1. © 2007 by Prentice Hall Management Information Systems, 10/e Raymond McLeod and George Schell 1 Management Information Systems, 10/e Raymond McLeod Jr. and George P. Schell

2. © 2007 by Prentice Hall Management Information Systems, 10/e Raymond McLeod and George Schell 2 Chapter 3 Using Information Technology to Engage in Electronic Commerce

3. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 3 Electronic Commerce ► Electronic Commerce (E-commerce) refers to a business transaction that uses network access, computer-based systems, and a Web browser interface. ► Electronic commerce is the use of computers to facilitate the firm’s operations  internal (finance, marketing, manufacturing,...)  external (customers, suppliers, government,...

4. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 4 E-commerce (Cont’d) ► Business-to-consumer (B2C) refers to transactions between a business and the final consumer of the product. ► Business-to-business (B2B) refers to transactions between businesses in which neither one is the final consumer. ► Electronic Government (E-gov) refers to transactions between a government agency and typically a citizen.

5. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 5 E-commerce (Cont’d) ► Main benefits to firms:  Improved customer service before, during, and after the sale  Improved relationships with suppliers and the financial community  Increased economic return on stockholder and owner investments

6. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 6 E-commerce (Cont’d) ► Main constraints to firms:  High costs  Security concerns  Immature or unavailable software

7. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 7 The Path to Electronic Commerce ► Implementing an e-commerce system includes a significant risk of failure ► The first step is a commitment to implement the system as part of a strategic business plan to use e-commerce to achieve competitive advantage ► The firm then gathers business intelligence to understand the potential role each environmental element will play

8. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 8 Business Intelligence ► Before engaging in e-commerce managers must understand their firm ’ s relationships with customers, competitors, suppliers, and other external entities ► Business Intelligence (BI) is the activity of gathering information about the elements in the environment that interacts with the firm. ► External databases are commercial databases that, usually for a fee, provide information and analyses on virtually any subject. WWW.LEISNEXIS.COM, WWW.DIALOG.COM, WWW.GXS.COM, WWW.THOMASNET.COM WWW.LEISNEXIS.COMWWW.DIALOG.COM WWW.GXS.COMWWW.THOMASNET.COM WWW.LEISNEXIS.COMWWW.DIALOG.COM WWW.GXS.COMWWW.THOMASNET.COM

9. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 9 Business Intelligence (Cont’d) ► Firms use these databases to gather BI because it is faster and less expensive than trying to research a wide array of information sources. ► Government databases offer a wide range of topics for researchers in many fields. WWW.LOC.GOV, WWW.CENSUS.GOV, WWW.BLS.GOV WWW.LOC.GOV WWW.CENSUS.GOVWWW.BLS.GOVWWW.LOC.GOV WWW.CENSUS.GOVWWW.BLS.GOV

10. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 10 Business Intelligence (Cont’d) ► Firms are more inclined to initiate their own external searches for market intelligence. ► Search engines are the most popular means for people to obtain information available from the Web.

11. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 11 Business Intelligence (Cont’d) ► Search engine is a special computer program that asks a user for a word or group of words to be found. WWW.GOOGLE.COM, WWW.YAHOO.COM, WWW.MSN.COM, WWW.ASKJEEVES.COM WWW.GOOGLE.COM WWW.YAHOO.COMWWW.MSN.COM WWW.ASKJEEVES.COMWWW.GOOGLE.COM WWW.YAHOO.COMWWW.MSN.COM WWW.ASKJEEVES.COM  Searches the content of web sites on the Internet to see if the word or words are on any Web sites.  Makes it possible to scan large volumes of information quickly, easily, and thoroughly.

12. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 12 E-commerce Strategy and Interorganizational Systems ► Interorganizational system (IOS) is the strategy in which a firm is linked with transmissions of electronic data with other firms so that all of the firms work together as a coordinated unit, achieving benefits that each could not achieve alone.  Participating firms are called trading partners, business partners, or a business alliance.

13. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 13 E-commerce Strategy and Interorganizational Systems ► E-commerce is fundamental to IOSs. ► Electronic data interchange (EDI) is a means for achieving an IOS; a subset. ► Extranets are another alternative.

14. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 14 IOS Benefits ► The trading partners enter into an IOS venture with the expectation of realizing benefits such as:  Comparative Efficiency  Internal efficiency  Inter organizational efficiency  Bargaining Power ► Comparative Efficiency: is obtained by the IOS because the trading partners can produce their goods and services with greater efficiency and provide their goods and services at lower costs to their customers. (price advantage over competitors)

15. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 15 IOS Benefits (Cont’d) ► Internal efficiency within the firm’s own operations.  Gather and analyze data quickly.  Make decisions faster. ► Interorganizational efficiency gained by working with other firms.  Offer more products and services.  Serve more customers.  Shift certain work to suppliers or customers.  Gather environmental data more easily.

16. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 16 IOS Benefits (Cont’d) ► Bargaining Power is the ability of a firm to resolve disagreements with its suppliers and customers to its own advantage.

17. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 17 Bargaining Power Improvements ► Unique product features enable firms to offer better service to their customers in the form of easier ordering, quicker shipments, and faster response times to requests for information.  This better service becomes a feature of the firm’s products, making them more appealing than similar products offered by competitors. ► Reduced search-related costs can reduce the firm’s “shopping” cost that its customers incur in searching for a supplier, identifying alternative products, and getting the lowest price.  The firm is a customer of its suppliers, the firm can realize the same shopping-cost reductions when ordering from its suppliers.

18. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 18 Bargaining Power Improvements (Cont’d) ► Increased switching costs is when a firm makes it more expensive, in cost and/or convenience, for customers to switch to a competitor.  Providing customers with such information resources as hardware, software, and data communications channels that would have to be replaced if products were purchased from another firm.

19. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 19 Extranet ► Extranets enable the sharing of sensitive computer-based information with other firms using information technology over the internet.  Used in collaboration with trusted suppliers and large customers  Security and privacy are serious concerns, so extranets are generally secured behind a firewall and use encryption.

20. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 20 IOS Benefits ► Direct benefits  Reduced data entry errors  Lower costs  Increased operational efficiency ► Indirect benefits  Increased ability to compete  Improved relationships with trading partners  Better customer service

21. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 21 Figure 3.3 IOS Direct and Indirect Benefits

22. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 22 B2C Strategies for E-commerce ► Important to understand B2C Strategies  More products and services are becoming available for digital delivery.  More consumers are overcoming their reluctance to purchase using the Web.  Higher communication speeds in homes has made delivery of digital products practical.  Fear of information theft has been replaced with acceptance.

23. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 23 Digital Products ► Entertainment–songs, albums, movies, etc. WWW.SONY.COM WWW.SONY.COM ► Computer programs and updates–virus protection software, tax software, etc. ► Services–WWW.LENDINGTREE.COM WWW.LENDINGTREE.COM ► Can be consumed as soon as they are downloaded ► Purchasers incur a substantial cost of the transaction in terms of computer cost, online connection fees, storage media, and so on.

24. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 24 Physical Products ► Items must be transported to the consumer. ► Shipment has to be arranged. ► Traditional delivery methods are slow. ► Faster delivery time options are costly. ► Mail/shipping companies offer services such as online tracking that allows more information and control over delivery.

25. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 25 Virtual vs. Hybrid Sales ► Virtual sales are those made by a firm that does not operate a physical storefront.  Customer can’t enter and purchase the product. ► Hybrid sales occur when firms have both a physical storefront and a Web site where customers can purchase products.  Brick-and-click operations

26. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 26 Virtual Sales Challenges ► Provide necessary product information without overwhelming the customer. ► Communicating image files from the Web site to the customer’s computer can take time. ► Payment over the Internet has suffered bad press–credit card fraud.

27. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 27 Hybrid Sales ► Most firms had storefronts before sales over the Internet were possible. ► Both a physical storefront and the Internet are necessary to their business plans. ► Stores act as showcases for products. ► Customers enjoy convenience of shopping over the Web. ► B2C sales means less inventory at its store; more sales floor space.

28. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 28 Virtual Sales ► Limit images displayed response time, WWW.OFFICEDEPOT.COM. WWW.OFFICEDEPOT.COM ► Secure data transfer of credit card information.  VeriSign  PayPal

29. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 29 The Next Step for E-commerce ► Mobile commerce (m-commerce) is the use of cell phones and personal digital assistants (PDAs) to engage in wireless e-commerce.

30. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 30 World Wide Web ► World Wide Web (WWW) efforts began in 1989 when Tim Berners-Lee came up with a idea for physicists to communicate. ► Hypertext-electronic documents that are linked together. ► Physicists would be able to click on words or phrases displayed on their computer screens and retrieve the hypertext.

31. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 31 World Wide Web (Cont’d) ► Hypertext became a reality in 1992. ► Hypermedia is the transmission of multimedia consisting of text, graphics, audio, and video over the WWW. ► WWW (Web) is information accessible via the Internet whereby hypermedia documents (computer files) are stored and then retrieved by means of a unique addressing scheme.

32. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 32 World Wide Web Terms ► Web site–collection of Web pages ► Hypertext link–pointer (text or a graphic) used to access hypertext stored at a Website ► Web page–hypermedia file stored at a unique Web site address ► Home page–first page of a Web site ► Browser–software designed to find and read files on the Internet written in hypertext markup language (HTTP).

33. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 33 World Wide Web Terms (Cont’d) ► Uniform resource locator (URL)–unique address of a Web page ► Protocol–set of standards that govern communication of data (HTTP, FTP, URL) ► Domain name–address of the website where a Web page is stored ► Path–certain directory/subdirectory and file at the Web site ► File Transfer Protocol (FTP) users can copy files onto their computers from any Web site.

34. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 34 Figure 3.5 World Wide Web Terminology

35. © 2007 by Prentice HallManagement Information Systems, 10/e Raymond McLeod and George Schell 35 Understanding the Difference ► The Internet is a global communications network that connects millions of computers.  Provides the network architecture ► The Web is a collection of computers acting as content servers that host documents formatted to enable viewing of text, graphics, and audio as well as allowing linkages to other documents on the Web.  Provides the method for storing and retrieving its documents