CH 09

Introduction to Information
Technology
2nd Edition
Turban, Rainer & Potter
© 2003 John Wiley & Sons, Inc.
Chapter 9:
Electronic Commerce
Prepared by:
Roberta M. Roth, Ph.D.
University of Northern Iowa
Introduction to Information Technology, 2nd Edition

9-1
Chapter Preview
In this chapter, we will study:
Forms and uses of business-to-
consumer electronic commerce
Forms and uses of business-to-
business electronic commerce
New forms of EC
Technical and non-technical
requirements needed to make EC
work
Legal and ethical issues associated
with EC
9-2
E-Commerce / E-Business
 Electronic Commerce: buying and
selling of products, services and
information via computer networks,
primarily the Internet
 Electronic Business: a broader definition
that includes
 buying and selling, plus
 servicing customers
 collaborating with business partners
 conducting electronic transactions within an
organization

9-3
Types of E-Commerce
 Business-to-business EC (B2B)
 Collaborative commerce (c-commerce)
 Business-to-consumer EC (B2C)
 Consumer-to-businesses (C2B)
 Consumer-to-consumer (C2C)
 Intrabusiness (intraorganizational)
commerce
 Government-to-citizens (G2C) and
others
 Mobile commerce (m-commerce)

9-4
E-Commerce History and Scope
 History
 Began in the early 1970s (long before the Internet
was open to commercial use)
 Limited to large businesses initially
 Electronic Fund Transfer (EFT) and Electronic Data
Interchange (EDI)
 Scope Today Includes
 advertising
 home banking
 shopping in electronic stores and malls
 buying stocks
 finding a job
 conducting an auction
 collaborating electronically with business partners
around the globe
 providing customer service

9-5
E-Commerce Framework

9-6
EC Benefits to Organizations
 Increased customer base:
 Broaden markets
 Find nice markets
 Reduced cost:
 Reach a large number of customers at little cost
 Procure material and services from other companies at less
cost
 Allow lower inventories by facilitating “pull”-type supply chain
management
 Shorten marketing distribution channels and reduce marketing
costs
 Decrease the cost of creating, processing, distributing,
storing, and retrieving paper-based information
 Lower telecommunications costs because the Internet is much
cheaper than value-added networks (VANs)
 Reduced cycle time:
 Procure material and services from other companies rapidly
 Reduce the time between the outlay of capital and the receipt of
products and services
Helps
Introduction small
to Information businesses
Technology, 2nd Edition compete against large companies
9-7
EC Benefits to Customers
 Choice
 Consumers can select from many vendors and many more
products than they could locate otherwise
 Consumers can get customized products, from PCs to cars, at
competitive or bargain prices
 Consumers can find unique products and collectors’ items
through virtual auctions that might otherwise require them to
travel long distances to a particular auction place at a specific
time
 Convenience
 Consumers can conduct online quick comparisons to find less
expensive products and services
 Customers can shop or make other transactions 24 hours a day,
year round, from almost any location
 Product information immediately available 24 hours a day,
year round, from almost any location
 Consumers can interact with other consumers in electronic
communities and can exchange ideas as well as compare
experiences
9-8
EC Benefits to Society
 Convenience
 Enables more individuals to work at home and to
do less traveling
 Access
 Allows some merchandise to be sold at lower
prices - less affluent people can buy more and
increase their standard of living
 Enables people in less developed countries and rural
areas to enjoy products and services that
otherwise are not available to them
 Facilitates delivery of public services, such as
government entitlements, reducing the cost of
distribution and fraud, and increasing the quality of
the social services, police work, health care and
education

9-9
Technical Limitations of EC
 A few technical challenges remain for
organizations wishing to conduct EC:
 Lack of universally accepted standards for quality,
security, and reliability
 Insufficient telecommunications bandwidth
 Still-evolving software development tools
 Difficulties in integrating the Internet and EC
software with some existing applications and
databases
 Need for special Web servers in addition to the
network servers (added cost)
 Expensive and/or inconvenient Internet accessibility
for many people
 All of these will diminish over time
9-10
Non-Technical Limitations of EC
 Legal and economic concerns:
 Many legal issues are yet unresolved
 Lack of national and international regulations and
standards
 Difficulty in measuring benefits of EC and justifying
EC
 Insufficient number (critical mass) of sellers and
buyers exists for profitable EC operations
 Cultural resistance:
 Distrust of the new: Many sellers and buyers are
waiting for EC to stabilize before they take part
 Customer resistance to the change from a physical
to virtual stores
 Perception that electronic commerce is expensive
and unsecured, so many do not want even to try it
9-11
Business-to-Consumer EC
 Electronic Storefronts and Malls
 Electronic retailing can be conducted
via solo storefront or as a part of
cybermall
 Issues of e-tailing
 May be channel conflict and conflict
with existing stores
 Difficult to fulfill large quantity of very
small orders
 Incorrect business model (advertising
revenue versus profitable sales)
9-12
(continued)
 Services Online
Banking (www.sfnb.com)

Securities trading (Schwab Online)

Job markets (Monster Board)

Travel (Expedia.com)

Real estate (Realtor.com)

 Auctions (eBay.com)

9-13
(continued)
 Personalization – ability to customize
product, service, advertisement, or
customer service
 B2C EC enables personalization at low
cost
 Internet enables marketing research
 Questionnaires
• Usually involve some inducement
 Direct behavior observation
• Cookies or site tracking services

9-14
(continued)
 Use of intelligent agents
 Help customers determine what to buy
 Search for and compare vendor prices
 Collect information and develop customer
profiles
 Online advertising
 Banners
• Keyword banners
• Random banners
 Direct email
 Pop-up windows

9-15
(continued)
 Advertising Approaches and Issues
 Permission marketing – offer incentives to
consumers to receive advertising
 Viral (advocacy) marketing – online word of
mouth advertising (send this ad to a friend and
get…)
 Customizing ads – base ads on consumers’
profile
 Attracting visitors to a site
• Making the top list of a search engine
• Online events, promotions, and attractions
 Electronic catalogs / customized
catalogs
 Coupons online
9-16
(continued)
 Providing Customer Service
 Help customer determine needs
 Help customer acquire product or
service
 Support customer during ownership
of product or service
 Help customer dispose of product or
service

9-17
Business-to-Business EC
 Composes the majority of EC volume
 Enables organizations to form electronic
relationships
 Covers all activities along the supply chain
 Business Models:
 Sell-Side Marketplace
• Organizations sell products to other organizations
electronically.
 Buy-Side Marketplace
• Buyers post needs; sellers submit bids
 Electronic Exchanges
• Electronic marketplaces link many buyers and
many sellers

9-18
Business-to-Business EC
(continued)
 Collaborative Commerce – non-
buying/selling activities between
businesses
 Planning and scheduling
 Design
 New product information
 Product content management
 Order management
 Sourcing and procurement

9-19
Electronic Commerce Innovations
 E-Government – deliver information
and public services to citizens and
members of the public sector
 M-Commerce – use of wireless
devices to deliver mobile e-commerce
 Consumer-to-consumer EC – direct
interaction facilitated by auctions,
classifieds, and bartering
 Intrabusiness EC – business units
interact or employees interact with
employers

9-20
Electronic Commerce
Requirements
 Infrastructure – hardware, software, and
networks needed to conduct transactions,
communicate, and collaborate
 Electronic Payment Mechanisms
 Electronic checks
• Customer opens account with a bank
• the customer e-mails an encrypted electronic
check signed with a digital signature
• the merchant deposits the check in his or her
account; money is debited in the buyer’s account
and credited to the seller’s account

9-21
Electronic Commerce
Requirements
 Electronic Payment Mechanisms (continued)
 Electronic credit cards
• Unencrypted payments - the buyer e-mails her or his
credit card number to the seller on the Internet
• Encrypted payments - credit card details encrypted for
security
 Electronic cash in PC
• bank provides special software to consumer
• customer buys “electronic money” from the bank
through software
• the bank sends electronic money note to this customer,
endorsing it with a digital signature
• the money is stored on the buyer’s PC and can be spent
in any electronic store that accepts e-cash
• the software is also used to transfer the e-cash from
the buyer’s computer to the seller’s computer
• the seller either deposits the e-cash in a bank or uses
the e-cash to make purchases elsewhere
9-22
Electronic Commerce
Requirements
 Security
 Authentication - assurance regarding the identity of
the parties who are involved in the deal
 Integrity - assurance that data and information
(orders, reply to queries, and payment authorization)
are not accidentally or maliciously altered or
destroyed during transmission
 Non-repudiation - Protection against the customer’s
unjustifiable denial of placing an order; buyer needs
protection against the vendor denial of shipment, or
sending wrong order
 Privacy - many customers want their identity to be
undisclosed
 Safety - assurance that it is safe to provide a credit
card number on the Internet

9-23
Electronic Commerce
Requirements
 Order Fulfillment
 Find, assemble, and pack
product
 Ship product to customer
 Collect customer payment
 Arrange for returns if needed
 Provide on-going support (e.g.,
animated assembly instructions)
 EC is a ‘pull’ operation – hard to
forecast demand and prepare to
fulfill orders
9-24
Electronic Commerce Issues
 Buyer Protection
 look for reliable brand names at sites like Wal-Mart
Online, Disney Online, and Amazon.com
 search any unfamiliar selling site for company’s
address and phone and fax number
 investigate how secure the seller’s site is by reading
the posted privacy notice, and evaluate how well the
site is organized
 examine the money-back guarantees, warranties,
and service agreements
 compare prices to those in regular stores (suspect
the too cheap sites)
 ask friends what they know about the vendor
 find out what your rights are in case of a dispute
 consult the National Fraud Information Center
9-25
 Seller Protection
 Need protection against consumers who
refuse to pay or pay with bad checks and
buyers’ claims that the merchandise did not
arrive
 Need protection against the use of their
name by others as well as use of their
unique words and phrases, slogans and
Web address
 Need legal recourse against customers who
download copyrighted software and/or
knowledge and sell it to others
9-26
 Ethics
 Privacy
• most electronic payment systems know
who the buyers are; therefore, it may be
necessary to protect the buyers’ identity
 Web Tracking
• by using sophisticated software it is
possible to track individual movements
on the internet
 Disintermediation
• the use of EC may result in the
elimination of some of a company’s
employees as well as brokers and agents
9-27
 Legal Concerns
 Domain Names
• several companies that have similar or
same names (in different countries)
compete over a domain name that is not
a registered trademark
 Taxes and Other Fees
• Federal, state, and local taxing
authorities are trying to figure out how to
impose taxes on Internet sales
 Copyright
• intellectual property is protected by
copyright laws and cannot be used freely
9-28
Chapter Summary
 B2C EC encompasses e-tailing,
auctions, and online services
 B2C EC provides numerous marketing
and advertising opportunities and
challenges
 B2B EC has the highest volume, and
provides several business models
 Payment mechanisms and security are
critical EC issues
 EC introduces many legal and ethical
concerns
9-29
Copyright © 2003 John Wiley & Sons, Inc. All rights reserved. Reproduction
or translation of this work beyond that permitted in Section 117 of the 1976
United Stated Copyright Act without the express written permission of the
copyright owner is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons, Inc. The
purchaser may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for errors,
omissions, or damages, caused by the use of these programs or from the
use of the information herein.

9-30

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Introduction to Information

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

Introduction to Information Technology, 2nd Edition

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