Using Information Technology to Engage in Electronic Commerce

Using Information Technology to Engage in Electronic Commerce Source: MIS, 10th Ed, McLeod & Schell

Electronic Commerce • Electronic Commerce (E-commerce) refers to a business transaction that uses network access, computer-based systems, and a Web browser interface. • Business-to-consumer (B2C) refers to transactions between a business and the final consumer of the product.

E-commerce (Cont’d) • Business-to-business (B2B) refers to transactions between businesses in which neither one is the final consumer. • Electronic Government (E-gov) refers to transactions between a government agency and typically a citizen.

E-commerce (Cont’d) • Main benefits to firms: • Improved customer service before, during, and after the sale. • Improved relationships with suppliers and the financial community. • Increased economic return on stockholder and owner investments.

E-commerce (Cont’d) • Main constraints to firms: • High costs. • Security concerns. • Immature or unavailable software.

Business Intelligence • Business Intelligence (BI) is the activity of gathering information about the elements in the environment that interacts with the firm. • External databases are commercial databases that, usually for a fee, provide information and analyses on virtually any subject. • www.leisnexis.com, www.dialog.com, www.gxs.com, www.thomasnet.com • Firms use these databases to gather BI because it is faster and less expensive than trying to research a wide array of information sources.

Business Intelligence (Cont’d) • Government databases offer a wide range of topics for researchers in many fields. • www.census.gov • www.bls.gov • www.loc.gov

Business Intelligence (Cont’d) • Search Engines are the most popular means for people to obtain information available from the Web. • Search engine is a special computer program that asks a user for a word or group of words to be found. • www.google.com • www.yahoo.com • Searches the content of web sites on the Internet to see if the word or words are on any Web sites. • Makes it possible to scan large volumes of information quickly, easily, and thoroughly.

E-commerce Strategy & Interorganizational Systems • Interorganizational system (IOS) is the strategy in which a firm is linked with transmissions of electronic data with other firms so that all of the firms work together as a coordinated unit, achieving benefits that each could not achieve alone. • Participating firms are called trading partners, business partners, or a business alliance.

E-commerce Strategy & IOS (Cont’d) • E-commerce is fundamental to IOSs. • Electronic data interchange (EDI) is a means for achieving an IOS; a subset. • E-commerce and EDI are the highways of IOSs. • Extranets are another alternative.

EDI • EDI consists of direct computer-to-computer transmissions of data in a machine-readable, structured format. • Older technology, but majority of B2B commerce use. • Enables data to be transmitted and received without rekeying.

EDI (Cont’d) • Equipment (communications lines, hardware, etc.) and support services provided by telephone companies (AT&T, MCI, et. al.) • Value-added network (VAN) is when the services that operate and manage the communications line (circuit) are provided in addition to the line itself.

EDI (Cont’d) • EDI is the dominant implementation of an IOS. • More that 2/3rd of e-commerce is conducted using EDI compared to other alternatives. • More costly 5,000-30,000 per year with a single vendor or customer • More bulky than newer IOS systems

Extranet • Extranets enable the sharing of sensitive computer-based information with other firms using information technology over the internet. • Used in collaboration with trusted suppliers and large customers. • Security and privacy are serious concerns, so extranets are generally secured behind a firewall and use encryption.

Extranet (Cont’d) • Firewall permits only authorized users to access the firm’s information. • Extranets allow for the same type of data exchange as EDI. • Extranets incorporate the common protocols and communication networks of the Internet which results in a great cost savings (EDI is costly to use).

IOS Benefits • Direct benefits • Reduced data entry errors • Lower costs • Increased operational efficiency • Indirect benefits • Increased ability to compete • Improved relationships with trading partners • Better customer service

IOS Direct & Indirect Benefits Indirect Benefits Direct Benefits Reduced Errors Competitors Trading Partners Reduced Costs Increased Operational Efficiency Increased ability to compete Improved relationship Improved services Customers

B2C Strategies for E-commerce • Important to understand B2C Strategies • More products and services are becoming available for digital delivery. • More consumers are overcoming their reluctance to purchase using the Web. • Higher communication speeds in homes has made delivery of digital products practical. • Fear of information theft has been replaced with acceptance.

Digital Products • Entertainment – songs, albums, movies, etc. • Computer programs & updates – virus protection software, tax software, etc. • Services – www.lendingtree.com • Can be consumed as soon as they are downloaded • Purchasers incur a substantial cost of the transaction in terms of computer cost, online connection fees, storage media, and so on.

Physical Products • Must be transported to the consumer. • Shipment has to be arranged. • Traditional delivery methods are slow. • Faster delivery time options are costly. • Mail/shipping companies offers services such as online tracking that allows more information and control over delivery.

Virtual vs. Hybrid Sales • Virtual sales are those made by a firm that does not operate a physical storefront. • Customer can’t enter and purchase the product. • Hybrid sales occur when firms have both a physical storefront and a Web site where customers can purchase products. • Brick-and-click operations.

Virtual Sales Challenges • Provide necessary product information without overwhelming the customer. • Communicating image files from the web site to the customer’s computer can take time. • Payment over the Internet has suffered bad press – credit card fraud.

Hybrid Sales • Most firms had storefronts before sales over the Internet were possible. • Necessary to their business plans. • Stores act as showcases for products. • Convenience of shopping over the Web. • B2C sales means less inventory at its store; more sales floor space.

The Next Step for E-commerce • Mobile commerce (m-commerce) is the use of cell phones and personal digital assistants (PDAs) to engage in wireless e-commerce. • Third generation (3G) telecommunications is data-capable wireless technologies. • $40 billion per year global industry by 2009.

M-commerce • Early applications included news services, financial information alert/transactions, and banking. • Movie ticket purchases, parking payments, etc. gaining acceptance. • Japan is 1st country to have a 3G carrier (almost all Japanese have a cell phone). • U.S. only about 40% have cell phone.

The Next Step … (Cont’d) • Wireless Internet Hot spots are created using a wired connection (for high communications speed) and then broadcast via a wireless access point to an area approx. 100 meters -> Starbucks. • Business-class wireless computing would provide fast wireless communication everywhere over the same communications carrier as cell phones.

Suggestions for Successful Internet Use • Make sure your Web site is robust. • Make sure your browser and database structure are both flexible and intuitive. • Emphasize content. • Update often. • Look beyond customers. • Target content to specific users’ needs. • Make interface intuitive. • Be in the right Web location. • Create a sense of community. • Get help if you need it.

Future Impact of the Internet on Business • E-commerce is growing in the U.S. and worldwide (15% annually past 5 years). • 3G and even faster 4G phone service. • Increase use of cellular phones for purchases.

Using Information Technology to Engage in Electronic Commerce