1

Chapter
7

Electronic Commerce Systems

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 2

Learning Objectives
Identify
the major categories and trends of e-
commerce applications.

Identify the essential processes of an e-

commerce system, and give examples of how
they are implemented in e-commerce
applications.

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 3

Learning Objectives (continued)

Identify several key factors and Web store

requirements needed to succeed in e-
commerce.

Identifythe business value of several types of

e-commerce marketplaces.

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 4

Learning Objectives (continued)

Discussthe benefits and trade-offs of several e-

commerce clicks and bricks alternatives.

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 5

Section I

Electronic Commerce Fundamentals

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 6

Electronic Commerce Fundamentals (continued)

“Few concepts have revolutionized business

more profoundly than e-commerce. E-
commerce is changing the shape of
competition, the speed of action, and the
streamlining of interactions, products, and
payments from customers to companies and
from companies to suppliers.”

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 7

Electronic Commerce Fundamentals (continued)

E-commerce

The online process of developing, marketing,

selling, delivering, servicing, and paying for
products & services transacted on
internetworked, global marketplaces of
customers, with the support of a worldwide
network of business partners.

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 8

The Scope of e-Commerce

Three Basic Categories
Business-to-Consumer (B2C)

Business-to-Business (B2B)

Consumer-to-Consumer (C2C)

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 9

Scope of e-Commerce (continued)

Electronic Commerce Technologies

The Internet, intranets, and extranets are

the network infrastructure or foundation

Customers must be provided with a range of

secure information, marketing, transaction
processing, and payment services

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 10

Scope of e-Commerce (continued)

Electronic commerce technologies (continued)

Trading and business partners rely on the

Internet and extranets to exchange

information and accomplish secure
transactions

Company employees depend on a variety of

Internet and intranet resources to
communicate and collaborate
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 11

Scope of e-Commerce (continued)

Electronic commerce technologies (continued)

IS professionals and end users can use a

variety of software tools to develop and
manage the content and operations of the
websites and other e-commerce resources

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 12

Essential e-Commerce Processes

Nine key components of an e-commerce
process architecture
Access control and security

Profiling and personalizing

Search management

Content management

Catalog management

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 13

Essential e-Commerce Processes (continued)

Key components (continued)

Payment

Workflow management

Event notification

Collaboration and training

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 14

Essential e-Commerce Processes (continued)

 Access control and security

 Processes MUST establish mutual trust and secure
access
 Authenticating users

 Authorizing access

 Enforcing security features

 Must protect the resources of e-commerce sites from

threats
 Hackers

 Theft of passwords or credit card numbers

 System failures
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 15

Essential e-Commerce Processes (continued)

Profiling and personalizing

One-to-one marketing strategy

Personalized view of the website

Based on…

Personal data

Website behavior and choices

Used to help authenticate your identity for

account management and payment purposes

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 16

Essential e-Commerce Processes (continued)

Search management
Helps customers find the specific product or

service they want

Software may include a search engine

component or a company may acquire a

customized e-commerce search engine

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 17

Essential e-Commerce Processes (continued)

Content and catalog management

Content management software helps

companies develop, generate, deliver,

update, and archive text data and
multimedia information
Frequently takes the form of multimedia

catalogs of product information

Works with profiling tools to personalize the

content of the website

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 18

Essential e-Commerce Processes (continued)

Content and catalog management (continued)

May be expanded to include product

configuration processes that support mass

customization of a company’s products

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 19

Essential e-Commerce Processes (continued)

Workflow management
Workflow software engine

Predefined sets of business rules

Roles of stakeholders

Authorization requirements

Routing alternatives

Databases used

Sequence of tasks

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 20

Essential e-Commerce Processes (continued)

Workflow management (continued)

Workflow systems ensure that..

Proper transactions, decisions, & work

activities are performed

Correct data and documents are routed to

the right employees, customers, suppliers,

and other business stakeholders

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 21

Essential e-Commerce Processes (continued)

Event notification
Most applications are event driven

New customer’s first visit

Payment and delivery processes

Customer relationship & supply chain

management activities
Notifies those concerned when an event

occurs that might affect their status in a

transaction
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 22

Essential e-Commerce Processes (continued)

Collaboration and training

Supports the collaboration arrangements &

trading services needed by customers,

suppliers, & other stakeholders
May be provided by Internet-based trading

services

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 23

Electronic Payment Processes

Processes are complex

Near anonymous nature of transactions

Security issues

Wide variety of debit and credit alternatives

Wide variety of financial institutions and

intermediaries

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 24

Electronic Payment Processes (continued)

Web payment processes

Credit cards

Purchase orders

Electronic shopping cart

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 25

Electronic Payment Processes (continued)

Electronic funds transfer (EFT)

Uses a variety of IT to capture and process
money and credit transfers between banks
and businesses and their customers
ATMs

Pay-by-phone

Web-based

PayPal & Bill Point (cash transfers)

CheckFree and PayTrust (automatic bill

paying services)
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 26

Electronic Payment Processes (continued)

Electronic funds transfer (continued)

Electronic bill payment

Point-of-sale terminals linked to bank EFT

systems

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 27

Electronic Payment Processes (continued)

Secure electronic payments

Addresses vulnerability to network sniffers

Encrypt data passing between customer

and merchant
Encrypt the data passing between the
customer and the company authorizing the
credit card transaction
Secure Socket Layer (SSL)

Digital Wallet

Secure Electronic Transaction standard

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 28

Section II

E-Commerce Applications and Issues

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 29

e-Commerce Application Trends

“E-commerce is here to stay. The Web and e-
commerce are key industry drivers. It’s
changed how many companies do business.
It’s created new channels for our customers.
Companies are at the e-commerce crossroads
and there are many ways to go.”

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 30

e-Commerce Application Trends (continued)

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 31

e-Commerce Application Trends (continued)

E-commerce Sectors
Six major e-commerce sectors

Infrastructure

Applications

Portals

Content

Services

Exchanges

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 32

Business-to-Consumer e-Commerce

Location is not a factor

Must build customer satisfaction, loyalty, &

relationships

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 33

Business-to-Consumer e-Commerce (continued)

Success factors

Selection and value

Offer a good selection of attractive

products and services

Build a reputation for high quality,

guaranteed satisfaction, and top customer

support

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 34

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Performance and service

Site must be efficiently designed for ease of

access, shopping, and buying

Service must be friendly and helpful

Products should be available in inventory

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 35

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Look and feel

Attractive storefront, shopping areas, and

multimedia product catalogs

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 36

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Advertising and incentives

Targeted, personalized ads

Incentives include

Coupons

Discounts

Special offers

Vouchers for other web services

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 37

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Personal attention

Encourages customers to buy and make

return visits
Welcomed by name

Greeted with special offers

Guided to the parts of the site that you are

most interested in
Relationship building
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 38

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

 Community relationships
 Giving customers with special interests a feeling
of belonging to a unique community
 Virtual communities

 Discussion forums

 Newsgroups

 Chat rooms

 Message boards

 Cross-links to related web communities

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 39

Business-to-Consumer e-Commerce (continued)

Success factors (continued)

Security and reliability

Customers must feel confident regarding

the security of their…

Credit card

Personal information

Transaction details

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 40

Business-to-Consumer e-Commerce (continued)

Success Factors (continued)

Must feel that you are dealing with a

trustworthy business.
Reliability

Orders filled and shipped as you

requested
Orders shipped in the timeframe

promised
Good customer support
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 41

Web Store Requirements

Developing a Web Store
Build

Website design tools

Site design templates

Custom design services

Website hosting

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 42

Web Store Requirements (continued)

Developing a web store (continued)

Market

Web page advertising

E-mail promotions

Web advertising exchanges with affiliated

sites
Search engine registrations

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 43

Web Store Requirements (continued)

Serving Your Customers

Serve

Personalized web pages

Dynamic multimedia catalog

Catalog search engine

Integrated shopping cart

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 44

Web Store Requirements (continued)

Serving your customers (continued)

Transact

Flexibleorder process
Credit card processing

Shipping and tax calculations

E-mail order notifications

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 45

Web Store Requirements (continued)

Serving your customers (continued)

Support

Website online help

Customer service e-mail

Discussion group and chat rooms

Links to related sites

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 46

Web Store Requirements (continued)

Managing a Web Store

Manage

Website usage statistics

Sales and inventory reports

Customer account management

Links to accounting system

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 47

Web Store Requirements (continued)

Managing a web store (continued)

Operate

24/7 website hosting

Online tech support

Scalable network capacity

Redundant servers and power

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 48

Web Store Requirements (continued)

Managing a web store (continued)

Protect

Userpassword protection
Encrypted order processing

Encrypted website administration

Network fire walls and security monitors

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 49

Business-to-Business e-Commerce
The wholesale and supply side of the
commercial process
Businesses buy, sell, or trade with other

businesses
Includes…

Electronic catalog systems

Electronic trading systems

Electronic data interchange

Electronic funds transfer

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 50

e-Commerce Marketplaces
One-to-Many

Sell-side. Host one major supplier who

dictates product catalog offerings & prices.

Many-to-One

Buy-side. Attract many suppliers that flock

to these exchanges to bid on the business of a
major buyer.

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 51

e-Commerce Marketplaces (continued)

Some-to-Many

Distributionmarketplaces. Unite major

suppliers who combine their product
catalogs to attract a larger audience of
buyers.
Many-to-Some

Procurement marketplaces. Unite major

suppliers who combine their purchasing
catalogs to attract more suppliers.
More competition, lower prices
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 52

e-Commerce Marketplaces (continued)

Many-to-Many

Auction marketplaces. Used by many

buyers and sellers that can create a variety
of buyers’ or sellers’ auctions to dynamically
optimize prices.

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 53

Clicks and Bricks

Alternatives

E-Commerce Integration
E-commerce is integrated into the

traditional business operations of a

company.
Business case for integration

Capitalizing on unique strategic

capabilities that exist in a company’s

traditional business operations
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 54

Clicks and Bricks (continued)

Alternatives (continued)
Gaining strategic benefits such as..

Sharing established brands

Sharing key business information

Joint buying power

Distribution efficiencies

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 55

Clicks and Bricks (continued)

Alternatives (continued)
Partial e-commerce integration using joint

ventures and strategic partnerships

Complete separation via the spin-off of an

independent e-commerce company

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 56

Clicks and Bricks (continued)

E-Commerce Channel Choices

An e-commerce channel is the marketing or

sales channel created by a company to

conduct and manage its chosen e-commerce
activities

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 57

Clicks and Bricks (continued)

 Revenue-generating alternatives
 Additive channel
 New offer channel

 Subscription

 Advertising

 Sponsorship

 Licensing

 Portaling

 Commission

 Tolling

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 58

Discussion Questions
Do you agree that most businesses should
engage in electronic commerce on the
Internet?

Are you interested in investing in, owning,

managing, or working for a business that is
primarily engaged in electronic commerce on
the Internet?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 59

Discussion Questions (continued)

Why do you think there have been so many

business failures among “dot-com” companies
that were devoted only to retail e-commerce?

Do the e-commerce success factors discussed

in the chapter guarantee success for an e-
commerce business venture?

What else could go wrong & how would you

confront those challenges?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 60

Discussion Questions (continued)

If personalizing a customer’s website

experience is a key success factor, then
electronic profiling processes to track visitor
website behavior are necessary. Do you agree?
What are the ethical implications?

All corporate procurement should be

accomplished in e-commerce auction
marketplaces, instead of using B2B websites
that feature fixed-price catalogs or negotiated
prices. Do you agree?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 61

Discussion Questions (continued)

If you were starting an e-commerce web store,

which of the business requirements listed in
this chapter would you primarily do yourself,
and which would you outsource to a Web
development or hosting company?

Which of the e-commerce clicks and bricks

alternatives discussed in this chapter would
you recommend to Barnes & Noble?
Amazon.com? Wal-Mart? Any business?
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 62

Real World Case 1 – Yahoo, Inc.

How is Yahoo doing financially right now?

Is Yahoo making the right moves toward

continuing e-commerce profitability?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 63

Real World Case 1 (continued)

What are several other things Terry Semel

could do to make Yahoo more successful?

Will Yahoo be able to compete successfully

with AOL and MSN as an online service and e-
commerce portal?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 64

Real World Case 2 – ChemConnect & Heritage Services

What are the business benefits and limitations

of using public B2B exchanges like
ChemConnect?

What is the business value of private B2B

exchanges for a company?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 65

Real World Case 2 (continued)

Should a small business use public or private

B2B exchanges, or should they use exchanges
like eBay, that attract both consumers and
small businesses?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 66

Real World Case 2 (continued)

How can ChemConnect broaden its customer

base?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 67

Real World Case 3 – Staples, Steelcase, Countrywide, & HSN

Does the fact that customers who shop online

and in other channels generate more sales, as
Staples and HSN have found, mean that most
companies should have an e-commerce
website?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 68

Real World Case 3 (continued)

Do you agree with Steelcase that it is better for

people to get product information online than
from a salesperson?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 69

Real World Case 3 (continued)

Do the Steelcase and Countrywide websites do

a good job of encouraging customers and
visitors to buy their products and use their
services?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 70

Real World Case 4 – eBags, Economy.com, & Classmates

Online

Do you feel that eBags will be able to sustain

its recent profitability?

How else could Economy.com increase its

products, markets, and profitability?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 71

Real World Case 4 (continued)

How could other kinds of businesses use the

Classmates Online business model to help
strengthen their e-commerce success?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 72

Real World Case 5 – Office Depot, Lands’ End, & Others

Which website, Office Depot or Lands’ End,

does a better job of helping users find the
products they want?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 73

Real World Case 5 (continued)

When comparing the business value of the

integration of customer information at Martha
Stewart, retailer information at Panasonic,
and inventory information at NextWine, which
capability is of greatest importance to the
success of an e-commerce business?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
 74

Real World Case 5 (continued)

Which website capability or feature would you

most like to see added to e-commerce
websites?

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.