Chap 08

Study Questions
Q1 How do companies use e-commerce?

Using MIS 3e Q2 What technology is needed for e-commerce?
Chapter 8 Q3 How can information systems enhance supply chain

performance?
Q4 Why is Web 2.0 important to business?
Q5 How can organizations benefit from social networking?
Q6 How can organizations benefit from Twitter?
E-Commerce and Web 2.0 Q7 What are the benefits and risks of user-generated content
(UGC)?
David Kroenke Q8 2020?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-3
How Do Companies Use

Chapter Preview
E-commerce?
Chapter has two major themes: e-commerce and Web 2.0.
• E-commerce is buying and selling goods and services over public
and private computer networks.
1. E-commerce: Begin by discussing how companies use e- • Merchant companies take title to the goods they sell.
commerce and survey important e-commerce technology. • Nonmerchant companies arrange for purchase and sale of goods
Conclude by discussing the role of e-commerce in supply chain without owning or taking title to those goods.
management.
2. Web 2.0: What it means, and what capabilities does it provide? Types of merchant and nonmerchant companies
How do businesses use social networking, including groups and
applications. We’ll discuss three primary uses for Twitter in
commerce. After that, we’ll investigate user generated content
and discuss some of the risks of it and social networking as well.
Finally, we’ll wrap up with 2020.
Fig 8-1 E-Commerce Categories

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-2 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-4
1
Types of Merchant E-Commerce How Does E-Commerce Market
Companies Efficiency?
1. B2C transactions occur between a supplier and retail customer. E-Commerce improves market efficiencies in a variety of ways,
The supplier generally uses a Web storefront. as this figure shows. Customers benefit from the first two,
disintermediation and increased price information. Businesses
2. B2B transactions occur between companies.
benefit from increasing their knowledge of price elasticity.
3. B2G transactions occur between companies and governmental
organizations.
Fig 8-2 Example of Use of B2B, B2G, and

B2C
Types of Nonmerchant What Economic Factors Disfavor

E-commerce Companies E-Commerce?
1. Auctions match buyers and sellers using the e-commerce 1. Channel conflict
version of standard auction where auction company Occurs when a manufacturer competes with its traditional retail
receives a commission on each product sold. eBay.com is outlets by selling directly to consumer
the best-known example. 2. Price conflict
2. Clearinghouse provides goods at a stated price, arranges Occurs when a manufacturer sells directly to consumers and
for delivery but never takes title to the goods. Company undercuts retailers’ prices
receives a commission on each product sold. Amazon.com 3. Increased logistics expenses
is the best-known example. Occurs when a manufacturer must process thousands of small-
3. Electronic exchanges are a type of clearinghouse similar quantity orders rather than a few large-quantity orders
to a stock exchange. Company matches up buyers and 4. Increased customer-service expenses
sellers and a transaction occurs. Exchange takes a Occurs when a manufacturer must begin dealing directly with
commission. Priceline.com is the best-known example. customers rather than relying on retailers’ direct relationships with
customers
2
Study Questions Commerce Server and Web Farm
Q1 How do companies use e-commerce? • Commerce server is part of server tier
Q2 What technology is needed for e-commerce? An application program that receives
Q3 How can information systems enhance supply chain requests from users via a Web server.
performance? When the program receives a request, it
takes some action, like coordinating a
customer checkout process, and then
returns a response to the user via a Web
Q7 What are the benefits and risks of user generated content
(UGC)? server.
Q8 2020? • A Web farm is a facility that houses numerous
Web server computers.
How Three-tier Architecture

Three-tier Architecture
Operates
• Each tier relates to a particular class of computers
1. User tier uses personal computers and browser software
that requests and processes Web pages. Web page
documents are coded in HTML and are transmitted using
HTTP protocols.
2. Server tier uses Web server computers and processes
application programs that help manage HTTP traffic
between Web servers and users.
3. Database tier uses computers that run a DBMS to
process SQL requests for retrieving and storing data.
Fig 8-5 Three-Tier Architecture
3
Sample of Commerce Server HTML Document (Left) Rendered
Pages: Product Offer Pages (Right) Using Internet Explorer
Examples of Web pages on an e-commerce Web site
Fig 8-6(a) Sample of Commerce Server Fig 8-6(b) Shopping Cart Page
Pages
Hypertext Markup Language eXtensible Markup Language

(HTML) (XML)
• Language used to structure the layout of Web pages • HTML is workhorse for Web pages and
• HTML includes these elements:
Tags—notation that defines a data element
e-commerce sites.
• <h2> and </h2> are tags that indicates that text will be • HTML is effective when one party is human.
formatted as a level two heading.
Hyperlinks
But what if two computer programs want to
• Serve as pointers to other Web pages. They include a URL exchange data?
for another document within same Web site or a different
Web site. • HTML has major disadvantages that are
• http://www.prenhall.com/kroenke is a hyperlink to another overcome with a different markup language
Web site.
called XML.
Attributes provide properties for tags. In the sample HTML
document on the next slide, the attribute href= provides the • XML tutorial
value of the hyperlink that follows.
4
What’s Wrong with HTML? How Can Suppliers Use XML?
1. HTML tags have no consistent meaning, • Improve efficiency of operations of distributors and
therefore are used inconsistently. suppliers
• REI prepares inventory count document according
2. HTML has a fixed number of tags and no
to its own design. Browser checks design against
way for users to define new ones. its XML Count_schema.
3. HTML mixes format, content, and structure • REI shares its XML schema with its suppliers.
rather than separating them. Suppliers can use Count_schema to validate
orders are from REI.
• Automates process of sending, receiving, and
validating order data
How Does XML Fix These

How Can Industries Use XML?
Problems?
• Provides superior means for computer programs to exchange
documents
• Requires content, structure, and format be separated into
different documents
• Document designers can create custom tags and specify
arrangement of tags in metadata.
• Metadata stored in XML schema document
• A computer program can read content document to find data
to process, it can reference a metadata document to verify
that content is correct and complete, and it can use a
formatting document to transform content into a particular
form that it needs.
5
How Can Industries Use XML? Generic Supply Chain
New Figure 8-8 here
Study Questions REI Supply Chain Example

Q2 What technology is needed for e-commerce?
Q3 How can information systems enhance
supply chain performance?
(UGC)?
Q8 2020?
6
Four Drivers of Supply Chain How Does Supply Chain
Performance: Facilities, Inventory, Profitability Differ from
Transportation, and Information Organizational Profitability?
• Supply chain profitability is determined by calculating the
difference between revenue generated by a supply chain and
costs that all organizations in supply chain incur to obtain that
revenue.
• Maximum profit to a supply chain will not occur if each

organization in a supply chain maximizes its own profits in
isolation from other participants in supply chain.
• Usually, profitability of supply chain increases if one or more

organizations operate at less than its own maximum
profitability.
Information Influences Supply

What Is the Bullwhip Effect?
Chain Performance Three Ways:
1. Purpose: transactional or informational? • Bullwhip effect occurs when variability in size and timing of orders increases at
each stage up chain.
2. Availability: ways in which information is shared Distributors, manufacturers, and suppliers must carry larger inventories than
necessary to meet real demand because of large fluctuations in orders.
3. Means: methods used to transmit information Reduces overall profitability of supply chain
Can be eliminated by giving all supply chain participants consumer-demand
information directly from retailers through interorganizational information
• E-commerce systems commonly use three-tier systems
architecture with HTML and XML. Increasingly such
systems are using SOA standards as means as well.
Fig 8-13 The Bullwhip Effect
7
Software as a (Free) Service
Study Questions
(SaaS)
Q1 How do companies use e-commerce? • Software as a Service, part of the Web 2.0 movement, changes
traditional thinking about how software is created, provided to
users, and used to create value.
Q3 How can information systems enhance supply chain
performance? • Its characteristics include:
Q4 Why is Web 2.0 important to business? Uses thin-client programs in browsers
Bulk of processing occurs on servers throughout the Internet
Companies rely on advertising or revenue rather than license fees.
Perpetual beta software because features and functions constantly
Q7 What are the benefits and risks of user generated content changing
(UGC)? SaaS companies clash with traditional software vendors that rely on
Q8 2020? traditional software programs to provide the bulk of their revenue.
Relies on viral marketing. Users spread word about its virtues rather
than the company that provides it.
More a Web 2.0-based site is used, the more value it attains
What Is Web 2.0? Other Characteristics of Web 2.0

• Specific meaning of Web 2.0 is hard to pin down.
• Value of site increases with users and use
• Generally refers to a loose grouping of capabilities,
technologies, business models, and philosophies. • Organic user interface and mashups
• Participation and ownership differences
Comparison of Web 2.0 to traditional processing
Traditional Web sites are about publishing
Web 2.0 is about participation
Traditional Web site lock down all legal rights to
content
Web 2.0 sites lock down only some rights
8
How Can Businesses Benefit from Fundamentals of Social
Web 2.0? Networking
• Advertising is specific to user interests. Two popular programs from
Google are:
• Social networking (SN)—interaction of
AdWords in which advertisers pay for particular search words. people connected by friendship, interests,
AdSense in which Google inserts ads on a Web site that match business association, or other common trait
content on site. When someone clicks on the ad, Google pays
site owner a fee. and supported by Web 2.0 technology
• Providing social networking services that connect people with similar • SN support N:M communication and social
interests
• Providing mashups between a business and its partners which collaboration
combine content of their products. Watch a movie, see a piece of
jewelry you like, click on a link, and purchase the product.
Study Questions Viral Marketing with SN

Traditional marketing at MRV
performance?
Q5 How can organizations benefit from social
networking?
(UGC)?
Q8 2020?
9
News About You Registering for Sample Viral Social Network
MRV Trip Broadcast to Your Marketing Outcome
Friends
Social Network Marketing
at Majestic River Ventures
• Figure CE15-6
You, Your Friends, Their Friends, How Can Businesses Utilize

and so on Form a Relationship Social Networking Groups?
with MRV’s SN • Types of SN groups
1. Public—anyone can find the group by
searching and anyone can join it.
2. Invitation—anyone can find the group by
searching, but he or she must be invited to join.
3. Private—the group cannot be found by
searching, and members must be invited to
join.
• Businesses can use SN groups to strengthen
Viral Social Network relationships among customers and to create
Marketing Possibility
possibility of viral marketing.
10
How Can Businesses Utilize Strengthening Ties with
Social Networking Groups? Social Networking
• Traditional business communication is unreliable.

• SN communication is more reliable.
• Viral messaging reaches more people, faster,
cheaper, and more personal.
• MRV could expand its viral marketing by inducing
(viral hook) customers to get their friends to form a
relationship with MRV.
Finding proper viral hook is critical
• Common ways companies form SN relationships
with customers are groups and applications.
Strengthening Relationships How Can Businesses Utilize

Among Customers to Create Viral Social Networking Applications?
Marketing Opportunities Social networking application
A computer program that interacts with and
• Invitation or private group
processes information in a social network
MRV could invite the customer to group for each river trip.
Place photos and videos of prior trips on Web site Examples:
Provide equipments lists, advice tips, weather forecasts • Survey Hurricane, a Facebook application created by
Start discussion lists among guides and group members before Infinistorm (www.infinistorm.com).
trips Users who install that application on their page can
survey their friends on topics of interest.
Members could post pictures, videos, documents, reflections
• New York Times quiz
• Create pubic version for alumni to share with friends • Applications for buying and selling items, comparing
movies, and so on
• Management use of SN: Groups of employees use SN to
build cohesion with their teammates.
11
SN Applications Run on Servers SN Application vs. Web Sites
• When you run an application on a Facebook page, • Share many features and functions
Facebook passes your application request, via a
service, to application vendor’s server.
• Why have SN?
Depends on degree to which the application
• Application service issues callbacks to Facebook requires a social graph
(or other SN vendors) to create friend requests, Does application use or benefit from N:M
find your existing friends, generate email, make communication?
requests, poke your friends, or take other actions.
Is there a need for social collaboration?
• Can collect data about you and your friends for Is there a need for feedback and iteration?
individualized marketing or for data mining
MRV SN Application Study Questions

performance?
• Figure 8-19 Q6 How can organizations benefit from Twitter?
(UGC)?
Q8 2020?
12
How Can Businesses Benefit from
Microblogs
Microblogging?
• Hundreds of businesses are now using Twitter for • Three business applications have emerged so far:
legitimate business purposes. 1. Public Relations
• Twitter is a microblog—a Web site where users • Product manager who’s excited about a
can publish their opinions. new use for his product. He can publish the
• More people microblog than blog because it is less idea and a summary of instructions.
intimidating. You don’t have space to spell well or • Coaches can increase fan awareness by
write a well constructed paragraph. blogging with insider details, how the
• Microblog competitors to Twitter are emerging. practice went, comments about the recent
game, and so forth.
• New public relations capability are
stressing existing institutions.
How Can Businesses Benefit from

We Are All Publishers Now
Microblogging?
• Microblogs make everyone a publisher. 2. Relationship Sales
Anyone can join, for free, and immediately Pure sales pitches are ineffective when
microblogging. People stop following sources
publish ideas, worldwide.
that only publish ads and sales pitches. Instead,
• Microblogging enables two-way publishing, people look for tweeters who offer something
worldwide. they value such as advice, links to resources,
and interesting and thought-provoking opinions.
• Microblogging enables users with like
minded interests to find one another. Twitter Revolution: How Social Media and
Mobile Marketing is Changing the Way We Do
Business and Market Online. Warren Whitlock
and Deborah Micek. Xeno Press, 2008.
13
How Can Businesses Benefit from Common Types of UGC and
Microblogging? Discusses Their Business
3.Market Research Applications
Want to know what people think of • Ratings and surveys
your product? Search Twitter to • Opinions
find out. • Customer stories
• Discussion groups
• Wikis
• Blogs
• Video
• Crowdsourcing specialty (Spore-create creator)
Study Questions Benefits of UGC

Q1 How do companies use e-commerce? • SN users are three times more likely to trust peers’
Q2 What technology is needed for e-commerce? opinions over advertiser claims.
Q3 How can information systems enhance supply chain • Increases loyalty to company site and brand loyalty
performance?
Q4 Why is Web 2.0 important to business? • Increases brand involvement, interaction, intimacy,
Q5 How can organizations benefit from social networking? influence
Q6 How can organizations benefit from Twitter? • Discussion groups share advice and assistance.
Q7 What are the benefits and risks of user • Provides useful information for product marketing
generated content (UGC)? and development
Q8 2020?
14
UGC Applications Design by Crowdsourcing
• Figure 8-21
Crowdsourcing UGC Videos

• Crowdsourcing organizations involve their users in the design • YouTube is famous for hosting UGC videos
and marketing of their products.
• For example, as shown in Figure 8-24, shoe startup company
provided as bait for advertising. Finally,
RYZ (ryzwear.com) sponsors shoe design contests to help it some sites include UGC as part of the
understand which shoes to create and how to market those product. The magazines Fine Woodworking
designs.
• Crowdsourcing combines social networking, viral marketing,
and Wooden Boat both include UGC video
and open-source design, saving considerable cost while as part of their product offerings
cultivating customers.
• With crowdsourcing, the crowd performs classic in-house
market research and development and does so in such a way
that customers are being set up to buy.
15
Impact of UGC Study Questions
• Increases conversion rates Q1 How do companies use e-commerce?
• Conversion rates are higher for products with less- Q2 What technology is needed for e-commerce?
than-perfect reviews than for products with no Q3 How can information systems enhance supply chain
performance?
reviews at all.
• UGC to post answers to questions, articles, best Q5 How can organizations benefit from social networking?
practices, blogs, code samples, and other Q6 How can organizations benefit from Twitter?
resources Q7 What are the benefits and risks of user generated content
• Return rates fall dramatically as number of product (UGC)?
reviews increases Q8 2020?
• Videos provide bait for advertising
• Some sites include UGC as part of the product
Risks of Using Social Networking

2020?
and User-Generated Content?
• Junk and crackpots • Expect that technology will enable voice and video
to be integrated into social networking.
• Inappropriate content
• Speak your tweets and have a program translate
• Unfavorable reviews your voice message into text? Jott.com already
• Mutinous movements offers a limited version of that service.
• Dependency on SN vendor • Tweet your video? 12Seconds.TV
Vulnerable to reliability and performance • What will social networking do to management?
Vendor may own content • What will microblogging do to employee evaluation
and compensation?
Vendor may remove site
• What will happen to language? Writing skills?
16
Ethics Guide: Hiding the Truth? Ethics Guide: Hiding the Truth?
• Is it unethical to post a false picture or false information about • You create a Facebook account for someone
yourself on Facebook? you’ve known for many years and have dozens of
• Is it unethical for you to encourage your employees to write photos of, some of which were taken at parties and
positive reviews about MRV? are unflattering and revealing. You post those
• One of those clients writes a poor review of your firm because photos along with critical comments that she made
of a bad experience. Is it ethical for you to delete that review about clients or employees. Most of the comments
from your site?
were made when she was tired or frustrated, and
• You think you were wrongly terminated by MRV. To get even,
they are hurtful, but because of her wit, also
you use Facebook to spread rumors to your friends (many of
whom are river guides) about the safety of MRV trips. Are humorous. You send friend invitations to people
your actions unethical? Are they illegal? whom she knows, many of whom are the target of
her biting and critical remarks. Are your actions
unethical?
Guide: Blending the Personal and

Ethics Guide: Hiding the Truth?
the Professional
• One employee invites his MySpace friends to a • Many businesses are beginning to use social networking
party at which he shows photos of prior rafting sites like Facebook, MySpace, and Twitter for professional
purposes.
trips. On the way to the party, one of the friends
• Every business social function is a business function, so even
has an automobile accident and dies. His spouse sharing photos and pages of work softball team begins to blur
sues Majestic. Should you be held accountable? the personal–professional boundary.
Does it matter if you knew about the presentation? • Our work is portable and always on—and judged by results,
Would it matter if you had not encouraged your not hours logged. In a work universe like that, the lines sort of
employees to be creative? slowly and inevitably blur…
• You should be careful if you’re in the introductory months of a
new job.
17
GUIDE: Interorganizational Information
Exchange Active Review
• Basic guidelines for participating in business meetings with Q1 How do companies use e-commerce?
people in other firms: Q2 What technology is needed for e-commerce?
Apply stronger limits on your conversation than when you Q3 How can information systems enhance supply chain
meet with employees in your own firm performance?
Assume that whatever you say to an employee of another Q4 Why is Web 2.0 important to business?
company could be general knowledge in your industry the Q5 How can organizations benefit from social networking?
next day Q6 How can organizations benefit from Twitter?
Reveal exactly what you must and no more Q7 What are the benefits and risks of user generated content
Have a clear and common understanding of the purpose (UGC)?
of the meeting Q8 2020?
Understand your organization’s policy concerning
nondisclosure agreements before the meeting starts
GUIDE: Interorganizational Information

Exchange Case Study 8: You, Inc.
Stick to the purpose of the meeting. Avoid conversations • Interorganizational information systems enable small
about your company or about third parties that do not businesses to avoid time and expense of building
relate to the meeting topic. infrastructure, thus reducing capital requirements and
There is simply no reason, other than carelessness or shortening time to market.
stupidity, to discuss topics with another company that do • People often pay more for new items on eBay than they
not relate to the matter at hand. would pay if they shopped for bargains on Internet.
Don’t embarrass yourself or the employees of the other • There is often an inefficiency in flow of price information
company by discussing in a public place anything other among eBay users.
than the weather • Using the Internet, you find sources for motorcycle parts.
Sourcing is a typical supply-chain activity; and by using the
Internet, you have avoided hiring someone else to do this
work for you.
18
Case Study 8: You, Inc. Case Study 8: You, Inc.
• You search for sites that offer products you want, have free Review This Scenario in Terms of Porter’s Value Chain Model
shipping, and (if possible) you do not need to pay taxes.
• When you find an item offered at a bargain price, you set up Primary value chain activities
an auction for that item on eBay. •You did market research, but you outsourced all of the data-gathering
• You have not yet purchased the item; you just know where activities to eBay, PriceGrabber, and so on.
you can buy it. •Set up the auction on eBay, and thus outsourced the sales infrastructure
• Set a price and terms of auction so whatever price the item to eBay
sells, you will make some profit •Did product-sourcing yourself with considerable help from the Internet
• You download pictures of item from your vendor and copy •Outsourced all inventory, operations, and shipping activities to vendor
those photos into your auction. •If customer pays before you pay your credit card, you can even earn
interest on customer’s money.
• Your only financial exposure if the item does not sell is the
• Outsourced service and support to manufacturer
cost of the auction.
Case Study 8: You, Inc. Case Study 8: You, Inc.

• The item sells.
• You then buy it from the vendor. Support activities
• Pay for it using PayPal or a credit card • Avoided building infrastructure, you have only one part-time
• Have vendor ship the item directly to your customer, a employee, yourself; you have no payroll or other
process called drop shipping. compensation needs.
• If you pay with a credit card, it is possible you will receive • Want insurance? If you sell enough using eBay you can buy
payment from your customer before you pay for the item you life and medical insurance from eBay at attractive terms.
sold. • Accounting: eBay, PayPal, credit card company, and vendor
• Because the item is new, and because you sell only high- do most of the work. All you do is maintain records to track
quality items, all service and support are handled by your income for tax reporting. You can even pay your taxes
manufacturer. online.
19
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright © 2011 Pearson Education, Inc.

Publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-77
20

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Study Questions

Q1 How do companies use e-commerce?

Chapter 8 Q3 How can information systems enhance supply chain

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-3

How Do Companies Use

Finally, we’ll wrap up with 2020.

Fig 8-1 E-Commerce Categories

Fig 8-2 Example of Use of B2B, B2G, and

Types of Nonmerchant What Economic Factors Disfavor

How Three-tier Architecture

Fig 8-5 Three-Tier Architecture

Hypertext Markup Language eXtensible Markup Language

How Does XML Fix These

New Figure 8-8 here

Study Questions REI Supply Chain Example

• Maximum profit to a supply chain will not occur if each

• Usually, profitability of supply chain increases if one or more

Information Influences Supply

Fig 8-13 The Bullwhip Effect

What Is Web 2.0? Other Characteristics of Web 2.0

Study Questions Viral Marketing with SN

You, Your Friends, Their Friends, How Can Businesses Utilize

• Traditional business communication is unreliable.

Strengthening Relationships How Can Businesses Utilize

MRV SN Application Study Questions

How Can Businesses Benefit from

Study Questions Benefits of UGC

Crowdsourcing UGC Videos

Risks of Using Social Networking

Guide: Blending the Personal and

GUIDE: Interorganizational Information

Case Study 8: You, Inc. Case Study 8: You, Inc.

Copyright © 2011 Pearson Education, Inc.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-77

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