1. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 4-1 Chapter 4 Enabling Commerce Using the Internet Coca-Cola is using social media to connect with customers.

2. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Electronic Commerce 4-2 Online exchange of goods, services, and money 2009:  3.7 percent of total retail revenue  $134.9 billion in revenue

3. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Most Common Types of E-Commerce 4-3 Business-to-consumer (B2C)  A person buys a book from Amazon.com. Business-to-business (B2B)  Retailer like Eddie Bauer for procurement of inventory Business-to-employee (B2E)  Employee uses the Web to change employee benefits. Consumer-to-consumer (C2C)  One person purchases from another on eBay.

4. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Other Types of E-Commerce 4-4 Government-to-citizen (G2C)  A person filing income taxes online. Government-to-business (G2B)  Government purchases supplies using Internet-enabled procurement system. Government-to-government (G2G)  Foreign government accessing U.S. federal regulations

5. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Key Capabilities of the Web 4-5

6. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Information Dissemination 4-6 Firms across the world have access to customers. Economical medium for marketing products and services Increased geographical reach

7. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Integration 4-7 Integration of information via Web sites Real-time access to personalized information No time lag between company decisions and customers’ ability to access these

8. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Example: Integration 4-8 Alaska Airlines customers can access their mileage program any time.  Real-time link between company database and customer

9. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Mass Customization 4-9 Meeting particular customers’ needs on a large scale Timbuk2.com  Custom Messenger Bag Builder  Customers create a virtual bag.  Preference-tracking helps Timbuk2 in marketing efforts.

10. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Interactive Communication 4-10 Immediate feedback between company and customers  E-mail notifications  Customer service online chat Best Buy  Geek Squad  24-hour computer support

11. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Transaction Support 4-11 Internet and the Web:  Reduced transaction costs  Enhanced operational efficiency Dell—automated transaction support  Cost savings per sale  Disintermediation Reintermediation  Reintroduction of middlemen  Example: Orbitz.com

12. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Commerce Business Strategies 4-12 Differentiated, based on levels of physical/virtual presence

13. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Brick-and-Mortar Business Strategy 4-13 Physical locations only Traditional stores, no E-Commerce Limited geographical reach

14. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Click-and-Mortar Business Strategy 4-14 Bricks-and-clicks business strategy Hybrid strategy Added complexity combining two different environments

15. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Click-Only Business Strategy 4-15 Business conducted in cyberspace—no physical location Price savings Difficulty with returns. Customers uncomfortable with online transactions

16. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Example: Click-and-Mortar Company 4-16

17. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Components of a Business Model 4-17 A plan of how to achieve EC success

18. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Typical Revenue Models for EC 4-18 Most important ingredient of business model:  How will the firm earn revenue?

19. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Business-to-Business E-Commerce B2B involves exchanges between two or more businesses; these exchanges do not include end customers (consumers). Supply chain—companies and processes moving product from suppliers of raw materials to suppliers of intermediate components, to final production, to the customer. 4-19

20. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Supply Network 4-20 The farther out in the supply chain one looks, the more suppliers are involved, forming a supply network.

21. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Electronic Data Interchange (EDI) 4-21 Used prior to the introduction of the Internet EDI = computer–computer communication (without human intervention) following standards:  UN Economic Commission (Europe), and  American National Standards Institute. However:  Use dedicated telecommunications networks ; therefore costly. Web-based EDI protocols are more economical.

22. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Exchanging Organizational Data Using Extranets 4-22 Extranet  a private part of the Internet,  cordoned off from ordinary users, and  enables two or more firms to use the Internet for EDI purposes. One of the best ways for organizations to gain a positive return on their technology-based investments Example: Boeing’s extranet involves over 1000 authorized business partners.

23. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Benefits of Extranets Information Timeliness and Accuracy  Cost effective, global medium for distributing proprietary information  Central management of documents Technology Integration  Cross-platform—Web protocols mitigate differences in platforms, operating systems, and so on. Low Cost–High Value  Low training needs; most employees know how to use the Web.  Automate business transactions  Reduce processing costs  Achieve shortened cycle times  Reduce errors 4-23

24. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Extranet System Architecture 4-24 Internet-based application Use of firewalls and Virtual private networks (VPN) to provide secure information transmission Firewalls to secure proprietary information

25. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Extranet Applications 4-25 Portals—access points for business partners. Supplier Portals  Single buyer and multiple suppliers  HP Supplier Portal Customer Portals  Single supplier and multiple buyers  MyBoeingFleet

26. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 B2B Marketplaces 4-26 Operated by third-party vendors Allow many buyers and many suppliers to interact Some operate within a vertical market (industry-specific); for examples:  steellink.com  paperindex.com  fibre2fashion.com Some are not industry- specific  Alibaba.com

27. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Business-to-Employee Electronic Commerce 4-27 Business-to-employee (B2E) electronic commerce Internet based private network using Web technologies Boeing  Intranet serves more than 200,000 employees.  More than 1 million pages Intranet—Used to facilitate secured transmission of proprietary information within companies. Intranets offer similar benefits as extranets.

28. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Intranet System Architecture 4-28 Internet-based application Use of firewalls and Virtual Private Networks (VPN) to secure information transmission

29. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Intranet Applications Training  Boeing’s Quality eTraining program Personalized Intranet Pages  Employee see only content that pertains to his or her job. Real-Time Access to Information  Less complicated to manage, update, distribute, and access corporate information  Improve employee productivity Online Entry of Information  Paper-base human resourced form:$20–$30  Web-based human resourced form:$2–$4 Collaboration  Timely communication of business activities 4-29

30. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Intranet Collaboration Using Groupware Two dimensions of categories: 1. Synchronous vs. asynchronous 2. Face-to-face vs. distributed Electronic meeting systems (EMS) 4-30

31. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Lotus Notes Award- winning groupware application Millions of users worldwide 4-31

32. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Collaboration Using Videoconferencing Desktop videoconferencing  PC, Web-cam, high-speed Internet  Videoconferencing software  Skype, Gizmo, Yahoo! Messenger, Windows Live Messenger Dedicated videoconferencing  Within conference rooms  Highly realistic  Expensive 4-32

33. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Use of Internet Technologies 4-33 Characteristics of the Internet, intranet, and extranet B2B and B2E rely on extranet and intranet. Internet provides an opportunity for B2C commerce.

34. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Stages of B2C E-Commerce 4-34 Web sites range from passive to active.

35. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Tailing 4-35 Selling goods and services online Click-and-mortar  Walmart.com Click only  Amazon.com Virtual company  Priceline.com  Reverse pricing vs. menu-driven pricing

36. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Tailing Benefits 4-36 Product benefits  Unlimited number and variety of products  Easier comparison shopping  Examples: AllBookstores, BizRate, or SideStep Place benefits  Anywhere, anytime  Purchasing on global scale Price benefits  Higher inventory turnover rate  No expenditures for physical retail space

37. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 The Long Tail 4-37 Traditional stores  Focus on mainstream needs  Target the average customer  Example: Blockbuster E-Tailers  Can focus on niche markets  Example: Netflix

38. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Tailing Drawbacks 4-38 Product delivery drawbacks  Delay between product order and delivery  Except for products that can be downloaded Direct product experience drawbacks  Lack of sensory information  Smell, taste, feel  Lack of the social element  Cannot replace going to the mall with friends

39. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Attracting and Retaining Online Customers 4-39 Basic rule of commerce  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.

40. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Banking 4-40 Financial institutions offer:  Online banking  Management of credit card, checking, and savings accounts  Electronic bill pay  Bill payment online  Online investing  Growing in popularity Extensive use of Internet for obtaining financial information

41. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 C2C E-Commerce 4-41 C2C commerce has always been present.  Bartering, auctions, tendering Seventeen percent of American adults have sold online.

42. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Auctions 4-42 Forward auction  Sellers post goods or services for sale.  Buyers bid on these items.  Highest bid wins. Reverse auction  Buyers post a request for quote (RFQ).  Seller proposes a bid.  Lowest seller bid wins.  This is frequently in B2B e-commerce.

43. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Auction Fraud 4-43 E-auctions marred with more fraud than any other Internet activity.  E-auctions represent 45 percent of all Internet fraud- related complaints.  Average loss: $724 Types of e-Auction fraud:  Bid luring  Reproductions  Bid shielding  Shipping fraud  Payment failure  Nonshipment

44. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Types of Internet Marketing Search Marketing  For Google or other search engines; search optimization Display Ads  Static and interactive banners; videos E-mail Marketing  Replacing direct mail; low cost Social Media  Facebook, Twitter Mobile Marketing  Audi built a game for the iPhone Pricing Models – e.g., pay-per-click 4-44

45. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Search Marketing 4-45 Search marketing will continue to have the largest share of interactive marketing spend. VanBoskirk (2009)

46. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Search Advertising 4-46 Search advertising  Also called sponsored search  Pay to ensure a spot on top of search results page  Example: Google AdWords  Bid for being listed in sponsored search results  Placement depends on relevance  Pay-per-click  Can get costly

47. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Search Engine Optimization 4-47 Position within search results based on complex formula Tips:  Have other pages link to one’s site  Keep updating content  Include key words

48. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Pricing Model Impression-based  This is based on the number of times the page containing an ad is viewed. Performance-based  This is more direct, such as pay-per-click.  Metrics—  click-through rate  conversion rate Click fraud—manually or automatically inflating the click-through rate. 4-48

49. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 C2B EC Relatively new phenomenon Consumers sell to businesses Stock photo sites such as www.shutterstock.com Crowdsourcing Blurry line between C2B and B2B 4-49

50. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 M-Commerce 4-50 Electronic transactions using wireless mobile devices Mobile networks  Wireless  Switched public network Smart phones  High-speed data transfer  “Always-on” connectivity

51. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 M-Commerce Applications 4-51

52. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Location-Based M-Commerce 4-52 Highly personalized mobile services Based on location  GPS functionality  Bluetooth e911  Federal mandate  Correct routing of emergency calls  GPS specifies location within 50 meters Phone locator  Location of family members’ cell phones  Alerting system when child leaves a certain area

53. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Location-Based Services 4-53 Next big thing: cell phone social networking Example: Facebook Gowalla

54. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Key Drivers of M-Commerce 4-54 Growth of consumer interest in adoption of the Internet and e-commerce Real-time transfer of data over 3G and 4G cellular networks  “Always-on” connectivity M-commerce market in the United States grew from $396 million to $1.2 billion from 2008 to 2009.

55. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Mobile Entertainment 4-55 Slingbox  Acts as a personal media server  “Placeshifts” television content to any Internet-enabled device  Television signal received at the user’s house  Relayed over the Internet to be accessed from anywhere

56. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Securing Payments in the Digital World 4-56 Eleven million consumers became victims of identity theft. Security concerns lead shoppers to frequently abandon their shopping carts. More than 1/2 of shopping carts are abandoned. Need for secure forms of online payment

57. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Credit and Debit Cards 4-57 Customer Verification Value (CVV2)  Three-digit code on the back of a card  Added to combat fraud in online purchases  Not included in the magnetic strip information  Code used for authorization by bank

58. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Conducting Safe Transactions Online 4-58 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.

59. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Payment Services 4-59 Online transactions without sharing private information with actual seller Payment service keeps information secure.  PayPal (owned by eBay)  Can send and receive money if you have an e-mail account.  Google Checkout  Linked with Google search  Users can see if merchants offer this option.

60. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Legal Issues in EC—Taxation 4-60 The Internet Tax Freedom Act (1998) Internet Tax Nondiscrimination Act (2004) Internet sales treated as mail-order sales No sales taxes paid in states where the company has no presence Arguments for and against Ecommerce Taxation:

61. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Legal Issues in EC—Digital Rights Management 4-61 Technological solution that allows publishers to control their digital media Entertainment industry: DRM allows copyright holders to minimize sales losses by preventing unauthorized duplication. Critics: publishers are arbitrary on how they enforce DRM, and infringe on existing consumer rights. Digital watermark: an electronic version of physical watermarks placed on paper currency to prevent counterfeiting.

62. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 E-Government 4-62 Providing information about public services  To citizens  To organizations  To other governmental agencies 1998—Government Paperwork Elimination Act

63. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Government-to-Citizens 4-63 Interactions between the government and its constituents  IRS—e-filing  Grants.gov  e-voting initiatives

64. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Government-to-Business 4-64 Relationships between businesses and the government  E-procurement  Forward auctions  Businesses buy surplus government equipment  AuctionRP.com  Online application for export licenses

65. IS Today (Valacich & Schneider) 5/e Copyright © 2012 Pearson Education, Inc. Published as Prentice Hall 7/3/2015 Government-to-Government 4-65 Interactions between countries  Regulations.gov  Export.gov Interactions between different levels of government