Week 3: Electronic Commerce

1. Week 3: Electronic Commerce MIS 2101: Management Information Systems Based on material from Information Systems Today: Managing in the Digital World, Leonard Jessup and Joseph Valacich, Pearson Prentice Hall, 2007 Also includes material by David Schuff, Paul Weinberg, and Cindy Joy Marselis.

2. “There is no physical analog for what Amazon.com is becoming.” Jeff Bezos Cofounder and long-time CEO of Amazon.com 5-2

3. 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

4. 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

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

6. Electronic Commerce Online exchange of goods, services and money 2011 7% of total retail revenue $202 billion in revenue 2012 $226 billion 7% of total retail revenue Why the dramatic increase from 2006? 2016 http://www.internetretailer.com/2012/02/27/e-retail-spending-increase-45-2016

7. 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

8. Key Capabilities: Information Dissemination Firms across the world have access to customers Economical medium for marketing products and services Increased geographical reach 5-8

9. Key Capabilities:Integration Integration of information via Web sites and other mechanisms Integration of processes among multiple companies Real-time access to personalized information “Efficient Markets”

10. Example: Integration 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

11. Other examples of integration • ATMs • Amazon --- purchase products from other companies through Amazon

12. 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

13. 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

14. Key Capabilities:Collaboration Virgin Entertainment Group Microsoft SharePoint Managers: spend more time selling products Head office: more time for strategic planning

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

16. E-Commerce Business Strategies Differentiated based on levels of physical/virtual presence Information Systems Today: Managing in the Digital World 5-16

17. 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 5-17

18. 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

19. As a result of the standards • You can retrieve material using a browser from any Web Server regardless of technology or location • You can send email to any email account regardless of technology or location • Dissimilar computers at multiple locations can function together to complete a process

20. Business-to-Business E-Commerce 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 Electronic Data Interchange (EDI) and Web Services are two technologies used for Extranets.

21. Electronic Data Interchange (EDI) Used for business to business applications prior to the introduction of Web Services • Digital or electronic transmission of business documents between organizations • Value-added networks (VAN) • Proprietary message formats

22. Web Services • A set of standards also used for business to business applications. • Developed by the World Wide Web Consortium • Different from EDI because the message formats are an international open standard. • Messages sent in (encrypted) text, making them easy to send and receive • Any business can communicate with any other business

23. Simple Web Services Example The Gap Stock DB “In stock” confirmation BigStore.com ProductLookup Application Credit card confirmation AccountDB Client Shopping Application GiantBank Credit verification application The BigStore.com application can check whether a product is in stock at The Gap, or the verify a customer’s credit card at GiantBank. BigStore.com doesn’t have to know the technology in use at the Gap or at GiantBank.

24. Web Services • Can they be used inside, or external to an organization? • Will industries and other groups agree on standard data definitions? • Why do you think Microsoft, IBM, and others are adopting Web Services standards • Will Web Services succeed even though Electronic Data Interchange (EDI) didn’t? Why? • Which industries are most likely to adopt this technology? • Which are not?

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

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

27. Intranet Application: Online Entry of Information Use of Web browsers to enter information online E.g., Microsoft MSExpense Prior to MSExpense 136 different report templates Outdated versions With MSExpense Online submission of expense records Easy and centralized updates to templates Savings of $4.3 million a year Shortened period for reimbursement from 3 weeks to 3 days Etc.

28. 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

29. 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

30. 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

31. Types of Consumer to Consumer (C2C) E-Commerce 17% of American adults have sold online Forward auction Sellers post goods or services for sale Buyers bid on these items Reverse auction Buyers post a request for quote (RFQ) Seller proposes a bid

32. 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

33. Social Online Communities Facebook Twitter Becoming increasingly powerful tools used by businesses to target customers and brand their products & services

34. 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 Blogging

35. Printing-On-Demand Customized printing Small batches Attractive for first time authors Select providers Lulu Blurb BookSurge Amazon End-to-end service

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

37. M-Commerce Electronic transactions using wireless mobile devices Mobile networks Wireless Switched public network Smart phones High-speed data transfer “Always-on” connectivity

38. M-Commerce Applications

39. M-Commerce Statistics • 64% of smartphone owners use their devices to shop online • 73% of consumers have used their mobile devices in a store • Mobile coupons are most popular at grocery stores • 74% of sp owners use their devices to get directions and other location-related information • Nearly 116 million Americans will use a smartphone at least monthly by the end of 2012. By 2013, half of mobile users will have a smartphone and by 2016 nearly 3 in 5 users will have a smartphone • 85% of merchants will focus on m-commerce in 2012, up from 68% in 2011 • 66% of shoppers use their smartphones to aid in shopping • http://www.digby.com/mobile-industry-resources/mobile-industry-statistics/

40. 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

41. 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

42. E-Government The use of information systems to provide citizens, organizations and other governmental agencies with information about public services and to allow for interaction with the government G2C G2B G2G

43. 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

44. 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 • Internet Tax Freedom Amendment Act of 2007 • Problem • Loss of tax incomes • Unfair advantage for e-tailers

45. 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

46. Arguments For and Against Internet Taxation

47. 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

48. Approaches to Net Neutrality

49. 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

50. Cases