Management Information Systems, 10/e

1. Management Information Systems, 10/e Raymond McLeod Jr. and George P. Schell Management Information Systems, 10/e Raymond McLeod and George Schell

2. Chapter 3 Using Information Technology to Engage in Electronic Commerce Management Information Systems, 10/e Raymond McLeod and George Schell

3. Electronic Commerce • Electronic Commerce (E-commerce) refers to a business transaction that uses network access, computer-based systems, and a Web browser interface. • Electronic commerce is the use of computers to facilitate the firm’s operations • internal (finance, marketing, manufacturing, ...) • external (customers, suppliers, government, ... Management Information Systems, 10/e Raymond McLeod and George Schell

4. E-commerce (Cont’d) • Business-to-consumer (B2C) refers to transactions between a business and the final consumer of the product. • 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. Management Information Systems, 10/e Raymond McLeod and George Schell

5. 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 Management Information Systems, 10/e Raymond McLeod and George Schell

6. E-commerce (Cont’d) • Main constraints to firms: • High costs • Security concerns • Immature or unavailable software Management Information Systems, 10/e Raymond McLeod and George Schell

7. The Path to Electronic Commerce • Implementing an e-commerce system includes a significant risk of failure • The first step is a commitment to implement the system as part of a strategic business plan to use e-commerce to achieve competitive advantage • The firm then gathers business intelligence to understand the potential role each environmental element will play Management Information Systems, 10/e Raymond McLeod and George Schell

8. Business Intelligence • Before engaging in e-commerce managers must understand their firm’s relationships with customers, competitors, suppliers, and other external entities • 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 Management Information Systems, 10/e Raymond McLeod and George Schell

9. Business Intelligence (Cont’d) • Firms use these databases to gather BI because it is faster and less expensive than trying to research a wide array of information sources. • Government databases offer a wide range of topics for researchers in many fields. WWW.LOC.GOV, WWW.CENSUS.GOV, WWW.BLS.GOV Management Information Systems, 10/e Raymond McLeod and George Schell

10. Business Intelligence (Cont’d) • Firms are more inclined to initiate their own external searches for market intelligence. • Search engines are the most popular means for people to obtain information available from the Web. Management Information Systems, 10/e Raymond McLeod and George Schell

11. Business Intelligence (Cont’d) • 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, WWW.MSN.COM, WWW.ASKJEEVES.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. Management Information Systems, 10/e Raymond McLeod and George Schell

12. E-commerce Strategy and 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. Management Information Systems, 10/e Raymond McLeod and George Schell

13. E-commerce Strategy and Interorganizational Systems • E-commerce is fundamental to IOSs. • Electronic data interchange (EDI) is a means for achieving an IOS; a subset. • Extranets are another alternative. Management Information Systems, 10/e Raymond McLeod and George Schell

14. IOS Benefits • The trading partners enter into an IOS venture with the expectation of realizing benefits such as: • Comparative Efficiency • Internal efficiency • Inter organizational efficiency • Bargaining Power • Comparative Efficiency: is obtained by the IOS because the trading partners can produce their goods and services with greater efficiency and provide their goods and services at lower costs to their customers. (price advantage over competitors) Management Information Systems, 10/e Raymond McLeod and George Schell

15. IOS Benefits (Cont’d) • Internal efficiency within the firm’s own operations. • Gather and analyze data quickly. • Make decisions faster. • Interorganizational efficiency gained by working with other firms. • Offer more products and services. • Serve more customers. • Shift certain work to suppliers or customers. • Gather environmental data more easily. Management Information Systems, 10/e Raymond McLeod and George Schell

16. IOS Benefits (Cont’d) • Bargaining Power is the ability of a firm to resolve disagreements with its suppliers and customers to its own advantage. Management Information Systems, 10/e Raymond McLeod and George Schell

17. Bargaining Power Improvements • Unique product features enable firms to offer better service to their customers in the form of easier ordering, quicker shipments, and faster response times to requests for information. • This better service becomes a feature of the firm’s products, making them more appealing than similar products offered by competitors. • Reduced search-related costs can reduce the firm’s “shopping” cost that its customers incur in searching for a supplier, identifying alternative products, and getting the lowest price. • The firm is a customer of its suppliers, the firm can realize the same shopping-cost reductions when ordering from its suppliers. Management Information Systems, 10/e Raymond McLeod and George Schell

18. Bargaining Power Improvements (Cont’d) • Increased switching costsis when a firm makes it more expensive, in cost and/or convenience, for customers to switch to a competitor. • Providing customers with such information resources as hardware, software, and data communications channels that would have to be replaced if products were purchased from another firm. Management Information Systems, 10/e Raymond McLeod and George Schell

19. 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. Management Information Systems, 10/e Raymond McLeod and George Schell

20. 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 Management Information Systems, 10/e Raymond McLeod and George Schell

21. Figure 3.3 IOS Direct and Indirect Benefits Management Information Systems, 10/e Raymond McLeod and George Schell

22. 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. Management Information Systems, 10/e Raymond McLeod and George Schell

23. Digital Products • Entertainment–songs, albums, movies, etc. WWW.SONY.COM • Computer programs and 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. Management Information Systems, 10/e Raymond McLeod and George Schell

24. Physical Products • Items 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 offer services such as online tracking that allows more information and control over delivery. Management Information Systems, 10/e Raymond McLeod and George Schell

25. 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 Management Information Systems, 10/e Raymond McLeod and George Schell

26. 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. Management Information Systems, 10/e Raymond McLeod and George Schell

27. Hybrid Sales • Most firms had storefronts before sales over the Internet were possible. • Both a physical storefront and the Internet are necessary to their business plans. • Stores act as showcases for products. • Customers enjoy convenience of shopping over the Web. • B2C sales means less inventory at its store; more sales floor space. Management Information Systems, 10/e Raymond McLeod and George Schell

28. Virtual Sales • Limit images displayed response time, WWW.OFFICEDEPOT.COM. • Secure data transfer of credit card information. • VeriSign • PayPal Management Information Systems, 10/e Raymond McLeod and George Schell

29. 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. Management Information Systems, 10/e Raymond McLeod and George Schell

30. World Wide Web • World Wide Web (WWW) efforts began in 1989 when Tim Berners-Lee came up with a idea for physicists to communicate. • Hypertext-electronic documents that are linked together. • Physicists would be able to click on words or phrases displayed on their computer screens and retrieve the hypertext. Management Information Systems, 10/e Raymond McLeod and George Schell

31. World Wide Web (Cont’d) • Hypertext became a reality in 1992. • Hypermedia is the transmission of multimedia consisting of text, graphics, audio, and video over the WWW. • WWW (Web) is information accessible via the Internet whereby hypermedia documents (computer files) are stored and then retrieved by means of a unique addressing scheme. Management Information Systems, 10/e Raymond McLeod and George Schell

32. World Wide Web Terms • Web site–collection of Web pages • Hypertext link–pointer (text or a graphic) used to access hypertext stored at a Website • Web page–hypermedia file stored at a unique Web site address • Home page–first page of a Web site • Browser–software designed to find and read files on the Internet written in hypertext markup language (HTTP). Management Information Systems, 10/e Raymond McLeod and George Schell

33. World Wide Web Terms (Cont’d) • Uniform resource locator (URL)–unique address of a Web page • Protocol–set of standards that govern communication of data (HTTP, FTP, URL) • Domain name–address of the website where a Web page is stored • Path–certain directory/subdirectory and file at the Web site • File Transfer Protocol (FTP) users can copy files onto their computers from any Web site. Management Information Systems, 10/e Raymond McLeod and George Schell

34. Figure 3.5 World Wide Web Terminology Management Information Systems, 10/e Raymond McLeod and George Schell

35. Understanding the Difference • The Internet is a global communications network that connects millions of computers. • Provides the network architecture • The Web is a collection of computers acting as content servers that host documents formatted to enable viewing of text, graphics, and audio as well as allowing linkages to other documents on the Web. • Provides the method for storing and retrieving its documents Management Information Systems, 10/e Raymond McLeod and George Schell