Week 3: Electronic Commerce

1. Week 3: Electronic Commerce MIS 2101: Management Information Systems

2. Learning Objectives • Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace • Explain the differences between: • The Internet • Extranets • Intranets • Describe emerging trends in electronic commerce • Discuss regulatory issues

3. Electronic Commerce Online exchange of goods, services and money Second quarter of 2006 2.7% of total retail revenue $24.8 billion in revenue

4. Most Common Types of E-Commerce Business-to-consumer (B2C) A person buys a book from Amazon.com Business-to-business (B2B) Retailer like Wal-Mart ordering from distributors Business-to-employee (B2E) Employee uses the Web to change employee benefits Consumer-to-consumer (C2C) One person purchases from another on eBay

5. E-Commerce Infrastructure Amazon.com Stock DB “In stock” confirmation Amazon.com Product Lookup Application Credit card confirmation AccountDB Client Shopping Application GiantBank Credit verification application

6. Key Capabilities: Information Dissemination Firms across the world have access to customers Economical medium for marketing products and services Increased geographical reach 5-6

7. Key Capabilities: Integration Integration of information via Web sites and other mechanisms Real-time access to personalized information Airline reservations Make the reservation through any almost any airline, travel agency, or online The reservation can involve multiple airlines Use a cell phone, voice, browser Change the reservation through almost any airline, travel agency, or online ATMs Amazon -- purchase products from other companies through Amazon

8. Key Capabilities: Mass Customization Meeting particular customers’ needs on a large scale Timbuk2.com Custom Messenger Bag Builder Customers create a virtual bag Preference-tracking helps Timbuk2 in marketing efforts

9. Key Capabilities:Interactive Communication Immediate feedback between company and customers E-mail notifications Customer service online chat Best Buy Geek Squad 24-hour computer support

10. Key Capabilities:Transaction Support Internet and the Web: Reduced transaction costs Enhanced operational efficiency Dell – automated transaction support Cost savings per sale Disintermediation

11. The Long Tail • Power Law Distributions • Limited Shelf Space • What are the consequences? • Enter Internet • How do things change?

12. Common Revenue Models for EC Most important ingredient of business model How will the firm earn revenue? Information Systems Today: Managing in the Digital World 5-12

13. Learning Objectives • Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace • Explain the differences between: • The Internet • Extranets • Intranets • Describe emerging trends in electronic commerce • Discuss regulatory issues Information Systems Today: Managing in the Digital World 5-13

14. The Internet . . . A network of networks • Computers and other devices capable of communicating • The infrastructure that connects them (fiber optics, copper, modems, routers, microwave, etc.) • The software tools and protocols that make communication possible • A set of standards • It is more than the World Wide Web

15. Extranets Extranets are applications which use Internet technology to conduct business involving multiple firms (B2B) Boeing 1,000 authorized business partners Nearly all Fortune 1,000 companies deploy some type of B2B applications

16. Intranets Business-to-employee (B2E) electronic commerce Internet based private network using Web technologies Boeing More than 1 million pages 200,000 employees

17. Intranet Applications: Training Boeing Company 200,000 employees get trained Quality e-Training program Catalogue of courses Online course content Standardized courses Business improvements Cost reduction Eliminated travel cost

18. Intranet Application: Real-Time Access to Information Manage, update, distribute, and access corporate information Boeing News releases uploaded to the Intranet Previously sent to all corporate offices as video tapes Reduced distribution costs Efficient information sharing Company-wide access

19. Intranet Application: Collaboration Boeing Information shared between employees across the world Reduced product development cycles Ability to stay current on projects Ability to stay current with the changing market conditions

20. Learning Objectives • Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace • Explain the differences between: • The Internet • Extranets • Intranets • Describe emerging trends in electronic commerce • Discuss regulatory issues

21. E-Auction Fraud E-auctions marred with more fraud than any other Internet activity 42% of all Internet-fraud related complaints Average loss: $1,155 Types of e-Auction fraud Bid luring Reproductions Bid shielding Shipping fraud Payment failure Nonshipment

22. Social Online Communities MySpace.com Over 100 million users Original purpose – social network based on music interests 2005 – purchased by NewsCorp for $580 million Income from targeted ads $2.17 per user per year Facebook Originally started at Harvard Expanded to other schools, now open to everyone Microsoft purchased 1.5% for $240 mn

23. Concerns • Privacy on Facebook • eBay, Fandango, Travelocity, and Blockbuster • Branding Issues • Legal Liability

24. Self-Publishing Consumers can voice their opinions with no editorial review Original material by the author Traditional B2B becoming C2C Publishing from home Print-On-Demand Online Music (RadioHead)

25. Blogging Weblogging Online text diary Chronological entries Power of bloggers Vlogging Video blogging

26. M-Commerce Electronic transactions using wireless mobile devices Smart phones High-speed data transfer “Always-on” connectivity Payment Advertisements Bluetooth

27. M-Commerce Applications

28. Online Entertainment Industry Digital rights management (DRM) Technological solution for control of digital media Restrictions Devices which will play it How many times it can play Prevention of illegal copying and distribution Watermark – illegal copy can be traced to original purchaser

29. Learning Objectives • Define electronic commerce. Discuss how it has evolved, and the strategies that companies use to compete in cyberspace • Explain the differences between: • The Internet • Extranets • Intranets • Describe emerging trends in electronic commerce • Discuss regulatory issues

30. Threats to E-Commerce The USA PATRIOT Act Introduced after 9/11 terrorist attacks in 2001 More power given to governmental agencies to protect Americans Critics – Civil Liberties Union Reduced checks and balances on surveillance Lack of focus on terrorism Surveillance on Americans

31. Internet Taxation • The Internet Tax Freedom Act – 1998 • Created as an incentive for EC businesses • Internet sales treated as mail-order sales • No sales taxes paid in states where the company has no presence • Problem • Loss of tax incomes • Unfair advantage for e-tailers

32. Internet Taxation • Solutions: • Use tax • Consumers required to pay their state’s sales tax • Part of some income tax returns • Streamlined Sales Tax Project • Simplification of tax codes • Collection of taxes by out-of-state sellers

33. Arguments For and Against Internet Taxation

34. Net Neutrality Data sent over the Internet is handled in a neutral manner All traffic treated the same way ISPs and telephone companies argue for prioritization Traditional Internet traffic suffers (e-mail) due to high bandwidth applications Example: YouTube.com not paying their fair share, should be deprioritized

35. Censorship Governmental attempts to control Internet traffic Limiting citizens from viewing content E.g., China, North Korea Strict guidelines on what can be viewed Key words and topics blocked United States Child Online Protection Act (COPA) Age verification for certain content

36. Cases

37. eBay Under Attack Phishing Scam artists pretending to be eBay Ask for credit card information and passwords eBay would never send such an email 2006 – London £200,000 stolen eBay feedback scores eBay buyer insurance

38. Employees Using Company Networks Can Affect Liability Illegal downloading of music and movies using company’s computer and Internet access Star Wars Episode III: Revenge of the Sith September 2005 “Screener” version stolen and distributed Forensic marker revealed the identity of the thief 3 years in prison 7 employees copied the movie 1 year in prison and $100,000 in fines Company not held liable

39. Questions!!!