Chapter 5
Electronic Commerce
Strategies for the New Economy
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Management Information Systems
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Introduction
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The new economy introduced by the www has been
interesting.
Fortunes have been made and lost.
Dot-com millionaires have been created.
Others have seen their company turn into a dot-bomb.
The revolution of ebusiness promised by the internet has
just began.
We are still learning what works and what does not work.
There is still a lot of uncharted territory ahead.
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Management Information Systems
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The Growth of E-Commerce
Figure 5.1
Four Categories
of E-Commerce
page 178
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Management Information Systems
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The Growth of E-Commerce

E-commerce
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Enables customers, consumers and companies to
form powerful new relationships that would not be
possible without the enabling technologies
The internet facilitates commerce by its ability to
move digital information at low cost.
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Management Information Systems
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The Growth of E-Commerce
The Digital Divide
Digital divide
Expresses the fact that different peoples,
cultures, and areas of the world or within a
nation do not have the same access to
information and telecommunications
technologies.
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Management Information Systems
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The Advantages of Business To Consumer ECommerce
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Retailers increasingly view the internet as simply
another channel by which to reach their customers
The internet is a channel that pocesses some unique
and powerful advantages over traditional channels
when used effectively
Know
When to use it
 How to use it effectively and
 When to use it in combination with other channels
Is key.

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Management Information Systems
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The Advantages of Business To Consumer ECommerce

The internet has several current and
potential advantages over the traditional
‘brick-and-mortar’ stores:
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Shopping can be faster and more convenient
Offerings and prices can change instantaneously
Call centers can be integrated with the web site
Broadband telecommunications will enhance the
buying experience
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Management Information Systems
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The Advantages of Business To Consumer ECommerce
Shopping Can Be Faster and More Convenient
Figure 5.3
Alternative
Channels for
Selling to
Customers
page 182
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Management Information Systems
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The Advantages of Business To Consumer ECommerce
Offerings and Prices Can Change
Instantaneously

E-tailers can change
product offerings and
prices instantaneously
in response to changes
in customer demand.
On Your Own
B2C Services
(p. 183)
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Management Information Systems
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The Advantages of Business To Consumer ECommerce
Call Centers Can Be Integrated With the Web
Site

The web technology has created
innovative adaptations in e-tailing such
as:
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Interactive chat
Internet telephony
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Management Information Systems
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The Advantages of Business To Consumer ECommerce
Call Centers Can Be Integrated With the Web
Site
Internet telephony
A combination of hardware and software
that uses the Internet as the medium for
transmission of telephone calls in place of
traditional telephone networks.
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Management Information Systems
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The Advantages of Business To Consumer ECommerce
Broadband Telecommunications Will Enhance
The Buying Experience
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Today, high-speed Internet is not widely
available to everybody.
When broadband telecommunications
become widely available the buying
experience will also be greatly
enhanced.
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Management Information Systems
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Keys To Success In Business To Consumer ECommerce
It is important to reflect on what have we
learned so far so that new B2C
entrepreneurs can increase their chances of
being successful
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Management Information Systems
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Keys To Success In Business To Consumer ECommerce

Important lessons include:
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Commodity like items work best.
Digital products are the best of all.
Attracting and retaining customers.
Remember the importance of merchandising.
You must execute well.
Watch the competition.
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Management Information Systems
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Keys To Success In Business To Consumer ECommerce
Attracting and Retaining Customers
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Designing an attractive web site that is easy to
use is one of the key factors in the success of a
B2C venture.
Once a potential customer has found your site it
is important


to keep them there until they purchase something
and
once they purchased something you need to give
them incentive to return.
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Management Information Systems
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Keys To Success In Business To Consumer ECommerce
Attracting and Retaining Customers

Additional techniques for attracting
Internet customers include:
1. Registering with search engines
2. Online ads
3. E-Mail and viral marketing
4. Affiliate programs
5. Selling to existing customers
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Management Information Systems
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Keys To Success In Business To Consumer ECommerce
Remember the Importance of Merchandising
Figure 5.3
Dos and Don’ts of Web
Site Design
page 188
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Management Information Systems
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All rights reserved
Keys To Success In Business To Consumer ECommerce
You must execute well

Simply means that when a customer
places an order on your web site, you
have to follow through and execute the
necessary business processes to get the
right item to the customer in a timely
fashion
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Management Information Systems
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Business to Business E-Commerce
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
B2B e-commerce is e-commerce that takes place between
organization.
Companies do business with other companies all over
the world.
Example: an airline needs to buy
Aircraft fuel
 Spare parts
 Food
 Other
From other companies

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Management Information Systems
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Business to Business E-Commerce

Relationships in B2B take different
forms in the e-commerce environment:
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Value networks
Corporate purchasing segments
Next-generation solutions
B2B marketplaces
Intranets and extranets
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Management Information Systems
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Business to Business E-Commerce
Value Networks

More and more in e-commerce involves
a complex network of relationships to
operate between
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the enterprise,
its customers,
intermediaries,
complemetors and
suppliers
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Management Information Systems
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Business to Business E-Commerce
Value Networks
Figure 5.6
The Value
Network
page 194
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Management Information Systems
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Second Canadian Edition
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Business to Business E-Commerce
Corporate Purchasing Segments

In B2B, most attention has been given to
the ways that e-commerce could
streamline the purchasing of materials
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Management Information Systems
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Business to Business E-Commerce
Corporate Purchasing Segments

Purchasing applications are usually
divided into three segments:
1. Purchasing of direct materials
2. Purchasing of indirect materials (MRO)
3. Purchasing of services
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Management Information Systems
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Business to Business E-Commerce
Corporate Purchasing Segments

The most important form of B2B ecommerce today is electronic data
interchange or EDI
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Management Information Systems
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Business to Business E-Commerce
Corporate Purchasing Segments
Figure 5.7
An EDI Hub-andSpoke
Arrangement
page 196
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Management Information Systems
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Business to Business E-Commerce
Corporate Purchasing Segments
Figure 5.8
How Value-Added Networks
(VANs) Facilitate EDI
page 197
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Management Information Systems
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Second Canadian Edition
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Business to Business E-Commerce
Next Generation Solutions

Efforts are underway to create a new
generation of EDI for the B2B
transactions that would be


Easier to setup and use
More attractive to small businesses
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Management Information Systems
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Second Canadian Edition
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Business to Business E-Commerce
B2B Marketplaces

B2B marketplaces - Internet-based services
that bring together buyers and sellers.

They give the potential to bring together large
numbers of buyers and sellers
•
•

giving buyers more choices and
aggregating demand for the sellers
Transaction costs can be reduced
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Management Information Systems
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Business to Business E-Commerce
Intranets and Extranets
Figure 5.10
Intranet Structure
page 201
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Management Information Systems
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Business to Business E-Commerce
Intranets and Extranets
Figure 5.11
Extranet Structure
page 202
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Management Information Systems
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The Role OF E-Government
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E-Government - describes the application
of e-commerce technologies in
governmental agencies.
In many countries the government is the
largest hub to use EDI for ecommerce
activities.
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Management Information Systems
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E-Commerce Payment Systems
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Just as there are traditional EDI
transactions for purchase orders and
other standard business documents,
there are EDI transactions for
payments.
Financial EDI (FEDI) - the use of EDI for
payments.
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Management Information Systems
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Second Canadian Edition
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E-Commerce Payment Systems

E-payments would solve traditional
timing problems such that:


Epayments would clear faster and
The payer would lose the use of that money
for those extra few day it would have taken for
the check to clear.
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Management Information Systems
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Second Canadian Edition
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E-Commerce Payment Systems
Credit Cards and Smart Cards

Smart cards - plastic cards the size of a
credit card that contain an embedded chip
on which digital information can be stored.
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Management Information Systems
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Second Canadian Edition
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E-Commerce Payment Systems
Financial Cybermediaries
Figure 5.12
The PayPal Web
Site
page 204
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Management Information Systems
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Second Canadian Edition
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