1

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

7

Electronic Commerce Systems

2

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

Identify the major categories and trends of e-commerce applications.

Identify the essential processes of an e-commerce system, and give examples of how they are implemented in e-commerce applications.

3

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives (continued)

Identify several key factors and Web store requirements needed to succeed in e-commerce.

Identify the business value of several types of e-commerce marketplaces.

4

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives (continued)

Discuss the benefits and trade-offs of several e-commerce clicks and bricks alternatives.

5

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Section I

Electronic Commerce Fundamentals

6

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Commerce Fundamentals (continued)

“Few concepts have revolutionized business more profoundly than e-commerce. E-commerce is changing the shape of competition, the speed of action, and the streamlining of interactions, products, and payments from customers to companies and from companies to suppliers.”

7

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Commerce Fundamentals (continued)

E-commerceThe online process of developing, marketing,

selling, delivering, servicing, and paying for products & services transacted on internetworked, global marketplaces of customers, with the support of a worldwide network of business partners.

8

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

The Scope of e-Commerce

Three Basic CategoriesBusiness-to-Consumer (B2C)Business-to-Business (B2B)Consumer-to-Consumer (C2C)

9

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Scope of e-Commerce (continued)

Electronic Commerce Technologies

The Internet, intranets, and extranets are the network infrastructure or foundation

Customers must be provided with a range of secure information, marketing, transaction processing, and payment services

10

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Scope of e-Commerce (continued)

Electronic commerce technologies (continued)Trading and business partners rely on the

Internet and extranets to exchange information and accomplish secure transactions

Company employees depend on a variety of Internet and intranet resources to communicate and collaborate

11

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Scope of e-Commerce (continued)

Electronic commerce technologies (continued)

IS professionals and end users can use a variety of software tools to develop and manage the content and operations of the websites and other e-commerce resources

12

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes

Nine key components of an e-commerce process architectureAccess control and securityProfiling and personalizingSearch managementContent managementCatalog management

13

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Key components (continued)PaymentWorkflow managementEvent notificationCollaboration and training

14

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Access control and securityProcesses MUST establish mutual trust and secure

accessAuthenticating usersAuthorizing accessEnforcing security features

Must protect the resources of e-commerce sites from threatsHackersTheft of passwords or credit card numbersSystem failures

15

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Profiling and personalizingOne-to-one marketing strategy

Personalized view of the websiteBased on…

Personal dataWebsite behavior and choices

Used to help authenticate your identity for account management and payment purposes

16

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Search managementHelps customers find the specific product or

service they wantSoftware may include a search engine

component or a company may acquire a customized e-commerce search engine

17

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Content and catalog managementContent management software helps

companies develop, generate, deliver, update, and archive text data and multimedia information

Frequently takes the form of multimedia catalogs of product information

Works with profiling tools to personalize the content of the website

18

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Content and catalog management (continued)May be expanded to include product

configuration processes that support mass customization of a company’s products

19

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Workflow managementWorkflow software engine

Predefined sets of business rulesRoles of stakeholdersAuthorization requirementsRouting alternativesDatabases usedSequence of tasks

20

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Workflow management (continued)Workflow systems ensure that..

Proper transactions, decisions, & work activities are performed

Correct data and documents are routed to the right employees, customers, suppliers, and other business stakeholders

21

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Event notificationMost applications are event driven

New customer’s first visitPayment and delivery processesCustomer relationship & supply chain

management activitiesNotifies those concerned when an event

occurs that might affect their status in a transaction

22

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Essential e-Commerce Processes (continued)

Collaboration and trainingSupports the collaboration arrangements &

trading services needed by customers, suppliers, & other stakeholders

May be provided by Internet-based trading services

23

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Payment Processes

Processes are complexNear anonymous nature of transactionsSecurity issuesWide variety of debit and credit alternativesWide variety of financial institutions and

intermediaries

24

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Payment Processes (continued)

Web payment processesCredit cardsPurchase ordersElectronic shopping cart

25

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Payment Processes (continued)

Electronic funds transfer (EFT)Uses a variety of IT to capture and process

money and credit transfers between banks and businesses and their customersATMsPay-by-phoneWeb-based

PayPal & Bill Point (cash transfers)CheckFree and PayTrust (automatic bill

paying services)

26

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Payment Processes (continued)

Electronic funds transfer (continued)

Electronic bill paymentPoint-of-sale terminals linked to bank EFT

systems

27

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Electronic Payment Processes (continued)

Secure electronic paymentsAddresses vulnerability to network sniffers

Encrypt data passing between customer and merchant

Encrypt the data passing between the customer and the company authorizing the credit card transactionSecure Socket Layer (SSL)Digital WalletSecure Electronic Transaction standard

28

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Section II

E-Commerce Applications and Issues

29

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

e-Commerce Application Trends

“E-commerce is here to stay. The Web and e-commerce are key industry drivers. It’s changed how many companies do business. It’s created new channels for our customers. Companies are at the e-commerce crossroads and there are many ways to go.”

30

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

e-Commerce Application Trends (continued)

31

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

e-Commerce Application Trends (continued)

E-commerce SectorsSix major e-commerce sectors

InfrastructureApplicationsPortalsContentServicesExchanges

32

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce

Location is not a factor

Must build customer satisfaction, loyalty, & relationships

33

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors

Selection and valueOffer a good selection of attractive

products and servicesBuild a reputation for high quality,

guaranteed satisfaction, and top customer support

34

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Performance and serviceSite must be efficiently designed for ease of

access, shopping, and buyingService must be friendly and helpfulProducts should be available in inventory

35

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Look and feelAttractive storefront, shopping areas, and

multimedia product catalogs

36

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors (continued)Advertising and incentives

Targeted, personalized adsIncentives include

CouponsDiscountsSpecial offersVouchers for other web services

37

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors (continued)Personal attention

Encourages customers to buy and make return visits

Welcomed by nameGreeted with special offersGuided to the parts of the site that you are

most interested inRelationship building

38

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors (continued)Community relationships

Giving customers with special interests a feeling of belonging to a unique community

Virtual communitiesDiscussion forumsNewsgroupsChat roomsMessage boardsCross-links to related web communities

39

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success factors (continued)Security and reliability

Customers must feel confident regarding the security of their…Credit cardPersonal informationTransaction details

40

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Consumer e-Commerce (continued)

Success Factors (continued)Must feel that you are dealing with a

trustworthy business.Reliability

Orders filled and shipped as you requested

Orders shipped in the timeframe promised

Good customer support

41

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements

Developing a Web StoreBuild

Website design toolsSite design templatesCustom design servicesWebsite hosting

42

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Developing a web store (continued)Market

Web page advertisingE-mail promotionsWeb advertising exchanges with affiliated

sitesSearch engine registrations

43

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Serving Your Customers

ServePersonalized web pagesDynamic multimedia catalogCatalog search engineIntegrated shopping cart

44

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Serving your customers (continued)

TransactFlexible order processCredit card processingShipping and tax calculationsE-mail order notifications

45

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Serving your customers (continued)

SupportWebsite online helpCustomer service e-mailDiscussion group and chat roomsLinks to related sites

46

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Managing a Web Store

ManageWebsite usage statisticsSales and inventory reportsCustomer account managementLinks to accounting system

47

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Managing a web store (continued)

Operate24/7 website hostingOnline tech supportScalable network capacityRedundant servers and power

48

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Web Store Requirements (continued)

Managing a web store (continued)

ProtectUser password protectionEncrypted order processingEncrypted website administrationNetwork fire walls and security monitors

49

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Business-to-Business e-Commerce

The wholesale and supply side of the commercial process

Businesses buy, sell, or trade with other businesses

Includes…Electronic catalog systemsElectronic trading systemsElectronic data interchangeElectronic funds transfer

50

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

e-Commerce Marketplaces

One-to-ManySell-side. Host one major supplier who

dictates product catalog offerings & prices.

Many-to-OneBuy-side. Attract many suppliers that flock

to these exchanges to bid on the business of a major buyer.

51

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

e-Commerce Marketplaces (continued)

Some-to-ManyDistribution marketplaces. Unite major

suppliers who combine their product catalogs to attract a larger audience of buyers.

Many-to-SomeProcurement marketplaces. Unite major

suppliers who combine their purchasing catalogs to attract more suppliers.

More competition, lower prices

52

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

e-Commerce Marketplaces (continued)

Many-to-ManyAuction marketplaces. Used by many

buyers and sellers that can create a variety of buyers’ or sellers’ auctions to dynamically optimize prices.

53

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Clicks and Bricks

AlternativesE-Commerce Integration

E-commerce is integrated into the traditional business operations of a company.

Business case for integrationCapitalizing on unique strategic

capabilities that exist in a company’s traditional business operations

54

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Clicks and Bricks (continued)

Alternatives (continued)Gaining strategic benefits such as..

Sharing established brandsSharing key business informationJoint buying powerDistribution efficiencies

55

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Clicks and Bricks (continued)

Alternatives (continued)Partial e-commerce integration using joint

ventures and strategic partnerships

Complete separation via the spin-off of an independent e-commerce company

56

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Clicks and Bricks (continued)

E-Commerce Channel ChoicesAn e-commerce channel is the marketing or

sales channel created by a company to conduct and manage its chosen e-commerce activities

57

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Clicks and Bricks (continued)

Revenue-generating alternativesAdditive channelNew offer channelSubscriptionAdvertisingSponsorshipLicensingPortalingCommissionTolling

58

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Discussion Questions

Do you agree that most businesses should engage in electronic commerce on the Internet?

Are you interested in investing in, owning, managing, or working for a business that is primarily engaged in electronic commerce on the Internet?

59

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Discussion Questions (continued)

Why do you think there have been so many business failures among “dot-com” companies that were devoted only to retail e-commerce?

Do the e-commerce success factors discussed in the chapter guarantee success for an e-commerce business venture?

What else could go wrong & how would you confront those challenges?

60

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Discussion Questions (continued)

If personalizing a customer’s website experience is a key success factor, then electronic profiling processes to track visitor website behavior are necessary. Do you agree? What are the ethical implications?

All corporate procurement should be accomplished in e-commerce auction marketplaces, instead of using B2B websites that feature fixed-price catalogs or negotiated prices. Do you agree?

61

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Discussion Questions (continued)

If you were starting an e-commerce web store, which of the business requirements listed in this chapter would you primarily do yourself, and which would you outsource to a Web development or hosting company?

Which of the e-commerce clicks and bricks alternatives discussed in this chapter would you recommend to Barnes & Noble? Amazon.com? Wal-Mart? Any business?

62

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 1 – Yahoo, Inc.

How is Yahoo doing financially right now?

Is Yahoo making the right moves toward continuing e-commerce profitability?

63

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 1 (continued)

What are several other things Terry Semel could do to make Yahoo more successful?

Will Yahoo be able to compete successfully with AOL and MSN as an online service and e-commerce portal?

64

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 2 – ChemConnect & Heritage Services

What are the business benefits and limitations of using public B2B exchanges like ChemConnect?

What is the business value of private B2B exchanges for a company?

65

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 2 (continued)

Should a small business use public or private B2B exchanges, or should they use exchanges like eBay, that attract both consumers and small businesses?

66

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 2 (continued)

How can ChemConnect broaden its customer base?

67

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 3 – Staples, Steelcase, Countrywide, & HSN

Does the fact that customers who shop online and in other channels generate more sales, as Staples and HSN have found, mean that most companies should have an e-commerce website?

68

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 3 (continued)

Do you agree with Steelcase that it is better for people to get product information online than from a salesperson?

69

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 3 (continued)

Do the Steelcase and Countrywide websites do a good job of encouraging customers and visitors to buy their products and use their services?

70

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 4 – eBags, Economy.com, & Classmates Online

Do you feel that eBags will be able to sustain its recent profitability?

How else could Economy.com increase its products, markets, and profitability?

71

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 4 (continued)

How could other kinds of businesses use the Classmates Online business model to help strengthen their e-commerce success?

72

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 5 – Office Depot, Lands’ End, & Others

Which website, Office Depot or Lands’ End, does a better job of helping users find the products they want?

73

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 5 (continued)

When comparing the business value of the integration of customer information at Martha Stewart, retailer information at Panasonic, and inventory information at NextWine, which capability is of greatest importance to the success of an e-commerce business?

74

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Real World Case 5 (continued)

Which website capability or feature would you most like to see added to e-commerce websites?