CLARK UNIVERSITY
College of Professional and Continuing Education
(COPACE)
Management Information Systems
Lection 08
E-commerce
Electronic commerce
• E-commerce is a type of industry where
buying and selling of product or service is
conducted over electronic systems such as the
Internet and other computer networks.
• E-commerce is conducting business activities
electronically over computer networks.
5 aspects of e-commerce
• Business processes - replacement business
processes to electronic sphere
• Services - tools of reducing the cost of
providing services
• Education - the engine of online education
• Cooperation - a platform for cooperation
among organizations
• Community - a platform for interaction
between members of some community
E-business
• E-business is more than a broad definition of
e-commerce, it includes not only the buying
and selling of goods and services, but also
customer services, interaction with business
partners and the management of electronic
transactions within the organization.
Forms of e-commerce
Forms of e-commerce organizations
• Clear physical organization carry out their
business off-line.
• Virtual organizations conduct the business
mainly on-line.
• For mixed organizations the e-commerce is an
additional marketing channel.
Sphere of e-commerce
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electroniс data interchange (EDI)
electronic funds transfer (EFS)
e-trade
e-cash
e-marketing
e-banking
e-insurance
Networks used by the e-commerce
• Internet
• Intranet (LAN)
• VAN is a private network that provide specialized
services (e.g., access to commercial databases, email and video-conference, etc.). It allows
controlled access from the outside, for specific
business or educational purposes.
• Separate automated working place (vending
machines)
E-commerce applications
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Direct marketing
Search jobs
Online banking
E-government
E-purchasing
B2B exchanges
B2C exchanges
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C2C exchanges
C-commerce
M-commerce
Auctions
Travel
Online publishing
Consumer services
Support services
• People: Buyers, Sellers, Intermediaries, Service,
Managers
• Public Policy: Taxes, Legal, Privacy Issues,
Regulations, Technical Standards
• Marketing and Advertisement: Market Research,
Promotions, Web content
• Support Services:, Logistics, Payments, Content,
Security system development
• Business Partnerships: Affiliate programs, Joint
ventures, Exchanges, E-marketplaces, Consortia
Electronic Payment Systems
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Credit card
Charge card
Debit card
Smart card: a credit card-sized device with an
embedded microchip to provide electronic
memory and processing capability
Infrastructure
• Common business services infrastructure
(security, smart cards, authentication electronic
payments, catalogs)
• Messaging and information distribution
infrastructure (EDI, e-mail, hypertext transfer
protocol, chat rooms)
• Multimedia content and network publishing
infrastructure (HTML, Java, XML, VRML)
• Network infrastructure (telecom, cable TV
wireless, internet)
• Interfacing infrastructure (with databases,
business partners applications).
Classification of e-commerce
(on the role of participants)
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B2B
B2C
B2B2C
C2B
C2C
B2E
7. P2P
8. m-commerce
9. c-commerce
10.e-learning
11.e-government
Business-to-business (B2B)
• All participants are organizations (for instance,
relationships between the company “Dell”
with the component suppliers).
• Useful tool for connecting business partners in
a virtual supply chain to cut the supply time
and to reduce costs.
Business-to-consumer (B2C)
• The organization sells some goods to the final
customer (e-tailing).
• Customers deal directly with an organization
and avoid intermediaries.
• Advantages:
– can lead to higher profits
– can lead to lower prices for consumers
– many goods and services are cheaper online
– easily comparison of prices, features and value
Business-to-business-to-consumer
(B2B2C)
• Organization provides products or services to
the other organization that provides goods
and services to their own consumers
(company employees), without surcharge
• Social projects
Consumer-to-business (C2B)
• Private persons sell goods and services to the
organizations.
• The private persons are seeking sellers at the
stated price (coral.ru, tez-tour.com).
Consumer-to-consumer (C2C)
• Consumer sells directly to another customer.
• Example: eBay
– Customers buy and sell items directly to each
other through the site
– 181 million users buy and sell items valued at
more than $44 billion
• Other popular online auction Web sites:
Craigslist, uBid, Yahoo! Auctions, Onsale,
WeBidz…
Business-to-employees (B2E)
• Organization provides services, information or
products of employees (usually via the
intranet)
Peer-to-peer (P2P)
• It is a technology that allows to exchange the
data directly between computers.
• It is used in C2C, B2B and B2C types of ecommerce.
Mobile commerce (m-commerce)
• The transactions are made through the
wireless networks.
• Devices are personal digital assistants, cell
phones, smart phones, communicators, tablet PC
and other.
• Only 12 to 14 percent of the world’s 1.8 billion
mobile phone users have ever used the Web from
their phones.
• Internet Corporation for Assigned Names and
Numbers (ICANN) created a .mobi domain to help
attract mobile users to the Web.
Collaborative commerce (c-commerce)
• A private person or a group of persons
communicate and collaborate online.
• Aims:
– to sell products or services more efficiently —
increase leads, improve win rates, and lower customer
support costs
– to buy goods and services more effectively —
negotiate best-value agreements to get the most
return from every penny at the lowest possible risk
– to manage cash more strategically — streamline and
improve invoicing and payment, and optimize working
capital
E-learning
• Training and education online
• It refers to the use of various kinds of
electronic media and information and
communication technologies in education
(text, audio, images, animation, streaming
video, audio or video tape, satellite TV, CDROM…)
E-government
• The state buys or provides goods, services,
information to organizations and citizens or
vice-a-versa.
• Forms of e-Government
– Government-to-consumer (G2C)
– Government-to-business (G2B)
– Government-to-government (G2G)
Multistage Model for E-commerce
(B2B and B2C)
Product and information flows for
HP printers ordered over the Web
Advantages of Electronic and Mobile
Commerce
• Global reach: helps reduce gap between rich
and poor countries
• Reduces costs: increases speed and accuracy
• Speeds the flow of goods and information
• Increases accuracy: eliminates human dataentry error
• Improves customer service: information about
delivery status and ability to meet customer
demand
Threats to Electronic and Mobile
Commerce
• Businesses must ensure that e-commerce and
m-commerce transactions are safe and
consumers are protected
• Number of threats to the continued growth of
e-commerce and m-commerce
– Security, theft of intellectual property, fraud,
invasion of privacy, lack of Internet access, return
on investment, legal jurisdiction, taxation
Security
• Methods to increase security
– Payment Card Industry security standard
– Address Verification System
– Card Verification Number technique
– Visa’s Advanced Authorization process
– Federal Financial Institutions Examination
Council’s “Authentication in an Internet Banking
Environment” guidelines
– Biometric technology
Theft of Intellectual Property
• Intellectual property: works of the mind that are
distinct somehow and are owned or created by a
single entity
– For example: books, films, music, processes, and
software
• Copyright law protects authored works such as
books, film, images, music, and software from
unauthorized copying
• Patents can protect software, business processes,
formulae, compounds, and inventions
Theft of Intellectual Property
(continued)
• Trade secrets
• Digital Rights Management (DRM): use of any
of several technologies to enforce policies for
controlling access to digital media
Fraud
• Phishing: sending bogus messages
purportedly from a legitimate institution to
pry personal information from customers by
convincing them to go to a “spoof” Web site
• Click fraud: arises in a pay-per-click online
advertising environment when additional
clicks are generated beyond those that come
from actual, legitimate users
• Online auction fraud
Invasion of Consumer Privacy
• Online profiling: practice of Web advertisers’
recording online behavior to produce targeted
advertising
• Clickstream data: data gathered based on the
Web sites you visit and the items you click on
Lack of Internet Access
• Digital divide: difference between people who do
and people who don’t have access or capability to
use high-quality, modern information and
communications technology to improve their
standard of living
– Exists between:
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More and less developed countries
Economic classes
The educated and uneducated
Those who live in cities and those who live in rural areas
Return on Investment
• The investment required for a large firm to
establish and operate a B2B or B2C Web site
can be in the millions of dollars
• Common problem with determining return on
investment: difficult to forecast project costs
and benefits
Legal Jurisdiction
• When conducting e-commerce, sales must not
violate county, state, or country legal
jurisdictions
• Examples
– Selling stun guns and similar devices
– Selling cigarettes or alcohol to underage
customers
Taxation
• U.S. Supreme Court ruling: Internet-based
merchants must apply sales tax only when buyers
live in a state where the company has physical
facilities, or “nexus”
• Most businesses set up separate companies to
avoid dealing with nonstandard rules of the more
than 7,500 taxing districts nationwide
– Consumers are responsible for voluntarily remitting
sales taxes
• Difficult for states to collect sales taxes on
Internet purchases
Strategies for Successful
E-Commerce
• Companies must develop effective Web sites
that include the following characteristics:
– Easy to use
– Accomplish the goals of the company
– Safe and secure
– Affordable to set up and maintain
Defining the Web Site Functions
• Decide which tasks the site must accomplish
• Create an attractive presence for the company
• Meet the needs of its visitors
– Examples: obtaining information about the
organization and its products, buying products or
services, getting advice, registering complaints
• Redefining your site’s basic business model to
capture new business opportunities
Establishing a Web Site
• Web site hosting companies
– Allow you to set up a Web page and conduct ecommerce within a matter of days
– Little up-front cost
• Storefront broker: companies that act as
middlemen between your Web site and online
merchants that have the products and retail
expertise
Building Traffic to Your Web Site
• Obtain and register a domain name
• Make your site search-engine-friendly
– Meta tag: special HTML tag that contains
keywords representing your site’s content
• Keywords are used by search engines to build indexes
pointing to your Web site
• Web site traffic data analysis software
• Adapting Web site design for global
consumers
Maintaining and Improving Your Web
Site
• Be alert to new trends and developments in ecommerce
• Be prepared to take advantage of new
opportunities
• Personalization: tailoring Web pages to
specifically target individual consumers
– Explicit: captures user-provided information
– Implicit: captures data from customer Web
sessions
History of e-commerce
• 1970 - Electronic Funds Transfer (EFT)
• 1983 - Electronic Data Interchange (EDI)
• 1990 - the commercialization of the Internet (WWW),
the appearance of the term e-commerce
• 1995 - the appearance of various forms of e-commerce
• 1999 - the shift from B2C to B2B
• 2001 - the shift in the direction of B2E, e-government,
e-learning
• 2005 - development of social networks, m-commerce