5-1 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Chapter 5 Electronic Commerce Strategies for the New Economy

5-2 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Presentation Overview The Growth of E-Commerce The Growth of E-Commerce The Advantages of Business To Consumer E-Commerce The Advantages of Business To Consumer E-Commerce Keys To Success in Business To Consumer E-Commerce Keys To Success in Business To Consumer E-Commerce Business To Business E-Commerce Business To Business E-Commerce The Role of E-Government The Role of E-Government E-Commerce Payment Systems E-Commerce Payment Systems

5-3 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Opening Case Study Sodas and Snack Food on the Web Soda and snack foods are one of the last things we would consider buying on-line because they are available on nearly every street corner. Soda and snack foods are one of the last things we would consider buying on-line because they are available on nearly every street corner. How can products that are easily available take advantage of generating sales on the Internet? How can products that are easily available take advantage of generating sales on the Internet?

5-4 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Growth of E-Commerce

5-5 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved E-commerce – is commerce, but it is commerce accelerated and enhanced by IT, in particular the Internet. E-commerce – is commerce, but it is commerce accelerated and enhanced by IT, in particular the Internet. Demand aggregation – combines purchase requests from multiple buyers into a single large order, which justifies a discount from the business. Demand aggregation – combines purchase requests from multiple buyers into a single large order, which justifies a discount from the business. The Growth of E-Commerce

5-6 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Growth of E-Commerce The Digital Divide Digital divide - expresses the fact that different peoples, cultures, and areas of the world or within a nation do not have the same access to information and telecommunications technologies. Digital divide - expresses the fact that different peoples, cultures, and areas of the world or within a nation do not have the same access to information and telecommunications technologies. Global digital divide - specifically describes the differences in IT access and capabilities between different countries or regions of the world. Global digital divide - specifically describes the differences in IT access and capabilities between different countries or regions of the world.

5-7 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Advantages of Business To Consumer E-Commerce The Internet’s most prominent advantages are: The Internet’s most prominent advantages are: 1. Shopping can be faster and more convenient. 2. Offerings and prices can change instantaneously. 3. Call centers can be integrated with the Web site. 4. Broadband telecommunications will enhance the buying experience.

5-8 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Advantages of Business To Consumer E-Commerce Shopping Can Be Faster and More Convenient E-tailer - an Internet retail site. E-tailer - an Internet retail site. Pure plays - Internet retailers without a physical store. Pure plays - Internet retailers without a physical store. Clicks–and-mortar retailers - both an Internet presence and one or more physical stores. Clicks–and-mortar retailers - both an Internet presence and one or more physical stores. M-commerce - describes e-commerce conducted over a wireless device such as a cell phone or PDA. M-commerce - describes e-commerce conducted over a wireless device such as a cell phone or PDA.

5-9 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Advantages of Business To Consumer E-Commerce Call Centers Can Be Integrated With the Web Site Interactive chat - lets you engage in real-time typed exchange of information. Interactive chat - lets you engage in real-time typed exchange of information. Internet telephony - a combination of hardware and software that uses the Internet transmission of telephone calls. Internet telephony - a combination of hardware and software that uses the Internet transmission of telephone calls. On Your Own B2C Services (p. 250)

5-10 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Advantages of Business To Consumer E-Commerce Broadband Telecommunications Will Enhance The Buying Experience Purchase a full-length feature film and download it in minutes. Purchase a full-length feature film and download it in minutes. Travel sites will offer full-motion video tours of vacation destinations. Travel sites will offer full-motion video tours of vacation destinations. Automobile buying sites will be able to offer virtual test drives to let you narrow down your choices before you take the time to visit an auto dealership. Automobile buying sites will be able to offer virtual test drives to let you narrow down your choices before you take the time to visit an auto dealership.

5-11 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Advantages of Business To Consumer E-Commerce Team Work Broadband Services: Where Do You Place Your Bets? (p. 251)

5-12 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 1 - Commoditylike Items Work Best People tend to be more comfortable buying items on the Internet that are commoditylike, that is, uniform. People tend to be more comfortable buying items on the Internet that are commoditylike, that is, uniform. People tend to be less comfortable buying “high touch” items on the Internet such as furniture. People tend to be less comfortable buying “high touch” items on the Internet such as furniture.

5-13 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 2 - Digital Products Are the Best of All Micro-payments - techniques to facilitate the exchange of small amounts of money for an Internet transaction. Micro-payments - techniques to facilitate the exchange of small amounts of money for an Internet transaction. Reasons digital products are best: Reasons digital products are best: 1. They are commoditylike products. 2. They can be mass-customized and personalized. 3. They can be delivered at the time of purchase. 4. They foster disintermediation. 5. They have global reach.

5-14 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 3 - Attracting and Retaining Customers Marketing mix - the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. Marketing mix - the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. 1. Registering with Search Engines Meta tags Meta tags 2. Online Ads

5-15 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 3 - Attracting and Retaining Customers 3. and Viral Marketing  Spam  Viral marketing 4. Affiliate Programs  Affiliate programs  Click-throughs 5. Selling to Existing Customers  Conversion rate

5-16 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 4 - Remember the Importance of Merchandising A B2C business must do an effective job of merchandising. A B2C business must do an effective job of merchandising.

5-17 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 5 - You Must Execute Well Executing well simply means that when a customer places an order on your Web site, you have to follow through and execute the necessary business processes to get the right item to the customer in a timely fashion. Executing well simply means that when a customer places an order on your Web site, you have to follow through and execute the necessary business processes to get the right item to the customer in a timely fashion.

5-18 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 6 - Watch the Competition Retaining customers is one of the keys to e-commerce success. Retaining customers is one of the keys to e-commerce success. Spend time on the Web surfing around seeing what’s going on in your competitive space by looking at the Web sites of known competitors. Spend time on the Web surfing around seeing what’s going on in your competitive space by looking at the Web sites of known competitors.

5-19 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Keys To Success In Business To Consumer E-Commerce 6 - Watch the Competition Team Work Evaluating Competing Web Sites (p. 258)

5-20 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Value Networks Intermediaries - specialist companies that provide services better than their client companies can themselves. Intermediaries - specialist companies that provide services better than their client companies can themselves. Complementors - provide products and services that complement the offerings of the enterprise. Complementors - provide products and services that complement the offerings of the enterprise.

5-21 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Value Networks Value network - all of the resources behind the click on a Web page that the customer doesn’t see, but that together create the customer relationship. Value network - all of the resources behind the click on a Web page that the customer doesn’t see, but that together create the customer relationship.

5-22 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Corporate Purchasing Segments Direct materials - used in production in a manufacturing company or for retail sales. Direct materials - used in production in a manufacturing company or for retail sales. Indirect materials - necessary for running a corporation, but do not relate to the primary business activities. Indirect materials - necessary for running a corporation, but do not relate to the primary business activities. Electronic data interchange (EDI) - computer-to- computer transfer of transaction information. Electronic data interchange (EDI) - computer-to- computer transfer of transaction information.

5-23 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Corporate Purchasing Segments

5-24 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Corporate Purchasing Segments Virtual private network - uses software to establish a secure channel on the Internet for transmitting data. Virtual private network - uses software to establish a secure channel on the Internet for transmitting data.

5-25 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Corporate Purchasing Segments XML (eXtensible Markup Language) - a coding language for the Web that lets computers interpret the meaning of information in Web documents. XML (eXtensible Markup Language) - a coding language for the Web that lets computers interpret the meaning of information in Web documents.

5-26 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Corporate Purchasing Segments ebXML - a set of technical specifications for business documents built around XML. ebXML - a set of technical specifications for business documents built around XML. Web Services - software applications that talk to other software applications over the Internet. Web Services - software applications that talk to other software applications over the Internet. On Your Own A Range of Possibilities For Next-Generation EDI (p. 265)

5-27 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce B2B Marketplaces B2B marketplaces - Internet-based services that bring together buyers and sellers. B2B marketplaces - Internet-based services that bring together buyers and sellers. Reverse auction - the process in which a buyer posts its interest in buying a certain quantity of items, and sellers compete for the business by submitting successively lower bids until there is only one seller left. Reverse auction - the process in which a buyer posts its interest in buying a certain quantity of items, and sellers compete for the business by submitting successively lower bids until there is only one seller left.

5-28 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Business to Business E-Commerce Intranets and Extranets Intranet - an internal organizational Internet. Intranet - an internal organizational Internet. Extranet - an intranet that is restricted to an organization and certain outsiders. Extranet - an intranet that is restricted to an organization and certain outsiders. Customer relationship management (CRM) systems - use information about customers to gain insights into their needs, wants, and behaviors in order to serve them better. Customer relationship management (CRM) systems - use information about customers to gain insights into their needs, wants, and behaviors in order to serve them better.

5-29 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved The Role Of E-Government E-Government - describes the application of e-commerce technologies in governmental agencies. E-Government - describes the application of e-commerce technologies in governmental agencies.

5-30 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved E-Commerce Payment Systems Financial EDI (FEDI) – use of EDI for payments. Financial EDI (FEDI) – use of EDI for payments. Smart cards - plastic cards the size of a credit card that contain digital information. Smart cards - plastic cards the size of a credit card that contain digital information. Financial cybermediaries - Internet-based companies that make it easy for payments over the Internet. Financial cybermediaries - Internet-based companies that make it easy for payments over the Internet. Electronic Bill Presentment and Payment (EBPP) systems - bills over the Internet. Electronic Bill Presentment and Payment (EBPP) systems - bills over the Internet.

5-31 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Closing Case Studies eBags: An E-Commerce Success Story eBags: An E-Commerce Success Story  How has eBags gained a competitive advantage over traditional bricks-and-mortar retailers of bags and accessories? Making Toyota’s Vision a Reality Making Toyota’s Vision a Reality  What advantages will Toyota gain by implementing this system?

5-32 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Summary Assignments & Exercises 1. Developing m-commerce scenarios for GPS cell phones 2. Dealing with the global digital divide 3. Alternatives for personalized digital music

5-33 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Visit the Web to Learn More Competitive intelligence Competitive intelligence Storefront software Storefront software Hosting services Hosting services Marketing the site Marketing the site B2B marketplaces B2B marketplaces