By: M.Nadeem Akhtar1 USING INFORMATION TECHNOLOGY TO ENGAGE IN ELECTRONIC COMMERCE Management Information Systems. M.Nadeem Akhtar

By: M.Nadeem Akhtar2  A financial business transaction that occurs over an electronic network  Sometimes called e-business  Anyone with access to a computer, an Internet connection, and a means to pay for purchased goods or services can participate in e-commerce E-Commerce What is electronic commerce (e-commerce)?

By: M.Nadeem Akhtar3 E-Commerce Business Models  B-to-C or (B2C) e-commerce.  B-to-B or (B2B) e-commerce.  C-to-C or (C2C) e-commerce.  (P2P) e-commerce.

By: M.Nadeem Akhtar4 Electronic Commerce Beyond the Boundary of the Firm  Business-to-customer (B2C) electronic commerce refers to transactions between a business and the final consumer of the product  Business-to-business (B2B) electronic commerce refers to transactions between businesses in which neither is the final consumer. These may involve relatively few people, generally the information systems groups of the companies are most affected

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6 Anticipated Benefits from Electronic Commerce There are three main benefits of e-Commerce: 1. Improved customer service before, during, and after the sale 2. Improved relationships with suppliers and the financial community 3. Increased economic return on stockholder and owner investments These benefits contribute to the firm’s financial stability and enable it to better compete in a business world that is using more and more computer technology

By: M.Nadeem Akhtar7 Electronic Commerce Constraints In 1996 survey 60% of firms felt following three constraints on e-commerce  High costs (Computer resources were costly but now a days costs of Computer resources comedown, according Gorden Moor’s Law)  Security concerns (But now a days secure telecommunicating networks are constantly monitoring for unauthorized access.)  Immature or unavailable software ( This deficiency was overcome by making common interfaces suitable for customers and electronic partners. ) Each of these constraints is being challenged as IT and IS needs for e- commerce become increasingly popular and the cost of the required computing resources keeps falling

By: M.Nadeem Akhtar8 Scope of Electronic Commerce  The amount of economic impact varies from industry to industry but about 94% of electronic commerce is B2B leaving 6% for B2C  E-commerce is estimated to be growing at between 5% and 15% each year, though may slow down, high growth in e-Commerce will likely continue for the next several years  Table 3.2 gives examples of the extent of the use of e-commerce in certain areas of the economy

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10 The Pathway to Electronic Commerce  Implementing an e-commerce system includes a significant risk of failure  The Strategic business plan embodies/make the commitment to use E- commerce to achieve competitive advantage  The firm first gathers business intelligence to understand the potential role each environmental element will play.  The next step is to establish an IOS by means of Electronic Data Interchange (EDI ).  The IOS is achieved by following the SLC or engaging in Business Process Redesign.  The Result is network oriented system that employs direct connectivity, value added networks, the internet or some combination.

By: M.Nadeem Akhtar11 Selection of E-Commerce Strategy, Methodology & Technology Strategic Business Plan IOS EDI Business Intelligence SLC BPR Direct Connectivity Value Added Network The Internet Enabling Strategy Enabling Methodology Enabling Technology Competitive Advantage

By: M.Nadeem Akhtar12 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 gathering of information about the environmental elements that interact with your firm

By: M.Nadeem Akhtar13 Business Intelligence Basic Tasks Data Intelligence 1-Collect Data 2-Evaluate Data 3-Analyze data 4-Store Intelligence 5-Disseminate Intelligence

By: M.Nadeem Akhtar14 Business Intelligence Basic Tasks 1-Collect Data. a) Primary Data : Gathered by Firm. Firm’s marketing researchers conduct customer surveys. b) Secondary Data: Available in form of commercial database provided by Data base services. 2- Evaluate Data. All Primary & secondary data evaluated prior to use to ensure its accuracy. 3-Analyze Data. Data is examined through different angels, looking for patterns, purpose of this step is to transform data into Intelligence

By: M.Nadeem Akhtar15 Business Intelligence Basic Tasks 4- Store Intelligence Printed Data/Intelligence is converted in Soft form through OCR or by Keying, So that can be used easily. 5-Disseminate Intelligence. Intelligence Profile of each user is prepared, describing in a coded form of the intelligence topics that the user wants to monitor.

By: M.Nadeem Akhtar16 External Databases  Companies can also use commercial databases that provide environmental information on virtually any subject.  Firms use these databases because it is faster and less expensive than trying to research the information on their own.e.g. Reuters ( search & analyze new media for subjects concerned to firm. DB provide index of more than 150,000 U.S & Canadian manufacturers, & can get info about products and their suppliers.  Figure 3.1 illustrates the use of external databases and Web searches for business intelligence

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By: M.Nadeem Akhtar18 Search Engines  A search engine is a special program that provides links to Web sites based on a keyword or group of words supplied by the user  Search engines then look through their database of Web site content to see which Web sites use that word or phrase  Other specialized indexing programs create directories of Web site categories, working on the “backend” of the search engine

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By: M.Nadeem Akhtar20 E-Commerce Strategy ( THE INTER-ORGANIZATIONAL SYSTEM (IOS))  For any problem there are several possible solutions, & this rule of thumb applies to problem of determining the best E-commerce strategy.  The strategy that is most often mentioned is one in which the elements are linked with transmissions of E-Data.  The name given to this strategy is IOS.  An IOS is created through linkages with other firms so they can work together as a coordinated unit  This allows them to achieve benefits that each could not achieve alone  Inter organizational systems are fundamental to electronic commerce

By: M.Nadeem Akhtar21 IOS Benefits  The trading partners enter into an IOS venture with the expectation of realizing benefits such as: 1-Comparative Efficiency –Internal efficiency (Improvement in firm’s own operations, enabling firm to get data, Analyze it and make decisions fast.) –Inter organizational efficiency (Improvements gained by working with other firms, like enabling firm to offer more products and services, serve more customers, shift certain work to suppliers or customers& gather environmental data more easily.)

By: M.Nadeem Akhtar22 2-Bargaining Power The ability of a firm to resolve disagreements with its suppliers & customers to its own advantage is called bargaining power. Bargaining power is derived from three basic methods : By offering –Unique product features (Easier ordering, quicker shipment & faster response time to requests for information. ) –Reduced search-related costs ( Firm can reduce shopping costs that its customer incur in searching for supplier, identifying alternative products & getting lower price. ) –Increased switching costs (by providing H/Ware S/ware & data communication channels so that customer will have to replace them if wants to switch to competitors firm. )

By: M.Nadeem Akhtar23 Electronic Data Interchange (EDI)  EDI is considered a subset of IOS, EDI is a means for achieving an IOS.  EDI consists of direct Computer –to- computer data transmissions among multiple firms, Or EDI is essentially electronic forms that can be sent over networks.  It involves transmitting data in a machine-readable, structured format, enabling the data to be received without the need for re-keying  Vendor stock replenishment/ fill up again is a special type of IOS where the supplier can initiate the replenishment process by electronically monitoring the firm’s inventory levels

By: M.Nadeem Akhtar24 EDI Standards.  The data that flows along each path b/w firm & its trading partner adhered to a standard format.Two major standards for EDI are the American National Standards Institute standard ASC X12 is used in North America and the EDIFACT international standards are used in Europe.  The standard formats enable the trading partners to exchange data but require a translation process prior to sending and after reciept.The translation is required because the partner’s computer application typically do not handle data in the same format as the standard.  Special software called mapping software performs the translation process.

By: M.Nadeem Akhtar25 Mapping s/w translates Data to & from Standard formats Application Software Mapping Software Mappings Software Application Software Sending Firm’s Computer Receiving Firm’s Computer

By: M.Nadeem Akhtar26 Extranet  Another way of establishing an IOS is by using a secure form of Internet technology called an extranet  Special type of Internet system where standard web page browsers and web servers are used, with limited number of trusted external entities are allowed access to sensitive firm data and application.  Security and privacy are serious concerns so the extranets are generally secured behind a firewall

By: M.Nadeem Akhtar27 Electronic Funds Transfer (EFT)  When data representing money is transmitted over a computer network, it is called electronic funds transfer  EFT is used by firms and individuals who have their payroll checks deposited into their bank accounts or who pay bills using electronic payments  EFT also plays a major role in electronic commerce

By: M.Nadeem Akhtar28 Proactive and Reactive Business Partners  When a firm decides to adopt EDI, it can do so in a Proactive or Reactive way.  The IOS sponsor typically takes a proactive approach (Take initiative), stimulating interest in the IOS and encouraging participation in the network  The participants, on the other hand, typically respond in a reactive manner—accepting or rejecting the sponsor’s offer to adopt IOS.

By: M.Nadeem Akhtar29 Adoption Influences  Prem Kumar and Rama Murthy studied the four factors that can influence the decision to adopt an IOS. They identified four factors that determine whether the firm will be proactive or reactive: –1. Competitive pressure –2. Exercised power –3. Internal need –4. Top management support  The second two are internal factors while the first two are environmental

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By: M.Nadeem Akhtar31 Adoption Influences 1.Competitive pressure When the firm is in a poor position in relation to its competitors or when industry or trade association provide strong pressure, the firm will adopt EDI in reactive way.

By: M.Nadeem Akhtar32 Adoption Influences 2. Exercised power When a firm can exert power over other members of the IOS it will be Proactive in adopting EDI.Some firms are so powerful that they can demand that their trading partners either use EDI or take their business elsewhere.

By: M.Nadeem Akhtar33 Adoption Influences 3- Internal need. When the firm sees that the participation in the IOS is a way to improve its own operations,it will approach EDI in a Proactive Manner.

By: M.Nadeem Akhtar34 Adoption Influences 4-Top management support. Regardless of whether the firm acts in Proactive or reactive manner, top management support always influence the decision.

By: M.Nadeem Akhtar35 Indirect IOS Benefits  The indirect benefits of participating in an IOS include: –increased ability to compete. –improved relationships with trading partners –and improved customer service  Figure 3.4 shows this relationship between direct and indirect benefits

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By: M.Nadeem Akhtar37 E-Commerce Technology. Technology Choices. There are three main technology choices. 1. Direct Connectivity 2. Value Added Network (VAN) 3. The Internet.

By: M.Nadeem Akhtar38 1-Direct Connectivity  The firm can establish data communication links with its trading partners using circuits provided by AT & T,GTE, MCI and Sprint.  The circuits take the form of dial up or private lines and can use a variety of such circuitry as fiber optics and microwave transmission.  This is a traditional way to build business networks, it provides trading partners with most direct control over network.

By: M.Nadeem Akhtar39 2-Value Added Networks (VAN)  VAN is provided by a vendor who not only furnishes the circuits but also provides many of the services that are necessary to use the circuits for EDI.  For example VAN vendor can provide the mapping software, maintain log files and assist in trading partner training.A prominent service is security of Data that travel over the network.  Leading VAN providers are Advantis, GEIS & Sterling Commerce.

By: M.Nadeem Akhtar40 3-Internet  Makes available a global communication network that not only links the trading partners but can also include consumers.  Much of the boom in E-Commerce is expected to come from firms that will promote –and in some cases deliver –their products via Internet.

By: M.Nadeem Akhtar41 EVOLUTION OF THE INTERNET  Understanding the Internet's evolution can help forecast future opportunities  ARPANET makes it possible for military personnel and civilian researchers to exchange information relating to military matters. It forms a major portion of what has come to be known today known as the Internet  In 1989, Tim Berners-Lee, working at CERN (Particle Physics Lab), came up with a way for physicists to communicate using hypertext electronically linked documents.  This system quickly evolved into what is now known as the World Wide Web

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By: M.Nadeem Akhtar44 CYBERSPACE AND THE INFORMATION SUPERHIGHWAY  The term cyberspace is from William Gibson’s 1984 book Neuromancer to describe a society that had become a slave to its technology  The information superhighway describes a system that gives everyone access to the wealth of information that exists in our modern society  The two main organizations in leadership roles in establishing Internet and Web standards are The Internet Society and the IETF (Internet Engineering Task Force)  Web standards come from the World Wide Web Consortium (W3C)

By: M.Nadeem Akhtar45 BUSINESS APPLICATIONS OF THE INTERNET  The Internet can be used for any business application that involves data communication, including both communication inside the firm and with the environment  Unlike proprietary networks, the Internet can be used with any computer platform without any special effort to access the network  The Internet also makes it possible to transmit a wider variety of media that can be handled over most conventional networks

By: M.Nadeem Akhtar46 Marketing Research and Retailing Applications  By taking advantage of this new source of customer information, industrial marketers have gained new inroads to their markets  The Web business application with which the general public is most familiar is retailing (sale of goods in small quantities to public ) – most large retail chains now have an established Web presence