Management Information Systems
4-1
Chapter 4
1
Electronic Business: E-Commerce and E-Government
Describe different business models used to compete in cyberspace as well as different forms of electronic government.
Business-to-Consumer E-Commerce
Describe business-to-consumer electronic commerce strategies.
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.
Electronic Commerce Websites and Internet Marketing
Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.
Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.
Table of Contents
Introduction
Electronic Commerce Defined
Most Common Types of E-Commerce
E-Government
1-2
Electronic Commerce Defined
Electronic Commerce
“the exchange of goods, services, and money among firms, between firms and their customers, and between customers, supported by communication technologies and, in particular, the Internet”
Electronic Commerce occurs when any aspect of the transaction is facilitated by Electronic Communication Technologies.
We typically think of the Internet, which is where the vast majority of Electronic Commerce takes place.
Exchanges can involve consumer, businesses, and the government where any of these can be the buyer, the seller, or both.
3
Most Common Types of E-Commerce
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| Type of EC | Description |
| Business-to-consumer (B2C) | Transactions between businesses and their customers |
| Business-to-business (B2B) | Transactions among businesses |
| Consumer-to-business (C2B) | Transactions between customers and businesses |
| Consumer-to-consumer (C2C) | Transactions between people not necessarily working together |
| Government-to-citizen (G2C) | Transactions between a government and its citizens |
| Government-to-business (G2B) | Transactions between a government and businesses |
| Government-to-government (G2G) | Transactions among governments |
There are many types of Electronic Commerce, based on who is interacting or selling to whom.
Business to Consumer is Businesses selling to Consumers; Consumer to Business is Consumers selling to Businesses.
E-Government
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Government-to-Citizens
Government-to-Business
Government-to-Government
Governments use e-Government to increase efficiency and effectiveness much like businesses do.
By reducing paperwork and allowing for the electronic dissemination of information and the automated processing of transactions, governments can significantly reduce operating costs while increasing services.
Examples of this might include the electronic filing of income tax returns, the online filing of business license applications, or the ability to share data electronically between different law enforcement agencies.
4-6
Chapter 4
6
Electronic Business: E-Commerce and E-Government
Describe different business models used to compete in cyberspace as well as different forms of electronic government.
Business-to-Consumer E-Commerce
Describe business-to-consumer electronic commerce strategies.
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.
Electronic Commerce Websites and Internet Marketing
Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.
Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.
Table of Contents
E-Commerce Business Strategies
e-Tailing: Capabilities and Benefits
Drawbacks of e-Tailing
An Entrepreneurial Example
1-7
E-Commerce Business Strategies
Differentiated, based on levels of physical/virtual presence
Brick-and-mortar does not include EC
4-8
Companies can ignore E-Commerce and just sell through physical outlets, can be virtual companies that only sell through online store fronts, or can combine them using a “Click and Mortar” approach that allows both online transactions and physical store sales.
The physical, store-only company has a limited product reach as well as limited sales and support hours.
The online company can sell anywhere in the world 24/7, but customers must wait for their product to be shipped and some products require physical inspection and testing to verify suitability.
Click-and-Mortar stores often combine the best of both worlds, but retailers must overcome the pricing differences inherent between online and physical locations as well as the complexity of two sales channels.
E-Tailing: Capabilities and Benefits
4-9
Mass Customization
Firms can tailor their products and services to meet a customer’s particular needs
Disintermediation
Cutting out the “middleman” and reaching customers more directly and efficiently
Group Buying
If many people agree to purchase the product or service, they get significant discounts
Powerful Web technologies have given rise to a global platform where firms from across the world can effectively compete for customers and gain access to new markets.
Web sites that are linked to corporate databases provide real-time access to personalized information.
E-Tailing: Capabilities and Benefits (cont.)
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New Revenue and Pricing Models
Companies can earn revenues not only through traditional sales, but also through subscription, licensing, or transaction fees
Companies and individuals can earn money through Web advertising or affiliate marketing
Social Commerce
Utilizing social networks to build lasting relationships and advertise products
The Web has opened new avenues for communication between companies and their customers, including Web-based support, electronic mail, online text or video chat applications, and social media.
This facilitates all stages of a transaction, allowing companies to conduct business online without human assistance, greatly reducing transaction costs while enhancing operational efficiency.
Mass Customization
4-11
Mass customization generates additional value for customers and profits for producers.
Mass customization, which caters to individualized customer preferences while maintaining economies of scale, helps firms tailor their products and services to meet a customer’s particular needs on a large scale.
Linking online product configuration systems with just-in-time production allows companies to assemble each individual product based on the customers’ specifications.
Dell and Nike are two examples of firms that have successfully implemented mass customization into their e-commerce strategy.
E-Tailing: Selling Goods and Services in the Digital World
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Companies utilizing E-Tailing have unique benefits
Product Benefits: With no store size and shelf space restrictions, companies can sell a far wider variety of goods.
Place Benefits: Internet storefronts are available on almost every computer connected to the Internet.
Price Benefits: The efficiency of online retailers, with high volumes and low overhead allow for very competitive pricing.
When companies are selling online, they can take advantage of the elimination of the Retail Market space, selling a much wider variety of products, targeting unique market segments on a global basis, and undercutting competitors pricing.
E-Tailing: The Long Tail
Traditional stores
Focus on mainstream needs
Target the average customer
E-Tailers
Can focus on niche markets
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Online retailers can cater to “The Long Tail”, or niche markets in addition to (or instead of) purely selling mainstream products.
While customers with unusual wants or needs may not be able to support a local storefront, there are often enough individuals in larger geographic regions to support an online merchant.
Drawbacks of e-Tailing
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Trust
This is especially a concern for new online businesses without a proven track record
Direct Product Experience
E-tailing doesn’t provide sensory information
Product Delivery and Returns
Except for direct downloads, e-tailing requires additional delivery time for products
Returns may also be a hassle, compared to just going to the store
There are challenges to e-tailing, especially for certain product and service types.
Often, trust becomes an issue due to the customer’s inability to adequately experience the capabilities and characteristics of a product prior to purchase, as well as due to uncertainties surrounding product delivery and returns.
4-15
Chapter 4
Electronic Business: E-Commerce and E-Government
Describe different business models used to compete in cyberspace as well as different forms of electronic government.
Business-to-Consumer E-Commerce
Describe business-to-consumer electronic commerce strategies.
Electronic Commerce Websites and Internet Marketing
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.
Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.
Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.
15
Table of Contents
Attracting and Retaining Online Customers
Designing Web Sites to Meet Online Consumers’ Needs
Internet Marketing
Internet Marketing Methods
Search Engine Optimization
Mobile Marketing
1-16
Attracting and Retaining Online Customers – 4 Key Recommendations
4-17
The Web site should offer something unique
The Web site must motivate people to visit, to stay, and to return
You must advertise your presence on the Web
You should learn from your Web site
Online customers have many choices, but if you can provide customers with something they can find nowhere else, then they will have to come to you to get that benefit.
You can compete for customers on price, but if you also offer them service, support, community, or other benefits you can build a relationship to draw customers to you instead.
Customers have to find you to buy from you.
If you have features on your Web site that are prompting customers to buy, or to leave, you should know what they are. By tracking how customers navigate through your site you can learn what is working and what isn’t, and make adjustments accordingly.
Designing Web Sites to Meet Online Customers’ Needs
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Structural Firmness
No bad links, understandable error messages, privacy/security, speed
Functional Convenience
Ease of use, simple navigation, user feedback, help features, one-click ordering, flexible payment, order tracking
Representational Delight
Aesthetically pleasing, professional look and feel, color/font/images, consistent layout, no clutter
Successful companies design their Web sites to enhance their online customers’ experience when interacting with the Web site.
The site has to work correctly, be easy to use, and look good.
There is a hierarchy of these needs. Most important is structural firmness, followed by functional convenience, and finally representational delight.
Designing Web Sites to Meet Online Customers’ Needs
4-19
Consumers need Web sites to meet their basic needs, which vary depending on why they are using the site.
If a site can’t reliably process transactions, is difficult to use, and is off-putting in it’s design, consumers are unlikely to use it.
Internet Marketing Methods
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| Search Marketing | Includes paid search, placing ads on search Web sites based on search terms, and SEO, optimizing a Web site and its relative search engine ranking |
| Display Ads | Simple banner ads, but now often contextualized to what the person is viewing |
| E-Mail Marketing | Extremely low cost, less than a penny an e-mail, and hence very popular; effectiveness also easy to track |
| Social Media Marketing | Increasingly used for interactive communication and relationship building with customers |
| Mobile Marketing | If ads can be tailored to a user’s location, then highly targeted marketing opportunities open up |
| Performance Assessment | Impression, pay-per-click/click-through, and conversion models (but beware of click fraud) |
Advertisers continually look for ways to deliver targeted information at the time and place where it will be most likely to stimulate a purchase or build a relationship increasing the lifetime value of the customer base. Internet marketing is no exception, and these approaches all seek to address these needs.
As with many aspects of business, there is a potential for fraud in advertising if aspects of the transaction can’t be monitored, and click fraud by the ad seller trying to drive up revenue or a competitor (or disgruntled employee) trying to drive up business costs can readily occur.
Internet Marketing
4-21
If you build it, they won’t come unless you market it
Search Engine Optimization (SEO) can be critical to your Web site’s success
Search Engine Optimization (SEO)
4-22
SEO attempts to improve a page’s ranking in search engines like Google.
Techniques include having other pages link to the page,
keeping content updated, and including key words.
It is hard to influence the ranking of your company’s page in the organic search results. Users will typically only click on the first few items of their search. Search engines’ algorithms are usually proprietary and are frequently changed, and there can be hundreds of factors influencing a page’s rank. They also check for “cheating,” such as hidden keywords.
4-23
Chapter 4
Electronic Business: E-Commerce and E-Government
Describe different business models used to compete in cyberspace as well as different forms of electronic government.
Business-to-Consumer E-Commerce
Describe business-to-consumer electronic commerce strategies.
Electronic Commerce Websites and Internet Marketing
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.
Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.
Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.
23
Table of Contents
Attracting and Retaining Online Customers
Designing Web Sites to Meet Online Consumers’ Needs
Internet Marketing
Internet Marketing Methods
Search Engine Optimization
Mobile Marketing
1-24
Attracting and Retaining Online Customers – 4 Key Recommendations
4-25
The Web site should offer something unique
The Web site must motivate people to visit, to stay, and to return
You must advertise your presence on the Web
You should learn from your Web site
Online customers have many choices, but if you can provide customers with something they can find nowhere else, then they will have to come to you to get that benefit.
You can compete for customers on price, but if you also offer them service, support, community, or other benefits you can build a relationship to draw customers to you instead.
Customers have to find you to buy from you.
If you have features on your Web site that are prompting customers to buy, or to leave, you should know what they are. By tracking how customers navigate through your site you can learn what is working and what isn’t, and make adjustments accordingly.
Designing Web Sites to Meet Online Customers’ Needs
4-26
Structural Firmness
No bad links, understandable error messages, privacy/security, speed
Functional Convenience
Ease of use, simple navigation, user feedback, help features, one-click ordering, flexible payment, order tracking
Representational Delight
Aesthetically pleasing, professional look and feel, color/font/images, consistent layout, no clutter
Successful companies design their Web sites to enhance their online customers’ experience when interacting with the Web site.
The site has to work correctly, be easy to use, and look good.
There is a hierarchy of these needs. Most important is structural firmness, followed by functional convenience, and finally representational delight.
Designing Web Sites to Meet Online Customers’ Needs
4-27
Consumers need Web sites to meet their basic needs, which vary depending on why they are using the site.
If a site can’t reliably process transactions, is difficult to use, and is off-putting in it’s design, consumers are unlikely to use it.
Internet Marketing Methods
4-28
| Search Marketing | Includes paid search, placing ads on search Web sites based on search terms, and SEO, optimizing a Web site and its relative search engine ranking |
| Display Ads | Simple banner ads, but now often contextualized to what the person is viewing |
| E-Mail Marketing | Extremely low cost, less than a penny an e-mail, and hence very popular; effectiveness also easy to track |
| Social Media Marketing | Increasingly used for interactive communication and relationship building with customers |
| Mobile Marketing | If ads can be tailored to a user’s location, then highly targeted marketing opportunities open up |
| Performance Assessment | Impression, pay-per-click/click-through, and conversion models (but beware of click fraud) |
Advertisers continually look for ways to deliver targeted information at the time and place where it will be most likely to stimulate a purchase or build a relationship increasing the lifetime value of the customer base. Internet marketing is no exception, and these approaches all seek to address these needs.
As with many aspects of business, there is a potential for fraud in advertising if aspects of the transaction can’t be monitored, and click fraud by the ad seller trying to drive up revenue or a competitor (or disgruntled employee) trying to drive up business costs can readily occur.
Internet Marketing
4-29
If you build it, they won’t come unless you market it
Search Engine Optimization (SEO) can be critical to your Web site’s success
Search Engine Optimization (SEO)
4-30
SEO attempts to improve a page’s ranking in search engines like Google.
Techniques include having other pages link to the page,
keeping content updated, and including key words.
It is hard to influence the ranking of your company’s page in the organic search results. Users will typically only click on the first few items of their search. Search engines’ algorithms are usually proprietary and are frequently changed, and there can be hundreds of factors influencing a page’s rank. They also check for “cheating,” such as hidden keywords.
4-31
Chapter 4
31
Electronic Business: E-Commerce and E-Government
Describe different business models used to compete in cyberspace as well as different forms of electronic government.
Business-to-Consumer E-Commerce
Describe business-to-consumer electronic commerce strategies.
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.
Electronic Commerce Websites and Internet Marketing
Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.
Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.
Table of Contents
Mobile Commerce
Mobile Commerce
GPS-Enabled Location-Based Services
C2C EC
Mobile Computing
Social Media
The Internet of Things (IoT)
Cloud Computing
Big Data
1-32
Mobile Commerce
4-33
Location-Based M-Commerce
Services can be offered tailored to a person’s needs based on their current location
Information on the Go
Customers can get further information about a product wherever they are, including in the store, but this can lead to “showrooming”
Product and Content Sales
Consumers use mobile apps to make purchases while on-the-go
Mobile E-Commerce is an emerging field that is still finding it’s place.
The promise of Mobile E-Commerce includes location-based services.
Customers can also look up additional information in a store about it’s products, but this sometimes leads to comparison shopping with online retailers.
Finally, mobile apps now allow consumers to make purchases wherever they are.
GPS-Enabled Location-Based Services
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| Service | Example |
| Location | Determining the basic geographic position of the cell phone |
| Mapping | Capturing specific locations to be viewed on the phone |
| Navigation | The ability to give route directions from one point to another |
| Tracking | The ability to see another person’s location |
GPS = global positioning system
Location-based services are highly personalized mobile services based on a user’s location. Location-based services are implemented via the cellular network, Wi-Fi networks, and global positioning system (GPS) functionality, now built into most modern cell phones.
Via GPS, search engines can provide specific information about attractions or restaurants located in the user’s vicinity, retail stores can enhance store locators with navigation instructions, or users can receive real-time traffic or public transport information.
C2C EC
4-35
E-Auctions
Individual sellers can sell or barter items at online auctions
Consumers place bids
Examples: eBay.com and swap.com
Revenue model based on small transaction fees, highly profitable
Online Classifieds
Just advertising, no online transactions
Freecycling
Example: craigslist.com
Consumer-to-Consumer E-Commerce allows consumers to achieve a fair price for goods which they otherwise might not be able to achieve.
E-Auctions allow consumers to sell rare and unusual items to a world market.
Online Classifieds allow consumers to sell and search for products locally, reaching a wider audience but still facilitating what is often a local face-to-face transaction.
C2C Opportunities and Threats
4-36
| Opportunities | Threats |
| Consumers can buy and sell to broader markets | No quality control |
| Eliminates the middleman that increases the final price of products and services | Higher possibility of fraud |
| Always available for consumers, 24/7/365 | Harder to use traditional payment methods (checks, cash, ATM cards) |
| Market demand is an efficient mechanism for setting prices in the electronic environment | |
| Increases the numbers of buyers and sellers who can find each other |
C2C is a very open medium of exchange, so provides both opportunities and threats.
C2B EC
4-37
Relatively new phenomenon, consumers can sell small pieces of work (e.g., photos) or services to businesses
It might be argued that anyone who made a living doing this is actually in business for themselves, so may be B2B
A relatively new phenomenon is C2B E-Commerce. This involves consumers selling what is typically small slices of work to businesses.
A good example might be businesses that buy photos from Amateur photographers to sell online to interested parties. Each photo is a small piece of work, but when they sell the photographer gets a small commission.
37
4-38
Chapter 4
38
Electronic Business: E-Commerce and E-Government
Describe different business models used to compete in cyberspace as well as different forms of electronic government.
Business-to-Consumer E-Commerce
Describe business-to-consumer electronic commerce strategies.
Understand the keys to successful electronic commerce Web sites, and explain the different forms of Internet marketing.
Electronic Commerce Websites and Internet Marketing
Mobile Commerce, Consumer-to-Consumer EC, and Consumer-to-Business EC
Describe mobile commerce, consumer-to-consumer electronic commerce, and consumer-to-business electronic commerce.
Managing Finances and Navigating Legal Issues in EC
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce.
Table of Contents
E-Banking
Securing Payments in the Digital World
Legal Issues in EC
Taxation Digital Rights Management
Net Neutrality
1-39
E-Banking
4-40
Online Banking
Convenience
Security Concerns
Mobile banking
Online Investing
Increased access to financial information and analytical tools
Online investing
Mobile investing
Online banking has become widely accepted, although many people are still worried about the security aspect.
An emerging trend is mobile banking apps allowing anytime, anywhere banking.
Online investing has also taken off, with a variety of sites offering financial information, investment advice, and online brokerage accounts.
Securing Payments in the Digital World
4-41
Credit and Debit Cards
Credit cards are a simple mechanism
Consumers have to transfer a lot of personal information to the seller
Risk of identity theft
Managing Risk
Businesses are financially liable for fraudulent transactions
Businesses have to look for fraud indicators and sometimes reject risky transactions
Payment Services
Examples: PayPal, Google Checkout
Online payments are readily made using credit cards, which offer consumers some protection against fraud by the seller, who typically still requires a significant amount of personal information to complete the sale.
At the same time, the merchant is at significant risk of fraud from buyers, and unlike “card-present” sales in traditional stores, when a sale is made online the merchant is financially liable if the sale is fraudulent.
Merchants now employ additional safeguards to flag and reject sales that have warning signs indicating they may not be legitimate.
Ways to Protect Yourself When Shopping Online
4-42
Use a secure browser
Check the site’s privacy policy
Read and understand the refund and shipping policies
Keep your personal information private
Give payment information only to businesses you know and trust
Keep records of your online transactions and check your e-mail
Review your monthly credit card and bank statements
Make sure that your browser has the latest encryption capabilities; also, always look for the padlock icon in your browser’s status bar before transmitting sensitive information.
Make sure that the company you’re about to do business with does not share any information you would prefer not to be shared.
Make sure that you can return unwanted/defective products for a refund.
Make sure that you don’t give out information, such as your Social Security number, unless you know what the other entity is going to do with it.
Make sure that you don’t provide your payment information to fly-by-night operations.
Make sure that you don’t miss important information about your purchases.
Make sure to check for any erroneous or unauthorized transactions.
Possible Indicators of Fraud
4-43
Email addresses
Shipping and billing addresses
Transaction patterns
In e-commerce transactions, there is no imprint of the physical card and no cardholder signature, so online merchants have to be especially careful when deciding whether or not to make a transaction.
Online merchants often use automated fraud screening services that provide the merchants with a risk score based on a number of variables such as match between shipping address, billing address, and phone number; the time of the order and the customer’s time zone; transaction volume; and the customer’s IP address and its geographic location.
Legal Issues in EC
4-44
Taxation
Sales taxes
Internet Freedom Act: Internet sales are treated like mail-order sales
Digital Rights Management
Preventing unauthorized duplication
Restrict which devices can play media
Limit number of times media can be played
Net Neutrality
Should the Internet be open? Or should Internet access come first to the highest bidder?
Sales taxes have historically not been levied on companies selling to consumers in different states.
EC both reduces state sales tax revenues and makes local business less competitive as compared to out-of-state online retailers.
Digital Rights Management, or DRM, includes practices to limit the copying and distribution of digital goods to paying customers.
Net Neutrality
4-45
Taxation
Sales taxes
Internet Freedom Act: Internet sales are treated like mail-order sales
Digital Rights Management
Preventing unauthorized duplication
Restrict which devices can play media
Limit number of times media can be played
Net Neutrality
Should the Internet be open? Or should Internet access come first to the highest bidder?