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Information Systems Today: Managing in the Digital World 5-1 5 Chapter Enabling Commerce Using the Internet “There is no physical analogy for what Amazon.com.

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Presentation on theme: "Information Systems Today: Managing in the Digital World 5-1 5 Chapter Enabling Commerce Using the Internet “There is no physical analogy for what Amazon.com."— Presentation transcript:

1 Information Systems Today: Managing in the Digital World Chapter Enabling Commerce Using the Internet “There is no physical analogy for what Amazon.com is becoming.” Jeff Bezos Cofounder and long-time CEO of Amazon.com COIS11011 WEEK 6

2 Information Systems Today: Managing in the Digital World 5-2 Learning Objectives

3 Information Systems Today: Managing in the Digital World 5-3 Learning Objectives

4 Information Systems Today: Managing in the Digital World 5-4 Electronic Commerce Online exchange of goods, services and money Second quarter of 2006 o 2.7% of total retail revenue o $24.8 billion in revenue

5 Information Systems Today: Managing in the Digital World 5-5 Most Common Types of E-Commerce Business-to-consumer (B2C) o A person buys a book from Amazon.com Business-to-business (B2B) o Retailer like Wal-Mart ordering from distributors Business-to-employee (B2E) o Employee uses the Web to change employee benefits Consumer-to-consumer (C2C) o One person purchases from another on eBay

6 Information Systems Today: Managing in the Digital World 5-6 Other Types of E-Commerce Government-to-citizen (G2C) o A person filing income taxes online Government-to-business (G2B) o Government purchases supplies using Internet-enabled procurement system Government-to-government (G2G) o Foreign government accessing U.S. federal regulations

7 Information Systems Today: Managing in the Digital World 5-7 Key Capabilities of the Web

8 Information Systems Today: Managing in the Digital World 5-8 Information Dissemination Firms across the world have access to customers Economical medium for marketing products and services Increased geographical reach

9 Information Systems Today: Managing in the Digital World 5-9 Integration Integration of information via Web sites Real-time access to personalized information No time lag between company decisions and customers’ ability to access these

10 Information Systems Today: Managing in the Digital World 5-10 Example: Integration Alaska Airlines customers can access their mileage program any time o Real-time link between company database and customer

11 Information Systems Today: Managing in the Digital World 5-11 Mass Customization Meeting particular customers’ needs on a large scale Timbuk2.com o Custom Messenger Bag Builder Customers create a virtual bag Preference-tracking helps Timbuk2 in marketing efforts

12 Information Systems Today: Managing in the Digital World 5-12 Interactive Communication Immediate feedback between company and customers o notifications o Customer service online chat Best Buy o Geek Squad o 24-hour computer support

13 Information Systems Today: Managing in the Digital World 5-13 Collaboration Virgin Entertainment Group o Microsoft SharePoint o Managers: spend more time selling products o Head office: more time for strategic planning

14 Information Systems Today: Managing in the Digital World 5-14 Transaction Support Internet and the Web: o Reduced transaction costs o Enhanced operational efficiency Dell – automated transaction support o Cost savings per sale Disintermediation

15 Information Systems Today: Managing in the Digital World 5-15 E-Commerce Business Strategies Differentiated based on levels of physical/virtual presence

16 Information Systems Today: Managing in the Digital World 5-16 Brick-and-Mortar Business Strategy Physical locations only Traditional stores Cons: Limited geographical reach

17 Information Systems Today: Managing in the Digital World 5-17 Click-Only Business Strategy Business conducted in cyberspace - no physical location Virtual companies Cons: Customers uncomfortable with online transactions No face-to-face interaction with customers

18 Information Systems Today: Managing in the Digital World 5-18 Click-and-Mortar Business Strategy Bricks-and-clicks business strategy Hybrid strategy Cons: Added complexity combining 2 different environments

19 Information Systems Today: Managing in the Digital World 5-19 Example: Click-and-Mortar Company

20 Information Systems Today: Managing in the Digital World 5-20 Ingredients of a Business Model A plan of how to achieve EC success

21 Information Systems Today: Managing in the Digital World 5-21 Common Revenue Models for EC Most important ingredient of business model How will the firm earn revenue?

22 Information Systems Today: Managing in the Digital World 5-22 Learning Objectives

23 Information Systems Today: Managing in the Digital World 5-23 Business-to-Business E-Commerce Extranet o Enables firms to do business together (B2B) o One of best ways for organizations to gain return on technology-based investments o Boeing 1,000 authorized business partners o Nearly all Fortune 1,000 companies deploy some type of B2B applications

24 Information Systems Today: Managing in the Digital World 5-24 Electronic Data Interchange (EDI) Used prior to the introduction of the Internet EDI used for B2B systems Digital or electronic transmission of business documents between organizations o Value-added networks (VAN) o Dedicated circuit between companies

25 Information Systems Today: Managing in the Digital World 5-25 Advantages and Disadvantages of EDI Advantages o Streamlining business processes o Reduction of error rates Disadvantages o Costly o Mid-size and small companies disadvantaged

26 Information Systems Today: Managing in the Digital World 5-26 Extranets New, more affordable alternative to EDI Advantages o Improved timelines and accuracy of information o Central management of documents o Cross-platform nature o Low cost of adoption o No specific user training required

27 Information Systems Today: Managing in the Digital World 5-27 Extranet System Architecture Internet-based application Virtual private network (VPN) used to secure information transmission Used to manage supply chains

28 Information Systems Today: Managing in the Digital World 5-28 Intranets Business-to-employee (B2E) electronic commerce Internet based private network using Web technologies Boeing o More than 1 million pages o 200,000 employees

29 Information Systems Today: Managing in the Digital World 5-29 Intranet System Architecture Internet-based application Firewalls used for security o Software placed between LAN and the Internet VPN used to access intranet from remote locations

30 Information Systems Today: Managing in the Digital World 5-30 Intranet: Training Boeing Company o 200,000 employees get trained o Quality eTraining program Catalogue of courses Online course content Standardized courses o Business improvements o Cost reduction Eliminated travel cost

31 Information Systems Today: Managing in the Digital World 5-31 Intranet: Application Integration Information from separate applications can be consolidated and presented to the user Netegrity SiteMinder

32 Information Systems Today: Managing in the Digital World 5-32 Intranet: Online Entry of Information Use of Web browsers to enter information online E.g., Microsoft MSExpense o Prior to MSExpense 136 different report templates Outdated versions o With MSExpense Online submission of expense records Easy and centralized updates to templates Savings of $4.3 million a year Shortened period for reimbursement from 3 weeks to 3 days Etc.

33 Information Systems Today: Managing in the Digital World 5-33 Intranet: Real-Time Access to Information Manage, update, distribute, and access corporate information o Boeing News releases uploaded to the Intranet Previously sent to all corporate offices as video tapes Reduced distribution costs Efficient information sharing Company-wide access

34 Information Systems Today: Managing in the Digital World 5-34 Intranet: Collaboration Boeing o Information shared between employees across the world o Reduced product development cycles o Ability to stay current on projects o Ability to stay current with the changing market conditions

35 Information Systems Today: Managing in the Digital World 5-35 Learning Objectives

36 Information Systems Today: Managing in the Digital World 5-36 Use of Internet Technologies Characteristics of the Internet, intranet and extranet B2B, B2E rely on extranet and intranet Internet provides an opportunity for B2C commerce

37 Information Systems Today: Managing in the Digital World 5-37 Stages of B2C E-Commerce Websites range from passive to active

38 Information Systems Today: Managing in the Digital World 5-38 E-Tailing Selling goods and services online Click-and-mortar o Walmart.com Click only o Amazon.com Virtual company o Priceline.com Reverse pricing vs. menu-driven pricing

39 Information Systems Today: Managing in the Digital World 5-39 E-Tailing Benefits Product benefits o Unlimited number and variety of products o Easier comparison shopping E.g., AllBookstores, BizRate, or SideStep Place benefits o Anywhere, anytime o Purchasing on global scale Price benefits o Higher inventory turnover rate o No expenditures for physical retail space

40 Information Systems Today: Managing in the Digital World 5-40 The Long Tail Traditional stores o Focus on mainstream needs o Target the average customer o E.g., Blockbuster E-Tailers o Can focus on niche markets o E.g., Netflix

41 Information Systems Today: Managing in the Digital World 5-41 E-Tailing Drawbacks Product delivery drawbacks o Delay between product order and delivery Except for products that can be downloaded Direct product experience drawbacks o Lack of sensory information Smell, taste, feel o Lack of the social element Cannot replace going to the mall with friends

42 Information Systems Today: Managing in the Digital World 5-42 Attracting and Retaining Online Customers Basic rule of commerce o Offer valuable products/services at fair prices Additional e-commerce rules 1. The Web site should offer something unique 2. The Web site must be aesthetically pleasing 3. The Web site must be easy to use and fast 4. The Web site must motivate people to visit, stay and return 5. You must advertise your presence on the Web 6. You should learn from your Web site

43 Information Systems Today: Managing in the Digital World 5-43 Web Site Rules: Rule 1 Offer something unique o Offer hard-to- find goods Global audience Reasonable prices

44 Information Systems Today: Managing in the Digital World 5-44 Web Site Rules: Rule 2 Website must be aesthetically pleasing o Use of color schemes, backgrounds, high quality images o Clear, concise and consistent layout Increases chances of return Can separate a Web site from the competition

45 Information Systems Today: Managing in the Digital World 5-45 Web Site Rules: Rule 3 Website must be easy to use and fast o Easy navigation o Fast download speed Average user will wait only a couple of seconds for a website to download o Present brief summary information with hyperlinks Allows users to “drill down”

46 Information Systems Today: Managing in the Digital World 5-46 Web Site Rules: Rule 4 Web site must motivate people to visit stay and return o Create a community GardenWeb oUsers share tips oBuy from each other

47 Information Systems Today: Managing in the Digital World 5-47 Web Site Rules: Rule 5 Advertise your presence on the Web o Pull marketing A passive method of attracting to a specific site Include the Web site address on all promotional materials Advertise your Web site on other sites

48 Information Systems Today: Managing in the Digital World 5-48 Web Site Rules: Rule 5 Advertise your presence on the Web (II) o Pay-per-click Only pay for advertising when user clicks on it Affiliate marketing – Web site owners post ads on their site Problem: click fraud – artificially clicking on ads to create revenue oNetwork click fraud oCompetitive click fraud

49 Information Systems Today: Managing in the Digital World 5-49 Web Site Rules: Rule 6 Learn from your Web site o Who are your customers? o What are they doing? Web analytics o Analyze behavior of visitors Path the visitors take Length of the visit Number of pages viewed Page from which they exit

50 Information Systems Today: Managing in the Digital World 5-50 Search Engine Marketing Paid inclusion o Fee paid to the search engine to appear in the results o Cannot influence order, thus companies may use: Search engine advertising Search engine optimization

51 Information Systems Today: Managing in the Digital World 5-51 Search Engine Advertising Sponsored search o Pay to ensure a spot on top of search results page o Company in control of ad positioning o Pay-per-click o Can get costly

52 Information Systems Today: Managing in the Digital World 5-52 Search Engine Optimization Position within search results based on complex formula Site owner has no control over the position of the ad Optimization based on o Web site updates o Use of key terms o Unethical “tricks”

53 Information Systems Today: Managing in the Digital World 5-53 Securing Payments in the Digital World 90 % of users have changed online behavior because of fear of identity theft 1/3 of online purchasers cut back on the volume of purchasing More than 1/2 of shopping carts are abandoned Need for secure forms of online payment

54 Information Systems Today: Managing in the Digital World 5-54 Credit and Debit Cards Customer Verification Value (CVV) o Three-digit code on the back of a card o Added to combat fraud in online purchases o Not included in the magnetic strip information o Code used for authorization by bank

55 Information Systems Today: Managing in the Digital World 5-55 Conducting Safe Transactions Online 1. Use a secure browser with the latest encryption capabilities 2. Check the site’s privacy policy 3. Read and understand refund and shipping policies 4. Keep personal information private 5. Give payment information only to those you know and trust 6. Keep records of online transaction 7. Review your monthly credit card and bank statements

56 Information Systems Today: Managing in the Digital World 5-56 Payment Services Online transactions without sharing private information with actual seller o PayPal (owned by eBay) Can send and receive money if you have an e- mail account o Google Checkout Linked with Google search Users can see if merchants offer this option o E-Gold Service backed by real gold

57 Information Systems Today: Managing in the Digital World 5-57 Example: Payment Services e-Gold Backed by real gold Person-to-person transfer

58 Information Systems Today: Managing in the Digital World 5-58 Managing Financial Transactions in the Digital World Financial institutions now offer: o Online banking Management of credit card, checking and savings accounts o Electronic bill pay Bill payment online o Online investing Growing in popularity

59 Information Systems Today: Managing in the Digital World 5-59 Learning Objectives

60 Information Systems Today: Managing in the Digital World 5-60 Types of C2C E-Commerce C2C commerce has always been present 17% of American adults have sold online C2C relationships characterized by o Number of buyers o Number of sellers

61 Information Systems Today: Managing in the Digital World 5-61 Opportunities and Threats of C2C E-Commerce

62 Information Systems Today: Managing in the Digital World 5-62 E-Auctions Forward auction o Sellers post goods or services for sale o Buyers bid on these items o Highest bid wins Reverse auction o Buyers post a request for quote (RFQ) o Seller proposes a bid o Lowest seller bid wins o Used frequently in B2B e-commerce

63 Information Systems Today: Managing in the Digital World 5-63 E-Auctions (II) eBay o Transaction fee-based revenue system o 2006 revenue - $6 billion o Mostly forward auctions

64 Information Systems Today: Managing in the Digital World 5-64 E-Auction Fraud E-auctions marred with more fraud than any other Internet activity o 42% of all Internet-fraud related complaints o Average loss: $1,155 Types of e-Auction fraud o Bid luring o Reproductions o Bid shielding o Shipping fraud o Payment failure o Nonshipment

65 Information Systems Today: Managing in the Digital World 5-65 Social Online Communities MySpace.com o 4.5% of all Internet site visits in mid 2006 o Over 100 million users o About 230,000 new users a day o Original purpose – social network based on music interests o 2005 – purchased by NewsCorp for $580 million o Income from targeted ads $2.17 per user per year

66 Information Systems Today: Managing in the Digital World 5-66 Cyworld Successful social online community Asian market South Korea – Cyworld’s per capita penetration greater than MySpace in the US Sale of virtual items o $7 per user per year

67 Information Systems Today: Managing in the Digital World 5-67 Self-Publishing Consumers can voice their opinions with no editorial review Original material by the author Traditional B2B becoming C2C Publishing from home o Print-On-Demand o Blogging

68 Information Systems Today: Managing in the Digital World 5-68 Printing-On-Demand Customized printing Small batches Attractive for first time authors Select providers o Lulu o Blurb o BookSurge Amazon End-to-end service

69 Information Systems Today: Managing in the Digital World 5-69 Blogging Weblogging o Online text diary o Chronological entries o Power of bloggers “Rathergate” Vlogging o Video blogging

70 Information Systems Today: Managing in the Digital World 5-70 M-Commerce Electronic transactions using wireless mobile devices Mobile networks o Wireless o Switched public network Smart phones o High-speed data transfer o “Always-on” connectivity

71 Information Systems Today: Managing in the Digital World 5-71 Popular Technologies for M-Commerce

72 Information Systems Today: Managing in the Digital World 5-72 M-Commerce Applications

73 Information Systems Today: Managing in the Digital World 5-73 Location-Based M-Commerce Highly personalized mobile services Based on location o GPS functionality o Bluetooth Pull-based – consumers seeking information Push-based – companies sending (unrequested) information to the consumer

74 Information Systems Today: Managing in the Digital World 5-74 Location-Based Services Next thing: cell phone social networking

75 Information Systems Today: Managing in the Digital World 5-75 Key Drivers of M-Commerce General interest in adoption of the Internet and e-commerce Real-time transfer of data over 3G and 4G cellular networks o “Always-on” connectivity Growth in mobile telephony 2007 M-commerce market: $250 billion

76 Information Systems Today: Managing in the Digital World 5-76 Crowdsourcing Use of everyday people as cheap labor force iStockphoto.com o Amateurs take pictures o Cost of picture $1 - $5 o Revenue shared with the photo creator Eli Lilly – InnoCentive o Companies post scientific problems o Anyone can try to solve them o Reward paid to a successful solver o Decreased R&D costs E-lancing

77 Information Systems Today: Managing in the Digital World 5-77 Online Entertainment Industry Digital rights management (DRM) o Technological solution for control of digital media Restrictions oDevices which will play it oHow many times it can play o Prevention of illegal copying and distribution Watermark – illegal copy can be traced to original purchaser

78 Information Systems Today: Managing in the Digital World 5-78 Slingbox Acts as a personal media server “Placeshifts” television content to any Internet- enabled device o Television signal received at the user’s house o Relayed over the Internet to be accessed from anywhere

79 Information Systems Today: Managing in the Digital World 5-79 Learning Objectives

80 Information Systems Today: Managing in the Digital World 5-80 E-Government Providing information about public services o To citizens o To organizations o To other governmental agencies 1998 – Government Paperwork Elimination Act

81 Information Systems Today: Managing in the Digital World 5-81 Government-to-Citizens Interactions between the government and its constituents o IRS – e-filing o Grants.gov o e-voting initiatives

82 Information Systems Today: Managing in the Digital World 5-82 Government-to-Business Relationships between businesses and the government o E-procurement o Forward auctions Businesses buy surplus government equipment Auctionrp.com o Online application for export licenses

83 Information Systems Today: Managing in the Digital World 5-83 Government-to-Government Interactions between countries o Regulations.gov o Export.gov Interactions between different levels of government


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