MANAGING
INFORMATION
TECHNOLOGY
FIFTH EDITION
CHAPTER 8
E-COMMERCE APPLICATIONS
E. Wainright Martin  Carol V. Brown  Daniel W. DeHayes
Jeffrey A. Hoffer  William C. Perkins
E-COMMERCE TECHNOLOGIES
Electronic commerce – the electronic transmission of
buyer/seller transactions and related information between
individuals and businesses or between two or more
businesses that are trading partners
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Chapter 8 - 2
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E-COMMERCE TECHNOLOGIES
 Will we see continued growth in e-commerce
(Internet) applications?
 Consider Metcalfe’s Law:
The value of a network to each of its members
is proportional to the number of other users,
expressed as (n2 – n) / 2

There are increasing returns to be gained as more
organizations and people use the Web
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E-COMMERCE TECHNOLOGIES
Commercial History of the Internet
© 2005 Pearson Prentice-Hall
Chapter 8 - 4
Figure 8.1 Internet Technology Innovations
for E-Commerce
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E-COMMERCE TECHNOLOGIES
Technologies for B2C Applications

Improvements for online sales or auction
bidding

New channels for customer service

Collection of clickstream metrics and
personal data from Web site users

Acceptance of Web “cookies” stored on
user’s hard drive to enable customization of
Web sites

Web browser improvements with multimedia
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E-COMMERCE TECHNOLOGIES
Technologies for B2B Applications
 Most important technological advance for
B2B applications – XML markup language


Now have accepted standards
Can be used for a flexible, low-entry form of EDI
Electronic data interchange (EDI) – proprietary applications
for communicating with trading partners based on agreedupon standards for business document transmission
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E-COMMERCE TECHNOLOGIES
Technologies for B2B Applications
 EDI Benefits:



Reduced cycle times for doing business
Cost savings for automated transaction handling
and elimination of paper documents
Improved interfirm coordination and reduced
interfirm coordination costs
 EDI Constraints:


Start-up coordination challenges (EDI standards
agreement and legal issues)
Start-up and ongoing IT costs
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E-COMMERCE TECHNOLOGIES
Technologies for B2B Applications
 Prediction:

Web forms using XML and extranet applications
will continue to grow!
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E-COMMERCE TECHNOLOGIES
Technologies for IT Security
 Potential constraint to e-commerce: lack of
security for Internet transactions
 Issues:


How to control access to a computer that is
physically networked to the Internet
How to ensure that security of a given
communication is not violated
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E-COMMERCE TECHNOLOGIES
Technologies for IT Security
How to control access to a computer that is physically networked
to the Internet?

Use of a firewall – devices that sit between the
Internet and an organization’s internal network to
block intrusions from unauthorized users and hackers
How to ensure that security of a given communication is not
violated?

Encryption – based on two decoding keys and
mathematical principles for factoring a product into its
two prime numbers, where one key codes a message
and the other decodes it
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Page 243-244
(Adapted from Applegate, Holsapple, et al. 1996; Kalakota and Whinston, 1996)
© 2005 Pearson Prentice-Hall
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Figure 8.2 E-Commerce Framework
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LEGAL AND REGULATORY
ENVIRONMENT
Tax Policies
Copyright Lays
Antitrust Laws
Privacy Issues
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STRATEGIC OPPORTUNITIES
AND THREATS
 Porter’s Competitive Forces Model
1.
Supplier power
2.
Customer power
3.
Threat of new entrants
4.
Threat of substitute products or services
5.
Responses of competitors
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STRATEGIC OPPORTUNITIES
AND THREATS
 Opportunities due to the Internet:
1.
Procurement of supplies via Internet can
increase company’s power over suppliers
2.
Size of potential market is expanded
3.
Distribution channels between traditional
company and customer can be eliminated
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STRATEGIC OPPORTUNITIES
AND THREATS
 Threats to traditional companies due to
the Internet:
Migration to price competition – difficult to
keep offerings proprietary
2. Increased number of potential competitors
3. Internet reduces some traditional barriers
(such as in-person sales force)
4. Customers increase their bargaining power –
Internet reduces customer’s switching costs
1.
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The four main areas where companies
conduct business online
1. Direct marketing,
selling, and
services
2. Financial and
information
services
3. Maintenance,
repair, and
operations
(MRO)
4. Intermediaries
Maintenance, Repair, & Operations
(MRO)
 MRO goods include – office suppliers, office
equipment, furniture, computers, and
replacement parts
 Internet transforms corporate purchasing
from a labor-and paperwork-intensive
process into a self-service application
Intermediaries
 Content providers – companies that use the Internet
to distribute copyrighted content, including news,
music, games, books, movies, and many other types
of information
 Online brokers – intermediaries between buyers and
sellers of goods and services
 Market makers –intermediaries that aggregate three
services for market participants
 A place to trade
 Rules to govern trading
 An infrastructure to support trading
Types of Intermediaries
E-BUSINESS MODELS
B2C Applications
© 2005 Pearson Prentice-Hall
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Figure 8.4 Potential Benefits
to Sellers and Buyers
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B2B Applications
 If Buyers and Sellers are
Fragmented, Independent
Intermediaries are likely to be
successful.
 If Sellers are Concentrated,
Sellers are likely to dominate.
 If Buyers are Concentrated,
Buyers are likely to dominate.
© 2005 Pearson Prentice-Hall
Chapter 8 - 21
Figure 8.5 Opportunities for B2B Marketplace
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E-BUSINESS MODELS
Atomic Business Models
Weill and Vitale proposition: The value
propositions of eight business models differ
according to the degree to which the following ebusiness assets are captured online:
 Customer transaction – to capture revenue
 Customer data – to capture data about
customer’s purchasing needs
 Customer relationship – ability to influence
customer’s behaviors
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E-BUSINESS MODELS
Atomic Business Models
(Based on Weill and Vitale 2001, Straub 2004)
© 2005 Pearson Prentice-Hall
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Figure 8.6 Business Models and
Their E-Business Assets
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E-BUSINESS MODELS
Atomic Business Models
(Based on Weill and Vitale 2001, Straub 2004)
© 2005 Pearson Prentice-Hall
Chapter 8 - 24
Figure 8.6 Business Models and
Their E-Business Assets
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DIRECT-TO-CUSTOMER EXAMPLES
Amazon.com
 Dot-com pioneer in online retailing of third-party
products
 Began as bookseller competitor
 Now a multi-store, online mall
 First profitable year 2003
 Provides excellent online shopping experiences
for millions of customers
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(© 2004 Amazon.com, Inc. All right reserved.)
© 2005 Pearson Prentice-Hall
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Figure 8.7 Amazon.com Home Page
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DIRECT-TO-CUSTOMER EXAMPLES
Dell.com
 Traditional direct seller and market leader of
made-to-order microcomputers
 Developed custom software to support “mass
customization” strategy
 Took advantage of early penetration of Internet
market
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(Used with permission of Dell Corporation.)
© 2005 Pearson Prentice-Hall
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Figure 8.8 Dell.com Home Page
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DIRECT-TO-CUSTOMER EXAMPLES
Landsend.com
 Traditional catalog company that developed
capability to give online tools to customers so
they could make orders for new custom clothing
via its Web site
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(© 2004 Lands’ End, Inc. Used with permission.)
© 2005 Pearson Prentice-Hall
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Figure 8.9 Landsend.com Home Page
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DIRECT-TO-CUSTOMER EXAMPLES
Successful Online Models
 Amazon.com
 Dell
 Lands’ End
© 2005 Pearson Prentice-Hall
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All developed B2C
Web sites that use
advanced
technologies to
support customized
interactions with
customers
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DIRECT-TO-CUSTOMER EXAMPLES
Successful Online Models
Source: Pew Internet & American Life Project Surveys, 2002
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Figure 8.10 Common Online Activities
by U.S. Consumers
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INTERMEDIARY EXAMPLES
(Based on Weill
and Vitale, 2001)
© 2005 Pearson Prentice-Hall
Chapter 8 - 33
Figure 8.11 Key Characteristics of Six
Types of Intermediaries
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INTERMEDIARY EXAMPLES
eBay
 A dot-com pioneer in electronic auctions
 One of first to achieve profitability
 Now is a C2C, B2B, and B2C intermediary
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These materials have been reproduced with the permission of eBay, Inc. Copyright © eBay, Inc. All rights reserved.
© 2005 Pearson Prentice-Hall
Chapter 8 - 35
Figure 8.12 eBay.com Home Page
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INTERMEDIARY EXAMPLES
Yahoo!
 Early dot-com intermediary
 Has recently leveraged IT innovations and
business acquisitions to become a leading portal
 As a portal, site owns only the customer
relationship
 Primary source of revenue is advertisements
 Through acquisition, now offers online job
searches
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Page 259-260
(Reproduced with permission of Yahoo! Inc. Copyright © 2004 by Yahoo! Inc. YAHOO! And the YAHOO! Logo are trademarks of Yahoo! Inc.)
© 2005 Pearson Prentice-Hall
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Figure 8.13 Yahoo.com Home Page
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INTERMEDIARY EXAMPLES
Manheim
 Traditional B2B intermediary for sale of used
cars
 Has leveraged the Internet to reduce purchasing
and sales costs
 Provides remote, real-time bidding during
physical auctions
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Page 260-261
(Used with permission of Manheim.)
© 2005 Pearson Prentice-Hall
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Figure 8.14 Manheim.com Home Page
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Types of Intermediaries
SPECIAL ISSUE: WHAT
MAKES A GOOD WEB SITE?
 Why is Web page design important?
 For e-commerce applications, the
company’s Web site is the company
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(Based on Rayport and Jaworski, 2004)
© 2005 Pearson Prentice-Hall
Chapter 8 - 42
Figure 8.15 7Cs Framework for
Web Site Design
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