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Introduction to Information Technology

Turban, Rainer and Potter
Chapter 12 Electronic Commerce

CHAPTER 12
ELECTRONIC COMEMRCE
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Learning Objectives
Describe electronic commerce, its dimensions,
benefits, limitations, and process
Describe the major applications of electronic
commerce, both business-to-customer and business-
to-business
Discuss the importance and activities of market
research and customer service
Describe the electronic commerce infrastructure and
support services
Compare the various payment systems and describe
the role of smart cards
Discuss legal and other implementation issues
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Case : Intel Corporation Embracing the Web
 The Business Problem
Intense competition in the ICs market
Orders from thousands of customers,
distributors and business partners worldwide were
received by fax and phone; errors, delays, high cost
The Solution
E-customer service
E-selling
E-purchasing
E-business programs using extranet and EDI
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Case (continued…)
The Results
Enhances competitive advantage by giving
customers better tools for managing transactions
The system brings substantial saving to Intel
What have we learned from this case??
Illustrates a new and effective way for
conducting business
Demonstrates that electronic commerce involves
not just selling electronically, but also providing
customer service and improving organization’s
internal business processes
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Definitions
Business-to-business EC
two (or more) businesses make transactions electronically
major benefits include: reduced cost, reduced cycle time,
increased customer base and sales, and improved customer
service
Business-to-consumer EC
companies sell directly to consumers over the Internet
major benefits include increased revenues, the creation of
new sources of revenues, and the elimination of costly
intermediaries
Intrabusiness
transactions take place within an organization
major benefits include increased productivity, speed, and
quality and reduced cost
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Definitions (continued…)
Electronic Business (E-business)
a broad definition of EC, not just buying and selling, but
also servicing customers, collaborating with business
partners, and conducting electronic transactions within an
organization
all about time cycle, speed, globalization, enhanced
productivity, reaching new customers, and sharing
knowledge across institutions for competitive advantage
a very diverse and interdisciplinary topic, with issues
ranging form technology, addressed by computer experts,
to consumer behavior, addressed by behavioral scientists
and marketing research experts
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

History and Scope
History
Began in the early 1970s
innovations such as electronic transfer of funds (EFT)
were limited to large corporations and a few daring small
businesses
Electronic Data Interchange (EDI)
added other kinds of transaction processing and extended the types
of participating companies
Over the last five years
innovative applications, from advertisement to auctions and
procurement
Scope
home banking, shopping in electronic stores and malls,
buying stocks, finding a job, conducting an auction,
collaborating electronically with business partners around
the globe, and providing customer service
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

A Framework for EC
Electronic Commerce Applications
• Direct Marketing • Stocks, Jobs • On-line banking
• Procurement and purchasing • Malls • Procurement • Auctions • Travel
• On-line publishing • Customer Services • Intrabusiness Transactions

People: Public Policy : Marketing and Supply Chain:
Buyers, Sellers, Taxes, Legal, Advertisement: Logistics and
Intermediaries, Privacy Issues, Market Research, Business Partners
Services, IS People Regulations, and Promotions, and
Technical
and Management Web content
Standards

Infrastructure
(1) (2) (3) (4) (5)
Common business Messaging and Multimedia content Network infrastructure Interfacing
services infrastructure information distribution and network (Telecom, cable TV infrastructure
(security, smart infrastructure publishing infrastructure wireless, Internet) (The databases,
cards/authentication (EDI, e-mail, Hyper Text (HTML, JAVA, World (VAN, WAN, LAN, logistics,
electronic payments, Transfer Protocol, Chat Wide Web, VRML) Intranet, Extranet) customers, and
directories/catalogs Rooms) Access (cell phones) applications)

Management
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Benefits of EC to Organizations
Expands a company’s marketplace to national and international markets
Allows a vendor to reach a large number of customers, anywhere around
the globe, at a very low cost
Enable companies to procure material and services from other companies,
rapidly and at less cost
Shortens or even eliminates marketing distribution channels; marketing
products cheaper and vendors’ profits are higher
Decrease the cost of creating, processing, distributing ,storing, and
retrieving paper-based information
Allows lower inventories by facilitating “pull”-type supply chain
management, which starts from customer orders and uses just-in-time
production and delivery processing
Reduces the time between the outlay of capital and the receipt of products
and services
Lowers telecommunications costs because the Internet is much chapter
than value-added networks (VANs)
Helps small businesses compete against large companies
Enables very specialized markets (e.g. www.dogtoys.com)
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Benefits of EC to Consumers
Frequently provides less expensive products and services by allowing
consumers to shop in many places and conduct online quick
comparisons
Gives consumers more choices - they can select from many vendors
and many more products than they could locate otherwise
Enables customers to shop or make other transactions 24 hours a
day, year round, from almost any location
Delivers relevant and detailed information in seconds, rather than in
days or weeks
Enables consumers to get customized products, from PCs to cars, at
competitive or bargain prices
Makes possible virtual auctions, in which consumers can find unique
products and collectors’ items that might otherwise require them to
travel long distances to a particular auction place at a specific time
Allows consumers to interact with other consumers in electronic
communities and to exchange ideas as well as compare experiences
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Benefits of EC to Society
Enables more individuals to work at home and to do
less traveling, resulting in less traffic on the roads and
lower air pollution
Allows some merchandise to be sold at lower prices, so
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
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Technical Limitations of 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 (especially legacy)
applications and databases
There is a need for special Web servers in
addition to the network servers (added cost)
Internet accessibility is still expensive and/or
inconvenient for many people
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Non-Technical Limitations of EC
Many legal issues are yet unresolved
Lack of national and international regulations and standards
for many circumstances
Difficulty in measuring benefits of EC, such as Web
advertising. Lack of mature methodologies for justifying EC
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
Insufficient number (critical mass) of sellers and buyers
which needed for profitable EC operations
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Retailing and Malls
Electronic Commerce enables consumers to buy
from home 24 hours a day, 7 days a week
Electronic Commerce offers consumers a wide
variety of products and services, including the most
unique items, usually at lower prices
Consumers can easily search for what they really
want to buy, not just what is shown on television or
in paper catalogs
Consumers can get very detailed information on
products, in seconds, and can easily search for and
compare competitors’ products and prices
Consumers can reduce (or eliminate) the pile of
paper catalogs
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Retailing
Direct sale (business to consumers) through
electronic storefronts or malls, usually
designed around an electronic catalog format
Solo storefronts
maintain their own Internet name and Web site
may or may not be affiliated with electronic malls
may be extensions of a physical store, or it is a
new businesses started by entrepreneurs who saw
a niche on the Web
can be found easily on the Internet - directories
and hyperlinks from other Web sites and
intelligent agents
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Malls (Cybermall)
A collection of individual shops under one
Internet address
Vendors that locate in brick-and-mortar
shopping malls, or locate themselves in a virtual
mall, give up a certain amount of independence
Success depends on the popularity of the entire
collection of stores as well as on its own efforts
Malls generate streams of prospective
customers who otherwise might never have
stopped at the store
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

The Process of Electronic Shopping
① A user gains access to an online service or the ⑩ Customer service is established. Product may
internet and goes to a merchant’s Web site. He be returned or exchanged, for example
may know the address, find it in another Web maintenance information may be found on the
site (refer to it by a search engine), or find it by Web site as needed.
browsing.
⑨ Shipment is made, if needed, or permission to
② The user enters the merchant’s storefront and download products from the Internet is granted.
goes to the product displays. Warranty is established.
③ If the user does not find anything of interest, ⑧ The payment authorization is either approved
or want to do more shopping he or she may or denied. If denied, the user is prompted for
browse some additional merchant storefronts to another form of payment .If approved, the
search for the desired products or services. transaction is executed.
④ When the user does find something of
interest, he or she may elect to purchase it ⑦ When the user is ready to pay he is advised
online. To finalize the decision, the user may about the payment options the user makes a
need more information that can be found on the section and provides payment information (e.g.,
Web pages or obtained by e-mail. the credit care number)

⑤ The item is typically stored in a shopping ⑥ At any time, the user can review the items in
cart. This allows the user to continue looking the shopping cart and change quantities or delete
through this store, or even to visit other items, This review continues until a final
merchants, before paying for the items. selection is made.
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Online
Advertisement
an attempt to disseminate information in order to
attract buyers
Internet Advertisement
can be updated any time at a minimal cost and
therefore can always be timely
can reach very large numbers of potential buyers, all
over the world
can be cheaper
can efficiently use the convergence of text, audio,
graphics, and animation
can be interactive and targeted to specific interest
groups and/or individuals
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Methods
Banners - Electronic Billboards
the most commonly used form of advertising on
the Internet, links to advertiser's site
contains a short text or graphical message to
promote a product or a vendor
Keyword banners
appear when a predetermined word is queried from the
search engine
effective for companies who want to narrow their target
to consumers interested in particular topics
Random banners
appear randomly
might be used to introduce new products to the widest
possible audience, or to keep a well-known brand in the
public memory
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Methods (continued …)
E-mail - emerging as an Internet advertising and marketing
channel that permits cost-effective implementation and a better
and quicker response rate than other advertising channels
marketers develop or purchase a list of e-mail addresses
marketers employing e-mail must take a long-term view and
work towards the goal of motivating consumers to continue
to open and read messages they receive
marketers must decide what portion of their target market
can be reached by e-mail and must supplement existing
database information with data relevant to e-mail campaigns
marketers should integrate inbound customer service e-mail
with their outbound marketing efforts
marketers must develop e-mail-specific editing skill and the
ability to deliver multimedia-rich e-mail
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Issues
Customizing Ads - Filtering the Irrelevant
Information
BroadVision : One-to-One system/ads
allows the rapid creation of secure Web sites that are visitor-
friendly, using a customer database, with registration data
and information gleaned from site visits
Webcast : push technology
delivers only the information users want or need
users get the information they want; at the same time they
also get the banner ads related to that information
marketers will get a more customized audience if they place
banners on a system that delivers via push technology
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Issues (continued …)
Attracting Visitors to a Site
Making the top list of a search engine
the search engine’s spider crawls through the submitted site,
following and indexing all related content and links
a company can get to the top of a search engine’s list by
adding, removing, or changing a few sentences
Online events, promotions, and attractions
people generally like the idea of something funny or
something free (or both)
contests, quizzes, coupons, and free samples are an integral
part of Internet commerce as much, or even more than, they
are of offline commerce
designed to attract visitors and to keep their attention
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Issues (continued …)
Attracting Visitors to a Site (CONT’)
ATTRACTION HOW IT WAS USED
Give away games and Yoyodyne Inc. sponsors games and contests to get users to read
discount contests. Also, product information of advertisers, ranging form Major League
games sponsored by Baseball to Sprint Communication. In one contest, tax-preparer
multiple companies H&R Block paid $20,000 towards the winner’s federal taxes.
Free Internet access Netzero and other offer this in exchange for viewing ads
Personal, nonautomated www.egghead.com uses real people to help you online.
selling www.lucent.com connects a sales rep with a customer over the phone
and then “pushes” material and ads to your computer
Monetary payment Cybergold (www.cybergold.com), Goldmine (www.goldmine.com),
and others connect users with advertisers who pay them real money to
read ads and explore the Web
Sweepstakes Netstakes runs sqeepstakes that requires no skills. Users register
only once and can randomly win prizes in different categories
(see http://webstakes.com). The site is divided into channels, and
each channel has several sponsors. The sponsors pay Netstakes to
send traffic. Netstakes runs online ads, both on the Web and in
many email lists that people request to be on.
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Issues (continued …)
Profiling Customers Using Intelligent Agents
Product brokering
some companies collect information about consumers for the
purpose of creating a customer’s profile
with this profile, the company can tailor ads to the specific
customers, or offer them product information
Example - Fujitsu’s agents profile consumers :
is using a new agent-based technology called Interactive
Marketing Interface (iMi) that allows advertisers to interact
directly with targeted customers
personal profiles submitted to iMi by consumers
product announcements, advertisements, and marketing
surveys are sent to customers via e-mail based on their
profiles
by answering marketing surveys or acknowledging receipt of
advertisements, consumers earn iMi points, redeemable for
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Catalogs
On CD-ROM and On the Web
can be searched quickly with the help of special search
engines
effective comparisons involving catalog products
customized catalogs
a catalog assembled specifically for a company, usually
for a regular customer of the catalog owner
can be tailored to individual consumers
let the system automatically identify customer
characteristics based on their transaction records
involve cookie technology and data mining technology
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Advertising Online
Interactive Advertising and Marketing
advertisers present customized, one-on-one
advertising, which is followed by sales
interactive : the ability to address an individual, to
gather and remember that person’s response, and to
serve that customer based on his or her previous,
unique responses
Coupons Online
consumers can gather any discount coupons they want
by accessing sites like www.hotcoupons.com or
www.supermarkets.com, selecting the store where
they plan to redeem the coupons
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online

Cyberbanking
names : electronic banking, virtual banking,
home banking, and banking online
capabilities ranging form paying bills to
securing a loan
for customers : saving time and convenience
for banks : offering an inexpensive alternative
to branch banking and a chance to enlist
remote customers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online (continued…)
Cyberbanking (CONT’)
SFNB puts security first
www.sfnb.com
the first virtual bank
offering secure banking transactions on the Web
Hong Kong Bank grows without branches
www.hongkongbank.com
using HEXAGON, the bank has leveraged its reputation and
infrastructure in the developing economies of Asia to become
a major international bank rapidly
Mark Twain supports foreign currency trading
www.marktwain.com
using electronic cash to support trading in 20 foreign
currencies
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online (continued…)
Online Stock Trading
an online trade typically costs between $5 and $30,
compared to an average fee of $100 from a full-service
broker and $25-50 from a discount broker
no waiting on busy telephone lines
small chance of making mistakes which are made in
oral communication
orders can be placed from anywhere, any time
can find considerable amount of information regarding
investing in a specific company or in a mutual fund
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online (continued…)
The Online Job Market
Job seekers
can reply to employment ads online
can take the initiative and place resumes on their own home
pages or on others’ Web sites, send messages to members of
newsgroups asking for referrals, and use recruiting firms
Job offerers
advertise openings on their Web site
use sites ranging form Yahoo!, to online services, bulletin boards,
and recruiting firms
Recruiting firms
use their own Web pages to post available job descriptions and
advertise their services in electronic malls and in other Web sites
Newsgroups
jobs in a certain category or location are posted, discussions are
conducted, and resumes can be sent
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online (continued…)
Travel
Internet is an ideal place to plan, explore, and arrange almost
any trip
potential savings are available through special sales, auctions,
and the elimination of travel agents
allows to purchase airline tickets, reserve hotel rooms, and
rent cars
supports an itinerary-based interface ,including a fare-tracker
feature
links to weather sites, currency converters, adventure
magazines, and chat forums, where users can share travel tips
allows to set a price that people are willing to pay for an
airline ticket or hotel accommodations, and the company then
attempts to find a vendor for that price (www.priceline.com)
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online (continued…)
Real Estate
consumers can view many properties on the screen,
saving time for themselves and the brokers
consumers can sort and organize properties according
to their criteria and preview the exterior and interior
designs of the properties, shortening the search process
consumers can find detailed information about the
properties and frequently get even more details than
brokers usually provide
homebuilders now use virtual reality technology on
their Web sites to demonstrate three-dimensional floor
plans to potential home buyers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Services Online (continued…)
Auctions
Specialized auction sites ( www.onsale.com )
Auctioning cars to dealers ( www.manheim.com )
Art auctions ( www.onlineart.com &
www.auctions-on-line.com ); collectors’ items (
www.ebay.com )
Airlines ( www.americanair.com & www.cathey.usa
.com )
Bartering
the exchange of goods and/or services without a
monetary transaction ( www.barterbrokers.com )
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Business-to-Business Applications
Product - specifications, prices, sales history
Customer - sales history and forecasts
Supplier - product line and lead times, sales terms and conditions
Product process - capacities, commitments, product plans
Transportation - carriers, lead times, costs
Inventory - inventory levels, carrying costs, locations
Supply chain alliance - key contracts, partners’ roles and
responsibilities, schedules
Competitor - benchmarking, competitive product offerings,
market share
Sales and marketing - point-of-sale (POS), promotions
Supply chain process and performance - process descriptions,
performance measures, quality, delivery time, customer satisfaction
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Seller-Oriented Marketspace
Organizations attempt to sell their products (services) to
other organizations electronically (e-selling)
The buyer is expected to visit the seller’s site or a mall,
view catalogs, and place orders
The buyer is an organization that may be a regular
customer of the sellers
Key Mechanisms : electronic catalog that can be
customized for each large buyer, the ordering system, the
payment system, and the integration of the incoming
orders with the vendor’s logistics system
EC is used to increase sales, reduce selling expenditures,
increase delivery speed, and reduce administrative costs
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Buyer-Oriented Marketspace
EC technology is used to reduce both the cost of items
purchased and the administrative cost of procurement
Request For Quotation (RFQ) on Buyer’s Web Site
businesses submit bids electronically, and the bids are
routed via the buyer’s intranet to the engineering and
finance departments for an evaluation
clarifications are made via e-mail
the winner is notified electronically
saves 10-15 percent on the cost of the items placed for bid
saves up to 85 percent on the administrative cost
saves about 50 percent on cycle time
known as e-purchasing or e-procurement
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Intermediary-Managed Marketspace
Electronic Intermediaries
A link between buyers and sellers
Main function : market making
PART - about 300 parts suppliers and dozens of
airlines participate (by Boeing Aircraft Corp.)
ProcureNet - more than 150,000 products, known
as MROs (maintenance, repairs, and operations)
Some of the online services make money, some of
them only improve service for customers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Customers and Their Behavior
Examples of the importance of learning
about customers
Peapod providing supermarket products online
the company was still incurring losses in 2000
problems :
» small customer base
» customers like to see and feel items before
they buy them
Amazon selling books published by others
assesses the potential customers’ reaction, and
correctly predicts books to be a desirable items
for online sale
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce
Market Research :
Behavioral Model
Personal Characteristics Environmental Characteristics
Age, Gender, Ethnicity, Education, Social, Family, Communities
Lifestyle, Psychological, Knowledge,
Values, Personality

Stimuli Buyers’ Decisions
Marketing Others Decision Buy or Not
Price Economical What to Buy
Promotion Technology Making Where (Vendor)
When
Product
Quality
Political
Cultural
Process How Much to Spend
Repeat Purchases

Vendors’ Controlled Systems
Logistic Technical Customer
Support Support Service
Payments, Web Design, FAQs, E-mail,
Delivery Intelligent Call Centers,
Agents One-to-One
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Market Research (continued …)
To find out what motivates consumers to buy
To developed models that explain consumer
behavior regarding purchasing decisions
To identify new markets
To investigate competitors and their products
To test consumer interest in new products
To help one-to-one marketing (allows one-to-one
personal contact with customers, and provides marketing
organizations with greater ability to understand
consumers, the market, and the competition)
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Market Research (continued …)
Asking Customers What They Want
interacting directly with consumers
filling in electronic questionnaires
vendors need to use inducements to motivate
consumers to participate and be honest
learning what consumer want from the
directly obtained answers
trying to infer from consumers’ preferences
on other preferences
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Market Research (continued …)
Tracking Customer Activities on the Web
observing consumers’ behavior on the internet
site-tracking services, based on cookies or other
approaches
one of the most interesting tools for tracking
customers on the Internet as well as helping
them to shop with intelligent agents
possible invasion of privacy
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Commerce Agents
Intelligent agents
computer programs that conduct routing tasks,
search and retrieve information ,support decision
making, and act as domain experts
sense the environment and act autonomously
without human intervention
Software agents
with no intelligence
Learning agents
exhibit some intelligent behavior
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

EC Agents (continued …)
Intelligent agents for information search and
filtering
help to determine what to buy to satisfy a specific need
Personalogic uses filtering process - consumers specify
requirements and constraints, and the system returns a
list of products that best meet the desired product
Firefly used (until recently) a collaborative filtering
process that can be described as “word of mouth” to
build the profile (not available any more)
its Passport generates a customer’s personal profile
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

EC Agents (continued …)
Intelligent agents for Product and Vendor Finding
help consumers decide where to buy by comparing
merchants’ offers
Bargainfinder from Andersen Consulting queried the price
of a specific CD from a number of online vendors and
returned the list of vendors and prices (Not in use any
longer)
Jango form NetBot/Excite originates the requests form the
user’s site instead of Jango’s, so vendors can not block it
Kasbah from MIT Laboratories allows users who want to
sell or buy a product, assign the task to an agent that is sent
out to actively seek buyers or sellers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

EC Agents (continued …)
Negotiation Agents
help to take away some of the frustration some
customers experience in the negotiating process and
the technical limitations of being in different locations
AuctionBot allows users create auction agents by
specifying a number of parameters that vary depending
on the type of auction selected
Kasbah allows users create agents for the purpose of
selling or buying process
Tele-@-tete uses a number of different parameters:
price, warranty, delivery time, service contracts, return
policy, loan option, and other value-added services
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Organizational Buyers

Make purchase decisions in business-
to-business situations
More formalized purchasing decision
The purchasing process may be more
important than advertising activities in
swaying purchase decisions
Decisions may be made by a group
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Customer Service
Phases in the Customer Service Life Cycle
Phase 1 : Requirements
assisting the customer to determine needs
Phase 2 : Acquisition
helping the customer to acquire a product or service
Phase 3 : Ownership
supporting the customer on an ongoing basis
Phase 4 : Retirement
helping the client to dispose of a service or product
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Customer Service (continued …)
Facilitating Customer Service
Personalized Web pages - customers build individualized
pages at the vendor’s site
Chat rooms - customers can interact with each other and with
vendor’s personnel who monitor the chat room
E-mail - send confirmations, product information, and
instructions to customers
FAQs - provide online answers to questions customers ask most
Tracking capabilities - enable customers to track the status of
their orders, services, or applications
Web-based call centers - a comprehensive communication
center takes customers’ inquiries in any form they come and
answers them quickly
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

EC Infrastructure
COMPONENT DESCRIPTION AND ISSUES
Networks A shift from VANs to the Internet. Increased use of VPNs (virtual
private networks) to enhance security and capabilities over the Internet.
Web severs Special Web servers are usually superior to dual-purpose servers.
Available for rent. The interface to legacy systems may be a problem
Web server support 1. Web site activity tracking. 2. Database connectivity. 3. Software for
and software creating electronic forms. 4. Software for creating chat rooms and
discussion groups.
Electronic catalogs Product description, multimedia use, customized catalogs, inclusion in
Web site design and construction, templates for construction.
Web page design and Web programming languages (HTML, JAVA, VRML, XML)
construction software
Transactional 1. Search engines for finding and comparing, products. 2. Negotiating
software software. 3. Encryption and payment. 4. Ordering (front office)
inventory and back office software.
Internet access TCP/IP package, Web browsers, remote access server, client dial-in
components software, Internet connection device, leased line connection, connection
to leased line, Internet kiosks
Others Firewalls, e-mail, HTTP (transfer protocols), smart cards
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Payment Systems
Electronic credit cards
Payments using unencrypted credit card
the buyer e-mails her or his credit card number to the
seller on the Internet
risk here is that hackers will be able to read the credit
card number
Encrypted payments
using public/private key encryption, credit card details
can be encrypted for better security
this can be done by simply using the SSL protocol in
the buyer’s computer
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Payment Systems
(continued …)
Electronic checks
secured by public-key cryptography and may be
suitable for some micropayments
Step 1 : the customer establishes a checking
account with a bank
Step 2 : the customer contacts a seller, buys a
product or a service, and e-mails an encrypted
electronic check signed with a digital signature
Step 3 : 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
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Payment Systems
(continued …)
Electronic cash in your PC
Step 1 : the customer opens an account with a bank and
receives special software for his or her PC
Step 2 : the customer buys “electronic money” from the
bank by using the software
Step 3 : the bank sends an electronic money note to this
customer, endorsing it with a digital signature
Step 4 : the money is stored on the buyer’s PC and can be
spent in any electronic store that accepts e-cash
Step 5 : the software is also used to transfer the e-cash
from the buyer’s computer to the seller’s computer
Step 6 : the seller can deposit the e-cash in a bank,
crediting his or her regular or electronic account, or use
the e-cash to make a purchases elsewhere
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Electronic Payment Systems
(continued …)
Electronic payment cash (Smart Cards) with e-cash
credit cards using magnetic strips contain only limited
information , such as the card’s ID number
cards to pay photocopies in the library, or to pay
telephone calls storing a fixed amount of prepaid money
card used by New York Metropolitan Transportation
Authority (MTA) in buses, trains, interstate toll bridges,
and tunnels
cards containing microprocessor storing a considerable
amount of information (more than 100 times more than a
regular credit card) and allowing money to be stored in
quantities that can be decreased as well as increased
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Security
Security Requirements
Authentication - the buyer, the seller, and the paying institutions
must be assured of the identity of the party with whom they are
dealing
Integrity - it is necessary to assure that data and information
transmitted in EC, such as orders, reply to queries, and payment
authorization, are not accidentally or maliciously altered or
destroyed during transmission
Non-repudiation - merchants need 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 - customers want to be sure that it is safe to provide a
credit card number on the Internet
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Security (continued …)
Security Protection
Encryption - a process of making messages indecipherable
except by those who have an authorized decryption key
Single-key encryption
» the sender of the electronic message (or payment)
encrypted the information with a key
» the receiver used an identical key to decrypt the
information to a readable form
» the same code had to be in the possession of both the
sender and the receiver
» problems : if a key were transmitted and intercepted
illegally, it could be used to read all encrypted messages
or to steal money
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Security (continued …)
Security Protection : Encryption (continued …)
Public/private key encryption
uses two different keys - public key and private key
several authorized people may know the public key, but
only its owner knows the private key
every person has one private key and one public key
encryption and decryption can be done with either key
if encryption is done with the public key, the
decryption can be done only with the private key and
vice versa
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Security (continued …)
Security Protection :Encryption (continued …)
Public/private key encryption
Public Key of Private Key of
Recipient Recipient

Message Message
Text Ciphered Text
Text
Signature Encryption Decryption Signature

Sender Private Key Public Key Receiver
of Sender of Sender
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Security (continued …)
Security Protection : Protocols
Secure Socket Layer (SSL)
the most common protocol used in EC
main capability is to encrypt messages
Secure Electronic Transaction Protocol (SET)
the major proposed standard for credit card processing
allows consumers to shop anywhere as conveniently and
securely as possible by incorporating digital signatures,
certification, encryption, and an agreed-upon payment
gateway
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Market Practices
Fraud on the Internet
internet fraud and its sophistication have grown as
much and even faster than the Internet itself
stocks manipulations, selling bogus investments
and phantom business opportunities
examples:
stock promoters falsely spread positive rumors about
the prospects of the companies they touted
the information provided might have been true, but the
promoters did not disclose that they were paid to
promote the companies
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Buyer Protection
Tips for safe electronic shopping include:
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
check out the seller with the local Chamber of Commerce and/or Better
Business Bureau
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 (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
check www.consumerworld.org for a listing of useful resources
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Seller Protection
Be protected against consumers who refuse
to pay or pay with bad checks and buyers’
claims that the merchandise did not arrive
Be protected against the use of their name by
others as well as use of their unique words
and phrases, slogans and Web address
Have legal recourse against customer who
download copyrighted software and/or
knowledge and sell it to others
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Ethical Issues
Privacy
most electronic payment systems know who the buyers
are; therefore, it may be necessary to protect the buyers’
identity
The Human Element
the technology is new to many IS directors and
employees and so many require new sets of skills
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
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

Legal Issues
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
particularly complex for interstate and international
commerce (A tax moratorium until October 2001)
Copyright
intellectual property is protected by copyright laws
and cannot be used freely
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

What’s in it for Me?
For Accounting
The implications of replacing paper documents by electronic
may impact many of the accountants’ tasks, especially the
auditing of EC activities and systems
For Finance
The world of banking ,stocks, and commodities markets, and
other financial services are being reengineered due to EC
For Marketing
The revolution is affecting many marketing theories, ranging
form consumer behavior to advertisement strategies
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 12 Electronic Commerce

What’s in IT for Me? (continued …)
For Production/Operations Management
EC is changing the manufacturing system form
a product-push mass production to an order-
pull mass customization
For Human Resource Management
Modern HRM has tremendous opportunities to
exploit Internet capabilities to improve the
productivity of HRM personnel, recruit and
maintain top employees, and increase job
satisfaction to very high levels