Principles of Information Systems Eighth Edition Chapter 8 Electronic and Mobile Commerce

2Principles of Information Systems, Eighth Edition 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

3Principles of Information Systems, Eighth Edition 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

4Principles of Information Systems, Eighth Edition Principles and Learning Objectives (continued) Although e-commerce and m-commerce offer many advantages, users must be aware of and protect themselves from many threats associated with this technology –Identify the major issues that represent significant threats to the continued growth of e-commerce and m-commerce Organizations must define and execute a strategy to be successful in e-commerce –Outline the key components of a successful e- commerce strategy

5Principles of Information Systems, Eighth Edition Principles and Learning Objectives (continued) E-commerce and m-commerce require the careful planning and integration of a number of technology infrastructure components –Identify the key components of technology infrastructure that must be in place for e-commerce and m-commerce to work –Discuss the key features of the electronic payment systems needed to support e-commerce

6Principles of Information Systems, Eighth Edition 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 manger may provide Web content for employees and investors Must learn about e-commerce and m-commerce

7Principles of Information Systems, Eighth Edition 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

8Principles of Information Systems, Eighth Edition 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

9Principles of Information Systems, Eighth Edition 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

10Principles of Information Systems, Eighth Edition 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

11Principles of Information Systems, Eighth Edition eGovernment 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)

12Principles of Information Systems, Eighth Edition Multistage Model for E-commerce Figure 8.1: Multistage Model for E-Commerce (B2B and B2C)

13Principles of Information Systems, Eighth Edition Multistage Model for E-commerce (continued) Figure 8.2: Product and Information Flow for HP Printers Ordered over the Web

14Principles of Information Systems, Eighth Edition 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

15Principles of Information Systems, Eighth Edition E-Commerce Challenges (continued) Figure 8.3: Three Basic Components of a Successful E-Commerce Model

16Principles of Information Systems, Eighth Edition E-Commerce Challenges (continued) Figure 8.4: Web-Based Order Processing Must Be Linked to Traditional Back-End Systems

17Principles of Information Systems, Eighth Edition 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

18Principles of Information Systems, Eighth Edition 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

19Principles of Information Systems, Eighth Edition 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

20Principles of Information Systems, Eighth Edition 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

21Principles of Information Systems, Eighth Edition 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

22Principles of Information Systems, Eighth Edition 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

23Principles of Information Systems, Eighth Edition Manufacturing To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet Electronic exchange: electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run back- office operations

24Principles of Information Systems, Eighth Edition Manufacturing (continued) Figure 8.5: Model of an Electronic Exchange

25Principles of Information Systems, Eighth Edition Marketing Market segmentation: identification of specific markets to target them with advertising messages Technology-enabled relationship management: use of detailed information about a customer’s behavior, preferences, needs, and buying patterns to customize the entire relationship with that customer

26Principles of Information Systems, Eighth Edition 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

27Principles of Information Systems, Eighth Edition 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

28Principles of Information Systems, Eighth Edition 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

29Principles of Information Systems, Eighth Edition 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

30Principles of Information Systems, Eighth Edition 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

31Principles of Information Systems, Eighth Edition 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

32Principles of Information Systems, Eighth Edition 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

33Principles of Information Systems, Eighth Edition Theft of Intellectual Property (continued) Trade secrets Digital Rights Management (DRM): use of any of several technologies to enforce policies for controlling access to digital media

34Principles of Information Systems, Eighth Edition Fraud Phishing: sending bogus messages purportedly from a legitimate institution to pry personal information from customers by convincing them to go to a “spoof” Web site Click fraud: arises in a pay-per-click online advertising environment when additional clicks are generated beyond those that come from actual, legitimate users Online auction fraud

35Principles of Information Systems, Eighth Edition Invasion of Consumer Privacy Online profiling: practice of Web advertisers’ recording online behavior to produce targeted advertising Clickstream data: data gathered based on the Web sites you visit and the items you click on

36Principles of Information Systems, Eighth Edition 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

37Principles of Information Systems, Eighth Edition Return on Investment The investment required for a large firm to establish and operate a B2B or B2C Web site can be in the millions of dollars Common problem with determining return on investment: difficult to forecast project costs and benefits

38Principles of Information Systems, Eighth Edition 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

39Principles of Information Systems, Eighth Edition Taxation U.S. Supreme Court ruling: Internet-based merchants must apply sales tax only when buyers live in a state where the company has physical facilities, or “nexus” Most businesses set up separate companies to avoid dealing with nonstandard rules of the more than 7,500 taxing districts nationwide –Consumers are responsible for voluntarily remitting sales taxes Difficult for states to collect sales taxes on Internet purchases

40Principles of Information Systems, Eighth Edition 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

41Principles of Information Systems, Eighth Edition Defining the Web Site Functions Decide which tasks the site must accomplish Create an attractive presence for the company Meet the needs of its visitors –Examples: obtaining information about the organization and its products, buying products or services, getting advice, registering complaints Redefining your site’s basic business model to capture new business opportunities

42Principles of Information Systems, Eighth Edition 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

43Principles of Information Systems, Eighth Edition 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

44Principles of Information Systems, Eighth Edition Maintaining and Improving Your Web Site Be alert to new trends and developments in e- commerce Be prepared to take advantage of new opportunities Personalization: tailoring Web pages to specifically target individual consumers –Explicit: captures user-provided information –Implicit: captures data from customer Web sessions

45Principles of Information Systems, Eighth Edition 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

46Principles of Information Systems, Eighth Edition Technology Infrastructure Required To Support E-commerce and M-commerce (continued) Figure 8.6: Key Technology Infrastructure Components

47Principles of Information Systems, Eighth Edition 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 Web site hosting: third-party Web service provider

48Principles of Information Systems, Eighth Edition Web Server Software Security and identification –Access controls –Encryption Retrieving and sending Web pages Web site tracking –Web log file Web site development –HTML/visual Web page editor, software development kits

49Principles of Information Systems, Eighth Edition Web Server Software (continued) Web page construction –Web editors and extensions –Static Web page: contains same information –Dynamic Web page: responds to a specific Web user’s request Examples of Web server software packages: Apache HTTP Server, Microsoft Internet Information Server

50Principles of Information Systems, Eighth Edition 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

51Principles of Information Systems, Eighth Edition E-Commerce Software (continued) Figure 8.7: Electronic Shopping Cart

52Principles of Information Systems, Eighth Edition Electronic Payment Systems Digital certificate: attachment to an 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

53Principles of Information Systems, Eighth Edition Electronic Payment Systems (continued) Credit card Charge card Debit card Smart card: a credit card–sized device with an embedded microchip to provide electronic memory and processing capability

54Principles of Information Systems, Eighth Edition 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) eGovernment: 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

55Principles of Information Systems, Eighth Edition 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

56Principles of Information Systems, Eighth Edition 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