1. Copyright © 2014 Pearson Education, Inc. 1 The Internet and World Wide Web are extremely well suited for conducting business electronically on a global basis Chapter 4 - Enabling Business-to-Consumer Electronic Commerce

2. Copyright © 2014 Pearson Education, Inc. 2 Before We Begin Laptops Cellphones Questions about life? Project 1 is up! – Due in class Feb 11/12

3. Copyright © 2014 Pearson Education, Inc. 3 Agenda What eCommerce IS? – It is IS Types of eCommerce business models Changes brought by eCommerce Long Tail We’ve talked quite about how we would assess an industry. Now lets talk about how to exploit one.

4. Copyright © 2014 Pearson Education, Inc. 4 “There is no physical analog for what Amazon.com is becoming.” Jeff Bezos Cofounder and long-time CEO of Amazon.com Complete the following sentences: 1.Amazon.com is ____________________ 2.In the physical world, Amazon.com is like _________________________________

5. Copyright © 2014 Pearson Education, Inc. 5 Chapter 4 Learning Objectives After this chapter, you will be able to: Electronic Commerce Defined Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace. Business-to-Consumer E-Commerce and Internet Marketing Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing. Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce. Managing Finances and Navigating Legal Issues in EC Describe how to conduct financial transactions and navigate the legal issues of electronic commerce. E-Government Explain different forms of electronic government.

6. Copyright © 2014 Pearson Education, Inc. 6 Electronic Commerce Defined Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace. Business-to-Consumer E-Commerce and Internet Marketing Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing. Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce. Managing Finances and Navigating Legal Issues in EC Describe how to conduct financial transactions and navigate the legal issues of electronic commerce. E-Government Explain different forms of electronic government.

7. Copyright © 2014 Pearson Education, Inc. 7 Electronic Commerce Defined Electronic Commerce “the exchange of goods, services, and money among firms, between firms and their customers, and between customers, supported by communication technologies and, in particular, the Internet”

8. Copyright © 2014 Pearson Education, Inc. 8 Question What are the most common types of E- Commerce? (There are really only two) – B2C – Business to Customer/Consumer – B2B – Business to Business There are also pedantic ones like C2C or G2C, these are foolish and don’t matter much

9. Copyright © 2014 Pearson Education, Inc. 9 Electronic Commerce Defined: Types of Electronic Commerce (EC) Type of ECDescription Business-to-consumer (B2C)Transactions between businesses and their customers Business-to-business (B2B)Transactions among businesses Consumer-to-business (C2B)Transactions between customers and businesses Consumer-to-consumer (C2C)Transactions between people not necessarily working together Government-to-citizen (G2C)Transactions between a government and its citizens Government-to-business (G2B)Transactions between a government and businesses Government-to-government (G2G)Transactions among governments

10. Copyright © 2014 Pearson Education, Inc. 10 Where is the money…B2B or B2C? This is where the media is This is where the big money is Management Information Systems for the Information Age, Haag and Cummings 97% 3%

11. Copyright © 2014 Pearson Education, Inc. 11 Question 2 Well, the presence of the internet gives rise to some interesting capabilities on the part of firms… Such as? – Information Dissemination – Information Integration – Mass Customization – Interactive Communication – Transaction Support – Disintermediation (probably the biggest one)

12. Copyright © 2014 Pearson Education, Inc. 12 Information Dissemination

13. Copyright © 2014 Pearson Education, Inc. 13 Information Integration

14. Copyright © 2014 Pearson Education, Inc. 14 Mass Customization

15. Copyright © 2014 Pearson Education, Inc. 15 Interactive Communication

16. Copyright © 2014 Pearson Education, Inc. 16 Transaction Support

17. Copyright © 2014 Pearson Education, Inc. 17 Disintermediation (This is the big one)

18. Copyright © 2014 Pearson Education, Inc. 18 These opportunities give rise to newly possible business strategies All of this is possible through this new fango thing we call the internet…

19. Copyright © 2014 Pearson Education, Inc. 19 The Internet... A network of networks Computers and other devices capable of communicating – Servers, desktops and laptops – Phones, PDAs and other mobile devices – Xbox 360, Wii – Vending machines, appliances, etc. The infrastructure that connects them (fiber optics, copper, modems, routers, microwave, etc.) The software tools and protocols that make communication possible It is more than the World Wide Web!

20. Copyright © 2014 Pearson Education, Inc. 20 Electronic Data Interchange (EDI)

21. Copyright © 2014 Pearson Education, Inc. 21 21 Web Services ProductLookup Application Credit verification application Stock DB Account DB Shopping Application BigStore.com The Gap GiantBank “In stock” confirmation Credit card confirmation Client The BigStore.com application can check whether a product is in stock at The Gap, or the verify a customer’s credit card at GiantBank. BigStore.com doesn’t have to know the technology in use at the Gap or at GiantBank.

22. Copyright © 2014 Pearson Education, Inc. 22 Business-to-Consumer E-Commerce and Internet Marketing Electronic Commerce Defined Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace. Business-to-Consumer E-Commerce and Internet Marketing D escribe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing. Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce. Managing Finances and Navigating Legal Issues in EC Describe how to conduct financial transactions and navigate the legal issues of electronic commerce. E-Government Explain different forms of electronic government.

23. Copyright © 2014 Pearson Education, Inc. 23 Stages of B2C e-Commerce Range from passive to active

24. Copyright © 2014 Pearson Education, Inc. 24 Three Stages of Evolution e-Information – Dissemination of marketing material and product info e-Integration – Dynamic access to customized information e-Transaction – Real time access to trading and markets for exchange

25. Copyright © 2014 Pearson Education, Inc. 25 This leads naturally to electronic retail Benefits? – Product: Unlimited number of products – Place: Virtual Storefronts are unconstrained geographically – Price: Frictionless pricing (but do they?) Drawbacks? – Delivery: Delayed – Direct product Experience: None

26. Copyright © 2014 Pearson Education, Inc. 26 The Long Tail Recall that in information goods our MC  0 The other benefit is that shelf space becomes infinite Before Digitization – Only Selling the red After Digitization – We can offer all of the blue products as well! – The sum of the blue products far exceeds red!

27. Copyright © 2014 Pearson Education, Inc. 27 Physical Economy Two Primary Limitations – We need to find local audiences People need to be nearby to purchase our goods – We are also constrained by the physics of the world The radio spectrum is not infinite The size of our shelves is not infinite People have varying tastes – how can we offer them everything they want

28. Copyright © 2014 Pearson Education, Inc. 28 In a Digital World Because MC  0 we can offer as much of any good as we want We can offer it to anyone with a modem We can offer as many goods as we want because our only shelf constraint is physical memory

29. Copyright © 2014 Pearson Education, Inc. 29 How to Harness the Long Tail Three Rules – Make everything available Increase variety to account for varying tastes – Reduce the price by half and lower it Incentivize purchase – Help me find it Reduce Search Costs

30. Copyright © 2014 Pearson Education, Inc. 30 Critical Thinking Is there value in the long tail? The Cello Suites: Johan Sebastian Bach – More than 200 versions on iTunes – Does this variety actually grow the market? Reducing Search Costs… – Does it actually matter if consumers don’t know the item exists? Consolidating the market – If the blockbuster is all people want why go through the effort and spend the money to get everything else?

31. Copyright © 2014 Pearson Education, Inc. 31 Time for a Break What eCommerce IS? – It is IS Types of eCommerce business models Changes brought by eCommerce Long Tail

32. Copyright © 2014 Pearson Education, Inc. 32 Take 10

33. Copyright © 2014 Pearson Education, Inc. 33 Before the break What eCommerce IS? Types of eCommerce business models Changes brought by eCommerce Long Tail

34. Copyright © 2014 Pearson Education, Inc. 34 Remainder of Class Mobile Commerce Online Auctions Financial management in the online age E-Government

35. Copyright © 2014 Pearson Education, Inc. 35 Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Electronic Commerce Defined Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace. Business-to-Consumer E-Commerce and Internet Marketing Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing. Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce. Managing Finances and Navigating Legal Issues in EC Describe how to conduct financial transactions and navigate the legal issues of electronic commerce. E-Government Explain different forms of electronic government.

36. Copyright © 2014 Pearson Education, Inc. 36 Mobile Commerce (mCommerce) In addition to influencing the products firm’s can carry the Internet has influenced consumer access – i.e. exploiting the “always on” society

37. Copyright © 2014 Pearson Education, Inc. 37 Mobile EC - Types Location-Based M-Commerce – Services can be offered tailored to a person’s needs based on their current location Information on the Go – Customers can get further information about a product wherever they are, including in the store, but this can lead to “showrooming” Product and Content Sales – Consumers use mobile apps to make purchases while on- the-go When will these items increase revenue for the firm?

38. Copyright © 2014 Pearson Education, Inc. 38 E-Auctions It has similarly given rise to the auction economy – Forward – Reverse Forward auction – English or Dutch – Highest offer wins Reverse auction (traditional bid process for projects) – Buyers post a request for quote (RFQ). – Seller proposes a bid. – Lowest seller bid wins. – This is frequently in B2B e-commerce. You will encounter this frequently in your professional life

39. Copyright © 2014 Pearson Education, Inc. 39 E-Auction Fraud (Trust is important) E-auctions are 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 Valachich omits what is potentially the most damaging – Collusion on the part of principal and the agent

40. Copyright © 2014 Pearson Education, Inc. 40 Managing Finances and Navigating Legal Issues in EC Electronic Commerce Defined Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace. Business-to-Consumer E-Commerce and Internet Marketing Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing. Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce. Managing Finances and Navigating Legal Issues in EC Describe how to conduct financial transactions and navigate the legal issues of electronic commerce. E-Government Explain different forms of electronic government.

41. Copyright © 2014 Pearson Education, Inc. 41 E-Banking Online Banking – Convenience – Security Concerns – Mobile banking Online Investing – Increased access to financial information and analytical tools – Online investing – Mobile investing

42. Copyright © 2014 Pearson Education, Inc. 42 Payment Services 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. Conceptually this is funding escrow

43. Copyright © 2014 Pearson Education, Inc. 43 Securing Payments in the Digital World Credit and Debit Cards – Credit Cards are a simple mechanism – Consumers have to transfer a lot of personal information to the seller – Difference between the European and American methods… Managing Risk – Businesses are financially liable for fraudulent transactions – Businesses have to look for fraud indicators and sometimes reject risky transactions – How can firms leverage analytics to assist with this?

44. Copyright © 2014 Pearson Education, Inc. 44 Legal Issues in EC Digital Rights Management – Preventing unauthorized duplication – Restrict which devices can play media – Limit number of times media can be played Taxation – Sales Taxes

45. Copyright © 2014 Pearson Education, Inc. 45 Legal Issues in EC—Taxation The Internet Tax Freedom Act (1998) Moratorium on online commerce taxation Internet Tax Nondiscrimination Act (2004) Replication of the ITFA Internet sales treated as mail-order sales No sales taxes paid in states where the company has no presence Critical thinking: is this a progressive or regressive tax?

46. Copyright © 2014 Pearson Education, Inc. 46 E-Government Electronic Commerce Defined Describe electronic commerce, how it has evolved, and the strategies that companies are adopting to compete in cyberspace. Business-to-Consumer E-Commerce and Internet Marketing Describe the stages of business-to-consumer electronic commerce, understand the keys to successful electronic commerce applications, and explain the different forms of Internet marketing. Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce. Managing Finances and Navigating Legal Issues in EC Describe how to conduct financial transactions and navigate the legal issues of electronic commerce. E-Government Explain different forms of electronic government.

47. Copyright © 2014 Pearson Education, Inc. 47 E-Government Government-to-Citizens – e-Filing of taxes – Licensure Government-to-Business – Taxation – Procurement – Contracting Government-to-Government – Law enforcement – Information Sharing – Health informatics

48. Copyright © 2014 Pearson Education, Inc. 48 Critical Thinking: Amazon and Alibaba Amazon and Alibaba are online retail stores based in Seattle, WA and Hangzhou, China providing B2C, C2C, and B2B sales of goods via their respective web portals In 2014 they were valued at $157.52B and $168.0B respectively. Consider the relative market position of each firm and their relative dominance in their focal markets. Why might Alibaba be at an advantage? Why might Amazon be at an advantage?

49. Copyright © 2014 Pearson Education, Inc. 49 Recap What eCommerce IS? Types of eCommerce business models Changes brought by eCommerce Long Tail Mobile Commerce Online Auctions Financial management in the online age E-Government

50. Copyright © 2014 Pearson Education, Inc. 50 Administrivia Project 1 – Due in class Feb 11/12