Week 3:
Electronic Commerce
MIS 2101: Management Information Systems
Learning Objectives
Define electronic commerce. Discuss how it has evolved,
and the strategies that companies use to compete in
cyberspace
Explain the differences between:
The Internet
Extranets
Intranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
2
Electronic Commerce


Online exchange of goods, services and money
Second quarter of 2006
 2.7% of total retail revenue
 $24.8 billion in revenue
3
Most Common Types of E-Commerce

Business-to-consumer (B2C)
 A person buys a book from Amazon.com

Business-to-business (B2B)
 Retailer like Wal-Mart ordering from distributors

Business-to-employee (B2E)
 Employee uses the Web to change employee benefits

Consumer-to-consumer (C2C)
 One person purchases from another on eBay
4
E-Commerce Infrastructure
Amazon.com
Stock DB
Amazon.com
Product Lookup
Application
Client
Shopping Application
GiantBank
Account
DB
Credit verification
application
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Key Capabilities: Information
Dissemination



Firms across the world have access to
customers
Economical medium for marketing
products and services
Increased geographical reach
5-6 6
Key Capabilities: Integration

Integration of information via Web sites and other mechanisms

Real-time access to personalized information

Airline reservations




Make the reservation through any almost any airline, travel agency, or online
The reservation can involve multiple airlines
Use a cell phone, voice, browser
Change the reservation through almost any airline, travel agency, or online

ATMs

Amazon -- purchase products from other companies through Amazon
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Key Capabilities:
Mass Customization

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
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Key Capabilities:
Interactive Communication

Immediate feedback
between company and
customers



E-mail notifications
Customer service online
chat
Best Buy


Geek Squad
24-hour computer support
9
Key Capabilities:
Transaction Support

Internet and the Web:



Dell – automated
transaction support


Reduced transaction
costs
Enhanced operational
efficiency
Cost savings per sale
Disintermediation
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The Long Tail

Power Law Distributions

Limited Shelf Space


What are the consequences?
Enter Internet

How do things change?
11
Common Revenue Models for EC


Most important ingredient of business model
How will the firm earn revenue?
Information Systems Today: Managing in the Digital World
5-12 12
Learning Objectives
Define electronic commerce. Discuss how it has evolved,
and the strategies that companies use to compete in
cyberspace
Explain the differences between:
The Internet
Extranets
Intranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
Information Systems Today: Managing in the Digital World
5-13 13
The Internet . . . A network of
networks

Computers and other devices capable of communicating

The infrastructure that connects them (fiber optics, copper,
modems, routers, microwave, etc.)

The software tools and protocols that make communication
possible

A set of standards

It is more than the World Wide Web
14
Extranets

Extranets are applications which use
Internet technology to conduct business
involving multiple firms (B2B)

Boeing


1,000 authorized business partners
Nearly all Fortune 1,000 companies deploy
some type of B2B applications
15
Intranets

Business-to-employee (B2E) electronic
commerce

Internet based private network using Web
technologies

Boeing


More than 1 million pages
200,000 employees
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Intranet Applications: Training

Boeing Company
 200,000 employees get
trained

Quality e-Training program



Catalogue of courses
Online course content
Standardized courses

Business improvements

Cost reduction

Eliminated travel cost
17
Intranet Application:
Real-Time Access to Information

Manage, update, distribute, and access corporate
information
 Boeing



News releases uploaded to the Intranet
Previously sent to all corporate offices as video tapes
Reduced distribution costs

Efficient information sharing

Company-wide access
18
Intranet Application:
Collaboration

Boeing

Information shared between employees across the world

Reduced product development cycles

Ability to stay current on projects

Ability to stay current with the changing market conditions
19
Learning Objectives
Define electronic commerce. Discuss how it has evolved,
and the strategies that companies use to compete in
cyberspace
Explain the differences between:
The Internet
Extranets
Intranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
20
E-Auction Fraud

E-auctions marred with more fraud than any other
Internet activity



42% of all Internet-fraud related complaints
Average loss: $1,155
Types of e-Auction fraud






Bid luring
Reproductions
Bid shielding
Shipping fraud
Payment failure
Nonshipment
21
Social Online Communities

MySpace.com
 Over 100 million users
 Original purpose – social network based on music
interests
 2005 – purchased by NewsCorp for $580 million
 Income from targeted ads


$2.17 per user per year
Facebook
 Originally started at Harvard
 Expanded to other schools, now open to everyone
 Microsoft purchased 1.5% for $240 mn
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Concerns

Privacy on Facebook

eBay, Fandango, Travelocity, and Blockbuster

Branding Issues

Legal Liability
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Self-Publishing

Consumers can voice their opinions with no
editorial review

Original material by the author

Traditional B2B becoming C2C

Publishing from home


Print-On-Demand
Online Music (RadioHead)
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Blogging

Weblogging




Online text diary
Chronological
entries
Power of bloggers
Vlogging

Video blogging
25
M-Commerce

Electronic transactions using wireless mobile devices

Smart phones
 High-speed data transfer
 “Always-on” connectivity

Payment

Advertisements
 Bluetooth
26
M-Commerce Applications
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Online Entertainment Industry

Digital rights management (DRM)

Technological solution for control of digital
media

Restrictions



Devices which will play it
How many times it can play
Prevention of illegal copying and distribution

Watermark – illegal copy can be traced to original
purchaser
28
Learning Objectives
Define electronic commerce. Discuss how it has evolved,
and the strategies that companies use to compete in
cyberspace
Explain the differences between:
The Internet
Extranets
Intranets
Describe emerging trends in electronic commerce
Discuss regulatory issues
29
Threats to E-Commerce

The USA PATRIOT Act

Introduced after 9/11 terrorist attacks in 2001

More power given to governmental agencies to protect
Americans

Critics – Civil Liberties Union



Reduced checks and balances on surveillance
Lack of focus on terrorism
Surveillance on Americans
30
Internet Taxation
• The Internet Tax Freedom Act – 1998
o Created as an incentive for EC businesses
o Internet sales treated as mail-order sales
• No sales taxes paid in states where the company has no
presence
• Problem
• Loss of tax incomes
• Unfair advantage for e-tailers
31
Internet Taxation
• Solutions:
• Use tax
o Consumers required to pay their state’s sales tax
o Part of some income tax returns
• Streamlined Sales Tax Project
o Simplification of tax codes
o Collection of taxes by out-of-state sellers
32
Arguments For and Against Internet
Taxation
33
Net Neutrality

Data sent over the Internet is handled in a neutral
manner

All traffic treated the same way

ISPs and telephone companies argue for
prioritization


Traditional Internet traffic suffers (e-mail) due to high
bandwidth applications
Example: YouTube.com not paying their fair share,
should be deprioritized
34
Censorship

Governmental attempts to control Internet traffic

Limiting citizens from viewing content

E.g., China, North Korea



Strict guidelines on what can be viewed
Key words and topics blocked
United States

Child Online Protection Act (COPA)

Age verification for certain content
35
Cases
36
eBay Under Attack

Phishing
 Scam artists pretending to
be eBay
 Ask for credit card
information and passwords
 eBay would never send such
an email
 2006 – London

£200,000 stolen

eBay feedback scores

eBay buyer insurance
37
Employees Using Company
Networks Can Affect Liability

Illegal downloading of music and movies using
company’s computer and Internet access

Star Wars Episode III: Revenge of the Sith


September 2005
“Screener” version stolen and distributed



Forensic marker revealed the identity of the thief
3 years in prison
7 employees copied the movie


1 year in prison and $100,000 in fines
Company not held liable
38

Questions!!!
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