Course: ISYS6093-Information System Concepts

Effective Period : September 2017

E-Business
and
E-Commerce
(L)

Session 9 & 10
 Acknowledgement

These slides have been adapted from:

Rainer, Prince, Cegielski (2014).

Introduction to Information Systems.

5th edition. John Willey & Sons, Inc.

Michigan. ISBN: 978-1-118-80855-9

Chapter 7
 Learning Outcome

Student will able to :

• Define the basic concepts of information systems
• Illustrate the application of information systems in
the business world
 Learning Objectives

After studying this chapter, student will

able to :
1. Describe the six common types of electronic
commerce.
2. Describe the various online services of business-to-
consumer (B2C) commerce, providing specific
examples of each.
3. Describe the three business models for business-to-
business electronic commerce.
4. Identify the ethical and legal issues related to
electronic commerce, providing examples.
 Chapter Outline
1. Overview of E-Business and E-Commerce
2. Business-to-Consumer (B2C) Electronic Commerce
3. Business-to-Business (B2B) Electronic Commerce
4. Ethical and Legal Issues in E-Business
 Overview of
E-Business & E-Commerce
Definitions and Concepts:
• Electronic commerce (e-commerce, EC) describes
the buying, selling, transferring or exchanging of
products, services or information via computer
networks, including the Internet.
• E-business is a broader definition of EC, including
buying and selling of goods and services, and also
servicing customers, collaborating with partners,
conducting e-learning and conducting electronic
transactions within an organization.
 Overview of
E-Business & E-Commerce
Definitions and Concepts:
Pure vs. Partial EC
Pure versus Partial Electronic Commerce depends on
the degree of digitization involved.
--The product can be physical or digital.
--The process can be physical or digital.
--The delivery agent can be physical or digital.
• Brick-and-mortar organizations are purely physical
organizations.
• Virtual organizations are companies that are
engaged only in EC. (Also called pure play)
• Click-and-mortar organizations are those that
conduct some e-commerce activities, yet their
business is primarily done in the physical world. i.e.
partial EC.
 Overview of
E-Business & E-Commerce
Types of E-Commerce:
• Business-to-consumer (B2C): the sellers are
organizations and the buyers are individuals.
• Business-to-business (B2B): both the sellers and
buyers are business organizations. B2B represents the
vast majority of e-commerce.
• Consumer-to-consumer (C2C): an individual sells
products or services to other individuals.
• Business-to-employee (B2E): An organization uses e-
commerce internally to provide information and
services to its employees. Companies allow employees
to manage their benefits, take training classes
electronically; buy discounted insurance, travel
packages, and event tickets.
 Overview of
E-Business & E-Commerce
Types of E-Commerce (continue….):
• E-Government: the use of Internet Technology in
general and e-commerce in particular to deliver
information about public services to citizens (called
Government-to-citizen [G2C EC]), business partners
and suppliers (called government-to-business [G2B
EC]),
• Mobile Commerce (m-
commerce) refers to e-
commerce that is
conducted in a wireless
environment. For example,
using cell phone to shop
over the Internet.

https://www.enterpriseinnovation.net/files/m-commerce.jpg
 Overview of
E-Business & E-Commerce
Major E-Commerce Mechanisms:
• An auction is a competitive buying and selling process
in which prices are determined dynamically by
competitive bidding.
• In forward auction, sellers solicit bids from many
potential buyers. Usually, sellers place items at sites
for auction, and buyers bid continuously for them. The
highest bidder wins the items. Both sellers and buyers
can be either individuals or businesses. E-Bay is a
forward auction.
• In reverse auctions, one buyer, usually an
organization, wants to buy a product or a service. The
buyer posts a request for quotation (RFQ) on its Web
site or on a third-party Web site. The RFQ contains
detailed information on the desired purchase.
Suppliers study the RFQ and submit bids, and the
lowest bid wins the auction.
 Overview of
E-Business & E-Commerce
Major E-Commerce Mechanisms:
• Forward and Reverse Auctions:

Bid Bid
price price

Time Time

Forward Auction Reverse Auction

 Overview of
E-Business & E-Commerce
E-Commerce Business Models:
Each of the above types of EC is executed in one or more
business models.
A business model is the method by which a company
generates revenue to sustain itself.
Table 7.1. (open page 169) summarize the major EC
business models.
• Online direct marketing: manufacturers or retailers
sell directly to customers.
• Electronic tendering system: businesses (or
governments) request quotes from suppliers; uses
B2B (or G2B) with reverse auctions.
• Name-your-own-price: customers decide how
much they want to pay.
 Overview of
E-Business & E-Commerce
E-Commerce Business Models (continue…) :
• Find-the-best-price. customers specify a need and
an intermediary compares providers and shows the
lowest price.
• Affiliate marketing: Vendors ask partners to place
logos or banners on partner’s site. If customers click
on logo, go to vendor’s site, and buy, then vendor pays
commission to partners.
• Viral marketing: receivers send information about
your product to their friends.
• Group purchasing: small buyers aggregate demand
to get a large volume; then the group conducts
tendering or negotiates a lower price.
• Online auctions: companies run auctions of various
types on the Internet.
 Overview of
E-Business & E-Commerce
E-Commerce Business Models (continue…) :
• Product customization: customers use the Internet
to self-configure products or services. Sellers then
price them and fulfill them quickly.
• Deep discounters: company offers deep price
discounts.
• Membership: only members can use the services
provided.
 Electronic Payments
E-payment systems enable you to pay for goods and
services electronically.
• Electronic checks (e-checks) are similar to paper
checks and are used mostly in B2B.
• Electronic credit cards allow customers to charge
online payments to their credit card account.
• Purchasing cards are the B2B equivalent of electronic
credit cards and are typically used for unplanned B2B
purchases.

Continue…
Electronic Payments
Electronic credit cards
 Electronic Payments
Electronic credit cards
• Step 1: When you buy a book from Amazon, for
example, your credit card information and purchase
amount are encrypted in your browser. This way the
information is safe while it is “traveling” on the
Internet to Amazon.
• Step 2: When your information arrives at Amazon, it is
not opened. Rather, it is transferred automatically (in
encrypted form) to a clearinghouse, where it is
decrypted for verification and authorization.
• Step 3: The clearinghouse asks the bank that issued
you your credit card (the card issuer bank) to verify
your credit card information.
• Step 4: Your card issuer bank verifies your credit card
information and reports this to the clearinghouse.
 Electronic Payments
Electronic credit cards
• Step 5: The clearinghouse reports the results of the
verification of your credit card to Amazon.
• Step 6: Amazon reports a successful purchase and
amount to you.
• Step 7: Your card issuer bank sends funds in the
amount of the purchase to Amazon’s bank.
• Step 8: Your card issuer bank notifies you (either
electronically or in your monthly statement) of the
debit on your credit card.
• Step 9: Amazon’s bank notifies Amazon of the funds
credited to its account.
 Electronic Payments

Figure 7.2 Example of virtual credit card

 Electronic Payments
Electronic cash
 Stored-value money cards allow you to store a
fixed amount of prepaid money and then spend it
as necessary.
 Smart cards contain a chip called a
microprocessor that can store a considerable
amount of information and are multipurpose – can
be used as a debit card, credit card or a stored-
value money card.
 Person-to-person payments are a form of e-cash
that enables two individuals or an individual and a
business to transfer funds without using a credit
card.
 Overview of
E-Business & E-Commerce
Benefits of E-Commerce :
• Benefits to organizations http://arvsu.com/wp-content/uploads/2015/10/eCommerce-1.jpg

 Makes national and international markets more

accessible
 Lowering costs of processing, distributing, and
retrieving information
• Benefits to customers
 Access a vast number of products and services
around the clock (24/7/365)
• Benefits to Society
 Ability to easily and conveniently deliver
information, services and products to people in
cities, rural areas and developing countries.
 Overview of
E-Business & E-Commerce
Limitations of E-Commerce :
• Technological Limitations
 Lack of universally accepted security standards
 Insufficient telecommunications bandwidth
 Expensive accessibility
• Non-technological Limitations
 Perception that EC is unsecure
 Unresolved legal issues
 Lacks a critical mass of sellers and buyers

http://arvsu.com/wp-content/uploads/2015/10/eCommerce-1.jpg
 Business-to-Consumer (B2C)
Electronic Commerce
• An electronic storefront is a Web site that represents
a single store.
• Electronic malls are collections of individual shops
under a single Internet address.
• Electronic retailing (e-tailing) is the direct sale of
products and services through electronic storefronts
or electronic malls, usually designed around electronic
catalog format and/or auction.
Figure 7.1.
Electronic malls
include
products from many
vendors.
 Business-to-Consumer (B2C)
Electronic Commerce
Online Service Industries :
• Cyber banking
• Online securities trading
• Online job market
• Travel services
• Online advertising
Disintermediation
https://www.hkbea.com.mo/images/mo/en/cyberbanking.jpg

Online service involves

customers accessing services via
the Web. Intermediaries or
middlemen provide information
and/or provide value-added
services. When the function(s) of
these intermediaries can be
automated or eliminated, this
process is called
 Business-to-Consumer (B2C)
Electronic Commerce
Online Advertising
Advertising is an attempt to disseminate information in
order to influence a buyer-seller transaction.

Online Advertising methods :

• Banners are simply electronic billboards.
• Pop-up ad appears in front of the current browser
window.
• Pop-under ad appears underneath the active window.
• Permission marketing asks consumers to give their
permission to voluntarily accept online advertising and
e-mail.
• Viral marketing refers to online “word-of-mouth”
marketing.
 Business-to-Consumer (B2C)
Electronic Commerce
Issues in E-Tailing
• Channel conflict occurs when manufacturers
disintermediate their channel partners, such as
distributors, retailers, dealers, and sales
representatives, by selling their products directly to
consumers, usually over the Internet through
electronic commerce.
• Multichanneling is a process in which a company
integrates its offline and online channels.
• Order fulfillment involves finding the product to be
shipped; packaging the product; arrange for speedy
delivery to the customer; and handle the return of
unwanted or defective products.
 Business-to-Consumer (B2C)
Electronic Commerce
Drivers of today’s online advertising :
• The emergence of “communitainment.”
• The increasing popularity of Usites.
• Mainstreaming of the Internet.
• Declining usage of traditional media.
• Fragmentation of content consumption.
• Consumers are multitasking and they do not like ads.

Source: PiperJaffrey
PiperJaffray is an investment bank. See PiperJaffray at http://www.piperjaffray.com.
 Business-to-Consumer (B2C)
Electronic Commerce
Eight Types of Web sites for Advertising :
• Portals: most popular; best for reach but not targeting
• Search: second largest reach; high advertising value
• Commerce: high reach; not conducive to advertising
• Entertainment: large reach; strong targetability
• Community: emphasize being a part of something;
good for specific advertising
• Communications: not good for branding; low
targetability
• News/weather/sports: poor targetability
• Games: good for very specific types of advertising
Source: PiperJaffrey
PiperJaffray is an investment bank. See PiperJaffray at http://www.piperjaffray.com.
 Business-to-Business (B2B)
Electronic Commerce
In B2B e-commerce, the buyers and sellers are
organizations.
B2B Sell-Side Marketplace
In the sell-side marketplace, organizations sell their
products or services to other organizations Electronically
from their own Web site and/or from a third-party Web
site.
This model is similar to the B2C model in which the buyer
comes to the seller’s site, views catalogs, and places an
order. In the B2B sell-side marketplace, the buyers are
organizations.
• Key mechanisms: electronic catalogs and forward
auctions
B2B Buy-Side Marketplace
• Key mechanism: reverse auctions
 Business-to-Business (B2B)
Electronic Commerce
Electronic Exchanges :
• Vertical exchanges connect buyers and sellers in a
given industry.
• Horizontal exchanges connect buyers and sellers
across many industries and are used mainly for MRO
materials.
• In functional exchanges, needed services such as
temporary help or extra office space are traded on an
“as-needed” basis.
 Ethical and Legal Issues
Ethical Issues :
• Privacy: ecommerce provides opportunities for
businesses and employers to track individual activities
on the WWW using cookies or special spyware. This
allows private/personal information to be tracked,
compiled, and stored as an individual profile. This
profile can be used or sold to other businesses for
target marketing or by employees to aide in personnel
management decisions (i.e., promotions, raises,
layoffs).
• Job Loss
 Ethical and Legal Issues
Legal Issues Specific to E-Commerce :
• Fraud on the Internet i.e. stocks, investments,
business opportunities, auctions.
• Domain Names problems with competition.
• Cybersquatting refers to the practice of registering
domain names solely for the purpose of selling them
later at a higher price.
• Domain Tasting is a practice of registrants using the
five-day "grace period" at the beginning of a domain
registration to profit from pay-per-click advertising.
• Taxes and other Fees when and where (and in some
cases whether) electronic sellers should pay business
license taxes, franchise fees, gross-receipts taxes,
excise taxes, …etc.
• Copyright protecting intellectual property in e-
commerce and enforcing copyright laws is extremely
difficult.
 Session 11 & 12 Preparation

• Read Case The Entrepreneur’s Dilemma

Alibaba, Tencent, and Amazon as E-Commerce
Platforms.
• After read the case, take notes and bring the
notes into classroom
Continued to session 11

Thank you