1 - bus 311 – fall 2003 electronic commerce electronic commerce chapter 5
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Electronic CommerceElectronic Commerce
Chapter 5
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HistoryHistory
Began in the early 1970sinnovations 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 companiesANSI X.12 standardized in 1983EDIFACT standardized in 1986-87
Over the last five yearsinnovative applications, from advertisement to auctions and procurementfueled by the internet
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Types of Electronic CommerceTypes of Electronic Commerce
Business-to-consumer EC (B2C)companies sell directly to consumers over the Internet
Business-to-business EC (B2B)two (or more) businesses make transactions electronicallyMore than $7.3 trillion volume by 200415x volume of B2CMostly done by EDI – 95% of EC is EDI!
Consumer-to-consumer (C2C)E.g. E-bay, Classifieds
Government-to-citizens (G2C) and to others Doing taxes online etc.
Mobile commerce (m-commerce)Wireless commerce. E.g. Using cell phone to pay for gas
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Supply Chain ManagementSupply Chain Management
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Value Chains in E-CommerceValue Chains in E-Commerce
Conversion to e-commerce supply chain management provides businesses with an opportunity to:
increase revenues or decrease costs by eliminating time-consuming and labor-intensive steps throughout the order and delivery processimprove customer satisfaction by enabling customers to view detailed information about delivery dates and order statusreduce inventory including raw materials, safety stocks, and finished goods
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Product and Information Flow for Product and Information Flow for HP Printers Ordered Over the WebHP Printers Ordered Over the Web
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E-Commerce ApplicationsE-Commerce Applications
Retail and WholesaleCybermallElectronic exchange
ManufacturingMarketingInvestment and Finance
On-line Stock TradingOn-line Banking
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Electronic RetailingElectronic Retailing
Solo storefrontsExamples: walmart.com, buy.comCan use services like http://store.yahoo.com
CybermallsExamples Cybermall.com, Shopnow.comStores give up some freedom to be part of the mallSome malls are just fancy directories of storesSome solo stores expand to become malls
Amazon.com, Buy.comSome malls are more like intelligent agents for comparing prices (pricegrabber.com)
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Issues in E-tailingIssues in E-tailing
Channel conflictLego.com: Keeping consumers and retailers happy (very small percent of revenue from online sales)
Order fulfillmentShipping small quantities to many customers. How to handle returns?
Incorrect revenue modelsUntil 2000 (dot-com bubble), profit was old-fashioned in e-commerceYou can’t have low prices and expect to make it up in advertising. Today: All is based on profit, not revenue!
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B2B E-commerceB2B E-commerce
Sell-side marketspacesOne company trying to sell its goods to many companiesCustomized catalogs, auctions
Buy-Side marketspaces / E-procurementOne large buyer, many smaller suppliersExamples: Supermarket chains, Ford, BoeingAlternative: Group procurement (e.g. shop2gether.com)
Electronic ExchangesMany sellers and many buyers
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An Electronic ExchangeAn Electronic Exchange
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Key Technical ComponentsKey Technical Components
Decision: Develop or outsource?
•Catalog Management•Product Configuration•Shopping Cart•E-commerce Transaction Processing•Web Site Data Analysis
Electronic Payment Systems•Credit cards, smart cards•Digital certificate•Electronic cash•Electronic wallet•P2P payment (PayPal)
•Apache Web server•Oracle•Web construction
•Linux•Unix•Windows
•PC•Mainframe•Mid-range
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Strategies for Successful E-Strategies for Successful E-CommerceCommerce
Developing an effective Web presencePutting up a Web site
Web Site Hosting ServicesStorefront Brokers
Building Traffic to your Web SiteAdvertising
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Advertising Issues:Attracting Advertising Issues:Attracting Visitors to a SiteVisitors to a Site
Making the top list of a search enginethe search engine’s spider crawls through the submitted site, following and indexing all related content and linksa company can get to the top of a search engine’s list by adding, removing, or changing a few sentencesor by paying for the service!
Paid search is a very effective advertising methodGoogle Adwords: www.google.com/ads
Check Google Toolbar for IE (PageRank)
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SecuritySecurity
Authentication the buyer, the seller, and the paying institutions must be assured of the identity of the party with whom they are dealing
Integrity data and information transmitted in EC, must not be 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
Most Americans are concerned about Internet security; 74% are worried about their personal infoMost (64%) people don’t pay attention to privacy policies (3% read them carefully).
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Advertising OnlineAdvertising Online
Advertisementan attempt to disseminate information in order to attract buyers
Internet Advertisementcan be updated any time at a minimal cost and therefore can always be timelycan reach very large numbers of potential buyers, all over the worldcan be cheapercan efficiently use the convergence of text, audio, graphics, and animationcan be interactive and targeted to specific interest groups and/or individuals
Online Ad Spending in US To Hit $8 billion in 2002(http://www2.cio.com/metrics/
2002/metric339.html)
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Advertising Advertising Methods:Methods: Banners Banners
the most commonly used form of advertising on the Internet, links to advertiser's sitecontains a short text or graphical message to promote a product or a vendorKeyword banners
appear when a predetermined word is queried from the search engineeffective for companies who want to narrow their target to consumers interested in particular topicsExample: Google.com (text-only),
Random bannersappear randomlymight be used to introduce new products to the widest possible audience, or to keep a well-known brand in the public memoryExample: Cnet.com (few, but large banner ads)
Related: Pop-up windows (pop-over and pop-under)
Banner ads remain most popular
online, claiming a 50% share of
all online ads. (March 7, 2002) Jupiter Media Metrix
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Advertising Methods: EmailAdvertising Methods: Email
Emerging as an Internet advertising and marketing channel that permits cost-effective implementation and a better and quicker response rate than other advertising channelsViral marketingA fine line between email marketing and spam!Typically works best where consumers sign up to receive specific informationBut apparently spam works, or 38% of all email wouldn’t be spam! (Business 2.0, November 2002, p. 64)
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Ethical and Legal Issues of E-Ethical and Legal Issues of E-commercecommerce
Privacymost electronic payment systems know who the buyers are; therefore, it may be necessary to protect the buyers’ identity
Web Trackingby using sophisticated software it is possible to track individual movements on the internet
Domain Namesseveral companies that have similar or same names (in different countries) compete over a domain name that is not a registered trademarkDomain names have been ‘stolen’ by cybersquatters Verisign had taken control of all unassigned domain names
Taxes and Other Feesparticularly complex for interstate and international commerce (A tax moratorium in the US – but not in EU)
Copyrightintellectual property is protected by copyright laws and cannot be used freely
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Transaction Processing Transaction Processing Information SystemsInformation Systems
What is a transaction?Grocerystore purchase, airline ticket reservation, deposit money to an account.Something is exchanged (money, goods, ...)What data is collected?What transactions did you take part in yesterday?
Transaction Processingmajor business processesprovide the mission-critical activitiestransaction may generate additional transaction
Transaction Processing System (TPS)computerized information systemsupports the transaction processes
Critical to the well-being of the organization!!
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Characteristics of TPSCharacteristics of TPS
Large amounts of data are processedThe TPS processes information on a regular basisHigh level of detail in dataLow complexity of calculationsSystems must be very reliableLarge storage (database) capacity is requiredNeed lots of processing speed due to the high volumeInput and output data are structuredNeed high level of accuracy, data integrity, and security Must allow for queries of data
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Transaction Processing OverviewTransaction Processing Overview
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Transaction Processing SystemsTransaction Processing Systems
Batch Processing SystemTransactions are accumulated over time and processed in a single group
On-line Transaction Processing (OLTP)Each transaction is processed immediately
Examples?Does anyone use a batch processing system?Know of one?Heard of one?
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Batch versus On-line ProcessingBatch versus On-line Processing
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Data Data Processing Processing ActivitiesActivities
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Transaction Processing ActivitiesTransaction Processing Activities
Data CollectionSource data automation makes it easier
Data EditingCheck for validity and completeness
Data CorrectionRe-enter invalid data
Data ManipulationSimple calculations
Data StorageUpdate databases
Document ProductionBusiness documents and Reports
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Example: Point-of-Sale SystemExample: Point-of-Sale System
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Order Processing SystemsOrder Processing SystemsSystems that process order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer interaction, and routing and scheduling
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Systems that Support Order Systems that Support Order ProcessingProcessing
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TPS, MIS/DSS, and AI/ESTPS, MIS/DSS, and AI/ES
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Enterprise Resource PlanningEnterprise Resource Planning
Provide real-time monitoring of business functionsPermits timely analysis of issues such as quality, availability, customer satisfaction, performance, and profitability.
Combines TPS and MIS (among other things)Advantages
Elimination of costly, inflexible legacy systemsImprovement of work processesIncrease in access to data for operational decision makingUpgrade of technology infrastructure
DisadvantagesExpense and Time in ImplementationDifficulty Implementing ChangeDifficulty Integrating with Other SystemsRisks in Using One Vendor
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Coming Up…Coming Up…
ThursdayRest of LectureDue: Lab 5
TuesdayChapter 6