetermined criteria. It can be very cost effective & further reaching in attraction of viable candidates. On the other hand, the maze may be very difficult for an applicant to maneuver through. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Travel Services Click images to homepages. Sites such as these have made it a most more competitive market for consumers. Discuss how. Price shopping, benefit shopping much easier utilizing Internet resources. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Real Estate Online Why are these sites ideal for e-commerce? Best deals may be found much easier than physically visiting each one. Much more cost effective when relocating to significant distances. Copyright 2010 John Wiley & Sons, Inc.

E-tailing Issues – B2C The concept of retailing and e-tailing implies the sale of goods and/or services to individual customers. The following are the major issues faced by e-tailers that may be handled and supported by IT tools: Resolving channel conflict: A firm’s distribution channels compete with each other and with the firm. Resolving conflicts within click-and-mortar organizations. When an established company decides to sell direct online, it may create a conflict within its existing operations in areas such as pricing, services, allocation of resources and logistical support. Organizing order fulfillment and logistics. E-tailers face a difficult problem of how to ship small quantities to a large number of buyers. Determining viability and risk of online e-tailers. How long does a company operate while losing money and how will it finance the losses. Identifying appropriate revenue models. It is necessary to identify appropriate revenue/business models.

Copyright 2010 John Wiley & Sons, Inc. 6.4 B2B Applications Copyright 2010 John Wiley & Sons, Inc.

Business-To-Business B2B business models Sell-Side Marketplaces: organizations attempt to sell their products or services to other organizations electronically, from their own private e-marketplace. Buy-Side Marketplaces: organizations attempt to buy needed products or services from other organizations electronically, usually from their own private e-marketplace. One buy-side model is a reverse auction. Here, a company that wants to buy items places a request for quotation (RFQ) on its Web site, or in a third-party bidding marketplace.

Business-To-Business Electronic Exchanges are E-marketplaces in which there are many sellers and many buyers. Vertical distributors for direct materials: These are B2B marketplaces where direct materials (materials that are inputs to manufacturing) are traded in an environment of long-term relationship, known as systematic sourcing. Vertical exchanges for indirect materials: Here indirect materials in one industry are purchased on an “as-needed” basis (called spot sourcing). Buyers and sellers may not know each other. In such vertical exchanges, prices are continually changing, based on the matching of supply and demand. Horizontal distributors: These are “many-to-many” e-marketplaces for indirect (MRO) materials, such as office supplies, used by any industry. Prices are fixed or negotiated in this systematic sourcing-type exchange. Functional exchanges: Here, needed services such as temporary help or extra space are traded on an “as-needed” basis (spot sourcing). Prices are dynamic, and they vary depending on supply and demand.

ChemConnect Case Study What are the advantages of the ChemConnect exchange? See IT at Work 6.4. Why are there 3 trading places? Why does the exchange provide information portal services? Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. 6.5 Major Models of E-Business: From E-Government to C2C Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. E-Government to C2C B2E – organizations disseminate information to employees over company intranet. E2E – employees communicate with each other. I.e.: goods & services bought & sold among fellow employees. SBU/SBU – company owned dealerships buy goods & services from main company. Improves internal supply chain operations. E-Collaborative – digital technologies that enable collaboration. E-Government – delivers information & services to citizens, business partners & suppliers. I.e.: G2C, G2B, G2G. B2E – disaster messages, weather related, business specific. E2E – furniture, crafts. SBU/SBU – parts & supplier. E-Collaboration – between organization & suppliers, vendors, etc. E-Government – EBT transfers such as social security payments. What are some others in each category? Task students to find. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. 6.6 E-Commerce Support Services: Payment, & Order Fulfillment Copyright 2010 John Wiley & Sons, Inc.

E-commerce support services Give examples in each category. For instance, in marketing, interactive marketing has given capability for one-to-one advertising through use of internet technologies. Market research is facilitated by social networks now possible. Blogs are great, cheap ways to collect needs & wants data. (Source: Drawn by E. Turban. Based on S.Y. Choi et al., 1997, p. 18.) Copyright 2010 John Wiley & Sons, Inc.

Market Research Online Click images to homepages. Examples of this very important category. Why are these so important now? In the past, these activities were very expensive if collected one at a time. Bias would be extremely common due to the expense of collecting vast cross-section of customer opinions. Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Electronic payment Informational slide. There exist several alternatives for paying for goods & services on the Internet. The major ones are summarized in this table. Copyright 2010 John Wiley & Sons, Inc.

How e-credit cards work Student discussion of how the “trust factor” has changed just in the last few years. How identity theft has been guarded against by organizations. Complete process of how credit cards work is shown in this figure. (The numbers 1-9 indicate the sequence of activities.) (Source: Drawn by E. Turban.) Copyright 2010 John Wiley & Sons, Inc.

The use of a mobile phone as an e-wallet COOL! I’ll take a Diet Coke, please! This is very convenient especially on college campuses. There are a bazillion examples. Students name others. RFID technology is integrated into mobile phone. Refer to A Closer Look, 6.3. (Source: Koichi Kamoshida/Getty Images.) Copyright 2010 John Wiley & Sons, Inc.

Order fulfillment and the logistics system Informational slide. A typical EC fulfillment process is shown in this figure. Process begins on the left. Some activities are simultaneous & others are sequential. (Source: Turban et al., Electronic Commerce: A Managerial Perspective 2008, Exhibit 13.2, p. 591). Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. 6.7 Ethical & Legal Issues in E-Business Copyright 2010 John Wiley & Sons, Inc.

Ethical and Legal Issues in E-Business Privacy Web tracking (cookies) Disintermediation and reintermediation Infomediaries Internet fraud Domain names Cybersquatting Taxes and other fees Intellectual property protection

Ethical and Legal Issues in E-Business Privacy Web tracking (cookies) Loss of jobs Disintermediation and reintermediation (a) matching and information providing; (b) value-added services e.g. consulting (Infomediaries) Internet fraud Domain names Cybersquatting Taxes and other fees Intellectual property protection

Copyright 2010 John Wiley & Sons, Inc. 6.8 Managerial Issues Copyright 2010 John Wiley & Sons, Inc.

Copyright 2010 John Wiley & Sons, Inc. Managerial Issues E-Commerce failures – common. Solid business analyses a must. Failed initiatives within an organization. Success stories & lessons learned should be shared. Managing resistance to change. Integration into business overall. Lack of qualified personnel & outsourcing. Managing impact on organization. Alliances can be very helpful & productive. Choosing appropriate strategy. All of these are extremely important. Perhaps setting strategy & appropriate business model are most critical & set the overall framework. Copyright 2010 John Wiley & Sons, Inc.

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