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					 Principles of Information
         Systems
      Eighth Edition

            Chapter 8
Electronic and Mobile Commerce
     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, and C2C
     – Outline a multistage purchasing model that
       describes how e-commerce works
     – Define m-commerce and identify some of its unique
       challenges

Principles of Information Systems, Eighth Edition           2
     Principles and Learning Objectives
                 (continued)
• E-commerce and m-commerce can be used in
  many innovative ways to improve the operations of
  an organization
     – Identify several e-commerce and m-commerce
       applications
     – Identify several advantages associated with the use
       of e-commerce and m-commerce




Principles of Information Systems, Eighth Edition            3
     Principles and Learning Objectives
                 (continued)
• Although e-commerce and m-commerce offer many
  advantages, users must be aware of and protect
  themselves from many threats associated with this
  technology
     – Identify the major issues that represent significant
       threats to the continued growth of e-commerce and
       m-commerce
• Organizations must define and execute a strategy
  to be successful in e-commerce
     – Outline the key components of a successful e-
       commerce strategy
Principles of Information Systems, Eighth Edition             4
     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




Principles of Information Systems, Eighth Edition            5
    Why Learn About Electronic and Mobile
               Commerce?
• Most organizations have an Internet presence
     – Sales/marketing manager involved with e-commerce
     – Customer service employees help develop the Web
       site
     – Human resource or public relations manger may
       provide Web content for employees and investors
• Must learn about e-commerce and m-commerce




Principles of Information Systems, Eighth Edition     6
             An Introduction to Electronic
                      Commerce
• Electronic commerce: conducting business
  activities electronically over computer networks
• Types of business activities that are strong
  candidates for conversion to e-commerce
     – Paper based
     – Time-consuming
     – Inconvenient for customers




Principles of Information Systems, Eighth Edition    7
              Business-to-Business (B2B)
                    E-Commerce
• Subset of e-commerce
• All the participants are organizations
• Useful tool for connecting business partners in a
  virtual supply chain to cut resupply times and
  reduce costs




Principles of Information Systems, Eighth Edition     8
            Business-to-Consumer (B2C)
                   E-Commerce
• Form of e-commerce in which customers deal
  directly with an organization and avoid
  intermediaries
     – Squeezes costs and inefficiencies out of supply
       chain
     – Can lead to higher profits
     – Can lead to lower prices for consumers
• E-commerce via the Internet
     – Many goods and services are cheaper online
     – The Internet allows consumers to easily compare
       prices, features, and value
Principles of Information Systems, Eighth Edition        9
          Consumer-to-Consumer (C2C)
                E-Commerce
• Subset of e-commerce that involves consumers
  selling directly to other consumers
• Example: eBay
     – Customers buy and sell items directly to each other
       through the site
     – 181 million users buy and sell items valued at more
       than $44 billion
• Other popular online auction Web sites: Craigslist,
  uBid, Yahoo! Auctions, Onsale, and WeBidz


Principles of Information Systems, Eighth Edition            10
                                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)



Principles of Information Systems, Eighth Edition   11
      Multistage Model for E-commerce




        Figure 8.1: Multistage Model for E-Commerce (B2B and B2C)
Principles of Information Systems, Eighth Edition                   12
         Multistage Model for E-commerce
                    (continued)




Figure 8.2: Product and Information Flow for HP Printers Ordered over the Web

   Principles of Information Systems, Eighth Edition                    13
                 E-Commerce Challenges

• Defining an effective e-commerce model and
  strategy
     – Community, content, and commerce
• Changing distribution systems and work processes
  to manage shipments of individual units directly to
  consumers
     – B2C systems must be able to handle split-case
       distribution
• Integrating Web-based order processing with
  traditional systems

Principles of Information Systems, Eighth Edition      14
  E-Commerce Challenges (continued)




Figure 8.3: Three Basic Components of a Successful E-Commerce Model

Principles of Information Systems, Eighth Edition                15
  E-Commerce Challenges (continued)




 Figure 8.4: Web-Based Order Processing Must Be Linked to Traditional
                           Back-End Systems
Principles of Information Systems, Eighth Edition                   16
   An Introduction to 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
• Handset manufacturers are working with
  communications carriers to develop appropriate
  wireless devices, related technology, and services
• Content providers and mobile service providers are
  working together more closely than ever


Principles of Information Systems, Eighth Edition   17
       Mobile Commerce in Perspective

• Only 12 to 14 percent of the world’s 1.8 billion
  mobile phone users have ever used the Web from
  their phones
• Internet Corporation for Assigned Names and
  Numbers (ICANN) created a .mobi domain to help
  attract mobile users to the Web
• Market for m-commerce in North America is
  maturing much later than in Western Europe and
  Japan


Principles of Information Systems, Eighth Edition    18
          Technology Needed for Mobile
                  Commerce
• Improved interface between the wireless device
  and its user
• Improved network speed
• Security
     – Encryption, digital certificates
• Web applications that are accessible for handheld
  users




Principles of Information Systems, Eighth Edition     19
          Technology Needed for Mobile
             Commerce (continued)
• Wireless application protocol (WAP): standard
  set of specifications for Internet applications that
  run on handheld, wireless devices
     – Effectively serves as a Web browser for such
       devices
     – Uses the Wireless Markup Language (WML), which
       is designed for effectively displaying information on
       small devices




Principles of Information Systems, Eighth Edition              20
       Electronic and Mobile Commerce
                  Applications
• Many B2B, B2C, C2C, and m-commerce
  applications are being used in:
     –   Retail and wholesale
     –   Manufacturing
     –   Marketing
     –   Investment and finance
     –   Auction arenas




Principles of Information Systems, Eighth Edition   21
                      Retail and Wholesale

• Electronic retailing (e-tailing): direct sale from
  business to consumer through electronic
  storefronts
     – Electronic storefronts are typically designed around
       an electronic catalog and shopping cart model
• Cybermall: single Web site that offers many
  products and services at one Internet location
• Manufacturing, repair, and operations (MRO)
  goods and services


Principles of Information Systems, Eighth Edition             22
                               Manufacturing

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




Principles of Information Systems, Eighth Edition    23
               Manufacturing (continued)




                   Figure 8.5: Model of an Electronic Exchange
Principles of Information Systems, Eighth Edition                24
                                     Marketing

• Market segmentation: 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 customize the entire relationship with that
  customer




Principles of Information Systems, Eighth Edition   25
                   Investment and Finance

• Online stock trading
     – Online tools for doing research and analysis
• Online banking
     – Customers can check account balances, transfer
       money among accounts, pay bills, etc.
     – Electronic bill presentment




Principles of Information Systems, Eighth Edition       26
                                       Auctions

• eBay
     – Has become synonymous with online auctions
     – Customer complaints: increased fees and problems
       with unscrupulous buyers
     – Constantly trying to expand and improve its services:
       Skype, Verisign
• Hundreds of other online auction sites
     – Example: Priceline.com




Principles of Information Systems, Eighth Edition         27
     Anywhere, Anytime Applications of
           Mobile Commerce
• M-commerce devices are ideal for accessing
  personal information and receiving targeted
  messages for a particular consumer
• Through m-commerce, companies can establish
  one-to-one marketing relationships with individual
  consumers anytime and anywhere
• The most successful m-commerce applications suit
  local conditions and people’s habits and
  preferences
• Examples: banking, stock trading, information
  services, retail, advertisements

Principles of Information Systems, Eighth Edition   28
   Advantages of Electronic and Mobile
              Commerce
• Global reach: helps reduce gap between rich and
  poor countries
• Reduces costs: increases speed and accuracy
• Speeds the flow of goods and information
• Increases accuracy: eliminates human data-entry
  error
• Improves customer service: information about
  delivery status and ability to meet customer
  demand


Principles of Information Systems, Eighth Edition   29
        Threats to Electronic and Mobile
                   Commerce
• Businesses must ensure that e-commerce and m-
  commerce transactions are safe and consumers
  are protected
• Number of threats to the continued growth of e-
  commerce and m-commerce
     – Security, theft of intellectual property, fraud, invasion
       of privacy, lack of Internet access, return on
       investment, legal jurisdiction, taxation




Principles of Information Systems, Eighth Edition             30
                                       Security

• Methods to increase security
     – Payment Card Industry security standard
     – Address Verification System
     – Card Verification Number technique
     – Visa’s Advanced Authorization process
     – Federal Financial Institutions Examination Council’s
       “Authentication in an Internet Banking Environment”
       guidelines
     – Biometric technology


Principles of Information Systems, Eighth Edition         31
             Theft of Intellectual Property

• Intellectual property: works of the mind that are
  distinct somehow and are owned or created by a
  single entity
     – For example: books, films, music, processes, and
       software
• Copyright law protects authored works such as
  books, film, images, music, and software from
  unauthorized copying
• Patents can protect software, business processes,
  formulae, compounds, and inventions

Principles of Information Systems, Eighth Edition         32
             Theft of Intellectual Property
                      (continued)
• Trade secrets
• Digital Rights Management (DRM): use of any of
  several technologies to enforce policies for
  controlling access to digital media




Principles of Information Systems, Eighth Edition   33
                                          Fraud

• Phishing: sending bogus messages purportedly
  from a legitimate institution to pry personal
  information from customers by convincing them to
  go to a “spoof” Web site
• Click fraud: arises in a pay-per-click online
  advertising environment when additional clicks are
  generated beyond those that come from actual,
  legitimate users
• Online auction fraud


Principles of Information Systems, Eighth Edition   34
           Invasion of Consumer Privacy

• Online profiling: practice of Web advertisers’
  recording online behavior to produce targeted
  advertising
• Clickstream data: data gathered based on the
  Web sites you visit and the items you click on




Principles of Information Systems, Eighth Edition   35
                    Lack of Internet Access

• Digital divide: difference between people who do
  and people who don’t have access or capability to
  use high-quality, modern information and
  communications technology to improve their
  standard of living
     – Exists between:
           •   More and less developed countries
           •   Economic classes
           •   The educated and uneducated
           •   Those who live in cities and those who live in rural
               areas
Principles of Information Systems, Eighth Edition                     36
                      Return on Investment

• The investment required for a large firm to
  establish and operate a B2B or B2C Web site can
  be in the millions of dollars
• Common problem with determining return on
  investment: difficult to forecast project costs and
  benefits




Principles of Information Systems, Eighth Edition       37
                           Legal Jurisdiction

• When conducting e-commerce, sales must not
  violate county, state, or country legal jurisdictions
• Examples
     – Selling stun guns and similar devices
     – Selling cigarettes or alcohol to underage customers




Principles of Information Systems, Eighth Edition            38
                                       Taxation

• U.S. Supreme Court ruling: Internet-based
  merchants must apply sales tax only when buyers
  live in a state where the company has physical
  facilities, or “nexus”
• Most businesses set up separate companies to
  avoid dealing with nonstandard rules of the more
  than 7,500 taxing districts nationwide
     – Consumers are responsible for voluntarily remitting
       sales taxes
• Difficult for states to collect sales taxes on Internet
  purchases
Principles of Information Systems, Eighth Edition            39
                  Strategies for Successful
                        E-Commerce
• Companies must develop effective Web sites that
  include the following characteristics:
     –   Easy to use
     –   Accomplish the goals of the company
     –   Safe and secure
     –   Affordable to set up and maintain




Principles of Information Systems, Eighth Edition   40
        Defining the Web Site Functions

• Decide which tasks the site must accomplish
• Create an attractive presence for the company
• Meet the needs of its visitors
     – Examples: obtaining information about the
       organization and its products, buying products or
       services, getting advice, registering complaints
• Redefining your site’s basic business model to
  capture new business opportunities



Principles of Information Systems, Eighth Edition          41
                   Establishing a Web Site
• Web site hosting companies
    – Allow you to set up a Web page and conduct e-
      commerce within a matter of days
    – Little up-front cost
• Storefront broker: companies that act as
  middlemen between your Web site and online
  merchants that have the products and retail
  expertise




Principles of Information Systems, Eighth Edition     42
         Building Traffic to Your Web Site

• Obtain and register a domain name
• Make your site search-engine-friendly
     – Meta tag: special HTML tag that contains keywords
       representing your site’s content
           • Keywords are used by search engines to build
             indexes pointing to your Web site
• Web site traffic data analysis software
• Adapting Web site design for global consumers



Principles of Information Systems, Eighth Edition           43
  Maintaining and Improving Your Web
                  Site
• Be alert to new trends and developments in e-
  commerce
• Be prepared to take advantage of new
  opportunities
• Personalization: tailoring Web pages to
  specifically target individual consumers
     – Explicit: captures user-provided information
     – Implicit: captures data from customer Web sessions



Principles of Information Systems, Eighth Edition       44
Technology Infrastructure Required To
     Support E-commerce and
            M-commerce
• Successful implementation of e-business requires
  significant changes to existing business processes
  and substantial investment in IS technology
• Poor Web site performance drives consumers to
  abandon some e-commerce sites in favor of those
  with better, more reliable performance




Principles of Information Systems, Eighth Edition   45
Technology Infrastructure Required To
     Support E-commerce and
     M-commerce (continued)




            Figure 8.6: Key Technology Infrastructure Components
Principles of Information Systems, Eighth Edition                  46
                                     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
• E-commerce solutions should be designed to be
  highly scalable
• Web site hosting: third-party Web service provider




Principles of Information Systems, Eighth Edition      47
                       Web Server Software

• Security and identification
   – Access controls
   – Encryption
• Retrieving and sending Web pages
• Web site tracking
     – Web log file
• Web site development
     – HTML/visual Web page editor, software
       development kits

Principles of Information Systems, Eighth Edition   48
       Web Server Software (continued)

• Web page construction
     – Web editors and extensions
     – Static Web page: contains same information
     – Dynamic Web page: responds to a specific Web
       user’s request
• Examples of Web server software packages:
  Apache HTTP Server, Microsoft Internet
  Information Server



Principles of Information Systems, Eighth Edition     49
                    E-Commerce Software

• E-commerce software tools
     – Catalog management: provides standard format
     – Product configuration: build product online to meet
       user needs
     – Shopping cart facilities
     – Transaction processing
     – Web traffic data analysis
     – Web services: software modules supporting specific
       business processes that users can interact with over
       a network as needed

Principles of Information Systems, Eighth Edition         50
     E-Commerce Software (continued)




                         Figure 8.7: Electronic Shopping Cart
Principles of Information Systems, Eighth Edition               51
             Electronic Payment Systems
• Digital certificate: attachment to an e-mail
  message or data embedded in a Web page that
  verifies the identity of a sender or a Web site
• Certificate authority (CA): trusted third party that
  issues digital certificates
• Secure Sockets Layer (SSL): communications
  protocol used to secure sensitive data
• Electronic cash: amount of money that is
  computerized, stored, and used as cash for e-
  commerce transactions

Principles of Information Systems, Eighth Edition        52
             Electronic Payment Systems
                      (continued)
•   Credit card
•   Charge card
•   Debit card
•   Smart card: a credit card–sized device with an
    embedded microchip to provide electronic memory
    and processing capability




Principles of Information Systems, Eighth Edition     53
                                      Summary

• Electronic commerce (or e-commerce): conducting
  business activities electronically over computer
  networks
• Types of e-commerce: business-to-consumer
  (B2C), business-to-business (B2B), and consumer-
  to-consumer (C2C)
• 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
Principles of Information Systems, Eighth Edition   54
                      Summary (continued)

• Multistage model for e-commerce: includes search
  and identification, selection and negotiation,
  electronic purchasing, delivery, and after-sales
  service
• Mobile commerce (m-commerce): uses wireless
  devices to place orders and conduct business
• B2B, B2C, C2C, and m-commerce applications are
  being used in retail and wholesale, manufacturing,
  marketing, investment and finance, and auction
  arenas

Principles of Information Systems, Eighth Edition   55
                      Summary (continued)

• Issues affecting growth of e- and m-commerce:
  security, theft of intellectual property, fraud,
  invasion of consumer privacy, lack of Internet
  access, return on investment, legal jurisdiction, and
  taxation
• An effective Web site should be easy to use,
  accomplish the goals of the company, be safe and
  secure, and be affordable to set up and maintain
• Successful implementation of e-business requires
  significant changes to existing business processes
  and substantial investment in IS technology
Principles of Information Systems, Eighth Edition     56

				
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