McLeod_CH03.ppt 345KB Mar 20 2011 09:28:40 PM

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Management

Information Systems,

10/e

Raymond McLeod and George

Schell

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2 2

Chapter 3

Using Information Technology

to Engage in Electronic

Commerce

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Learning Objectives

► Recognize the importance and advantages of _{Recognize the importance and advantages of} electronic commerce.

electronic commerce.

► Understand how electronic commerce is _{Understand how electronic commerce is} being blended into everyday business

being blended into everyday business

processes.

► Understand the difference between business-_{Understand the difference between} business-to-business electronic commerce and

to-business electronic commerce and

business-to-commerce electronic commerce.

► Be familiar with examples of good business-_{Be familiar with examples of good} business-to-business electronic commerce and

to-business electronic commerce and

business-to-consumer electronic commerce.

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Management Information S ystems, 10/e Raymond Mc Leod and George Schell

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Learning Objectives (Cont’d)

► Know the role that Interorganizational _{Know the role that Interorganizational}

systems, the Internet, and the world Wide

Web play in electronic commerce.

► Know what factors influence the adoption of _{Know what factors influence the adoption of} Interorganizational systems.

Interorganizational systems.

► Recognize the movement from electronic _{Recognize the movement from electronic} data interchange to various Web-standard

data interchange to various Web-standard

data exchange practices.

► Understand why many firms choose to have _{Understand why many firms choose to have} both a virtual store and a physical store.

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Electronic Commerce

►

Electronic Commerce (E-

Electronic Commerce

(E-commerce)

commerce)

refers to a business

transaction that uses network access,

computer-based systems, and a Web

browser interface.

►

Business-to-consumer (B2C)

refers

to transactions between a business

and the final consumer of the product.

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E-commerce (Cont’d)

►

Business-to-business (B2B)

refers

to transactions between businesses in

which neither one is the final

consumer.

►

Electronic Government (E-gov)

refers to transactions between a

government agency and typically a

citizen.

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►

Main benefits to firms:

 _{Improved customer service before, during,}_{Improved customer service before, during,}

and after the sale.

 _{Improved relationships with suppliers and}_{Improved relationships with suppliers and}

the financial community.

 _{Increased economic return on stockholder}_{Increased economic return on stockholder}

and owner investments.

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E-commerce (Cont’d)

►

Main constraints to firms:

 _{High costs.}_{High costs.}

 _{Security concerns.}_{Security concerns.}

 _{Immature or unavailable software.}_{Immature or unavailable software.} ►

Scope of E-commerce

 WWW.CENSUS.GOVWWW.CENSUS.GOV

 _{Link to the E-stats Web page to find the}_{Link to the E-stats Web page to find the}

most current e-commerce figures.

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Business Intelligence

► Business Intelligence (BI)_{Business Intelligence (BI)} is the activity _{is the activity} of gathering information about the elements

of gathering information about the elements

in the environment that interacts with the

firm.

► External databases_{External databases} are commercial _{are commercial}

databases that, usually for a fee, provide

information and analyses on virtually any

subject.

subject. WWW.LEISNEXIS.COMWWW.LEISNEXIS.COM, , WWW.DIALOG.COM

WWW.DIALOG.COM, , WWW.GXS.COMWWW.GXS.COM, ,

WWW.THOMASNET.COM

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Business Intelligence (Cont’d)

►

Firms use these databases to gather BI

because it is faster and less expensive

than trying to research a wide array of

information sources.

►

Government databases

offer a wide

range of topics for researchers in

many fields.

WWW.LOC.GOV

,

WWW.CENSUS.GOV

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Business Intelligence (Cont’d)

►

Firms are more inclined to initiate their

own external searches for market

intelligence.

►

Search engines are the most popular

means for people to obtain information

available from the Web.

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► Search engine_{Search engine} is a special computer _{is a special computer}

program that asks a user for a word or group

of words to be found.

of words to be found. WWW.GOOGLE.COMWWW.GOOGLE.COM, , WWW.YAHOO.COM

WWW.YAHOO.COM, , WWW.MSN.COMWWW.MSN.COM, ,

WWW.ASKJEEVES.COM

► Searches the content of web sites on the _{Searches the content of web sites on the} Internet to see if the word or words are on

Internet to see if the word or words are on

any Web sites.

► Makes it possible to scan large volumes of _{Makes it possible to scan large volumes of} information quickly, easily, and thoroughly.

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[image:14.720.18.720.78.521.2]

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E-commerce Strategy &

Interorganizational Systems

► Interorganizational system (IOS)_{Interorganizational system (IOS)} is the _{is the} strategy in which a firm is linked with

strategy in which a firm is linked with

transmissions of electronic data with other

firms so that all of the firms work together

as a coordinated unit, achieving benefits

that each could not achieve alone.

 _{Participating firms are called}_{Participating firms are called}_{trading partners}_{trading partners}_,_,

business partners

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E-commerce Strategy & IOS

(Cont’d)

►

E-commerce

is fundamental to IOSs.

►

Electronic data interchange (EDI)

is a means for achieving an IOS; a

subset.

►

E-commerce and EDI are the highways

of IOSs.

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IOS Benefits

►

Comparative Efficiency

is obtained

by the IOS because the trading

partners can produce their goods and

services with greater efficiency and

provide their goods and services at

lower costs to their customers. (

price

advantage over competitors)

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Comparative Efficiency

Improvements

► Internal efficiencyInternal efficiency within the firm’s own _{within the firm’s own} operations.

operations.

 _{Gather & analyze data quickly.}_{Gather & analyze data quickly.}  _{Make decisions faster.}_{Make decisions faster.}

► Interorganizational efficiencyInterorganizational efficiency gained by _{gained by} working with other firms.

working with other firms.

 _{Offer more products and services.}_{Offer more products and services.}  _{Serve more customers.}_{Serve more customers.}

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IOS Benefits

►

Bargaining Power

is the ability of a

firm to resolve disagreements with its

suppliers and customers to its own

advantage

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Bargaining Power

Improvements

► Unique product featuresUnique product features enable firms to _{enable firms to}

offer better service to their customers in the

form of easier ordering, quicker shipments,

and faster response times to requests for

information.

► This better service becomes a feature of the _{This better service becomes a feature of the} firm’s products, making them more

firm’s products, making them more

appealing that similar products offered by

competitors.

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Bargaining Power

Improvements

► Reduced search-related costsReduced search-related costs can reduce _{can reduce}

the firm’s “shopping” cost that its customers

incur in searching for a supplier, identifying

alternative products, and getting the lowest

price.

► The firm is a customer of its suppliers, the _{The firm is a customer of its suppliers, the} firm can realize the same shopping-cost

firm can realize the same shopping-cost

reductions when ordering from its suppliers.

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Bargaining Power

Improvements (Cont’d)

► Increased switching costs Increased switching costs is when a firm _{is when a firm} makes it more expensive, in cost and/or

makes it more expensive, in cost and/or

convenience, for customers to switch to a

competitor.

► Providing customers with such information _{Providing customers with such information} resources as hardware, software, and data

resources as hardware, software, and data

communications channels that would have

to be replaced if products were purchased

from another firm.

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IOS

► Vendor stock replenishment _{Vendor stock replenishment}is a special _{is a special} type of IOS in that the customer trusts the

type of IOS in that the customer trusts the

supplier enough to allow the supplier to

access its computer-based inventory

system.

► The supplier initiates the replenishment _{The supplier initiates the replenishment} process by electronically monitoring the

process by electronically monitoring the

firm’s inventory levels.

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EDI

►

EDI consists of direct computer-to-

EDI consists of direct

computer-to-computer transmissions of data in a

computer transmissions of data in a

machine-readable, structured format.

►

Older technology, but majority of B2B

commerce use.

►

Enables data to be transmitted and

received without rekeying.

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EDI (Cont’d)

►

Equipment (communications lines,

hardware, etc.) and support services

provided by telephone companies

(AT&T, MCI, et. al.)

►

Value-added network (VAN)

is when

the services that operate and manage

the communications line (circuit) are

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EDI (Cont’d)

►

EDI is the dominant implementation of

an IOS.

 _{More that 2/3}_{More that 2/3}rdrd of e-commerce is of e-commerce is

conducted using EDI compared to other

alternatives.

 _{More costly 5,000-30,000 per year with a}_{More costly 5,000-30,000 per year with a}

single vendor or customer

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Extranet

► Extranets_Extranets enable the sharing of sensitive _{enable the sharing of sensitive}

computer-based information with other firms

using information technology over the

internet.

► Used in collaboration with trusted suppliers _{Used in collaboration with trusted suppliers} and large customers

and large customers..

► Security and privacy are serious concerns, _{Security and privacy are serious concerns,} so extranets are generally secured behind a

so extranets are generally secured behind a

firewall and use encryption such as

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Extranet (Cont’d)

►

Firewall permits only authorized users

to access the firm’s information.

►

Extranets allow for the same type of

data exchange as EDI.

►

Extranets incorporate the common

protocols and communication

networks of the Internet which results

in a great cost savings (EDI is costly to

use).

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IOS Adoption Influences

► Proactive and reactive business partners_{Proactive and reactive business partners} ► Adoption influences_{Adoption influences}

 _{Competitive pressures}_{Competitive pressures}_{(HIGH, firm is reactive in}_{(HIGH, firm is reactive in} adopting IOS, usually EDI)

adopting IOS, usually EDI)

 _{Exercised power}_{Exercised power}_{(powerful firm is proactive in}_{(powerful firm is proactive in} adopting/demanding IOS)

adopting/demanding IOS)

 _{Internal need}_{Internal need}_{(firms see participation as a way to}_{(firms see participation as a way to} improve)

improve)

 _{Top management support}_{Top management support}_{(ALWAYS influences the}_{(ALWAYS influences the} decision)

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[image:30.720.37.685.107.516.2]

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IOS Benefits

► Direct benefits_{Direct benefits}

 _{Reduced data entry errors}_{Reduced data entry errors}  _{Lower costs}_{Lower costs}

 _{Increased operational efficiency}_{Increased operational efficiency}

► Indirect benefits_{Indirect benefits}

 _{Increased ability to compete}_{Increased ability to compete}

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[image:32.720.56.717.62.511.2]

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Figure 3.3 IOS Direct & Indirect

Benefits

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B2C Strategies for

E-commerce

commerce

► Important to understand B2C Strategies_{Important to understand B2C Strategies}

 _{More products and services are becoming}_{More products and services are becoming} available for digital delivery.

available for digital delivery.

 _{More consumers are overcoming their reluctance}_{More consumers are overcoming their reluctance} to purchase using the Web.

to purchase using the Web.

 _{Higher communication speeds in homes has}_{Higher communication speeds in homes has} made delivery of digital products practical.

made delivery of digital products practical.

 _{Fear of information theft has been replaced with}_{Fear of information theft has been replaced with} acceptance.

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Digital Products

► Entertainment – songs, albums, movies, etc. _{Entertainment – songs, albums, movies, etc.} WWW.SONY.COM

WWW.SONY.COM

► Computer programs & updates – virus _{Computer programs & updates – virus} protection software, tax software, etc.

protection software, tax software, etc.

► Services – _{Services –}WWW.LENDINGTREE.COM_{WWW.LENDINGTREE.COM} ► Can be consumed as soon as they are _{Can be consumed as soon as they are}

downloaded

► Purchasers incur a substantial cost of the _{Purchasers incur a substantial cost of the} transaction in terms of computer cost,

transaction in terms of computer cost,

online connection fees, storage media, and

so on.

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Physical Products

►

Must be transported to the consumer.

►

Shipment has to be arranged.

►

Traditional delivery methods are slow.

►

Faster delivery time options are costly.

►

Mail/shipping companies offers

services such as online tracking that

allows more information and control

over delivery.

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Virtual vs. Hybrid Sales

► Virtual sales_{Virtual sales} are those made by a firm that _{are those made by a firm that} does not operate a physical storefront.

does not operate a physical storefront.

 _{Customer can’t enter and purchase the product.}_{Customer can’t enter and purchase the product.}

► Hybrid sales_{Hybrid sales} occur when firms have both a _{occur when firms have both a} physical storefront and a Web site where

physical storefront and a Web site where

customers can purchase products.

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Virtual Sales Challenges

►

Provide necessary product information

without overwhelming the customer.

►

Communicating image files from the

web site to the customer’s computer

can take time.

►

Payment over the Internet has suffered

bad press – credit card fraud.

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Hybrid Sales

►

Most firms had storefronts before sales

over the Internet were possible.

►

Necessary to their business plans.

►

Stores act as showcases for products.

►

Convenience of shopping over the

Web.

►

B2C sales means less inventory at its

store; more sales floor space.

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Virtual Sales (Cont’d)

►

Limit images displayed response time,

WWW.OFFICEDEPOT.COM

.

►

Secure data transfer of credit card

information.

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The Next Step for

E-commerce

commerce

► Mobile commerce (m-commerce)_{Mobile commerce (m-commerce)} is the _{is the} use of cell phones and

use of cell phones and personal digital personal digital assistants (PDAs)

assistants (PDAs) to engage in wireless e- to engage in wireless e-commerce.

commerce.

► Third generation (3G) _{Third generation (3G)}

telecommunications

telecommunications is data-capable is data-capable wireless technologies.

wireless technologies.

► Europe purchased 3G licenses in 2000; U.S. _{Europe purchased 3G licenses in 2000; U.S.} in 2004.

in 2004.

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M-commerce

►

Early applications included news

services, financial information

alert/transactions, and banking.

►

Movie ticket purchases, parking

payments, etc. gaining acceptance.

►

Japan is 1

stst

country to have a 3G

carrier (almost all Japanese have a cell

phone).

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The Next Step … (Cont’d)

► Wireless Internet Hot spots_{Wireless Internet Hot spots} are created _{are created} using a wired connection (for high

using a wired connection (for high

communications speed) and then broadcast

via a wireless access point to an area

approx. 100 meters, Starbucks.

► Business-class wireless computing_{Business-class wireless computing}

would provide fast wireless communication

everywhere over the same communications

carrier as cell phones, Verizon.

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Using the Internet

►

The origin of the Internet can be traced

to 1969, when the U.S. government

established a network called ARPANET.

►

ARPANET demonstrated that it was

possible for a person to request and

receive data over a complex network

that included many computers and

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World Wide Web

► World Wide Web (WWW)_{World Wide Web (WWW)} efforts began in _{efforts began in} 1989 when Tim Berners-Lee came up with a

1989 when Tim Berners-Lee came up with a

idea for physicists to communicate.

► Hypertext_Hypertext - electronic documents that are _{- electronic documents that are} linked together.

linked together.

► Physicists would be able to click on words or _{Physicists would be able to click on words or} phrases displayed on their computer screens

phrases displayed on their computer screens

and retrieve the hypertext.

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WWW (Cont’d)

► Hypertext became a reality in 1992._{Hypertext became a reality in 1992.}

► Hypermedia_Hypermedia is to transmit multimedia _{is to transmit multimedia}

consisting of text, graphics, audio, and video

over the WWW.

► WWW (Web)_{WWW (Web)} is information accessible via _{is information accessible via} the Internet whereby hypermedia

the Internet whereby hypermedia

documents (computer files) are stored and

then retrieved by means of a unique

addressing scheme.

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WWW Terms

► Web site_{Web site} – collection of Web pages._{– collection of Web pages.}

► Hypertext link_{Hypertext link} – pointer (text or a graphic) _{– pointer (text or a graphic)} used to access hypertext stored at a

used to access hypertext stored at a

Website.

► Web page_{Web page} – hypermedia file stored at a _{– hypermedia file stored at a} unique Website address.

unique Website address.

► Home page_{Home page} – first page of a Web site._{– first page of a Web site.}

► Browser_Browser – software designed to find and _{– software designed to find and} read files on the Internet written in

read files on the Internet written in

hypertext markup language (HTTP)

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WWW Terms (Cont’d)

► Uniform resource locator (URL)_{Uniform resource locator (URL)} – unique _{– unique}

address of a Web page.

► Protocol_Protocol – set of standards that govern _{– set of standards that govern}

communication of data (HTTP, FTP, URL).

► Domain name_{Domain name} – address of the website where a _{– address of the website where a}

Web page is stored.

► Path_Path – certain directory/subdirectory and file at the _{– certain directory/subdirectory and file at the}

Website.

► File Transfer Protocol (FTP)_{File Transfer Protocol (FTP)} users can copy files _{users can copy files}

onto their computers from any web site.

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[image:48.720.25.701.94.510.2]

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Understanding the Difference

► Internet_Internet is a global communications _{is a global communications} network that connects millions of

network that connects millions of

computers.

 _{Provides the network architecture.}_{Provides the network architecture.}

► Web_Web is a collection of computers acting as _{is a collection of computers acting as} content servers that host documents

content servers that host documents

formatted to enable viewing of text,

graphics, and audio as well as allowing

linkages to other documents on the Web.

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Cyberspace & the

Information Superhighway

►

Cyberspace

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a society that had

become a slave to technology.

►

Information Superhighway

describes a positive force that gives

everyone access to the wealth of

information that exists in modern

society.

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Internet Standards

►

Internet Society

(1992) promotes

commercial internet use.

►

Internet Engineering Task force

(IETF)

responsible for Internet

standards.

►

World Wide Web Consortium

(W3C)

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E-commerce & Hospital

Supply Chain Management

► Hospitals conduct most of their purchases online._{Hospitals conduct most of their purchases online.}

 _{Only 5 % benefit compared to manual purchasing.}_{Only 5 % benefit compared to manual purchasing.}

► Hospitals can use a standard protocol such as the _{Hospitals can use a standard protocol such as the}

Internet to replace EDI.

 _{Global Healthcare Exchange (WWW.GHX.COM) help}_{Global Healthcare Exchange (WWW.GHX.COM) help}

hospitals implement clinical commercial exchange hospitals implement clinical commercial exchange

 _{Hospitals have hundreds, sometimes thousands, of}_{Hospitals have hundreds, sometimes thousands, of}

vendors, the savings is substantial. vendors, the savings is substantial.

► Speed and ease of connection to a new vendor for _{Speed and ease of connection to a new vendor for}

e-commerce is a strong incentive for change.

 _{Analyze purchase requests.}_{Analyze purchase requests.}

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Business Applications of the

Internet

► Retailing Operations _{Retailing Operations}

 _{Most of the large retail chains have established a Web}_{Most of the large retail chains have established a Web}

presence. presence.

 _{Retailers make their home pages directly accessible}_{Retailers make their home pages directly accessible}

through the Web. through the Web.

► Virtual mall_{Virtual mall} combine with other stores in a _{combine with other stores in a}

collection sites.

► Retailing organizations changing the face of Web _{Retailing organizations changing the face of Web}

information.

 WWW.AUTOBYTEL.COMWWW.AUTOBYTEL.COM  WWW.AMAZON.COMWWW.AMAZON.COM

► _{Over 70% of Internet users make a yearly online}_{Over 70% of Internet users make a yearly online}

purchase.

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Suggestions for Successful

Internet Use

► Make sure your Web site is robust._{Make sure your Web site is robust.}

► Make sure your browser and database structure are _{Make sure your browser and database structure are}

both flexible and intuitive.

► Emphasize content._{Emphasize content.} ► Update often._{Update often.}

► Look beyond customers._{Look beyond customers.}

► Target content to specific users’ needs._{Target content to specific users’ needs.} ► Make interface intuitive._{Make interface intuitive.}

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Future Impact of the Internet

on Business

►

E-commerce is growing in the U.S. and

worldwide (15% annually past 5

years).

►

3G and even faster 4G phone service.

►

Increase use of cellular phones for

purchases.