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Introduction to Information TechnologyTurban, Rainer and Potter
Chapter 12 Electronic Commerce
2
Learning ObjectivesDescribe electronic commerce, its dimensions,
benefits, limitations, and processDescribe the major applications of electroniccommerce, both business-to-customer and business-to-businessDiscuss the importance and activities of marketresearch and customer service
Describe the electronic commerce infrastructure andsupport servicesCompare the various payment systems and describethe role of smart cardsDiscuss legal and other implementation issues
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Case : Intel Corporation Embracing the Web The Business Problem
Intense competition in the ICs market
The Solution
E-customer serviceE-sellingE-purchasing
E-business programs using extranet and EDI
Orders from thousands of customers,
distributors and business partners worldwide werereceived by fax and phone; errors, delays, high cost
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The Results
Case (continued…)
Enhances competitive advantage by givingcustomers better tools for managing transactionsThe system brings substantial saving to Intel
What have we learned from this case??
Demonstrates that electronic commerce involvesnot just selling electronically, but also providingcustomer service and improving organization’s
internal business processes
Illustrates a new and effective way forconducting business
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Definitions (continued…)
Electronic Business (E-business)a broad definition of EC, not just buying and selling, butalso servicing customers, collaborating with business
partners, and conducting electronic transactions within anorganizationall about time cycle, speed, globalization, enhanced
productivity, reaching new customers, and sharingknowledge across institutions for competitive advantagea very diverse and interdisciplinary topic, with issuesranging form technology, addressed by computer experts,to consumer behavior, addressed by behavioral scientistsand marketing research experts
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History and ScopeHistory
Began in the early 1970sinnovations such as electronic transfer of funds (EFT)were limited to large corporations and a few daring small
businessesElectronic Data Interchange (EDI)added other kinds of transaction processing and extended the typesof participating companies
Over the last five yearsinnovative applications, from advertisement to auctions and
procurementScope
home banking, shopping in electronic stores and malls, buying stocks, finding a job, conducting an auction,
collaborating electronically with business partners aroundthe globe, and providing customer service
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A Framework for ECElectronic Commerce Applications
• Direct Marketing • Stocks, Jobs • On -line banking• Procurement and purchasing • Malls • Procurement • Auctions • Travel • On -line publishing • Customer Services • Intrabusiness Transactions
People : Buyers, Sellers,Intermediaries,
Services, IS Peopleand Management
Public Policy :Taxes, Legal,
Privacy Issues,Regulations, and
TechnicalStandards
Marketing and Advertisement:
Market Research,Promotions, and
Web content
Supply Chain:Logistics and
Business Partners
Infrastructure
(1)Common business
services infrastructure(security, smart
cards/authenticationelectronic payments,directories/catalogs
(2)Messaging and
information distributioninfrastructure
(EDI, e-mail, Hyper TextTransfer Protocol, Chat
Rooms)
(3)Multimedia content
and networkpublishing infrastructure
(HTML, JAVA, WorldWide Web, VRML)
(4)Network infrastructure
(Telecom, cable TVwireless, Internet)(VAN, WAN, LAN,Intranet, Extranet)
Access (cell phones)
(5)Interfacing
infrastructure(The databases,
logistics,customers, and
applications)
Management
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Benefits of EC to OrganizationsExpands a company’s marketplace to national and international markets Allows a vendor to reach a large number of customers, anywhere aroundthe globe, at a very low costEnable companies to procure material and services from other companies,rapidly and at less cost
Shortens or even eliminates marketing distribution channels; marketingproducts cheaper and vendors’ profits are higher Decrease the cost of creating, processing, distributing ,storing, andretrieving paper-based informationAllows lower inventories by facilitating “pull” -type supply chainmanagement, which starts from customer orders and uses just-in-timeproduction and delivery processingReduces the time between the outlay of capital and the receipt of productsand servicesLowers telecommunications costs because the Internet is much chapterthan value-added networks (VANs)
Helps small businesses compete against large companiesEnables ver s ecialized markets e. . www.do to s.com
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Benefits of EC to ConsumersFrequently provides less expensive products and services by allowingconsumers to shop in many places and conduct online quickcomparisonsGives consumers more choices - they can select from many vendorsand many more products than they could locate otherwiseEnables customers to shop or make other transactions 24 hours aday, year round, from almost any locationDelivers relevant and detailed information in seconds, rather than indays or weeks
Enables consumers to get customized products, from PCs to cars, atcompetitive or bargain pricesMakes possible virtual auctions, in which consumers can find uniqueproducts and collectors’ items that might otherwise require them totravel long distances to a particular auction place at a specific time
Allows consumers to interact with other consumers in electroniccommunities and to exchan e ideas as well as com are ex eriences
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Benefits of EC to SocietyEnables more individuals to work at home and to doless traveling, resulting in less traffic on the roads andlower air pollution
Allows some merchandise to be sold at lower prices, soless affluent people can buy more and increase theirstandard of livingEnables people in less developed countries and rural
areas to enjoy products and services that otherwise arenot available to themFacilitates delivery of public services, such asgovernment entitlements, reducing the cost ofdistribution and fraud, and increasing the quality of thesocial services, police work, health care and education
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Technical Limitations of ECLack of universally accepted standards forquality, security, and reliabilityInsufficient telecommunications bandwidthStill-evolving software development toolsDifficulties in integrating the Internet and ECsoftware with some existing (especially legacy)
applications and databasesThere is a need for special Web servers inaddition to the network servers (added cost)Internet accessibility is still expensive and/orinconvenient for man eo le
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Non-Technical Limitations of EC Many legal issues are yet unresolvedLack of national and international regulations and standardsfor many circumstances
Difficulty in measuring benefits of EC, such as Webadvertising. Lack of mature methodologies for justifying ECDistrust of the new: Many sellers and buyers are waiting forEC to stabilize before they take partCustomer resistance to the change from a physical to virtualstoresPerception that electronic commerce is expensive andunsecured, so many do not want even to try itInsufficient number (critical mass) of sellers and buyerswhich needed for profitable EC operations
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Electronic Retailing and Malls Electronic Commerce enables consumers to buyfrom home 24 hours a day, 7 days a weekElectronic Commerce offers consumers a wide
variety of products and services, including the mostunique items, usually at lower pricesConsumers can easily search for what they reallywant to buy, not just what is shown on television orin paper catalogsConsumers can get very detailed information on
products, in seconds, and can easily search for andcompare competitors’ products and prices Consumers can reduce (or eliminate) the pile of
paper catalogs
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Electronic Retailing Direct sale (business to consumers) throughelectronic storefronts or malls, usuallydesigned around an electronic catalog formatSolo storefronts
maintain their own Internet name and Web sitemay or may not be affiliated with electronic malls
may be extensions of a physical store, or it is anew businesses started by entrepreneurs who sawa niche on the Webcan be found easily on the Internet - directoriesand hyperlinks from other Web sites andintelligent agents
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Electronic Malls (Cybermall)A collection of individual shops under oneInternet addressVendors that locate in brick-and-mortarshopping malls, or locate themselves in a virtualmall, give up a certain amount of independenceSuccess depends on the popularity of the entire
collection of stores as well as on its own effortsMalls generate streams of prospective customerswho otherwise might never have stopped at thestore
d f h l
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The Process of Electronic Shopping
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A user gains access to an online service or theinternet and goes to a merchant’s Web site. Hemay know the address, find it in another Website (refer to it by a search engine), or find it by
browsing.
At any time, the user can review the items inthe shopping cart and change quantities or deleteitems, This review continues until a final
selection is made.
The user enters the merchant’s storefront andgoes to the product displays.
If the user does not find anything of interest,or want to do more shopping he or she may
browse some additional merchant storefronts tosearch for the desired products or services.
When the user does find something ofinterest, he or she may elect to purchase itonline. To finalize the decision, the user mayneed more information that can be found on theWeb pages or obtained by e-mail.
The item is typically stored in a shoppingcart. This allows the user to continue lookingthrough this store, or even to visit other
merchants, before paying for the items.
When the user is ready to pay he is advisedabout the payment options the user makes asection and provides payment information (e.g.,the credit care number)
The payment authorization is either approvedor denied. If denied, the user is prompted foranother form of payment .If approved, thetransaction is executed.
Shipment is made, if needed, or permission todownload products from the Internet is granted.Warranty is established.
Customer service is established. Product may be returned or exchanged, for examplemaintenance information may be found on theWeb site as needed.
I d i I f i T h l
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Advertisementan attempt to disseminate information in order toattract buyers
Internet Advertisementcan be updated any time at a minimal cost andtherefore can always be timelycan reach very large numbers of potential buyers, all
over the worldcan be cheapercan efficiently use the convergence of text, audio,graphics, and animation
can be interactive and targeted to specific interestgroups and/or individuals
Advertising Online
I d i I f i T h l
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Banners - Electronic Billboardsthe most commonly used form of advertising onthe Internet, links to advertiser's sitecontains a short text or graphical message to
promote a product or a vendorKeyword banners
appear when a predetermined word is queried from thesearch engine
effective for companies who want to narrow their targetto consumers interested in particular topicsRandom banners
appear randomlymight be used to introduce new products to the widest
possible audience, or to keep a well-known brand in the public memory
Advertising Methods
I d i I f i T h l
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E-mail - emerging as an Internet advertising and marketingchannel that permits cost-effective implementation and a betterand quicker response rate than other advertising channels
marketers develop or purchase a list of e-mail addressesmarketers employing e-mail must take a long-term view andwork towards the goal of motivating consumers to continueto open and read messages they receivemarketers must decide what portion of their target market
can be reached by e-mail and must supplement existingdatabase information with data relevant to e-mail campaignsmarketers should integrate inbound customer service e-mailwith their outbound marketing efforts
marketers must develop e-mail-specific editing skill and theability to deliver multimedia-rich e-mail
Advertising Methods (continued …)
I t d ti t I f ti T h l
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Customizing Ads - Filtering the IrrelevantInformation
BroadVision : One-to-One system/adsallows the rapid creation of secure Web sites that are visitor-friendly, using a customer database, with registration dataand information gleaned from site visits
Webcast : push technologydelivers only the information users want or needusers get the information they want; at the same time theyalso get the banner ads related to that informationmarketers will get a more customized audience if they place
banners on a system that delivers via push technology
Advertising Issues
I t d ti t I f ti T h l g
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Attracting Visitors to a SiteMaking the top list of a search engine
the search engine’s spider crawls through the submitted site,following and indexing all related content and linksa company can get to the top of a search engine’s list byadding, removing, or changing a few sentences
Online events, promotions, and attractions people generally like the idea of something funny orsomething free (or both)contests, quizzes, coupons, and free samples are an integral
part of Internet commerce as much, or even more than, theyare of offline commerce
designed to attract visitors and to keep their attention
Advertising Issues (continued …)
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Attracting Visitors to a Site (CONT’)
Advertising Issues (continued …)
ATTRACTION HOW IT WAS USEDGive away games anddiscount contests. Also,games sponsored bymultiple companies
Yoyodyne Inc. sponsors games and contests to get users to read product information of advertisers, ranging form Major LeagueBaseball to Sprint Communication. In one contest, tax-preparerH&R Block paid $20,000 towards the winner’s federal taxes.
Free Internet access Netzero and other offer this in exchange for viewing adsPersonal, nonautomatedselling
www.egghead.com uses real people to help you online.www.lucent.com connects a sales rep with a customer over the phoneand then “pushes” material and ads to your computer
Monetary payment Cybergold (www.cybergold.com), Goldmine (www.goldmine.com),and others connect users with advertisers who pay them real money toread ads and explore the Web
Sweepstakes Netstakes runs sqeepstakes that requires no skills. Users registeronly once and can randomly win prizes in different categories(see http://webstakes.com). The site is divided into channels, andeach channel has several sponsors. The sponsors pay Netstakes tosend traffic. Netstakes runs online ads, both on the Web and inmany email lists that people request to be on.
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Profiling Customers Using Intelligent AgentsProduct brokering
some companies collect information about consumers for the purpose of creating a customer’s profile
with this profile, the company can tailor ads to the specificcustomers, or offer them product informationExample - Fujitsu’s agents profile consumers :
is using a new agent-based technology called InteractiveMarketing Interface (iMi) that allows advertisers to interactdirectly with targeted customers personal profiles submitted to iMi by consumers
product announcements, advertisements, and marketingsurveys are sent to customers via e-mail based on their profiles
by answering marketing surveys or acknowledging receipt of
advertisements, consumers earn iMi points, redeemable forgift certificates and phone cards
Advertising Issues (continued …)
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Interactive Advertising and Marketingadvertisers present customized, one-on-oneadvertising, which is followed by sales
interactive : the ability to address an individual, togather and remember that person’s response, and toserve that customer based on his or her previous,unique responses
Coupons Onlineconsumers can gather any discount coupons they want
by accessing sites like www.hotcoupons.com orwww.supermarkets.com , selecting the store wherethey plan to redeem the coupons
Advertising Online
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Services Online
Cyberbankingnames : electronic banking, virtual banking,home banking, and banking onlinecapabilities ranging form paying bills tosecuring a loan
for customers : saving time and conveniencefor banks : offering an inexpensive alternativeto branch banking and a chance to enlistremote customers
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Cyberbanking (CONT’)
SFNB puts security firstwww.sfnb.com the first virtual bankoffering secure banking transactions on the Web
Hong Kong Bank grows without brancheswww.hongkongbank.comusing HEXAGON, the bank has leveraged its reputation andinfrastructure in the developing economies of Asia to becomea major international bank rapidly
Mark Twain supports foreign currency tradingwww. marktwain.com
using electronic cash to support trading in 20 foreigncurrencies
Services Online (continued…)
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Services Online (continued…)
Online Stock Tradingan online trade typically costs between $5 and $30,compared to an average fee of $100 from a full-service
broker and $25-50 from a discount brokerno waiting on busy telephone linessmall chance of making mistakes which are made inoral communicationorders can be placed from anywhere, any timecan find considerable amount of information regarding
investing in a specific company or in a mutual fund
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Services Online (continued…) The Online Job Market
Job seekerscan reply to employment ads onlinecan take the initiative and place resumes on their own home
pages or on others’ Web sites, send messages to members ofnewsgroups asking for referrals, and use recruiting firmsJob offerers
advertise openings on their Web siteuse sites ranging form Yahoo!, to online services, bulletin boards,
and recruiting firmsRecruiting firmsuse their own Web pages to post available job descriptions andadvertise their services in electronic malls and in other Web sites
Newsgroups
jobs in a certain category or location are posted, discussions areconducted, and resumes can be sent
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Services Online (continued…) Travel
Internet is an ideal place to plan, explore, and arrange almostany trippotential savings are available through special sales, auctions,and the elimination of travel agentsallows to purchase airline tickets, reserve hotel rooms, andrent carssupports an itinerary-based interface ,including a fare-tracker
featurelinks to weather sites, currency converters, adventuremagazines, and chat forums, where users can share travel tipsallows to set a price that people are willing to pay for anairline ticket or hotel accommodations, and the company thenattempts to find a vendor for that price ( www.priceline.com )
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Services Online (continued…) Real Estate
consumers can view many properties on the screen,saving time for themselves and the brokers
consumers can sort and organize properties accordingto their criteria and preview the exterior and interiordesigns of the properties, shortening the search processconsumers can find detailed information about the
properties and frequently get even more details than brokers usually providehomebuilders now use virtual reality technology ontheir Web sites to demonstrate three-dimensional floor
plans to potential home buyers
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Services Online (continued…)
AuctionsSpecialized auction sites ( www.onsale.com )Auctioning cars to dealers ( www.manheim.com )Art auctions ( www.onlineart.com & www.auctions-on-line.com ); collectors’ items ( www.ebay.com )Airlines ( www.americanair.com &www.cathey.usa.com )
Barteringthe exchange of goods and/or services without amonetary transaction ( www.barterbrokers.com )
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Business-to-Business ApplicationsProduct - specifications, prices, sales history Customer - sales history and forecasts Supplier - product line and lead times, sales terms and conditions
Product process - capacities, commitments, product plansTransportation - carriers, lead times, costs Inventory - inventory levels, carrying costs, locations Supply chain alliance - key contracts, partners’ roles andresponsibilities, schedules Competitor - benchmarking, competitive product offerings,market share Sales and marketing - point-of-sale (POS), promotions Supply chain process and performance - process descriptions,performance measures, quality, delivery time, customer satisfactio
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Seller-Oriented MarketspaceOrganizations attempt to sell their products (services) toother organizations electronically (e-selling)The buyer is expected to visit the seller’s site or a mall,
view catalogs, and place ordersThe buyer is an organization that may be a regularcustomer of the sellersKey Mechanisms : electronic catalog that can be
customized for each large buyer, the ordering system, the payment system, and the integration of the incomingorders with the vendor’s logistics system EC is used to increase sales, reduce selling expenditures,increase delivery speed, and reduce administrative costs
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Buyer-Oriented MarketspaceEC technology is used to reduce both the cost of items
purchased and the administrative cost of procurementRequest For Quotation (RFQ) on Buyer’s Web Site
businesses submit bids electronically, and the bids arerouted via the buyer’s intranet to the engineering andfinance departments for an evaluationclarifications are made via e-mail
the winner is notified electronicallysaves 10-15 percent on the cost of the items placed for bidsaves up to 85 percent on the administrative costsaves about 50 percent on cycle timeknown as e-purchasing or e-procurement
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Intermediary-Managed Marketspace
Electronic IntermediariesA link between buyers and sellers
Main function : market makingPART - about 300 parts suppliers and dozens ofairlines participate (by Boeing Aircraft Corp.)
ProcureNet - more than 150,000 products, knownas MROs (maintenance, repairs, and operations)Some of the online services make money, some ofthem only improve service for customers
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Customers and Their BehaviorExamples of the importance of learningabout customers
Peapod providing supermarket products onlinethe company was still incurring losses in 2000problems :
» small customer base» customers like to see and feel items before
they buy them
Amazon selling books published by othersassesses the potential customers’ reaction, andcorrectly predicts books to be a desirable itemsfor online sale
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Market Research :
Behavioral Model
DecisionMakingProcess
Personal CharacteristicsAge, Gender, Ethnicity, Education,Lifestyle, Psychological, Knowledge,Values, Personality
Environmental CharacteristicsSocial, Family, Communities
Vendors’ Controlled Systems LogisticSupportPayments,Delivery
TechnicalSupportWeb Design,
IntelligentAgents
CustomerServiceFAQs, E-mail,
Call Centers,One-to-One
Buyers’ Decisions Buy or NotWhat to BuyWhere (Vendor)WhenHow Much to Spend
Repeat Purchases
StimuliMarketingPricePromotionProductQuality
OthersEconomicalTechnologyPoliticalCultural
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Market Research (continued …)
To find out what motivates consumers to buyTo developed models that explain consumer
behavior regarding purchasing decisionsTo identify new marketsTo investigate competitors and their products
To test consumer interest in new productsTo help one-to-one marketing (allows one-to-one
personal contact with customers, and provides marketingorganizations with greater ability to understandconsumers, the market, and the competition)
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Market Research (continued …)
Asking Customers What They Wantinteracting directly with consumersfilling in electronic questionnaires
vendors need to use inducements to motivateconsumers to participate and be honest
learning what consumer want from thedirectly obtained answerstrying to infer from consumers’ preferenceson other preferences
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Market Research (continued …)
Tracking Customer Activities on the Webobserving consumers’ behavior on the internet
site-tracking services, based on cookies or otherapproachesone of the most interesting tools for tracking
customers on the Internet as well as helpingthem to shop with intelligent agents possible invasion of privacy
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Electronic Commerce AgentsIntelligent agents
computer programs that conduct routing tasks,search and retrieve information ,support decisionmaking, and act as domain expertssense the environment and act autonomouslywithout human intervention
Software agentswith no intelligence
Learning agents
exhibit some intelligent behavior
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EC Agents (continued …)
Intelligent agents for information search andfiltering
help to determine what to buy to satisfy a specific needPersonalogic uses filtering process - consumers specifyrequirements and constraints, and the system returns alist of products that best meet the desired productFirefly used (until recently) a collaborative filtering
process that can be described as “word of mouth” to build the profile (not available any more)
its Passport generates a customer’s personal profile
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EC Agents (continued …)
Intelligent agents for Product and Vendor Findinghelp consumers decide where to buy by comparingmerchants’ offers
Bargainfinder from Andersen Consulting queried the priceof a specific CD from a number of online vendors andreturned the list of vendors and prices (Not in use anylonger)
Jango form NetBot/Excite originates the requests form theuser’s site instead of Jango’s, so vendors can not block it Kasbah from MIT Laboratories allows users who want tosell or buy a product, assign the task to an agent that is sentout to actively seek buyers or sellers
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EC Agents (continued …)
Negotiation Agentshelp to take away some of the frustration somecustomers experience in the negotiating process and
the technical limitations of being in different locationsAuctionBot allows users create auction agents byspecifying a number of parameters that vary dependingon the type of auction selected
Kasbah allows users create agents for the purpose ofselling or buying processTele-@-tete uses a number of different parameters:
price, warranty, delivery time, service contracts, return policy, loan option, and other value-added services
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Organizational Buyers
Make purchase decisions in business-to- business situationsMore formalized purchasing decisionThe purchasing process may be moreimportant than advertising activities inswaying purchase decisionsDecisions may be made by a group
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Customer Service
Phases in the Customer Service Life CyclePhase 1 : Requirements
assisting the customer to determine needsPhase 2 : Acquisition
helping the customer to acquire a product or service
Phase 3 : Ownershipsupporting the customer on an ongoing basis
Phase 4 : Retirementhelping the client to dispose of a service or product
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Customer Service (continued …) Facilitating Customer Service
Personalized Web pages - customers build individualized pages at the vendor’s site
Chat rooms - customers can interact with each other and withvendor’s personnel who monitor the chat room E-mail - send confirmations, product information, andinstructions to customers
FAQs - provide online answers to questions customers ask most Tracking capabilities - enable customers to track the status oftheir orders, services, or applications Web-based call centers - a comprehensive communicationcenter takes customers’ inquiries in any form they come andanswers them quickly
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Electronic Payment Systems Electronic credit cards
Payments using unencrypted credit cardthe buyer e-mails her or his credit card number to theseller on the Internetrisk here is that hackers will be able to read the creditcard number
Encrypted paymentsusing public/private key encryption, credit card detailscan be encrypted for better securitythis can be done by simply using the SSL protocol inthe buyer’s computer
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Electronic Payment Systems
(continued …)
Electronic checkssecured by public-key cryptography and may besuitable for some micropaymentsStep 1 : the customer establishes a checkingaccount with a bankStep 2 : the customer contacts a seller, buys a
product or a service, and e-mails an encryptedelectronic check signed with a digital signatureStep 3 : the merchant deposits the check in his orher account: money is debited in the buyer’saccount and credited to the seller’s account
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Electronic Payment Systems
(continued …)
Electronic cash in your PCStep 1 : the customer opens an account with a bank andreceives special software for his or her PCStep 2 : the customer buys “electronic money” from the
bank by using the softwareStep 3 : the bank sends an electronic money note to thiscustomer, endorsing it with a digital signatureStep 4 : the money is stored on the buyer’s PC and can bespent in any electronic store that accepts e-cashStep 5 : the software is also used to transfer the e-cashfrom the buyer’s computer to the seller’s computer Step 6 : the seller can deposit the e-cash in a bank,
crediting his or her regular or electronic account, or usethe e-cash to make a urchases elsewhere
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Electronic Payment Systems
(continued …) Electronic payment cash (Smart Cards) with e-cashcredit cards using magnetic strips contain only limitedinformation , such as the card’s ID number
cards to pay photocopies in the library, or to paytelephone calls storing a fixed amount of prepaid moneycard used by New York Metropolitan TransportationAuthority (MTA) in buses, trains, interstate toll bridges,and tunnelscards containing microprocessor storing a considerableamount of information (more than 100 times more than aregular credit card) and allowing money to be stored inquantities that can be decreased as well as increased
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SecuritySecurity Requirements
Authentication - the buyer, the seller, and the paying institutionsmust be assured of the identity of the party with whom they aredealing
Integrity - it is necessary to assure that data and informationtransmitted in EC, such as orders, reply to queries, and paymentauthorization, are not accidentally or maliciously altered ordestroyed during transmission
Non-repudiation - merchants need protection against thecustomer’s unjustifiable denial of placing an order; buyer needs
protection against the vendor denial of shipment, or sending wrongorder Privacy - many customers want their identity to be undisclosed
Safety - customers want to be sure that it is safe to provide acredit card number on the Internet
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Security (continued …)
Security ProtectionEncryption - a process of making messages indecipherableexcept by those who have an authorized decryption key
Single-key encryption» the sender of the electronic message (or payment)
encrypted the information with a key» the receiver used an identical key to decrypt the
information to a readable form» the same code had to be in the possession of both the
sender and the receiver» problems : if a key were transmitted and intercepted
illegally, it could be used to read all encrypted messagesor to steal money
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Security (continued …)
Security Protection : Encryption (continued …)
Public/private key encryptionuses two different keys - public key and private keyseveral authorized people may know the public key, butonly its owner knows the private keyevery person has one private key and one public key
encryption and decryption can be done with either keyif encryption is done with the public key, thedecryption can be done only with the private key andvice versa
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Security (continued …) Security Protection :Encryption (continued …)
Public/private key encryption
MessageText
MessageText
Sender Receiver
Encryption Decryption
Public Key ofRecipient
Private Key ofRecipient
Signature Signature
Private Key
of Sender
Public Key
of Sender
Ciphered
Text
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Market Practices
Fraud on the Internetinternet fraud and its sophistication have grown asmuch and even faster than the Internet itselfstocks manipulations, selling bogus investmentsand phantom business opportunitiesexamples:
stock promoters falsely spread positive rumors aboutthe prospects of the companies they toutedthe information provided might have been true, but the
promoters did not disclose that they were paid to promote the companies
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Buyer ProtectionTips for safe electronic shopping include:
look for reliable brand names at sites like Wal-Mart Online, DisneyOnline, and Amazon.comsearch any unfamiliar selling site for company’s address and phoneand fax numbercheck out the seller with the local Chamber of Commerce and/or BetterBusiness Bureauinvestigate how secure the seller’s site is by reading the posted privacynotice, and evaluate how well the site is organizedexamine the money-back guarantees, warranties, and serviceagreementscompare prices to those in regular (suspect the too cheap sites)ask friends what they know about the vendorfind out what your rights are in case of a disputeconsult the National Fraud Information Centercheck www.consumerworld.org for a listing of useful resources
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Seller Protection
Be protected against consumers who refuseto pay or pay with bad checks and buyers’
claims that the merchandise did not arriveBe protected against the use of their name byothers as well as use of their unique words
and phrases, slogans and Web addressHave legal recourse against customer whodownload copyrighted software and/orknowledge and sell it to others
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Ethical IssuesPrivacy
most electronic payment systems know who the buyersare; therefore, it may be necessary to protect the buyers’identity
The Human Elementthe technology is new to many IS directors andemployees and so many require new sets of skills
Web Tracking by using sophisticated software it is possible to trackindividual movements on the internet
Disintermediationthe use of EC may result in the elimination of some of acompany’s employees as well as brokers and agents
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Legal Issues
Domain Namesseveral companies that have similar or same names(in different countries) compete over a domain namethat is not a registered trademark
Taxes and Other Fees particularly complex for interstate and internationalcommerce (A tax moratorium until October 2001)
Copyrightintellectual property is protected by copyright laws
and cannot be used freely
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For AccountingThe implications of replacing paper documents by electronicmay impact many of the accountants’ tasks, especially theauditing of EC activities and systems
For FinanceThe world of banking ,stocks, and commodities markets, andother financial services are being reengineered due to EC
For MarketingThe revolution is affecting many marketing theories, rangingform consumer behavior to advertisement strategies
What’s in it for Me?
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What’s in IT for Me? (continued …)
For Production/Operations ManagementEC is changing the manufacturing system forma product-push mass production to an order-
pull mass customizationFor Human Resource Management
Modern HRM has tremendous opportunities to
exploit Internet capabilities to improve the productivity of HRM personnel, recruit andmaintain top employees , and increase jobsatisfaction to very high levels