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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
CHAPTER 12
ELECTRONIC COMEMRCE
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Learning Objectives
 Describe electronic commerce, its dimensions,
benefits, limitations, and process
 Describe the major applications of electronic
commerce, both business-to-customer and businessto-business
 Discuss the importance and activities of market
research and customer service
 Describe the electronic commerce infrastructure and
support services
 Compare the various payment systems and describe
the role of smart cards
 Discuss legal and other implementation issues
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Case : Intel Corporation Embracing the Web
 The Business Problem
 Intense competition in the ICs market
 Orders from thousands of customers,
distributors and business partners worldwide were
received by fax and phone; errors, delays, high cost
The Solution




E-customer service
E-selling
E-purchasing
E-business programs using extranet and EDI
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Case (continued…)
The Results
 Enhances competitive advantage by giving
customers better tools for managing transactions
 The system brings substantial saving to Intel
What have we learned from this case??
 Illustrates a new and effective way for
conducting business
 Demonstrates that electronic commerce involves
not just selling electronically, but also providing
customer service and improving organization’s
internal business processes
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Definitions
Business-to-business EC
 two (or more) businesses make transactions electronically
 major benefits include: reduced cost, reduced cycle time,
increased customer base and sales, and improved customer
service
Business-to-consumer EC
 companies sell directly to consumers over the Internet
 major benefits include increased revenues, the creation of
new sources of revenues, and the elimination of costly
intermediaries
Intrabusiness
 transactions take place within an organization
 major benefits include increased productivity, speed, and
quality and reduced cost
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Definitions (continued…)
Electronic Business (E-business)
 a broad definition of EC, not just buying and selling, but
also servicing customers, collaborating with business
partners, and conducting electronic transactions within an
organization
 all about time cycle, speed, globalization, enhanced
productivity, reaching new customers, and sharing
knowledge across institutions for competitive advantage
 a very diverse and interdisciplinary topic, with issues
ranging form technology, addressed by computer experts,
to consumer behavior, addressed by behavioral scientists
and marketing research experts
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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History and Scope
History
 Began in the early 1970s
 innovations 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 companies
 Over the last five years
 innovative applications, from advertisement to auctions and
procurement
Scope
 home banking, shopping in electronic stores and malls,
buying stocks, finding a job, conducting an auction,
collaborating electronically with business partners around
the globe, and providing customer service
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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A Framework for EC
Electronic Commerce Applications
• Direct Marketing • Stocks, Jobs • On-line banking
• Procurement and purchasing • Malls • Procurement • Auctions • Travel
• On-line publishing • Customer Services • Intrabusiness Transactions
People:
Buyers, Sellers,
Intermediaries,
Services, IS People
and Management
Public Policy :
Taxes, Legal,
Privacy Issues,
Regulations, and
Technical
Standards
Marketing and
Advertisement:
Market Research,
Promotions, and
Web content
Supply Chain:
Logistics and
Business Partners
Infrastructure
(1)
Common business
services infrastructure
(security, smart
cards/authentication
electronic payments,
directories/catalogs
(2)
Messaging and
information distribution
infrastructure
(EDI, e-mail, Hyper Text
Transfer Protocol, Chat
Rooms)
(3)
(4)
Multimedia content
Network infrastructure
and network
(Telecom, cable TV
publishing infrastructure
wireless, Internet)
(HTML, JAVA, World
(VAN, WAN, LAN,
Wide Web, VRML)
Intranet, Extranet)
Access (cell phones)
Management
(5)
Interfacing
infrastructure
(The databases,
logistics,
customers, and
applications)
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Benefits of EC to Organizations
 Expands a company’s marketplace to national and international markets
 Allows a vendor to reach a large number of customers, anywhere around
the globe, at a very low cost
 Enable companies to procure material and services from other companies,
rapidly and at less cost
 Shortens or even eliminates marketing distribution channels; marketing
products cheaper and vendors’ profits are higher
 Decrease the cost of creating, processing, distributing ,storing, and
retrieving paper-based information
 Allows lower inventories by facilitating “pull”-type supply chain
management, which starts from customer orders and uses just-in-time
production and delivery processing
 Reduces the time between the outlay of capital and the receipt of products
and services
 Lowers telecommunications costs because the Internet is much chapter
than value-added networks (VANs)
 Helps small businesses compete against large companies
 Enables very specialized markets (e.g. www.dogtoys.com)
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Benefits of EC to Consumers
 Frequently provides less expensive products and services by allowing
consumers to shop in many places and conduct online quick
comparisons
 Gives consumers more choices - they can select from many vendors
and many more products than they could locate otherwise
 Enables customers to shop or make other transactions 24 hours a
day, year round, from almost any location
 Delivers relevant and detailed information in seconds, rather than in
days or weeks
 Enables consumers to get customized products, from PCs to cars, at
competitive or bargain prices
 Makes possible virtual auctions, in which consumers can find unique
products and collectors’ items that might otherwise require them to
travel long distances to a particular auction place at a specific time
 Allows consumers to interact with other consumers in electronic
communities and to exchange ideas as well as compare experiences
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Benefits of EC to Society
 Enables more individuals to work at home and to do
less traveling, resulting in less traffic on the roads and
lower air pollution
 Allows some merchandise to be sold at lower prices, so
less affluent people can buy more and increase their
standard of living
 Enables people in less developed countries and rural
areas to enjoy products and services that otherwise are
not available to them
 Facilitates delivery of public services, such as
government entitlements, reducing the cost of
distribution and fraud, and increasing the quality of the
social services, police work, health care and education
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Technical Limitations of EC
 Lack of universally accepted standards for
quality, security, and reliability
 Insufficient telecommunications bandwidth
 Still-evolving software development tools
 Difficulties in integrating the Internet and EC
software with some existing (especially legacy)
applications and databases
 There is a need for special Web servers in
addition to the network servers (added cost)
 Internet accessibility is still expensive and/or
inconvenient for many people
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Non-Technical Limitations of EC
 Many legal issues are yet unresolved
 Lack of national and international regulations and standards
for many circumstances
 Difficulty in measuring benefits of EC, such as Web
advertising. Lack of mature methodologies for justifying EC
 Distrust of the new: Many sellers and buyers are waiting for
EC to stabilize before they take part
 Customer resistance to the change from a physical to virtual
stores
 Perception that electronic commerce is expensive and
unsecured, so many do not want even to try it
 Insufficient number (critical mass) of sellers and buyers
which needed for profitable EC operations
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Electronic Retailing and Malls
Electronic Commerce enables consumers to buy
from home 24 hours a day, 7 days a week
Electronic Commerce offers consumers a wide
variety of products and services, including the most
unique items, usually at lower prices
Consumers can easily search for what they really
want to buy, not just what is shown on television or
in paper catalogs
Consumers can get very detailed information on
products, in seconds, and can easily search for and
compare competitors’ products and prices
Consumers can reduce (or eliminate) the pile of
paper catalogs
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Electronic Retailing
Direct sale (business to consumers) through
electronic storefronts or malls, usually
designed around an electronic catalog format
Solo storefronts
 maintain their own Internet name and Web site
 may or may not be affiliated with electronic malls
 may be extensions of a physical store, or it is a
new businesses started by entrepreneurs who saw
a niche on the Web
 can be found easily on the Internet - directories
and hyperlinks from other Web sites and
intelligent agents
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Electronic Malls (Cybermall)
A collection of individual shops under one
Internet address
Vendors that locate in brick-and-mortar
shopping malls, or locate themselves in a virtual
mall, give up a certain amount of independence
Success depends on the popularity of the entire
collection of stores as well as on its own efforts
Malls generate streams of prospective customers
who otherwise might never have stopped at the
store
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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The Process of Electronic Shopping
 A user gains access to an online service or the
internet and goes to a merchant’s Web site. He
may know the address, find it in another Web
site (refer to it by a search engine), or find it by
browsing.
 The user enters the merchant’s storefront and
goes to the product displays.
 If the user does not find anything of interest,
or want to do more shopping he or she may
browse some additional merchant storefronts to
search for the desired products or services.
 When the user does find something of
interest, he or she may elect to purchase it
online. To finalize the decision, the user may
need more information that can be found on the
Web pages or obtained by e-mail.
 Customer service is established. Product may
be returned or exchanged, for example
maintenance information may be found on the
Web site as needed.
 Shipment is made, if needed, or permission to
download products from the Internet is granted.
Warranty is established.
 The payment authorization is either approved
or denied. If denied, the user is prompted for
another form of payment .If approved, the
transaction is executed.
 When the user is ready to pay he is advised
about the payment options the user makes a
section and provides payment information (e.g.,
the credit care number)
 The item is typically stored in a shopping
 At any time, the user can review the items in
cart. This allows the user to continue looking
through this store, or even to visit other
merchants, before paying for the items.
the shopping cart and change quantities or delete
items, This review continues until a final
selection is made.
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Online
Advertisement
 an attempt to disseminate information in order to
attract buyers
Internet Advertisement
 can be updated any time at a minimal cost and
therefore can always be timely
 can reach very large numbers of potential buyers, all
over the world
 can be cheaper
 can efficiently use the convergence of text, audio,
graphics, and animation
 can be interactive and targeted to specific interest
groups and/or individuals
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Methods
Banners - Electronic Billboards
 the most commonly used form of advertising on
the Internet, links to advertiser's site
 contains a short text or graphical message to
promote a product or a vendor
 Keyword banners
 appear when a predetermined word is queried from the
search engine
 effective for companies who want to narrow their target
to consumers interested in particular topics
 Random banners
 appear randomly
 might be used to introduce new products to the widest
possible audience, or to keep a well-known brand in the
public memory
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Advertising Methods (continued …)
E-mail - emerging as an Internet advertising and marketing
channel that permits cost-effective implementation and a better
and quicker response rate than other advertising channels
 marketers develop or purchase a list of e-mail addresses
 marketers employing e-mail must take a long-term view and
work towards the goal of motivating consumers to continue
to open and read messages they receive
 marketers must decide what portion of their target market
can be reached by e-mail and must supplement existing
database information with data relevant to e-mail campaigns
 marketers should integrate inbound customer service e-mail
with their outbound marketing efforts
 marketers must develop e-mail-specific editing skill and the
ability to deliver multimedia-rich e-mail
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Issues
Customizing Ads - Filtering the Irrelevant
Information
 BroadVision : One-to-One system/ads
 allows the rapid creation of secure Web sites that are visitorfriendly, using a customer database, with registration data
and information gleaned from site visits
 Webcast : push technology
 delivers only the information users want or need
 users get the information they want; at the same time they
also get the banner ads related to that information
 marketers will get a more customized audience if they place
banners on a system that delivers via push technology
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Issues (continued …)
Attracting Visitors to a Site
 Making the top list of a search engine
 the search engine’s spider crawls through the submitted site,
following and indexing all related content and links
 a company can get to the top of a search engine’s list by
adding, removing, or changing a few sentences
 Online events, promotions, and attractions
 people generally like the idea of something funny or
something free (or both)
 contests, quizzes, coupons, and free samples are an integral
part of Internet commerce as much, or even more than, they
are of offline commerce
 designed to attract visitors and to keep their attention
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Issues (continued …)
Attracting Visitors to a Site (CONT’)
ATTRACTION
HOW IT WAS USED
Give away games and
discount contests. Also,
games sponsored by
multiple companies
Free Internet access
Personal, nonautomated
selling
Yoyodyne Inc. sponsors games and contests to get users to read
product information of advertisers, ranging form Major League
Baseball to Sprint Communication. In one contest, tax-preparer
H&R Block paid $20,000 towards the winner’s federal taxes.
Netzero and other offer this in exchange for viewing ads
www.egghead.com uses real people to help you online.
www.lucent.com connects a sales rep with a customer over the phone
and then “pushes” material and ads to your computer
Cybergold (www.cybergold.com), Goldmine (www.goldmine.com),
and others connect users with advertisers who pay them real money to
read ads and explore the Web
Netstakes runs sqeepstakes that requires no skills. Users register
only once and can randomly win prizes in different categories
(see http://webstakes.com). The site is divided into channels, and
each channel has several sponsors. The sponsors pay Netstakes to
send traffic. Netstakes runs online ads, both on the Web and in
many email lists that people request to be on.
Monetary payment
Sweepstakes
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Issues (continued …)
Profiling Customers Using Intelligent Agents
 Product brokering
 some companies collect information about consumers for the
purpose of creating a customer’s profile
 with this profile, the company can tailor ads to the specific
customers, or offer them product information
 Example - Fujitsu’s agents profile consumers :
 is using a new agent-based technology called Interactive
Marketing Interface (iMi) that allows advertisers to interact
directly with targeted customers
 personal profiles submitted to iMi by consumers
 product announcements, advertisements, and marketing
surveys are sent to customers via e-mail based on their profiles
 by answering marketing surveys or acknowledging receipt of
advertisements, consumers earn iMi points, redeemable for
gift certificates and phone cards
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Electronic Catalogs
 On CD-ROM and On the Web
 can be searched quickly with the help of special search
engines
 effective comparisons involving catalog products
 customized catalogs
 a catalog assembled specifically for a company, usually for
a regular customer of the catalog owner
 can be tailored to individual consumers
 let the system automatically identify customer
characteristics based on their transaction records
 involve cookie technology and data mining technology
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Advertising Online
Interactive Advertising and Marketing
 advertisers present customized, one-on-one
advertising, which is followed by sales
 interactive : the ability to address an individual, to
gather and remember that person’s response, and to
serve that customer based on his or her previous,
unique responses
Coupons Online
 consumers can gather any discount coupons they want
by accessing sites like www.hotcoupons.com or
www.supermarkets.com, selecting the store where they
plan to redeem the coupons
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online
Cyberbanking
 names : electronic banking, virtual banking,
home banking, and banking online
 capabilities ranging form paying bills to
securing a loan
 for customers : saving time and convenience
 for banks : offering an inexpensive alternative
to branch banking and a chance to enlist
remote customers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online (continued…)
Cyberbanking (CONT’)
 SFNB puts security first
 www.sfnb.com
 the first virtual bank
 offering secure banking transactions on the Web
 Hong Kong Bank grows without branches
 www.hongkongbank.com
 using HEXAGON, the bank has leveraged its reputation and
infrastructure in the developing economies of Asia to become
a major international bank rapidly
 Mark Twain supports foreign currency trading
 www.marktwain.com
 using electronic cash to support trading in 20 foreign
currencies
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online (continued…)
Online Stock Trading
 an online trade typically costs between $5 and $30,
compared to an average fee of $100 from a full-service
broker and $25-50 from a discount broker
 no waiting on busy telephone lines
 small chance of making mistakes which are made in
oral communication
 orders can be placed from anywhere, any time
 can find considerable amount of information regarding
investing in a specific company or in a mutual fund
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online (continued…)
The Online Job Market
 Job seekers
 can reply to employment ads online
 can take the initiative and place resumes on their own home
pages or on others’ Web sites, send messages to members of
newsgroups asking for referrals, and use recruiting firms
 Job offerers
 advertise openings on their Web site
 use sites ranging form Yahoo!, to online services, bulletin boards,
and recruiting firms
 Recruiting firms
 use their own Web pages to post available job descriptions and
advertise their services in electronic malls and in other Web sites
 Newsgroups
 jobs in a certain category or location are posted, discussions are
conducted, and resumes can be sent
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online (continued…)
Travel
 Internet is an ideal place to plan, explore, and arrange almost
any trip
 potential savings are available through special sales, auctions,
and the elimination of travel agents
 allows to purchase airline tickets, reserve hotel rooms, and
rent cars
 supports an itinerary-based interface ,including a fare-tracker
feature
 links to weather sites, currency converters, adventure
magazines, and chat forums, where users can share travel tips
 allows to set a price that people are willing to pay for an
airline ticket or hotel accommodations, and the company then
attempts to find a vendor for that price (www.priceline.com)
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online (continued…)
Real Estate
 consumers can view many properties on the screen,
saving time for themselves and the brokers
 consumers can sort and organize properties according
to their criteria and preview the exterior and interior
designs of the properties, shortening the search process
 consumers can find detailed information about the
properties and frequently get even more details than
brokers usually provide
 homebuilders now use virtual reality technology on
their Web sites to demonstrate three-dimensional floor
plans to potential home buyers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Services Online (continued…)
 Auctions
 Specialized auction sites ( www.onsale.com )
 Auctioning cars to dealers ( www.manheim.com )
 Art auctions ( www.onlineart.com & www.auctionson-line.com ); collectors’ items ( www.ebay.com )
 Airlines ( www.americanair.com &
www.cathey.usa.com )
 Bartering
 the exchange of goods and/or services without a
monetary transaction ( www.barterbrokers.com )
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Introduction to Information Technology
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Chapter 12 Electronic Commerce
Business-to-Business Applications
 Product - specifications, prices, sales history
 Customer - sales history and forecasts
 Supplier - product line and lead times, sales terms and conditions
 Product process - capacities, commitments, product plans
 Transportation - carriers, lead times, costs
 Inventory - inventory levels, carrying costs, locations
 Supply chain alliance - key contracts, partners’ roles and
responsibilities, schedules
 Competitor - benchmarking, competitive product offerings,
market share
 Sales and marketing - point-of-sale (POS), promotions
 Supply chain process and performance - process descriptions,
performance measures, quality, delivery time, customer satisfaction
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Seller-Oriented Marketspace
 Organizations attempt to sell their products (services) to
other organizations electronically (e-selling)
 The buyer is expected to visit the seller’s site or a mall,
view catalogs, and place orders
 The buyer is an organization that may be a regular
customer of the sellers
 Key Mechanisms : electronic catalog that can be
customized for each large buyer, the ordering system, the
payment system, and the integration of the incoming
orders with the vendor’s logistics system
 EC is used to increase sales, reduce selling expenditures,
increase delivery speed, and reduce administrative costs
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Introduction to Information Technology
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Chapter 12 Electronic Commerce
Buyer-Oriented Marketspace
 EC technology is used to reduce both the cost of items
purchased and the administrative cost of procurement
 Request For Quotation (RFQ) on Buyer’s Web Site
 businesses submit bids electronically, and the bids are
routed via the buyer’s intranet to the engineering and
finance departments for an evaluation
 clarifications are made via e-mail
 the winner is notified electronically
 saves 10-15 percent on the cost of the items placed for bid
 saves up to 85 percent on the administrative cost
 saves about 50 percent on cycle time
 known as e-purchasing or e-procurement
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Intermediary-Managed Marketspace
Electronic Intermediaries
 A link between buyers and sellers
 Main function : market making
 PART - about 300 parts suppliers and dozens of
airlines participate (by Boeing Aircraft Corp.)
 ProcureNet - more than 150,000 products, known
as MROs (maintenance, repairs, and operations)
 Some of the online services make money, some of
them only improve service for customers
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Introduction to Information Technology
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Chapter 12 Electronic Commerce
Customers and Their Behavior
Examples of the importance of learning
about customers
 Peapod providing supermarket products online
 the company was still incurring losses in 2000
 problems :
» small customer base
» customers like to see and feel items before
they buy them
 Amazon selling books published by others
 assesses the potential customers’ reaction, and
correctly predicts books to be a desirable items
for online sale
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Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Market Research :
Behavioral Model
Personal Characteristics
Environmental Characteristics
Age, Gender, Ethnicity, Education,
Lifestyle, Psychological, Knowledge,
Values, Personality
Buyers’ Decisions
Stimuli
Marketing
Price
Promotion
Product
Quality
Social, Family, Communities
Others
Economical
Technology
Political
Cultural
Decision
Making
Process
Buy or Not
What to Buy
Where (Vendor)
When
How Much to Spend
Repeat Purchases
Vendors’ Controlled Systems
Logistic
Support
Payments,
Delivery
Technical
Support
Web Design,
Intelligent
Agents
Customer
Service
FAQs, E-mail,
Call Centers,
One-to-One
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Introduction to Information Technology
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Chapter 12 Electronic Commerce
Market Research (continued …)
To find out what motivates consumers to buy
To developed models that explain consumer
behavior regarding purchasing decisions
To identify new markets
To investigate competitors and their products
To test consumer interest in new products
To help one-to-one marketing (allows one-to-one
personal contact with customers, and provides marketing
organizations with greater ability to understand
consumers, the market, and the competition)
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Introduction to Information Technology
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Chapter 12 Electronic Commerce
Market Research (continued …)
Asking Customers What They Want
 interacting directly with consumers
 filling in electronic questionnaires
 vendors need to use inducements to motivate
consumers to participate and be honest
 learning what consumer want from the
directly obtained answers
 trying to infer from consumers’ preferences
on other preferences
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Market Research (continued …)
Tracking Customer Activities on the Web
 observing consumers’ behavior on the internet
 site-tracking services, based on cookies or other
approaches
 one of the most interesting tools for tracking
customers on the Internet as well as helping
them to shop with intelligent agents
 possible invasion of privacy
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
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Electronic Commerce Agents
Intelligent agents
 computer programs that conduct routing tasks,
search and retrieve information ,support decision
making, and act as domain experts
 sense the environment and act autonomously
without human intervention
Software agents
 with no intelligence
Learning agents
 exhibit some intelligent behavior
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Introduction to Information Technology
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EC Agents (continued …)
Intelligent agents for information search and
filtering
 help to determine what to buy to satisfy a specific need
 Personalogic uses filtering process - consumers specify
requirements and constraints, and the system returns a
list of products that best meet the desired product
 Firefly used (until recently) a collaborative filtering
process that can be described as “word of mouth” to
build the profile (not available any more)
 its Passport generates a customer’s personal profile
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EC Agents (continued …)
Intelligent agents for Product and Vendor Finding
 help consumers decide where to buy by comparing
merchants’ offers
 Bargainfinder from Andersen Consulting queried the price
of a specific CD from a number of online vendors and
returned the list of vendors and prices (Not in use any
longer)
 Jango form NetBot/Excite originates the requests form the
user’s site instead of Jango’s, so vendors can not block it
 Kasbah from MIT Laboratories allows users who want to
sell or buy a product, assign the task to an agent that is sent
out to actively seek buyers or sellers
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EC Agents (continued …)
Negotiation Agents
 help to take away some of the frustration some
customers experience in the negotiating process and
the technical limitations of being in different locations
 AuctionBot allows users create auction agents by
specifying a number of parameters that vary depending
on the type of auction selected
 Kasbah allows users create agents for the purpose of
selling or buying process
 Tele-@-tete uses a number of different parameters:
price, warranty, delivery time, service contracts, return
policy, loan option, and other value-added services
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Organizational Buyers
Make purchase decisions in business-tobusiness situations
More formalized purchasing decision
The purchasing process may be more
important than advertising activities in
swaying purchase decisions
Decisions may be made by a group
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Customer Service
Phases in the Customer Service Life Cycle
 Phase 1 : Requirements
 assisting the customer to determine needs
 Phase 2 : Acquisition
 helping the customer to acquire a product or service
 Phase 3 : Ownership
 supporting the customer on an ongoing basis
 Phase 4 : Retirement
 helping the client to dispose of a service or product
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Customer Service (continued …)
Facilitating Customer Service
 Personalized Web pages - customers build individualized

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
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pages at the vendor’s site
Chat rooms - customers can interact with each other and with
vendor’s personnel who monitor the chat room
E-mail - send confirmations, product information, and
instructions to customers
FAQs - provide online answers to questions customers ask most
Tracking capabilities - enable customers to track the status of
their orders, services, or applications
Web-based call centers - a comprehensive communication
center takes customers’ inquiries in any form they come and
answers them quickly
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EC Infrastructure
COMPONENT DESCRIPTION AND ISSUES
A shift from VANs to the Internet. Increased use of VPNs (virtual
private networks) to enhance security and capabilities over the Internet.
Special Web servers are usually superior to dual-purpose servers.
Web severs
Available for rent. The interface to legacy systems may be a problem
Web server support and1. Web site activity tracking. 2. Database connectivity. 3. Software for
creating electronic forms. 4. Software for creating chat rooms and
software
discussion groups.
Electronic catalogs Product description, multimedia use, customized catalogs, inclusion in
Web site design and construction, templates for construction.
Web page design and Web programming languages (HTML, JAVA, VRML, XML)
Networks
construction software
1. Search engines for finding and comparing, products. 2. Negotiating
Transactional
software. 3. Encryption and payment. 4. Ordering (front office)
software
Internet access
components
Others
inventory and back office software.
TCP/IP package, Web browsers, remote access server, client dial-in
software, Internet connection device, leased line connection, connection
to leased line, Internet kiosks
Firewalls, e-mail, HTTP (transfer protocols), smart cards
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Electronic Payment Systems
Electronic credit cards
 Payments using unencrypted credit card
 the buyer e-mails her or his credit card number to the
seller on the Internet
 risk here is that hackers will be able to read the credit
card number
 Encrypted payments
 using public/private key encryption, credit card details
can be encrypted for better security
 this can be done by simply using the SSL protocol in
the buyer’s computer
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Electronic Payment Systems
(continued …)
Electronic checks
 secured by public-key cryptography and may be
suitable for some micropayments
 Step 1 : the customer establishes a checking
account with a bank
 Step 2 : the customer contacts a seller, buys a
product or a service, and e-mails an encrypted
electronic check signed with a digital signature
 Step 3 : the merchant deposits the check in his or
her account: money is debited in the buyer’s
account and credited to the seller’s account
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Electronic Payment Systems
(continued …)
Electronic cash in your PC
 Step 1 : the customer opens an account with a bank and





receives special software for his or her PC
Step 2 : the customer buys “electronic money” from the
bank by using the software
Step 3 : the bank sends an electronic money note to this
customer, endorsing it with a digital signature
Step 4 : the money is stored on the buyer’s PC and can be
spent in any electronic store that accepts e-cash
Step 5 : the software is also used to transfer the e-cash
from the buyer’s computer to the seller’s computer
Step 6 : the seller can deposit the e-cash in a bank,
crediting his or her regular or electronic account, or use
the e-cash to make a purchases elsewhere
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Electronic Payment Systems
(continued …)
Electronic payment cash (Smart Cards) with e-cash
 credit cards using magnetic strips contain only limited
information , such as the card’s ID number
 cards to pay photocopies in the library, or to pay
telephone calls storing a fixed amount of prepaid money
 card used by New York Metropolitan Transportation
Authority (MTA) in buses, trains, interstate toll bridges,
and tunnels
 cards containing microprocessor storing a considerable
amount of information (more than 100 times more than a
regular credit card) and allowing money to be stored in
quantities that can be decreased as well as increased
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Security
Security Requirements
 Authentication - the buyer, the seller, and the paying institutions

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must be assured of the identity of the party with whom they are
dealing
Integrity - it is necessary to assure that data and information
transmitted in EC, such as orders, reply to queries, and payment
authorization, are not 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
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Security (continued …)
Security Protection
 Encryption - a process of making messages indecipherable
except by those who have an authorized decryption key
 Single-key encryption
» the sender of the electronic message (or payment)
encrypted the information with a key
» the receiver used an identical key to decrypt the
information to a readable form
» the same code had to be in the possession of both the
sender and the receiver
» problems : if a key were transmitted and intercepted
illegally, it could be used to read all encrypted messages
or to steal money
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Security (continued …)
Security Protection : Encryption (continued …)
 Public/private key encryption
 uses two different keys - public key and private key
 several authorized people may know the public key, but
only its owner knows the private key
 every person has one private key and one public key
 encryption and decryption can be done with either key
 if encryption is done with the public key, the decryption
can be done only with the private key and vice versa
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Security (continued …)
Security Protection :Encryption (continued …)
 Public/private key encryption
Public Key of
Recipient
Message
Text
Signature
Sender
Private Key of
Recipient
Message
Text
Ciphered
Text
Encryption
Private Key
of Sender
Decryption
Public Key
of Sender
Signature
Receiver
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Security (continued …)
Security Protection : Protocols
 Secure Socket Layer (SSL)
 the most common protocol used in EC
 main capability is to encrypt messages
 Secure Electronic Transaction Protocol (SET)
 the major proposed standard for credit card processing
 allows consumers to shop anywhere as conveniently and
securely as possible by incorporating digital signatures,
certification, encryption, and an agreed-upon payment
gateway
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Market Practices
Fraud on the Internet
 internet fraud and its sophistication have grown as
much and even faster than the Internet itself
 stocks manipulations, selling bogus investments
and phantom business opportunities
 examples:
 stock promoters falsely spread positive rumors about
the prospects of the companies they touted
 the information provided might have been true, but the
promoters did not disclose that they were paid to
promote the companies
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Buyer Protection
Tips for safe electronic shopping include:
 look for reliable brand names at sites like Wal-Mart Online, Disney









Online, and Amazon.com
search any unfamiliar selling site for company’s address and phone and
fax number
check out the seller with the local Chamber of Commerce and/or Better
Business Bureau
investigate how secure the seller’s site is by reading the posted privacy
notice, and evaluate how well the site is organized
examine the money-back guarantees, warranties, and service
agreements
compare prices to those in regular (suspect the too cheap sites)
ask friends what they know about the vendor
find out what your rights are in case of a dispute
consult the National Fraud Information Center
check www.consumerworld.org for a listing of useful resources
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Seller Protection
Be protected against consumers who refuse
to pay or pay with bad checks and buyers’
claims that the merchandise did not arrive
Be protected against the use of their name by
others as well as use of their unique words
and phrases, slogans and Web address
Have legal recourse against customer who
download copyrighted software and/or
knowledge and sell it to others
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Ethical Issues
Privacy
 most electronic payment systems know who the buyers
are; therefore, it may be necessary to protect the buyers’
identity
The Human Element
 the technology is new to many IS directors and
employees and so many require new sets of skills
Web Tracking
 by using sophisticated software it is possible to track
individual movements on the internet
Disintermediation
 the use of EC may result in the elimination of some of a
company’s employees as well as brokers and agents
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Legal Issues
Domain Names
 several companies that have similar or same names
(in different countries) compete over a domain name
that is not a registered trademark
Taxes and Other Fees
 particularly complex for interstate and international
commerce (A tax moratorium until October 2001)
Copyright
 intellectual property is protected by copyright laws
and cannot be used freely
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What’s in it for Me?
For Accounting
 The implications of replacing paper documents by electronic
may impact many of the accountants’ tasks, especially the
auditing of EC activities and systems
For Finance
 The world of banking ,stocks, and commodities markets, and
other financial services are being reengineered due to EC
For Marketing
 The revolution is affecting many marketing theories, ranging
form consumer behavior to advertisement strategies
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What’s in IT for Me? (continued …)
For Production/Operations Management
 EC is changing the manufacturing system form
a product-push mass production to an order-pull
mass customization
For Human Resource Management
 Modern HRM has tremendous opportunities to
exploit Internet capabilities to improve the
productivity of HRM personnel, recruit and
maintain top employees, and increase job
satisfaction to very high levels
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CHAPER 1 INTRODUCTION : BUSINESS AND …