Turban, Aronson, and Liang
Decision Support Systems and Intelligent Systems,
Seventh Edition
Chapter 14
Electronic Commerce
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-1
Learning Objectives
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Describe the concepts involved in electronic commerce.
Understand auctions and portal mechanisms.
Know the applications involved in e-commerce.
Learn about electronic market research, eCRM, and online
advertising.
Define collaborative commerce and B2B applications.
Understand e-government activities.
Describe mobile commerce and pervasive computing.
Learn e-commerce infrastructure and support services.
Understand the ethical and legal issues involved in ecommerce.
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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E-commerce Provides Decision
Support to Hi-Life Corp. Vignette
• Convenience store chain needs accurate stock
count
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Overstocking expensive
Understocking results in customer dissatisfaction
Losses due to shrinkage
Manual counts used data collection sheets
• Expensive, labor intensive
• Solution based on handheld computer
– Counts entered relayed immediately to headquarters
– Bar code scanner employed to shorten process, minimize
errors
– Allows for real time product totals
– Dramatic reduction in labor involved
– Lower inventory levels and quicker response time
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-3
E-commerce
• Process of buying, selling, transferring,
exchanging products, services, or information over
computer networks
• Pure versus partial
– Based on degree of digitization
• Product
• Process
• Intermediary
– Pure requires all three components to be fully digitized
• Internet versus non-Internet
– Most are Internet based
– May be value-added networks or local area networks
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-4
E-commerce Transactions
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Business-to-business (B2B)
Business-to-consumer (B2C)
Consumer-to-consumer (C2C)
Consumer-to-business (C2B)
Government-to-citizens (G2C)
Collaborative commerce between partners
Business to employees
Intrabusiness/Intraorganizational
commerce
• Mobile commerce (M-commerce)
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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Scope of E-commerce
• Applications supported by infrastructure
– Hardware
– Software
• Messaging, multimedia, interfaces, business services
– Networks
• communications
• Support areas
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People
Legal and public policy and regulations
Marketing and advertisements
Support services ranging from payments to order delivery
Business partnerships like joint ventures, emarketplaces, affiliations
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
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Advantages
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Advantages:
– Expands marketplace
globally
– Expands availability of
resources
– Shortens marketingdistribution channels
– Decreases expenses
– Reduces inventory
– Aids small businesses in
competing
– Enables specialized niches
– Quicker delivery of
information
– Enables individuals to work
from home
– Facilitates delivery of public
services
– Allows for purchase of
goods at lowered prices
– Enables customization,
personalization
– Decreases costs to
customers, while
increasing their choices
– Allows for 24 hour
shopping
– Makes electronic
auctions possible
– Enables people to
interact in electronic
communities
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-7
Limitations
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Limitations:
– Lack of universal standards
– Insufficient bandwidth
– Software-development tools are still evolving
– Integration difficulties
– Need for special Web servers in addition to network servers
– Accessibility expensive
– Unresolved legal issues
– Lack of national and international governmental regulations
– Lack of mature methodologies to measure benefits and justify
– Customer resistance
– Security questions
– Insufficient number of buyers and sellers for profitable ecommerce operations
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-8
DSS and E-commerce
• DSS supports e-commerce
– DSS allows for scheduling and transportation
optimization
– Match buyers to sellers
– Improves market operations
– Conducts risk analysis
– Optimizes selection of transportation routes
– Assists in running B2C operations
– Data collection
– Business intelligence
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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DSS and E-commerce
• E-commerce facilitates decision support
– Efficient transfer of information
– Enhances decision-support process
– Data collection and storage
• E-commerce works with DSS
– Inventory management
– Produce strategic change in call center by integration of
simulation decision support
– Marketing database applications and distribution systems
– Streaming financial reports
– Comparison shopping engines
– Data transfer and storage for BI analysis
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-10
E-commerce Mechanisms
• Electronic auctions
– Competitive market mechanisms
• Forward auctions
– Sellers place offers and buyers make sequential bids
• Reverse auctions
– Sellers are invited to submit bids on product or service
buyer wants
• Bartering
– Exchange of goods or services without money
transactions
• Portals
– Information gateways
• Single point of access through Web browser
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
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Portals
• Commercial
– Offer content to broad audiences
• Routine
• Little personalization
• Publishing
– Based on specific interests
• Extensive search capabilities
• Personal
– Target specific filtered information
• Narrow content
• Personalized
• Mobile
– Accessible through mobile devices
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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Portals
• Voice
– Audio interfaces
– Accessible through phones
• Corporate
– Access to business information located both
within and outside of organization
• Rich content
• Limited communities
• Organized focal point
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Suppliers
Customers
Employees
Supervisors
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-13
Business to Consumer
Applications
• E-tailing
– Storefronts
• General or specialized
• May be extensions of physical stores
– E-Malls
• Collection of stores under single Internet
address
– Manufacturers may sell direct
– Retailers may act as intermediaries
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
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14-14
DSS Support
• Channel conflict resolution through GDSS tools
• DSS and GDSS can be used for conflict resolution
on pricing, resource allocation, logistics services
• DSS can aid in order fulfillment and logistics of
small quantities
• DSS models can foster strategies and determine
viability
• Identification of appropriate revenue models
• Risk analysis with DSS modeling
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-15
Online Service Industries
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Electronic banking
International banking
Securities trading
Online job market
Travel
Real estate
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
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14-16
Market Research
• E-commerce model of consumer behavior
– Independent uncontrollable variables
• Personal characteristics
– Age, gender, demographics
• Environmental characteristics
– Social, cultural, available information, government
regulations, legal constraints
– Intervening variables
• Vendor controlled
• Market stimuli
• E-commerce systems
– Physical environment, logistics support, customer
services
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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Market Research
– Decision making process
• Influenced by independent and intervening
variables
• Feeds into buyers’ decisions
– Dependent variables
• Buyers’ decisions
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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Market Research
– Decision-making process
• Generic model
– Identification of needs, information search,
evaluation of alternatives, purchase and delivery,
after-purchase evaluation
• Consumer decision support system model
– Support facilities from CDSS and Internet and
Web produce framework for Web purchasing
• Online buyer decision support model
– Customer decision-making guided by Web
purchasing models
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
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© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-20
Discovering Customer Desires
• Software agent search engines
• Intelligent agents
– Monitor site activity
– Searching and filtering agents for customers
– Comparison agents
• Electronic questionnaires
• Site tracking
– Cookies, Web bugs, spyware
• Collaborative filtering through inference of
interest
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-21
E-commerce CRM
• During life cycle of product
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Determine customer requirements
Help customer acquire product or service
Ongoing support
Aid in disposal
• Tools available
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FAQs
E-mail messaging
Track status of order
Personalization of Web pages and information at
vendor’s site
– Chat rooms and communities
– Web-based call centers
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-22
Online Advertising
• Media rich, dynamic, interactive
• Types
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Banners
Pop-ups and pop-unders
E-mail advertisements
Electronic catalogs and brochures
Advertisement postings in chatrooms, communities, and
newsgroups
– Online classifieds
• Issues
– Spam
• Permission marketing
• Viral marketing
– Passive, mass market advertising
• Interactive advertising
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-23
B2B Applications
• Sell-side marketplaces
– Private e-marketplaces operated by seller
• Electronic catalogs
• Forward auctions
• Buy-side marketplaces
– Reverse auction
– Third-party bidding marketplace or buyer’s Web
site
– Procurement models
• Group purchasing
• Desktop purchasing
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-24
B2B Applications
• Electronic exchanges
– E-marketplaces with many sellers and buyers
• Types
– Systematic sourcing by vertical distributors of
direct materials
– Indirect materials sold on “as needed” basis
with dynamic pricing
– Systematic sourcing for indirect materials at
fixed pricing
– Spot sourcing of services on “as needed” basis
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-25
Collaborative E-commerce
• Non-sales based e-commerce transactions
between organizations
• Electronic support of communication,
information sharing, joint decision making
• Types
– Retailers/suppliers
– Vendor-managed inventories supplied to
retailers
– Product design
– Collaborative manufacturing through
outsourcing of components and subassemblies
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
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Collaborative E-commerce
• Collaborative workflow management
– Planning and scheduling
– Design
– New product information
– Product-content management
– Order management
– Sourcing and procurement
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-27
Intrabusiness E-commerce
• B2E
– Intranet-enabled business between business
and employees
• E-commerce between business units
– Organization units sell and buy materials and
products from each other
• E-commerce between corporate
employees
– Classified ads
• Sales force automation
– Empowerment of salespersons
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-28
E-government
• Use of Internet technologies and e-commerce to
deliver information and services to citizens
– Gives citizens more access to information
– Allows for more feedback from citizens
– Facilitates fundamental changes in relationships between
citizen and government
• Types
– Government-to-citizens (G2C)
• Electronic benefits transfer, payment of taxes
– Government-to-business (G2B)
• RFQs, RFBs, reverse auctions
– Government-to-government (G2G)
• Sharing of databases, information
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-29
E-learning
• Online delivery of information for educational or
training purposes
• Benefits
– Eliminates barriers of time, distance, socioeconomic
status
– Saves money, reduces travel time
– Increases access to experts
– Enables large numbers to take classes
– Provides on-demand, self-paced learning
• Limitations
– Special training for instructors and students
– Requires special equipment and support services
– Lack of face-to-face interaction
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-30
Customer to Customer
E-commerce
• Buyers and sellers not businesses
• Types
– Auctions
– Classified ads
– Personal services
– Bartering
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-31
Variants of E-Commerce
• Mobile commerce
– E-commerce through use of mobile computing devices
on wireless networks
• Advantages
– Mobility
– People can be reached at any time
• L-commerce
– Location-based mobile commerce
• Information pushed out to recipient based on their current
location
• Pervasive computing
– Computations become part of the environment
• Embodied in things
• Based on intelligent systems
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-32
E-commerce Support Systems
• Electronic payments
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Electronic checks
Electronic credit cards
Virtual credit cards
Purchasing cards
Electronic cash
• Stored value money cards
• Smart cards with microprocessors
• Person-to-person payments
– Payment of bills online
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-33
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-34
Security in Electronic Payments
• Authentication of all parties
• Protection of data from alteration or
destruction during transmission
• Protection from buyer’s unjustified
repudiation
• Privacy
• Customer safety
• Protection of information at seller’s
end
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-35
Order Fulfillment in Electronic
Commerce
• Provide customers with ordered
goods
• Goods must be quickly packaged,
shipped, and delivered
• Payment collection system must be in
force
• Handle the return of unwanted or
defective merchandise
• Customer relations
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-36
Legal and Ethical Issues
• Fraud
– Seller’s and buyer’s
• Buyer protection
• Seller protection
– Unwarranted repudiation
– Intellectual property rights
– Domain names
• Privacy issues
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Cookies
Web tracking
Sales of lists
Monitoring e-mails and site visits
• Taxation
• Disintermediation
• Intellectual Property issues
© 2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th Edition,
Turban, Aronson, and Liang
14-37