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MIS
CHAPTER 8
E-COMMERCE
Hossein BIDGOLI
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
learning outcomes
LO1
Define e-commerce and describe its advantages,
disadvantages, and business models.
LO2
LO3
Explain the major categories of e-commerce.
LO4
Summarize the major models of business-tobusiness e-commerce.
LO5
Describe mobile- and voice-based e-commerce.
Describe the business-to-consumer e-commerce
cycle.
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
l e a r n i n g o u t c o m e s (cont’d.)
LO6
Explain two supporting technologies for ecommerce.
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Defining E-Commerce
• E-business
– Activities a company performs for selling and buying
products and services, using computers and
communication technologies
• E-commerce
– Buying and selling goods and services over the
Internet
– Builds on traditional commerce by adding the
flexibility that networks offer and the availability of
the Internet
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Defining E-Commerce (cont’d.)
• Business applications that use the Internet:
–
–
–
–
–
–
–
–
Buying and selling products and services
Collaborating with other companies
Communicating with business partners
Gathering business intelligence on customers and
competitors
Providing customer service
Making software updates and patches available
Offering vendor support
Publishing and disseminating information
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
The Value Chain and E-Commerce
• Value chain
– Michael Porter
– 1985
– Series of activities designed to meet business needs
by adding value (or cost) in each phase of the
process
• Supporting activities:
– Organizational infrastructure, human resource
management, technological development, and
procurement
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Exhibit 8.1
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
Michael Porter’s Value Chain
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Chapter 8 E-Commerce
The Value Chain and E-Commerce (cont’d.)
• Primary activities:
–
–
–
–
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Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
• The Internet
– Increases the speed and accuracy of communication
between suppliers, distributors, and customers
– Low cost means companies of any size can participate
in value chain integration
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
E-Commerce versus Traditional Commerce
• Internet and telecommunication technologies
play major role
• No physical store
• Click-and-brick e-commerce
– Mix of traditional and e-commerce
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Twitter Helps Businesses to Find Customers
• Twitter can be used by businesses as a promotional tool
and as a way to find sales leads
• Boloco, a burrito restaurant chain, posted a photo of a
coupon on Twitter and invited customers to bring in any
image of the coupon -- a photocopy, a printout, or even
an image on a mobile phone -- to get the discount
• The promotion was a big success, given that 900
customers redeemed the coupon (including by bringing
their mobile phones) as opposed to the usual 350
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Advantages and Disadvantages of E-Commerce
• Advantages:
– Better relationships with suppliers, customers,
business partners
– Price transparency
– Round the clock and globe operations
– More information on potential customers
– Increasing customer involvement
– Improving customer service
– Increasing flexibility and ease of shopping
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Advantages and Disadvantages of E-Commerce
(cont’d.)
– Increasing the number of customers
– Increasing opportunities for collaboration with
business partners
– Increasing return on investment because inventory
needs are reduced
– Offering personalized services and product
customization
– Reducing administrative and transaction costs
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Advantages and Disadvantages of E-Commerce
(cont’d.)
• Disadvantages:
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Bandwidth capacity problems
Security issues
Accessibility
Acceptance
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
E-Commerce Business Models
• E-commerce companies focus their operations in
different parts of the value chain
• Types:
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Merchant
Brokerage
Advertising
Mixed
Informediary
Subscription
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Exhibit 8.3
Business-to-Consumer E-Commerce
Major Categories of E-Commerce
Business-to-Consumer
E-Commerce
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Business-to-Consumer E-Commerce (cont’d.)
• Companies sell directly to consumers
• Examples:
– Amazon.com
– Barnesandnoble.com
– Onsale.com
• Types:
– Pure-play
– Brick and mortar stores with virtual storefronts
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Business-to-Business E-Commerce
• Involves electronic transactions between
businesses
• Electronic data interchange (EDI) and electronic
funds transfer (EFT)
• Fastest growing segment of e-commerce
• Uses:
– Purchase orders, invoices, inventory status, shipping
logistics, business contracts, and other operations
• Example:
– Walmart
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Chapter 8 E-Commerce
Consumer-to-Consumer E-Commerce
• Involves business transactions between users
• Online classified ads:
– Craigslist.org
• Online auction sites:
– eBay.com
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Chapter 8 E-Commerce
Consumer-to-Business E-Commerce
• Involves people selling products or services to
businesses
• Example:
– Creating online surveys
• Search for sellers of a product and services
– Priceline.com
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Chapter 8 E-Commerce
Government and Nonbusiness E-Commerce
• E-government applications
• Categories:
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–
–
–
Government-to-citizen (G2C)
Government-to-business (G2B)
Government-to-government (G2G)
Government-to-employee (G2E)
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Chapter 8 E-Commerce
Government and Nonbusiness E-Commerce (cont’d.)
• Nonbusiness organizations:
– Universities
– Nonprofits
– Political and social organizations
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Organizational or Intrabusiness E-Commerce
• Involves e-commerce activities that take place
inside an organization
• Can include:
– Exchange of goods, services, or information among
employees
– Conducting training programs and offering human
resource services
• Supporting activities in Porter’s value chain
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Chapter 8 E-Commerce
A B2C E-Commerce Cycle
• Major activities:
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Information sharing
Ordering
Payment
Fulfillment
Service and support
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Exhibit 8.3
MIS, Chapter 8
©2011 Course Technology, a part of Cengage Learning
Major Activities in B2C E-Commerce
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Chapter 8 E-Commerce
B2B E-Commerce: A Second Look
• B2Bs use these additional technologies
extensively:
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Intranets
Extranets
Virtual private networks
Electronic data interchange (EDI)
Electronic funds transfer (EFT)
• Lowers production costs and improves accuracy
– By eliminating many labor-intensive tasks
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Chapter 8 E-Commerce
Major Models of B2B E-Commerce
• Three major types of B2B e-commerce models,
based on who controls the marketplace:
– Seller
– Buyer
– Intermediary (third-party)
• Fourth model called trading partner agreements
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Seller-Side Marketplace
• Most popular B2B model
• Sellers who cater to specialized markets come
together to create a common marketplace for
buyers
• E-procurement
– Enables employees in an organization to order and
receive supplies and services directly from suppliers
– Can also automate some buying and selling activities
• Major vendors of e-commerce and B2B solutions
include I2 Technologies, IBM, Oracle, and SAP
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Chapter 8 E-Commerce
E-Procurement at Schlumberger
• Schlumberger
– Oil field services provider
• E-procurement system for order processing
– Has reduced the cost per order by streamlining
paperwork
– Replaced a centralized electronic data interchange
(EDI) procurement system
– Easy-to-use interface
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Buyer-Side Marketplace
• Buyer, or a group of buyers, opens an electronic
marketplace
– Invites sellers to bid on announced products or
requests for quotation (RFQs)
• Buyers can:
– Manage the procurement process more efficiently
– Lower administrative costs
– Implement uniform pricing
• Large corporations, such as General Electric or
Boeing
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Third-Party Exchange Marketplace
• Controlled by a third party
• Marketplace generates revenue from the fees
charged for matching buyers and sellers
• Usually active in vertical or horizontal
market
• Offers suppliers a direct channel of
communication to buyers through online
storefronts
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Worldbid.com: A Third-Party Exchange Marketplace
• International marketplace
• Designed to help small to mid-sized companies
buy and sell products or services domestically or
internationally
• Provides:
– Trade leads
– Request for proposals for private and government
organizations worldwide
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Trading Partner Agreements
• Automate negotiating processes and enforce
contracts between participating businesses
• Business partners can send and receive bids,
contracts, and other information needed when
offering and purchasing products and services
• Enables customers to submit electronic
documents via the Internet that previously
required hard copies with signatures
– Using XML
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Mobile and Voice-Based E-Commerce
• Mobile commerce (m-commerce)
– Based on Wireless Application Protocol (WAP)
– Using handheld devices, such as smart phones or
PDAs, to conduct business transactions
• Supporting technologies:
– Wireless wide-area networks and 3G networks
– Short-range wireless communication technologies
• Examples:
– iPhone apps
– Internet Explorer Mobile
– Google mobile
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Chapter 8 E-Commerce
Mobile and Voice-Based E-Commerce (cont’d.)
• Voice-based e-commerce
– Rely on voice recognition and text-to-speech
technologies
– Can conduct business using e-wallets
– Security features
• Call recognition, voice recognition, fixed shipping
address
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
E-Commerce Supporting Technologies
• Electronic payment systems
• Web marketing
• Search engine optimization
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Chapter 8 E-Commerce
Electronic Payment Systems
• Electronic payment
– Money or scrip that is exchanged only electronically
• Payment cards:
– Credit, debit, charge, and smart cards
• Smart cards
– Credit card sized
– Contain an embedded microprocessor chip storing
important financial and personal information
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Chapter 8 E-Commerce
Electronic Payment Systems (cont’d.)
• Other types of payments:
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E-cash
E-check
E-wallets
PayPal
Micropayments
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Chapter 8 E-Commerce
Web Marketing
• Uses the Web and its supporting technologies to
promote goods and services
• Terms:
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Ad impression
Banner ads
Click
Cost per thousand (CPM)
Cost per click (CPC)
Click-through rate (CTR)
Cookie
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Chapter 8 E-Commerce
Web Marketing (cont’d.)
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Hit
Meta tag
Page view (PV)
Pop-up ads
Pop-under ads
Splash screen
Spot leasing
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Search Engine Optimization
• Method for improving the volume or quality of
traffic to a Web site
• Some companies offer SEO service
– Editing a site’s contents and HTML code to increase
its relevance to specific keywords
• Recommendations for optimizing a Web site:
– Keywords
– Page title
– Inbound links
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©2011 Course Technology, a part of Cengage Learning
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Chapter 8 E-Commerce
Summary
• Michael Porter’s value chain, compared ecommerce with traditional commerce
• Major e-commerce business models
• Main categories of e-commerce
• B2C e-commerce business cycle
• B2B e-commerce business models
• Mobile and voice e-commerce
• Supporting technologies
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©2011 Course Technology, a part of Cengage Learning
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