Next Back MAP MAP 5-1 Management Information Systems for the Information Age Second Canadian Edition...

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Management Information Systems Management Information Systems for the Information Agefor the Information Age

Second Canadian EditionSecond Canadian Edition

Copyright 2004 Copyright 2004 The McGraw-Hill Companies, Inc. The McGraw-Hill Companies, Inc.

All rights reservedAll rights reserved

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Chapter 5Chapter 5

Electronic CommerceElectronic Commerce

Strategies for the New EconomyStrategies for the New Economy

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IntroductionIntroduction The new economy introduced by the www has been The new economy introduced by the www has been

interesting.interesting. Fortunes have been made and lost.Fortunes have been made and lost. Dot-com millionaires have been created.Dot-com millionaires have been created. Others have seen their company turn into a dot-bomb.Others have seen their company turn into a dot-bomb. The revolution of ebusiness promised by the internet has The revolution of ebusiness promised by the internet has

just began.just began. We are still learning what works and what does not work.We are still learning what works and what does not work. There is still a lot of uncharted territory ahead.There is still a lot of uncharted territory ahead.

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The Growth of E-CommerceThe Growth of E-Commerce

Figure 5.1Figure 5.1Four Categories Four Categories of E-Commerceof E-Commercepage 178page 178

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E-commerceE-commerce Enables customers, consumers and companies to Enables customers, consumers and companies to

form powerful new relationships that would not be form powerful new relationships that would not be possible without the enabling technologiespossible without the enabling technologies

The internet facilitates commerce by its ability to The internet facilitates commerce by its ability to move digital information at low cost.move digital information at low cost.


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The Digital DivideThe Digital Divide

Digital divideDigital divide

Expresses the fact that different peoples, Expresses the fact that different peoples, cultures, and areas of the world or within a cultures, and areas of the world or within a

nation do not have the same access to nation do not have the same access to information and telecommunications information and telecommunications

technologies. technologies.

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The Advantages of Business To Consumer E-The Advantages of Business To Consumer E-CommerceCommerce

Retailers increasingly view the internet as simply Retailers increasingly view the internet as simply another channel by which to reach their customersanother channel by which to reach their customers

The internet is a channel that pocesses some unique The internet is a channel that pocesses some unique and powerful advantages over traditional channels and powerful advantages over traditional channels when used effectivelywhen used effectively

Know Know When to use itWhen to use it How to use it effectively andHow to use it effectively and When to use it in combination with other channelsWhen to use it in combination with other channelsIs key.Is key.

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The internet has several current and The internet has several current and potential advantages over the traditional potential advantages over the traditional ‘brick-and-mortar’ stores:‘brick-and-mortar’ stores: Shopping can be faster and more convenientShopping can be faster and more convenient Offerings and prices can change instantaneouslyOfferings and prices can change instantaneously Call centers can be integrated with the web siteCall centers can be integrated with the web site Broadband telecommunications will enhance the Broadband telecommunications will enhance the

buying experiencebuying experience

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Shopping Can Be Faster and More ConvenientShopping Can Be Faster and More Convenient

Figure 5.3Figure 5.3Alternative Alternative Channels for Channels for Selling to Selling to CustomersCustomerspage 182page 182

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Offerings and Prices Can Change Offerings and Prices Can Change InstantaneouslyInstantaneously

E-tailers can change E-tailers can change product offerings and product offerings and prices instantaneously prices instantaneously in response to changes in response to changes in customer demand.in customer demand.

On Your Own

B2C Services(p. 183)

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Call Centers Can Be Integrated With the Web Call Centers Can Be Integrated With the Web SiteSite

The web technology has created The web technology has created innovative adaptations in e-tailing such innovative adaptations in e-tailing such as:as: Interactive chatInteractive chat Internet telephonyInternet telephony

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Call Centers Can Be Integrated With the Web Call Centers Can Be Integrated With the Web SiteSite

Internet telephonyInternet telephony

AA combination of hardware and software combination of hardware and software that uses the Internet as the medium for that uses the Internet as the medium for

transmission of telephone calls in place of transmission of telephone calls in place of traditional telephone networks.traditional telephone networks.

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Broadband Telecommunications Will Enhance Broadband Telecommunications Will Enhance The Buying ExperienceThe Buying Experience

Today, high-speed Internet is not Today, high-speed Internet is not widely available to everybody.widely available to everybody.

When broadband telecommunications When broadband telecommunications become widely available the buying become widely available the buying experience will also be greatly experience will also be greatly enhanced.enhanced.

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Keys To Success In Business To Consumer E-Keys To Success In Business To Consumer E-CommerceCommerce

It is important to reflect on what have we It is important to reflect on what have we learned so far so that new B2C learned so far so that new B2C

entrepreneurs can increase their chances of entrepreneurs can increase their chances of being successfulbeing successful

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Keys To Success In Business To Consumer E-Keys To Success In Business To Consumer E-CommerceCommerce

Important lessons include:Important lessons include: Commodity like items work best.Commodity like items work best. Digital products are the best of all.Digital products are the best of all. Attracting and retaining customers.Attracting and retaining customers. Remember the importance of merchandising.Remember the importance of merchandising. You must execute well.You must execute well. Watch the competition.Watch the competition.

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Keys To Success In Business To Consumer E-Keys To Success In Business To Consumer E-Commerce Commerce

Attracting and Retaining CustomersAttracting and Retaining Customers

Designing an attractive web site that is easy to Designing an attractive web site that is easy to use is one of the key factors in the success of a use is one of the key factors in the success of a B2C venture.B2C venture.

Once a potential customer has found your site it Once a potential customer has found your site it is importantis important to keep them there until they purchase something to keep them there until they purchase something

and and once they purchased something you need to give once they purchased something you need to give

them incentive to return.them incentive to return.

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Attracting and Retaining CustomersAttracting and Retaining Customers

Additional techniques for attracting Additional techniques for attracting Internet customers include:Internet customers include:1.1. Registering with search enginesRegistering with search engines2.2. Online adsOnline ads3.3. E-Mail and viral marketingE-Mail and viral marketing4.4. Affiliate programsAffiliate programs5.5. Selling to existing customersSelling to existing customers

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Remember the Importance of MerchandisingRemember the Importance of Merchandising

Figure 5.3Figure 5.3Dos and Don’ts of Web Dos and Don’ts of Web Site DesignSite Designpage 188page 188

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You must execute wellYou must execute well

Simply means that when a customer Simply means that when a customer places an order on your web site, you places an order on your web site, you have to follow through and execute the have to follow through and execute the necessary business processes to get the necessary business processes to get the right item to the customer in a timely right item to the customer in a timely fashion fashion

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Business to Business E-CommerceBusiness to Business E-Commerce

B2B e-commerce is e-commerce that takes place between B2B e-commerce is e-commerce that takes place between organization.organization.

Companies do business with other companies all over Companies do business with other companies all over the world.the world.

Example: an airline needs to buyExample: an airline needs to buy Aircraft fuelAircraft fuel Spare partsSpare parts FoodFood Other Other From other companiesFrom other companies

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Relationships in B2B take different Relationships in B2B take different forms in the e-commerce environment:forms in the e-commerce environment: Value networksValue networks Corporate purchasing segmentsCorporate purchasing segments Next-generation solutionsNext-generation solutions B2B marketplacesB2B marketplaces Intranets and extranetsIntranets and extranets

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Value NetworksValue Networks

More and more in e-commerce involves More and more in e-commerce involves a complex network of relationships to a complex network of relationships to operate between operate between the enterprise, the enterprise, its customers, its customers, intermediaries, intermediaries, complemetors and complemetors and supplierssuppliers

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Value NetworksValue Networks

Figure 5.6Figure 5.6The Value The Value NetworkNetworkpage 194page 194

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Corporate Purchasing SegmentsCorporate Purchasing Segments

In B2B, most attention has been given to In B2B, most attention has been given to the ways that e-commerce could the ways that e-commerce could streamline the purchasing of materialsstreamline the purchasing of materials

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Purchasing applications are usually Purchasing applications are usually divided into three segments:divided into three segments:

1. Purchasing of direct materials1. Purchasing of direct materials

2. Purchasing of indirect materials (MRO)2. Purchasing of indirect materials (MRO)

3. Purchasing of services3. Purchasing of services

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The most important form of B2B e-The most important form of B2B e-commerce today is electronic data commerce today is electronic data interchange or EDIinterchange or EDI



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Figure 5.7Figure 5.7An EDI Hub-and-An EDI Hub-and-Spoke Spoke ArrangementArrangementpage 196page 196



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Figure 5.8Figure 5.8How Value-Added Networks How Value-Added Networks (VANs) Facilitate EDI(VANs) Facilitate EDIpage 197page 197

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Next Generation SolutionsNext Generation Solutions

Efforts are underway to create a new Efforts are underway to create a new generation of EDI for the B2B generation of EDI for the B2B transactions that would betransactions that would be Easier to setup and useEasier to setup and use More attractive to small businessesMore attractive to small businesses

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B2B MarketplacesB2B Marketplaces

B2B marketplacesB2B marketplaces - - Internet-based services Internet-based services that bring together buyers and sellers.that bring together buyers and sellers. They give the potential to bring together large They give the potential to bring together large

numbers of buyers and sellers numbers of buyers and sellers • giving buyers more choices and giving buyers more choices and • aggregating demand for the sellersaggregating demand for the sellers

Transaction costs can be reducedTransaction costs can be reduced

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Intranets and ExtranetsIntranets and Extranets

Figure 5.10Figure 5.10Intranet Structure Intranet Structure page 201page 201

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Intranets and ExtranetsIntranets and Extranets

Figure 5.11Figure 5.11Extranet Structure Extranet Structure page 202page 202

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The Role OF E-GovernmentThe Role OF E-Government

E-GovernmentE-Government - describes the application - describes the application of e-commerce technologies in of e-commerce technologies in governmental agencies.governmental agencies.

In many countries the government is the In many countries the government is the largest hub to use EDI for ecommerce largest hub to use EDI for ecommerce activities.activities.

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E-Commerce Payment SystemsE-Commerce Payment Systems

Just as there are traditional EDI Just as there are traditional EDI transactions for purchase orders and transactions for purchase orders and other standard business documents, other standard business documents, there are EDI transactions for there are EDI transactions for payments.payments.

Financial EDI (FEDI) - tFinancial EDI (FEDI) - the use of EDI for he use of EDI for payments. payments.

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E-Commerce Payment SystemsE-Commerce Payment Systems

E-payments would solve traditional E-payments would solve traditional timing problems such that:timing problems such that: Epayments would clear faster andEpayments would clear faster and The payer would lose the use of that money The payer would lose the use of that money

for those extra few day it would have taken for for those extra few day it would have taken for the check to clear.the check to clear.

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E-Commerce Payment SystemsE-Commerce Payment Systems Credit Cards and Smart CardsCredit Cards and Smart Cards

Smart cardsSmart cards - - plastic cards the size of a plastic cards the size of a credit card that contain an embedded chip credit card that contain an embedded chip on which digital information can be stored. on which digital information can be stored.

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E-Commerce Payment SystemsE-Commerce Payment Systems Financial CybermediariesFinancial Cybermediaries

Figure 5.12Figure 5.12The PayPal Web The PayPal Web SiteSitepage 204page 204

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