CHAPTER 6
Electronic Commerce
6-1
IT for Management
Prof. Efraim Turban
Learning Objectives
6-2
• Describe electronic commerce, its dimensions, benefits,
limitations, and process.
• Describe the major applications of electronic commerce,
both business-to-customer and business-to-business.
• Discuss the importance and activities of market research
and customer service.
• Describe the electronic commerce infrastructure and EDI.
• Compare the various payment systems and describe the
role of smart cards.
• Describe the relationship between EC, supply chain
management, ERP, and EDI.
• Discuss legal and ethical issues related to e-commerce.
IT for Management
Prof. Efraim Turban
Intel Corporation
Embracing the Web
• The Problem
– slow, expensive, and frequently not up to date
distribution and communication process
• The Solution
– established an e-business program using an
extranet
• The Results
6-3
– enhances competitive advantage by giving
Intel’s customers better tools for managing
transactions
– brings substantial tangible savings
IT for Management
Prof. Efraim Turban
Toshiba’s Extranet
Keeps Dealers on Time
• The Problem
– dealers needed parts quickly
• The Solution
– created a Web-based ordering entry system
using an extranet
• The Results
6-4
– reduces the cost per order
– reduces the networking cost of the
Electronic Imaging Division (EID)
– increases customer satisfaction
IT for Management
Prof. Efraim Turban
Foundations of
Electronic Commerce (EC)
6-5
• In EC, business transactions take place
via telecommunications networks,
primarily the Internet
• Marketspace is an electronic market place
• E-business (or e-biz) refers to a broader
definition of EC, not just buying and
selling, but also servicing customers,
collaborating with business partners, and
conducting electronic transactions within
an organization
IT for Management
Prof. Efraim Turban
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
6-6
(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)
IT for Management
Prof. Efraim Turban
Electronic Markets
• The business center is not a physical
building but a network-based location
where business interactions occur
• The principal participants - transaction
handlers, buyers, brokers, and sellers not only are at different locations but
seldom even know one another
6-7
IT for Management
Prof. Efraim Turban
Interorganizational
Information System (IOS)
6-8
• Drivers of Interorganizational Systems
– Reducing costs
– Improving the quality of information
– Compressing cycle time
– Eliminating paper
– Making the trading process easy for users
• Types of Interorganizational Systems
– Electronic data interchange (EDI)
– Electronic funds transfer (EFT)
– Extranets
– Integrated messaging
– Shared databases
IT for Management
Prof. Efraim Turban
Benefits of EC
to Organizations
• Decreasing information costs
• Reduced inventories
• Reduced cycle time
• Supports BPR
• Lowers telecommunication costs
6-9
IT for Management
Prof. Efraim Turban
Benefits of EC
to Consumers
6-10
•
•
•
•
•
•
•
•
More choice
Less expensive products
Quick delivery
24-hour availability
Quick access to information
Customized product at competitive prices
Virtual auctions
Interact with other EC customers
IT for Management
Prof. Efraim Turban
Benefits of EC
to Society
• Lower air pollution
• Increase standard of living
• Enjoy products and
services in third-world
• Facilitate delivery of
public services
6-11
IT for Management
Prof. Efraim Turban
Limitations of EC
Technical
• Lack of security
• Insufficient telecommunication
bandwidth
• Software tools still evolving
• Integration of internet and EC software
• Special Web servers
6-12
• Interoperability of software and
hardware
IT for Management
Prof. Efraim Turban
Limitations of EC
Nontechnical
• Accessibility
• Legal issues
• Government regulations
• Difficult to measure benefits
• EC still evolving
• Customers resist change
6-13
IT for Management
Prof. Efraim Turban
Limitations
Nontechnical
• Insufficient support services
• Perception that EC is expensive
and insecure
• EC has not obtained a critical
mass of sellers and customers
• EC - breakdown of human
relationships
6-14
Market
Distributors
Non-Company
Retailers
Non-Company
Manufacturers
Corporate
Extranet
Corporate
Intranet
Head Quarter
Toys Inc
Suppliers
(Purchasing)
Professional
Associations, large
suppliers, competitors
Toy Industry
Extranet
Manufacturing
Retail Stores
Other
Extranets
Employees
Liquidateors
contractors
EDI, VAN
Internet
Customers
Travel
agency
Sales peoples
and other
mobile
employees
Small
retailers
Public
Banks and other
business partners
Government
Small
customers
Small
vendors
The network organization:
How a company uses the Internet, and internet and extranet
IT for Management
Prof. Efraim Turban
Interactive
One-to-One Marketing
“Treat Different Customers
Differently”
• A firm must be able to change how its
products are configured or its services
is delivered, based on the needs of
individual customers
6-16
IT for Management
Prof. Efraim Turban
The New Marketing Model
Customer receives
Customer decides on
New media chosen
marketing
marketing medium
to best serve/reach
exposure
for response
customer
“Four P’S”
updated
uniquely to
customer
6-17
Customer profiled
based on behavior;
custom segmentation
developed
Relationship
Building
Database
Update
Customer
makes
purchase
decision
Detailed transaction/
behavior data
collection
IT for Management
Prof. Efraim Turban
Electronic Retailing
• Electronic retailing is the direct sale
(B2C) through electronic storefronts or
in electronic malls, usually designed
around an electronic catalog format
• Electronic storefronts maintain their own
Internet name and a Web site and may or
may not be associated with electronic
malls.
6-18
IT for Management
Prof. Efraim Turban
Electronic Malls (Cybermalls)
• Electronic mall is a collection of individual
shops under one Internet address.
• Electronic mall provide a one-stop shopping
place that offers many products and services.
• Representative cybermalls
– Downtown Anywhere (www.da.awa.com)
– America’s Choice Mall (www.choicemall.com)
– Shopping 2000 (www.shopping2000.com)
6-19
IT for Management
Prof. Efraim Turban
Advertising Online
• Why Internet advertisement?
6-20
– Ads can be updated any time with a minimal cost,
so they can always be timely
– Ads can reach very large numbers of potential
buyers all over the world
– Online ads are frequently cheaper
– Web ads can efficiently use text, audio, graphics,
and animation
– The audience for Internet advertisement is growing
– Web ads can be interactive and targeted to specific
interest groups and/or individuals
– Customers can move easily and quickly from
viewing an ad to getting details and to ordering
IT for Management
Prof. Efraim Turban
Banner Advertisement
• Keyword banners
– appear when a predetermined
word is queried target
• Random banners
– appear randomly
6-21
IT for Management
Prof. Efraim Turban
Benefits ( ) and Shortcoming()
of Internet Advertisement
6-22
 24 hours a day,
365 days a year
 Large market
segmentation opportunity
 One-to-one direct
marketing
 More attractive and
compelling ads
 Low distribution costs
 Always up-to-day
 Ease of logical navigation
 No clear standard or
language
 Immature
measurement tools
and metrics
 Apples-to-apples
comparisons difficult
for media buyers
 Difficult to measure
size of market
 Small audience
IT for Management
Prof. Efraim Turban
E-mail Advertisement
• E-mail advertisement send advertisement
material to potential buyers
• E-mail advertisement offers cost-effective
implementation and a better and quicker
response rate than other advertisement
channels
• Marketers develop or purchase a list of email addresses, place them in a database,
and then send ads to them via e-mail
6-23
IT for Management
Prof. Efraim Turban
URL Advertisement
• URL - universal resource locator
It is free
Any company can submit its URL to a
search engine and be listed
The targeted audience can be locked and
uninterested viewers can be filtered
The chance to be placed at the top of the
list is low
6-24
IT for Management
Prof. Efraim Turban
Online Advertisement Issues
• Customizing Ads
– Filtering the irrelevant information by
providing customized ads can be beneficial
to customers and advertisers alike
– Push technology - When a user establishes
his/her system, the user selects the type of
desired information. The user then gets the
information he or she wants, but at the same
time also gets banner ads.
6-25
IT for Management
Prof. Efraim Turban
Online Advertisement Issues
• Difficulties in measuring the
effectiveness of advertisements
– difficult to relate sales to the number of hits
– it is inadequate to use the gross number of visits
as a possible measure of effectiveness
– no guarantee that a purchase will be made
– offline purchasing may be the results of online
advertisement
6-26
IT for Management
Prof. Efraim Turban
Online Advertisement Issues
• Attracting visitors to a site
– Online events and promotions
• Contests
• Quizzes
• Coupons
• Give-away samples
6-27
IT for Management
Prof. Efraim Turban
Intelligent Agents in
EC and Retailing
• To help users to conduct routine tasks
• To help users to search and retrieve
information
• To help users to support decision
marking
• To help users to act as consulting
experts
6-28
IT for Management
Prof. Efraim Turban
Intelligent Agents for
Information Search and Filtering
• Product broker use collaborative
filtering process
– use like-minded people to make
recommendations
– alerts users to new product releases or
recommends products based on past
selections or requirements specified by
the buyer
6-29
IT for Management
Prof. Efraim Turban
Electronic Catalogs
• Advertise and promote products and
services, whereas customers use them as a
source of information on products and
services
• Consists of product database, directory,
search capability, and a presentation function
• Dynamic, customized, and integrated with
selling and buying procedures such as order
taking and payment
6-30
IT for Management
Prof. Efraim Turban

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
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
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
6-31
Benefits() and Shortcoming ()
of Online Catalog
Easy to update
Able to integrate with the purchasing process
Good search and comparison capabilities
Able to provide up-to-date information
Provision for global range of information
Possibility of adding voice and motion pictures
Cost savings
Easy to customize
More comparative shopping
Ease of connecting order processing, inventory
processing, and payment processing to the system
 Large fixed cost
 Need for customer skill to deal with computers and
browsers
IT for Management
Prof. Efraim Turban
Customized Catalogs
• Assembled specifically for a company,
usually a customer of the catalog owner
• Tailored to individuals consumers in
certain cases
• Two approaches
6-32
– to let the customers identify the interesting
items out of the total catalogs
– to let the system automatically identify the
characteristics of customers, based on their
transaction records, and build a catalog
accordingly
IT for Management
Prof. Efraim Turban
Disintermediation and
Reintermediation
• Disintermediation
– by using the Internet, manufacturers can sell
directly to customers and provide customer
support online
– the traditional intermediaries are eliminated
• Reintermediation
6-33
– traditional intermediaries like retailers and
department stores have initiated online stores
– new electronic intermediaries - e-mail and
product selection agents - are emerging
IT for Management
Prof. Efraim Turban
Impact of EC on Manufacturers’
Distribution Strategy
• Manufacturer’s monopolistic
Internet-based distribution
• Coexistence with the dealers
• Regionally mixed strategy
• Restraint of competition by
powerful distributors
6-34
IT for Management
Prof. Efraim Turban
Cyberbanking
• Includes all major banking activities,
from paying bills to securing a loan,
conducted from home, a business, or
on the road instead of at a physical
bank location
• Saves time and is convenient for
customers
6-35
IT for Management
Prof. Efraim Turban
The Future of Banking
• Customer’s agents
– offers customers the widest possible choice of
banking products from multiple outside sources
– provide customers with information-integrated
services
• Product manufacturers
– a branded or unbranded wholesaler of product
and processing services to other banks
• Integrated players
6-36
IT for Management
Prof. Efraim Turban
Personal Finance
6-37
• Bill paying and electronic check writing
• Tracking bank accounts, expenditures, and credit
cards
• Budget organization
• Record keeping of cash flow and profit and loss
computations
• Portfolio management, including reports and
capital gains (losses) computations
• Investment tracking and monitoring of securities
• Quotes and tradelines, historical and current prices
• Tax computations
• Retirement goals, planning, and budgeting
IT for Management
Prof. Efraim Turban
Paying Bills Online
• Automatic payment of mortgages
• Automatic transfer of funds to pay
monthly utility bills
• Paying bills from online banking
account
• Merchant-to-customer direct billing
• Using an intermediary
6-38
IT for Management
Prof. Efraim Turban
Online Investment Trading
• Includes stocks and bonds, financial
derivatives, commodities, mutual
funds, and more
• Less expensive
• No waiting on busy telephone lines,
and the chance of making mistakes
• Anywhere, anytime
• Considerable amount of information
6-39
IT for Management
Prof. Efraim Turban
Investment Information
•
•
•
•
•
•
•
6-40
•
•
Municipal bond pricing
Overall market information and many links
Free gurus’ advice
Stock screening and evaluation
Articles from the journal of the American
Association of Individual Investors
Chart lovers have many options
Mutual fund evaluation and other
interesting investment information
Earning estimates
Current news
IT for Management
Prof. Efraim Turban
The Job Market Online
• The participants in the job market
6-41
– Job seekers : reply to employment ads
posted online; take the initiative and place
resumes on their own resumes
– Job offerers : advertise openings on their
Web sites
– Recruiting firms : post available job
descriptions and advertise their services in
electronic mail and in others’ Web sites
– Newsgroups : able to post job; conduct
discussions; and send resumes
IT for Management
Prof. Efraim Turban
Advantages
For Job Seekers
6-42
• Ability to find information on a large number of
jobs and employing companies worldwide
• Ability to quickly communicate with potential
employers
• Ability to write and post resumes for large-volume
distribution
• Ability to customize resumes quickly and at no cost
• Ability to search for jobs quickly from any place at
any time
• Several support services available at no cost
• Ability to learn how to use your voice in interview
IT for Management
Prof. Efraim Turban
Advantages
For Employers
• Ability to advertise to a large number of
job seekers
• Ability to save on advertisement costs
• Ability to post job openings quickly
• Lower cost of processing applications
• Ability to provide greater “equal
opportunity” for job seekers
• Ability to find highly skilled employees
6-43
IT for Management
Prof. Efraim Turban
Limitations of the
Electronic Job Market
• Many people do not use the Internet
• Security and privacy
• Creating high and expensive turnover
• Information overload
6-44
IT for Management
Prof. Efraim Turban
Travel and Tourism
• Potential savings through special
sales, auctions, and the elimination
of travel agents
• Online services by all major airline
vacation services, large conventional
travel agencies, car rental agencies,
hotels, and tour companies
6-45
IT for Management
Prof. Efraim Turban
Real Estate
6-46
• 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 can use virtual reality technology on
their Web sites to demonstrate three-dimensional
floor plans to potential home buyers
IT for Management
Prof. Efraim Turban
Auctions, Bidding,and Bartering
• Auctions
– specialized auction sites; auction cars;
art auctions; airline tickets
• Bidding
– special type of auction (Reverse auction)
• Bartering
– the exchange of goods and/or services
6-47
IT for Management
Prof. Efraim Turban
B2B Business Models
• Seller-Oriented Marketspace (e-selling)
– the buyer is an organization that may be a
regular customer of the seller
– EC is used in the seller-oriented model to
increase sales, reduce selling and
advertisement expenditures, increase
delivery speed, and reduce administrative
cost
6-48
IT for Management
Prof. Efraim Turban
B2B Business Models
• Buyer-Oriented Marketspace
(e-procurement and bidding)
– involves placing a request for quotation
(RFQ) on the buyer’s Web site, or in a
bidding marketspace
• Intermediaries in Electronic Commerce
(exchange)
– make markets
– make money, improve service for customers,
reduce search time of its own staff
6-49
IT for Management
Prof. Efraim Turban
B2B Business Models
• Buyer’s Internal Marketplace
(aggregation)
– company buys large number of supply
items from many vendors
– items purchased are listed in the
company’s catalog
– purchasers at various company offices
around the world now view the catalog,
select, electronically place orders, and
pay with a company procurement card
6-50
IT for Management
Prof. Efraim Turban
B2B Business Models
• Business-to-Business Auctions
– to use the organization’s own Web
site or use an auction site of an
intermediary
– benefits of auctions
• generating revenue
• increasing page views
• acquiring and retaining members
6-51
IT for Management
Prof. Efraim Turban
B2B Business Models
• Type of B2B Auctions
– Independent auctions
• use a third-party auctioneer to create the site
and sell the goods
– Commodity auctions
• many buyers and sellers come together to a
third-party Web site
– Private auctions by invitation only
• several companies bypass the intermediaries
and auction their products by themselves
– Auction at the company web site
6-52
• company build an auction capability on their
web site
IT for Management
Prof. Efraim Turban
Intrabusiness Commerce on
Intranets
• Intrabusiness EC is electronic
commerce within companies
• Intranet uses Internet-based
technology, including browsers
and search engines, to provide
access to a variety of information
within a firm
6-53
IT for Management
Prof. Efraim Turban
The Extranets and Whole
Industry Vertical Markets
• Extranet is a network that links
business partners to one another
over the Internet by tying together
their corporate intranets
• Goal is to foster collaboration
between organizations
• Vertical market-in one industry
only
6-54
IT for Management
Prof. Efraim Turban
Consumers and Their Behaviors
•
•
•
•
Mostly 15- to 35-years-old
Males and females
Married and highly educated
Working in educational
institutions, computer industry,
professions, and organizations
• High household incomes
6-55
IT for Management
Prof. Efraim Turban
Models of Market Research
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
IT for Management
Prof. Efraim Turban
How to Find out
What Customers Want?
• Asking customers what they want
– ask potential customers to fill in electronic
questionnaires
• Tracking customers’ activities on the Web
– based on cookies or other approaches
– data such as where customers come from or
how many customer have gone straight from
the home page to ordering
6-57
IT for Management
Prof. Efraim Turban
Process of
Conducting the Research
•
•
•
•
•
Define the target market
Identify newsgroups to study
Identify topics for discussion
Subscribe to the pertinent groups
Search discussion group topic and content lists to
find target market
• Search e-mail discussion group lists
• Subscribe to filtering services that monitor groups
• Read FAQs and other instructions
6-58
IT for Management
Prof. Efraim Turban
Intelligent Agents for Product
and Vendor Findings
• Helps consumers decide where to buy by
comparing merchants’ offers
• Jango originates the requests for the
price form the customer’s site instead of
Jango’s site
• In Kasbah, users who want to sell or buy
a product assign the task to an agent that
is then sent out to proactively seek
buyers or sellers
6-59
IT for Management
Prof. Efraim Turban
Negotiation Agents
• Intelligent agents negotiate the price
and other terms of the transactions for
consumers
• Intelligent agents can take away some
of the real-world problems associated
with negotiation such as the frustration
some customers experience in the
process, and the technical limitations of
being physically in different locations
6-60
IT for Management
Prof. Efraim Turban
Customer Services
• The process of customer service
– Phase 1 : Requirements
• assisting the customer to determine needs
– Phase 2 : Acquisition
• helping customer to acquire a product or service
– Phase 3 : Ownership
• supporting customer on an ongoing basis
– Phase 4 : Retirement
• helping client to dispose of a service or product
6-61
IT for Management
Prof. Efraim Turban
Business to Consumer (B2C)
Applications
6-62
• Advertising, online publishing and
push technology
• Cyber banking, personal finance
and stock trading
• Job market, auctions, bids and
bartering
• Travel and real estate
• Electronic retailing and malls
IT for Management
Prof. Efraim Turban
Facilitating Customer Service
• Personalized Web pages
• A chat room
• E-mail
• FAQs
• Tracking capabilities
6-63
IT for Management
Prof. Efraim Turban
Electronic Commerce 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
IT for Management
Prof. Efraim Turban
Electronic Data Interchange
• Business transactions messages
– electronically transfer repetitive business
transactions
• Data formatting standards
– use some formatting (coding) standards
• EDI translators
– does the conversion of data into standard format
• Private lines versus the Internet
6-65
– problem of compatibility of EDI
– Internet-based EDI
IT for Management
Prof. Efraim Turban
Benefits of EDI
6-66
• Send and receive large amounts of routine
transaction information quickly around the globe
• Very few errors
• Information flow among several trading partners
consistently and freely
• Access partner’s databases to retrieve and store
standard transactions
• Fosters true partnership relationships
• Creates a complete paperless TPS environment
• Shorten payment collection cycle
• Enter data offline
• Use data immediately
• Deliver Sales information in real time
• Save a considerable amount of money
IT for Management
Prof. Efraim Turban
Reasons to Create EDI Ability
over the Internet
6-67
• Few geographical constraints
• Reach the widest possible number of
trading partners of any viable alternative
currently available
• Seedbed for growth of a vast range of
business applications
• Cut EDI communication coasts
• Complement or replace current EDI
application
• Very user-friendly
IT for Management
Prof. Efraim Turban
Limitations of Traditional
Payment Instruments in EC
• Cash cannot be used since there is no
face-to-face contact
• It takes time to be received by mail
• It takes time to process the credit card
number provided by phone or fax
• Some buyers do not have credit cards or
checking accounts
6-68
IT for Management
Prof. Efraim Turban
Security Requirements
6-69
• Authentification : be assured of the identity of
the party with whom they are dealing
• Privacy : want identity to be secured
• Integrity : data and information transmitted are
not accidentally or maliciously altered or
destroyed
• Non-repudiation : protection against
unjustifiable denial of placing an order or
payments made
• Safety : ensure it is safe to provide a credit
card number on the Internet
IT for Management
Prof. Efraim Turban
Encryption
• Single-key (Symmetric) encryption
– The sender of the message encrypts the
information with a key and the receiver used an
identical key to decrypt the information to a
readable form
• Public/Private key system
– Several authorized people may know the public
key, while only its owner knows the private key
– encryption and decryption can be done with
either key
6-70
• Sophisticated systems use both keys
IT for Management
Prof. Efraim Turban
Electronic Certificates
• Issued by a trusted third party certificate authority (CA)
• Verify that a specific public key
belongs to specific individual
• A higher certificate authority that
guarantees certifiers is the Post Office
in many countries
6-71
IT for Management
Prof. Efraim Turban
Protocols
• A protocols is a set of rules and procedures
that govern the transfer of information on the
Internet
• Secure Socket Layer (SSL)
– encrypt messages
• Secure Electronic Transaction Protocol (SET)
6-72
– incorporate digital signatures, certification,
encryption, and an agreed-upon payment
gateway
IT for Management
Prof. Efraim Turban
Electronic Credit Cards
• Payments using unencrypted credit card
– the buyer e-mail his or her credit card
number to the seller on the Internet
• Encrypted payments
– Using SSL encryption, credit card details
are encrypted for security
• High level of security and privacy
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– Using the SET protocol or a third-party
intermediation, very high level of security,
integrity and privacy will be given
IT for Management
Prof. Efraim Turban
Electronic Checks
• STEP 1 : the customer establishes a
checking account with a bank
• STEP 2 : the customer contacts sellers,
buys a product or service, and e-mails an
encrypted electronic check signed with a
digital signature and two certificates, one
for the bank, one for the buyer
• STEP 3 : the merchant deposits the check
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in his or her account; money is debited in
the buyer’s account and credited to the
seller’s account
IT for Management
Prof. Efraim Turban
Electronic Cash
• STEP 1 : the customer opens an account with a bank
•
•
•
•
•
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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 ecash 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
IT for Management
Prof. Efraim Turban
Electronic Payment Cards
(Smart Cards) with E-cash
• Using smart cards
– combine several credit cards, debit cards,
and stored electronic cash
• Electronic payment from cellular phones
– enable people to make payments form their
cell phone
• Electronic funds transfer
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– transfer money electronically to and from
financial institutions using
telecommunication networks
IT for Management
Prof. Efraim Turban
Fraud on the Internet
• Internet stocks fraud
– In fall 1998, the SEC brought charges
against 44 companies and individuals who
illegally promoted stocks on computer
bulletin boards, online newspapers, and
investment Web sites
• Other financial fraud
– Other areas include selling bogus
investments and phantom business
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IT for Management
Prof. Efraim Turban
Buyer Protection
• Tips for safe electronic shopping include:
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– Look for reliable brand names at sites like Wal-Mart Online, Disney
Online, and Amazon.com. Enter it directly (Not from a link)
– 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 and how well it is organized
– Examine the money-back guarantees, warranties, and service
agreements
– Compare prices to those in regular stores (too low-a suspect)
– Ask friends what they know
– 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
– Be aware that you have shopper’s rights
IT for Management
Prof. Efraim Turban
Seller Protection
• Sellers are protected against:
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– consumers who refuse to pay, or pay with bad
checks
– use of sellers’ name by others
– buyers’ claims that the merchandise did not
arrive
– use of sellers’ unique words and phrases, names,
slogans, and Web address
– customers downloading copyrighted software
and/or knowledge and selling it to others
IT for Management
Prof. Efraim Turban
Legal Issues Specific to
E-commerce
• Domain Name
– several companies that have similar or same
names (in different countries) compete over a
domain name that is not registered trademark
• Taxes and Other Fees
– particularly complex for interstate and
international commerce
• Copyright
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– intellectual property is protected by copyright
laws and cannot be used freely
IT for Management
Prof. Efraim Turban
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
– technology is new to many IS directors and
employees; so many require new sets of skills
• Web Tracking
– by using sophisticated software it is possible to track
individual movements on the internet
• Disintermediation
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– use of EC may result in the elimination of some of a
company’s employees as well as brokers and agents
IT for Management
Prof. Efraim Turban
Copyright  2001 John Wiley & Sons, Incorporated. All
rights reserved. Reproduction or translation of this work
beyond that permitted in Section 117 of the 1976 United
States Copyright Act without the express written
permission of the copyright owner in unlawful. Request
for further information should be addressed to the
Permissions Department, John Wiley & Son, Inc.
Adopters of the textbook are granted permission to make
back-up copies for his/her own use only, to make copies
for distribution to student of the course the textbook is
used in, and to modify this material to best suit their
instructional needs. Under no circumstances can copies
be made for resale. The publisher assumes no
responsibility for errors, omissions, or damages, caused
by the use of these programs or from the use of the
information contained herein.
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Business Process Reengineering & Infromation Technology