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Transcript of I ch12
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce1
CHAPTER 12ELECTRONIC COMEMRCE
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce2
Learning Objectives Describe electronic commerce, its dimensions, benefits,
limitations, and process Describe the major applications of electronic commerce,
both business-to-customer and business-to-business Discuss the importance and activities of market research and
customer service Describe the electronic commerce infrastructure and support
services Compare the various payment systems and describe the role
of smart cards Discuss legal and other implementation issues
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce3
Case : Intel Corporation Embracing the Web The Business Problem
Intense competition in the ICs market
The Solution E-customer service E-selling E-purchasing E-business programs using extranet and EDI
Orders from thousands of customers,distributors and business partners worldwide were received by fax and phone; errors, delays, high cost
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce4
The Results
Case (continued…)
Enhances competitive advantage by giving customers better tools for managing transactions
The system brings substantial saving to Intel What have we learned from this case??
Demonstrates that electronic commerce involves not just selling electronically, but also providing customer service and improving organization’s internal business processes
Illustrates a new and effective way for conducting business
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Chapter 12 Electronic Commerce5
Definitions Business-to-business EC
two (or more) businesses make transactions electronically major benefits include: reduced cost, reduced cycle time,
increased customer base and sales, and improved customer service
Business-to-consumer EC companies sell directly to consumers over the Internet major benefits include increased revenues, the creation of new
sources of revenues, and the elimination of costly intermediaries
Intrabusiness transactions take place within an organization major benefits include increased productivity, speed, and
quality and reduced cost
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Definitions (continued…) Electronic Business (E-business)
a broad definition of EC, not just buying and selling, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization
all about time cycle, speed, globalization, enhanced productivity, reaching new customers, and sharing knowledge across institutions for competitive advantage
a very diverse and interdisciplinary topic, with issues ranging form technology, addressed by computer experts, to consumer behavior, addressed by behavioral scientists and marketing research experts
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce7
History and Scope History
Began in the early 1970s innovations such as electronic transfer of funds (EFT) were limited to large corporations and a few daring small businesses
Electronic Data Interchange (EDI) added other kinds of transaction processing and extended the types of
participating companies Over the last five years
innovative applications, from advertisement to auctions and procurement Scope
home banking, shopping in electronic stores and malls, buying stocks, finding a job, conducting an auction, collaborating electronically with business partners around the globe, and providing customer service
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce8
A Framework for ECElectronic Commerce Applications
• Direct Marketing • Stocks, Jobs • On-line banking • Procurement and purchasing • Malls • Procurement • Auctions • Travel
• On-line publishing • Customer Services • Intrabusiness Transactions
People:Buyers, Sellers,Intermediaries,
Services, IS Peopleand Management
Public Policy :Taxes, Legal,
Privacy Issues, Regulations, and
Technical Standards
Marketing andAdvertisement:
Market Research,Promotions, and
Web content
Supply Chain:Logistics and
Business Partners
Infrastructure
(1)Common business
services infrastructure(security, smart
cards/authenticationelectronic payments,directories/catalogs
(2)Messaging and
information distributioninfrastructure
(EDI, e-mail, Hyper TextTransfer Protocol, Chat
Rooms)
(3)Multimedia content
and networkpublishing infrastructure
(HTML, JAVA, WorldWide Web, VRML)
(4)Network infrastructure
(Telecom, cable TVwireless, Internet)(VAN, WAN, LAN,Intranet, Extranet)
Access (cell phones)
(5)Interfacing
infrastructure(The databases,
logistics,customers, and
applications)
Management
Introduction to Information TechnologyTurban, Rainer and Potter
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Benefits of EC to Organizations Expands a company’s marketplace to national and international markets Allows a vendor to reach a large number of customers, anywhere around the globe, at a
very low cost Enable companies to procure material and services from other companies, rapidly and at
less cost Shortens or even eliminates marketing distribution channels; marketing products cheaper
and vendors’ profits are higher Decrease the cost of creating, processing, distributing ,storing, and retrieving paper-based
information Allows lower inventories by facilitating “pull”-type supply chain management, which
starts from customer orders and uses just-in-time production and delivery processing Reduces the time between the outlay of capital and the receipt of products and services Lowers telecommunications costs because the Internet is much chapter than value-added
networks (VANs) Helps small businesses compete against large companies Enables very specialized markets (e.g. www.dogtoys.com)
Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce10
Benefits of EC to Consumers Frequently provides less expensive products and services by allowing consumers to
shop in many places and conduct online quick comparisons Gives consumers more choices - they can select from many vendors and many
more products than they could locate otherwise Enables customers to shop or make other transactions 24 hours a day, year round,
from almost any location Delivers relevant and detailed information in seconds, rather than in days or weeks Enables consumers to get customized products, from PCs to cars, at competitive or
bargain prices Makes possible virtual auctions, in which consumers can find unique products and
collectors’ items that might otherwise require them to travel long distances to a particular auction place at a specific time
Allows consumers to interact with other consumers in electronic communities and to exchange ideas as well as compare experiences
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Benefits of EC to Society Enables more individuals to work at home and to do less traveling,
resulting in less traffic on the roads and lower air pollution Allows some merchandise to be sold at lower prices, so less
affluent people can buy more and increase their standard of living Enables people in less developed countries and rural areas to enjoy
products and services that otherwise are not available to them Facilitates delivery of public services, such as government
entitlements, reducing the cost of distribution and fraud, and increasing the quality of the social services, police work, health care and education
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Chapter 12 Electronic Commerce12
Technical Limitations of EC Lack of universally accepted standards for quality, security,
and reliability Insufficient telecommunications bandwidth Still-evolving software development tools Difficulties in integrating the Internet and EC software with
some existing (especially legacy) applications and databases There is a need for special Web servers in addition to the
network servers (added cost) Internet accessibility is still expensive and/or inconvenient
for many people
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Non-Technical Limitations of EC Many legal issues are yet unresolved Lack of national and international regulations and standards for
many circumstances Difficulty in measuring benefits of EC, such as Web advertising.
Lack of mature methodologies for justifying EC Distrust of the new: Many sellers and buyers are waiting for EC to
stabilize before they take part Customer resistance to the change from a physical to virtual stores Perception that electronic commerce is expensive and unsecured,
so many do not want even to try it Insufficient number (critical mass) of sellers and buyers which
needed for profitable EC operations
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Chapter 12 Electronic Commerce14
Electronic Retailing and Malls Electronic Commerce enables consumers to buy
from home 24 hours a day, 7 days a week Electronic Commerce offers consumers a wide
variety of products and services, including the most unique items, usually at lower prices
Consumers can easily search for what they really want to buy, not just what is shown on television or in paper catalogs
Consumers can get very detailed information on products, in seconds, and can easily search for and compare competitors’ products and prices
Consumers can reduce (or eliminate) the pile of paper catalogs
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Chapter 12 Electronic Commerce15
Electronic Retailing Direct sale (business to consumers) through
electronic storefronts or malls, usually designed around an electronic catalog format
Solo storefronts maintain their own Internet name and Web site may or may not be affiliated with electronic malls may be extensions of a physical store, or it is a new
businesses started by entrepreneurs who saw a niche on the Web
can be found easily on the Internet - directories and hyperlinks from other Web sites and intelligent agents
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Electronic Malls (Cybermall) A collection of individual shops under one Internet
address Vendors that locate in brick-and-mortar shopping
malls, or locate themselves in a virtual mall, give up a certain amount of independence
Success depends on the popularity of the entire collection of stores as well as on its own efforts
Malls generate streams of prospective customers who otherwise might never have stopped at the store
The Process of Electronic Shopping
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A user gains access to an online service or the internet and goes to a merchant’s Web site. He may know the address, find it in another Web site (refer to it by a search engine), or find it by browsing.
At any time, the user can review the items in the shopping cart and change quantities or delete items, This review continues until a final selection is made.
The user enters the merchant’s storefront and goes to the product displays.
If the user does not find anything of interest, or want to do more shopping he or she may browse some additional merchant storefronts to search for the desired products or services.
When the user does find something of interest, he or she may elect to purchase it online. To finalize the decision, the user may need more information that can be found on the Web pages or obtained by e-mail.
The item is typically stored in a shopping cart. This allows the user to continue looking through this store, or even to visit other merchants, before paying for the items.
When the user is ready to pay he is advised about the payment options the user makes a section and provides payment information (e.g., the credit care number)
The payment authorization is either approved or denied. If denied, the user is prompted for another form of payment .If approved, the transaction is executed.
Shipment is made, if needed, or permission to download products from the Internet is granted. Warranty is established.
Customer service is established. Product may be returned or exchanged, for example maintenance information may be found on the Web site as needed.
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Advertisement an attempt to disseminate information in order to
attract buyers Internet Advertisement
can be updated any time at a minimal cost and therefore can always be timely
can reach very large numbers of potential buyers, all over the world
can be cheaper can efficiently use the convergence of text, audio,
graphics, and animation can be interactive and targeted to specific interest
groups and/or individuals
Advertising Online
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Banners - Electronic Billboards the most commonly used form of advertising on
the Internet, links to advertiser's site contains a short text or graphical message to
promote a product or a vendor Keyword banners
appear when a predetermined word is queried from the search engine
effective for companies who want to narrow their target to consumers interested in particular topics
Random banners appear randomly might be used to introduce new products to the widest
possible audience, or to keep a well-known brand in the public memory
Advertising Methods
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E-mail - emerging as an Internet advertising and marketing channel that permits cost-effective implementation and a better and quicker response rate than other advertising channels marketers develop or purchase a list of e-mail addresses marketers employing e-mail must take a long-term view and
work towards the goal of motivating consumers to continue to open and read messages they receive
marketers must decide what portion of their target market can be reached by e-mail and must supplement existing database information with data relevant to e-mail campaigns
marketers should integrate inbound customer service e-mail with their outbound marketing efforts
marketers must develop e-mail-specific editing skill and the ability to deliver multimedia-rich e-mail
Advertising Methods (continued …)
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Customizing Ads - Filtering the Irrelevant Information BroadVision : One-to-One system/ads
allows the rapid creation of secure Web sites that are visitor-friendly, using a customer database, with registration data and information gleaned from site visits
Webcast : push technology delivers only the information users want or need users get the information they want; at the same time they
also get the banner ads related to that information marketers will get a more customized audience if they place
banners on a system that delivers via push technology
Advertising Issues
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Attracting Visitors to a Site Making the top list of a search engine
the search engine’s spider crawls through the submitted site, following and indexing all related content and links
a company can get to the top of a search engine’s list by adding, removing, or changing a few sentences
Online events, promotions, and attractions people generally like the idea of something funny or
something free (or both) contests, quizzes, coupons, and free samples are an integral
part of Internet commerce as much, or even more than, they are of offline commerce
designed to attract visitors and to keep their attention
Advertising Issues (continued …)
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Attracting Visitors to a Site (CONT’)
Advertising Issues (continued …)
ATTRACTION HOW IT WAS USEDGive away games and discount contests. Also, games sponsored by multiple companies
Yoyodyne Inc. sponsors games and contests to get users to read product information of advertisers, ranging form Major League Baseball to Sprint Communication. In one contest, tax-preparer H&R Block paid $20,000 towards the winner’s federal taxes.
Free Internet access Netzero and other offer this in exchange for viewing adsPersonal, nonautomated selling
www.egghead.com uses real people to help you online. www.lucent.com connects a sales rep with a customer over the phone and then “pushes” material and ads to your computer
Monetary payment Cybergold (www.cybergold.com), Goldmine (www.goldmine.com), and others connect users with advertisers who pay them real money to read ads and explore the Web
Sweepstakes Netstakes runs sqeepstakes that requires no skills. Users register only once and can randomly win prizes in different categories (see http://webstakes.com). The site is divided into channels, and each channel has several sponsors. The sponsors pay Netstakes to send traffic. Netstakes runs online ads, both on the Web and in many email lists that people request to be on.
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Profiling Customers Using Intelligent Agents Product brokering
some companies collect information about consumers for the purpose of creating a customer’s profile
with this profile, the company can tailor ads to the specific customers, or offer them product information
Example - Fujitsu’s agents profile consumers : is using a new agent-based technology called Interactive
Marketing Interface (iMi) that allows advertisers to interact directly with targeted customers
personal profiles submitted to iMi by consumers product announcements, advertisements, and marketing surveys
are sent to customers via e-mail based on their profiles by answering marketing surveys or acknowledging receipt of
advertisements, consumers earn iMi points, redeemable for gift certificates and phone cards
Advertising Issues (continued …)
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On CD-ROM and On the Web can be searched quickly with the help of special search
engines effective comparisons involving catalog products customized catalogs
a catalog assembled specifically for a company, usually for a regular customer of the catalog owner
can be tailored to individual consumers let the system automatically identify customer
characteristics based on their transaction records involve cookie technology and data mining technology
Electronic Catalogs
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Interactive Advertising and Marketing advertisers present customized, one-on-one
advertising, which is followed by sales interactive : the ability to address an individual, to
gather and remember that person’s response, and to serve that customer based on his or her previous, unique responses
Coupons Online consumers can gather any discount coupons they want
by accessing sites like www.hotcoupons.com or www.supermarkets.com, selecting the store where they plan to redeem the coupons
Advertising Online
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Services Online
Cyberbanking names : electronic banking, virtual banking,
home banking, and banking online capabilities ranging form paying bills to
securing a loan for customers : saving time and convenience for banks : offering an inexpensive alternative
to branch banking and a chance to enlist remote customers
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Cyberbanking (CONT’) SFNB puts security first
www.sfnb.com the first virtual bank offering secure banking transactions on the Web
Hong Kong Bank grows without branches www.hongkongbank.com using HEXAGON, the bank has leveraged its reputation and
infrastructure in the developing economies of Asia to become a major international bank rapidly
Mark Twain supports foreign currency trading www.marktwain.com using electronic cash to support trading in 20 foreign
currencies
Services Online (continued…)
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Services Online (continued…) Online Stock Trading
an online trade typically costs between $5 and $30, compared to an average fee of $100 from a full-service broker and $25-50 from a discount broker
no waiting on busy telephone lines small chance of making mistakes which are made in oral
communication orders can be placed from anywhere, any time can find considerable amount of information regarding investing
in a specific company or in a mutual fund
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Services Online (continued…) The Online Job Market
Job seekers can reply to employment ads online can take the initiative and place resumes on their own home pages
or on others’ Web sites, send messages to members of newsgroups asking for referrals, and use recruiting firms
Job offerers advertise openings on their Web site use sites ranging form Yahoo!, to online services, bulletin boards,
and recruiting firms Recruiting firms
use their own Web pages to post available job descriptions and advertise their services in electronic malls and in other Web sites
Newsgroups jobs in a certain category or location are posted, discussions are
conducted, and resumes can be sent
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Services Online (continued…) Travel
Internet is an ideal place to plan, explore, and arrange almost any trip
potential savings are available through special sales, auctions, and the elimination of travel agents
allows to purchase airline tickets, reserve hotel rooms, and rent cars
supports an itinerary-based interface ,including a fare-tracker feature
links to weather sites, currency converters, adventure magazines, and chat forums, where users can share travel tips
allows to set a price that people are willing to pay for an airline ticket or hotel accommodations, and the company then attempts to find a vendor for that price (www.priceline.com)
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Services Online (continued…) Real Estate
consumers can view many properties on the screen, saving time for themselves and the brokers
consumers can sort and organize properties according to their criteria and preview the exterior and interior designs of the properties, shortening the search process
consumers can find detailed information about the properties and frequently get even more details than brokers usually provide
homebuilders now use virtual reality technology on their Web sites to demonstrate three-dimensional floor plans to potential home buyers
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Services Online (continued…) Auctions
Specialized auction sites ( www.onsale.com ) Auctioning cars to dealers ( www.manheim.com ) Art auctions ( www.onlineart.com &
www.auctions-on-line.com ); collectors’ items ( www.ebay.com )
Airlines ( www.americanair.com & www.cathey.usa.com )
Bartering the exchange of goods and/or services without a
monetary transaction ( www.barterbrokers.com )
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Chapter 12 Electronic Commerce34
Business-to-Business Applications Product - specifications, prices, sales history Customer - sales history and forecasts Supplier - product line and lead times, sales terms and conditions Product process - capacities, commitments, product plans Transportation - carriers, lead times, costs Inventory - inventory levels, carrying costs, locations Supply chain alliance - key contracts, partners’ roles and responsibilities,
schedules Competitor - benchmarking, competitive product offerings, market share Sales and marketing - point-of-sale (POS), promotions Supply chain process and performance - process descriptions, performance
measures, quality, delivery time, customer satisfaction
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Seller-Oriented Marketspace Organizations attempt to sell their products (services) to other
organizations electronically (e-selling) The buyer is expected to visit the seller’s site or a mall, view
catalogs, and place orders The buyer is an organization that may be a regular customer of the
sellers Key Mechanisms : electronic catalog that can be customized for each
large buyer, the ordering system, the payment system, and the integration of the incoming orders with the vendor’s logistics system
EC is used to increase sales, reduce selling expenditures, increase delivery speed, and reduce administrative costs
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Buyer-Oriented Marketspace EC technology is used to reduce both the cost of items purchased and the
administrative cost of procurement Request For Quotation (RFQ) on Buyer’s Web Site
businesses submit bids electronically, and the bids are routed via the buyer’s intranet to the engineering and finance departments for an evaluation
clarifications are made via e-mail the winner is notified electronically saves 10-15 percent on the cost of the items placed for bid saves up to 85 percent on the administrative cost saves about 50 percent on cycle time known as e-purchasing or e-procurement
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Intermediary-Managed Marketspace
Electronic Intermediaries A link between buyers and sellers Main function : market making PART - about 300 parts suppliers and dozens of airlines
participate (by Boeing Aircraft Corp.) ProcureNet - more than 150,000 products, known as
MROs (maintenance, repairs, and operations) Some of the online services make money, some of them
only improve service for customers
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Customers and Their Behavior Examples of the importance of learning about
customers Peapod providing supermarket products online
the company was still incurring losses in 2000 problems :
» small customer base» customers like to see and feel items before they buy them
Amazon selling books published by others assesses the potential customers’ reaction, and correctly
predicts books to be a desirable items for online sale
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Market Research : Behavioral Model
Decision Making Process
Personal CharacteristicsAge, Gender, Ethnicity, Education, Lifestyle, Psychological, Knowledge, Values, Personality
Environmental CharacteristicsSocial, Family, Communities
Vendors’ Controlled SystemsLogistic SupportPayments, Delivery
Technical SupportWeb Design, Intelligent Agents
Customer ServiceFAQs, E-mail, Call Centers,One-to-One
Buyers’ DecisionsBuy or NotWhat to BuyWhere (Vendor)When How Much to SpendRepeat Purchases
StimuliMarketingPricePromotionProductQuality
OthersEconomicalTechnologyPoliticalCultural
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Market Research (continued …) To find out what motivates consumers to buy To developed models that explain consumer behavior
regarding purchasing decisions To identify new markets To investigate competitors and their products To test consumer interest in new products To help one-to-one marketing (allows one-to-one personal contact
with customers, and provides marketing organizations with greater ability to understand consumers, the market, and the competition)
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Market Research (continued …)
Asking Customers What They Want interacting directly with consumers filling in electronic questionnaires
vendors need to use inducements to motivate consumers to participate and be honest
learning what consumer want from the directly obtained answers
trying to infer from consumers’ preferences on other preferences
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Market Research (continued …)
Tracking Customer Activities on the Web observing consumers’ behavior on the internet site-tracking services, based on cookies or other
approaches one of the most interesting tools for tracking
customers on the Internet as well as helping them to shop with intelligent agents
possible invasion of privacy
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Electronic Commerce Agents Intelligent agents
computer programs that conduct routing tasks, search and retrieve information ,support decision making, and act as domain experts
sense the environment and act autonomously without human intervention
Software agents with no intelligence
Learning agents exhibit some intelligent behavior
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EC Agents (continued …)
Intelligent agents for information search and filtering help to determine what to buy to satisfy a specific need Personalogic uses filtering process - consumers specify
requirements and constraints, and the system returns a list of products that best meet the desired product
Firefly used (until recently) a collaborative filtering process that can be described as “word of mouth” to build the profile (not available any more) its Passport generates a customer’s personal profile
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EC Agents (continued …) Intelligent agents for Product and Vendor Finding
help consumers decide where to buy by comparing merchants’ offers Bargainfinder from Andersen Consulting queried the price of a
specific CD from a number of online vendors and returned the list of vendors and prices (Not in use any longer)
Jango form NetBot/Excite originates the requests form the user’s site instead of Jango’s, so vendors can not block it
Kasbah from MIT Laboratories allows users who want to sell or buy a product, assign the task to an agent that is sent out to actively seek buyers or sellers
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EC Agents (continued …) Negotiation Agents
help to take away some of the frustration some customers experience in the negotiating process and the technical limitations of being in different locations
AuctionBot allows users create auction agents by specifying a number of parameters that vary depending on the type of auction selected
Kasbah allows users create agents for the purpose of selling or buying process
Tele-@-tete uses a number of different parameters: price, warranty, delivery time, service contracts, return policy, loan option, and other value-added services
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Organizational Buyers
Make purchase decisions in business-to-business situations
More formalized purchasing decision The purchasing process may be more
important than advertising activities in swaying purchase decisions
Decisions may be made by a group
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Customer Service
Phases in the Customer Service Life Cycle Phase 1 : Requirements
assisting the customer to determine needs Phase 2 : Acquisition
helping the customer to acquire a product or service Phase 3 : Ownership
supporting the customer on an ongoing basis Phase 4 : Retirement
helping the client to dispose of a service or product
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Customer Service (continued …) Facilitating Customer Service
Personalized Web pages - customers build individualized pages at the vendor’s site
Chat rooms - customers can interact with each other and with vendor’s personnel who monitor the chat room
E-mail - send confirmations, product information, and instructions to customers
FAQs - provide online answers to questions customers ask most Tracking capabilities - enable customers to track the status of their orders,
services, or applications Web-based call centers - a comprehensive communication center takes
customers’ inquiries in any form they come and answers them quickly
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EC InfrastructureCOMPONENT DESCRIPTION AND ISSUESNetworks A shift from VANs to the Internet. Increased use of VPNs (virtual
private networks) to enhance security and capabilities over the Internet.Web severs Special Web servers are usually superior to dual-purpose servers.
Available for rent. The interface to legacy systems may be a problemWeb server support and software
1. Web site activity tracking. 2. Database connectivity. 3. Software for creating electronic forms. 4. Software for creating chat rooms and discussion groups.
Electronic catalogs Product description, multimedia use, customized catalogs, inclusion in Web site design and construction, templates for construction.
Web page design and construction software
Web programming languages (HTML, JAVA, VRML, XML)
Transactional software
1. Search engines for finding and comparing, products. 2. Negotiating software. 3. Encryption and payment. 4. Ordering (front office) inventory and back office software.
Internet access components
TCP/IP package, Web browsers, remote access server, client dial-in software, Internet connection device, leased line connection, connection to leased line, Internet kiosks
Others Firewalls, e-mail, HTTP (transfer protocols), smart cards
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Electronic Payment Systems Electronic credit cards
Payments using unencrypted credit card the buyer e-mails her or his credit card number to the seller on the
Internet risk here is that hackers will be able to read the credit card number
Encrypted payments using public/private key encryption, credit card details can be
encrypted for better security this can be done by simply using the SSL protocol in the buyer’s
computer
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Electronic Payment Systems (continued …)
Electronic checks secured by public-key cryptography and may be suitable for
some micropayments Step 1 : the customer establishes a checking account with a bank Step 2 : the customer contacts a seller, buys a product or a
service, and e-mails an encrypted electronic check signed with a digital signature
Step 3 : the merchant deposits the check in his or her account: money is debited in the buyer’s account and credited to the seller’s account
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Electronic Payment Systems (continued …)
Electronic cash in your PC Step 1 : the customer opens an account with a bank and receives special
software for his or her PC Step 2 : the customer buys “electronic money” from the bank by using the
software Step 3 : the bank sends an electronic money note to this customer,
endorsing it with a digital signature Step 4 : the money is stored on the buyer’s PC and can be spent in any
electronic store that accepts e-cash Step 5 : the software is also used to transfer the e-cash from the buyer’s
computer to the seller’s computer Step 6 : the seller can deposit the e-cash in a bank, crediting his or her
regular or electronic account, or use the e-cash to make a purchases elsewhere
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Electronic Payment Systems (continued …)
Electronic payment cash (Smart Cards) with e-cash credit cards using magnetic strips contain only limited
information , such as the card’s ID number cards to pay photocopies in the library, or to pay telephone calls
storing a fixed amount of prepaid money card used by New York Metropolitan Transportation Authority
(MTA) in buses, trains, interstate toll bridges, and tunnels cards containing microprocessor storing a considerable amount of
information (more than 100 times more than a regular credit card) and allowing money to be stored in quantities that can be decreased as well as increased
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Security Security Requirements
Authentication - the buyer, the seller, and the paying institutions must be assured of the identity of the party with whom they are dealing
Integrity - it is necessary to assure that data and information transmitted in EC, such as orders, reply to queries, and payment authorization, are not accidentally or maliciously altered or destroyed during transmission
Non-repudiation - merchants need protection against the customer’s unjustifiable denial of placing an order; buyer needs protection against the vendor denial of shipment, or sending wrong order
Privacy - many customers want their identity to be undisclosed Safety - customers want to be sure that it is safe to provide a credit card
number on the Internet
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Security (continued …) Security Protection
Encryption - a process of making messages indecipherable except by those who have an authorized decryption key Single-key encryption
» the sender of the electronic message (or payment) encrypted the information with a key
» the receiver used an identical key to decrypt the information to a readable form
» the same code had to be in the possession of both the sender and the receiver
» problems : if a key were transmitted and intercepted illegally, it could be used to read all encrypted messages or to steal money
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Security (continued …)
Security Protection : Encryption (continued …) Public/private key encryption
uses two different keys - public key and private key several authorized people may know the public key, but
only its owner knows the private key every person has one private key and one public key encryption and decryption can be done with either key if encryption is done with the public key, the decryption
can be done only with the private key and vice versa
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Security (continued …) Security Protection :Encryption (continued …)
Public/private key encryption
MessageText
MessageText
Sender Receiver
Encryption Decryption
Public Key of Recipient
Private Key ofRecipient
Signature Signature
Private Key of Sender
Public Key of Sender
CipheredText
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Security (continued …) Security Protection : Protocols
Secure Socket Layer (SSL) the most common protocol used in EC main capability is to encrypt messages
Secure Electronic Transaction Protocol (SET) the major proposed standard for credit card processing allows consumers to shop anywhere as conveniently and
securely as possible by incorporating digital signatures, certification, encryption, and an agreed-upon payment gateway
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Market Practices Fraud on the Internet
internet fraud and its sophistication have grown as much and even faster than the Internet itself
stocks manipulations, selling bogus investments and phantom business opportunities
examples: stock promoters falsely spread positive rumors about the
prospects of the companies they touted the information provided might have been true, but the
promoters did not disclose that they were paid to promote the companies
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Buyer Protection Tips for safe electronic shopping include:
look for reliable brand names at sites like Wal-Mart Online, Disney Online, and Amazon.com
search any unfamiliar selling site for company’s address and phone and fax number check out the seller with the local Chamber of Commerce and/or Better Business
Bureau investigate how secure the seller’s site is by reading the posted privacy notice, and
evaluate how well the site is organized examine the money-back guarantees, warranties, and service agreements compare prices to those in regular (suspect the too cheap sites) ask friends what they know about the vendor find out what your rights are in case of a dispute consult the National Fraud Information Center check www.consumerworld.org for a listing of useful resources
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Seller Protection
Be protected against consumers who refuse to pay or pay with bad checks and buyers’ claims that the merchandise did not arrive
Be protected against the use of their name by others as well as use of their unique words and phrases, slogans and Web address
Have legal recourse against customer who download copyrighted software and/or knowledge and sell it to others
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Ethical Issues Privacy
most electronic payment systems know who the buyers are; therefore, it may be necessary to protect the buyers’ identity
The Human Element the technology is new to many IS directors and employees and so
many require new sets of skills Web Tracking
by using sophisticated software it is possible to track individual movements on the internet
Disintermediation the use of EC may result in the elimination of some of a company’s
employees as well as brokers and agents
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Legal Issues Domain Names
several companies that have similar or same names (in different countries) compete over a domain name that is not a registered trademark
Taxes and Other Fees particularly complex for interstate and international commerce (A
tax moratorium until October 2001) Copyright
intellectual property is protected by copyright laws and cannot be used freely
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For Accounting The implications of replacing paper documents by electronic
may impact many of the accountants’ tasks, especially the auditing of EC activities and systems
For Finance The world of banking ,stocks, and commodities markets, and
other financial services are being reengineered due to EC For Marketing
The revolution is affecting many marketing theories, ranging form consumer behavior to advertisement strategies
What’s in it for Me?
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What’s in IT for Me? (continued …)
For Production/Operations Management EC is changing the manufacturing system form a
product-push mass production to an order-pull mass customization
For Human Resource Management Modern HRM has tremendous opportunities to
exploit Internet capabilities to improve the productivity of HRM personnel, recruit and maintain top employees, and increase job satisfaction to very high levels