DIT 2213
Prepared by : Wan Siti Nur Aiza
Chapter 1
Introduction to
Electronic-Commerce
What is Commerce?
•
Traditional commerce may be defined as:
•
•
From Webster's Revised Unabridged Dictionary
Commerce : \Com"merce\, noun.
The exchange or buying and selling of commodities;
esp. the exchange of merchandise, on a large scale,
between different places or communities; extended
trade or traffic.
What is E-Commerce?
•
•
A general term for any type of business, or
commercial transaction that involves the transfer
of information across the Internet.
This covers a range of different types of
businesses from consumer-based retail sites, like
Amazon.com, through auction and music sites
like eBay or MP3.com, to business exchanges
trading goods or services between corporations.
What is E-Commerce Cont’d?
•
The use of electronic communication to do business.
•
E-commerce is not about technology. It is not a new business.
E-commerce is a method for companies to create and operate
their business in new and efficient ways.
What is E-Commerce Cont’d?
•
Most fundamentally, e-commerce represents the realization of
digital, as opposed to paper-based, commercial transactions
between businesses, between a business and its consumers, or
between a government and its citizens or constituent business.
What is E-Commerce Cont’d?
•
In summary, e-commerce is the
•
•
use of electronic communication to do business
• Specifically, the transfer of information
(transactions), over the Internet
Some people use the term e-business to refer to
all the categories of e-commerce
•
E.g. IBM defines e-business as:
• The transformation of key business processes
through the use of Internet technologies
THE EVALUATION / HISTORY OF ECOMMERCE
Chapter 2
History of E-Commerce
• ARPAnet created in 1969 (evolved to TCP/IP)
• Personal computers exploded in 1981
• Processing power increases, cost decreases
• LANs and WANs became requirements in 1980s
• The Internet was of significant size by mid 1980s
• WWW started in 1990 with HTTP and HTML
• General browser technology created in 1993 (used
HTTP, ftp, gopher, and .gif and .jpg images)
• Search engines soon followed (AltaVista, Lycos)
History of E-Commerce
• Businesses transformed Internet technologies into
intranets, extranets to solve integration problems
• Object Oriented Programming (Java) and the Web
provide new client-server paradigm
• Audio (.wav), video (.mpg), animation (Flash)
standards
• Broadcast and Push technologies, e.g. PointCast
• Portals, intelligent web agents, personalization
• General telecom (audio, video) over IP
• Wireless Internet access (cell phones and PDAs) …
pervasive computing
Key Technologies Enabling
E-Commerce Evolution
• Decreasing cost of increasingly more powerful
hardware – GHz processors, Mb nets,GB drives
• Integration of voice, data, image, video data
• Distributed database methods
• Graphical user interfaces (GUI)
• Communications (TCP/IP, HTTP) protocols and
content/ publication (HTML, XML) standards
• Object oriented methods (Java, J2EE, ORB)
• Lightweight electronics for mobile IT (Palm, RIM,
Pocket PC)
Business Evolution on Web
Processes
Functionality
Transactions
Web-enabled
applicatons
Interactivity
Dynamic web pages
Publishing
Static web pages
Time or Maturity
Effects of E-Commerce
•
•
•
•
•
•
•
Spam
Bandwidth load shift
Work load time shift
Work place shift
Play time shift
Growth of on-line “virtual communities”
Privacy challenges / new privacy products
Effects of E-Commerce
• Liberalization of pornography
• Promises of wealth creation beyond your wildest
dreams … seemed unbelievable … well it was!!
• Reducing TV consumption?
• Dynamic and free content
• Uncharted legal issues
• Reinforcing media / converging media
• Access to commodities such as prescription
drugs without normal levels of control
Effects of E-commerce
•
•
•
•
Credit card fraud
Tax avoidance
Many new copyright issues
Free access to information
• How to save a life (CPR, FirstAid, choking)
• How to build a bomb, or counterfeiting instructions
•
•
•
•
Accuracy of information sources in question
Hacking and computer viruses
Shifting barriers of competition
Disintermediation and reintermediation
Where has E-Commerce Had the
Greatest Impacts?
•
•
•
•
•
•
•
•
Postal service
Real estate
Communications
Radio / TV
Finance (banks)
Entertainment
Travel agents
Stock brokers
What do all these
Businesses have
in common?
Information = $
Time = $
Client self-service
is acceptable
Evaluation of E-Commerce
• Electronic funds transfers (EFTs)
• Also called wire transfers
• Electronic transmissions of account exchange information
over private communications networks
• Electronic data interchange (EDI)
• Transmitting computer-readable data in a standard format to
another business
Evaluation of E-Commerce
• Trading partners
• Businesses that engage in EDI with each other
• Value-added network (VAN)
• Independent firm that offers connection and transactionforwarding services to buyers and sellers engaged in EDI
From Traditional Commerce to Ecommerce
Sailing ships
Printing press
Steam engine
Telephone
Opened avenues for
trade between buyers
and sellers. Ancient
times (thousands of
years ago)
From Traditional Commerce to Ecommerce Cont’d
Electronic Funds Transfer (EFTs)
Electronic Data Interchange (EDI)
Internet
Wire transfers - used
by banks
Businesses transfer
electronic data
- data not re-keyed
- high implementation
cost, thus excluded
small businesses
On-line shopping
Business Processes Suited to Certain
Type of Commerce
• E-commerce
• Sale/purchase of books & CDs, travel
services, investments and insurance
services
• Online delivery of software
• Online shipment tracking
Business Processes Suited to Certain Type of
Commerce Cont’d
• E-commerce & Traditional
•
•
•
Sale/purchase of automobiles and residential
real estate (e.g. do research online then buy
from a dealer or real estate agent)
Online banking
Roommate matching service
Business Processes Suited to Certain Type
of Commerce Cont’d
• Traditional
•
•
Sale/purchase of impulse items for immediate
use, high fashion jewelry and antiques (personal
inspection required; prefer to touch, smell or
examine closely)
Small denomination purchases and sales (since
there is not yet a standard for transferring small
amounts of money)
What Are the Advantages of Ecommerce?
•
Increases sales, decreases cost
•
•
•
•
•
Allows small businesses to have global customer
base
Reduced cost through electronic sales inquiries,
price quotes and order taking
Provides purchasing opportunities for buyers
(businesses can identify new suppliers and
partners)
Increase speed and accuracy for exchanged
information, thus reducing cost
(Telecommuting)
Virtual Community
What Are the Advantages of Ecommerce Cont’d?
•
•
•
•
•
Business can be transacted 24hrs a day
The level of detail of purchase information is
selected by user
Digital products can be delivered instantly
Tax refunds, public retirement and welfare
support costs less when distributed over the
Internet
Allows products and services to be available in
remote areas, e.g. remote learning
What Are the Disadvantages of Ecommerce?
•
•
•
•
•
Inability to sell some products (e.g. high cost
jewelry and perishable foods, although
supermarkets like www.philgrocer.com delivers
to your home)
The newness and evolution of the current
technology
Many products require a large number of people
to purchase to be viable
High capital investment
There are a myriad of privacy issues
What Are the Disadvantages of Ecommerce Cont’d?
•
•
Difficulty in integrating current databases and
transaction processing systems into e-commerce
solutions
Cultural and legal obstacles
•
•
•
•
Transmission of credit card details
Some consumers resistant to change
Laws are unclear
Shipping profile: Products with a low value-toweight ratio that can not be efficiently packed
and shipped are unsuitable (use traditional
commerce)
e-business:
.
e-business: a broader definition of EC, which includes:
 buying and selling of goods and services
 servicing customers
 collaborating with business partners
 conducting electronic transactions within an
organization
Chapter 3
ELECTRONIC
TRANSACTION
Alternative Payment Methods:
Software Based
• MainSystems
Topic: Internet
• Several Schemes devised to make
purchases secure over the Internet
• Security: Main concern for the method
developers
• Open Network
• MasterCard and Visa agreement for SET
(Secure Electronic Transactions) standard
(1996)
Alternative Payment Methods:
Software Based Systems
• Digital Gold Currency
• Paypal
• Liberty Reserve
Major Types of E-Commerce
37
E-Commerce categories
•
There are five general e-commerce categories:
 Business to Consumer (or B2C) e-commerce
 Business to Business (or B2B) e-commerce (sometimes
called e-procurement)
 Business processes that support buying and selling
activities
 Consumer-to-consumer (or C2C) e-commerce
 Business-to-government (or B2G) e-commerce
B2C e-commerce
•
Description
•
•
Example
•
•
Businesses sell products or services to individual customers
(consumers)
Walmart.com sells merchandise to consumers through its Web
site
Web site
•
•
www.walmart.com
www.sm.com
B2B E-commerce
•
Description
•
•
Example
•
•
Businesses sell products or services to other businesses
Grainger.com sells industrial supplies to large and small
businesses through its Web site
Web site
•
www.grainger.com
Business Processes that Support
Buy/Sell Activities
•
Description
•
•
Businesses and other organisations maintain and use
information to identify and evaluate customers,
suppliers and employees (and to support buying,
selling hiring, planning and other activities). More
and more this information is being shared
Example
•
Dell Computer uses secure internet connections to
share current sales and forecasts with suppliers who
use it to plan their production, therefore they deliver
the right quantities of components at the right time
C2C e-commerce
•
Description
•
•
Example
•
•
Participants in an online marketplace can buy and sell
goods with each other
Consumers and businesses trade with each other on
eBay.com
Web site
•
•
www.ebay.com
www.ebili.com
B2G e-commerce
•
Description
•
•
Example
•
•
Business sell goods or services to governments and government
agencies
Cal-Buy portal for businesses that want to sell online to the State
of California
Web site
•
www.pd.dgs.ca.gov/calbuy/default.htm
E-commerce Categories Example
•
You are a computer manufacturing company who
performs the following activities on the Internet:
•
•
•
•
•
Sells computers to individuals (B2C)
Purchases parts (e.g. hard drives, power supplies
etc.) from a supplier (B2B)
Hires staff, manage customer accounts, advertise,
etc. (Business processes)
Sells computers to the Government to be used in
schools (B2G)
On eBay.com individuals buy and sell this brand of
computers (C2C)
Relative Sizes of E-commerce
Categories
Business processes
B2C
B2B
Relative Sizes of E-commerce
Categories Cont’d
Year
B2C Sales
($ Billions)
B2B Sales
($ Billions)
2005
150
4100
2004
130
2800
2003
100
1600
2000
50
60
Disciplines Concerned with ECommerce
47
Benefits of EC:
Benefits to organizations:
 Global reach
 Cost reduction
 Supply chain
improvements
 Extended hours:
24x7x365
 Customization
 New business models
 Vendors’ specialization





Ubiquity
More products and
services
Cheaper products and
services
Instant delivery
Information availability











Rapid time-to-market
Lower communication
costs
Efficient procurement
Improved customer
relations
Up-to-date company
material
No city business permits
and fees
Other benefits
Participation in
auctions
Electronic
communities
“Get it your way”
No sales tax
Limitations of EC:
Barriers of EC:





Security
Trust and risk
Lack of qualified personnel
Lack of business models
Culture

User authentication and lack
of public key infrastructure
Organization
Fraud
Slow navigation on the
Internet




Legal issues
Concept of Electronic Money
• Money exchanged eletronically
involving microprocessors
computer networks,
internet and digital stored values.
• Two General Forms of Electronic Money
• Card Based
• Software Based
First and Current Implementations
of E-Money
• Smart Cards
Generally defined as a portable data
storage device with intelligence
(chip memory) and provisions for
identity and security.
First and Current Implementations of E-Money
Continue…
• Some History…
• 1970 - First implementation of microelectronic devices in plastic
substrate (Kunitaka Arimura)
• 1974 - First patent “An independent electronic object with
memory” (Roland Moreno).
• 1979 – First smart card by Honeywell Bull
• 1980’s First Trials in France
• French Bank Card Association (Blue Card, Green Card, TA)
• University Cards in France
Date Information took from The Changing Face of Money, Good
Barbara
First and Current Implementations of
E-Money
• Smart Card (Open System)
• The scheme allows the value on the card to be used in the same
manner as any other payments method or form currently in the
specific place.
• Promblems for wide development: Need for terminal to process
transactions, clearing and settlement system.
First and Current Implementations of
E-Money
• Unaccounted Electronic Money Model
• Transactions closely proximate to cash ones
• Aim to provide universal cash replacement
• Without a full audit trail
• Mondex Card
First and Current Implementations of E-Money
Continue…
• Accounted Electronic Money Model
• Provide a general audit trail
• Archiving Functions
• Does not permit the anonymity of incorporate it into the Web
browsers
First and Current Implementations of E-Money
Continue…

Graph took from The Changing Face of Money, Good Barbara
First and Current
Implementations of E-Money
continue..
• Smart Cards (Closed System)
• A stored-value card that only can
be used for one purpose or only
in one determined environment.
First and Current
Implementations of E-money
continue..
• Octopus Card
• Singapore
(Public Transportation payment)
• Chipknip
Octopus Card
• Rechargeable without contact stored value smart card (mass
transit system in Hong Kong)
• Nowadays convenience stores, supermarkets, parking meters,
vending machines, etc.
Off-line Electronic Money
• The merchant does not need to
interact with the bank before
accepting a user’s coin.
• Merchant guaranteed that the
user’s e-coin will be accepted by
the bank (the bank is able to
identify cheating user).
Off-line Electronic Money
• Blind Signatures to achieve unlikability between withdrawal
and spend transactions.
• Using cryptography
Anonymous e-cash was
Introduced by David Chaum
Evolution, future approaches
• Objectives
• Turn it able to use it through wider range of hardware such as
secured credit cards
• Linked bank accounts for exchange with a secure
micropayment system (Paypal)
In General…
• Advantages:
• Convenience
• Privacy
• Increased efficency of
transactions
• Lower transaction fees
• New business opportunities
In General…
• Disadvantages
• How to levy taxes
• (Tax levy definition: the amount of money charged
as taxation on particular assets or goods)
• Possible facility of money
laundering
• Exchange rate instabilities
• Shortage of money supplies
Chapter 4
ELECTRONIC PAYMENT
SYSTEM
What Electronic Payment system is?
Electronic payment system is a system which helps the
customer or user to make online payment for their shopping.
To transfer money over the Internet.
Methods of traditional payment.
oCheck, credit card, or cash.
Methods of electronic payment.
oElectronic cash, software wallets, smart cards,
and credit/debit cards.
Some Examples Of EPS:Online reservation
Online bill payment
Online order placing (nirulas)
Online ticket booking ( Movie)
Two storage methods
• On-line
• Individual does not have possession personally of electronic cash
• Trusted third party, e.g. online bank, holds customers’ cash accounts
• Off-line
• Customer holds cash on smart card or software wallet
• Fraud and double spending require tamper-proof encryption
E- WALLETS
E- CASH
Types of EPS
SMART CARDS
CREDIT CARDS
E-Cash
A system that allows a person to pay for goods or
services by transmitting a number from one computer to
another.
Like the serial numbers on real currency notes, the Ecash numbers are unique.
This is issued by a bank and represents a specified
sum of real money.
It is anonymous and reusable.
Electronic Cash Security
• Complex cryptographic algorithms prevent double spending
• Anonymity is preserved unless double spending is attempted
• Serial numbers can allow tracing to prevent money laundering
1. Consumer buys e-cash from Bank
E-Cash Processing
Merchant
3. Consumer sends e-cash to
merchant
5
4
Bank
1
3
2
2. Bank sends e-cash bits to consumer
(after charging that amount plus fee)
4. Merchant checks with Bank that ecash
is valid (check for forgery or fraud)
5. Bank verifies that e-cash is valid
Consumer
6. Parties complete transaction
E-Wallet
The E-wallet is another payment scheme that
operates like a carrier of e-cash and other
information.
The aim is to give shoppers a single, simple,
and secure way of carrying currency
electronically.
Trust is the basis of the e-wallet as a form of
electronic payment.
Procedure for using an e-wallet
1. Decide on an online site where you would like to shop.
2. Download a wallet from the merchant’s website.
3. Fill out personal information such as your credit card
number, name, address and phone number, and where
merchandise should be shipped.
4. When you are ready to buy, click on the wallet button,
the buying process is fully executed.
Smart Cards
A smart card, is any pocket-sized card with
embedded integrated circuits which can process data
This implies that it can receive input which is
processed and delivered as an output
Smart card Processing
Credit cards
 It is a Plastic Card having a Magnetic Number and code on it.
 It has Some fixed amount to spend.
 Customer has to repay the spend amount after sometime.
Processing a Credit cards payment
Risk in using Credit cards
Operational Risk
Credit Risk
Legal Risk
Secure Electronic Transaction (SET)
Protocol
• Jointly designed by MasterCard and Visa with backing of
Microsoft, Netscape, IBM, GTE, SAIC, and others
• Designed to provide security for card payments as they
travel on the Internet
• Contrasted with Secure Socket Layers (SSL) protocol,
SET validates consumers and merchants in addition to
providing secure transmission
• SET specification
• Uses public key cryptography and digital certificates
for validating both consumers and merchants
• Provides privacy, data integrity, user and merchant
authentication, and consumer nonrepudiation
The SET protocol
Security Requirements of EPS
Integrity
Authentication
Privacy
Nonrepudiation
Safety
What Is payment Gateways??
A payment gateway is an e-commerce application service
provider service that authorizes payments for ebusinesses, online Shopping, etc.
Payment gateway protects credit cards details encrypting
sensitive information, such as credit card numbers, to ensure
that information passes securely between the customer and the
merchant and also between merchant and payment processor.
How It works??
CONCLUSION
 Expand Market beyond Traditional geographic market
 Override traditional marketing system into digital
marketing system.
 Made human life convenient as a person can pay his
payments online while he is taking rest.
CHAPTER 5
INTRODUCTION TO EDI
What is EDI?
•
Electronic Data Interchange (EDI), is the computer-to-computer exchange of
standard business documents in electronic format between two companies
•
EDI operates under two principles, firstly electronic documents replace paper ones
and secondly the exchange of documents takes place in a standardised format
EDI Replaces Paper-Based (Business Documents)
Purchase
Orders
ASN/
Delivery
Notices
Customs
Declaration
Forms
Invoices
Why use EDI?
The EDI Alternative
•
The buyer raises a Purchase Order (PO) with EDI software, which can be
automatically transmitted to the seller in near real-time
•
The seller’s order entry system receives the PO and an acknowledgement is
transmitted to the buyer with delivery confirmation
•
What can take five days with paper takes minutes with EDI
What Does an EDI Message
Consist of ?
•
Paper-based documents are posted in envelopes and it is possible to mail many documents in
one envelope, EDI is just the same
•
A “message envelope” defines the start and end of a document
•
“Functional Group envelopes” contain all message envelopes of a specific type, eg POs,
invoices etc
•
“Interchange envelopes” enclose all functional group envelopes
What are the Basic Steps for EDI?
So How Much Does EDI Cost to
Implement?
• EDI can be provided via different pricing
models, namely:
• priced by the number of kilocharacters (KC’s) contained within an
EDI document
• subscription models allow pay-asyou-go, monthly or annual contracts
• EDI software can be purchased with
ongoing maintenance contracts
What are the Benefits of Using EDI?
1.Need for Speed
•
Sending an electronic message locally or
globally takes seconds
•
Information sent by EDI is available
immediately for use within internal
applications
•
Faster receipt of documents can provide
a competitive edge in any business
2. Need for Accuracy
• Electronic transfer of business
documents
• eliminates the need for copying
data between paper-based
documents
• eliminates errors caused by
manual updates or intervention
• helps to reduce re-work
Advantages of EDI
• Reduces inventory costs through the
shortening of order processing and
delivery cycles
• Reduces overhead costs through
elimination of manual handling in
areas such as mailroom, sorting and
circulation, clerical documentation
and data entry
What EDI Standards are in Use?
• EDI standards help to ensure that
electronic business documents can
be exchanged between companies
with ease
• There are many different EDI
standards in use locally and around
the world
EDI Industry Standards
• Different industry sectors have
their own set of standards for
processing electronic documents
• Industry groups such as EDIFICE
(high-tech) and Odette
(automotive) represent their
industry groups but also work
together to share standards across
the automotive and high-tech
sectors
EDI Document Standards
• Companies need to be able to
exchange documents of any type
with customers and suppliers
• Mapping is the process used to
convert business documents to the
required EDI format
• Document mapping requires
skilled staff to generate the maps
EDI Communication Standards
VAN / B2B
Services
Provider
,OFTP2
Companies can use a variety of communication
protocols to connect with each other
What is EDI Outsourcing?
EDI Outsourcing :
• Many companies do not have the
internal skills necessary to implement
and manage EDI or B2B infrastructures
• Outsourcing can offer an easy route
for companies to implement EDI for
the first time
• Companies can streamline internal and
external business processes with EDI
outsourcing
EDI Outsourcing
• EDI outsourcing helps companies to
manage their own internal EDI
infrastructure and also that of their
trading partner community
• Outsourcing can provide global
support capabilities
• It enables companies to focus on
their core competencies rather
than on managing their EDI
infrastructure
CHAPTER 6
MANAGING THE INTRODUCTION OF ECOMMERCE INTO A BUSINESS
Business transformation through ecommerce
• Linking stakeholders through e-commerce
• Supply chain management integration
• The product flow
• The information flow
• The finances flow
• Shared data in diverse database systems, data warehouse
• Sharing data “upstream” (with a company’s suppliers) and
“downstream” (with a company’s clients)
• shared digital business infrastructure
• including integrated value chains
• e-business management model
• business policies consistent with e-commerce laws,
teleworking/virtual work, distance learning, incentive schemes
107
E-COMMERCE APPLICATIONS: ISSUES AND PROSPECTS
• e-banking, e-tailing and online publishing/online retailing
• telephone banking, credit cards, ATMs
• E-commerce in developing countries
• Cash-on-delivery
• Bank payments
• electronic payment system
• Security issues in e-payment
• Factors the growth of e-banking in developing countries
• access to the Internet
• Inclination for banking over the internet
• access to high-quality products
• Security over internet
108
Future trend in e-banking in third world
countries
• Lead users
• Followers
• Rejecters
• Interest in conducting complex activities over the Internet
• E-tailing (or electronic retailing)
• selling of retail goods on the Internet
• 1997 is considered the initial year
• Lower customer acquisition costs
• Online publishing
• newsletters, online magazines and databases, brochures and
other promotional materials, books
• Internet as a medium
109
Future trend in e-banking in third world
countries..contd..
• Online publishing
• Advantages
• low-cost universal access
• independence of time and place
• ease of distribution
• effective marketing outreach medium
• Issues
• what kind of business model would result in the most revenue
• Pricing, mark up
• fairness of charges to advertisers
• inadequate copyright protection
• encryption for paid subscribers
• unsolicited commercial e-mail or “spam mail”
110
e-commerce AND entrepreneurs
• 1. It facilitates the access of artisans and SMEs to world markets.
• 2. It facilitates the promotion and development of tourism of
developing countries in a global scale.
• 3. It facilitates the marketing of agricultural and tropical products
in the global market.
• 4. It provides avenues for firms in poorer countries to enter into
B2B and B2G supply chains.
• 5. It assists service-providing enterprises in developing countries
by allowing them to operate more efficiently and directly provide
specific services to customers globally
111
e-commerce AND entrepreneurs..contd
• e-commerce evolution for entrepreneurs
• use of the Internet for communication
• use of the Internet for research and information search
• information about a firm’s goods or services
• Internet for e-commerce
• maintaining business relationships with business partners
• Issues with adoption of e-commerce by entrepreneurs
• unfavorable economic environment,
• high cost of ICT
• security concerns
• lack of ICT awareness and knowledg
• Lack of ICT-capable employees
112
Role of government and e-commerce
• Creating a favorable policy
• Becoming a leading-edge user of e-commerce
• Its applications in its operations
• A provider to citizens of e-government services,
• To encourage its mass use
• Bridging the digital divide
• legal recognition of e-commerce transactions
• consumer protection from fraud
• protection of consumers’ right to privacy
• legal protection against cracking
• protection of intellectual property
113
E-commerce vs. E-business
E-commerce involves

Digitally enabled commercial transactions between
organizations and individuals.

Digitally enabled transactions include all
transactions mediated by digital technology

Commercial transactions involve the exchange of
value across organizational or individual
boundaries in return for products or services
114
E-commerce vs. E-business
E-business involves

Digital enablement of transactions and processes
within a firm, involving information systems under
the control of the firm

E-business does not involve commercial
transactions across organizational boundaries
where value is exchanged
115
The Difference Between E-commerce
and E-Business
116
Trends effecting
E-Commerce/E-Business
• Consumer Trends
• Speed of Service, Self-Service (empowerment)
• Integrated solutions, not piecemeal products
• Service/Process Trends
• Convergence of sales and service
• Long-term Customer Relationship Management
• Flexible fulfillment and service delivery
Trends effecting
E-Commerce/E-Business
• Organizational Trends
•
•
•
•
Brand not capital: contract JIT manufacturing
Retain the core, outsource the rest
Increase process visibility (to customers, suppliers)
Employee retention, cont. learning/innovation
• Technology Use Trends
• Enterprise wide applications, use middleware for integration
• Integrate voice, data, video comm. channels
• Handheld and wireless – an explosion !
Five Major Predictions for the
E-Commerce Future
1. E-Commerce technology take-up will continue
to grow by ~50% until about ~2006
2. E-Commerce prices will rise to cover real costs
of doing business on the web
3. E-Commerce profits will rise to meet levels of
bricks and mortar stores
4. Major players will become the experienced
Fortune 500 companies who have been
watching (eg. WalMart, Sears, JC Penny, the
Gap)
5. The number of successful dot.coms will further
reduce and adopt “clicks and bricks “
strategies
Constructing the E-Business
• Architecture
The New Era of Cross-Functional Integrated
Applications
Middleware
Procurement
Management
Supply
Chain
Management
Enterprise
Resource Knowledge
Planning Management
Selling
Customer
Chain
Relationship
Management
Management
Constructing the E-Business
Architecture
• The New Era of Cross-Functional Integrated
Applications
CRM = Customer Relationship Management
ERP = Enterprise Resource Planning
SupCM = Supply Chain Management
SellCM = Selling Chain Management
PM = Procurement (Operational Resource)
Management
• Middleware = Integration Applications
• KM = Knowledge Management (DW/Analytics)
•
•
•
•
•
Constructing the E-Business
Architecture
• CRM = Customer Relationship Management
• Marketing, Sales, Service
• ERP = Enterprise Resource Planning
•
•
•
•
•
Forecasting and Planning
Purchasing and Material Management
Inventory Management
Finished Porduct distribution
Accounting and Finance
Constructing the E-Business
Architecture
• SupCM = Supply Chain Management
• Market demand
• Resource and capacity constraints
• Real-time scheduling
• SellCM = Selling Chain Management
•
•
•
•
Product Customization
Pricing, Contract and Commission Management
Quote and Proposal Generation
Promotions Management
Constructing the E-Business
Architecture
• PM = Procurement Management
• Office Supplies, Business Travel, Entertainment,
Service contracting, IT h/w, s/w and networking
• KM = Knowledge Management
(DW/Analytics)
• Data Warehousing
• Business Analytics (data mining)
• Executive Info Systems, Decision Support Systems
• Middleware = Integration Applications
• e.g. SAP (ERP) to SAS (KM)
The E-Business Architecture
Partners, Suppliers
SupCM
Employees
ERP
PM
KM
Middleware
SellCM
CRM
Customers, Distributors
Stakeholders
CHAPTER 7
TECHNOLOGY BASIC
Technology Basic
Computer environments:
1. Internet: global networked environment
2. Intranet: a corporate or government network
that uses Internet tools, such as Web browsers,
and Internet protocols
3. Extranet: a network that uses the Internet to
link multiple intranets
Technology Basic
EC applications are supported by infrastructure and
by five support areas:
People
Public policy
Marketing and advertising
Support services
Business partnerships
The Interdisciplinary Nature of EC:
Major EC disciplines:
Computer science
Marketing
Consumer behavior
Finance
Economics
Management information systems
Typical Path evolutionary of Ecommerce
Business Communication :Internet Way
Business Communication :Intranet Way
CHAPTER 8
FUNDAMENTAL SECURITY AND
USER ISSUE
CHAPTER 9
ETHICAL AND LEGAL ISSUE
Ethical and Legal Issues
Privacy on the Internet
• Right to Privacy
• Individual privacy vs. meeting consumer needs
• Financial Services Modernization Act of 1999 establishes a
set of regulations concerning the mgmt of consumer info
• Network Advertising Initiative (NAI) July 1999
• NAI represents 90% of Web advertisers
• Established to determine the proper protocols for managing a
Web user’s personal info on the Internet
• Employer and Employee
• Businesses monitoring employee activities on corporate and
communications equipment
• Keystroke software is used to monitor productivity and the
abuse of company equipment
• Issue of company time and company equipment vs. employee’s
right of expression
• Notice of Electronic Monitoring Act proposed in 2000 – requires
employers to notify employees of telephone, email, and
Internet surveillance
• Cookies
• “…bits of info collected and stored by a Web browser
when a person navigates the Web.”
• Online Profiling
• “…aggregating data about customers by tracking their
clickstream.”
Protecting the business
•
•
•
Privacy policy on the Web site
Platform for Privacy Preferences (P3P) – industry
standard to allow Web users to gain more control over
the personal info being collected on the Web and to
make privacy policies easier to find and understand;
determine if Web site privacy policies match users’
privacy needs
Consumer Privacy Act of 2000
•
•
Must give notice, obtain consent, etc., when collecting
personally identifiable information
Online Privacy and Disclosure Act of 2000
•
•
Display seal on website when comply with the Principles
for Fair Personal Information Practice
• Privacy of Consumer Financial Information Act
(GLB Act) :
• U.S. financial institutions must provide its customers
with a notice of its privacy policies and practices.
• It prohibits a financial institution from disclosing
nonpublic personal info about a consumer to a
nonaffiliated third party unless the institution
satisfies various disclosures and opt-out requirements
and the consumer has not elected to opt-out of the
disclosure.
• Federal Trade Commission (FTC) established 5 Core Fair Info Practices:
1. Consumers should be aware that personal info will be collected
2. Consumers should have a say in how this info will be used
3. Consumers should have the ability to check the info collected to ensure that it
is complete and accurate
4. Info collected should be secure
5. Web site should be responsible for seeing that these practices are followed
Other Legal Areas of Concern
• Defamation
• Injuring another’s reputation, honor or good name through false
written or oral communication
• Good Samaritan provision, Section 230 of the Telecommunications
Act protects ISPs from defamation lawsuits
• Children and the Internet
• Younger Internet audiences are able to gain access to the same info
as adults without the constraints that might be found in real space
• Communications Decency Act of 1996 (CDA) and Child Online
Protection Act of 1998 (COPA) were designed to restrict
pornography on the Internet, particularly in the interest of children
• Children’s Online Privacy Protection Act of 2000 (COPPA) prohibits
Web sites from collecting personal info from children under the age
of 13 without parental consent
• Intellectual property
• Copyright – “…protection given to the author of an original
piece, including ‘literary, dramatic, musical, artistic and
certain other intellectual works,’ where the work has been
published or not.”
• To have a copyright, creators must only fix their creation in
a “tangible medium,” such as paper or magnetic disk.
Authors DO NOT have to add their names, dates, or
copyright sign on the medium to have a copyright.
• Napster ?
• Digital Millennium Copyright Act of 1998 (DMCA) represents
the rights of creative bodies to protect their work, as well
as the rights of educators and resource providers to receive
access to the work
• Trademark and domain name registration
• Distinctive symbol, word or phrase used to identify a
business’s products and distinguish them from other
business’s products
• Parasite – selects a domain name based on common typos
made when entering a popular domain name
• Cybersquatting – buys an assortment of domain names that
are obvious representations of the brick-and-mortar
companies
• Anticybersquatting Consumer Protection Act of 1999 (ACPA) –
protects traditional trademarking in cyberspace
• Spam
• Unsolicited email
• Unsolicited Electronic Mail Act of 1999 – protects against spam
(must be able to get off of email list)
• Unsolicited Commercial Electronic Mail Act of 2001 – “protects
individuals, families, and Internet service providers from
unsolicited and unwanted electronic mail”
• Mail Abuse Prevention System (MAPS) – takes consumer complaints
and places address on a list of offenders who are then blocked
• Online contracts
• Electronic Signatures in Global and National Commerce Act of
2000 (E-Sign bill) promotes online commerce by legitimizing online
contractual agreements
• User agreements
• Click-Throughs – must agree to before proceeding
Internet Taxation
• Use Tax
• If vendor and consumer are located in the same state, then a sales
tax can be imposed
• If vendor and consumer are not located in the same state, then the
sale is subject to a use tax
• Internet Tax Commission recommendation in April 2000
• Streamlined Sales Tax Project designed to resolve Internet taxation
issues – suggests that taxation should occur in the state where a
product is delivered and that the state should determine the
percentage taxed
• The National Academy of Science’s National Research Center
suggests a flat tax rate should be collected by the vendor and
returned to the state in which the vendor resides
Accounting Issues
• Revenue Recognition
• Net vs. Gross
• Barter – counted as revenue but should be treated as “fair
value”
• Coupons, Discounts, Loss Leaders – putting sales at full price
and deferring costs
• Fulfillment Costs – are being classified as a marketing
expense instead of cost of sales (which hides operational
expenses amongst huge marketing costs)
• Auctions – are recognizing revenues immediately, but
should be recognizing them over the period that the
item is on the block
FUTURE DIRECTION FOR
CHAPTER
10
ELECTRONIC
COMMERCE
Future of E-Commerce
•
•
•
eMarketer, an Internet technology (IT) research and
reporting firm, estimates that the dollar figure for ecommerce will rise from approximately
• U.S. $18 billion in 1998 to
• U.S. $294 billion in 2002. US
• Or maybe $184 billion by 2004.
(Forrester, Business 2.0 Jan 2000)
In Europe, consumers' internet purchases will jump from:
• US $2.9 billion in 1999 to
• US $174 billion in 2005.
Online business-to-business e-commerce is projected to
speed past $1 trillion in annual revenue by 2003
Future Trends to Watch in ECommerce
• Women take control. Women make or influence 80
percent of household sales in the United States,
according to WomanTrend, despite the fact that they
make up 51 percent of the population.
• The untapped get tapped. Two highly touted markets
$509 million health and beauty, and $513 million grocery
still lag behind expectations.
• More "click and mortar." Traditional retailers Circuit
City, Crate and Barrel, Sears, Toys R Us, Wal-Mart, and
Federated Department Stores missed the boat in 1995
and 1996, but rest assured they "get it" now, and are
attempting re-entry, this time around with more money
and smarts.
Security
Issues are
Important
Still a Long Way To Go
• Andersen Consulting and Forrester Research
both show shopping cart abandonment rates of
25%.
• E-commerce still accounts for less than 1% of
total retail sales
• Pure plays have struggled to maintain cash flow
and have either:
• Folded
• Cut back
• Been bought at cheap prices
LESSON END