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By: M.Nadeem Akhtar 1
USING INFORMATION TECHNOLOGY TO ENGAGE IN ELECTRONIC
COMMERCE
Management Information Systems.M.Nadeem Akhtar
By: M.Nadeem Akhtar 2
A financial business transaction that occurs over an electronic network
Sometimes called e-business
Anyone with access to a computer, an Internet connection, and a means to pay for purchased goods or services can participate in e-commerce
E-Commerce
What is electronic commerce (e-commerce)?
By: M.Nadeem Akhtar 3
E-Commerce Business Models
B-to-C or (B2C) e-commerce.B-to-B or (B2B) e-commerce.C-to-C or (C2C) e-commerce. (P2P) e-commerce.
By: M.Nadeem Akhtar 4
Electronic Commerce Beyond the
Boundary of the Firm Business-to-customer (B2C) electronic commerce
refers to transactions between a business and the final consumer of the product
Business-to-business (B2B) electronic commerce refers to transactions between businesses in which neither is the final consumer. These may involve relatively few people, generally the information systems groups of the companies are most affected
By: M.Nadeem Akhtar 5
By: M.Nadeem Akhtar 6
Anticipated Benefits from Electronic
Commerce There are three main benefits of e-Commerce:1. Improved customer service before, during, and
after the sale2. Improved relationships with suppliers and the
financial community3. Increased economic return on stockholder and
owner investmentsThese benefits contribute to the firm’s financialstability and enable it to better compete in a businessworld that is using more and more computertechnology
By: M.Nadeem Akhtar 7
Electronic Commerce Constraints In 1996 survey 60% of firms felt following three constraints on
e-commerce High costs (Computer resources were costly but now a days
costs of Computer resources comedown, according Gorden Moor’s Law)
Security concerns (But now a days secure telecommunicating networks are constantly monitoring for unauthorized access.)
Immature or unavailable software(This deficiency was overcome by making common interfaces suitable for
customers and electronic partners. )Each of these constraints is being challenged as IT and IS needs for e-
commerce become increasingly popular and the cost of the required computing resources keeps falling
By: M.Nadeem Akhtar 8
Scope of Electronic Commerce
The amount of economic impact varies from industry to industry but about 94% of electronic commerce is B2B leaving 6% for B2C
E-commerce is estimated to be growing at between 5% and 15% each year, though may slow down, high growth in e-Commerce will likely continue for the next several years
Table 3.2 gives examples of the extent of the use of e-commerce in certain areas of the economy
By: M.Nadeem Akhtar 9
By: M.Nadeem Akhtar 10
The Pathway to Electronic Commerce
Implementing an e-commerce system includes a significant risk of failure
The Strategic business plan embodies/make the commitment to use E-commerce to achieve competitive advantage
The firm first gathers business intelligence to understand the potential role each environmental element will play.
The next step is to establish an IOS by means of Electronic Data Interchange (EDI ) .
The IOS is achieved by following the SLC or engaging in Business Process Redesign.
The Result is network oriented system that employs direct connectivity, value added networks, the internet or some combination.
By: M.Nadeem Akhtar 11
Selection of E-Commerce Strategy, Methodology &
Technology
Strategic Business
Plan
IOS
EDI
Business Intelligence
SLC
BPR
Direct Connectivity
Value Added Network
The Internet
Enabling Strategy
Enabling Methodology
Enabling
Technology
Competitive Advantage
By: M.Nadeem Akhtar 12
BUSINESS INTELLIGENCE
Before engaging in e-commerce managers must understand their firm’s relationships with customers, competitors, suppliers, and other external entities
Business Intelligence (BI) is the gathering of information about the environmental elements that interact with your firm
By: M.Nadeem Akhtar 13
Business Intelligence Basic Tasks
Data
Data
Intelligence
Intelligence
1-Collect Data
2-Evaluate Data
3-Analyze data
4-Store Intelligence
5-DisseminateIntelligence
By: M.Nadeem Akhtar 14
Business Intelligence Basic Tasks
1-Collect Data.
a) Primary Data : Gathered by Firm. Firm’s marketing researchers conduct customer surveys.
b) Secondary Data: Available in form of commercial database provided by Data base services.
2- Evaluate Data.
All Primary & secondary data evaluated prior to use to ensure its accuracy.
3-Analyze Data.
Data is examined through different angels, looking for patterns , purpose of this step is to transform data into Intelligence
By: M.Nadeem Akhtar 15
Business Intelligence Basic Tasks
4- Store Intelligence
Printed Data/Intelligence is converted in Soft form through OCR or by Keying, So that can be used easily.
5-Disseminate Intelligence. Intelligence Profile of each user is prepared, describing
in a coded form of the intelligence topics that the user wants to monitor.
By: M.Nadeem Akhtar 16
External Databases
Companies can also use commercial databases that provide environmental information on virtually any subject.
Firms use these databases because it is faster and less expensive than trying to research the information on their own.e.g. Reuters (www.reuters.com) search & analyze new media for subjects concerned to firm. www.thomasregister.com DB provide index of more than 150,000 U.S & Canadian manufacturers, & can get info about products and their suppliers.
Figure 3.1 illustrates the use of external databases and Web searches for business intelligence
By: M.Nadeem Akhtar 17
By: M.Nadeem Akhtar 18
Search Engines
A search engine is a special program that provides links to Web sites based on a keyword or group of words supplied by the user
Search engines then look through their database of Web site content to see which Web sites use that word or phrase
Other specialized indexing programs create directories of Web site categories, working on the “backend” of the search engine
By: M.Nadeem Akhtar 19
By: M.Nadeem Akhtar 20
E-Commerce Strategy (THE INTER-ORGANIZATIONAL SYSTEM (IOS))
For any problem there are several possible solutions, & this rule of thumb applies to problem of determining the best E-commerce strategy.
The strategy that is most often mentioned is one in which the elements are linked with transmissions of E-Data.
The name given to this strategy is IOS. An IOS is created through linkages with other firms so
they can work together as a coordinated unit This allows them to achieve benefits that each could not
achieve alone Inter organizational systems are fundamental to electronic
commerce
By: M.Nadeem Akhtar 21
IOS Benefits
The trading partners enter into an IOS venture with the expectation of realizing benefits such as:
1-Comparative Efficiency – Internal efficiency (Improvement in firm’s own operations,
enabling firm to get data, Analyze it and make decisions fast.)
– Inter organizational efficiency(Improvements gained by working with other firms, like enabling firm to offer more products and services, serve more customers, shift certain work to suppliers or customers& gather environmental data more easily.)
By: M.Nadeem Akhtar 22
2-Bargaining Power The ability of a firm to resolve disagreements with its suppliers &
customers to its own advantage is called bargaining power.
Bargaining power is derived from three basic methods: By offering
– Unique product features(Easier ordering, quicker shipment & faster response time to requests for information. )
– Reduced search-related costs (Firm can reduce shopping costs that its customer incur in searching for supplier, identifying
alternative products & getting lower price.)– Increased switching costs (by providing H/Ware S/ware &
data communication channels so that customer will have to replace them if wants to switch to competitors firm. )
By: M.Nadeem Akhtar 23
Electronic Data Interchange (EDI)
EDI is considered a subset of IOS, EDI is a means for achieving an IOS .
EDI consists of direct Computer –to- computer data transmissions among multiple firms, Or EDI is essentially electronic forms that can be sent over networks.
It involves transmitting data in a machine-readable, structured format, enabling the data to be received without the need for re-keying
Vendor stock replenishment/ fill up again is a special type of IOS where the supplier can initiate the replenishment process by electronically monitoring the firm’s inventory levels
By: M.Nadeem Akhtar 24
EDI Standards.
The data that flows along each path b/w firm & its trading partner adhered to a standard format .Two major standards for EDI are the American National Standards Institute standard ASC X12 is used in North America and the EDIFACT international standards are used in Europe.
The standard formats enable the trading partners to exchange data but require a translation process prior to sending and after reciept.The translation is required because the partner’s computer application typically do not handle data in the same format as the standard.
Special software called mapping software performs the translation process.
By: M.Nadeem Akhtar 25
Mapping s/w translates Data to & from Standard formats
Application Software
Mapping Software
Mappings Software
Application Software
Sending Firm’s Computer
Receiving Firm’s Computer
By: M.Nadeem Akhtar 26
Extranet
Another way of establishing an IOS is by using a secure form of Internet technology called an extranet
Special type of Internet system where standard web page browsers and web servers are used, with limited number of trusted external entities are allowed access to sensitive firm data and application.
Security and privacy are serious concerns so the extranets are generally secured behind a firewall
By: M.Nadeem Akhtar 27
Electronic Funds Transfer (EFT) When data representing money is
transmitted over a computer network, it is called electronic funds transfer
EFT is used by firms and individuals who have their payroll checks deposited into their bank accounts or who pay bills using electronic payments
EFT also plays a major role in electronic commerce
By: M.Nadeem Akhtar 28
Proactive and Reactive Business Partners
When a firm decides to adopt EDI, it can do so in a Proactive or Reactive way.
The IOS sponsor typically takes a proactive approach (Take initiative), stimulating interest in the IOS and encouraging participation in the network
The participants, on the other hand, typically respond in a reactive manner—accepting or rejecting the sponsor’s offer to adopt IOS.
By: M.Nadeem Akhtar 29
Adoption Influences Prem Kumar and Rama Murthy studied the four factors
that can influence the decision to adopt an IOS. They identified four factors that determine whether the firm will be proactive or reactive:
– 1. Competitive pressure
– 2. Exercised power
– 3. Internal need
– 4. Top management support The second two are internal factors while the first two
are environmental
By: M.Nadeem Akhtar 30
By: M.Nadeem Akhtar 31
Adoption Influences
1. Competitive pressure
When the firm is in a poor position in relation to its competitors or when industry or trade association provide strong pressure, the firm will adopt EDI in reactive way.
By: M.Nadeem Akhtar 32
Adoption Influences
2. Exercised power
When a firm can exert power over other members of the IOS it will be Proactive in adopting EDI.Some firms are so powerful that they can demand that their trading partners either use EDI or take their business elsewhere.
By: M.Nadeem Akhtar 33
Adoption Influences
3- Internal need.
When the firm sees that the participation in the IOS is a way to improve its own operations ,it will approach EDI in a Proactive Manner.
By: M.Nadeem Akhtar 34
Adoption Influences
4-Top management support.
Regardless of whether the firm acts in Proactive or reactive manner, top management support always influence the decision.
By: M.Nadeem Akhtar 35
Indirect IOS Benefits The indirect benefits of participating in an
IOS include:– increased ability to compete.– improved relationships with trading partners– and improved customer service
Figure 3.4 shows this relationship between direct and indirect benefits
By: M.Nadeem Akhtar 36
By: M.Nadeem Akhtar 37
E-Commerce Technology.
Technology Choices.
There are three main technology choices.
1. Direct Connectivity
2. Value Added Network (VAN)
3. The Internet.
By: M.Nadeem Akhtar 38
1-Direct Connectivity
The firm can establish data communication links with its trading partners using circuits provided by AT & T,GTE, MCI and Sprint.
The circuits take the form of dial up or private lines and can use a variety of such circuitry as fiber optics and microwave transmission.
This is a traditional way to build business networks, it provides trading partners with most direct control over network.
By: M.Nadeem Akhtar 39
2-Value Added Networks (VAN)
VAN is provided by a vendor who not only furnishes the circuits but also provides many of the services that are necessary to use the circuits for EDI.
For example VAN vendor can provide the mapping software, maintain log files and assist in trading partner training.A prominent service is security of Data that travel over the network.
Leading VAN providers are Advantis, GEIS & Sterling Commerce.
By: M.Nadeem Akhtar 40
3-Internet
Makes available a global communication network that not only links the trading partners but can also include consumers.
Much of the boom in E-Commerce is expected to come from firms that will promote –and in some cases deliver –their products via Internet.
By: M.Nadeem Akhtar 41
EVOLUTION OF THE INTERNET
Understanding the Internet's evolution can help forecast future opportunities
ARPANET makes it possible for military personnel and civilian researchers to exchange information relating to military matters. It forms a major portion of what has come to be known today known as the Internet
In 1989, Tim Berners-Lee, working at CERN (Particle Physics Lab), came up with a way for physicists to communicate using hypertext electronically linked documents.
This system quickly evolved into what is now known as the World Wide Web
By: M.Nadeem Akhtar 42
By: M.Nadeem Akhtar 43
By: M.Nadeem Akhtar 44
CYBERSPACE AND THE INFORMATION SUPERHIGHWAY
The term cyberspace is from William Gibson’s 1984 book Neuromancer to describe a society that had become a slave to its technology
The information superhighway describes a system that gives everyone access to the wealth of information that exists in our modern society
The two main organizations in leadership roles in establishing Internet and Web standards are The Internet Society and the IETF (Internet Engineering Task Force)
Web standards come from the World Wide Web Consortium (W3C)
By: M.Nadeem Akhtar 45
BUSINESS APPLICATIONS OF THE INTERNET
The Internet can be used for any business application that involves data communication, including both communication inside the firm and with the environment
Unlike proprietary networks, the Internet can be used with any computer platform without any special effort to access the network
The Internet also makes it possible to transmit a wider variety of media that can be handled over most conventional networks
By: M.Nadeem Akhtar 46
Marketing Research and Retailing
Applications
By taking advantage of this new source of customer information, industrial marketers have gained new inroads to their markets
The Web business application with which the general public is most familiar is retailing (sale of goods in small quantities to public ) – most large retail chains now have an established Web presence