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An Introduction to Electronic Commerce

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					Fundamentals of Information
Systems
Fourth Edition
   Chapter 5
   Electronic and Mobile Commerce and
   Enterprise Systems
Principles and Learning Objectives

   Electronic commerce and mobile commerce are
    evolving, providing new ways of conducting
    business that present both opportunities for
    improvement and potential problems
       Describe the current status of various forms of e-
        commerce, including B2B, B2C, C2C, and m-commerce
       Identify several e-commerce and m-commerce applications
       Identify several advantages associated with the use of e-
        commerce and m-commerce



                         Fundamentals of Information Systems,
                                   Fourth Edition               2
Principles and Learning Objectives
(continued)
   E-commerce and m-commerce require the careful
    planning and integration of a number of technology
    infrastructure components
       Identify the key components of technology infrastructure
        that must be in place for e-commerce and m-commerce to
        work
       Discuss the key features of the electronic payment systems
        needed to support e-commerce




                         Fundamentals of Information Systems,
                                   Fourth Edition                3
Principles and Learning Objectives
(continued)
   An organization must have information systems that
    support the routine, day-to-day activities that occur
    in the normal course of business and help a
    company add value to its products and services
       Identify the basic activities and business objectives
        common to all transaction processing systems
       Identify key control and management issues associated
        with transaction processing systems




                        Fundamentals of Information Systems,
                                  Fourth Edition                4
Principles and Learning Objectives
(continued)
   A company that implements an enterprise resource
    planning system is creating a highly integrated set of
    systems, which can lead to many business benefits
       Discuss the advantages and disadvantages associated
        with the implementation of an enterprise resource planning
        system
       Identify the challenges multinational corporations must face
        in planning, building, and operating their TPSs




                         Fundamentals of Information Systems,
                                   Fourth Edition                  5
Why Learn About Electronic and Mobile
Commerce and Enterprise Systems?
   Most organizations have an Internet presence
       Sales/marketing manager involved with e-commerce
       Customer service employees help develop Web site
       Human resource or public relations manger may provide
        Web content for employees and investors
   Must learn about e-commerce and m-commerce
   Many organizations use enterprise systems to
    perform business processes and to keep records
   Support various business activities: Supply chain
    management, customer relationship management

                        Fundamentals of Information Systems,
                                  Fourth Edition                6
An Introduction to Electronic
Commerce
   Electronic commerce: conducting business
    activities (e.g., distribution, buying, selling,
    marketing, and servicing of products or services)
    electronically over computer networks such as the
    Internet, extranets, and corporate networks
   Business activities that are strong candidates for
    conversion to e-commerce
       Paper-based
       Time-consuming
       Inconvenient for customers


                        Fundamentals of Information Systems,
                                  Fourth Edition               7
Business-to-Business (B2B)
E-Commerce
   Business-to-business (B2B) e-commerce:
    subset of e-commerce where all the
    participants are organizations
       Considerably larger and growing more rapidly
        than the business-to-consumer market




                      Fundamentals of Information Systems,
                                Fourth Edition               8
Business-to-Consumer (B2C)
E-Commerce
   Business-to-consumer (B2C) e-commerce:
    customers deal directly with the organization,
    avoiding any intermediaries
   Elimination of intermediaries:
       Squeezes costs and inefficiencies out of supply chain
       Can lead to higher profits for companies and lower prices
        for consumers




                         Fundamentals of Information Systems,
                                   Fourth Edition                   9
Consumer-to-Consumer (C2C)
E-Commerce
   Consumer-to-consumer (C2C) e-commerce:
    participants are individuals, with one serving as the
    buyer and the other as the seller
       eBay: example of a C2C e-commerce site




                        Fundamentals of Information Systems,
                                  Fourth Edition               10
eGovernment

   eGovernment: use of information and
    communications technology to simplify the sharing
    of information, speed formerly paper-based
    processes, and improve the relationship between
    citizen and government
   Forms of eGovernment
       Government-to-consumer (G2C)
       Government-to-business (G2B)
       Government-to-government (G2G)




                       Fundamentals of Information Systems,
                                 Fourth Edition               11
Mobile Commerce

   Mobile commerce (m-commerce) relies on the use
    of wireless devices, such as personal digital
    assistants, cell phones, and smart phones, to place
    orders and conduct business




                     Fundamentals of Information Systems,
                               Fourth Edition               12
Mobile Commerce in Perspective

   Market for m-commerce in North America is
    maturing much later than in Western Europe and
    Japan
       Western European and Japanese consumers are much
        more willing to use m-commerce
   Mobile phone gaming in the United States is
    expected to increase from about $380 million in
    2006 to more than $1 billion by 2009




                       Fundamentals of Information Systems,
                                 Fourth Edition               13
Technology Needed for Mobile
Commerce
   Handheld devices used for m-commerce have
    limitations that complicate their use
   Wireless application protocol (WAP): a standard
    set of specifications for Internet applications that run
    on handheld, wireless devices




                      Fundamentals of Information Systems,
                                Fourth Edition               14
Electronic and Mobile Commerce
Applications: Retail and Wholesale
   Electronic retailing (e-tailing): the direct sale from
    business to consumer through electronic storefronts,
    typically designed around an electronic catalog and
    shopping cart model
   Cybermall: a single Web site that offers many
    products and services at one Internet location
   Manufacturing, repair, and operations (MRO) goods
    and services



                     Fundamentals of Information Systems,
                               Fourth Edition               15
Manufacturing

   To raise profitability and improve customer service,
    many manufacturers move their supply chain
    operations onto the Internet
   Electronic exchange: an electronic forum where
    manufacturers, suppliers, and competitors buy and
    sell goods, trade market information, and run back-
    office operations




                     Fundamentals of Information Systems,
                               Fourth Edition               16
Manufacturing (continued)




      Figure 5.2: Model of an Electronic Exchange
                  Fundamentals of Information Systems,
                            Fourth Edition               17
Marketing

   Market segmentation: the identification of specific
    markets to target them with advertising messages
   Technology-enabled relationship management:
    use of detailed information about a customer’s
    behavior, preferences, needs, and buying patterns
    to set prices, negotiate terms, tailor promotions, add
    product features, and otherwise customize the entire
    relationship with that customer



                     Fundamentals of Information Systems,
                               Fourth Edition               18
Investment and Finance

   Online stock trading has brought many investors to
    the Web
   Online banking
       Online bill payment facility
   Electronic bill presentment: a method of billing
    whereby a vendor posts an image of your statement
    on the Internet and alerts you by e-mail that your bill
    has arrived



                          Fundamentals of Information Systems,
                                    Fourth Edition               19
Auctions

   eBay: synonymous with online auctions for both
    private sellers and small companies
   Hundreds of other online auction sites cater to
    newcomers to online auctions and to unhappy eBay
    customers
   Most frequent complaints
       Increases in fees
       Unscrupulous buyers




                       Fundamentals of Information Systems,
                                 Fourth Edition               20
Anywhere, Anytime Applications of
Mobile Commerce
   M-commerce devices are ideal for accessing
    personal information and receiving targeted
    messages because of having a single user
   Companies can reach individual consumers to
    establish one-to-one marketing relationships and
    communicate whenever it is convenient—in short,
    anytime and anywhere




                    Fundamentals of Information Systems,
                              Fourth Edition               21
Advantages of Electronic and Mobile
Commerce




  Table 5.1: Advantages of Electronic and Mobile Commerce
                    Fundamentals of Information Systems,
                              Fourth Edition                22
Technology Infrastructure Required to
Support E-commerce and M-commerce
   Successful implementation of e-business requires:
       Significant changes to existing business processes
       Substantial investment in IS technology
   Poor Web site performance drives consumers to
    abandon some e-commerce sites




                        Fundamentals of Information Systems,
                                  Fourth Edition               23
Technology Infrastructure Required to Support
E-commerce and M-commerce (continued)




    Figure 5.3: Key Technology Infrastructure Components
                    Fundamentals of Information Systems,
                              Fourth Edition               24
Hardware

   Storage capacity and computing power required of
    the Web server depends on:
       Software that will run on the server
       Volume of e-commerce transactions
   Web site hosting




                         Fundamentals of Information Systems,
                                   Fourth Edition               25
Web Server Software

   Web server software is used to perform fundamental
    services, including:
       Security and identification
       Retrieving and sending Web pages
       Web site tracking
       Web site development
       Web page construction




                        Fundamentals of Information Systems,
                                  Fourth Edition               26
Web Server Software (continued)

   E-commerce software must support:
       Catalog management
       Product configuration
       Shopping cart facilities
       E-commerce transaction processing
       Web traffic data analysis




                        Fundamentals of Information Systems,
                                  Fourth Edition               27
Web Server Software (continued)




        Figure 5.4: Electronic Shopping Cart
                Fundamentals of Information Systems,
                          Fourth Edition               28
Electronic Payment Systems

   Digital certificate: an attachment to an e-mail
    message or data embedded in a Web page that
    verifies the identity of a sender or a Web site
   Secure Sockets Layer (SSL): a communications
    protocol used to secure sensitive data during e-
    commerce
   Electronic cash: an amount of money that is
    computerized, stored, and used as cash for e-
    commerce transactions


                    Fundamentals of Information Systems,
                              Fourth Edition               29
Electronic Payment Systems (continued)

   Credit card
   Charge card
   Debit card
   Smart card




                  Fundamentals of Information Systems,
                            Fourth Edition               30
An Overview of Enterprise Systems:
Transaction Processing Systems and
Enterprise Resource Planning
   Enterprise system: a system central to the
    organization that ensures information can be
    shared across all business functions and all levels
    of management to support the running and
    managing of a business
   Eliminates the problems of lack of information and
    inconsistent information caused by multiple
    transaction processing systems


                     Fundamentals of Information Systems,
                               Fourth Edition               31
Transaction Processing Systems and
Enterprise Resource Planning (continued)
   Enterprise resource planning systems support
    supply-chain processes
   Transaction processing systems capture and
    process detailed data necessary to update records
    about the fundamental business operations of the
    organization
       Include order entry, inventory control, payroll, accounts
        payable, accounts receivable, and the general ledger




                         Fundamentals of Information Systems,
                                   Fourth Edition                   32
Transaction Processing Systems and
Enterprise Resource Planning (continued)




   Figure 5.5: TPS, MIS/DSS, and Special Information Systems in
                             Perspective
                       Fundamentals of Information Systems,
                                 Fourth Edition                   33
Traditional Transaction Processing
Methods and Objectives
   Batch processing system: method of
    computerized processing in which business
    transactions are accumulated over a period of time
    and prepared for processing as a single unit or
    batch
   Online transaction processing (OLTP):
    computerized processing in which each transaction
    is processed immediately, without the delay of
    accumulating transactions into a batch


                    Fundamentals of Information Systems,
                              Fourth Edition               34
Traditional Transaction Processing
Methods and Objectives (continued)




  Figure 5.6: Batch Versus Online Transaction Processing
                     Fundamentals of Information Systems,
                         Fourth Edition                     35
Transaction Processing Activities

   TPSs
       Capture and process data that describes fundamental
        business transactions
       Update databases
       Produce a variety of reports
   Transaction processing cycle: the process of data
    collection, data editing, data correction, data
    manipulation, data storage, and document
    production


                        Fundamentals of Information Systems,
                                  Fourth Edition               36
Transaction Processing Activities
(continued)




 Figure 5.8: Data-Processing Activities Common to Transaction
                       Processing Systems
                     Fundamentals of Information Systems,
                               Fourth Edition                   37
Data Collection

   Data collection: capturing and gathering all
    data necessary to complete the processing of
    transactions
   Data should be:
       Collected at source
       Recorded accurately and in a timely fashion




                      Fundamentals of Information Systems,
                                Fourth Edition               38
Data Editing

   Data editing: the process of checking data
    for validity and completeness
       Example: quantity and cost data must be numeric
        and names must be alphabetic; otherwise, the
        data is not valid




                      Fundamentals of Information Systems,
                                Fourth Edition               39
Data Correction

   Data correction: the process of reentering
    data that was not typed or scanned properly
       Example: a scanned UPC code must match a
        code in a master table of valid UPCs




                     Fundamentals of Information Systems,
                               Fourth Edition               40
Data Manipulation

   Data manipulation: the process of
    performing calculations and other data
    transformations related to business
    transactions
       Includes classifying data, sorting data into
        categories, performing calculations, summarizing
        results, and storing data in the organization’s
        database for further processing



                      Fundamentals of Information Systems,
                                Fourth Edition               41
Data Storage

   Data storage: the process of updating one or
    more databases with new transactions
   After being updated, this data can be further
    processed and manipulated by other systems
    and made available for management
    reporting and decision making




                  Fundamentals of Information Systems,
                            Fourth Edition               42
Document Production and Reports

   Document production: the process of
    generating output records and reports
       Hard-copy paper reports
       Displays on computer screens (soft copy)




                      Fundamentals of Information Systems,
                                Fourth Edition               43
Control and Management Issues:
Disaster Recovery Plan
   Disaster recovery plan (DRP): formal plan
    describing the actions that must be taken to
    restore computer operations and services in
    the event of a disaster
   Necessary for preventing a lengthy disruption
    in the operation of any of a company’s critical
    business information systems that directly
    affect its cash flow

                   Fundamentals of Information Systems,
                             Fourth Edition               44
Transaction Processing System Audit
   Transaction processing system audit: a check
    of a firm’s TPS systems to prevent accounting
    irregularities and/or loss of data privacy
   Attempts to answer four basic questions
       Does the system meet the business need for which it was
        implemented?
       What procedures and controls have been established?
       Are these procedures and controls being used properly?
       Are the information systems and procedures producing
        accurate and honest reports?




                        Fundamentals of Information Systems,
                                  Fourth Edition                  45
Traditional Transaction Processing
Applications




Table 5.2: Systems That Support Order Processing, Purchasing,
                    and Accounting Functions
                     Fundamentals of Information Systems,
                               Fourth Edition                   46
Order Processing Systems

   Traditional order processing transaction
    processing systems include:
       Order entry
       Sales configuration
       Shipment planning
       Shipment execution
       Inventory control
       Accounts receivable


                      Fundamentals of Information Systems,
                                Fourth Edition               47
Order Processing Systems (continued)




 Figure 5.10: Traditional TPS Systems That Support the Order
                       Fundamentals Business Function
                  Processing of Information Systems,
                          Fourth Edition                       48
Purchasing Systems

   Purchasing transaction processing systems
    include:
       Inventory control
       Purchase order processing
       Receiving
       Accounts payable




                     Fundamentals of Information Systems,
                               Fourth Edition               49
Accounting Systems

   Accounting transaction processing systems
    include:
       Budget
       Accounts receivable
       Payroll
       Asset management
       General ledger



                      Fundamentals of Information Systems,
                                Fourth Edition               50
Enterprise Resource Planning, Supply
Chain Management, and Customer
Relationship Management
   Enterprise resource planning (ERP): a set of
    integrated programs that manage a company’s vital
    business operations for an entire multisite, global
    organization




                        Fundamentals Resource Planning System
        Figure 5.11: Enterprise of Information Systems,
                              Fourth Edition                    51
An Overview of Enterprise Resource Planning

   ERP systems evolved from materials requirement
    planning systems (MRP) developed in the 1970s
   1980s - early 1990s: organizations recognized that
    their legacy transaction processing systems lacked
    integration
       Result: higher costs and poorer customer service
   Realization of a need for a system to coordinate
    activities and share valuable information across all
    the business functions of the firm, i.e., an ERP
    system

                         Fundamentals of Information Systems,
                                   Fourth Edition               52
Advantages of ERP

   Improved access to data for operational
    decision making
   Elimination of costly, inflexible legacy
    systems
   Improvement of work processes
   Upgrade of technology infrastructure



                   Fundamentals of Information Systems,
                             Fourth Edition               53
Disadvantages of ERP Systems

   Expense and time in implementation
   Difficulty implementing change
   Difficulty integrating with other systems
   Risks in using one vendor
   Risk of implementation failure




                   Fundamentals of Information Systems,
                             Fourth Edition               54
Production and Supply Chain
Management
   ERP systems follow a systematic process for
    developing a production plan
       Sales forecasting
       Sales and operations plan
       Demand management
       Detailed scheduling
       Materials requirement planning
       Purchasing
       Production
                      Fundamentals of Information Systems,
                                Fourth Edition               55
Customer Relationship Management
and Sales Ordering
   Customer relationship management (CRM)
    system: a system that helps a company manage
    all aspects of customer encounters, including
    marketing and advertising, sales, customer service
    after the sale, and programs to retain loyal
    customers
   Goals of CRM
       Understand and anticipate the needs of current and
        potential customers to increase customer retention and
        loyalty
       Optimize the way products and services are sold

                        Fundamentals of Information Systems,
                                  Fourth Edition                 56
Customer Relationship Management
and Sales Ordering (continued)
   Sales ordering: set of activities that must be
    performed to capture a customer sales order
   Essential steps include:
       Recording the items to be purchased
       Setting the sales price
       Recording the order quantity
       Determining the total cost of the order including
        delivery costs
       Confirming the customer’s available credit
                       Fundamentals of Information Systems,
                                 Fourth Edition               57
Financial and Managerial Accounting

   General ledger: main accounting record of a
    business
       Assets
       Liabilities
       Revenue
       Expenses
       Equity



                      Fundamentals of Information Systems,
                                Fourth Edition               58
Financial and Managerial Accounting
(continued)
   In an ERP system, input to the general ledger
    occurs simultaneously with the input of a business
    transaction
   Financial accounting: capturing and recording all
    transactions that affect a company’s financial state
    and using these documented transactions to
    prepare financial statements to external decision
    makers, such as stockholders, suppliers, banks, and
    government agencies


                     Fundamentals of Information Systems,
                               Fourth Edition               59
Financial and Managerial Accounting
(continued)
   Managerial accounting: use of historical
    and estimated data to provide information
    that management uses in conducting daily
    operations, in planning future operations, and
    in developing overall business strategies




                   Fundamentals of Information Systems,
                             Fourth Edition               60
Hosted Software Model for Enterprise
Software
   Target market: small-to-medium businesses
   Offered by vendors such as NetSuite,
    Salesforce.Com Inc., Everest Software, and SAP
   Appealing to small businesses because they:
       Can experiment with powerful software capabilities without
        major financial investment
       Do not need to employ a full-time IT person to maintain key
        business applications
       Can expect additional savings from reduced hardware
        costs


                         Fundamentals of Information Systems,
                                   Fourth Edition                 61
International Issues Associated with
Enterprise Systems
   Challenges that must be met by an enterprise
    system of a multinational company include:
       Different languages and cultures
       Disparities in information system infrastructure
       Varying laws and customs rules
       Multiple currencies




                       Fundamentals of Information Systems,
                                 Fourth Edition               62
Summary

   In business-to-business (B2B) e-commerce, the
    participants are organizations
   In business-to-consumer (B2C) e-commerce,
    customers deal directly with the organization
   In consumer-to-consumer (C2C) e-commerce,
    participants are individuals, with one serving as the
    buyer and the other as the seller
   Mobile commerce (m-commerce) uses wireless
    devices to place orders and conduct business


                     Fundamentals of Information Systems,
                               Fourth Edition               63
Summary (continued)

   Transaction processing systems (TPSs): process
    the detailed data necessary to update records about
    the fundamental business operations
   Transaction processing cycle: data collection, data
    editing, data correction, data manipulation, data
    storage, and document production
   Order processing TPSs: order entry, sales
    configuration, shipment planning, shipment
    execution, inventory control, and accounts
    receivable

                    Fundamentals of Information Systems,
                              Fourth Edition               64
Summary (continued)

   Purchasing TPSs: inventory control, purchase order
    processing, receiving, and accounts payable
   Accounting TPSs: budget, accounts receivable,
    payroll, asset management, and general ledger
   Primary benefits of implementing ERP: improved
    access to data for operational decision making,
    elimination of inefficient or outdated systems,
    improvement of work processes, and technology
    standardization


                    Fundamentals of Information Systems,
                              Fourth Edition               65

				
DOCUMENT INFO
Description: Electronic commerce: conducting business activities (e.g., distribution, buying, selling, marketing, and servicing of products or services) electronically over computer networks such as the Internet, extranets, and corporate networks Business activities that are strong candidates for conversion to e-commerce Paper-based Time-consuming Inconvenient for customers