Chapter 9 Electronic

Commerce Systems

James A. O'Brien, and George Marakas.

Management Information Systems with MISource
2007, 8th ed. Boston, MA: McGraw-Hill, Inc.,
2007. ISBN: 13 9780073323091
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
 Identify and give examples of several key factors
and Web store requirements need to succeed in e-
commerce
 Identify and explain the business value of several
types of e-commerce marketplaces
 Discuss the benefits and trade-offs of several e-
commerce clicks and bricks alternatives
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Introduction to e-Commerce
 Electronic commerce encompasses the entire
online process of
 Developing
 Marketing
 Selling
 Delivering
 Servicing
 Paying for products and services
 It relies on the Internet and other information
technologies to support every step of the
process
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Case 1 eBay, Running the
Right Play
 eBay is one of the fastest-growing companies in
history, and business is surging
 31 sites around the world
 $1.1 billion in international sales in 2004, and
growing twice as fast as the domestic market
 Half of their 125 million registered users are
outside of the United States
 eBay keeps a playbook
 Several hundred pages of wisdom collected
from worldwide managers
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Case Study Questions
 Why has eBay become such a successful and
diverse online marketplace?
 What do you think of eBay’s playbook concept?
 Why do they call it a playbook?
 Is eBay’s move into the international arena a
good long-term strategy?

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The Scope of e-Commerce

Chapter 9 Electronic Commerce Systems 6

E-Commerce Technologies

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Categories of e-Commerce
 Business-to-Consumer
 Virtual storefronts, multimedia catalogs,
interactive order processing, electronic
payment, online customer support
 Business-to-Business
 Electronic business marketplaces, direct links
between businesses, auctions and exchanges
 Consumer-to-Consumer
 Online auctions, posting to newspaper sites,
personal websites, e-commerce portals

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Essential e-Commerce Architecture

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Access Control and Security
 E-commerce processes must establish mutual
trust and secure access between parties
 User names and passwords
 Encryption key
 Digital certificates and signatures
 Restricted access areas
 Other people’s accounts
 Restricted company data
 Webmaster administration areas

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Profiling and Personalizing
 Profiling gathers data on you and your website
behavior and choices
 User registration
 Cookie files and tracking software
 User feedback
 Profiling is used for
 Personalized (one-to-one) marketing
 Authenticating identity
 Customer relationship management
 Marketing planning
 Website management

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Search Management
 Search processes help customers find the
specific product or service they want
 E-commerce software packages often include

a website search engine

 A customized search engine may be acquired
from companies like Google or Requisite
Technology
 Searches are often on content or by
parameters

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Content and Catalog Management
 Content Management Software
 Helps develop, generate, deliver, update, and
archive text and multimedia information at
e-commerce websites
 Catalog Management Software
 Helps generate and manage catalog content
 Catalog and content management software
works with profiling tools to personalize content
 Includes product configuration and
mass customization

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Workflow Management
 E-business and e-commerce workflow
management depends on a workflow software
engine
 Contains software model of business
processes
 Workflow models express predefined
 Sets of business rules
 Roles of stakeholders
 Authorization requirements
 Routing alternative
 Databases used
 Task sequences
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Example of Workflow
Management

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Event Notification
 Most e-commerce applications are event driven
 Responds to such things as customer’s first
website visit and payments
 Monitors all e-commerce processes
 Records all relevant events, including problem
situations
 Notifies all involved stakeholders
 Works in conjunction with user-profiling
software

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Collaboration and Trading
 Processes that support vital collaboration
arrangements and trading services
 Needed by customers, suppliers, and other
stakeholders
 Online communities of interest
 E-mail, chat, discussion groups
 Enhances customer service
 Builds loyalty

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Electronic Payment Processes
 Complex processes
 Near-anonymous and electronic nature
of transactions
 Many security issues
 Wide variety of debit and credit alternatives
 Financial institutions may be part of the
process

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Electronic Payment Processes
 Web Payment Processes
 Shopping cart process
 Credit card payment process
 Debit and other more complex processes
 Electronic Funds Transfer (EFT)
 Major payment system in banking, retail
 Variety of information technologies capture
and process money and credit card transfers
 Most point-of-sale terminals in retail stores
are networked to bank EFT systems

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Electronic Payment Example

Chapter 9 Electronic Commerce Systems 20

Securing Electronic Payments
 Network sniffers easily recognize credit card
formats
 Encrypt data between customer and merchant
 Encrypt data between customer and financial
institution
 Take sensitive information off-line

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E-Commerce Application Trends

Chapter 9 Electronic Commerce Systems 22

Case 2 Battle for e-Commerce
Supremacy
 eBay commands more than 90 percent of the
online auction market
 Growth is at least 40 percent per year
 CraigsList is an online classifieds meeting place
 Buying and selling, but no payment system
 Online classifieds growing faster than
auctions
 Google and Microsoft entering the market with
added features
 Search by zip code, online maps, free listings
Chapter 9 Electronic Commerce Systems 23
Case Study Questions
 Do you agree with Google and Microsoft that
eBay is now vulnerable to their assaults via
Google Base and Windows Live Expo?
 What are the major advantages and limitations
of Google Base and Windows Live Expo?
 Which do you prefer, or would you use both?
 Are eBay’s development of Kijiji, acquisition
of Skype, alliance with Yahoo, and other
acquisitions enough to ward off the competitive
assaults of Google and Microsoft?

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E-Commerce Success Factors
 Some of the success factors in e-commerce
 Selection and value
 Performance and service
 Look and feel
 Advertising and incentives
 Personal attention (one-to-one marketing)
 Community relationships
 Security and reliability

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Differences in Marketing

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Web Store Requirements

Chapter 9 Electronic Commerce Systems 27

Developing a Web Store
 Build a website
 Choose or set up web hosting
 Use simple design tools and templates
 Include a shopping cart and payment support
 Market the website
 Include Web page and e-mail advertising
and promotions
 Exchange advertising with other Web stores
 Register with search engines and directories
 Sign up for affiliate programs

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Serving Your Customers
 Convert visitors into loyal customers
 Develop one-to-one relationship with
customers
 Create incentives to encourage registration
 Use Web cookies to identify visitors
 Use tracking services to record and analyze
website behavior and customer preferences
 Create an attractive, friendly, efficient store
 Offer fast order processing and payment
 Notify when orders are processed and
shipped
 Provide links to related websites
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Managing a Web Store
 Manage both the business and the website
 Record and analyze traffic, inventory, sales
 Use CRM features to help retain customers
 Link sales, inventory data to accounting
systems
 Operate 24 hours a day, seven day a week
 Protect transactions and customer records
 Use security monitors and firewalls
 Use redundant systems and power sources
 Employ passwords and encryption
 Offer 24-hour tech support

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B2B E-Commerce
 B2B is the wholesale and supply side of
the commercial process
 Businesses buy, sell, or trade with other
businesses
 Relies on multiple electronic information
technologies
 Catalog systems
 Trading systems
 Data interchange
 Electronic funds transfers

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E-Commerce Marketplaces
 One to Many
 Sell-side marketplaces
 One supplier dictates product offerings and
prices
 Many to One
 Buy-side marketplaces
 Many suppliers bid for the business of a buyer
 Some to Many
 Distribution marketplaces
 Unites suppliers who combine their product
catalogs to attract a larger audience
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E-Commerce Marketplaces
 Many to Some
 Procurement marketplaces
 Unites major buyers who combine purchasing
catalogs
 Attracts more competition and thus lower
prices
 Many to Many
 Auction marketplaces
 Dynamically optimizes prices

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E-Commerce Portals
 B2B e-commerce portals offer multiple
marketplaces
 Catalogs
 Exchanges
 Auctions
 Often developed and hosted by third-party
market-maker companies
 Infomediaries serve as intermediaries in
e-business and e-commerce transactions

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B2B E-Commerce Web Portal

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Clicks and Bricks
 Success will go to those who can integrate
Internet initiatives with traditional operations
 Merging operations has trade-offs
 See Figure 9.18

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E-Commerce Integration
 The business case for merging e-commerce
with traditional business operations
 Move strategic capabilities in traditional
operations to the e-commerce business
 Integrate e-commerce into the traditional
business
 Sharing of established brands
 Sharing of key business information
 Joint buying power and distribution

efficiencies
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Other Clicks and Bricks Strategies
 Partial e-commerce integration
 Joint ventures and strategic partnerships
 Complete separation
 Spin-off of an independent e-commerce
company
 Barnes and Noble’s experience
 Spun off independent e-commerce company
 Gained venture capital, entrepreneurial
culture, and flexibility
 Attracted quality management
 Accelerated decision making
 Failed to gain market share
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E-Commerce Channel Choices
 An e-commerce channel is the marketing or
sales channel created by a company for its e-
commerce activities
 There is no universal strategy or e-commerce
channel choice
 Both e-commerce integration and separation
have major business benefits and
shortcoming
 Most businesses are implementing some
measure of clicks and bricks integration

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E-Commerce Strategy Checklist
 Questions to ask and answer
 What audiences are we attempting to reach?
 What action do we want those audiences to
take?
 Who owns the e-commerce channel within the
organization?
 Is the e-commerce channel planned alongside
other channels?
 Is there a process for generating, approving,
releasing, and withdrawing content?
 Will our brand translate to the new channel?
 How will we market the channel itself?
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Case 3 Yahoo and Flickr
 Flickr is a photo sharing site
 14,000 images per hour are uploaded
 There are 1.5 million users
 80 percent of the 60 million photos are public
 More than half have user-created labels that
make them searchable
 Yahoo purchased Flickr
 The user-generated content (social media)
will be used in the war against Google
 It would like to apply the same concept to
web content as well
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Case 3 Yahoo and Flickr
 Google takes an automated approach to
searches
 Armies of Ph.D.s and servers
 Creates more relevant searches by using
algorithms
 Yahoo’s strategy
 Also uses algorithms, but not as well
 Is gambling that the collective intelligence
of its audience will produce more relevant
search results

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Case Study Questions
 How does the Web foster the growth of social
media and social networking?
 What business benefits does Yahoo hope to
gain from its acquisition of Flickr and drive to
“Flickize” its business?
 How realistic are such planned benefits?
 Can social media and networking serve as a
strategic competitive differentiator that enables
Yahoo to overtake Google in the multibillion-
dollar targeted search ads market?

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Case 4 Today’s Web; Anything
but Usual
 Customers aren’t just reading these days
 They’re writing and watching as well
 Community features
 Interactive webcasts
 Newsgroups
 Online chat forums
 Customer-to-customer interactions help
Microsoft learn which product features work, and
which don’t

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Case 4 Today’s Web; Anything
but Usual
 Federated will be using FedAd software to
 Coordinate the efforts of 4,000 marketing
staffers in six divisions
 Buy and publish the company’s newspaper,
radio, and TV ads
 Pay invoices
 Ship ads to publications
 Manage marketing expenses against the
company’s budget

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Case 4 Today’s Web; Anything
but Usual
 Dell’s initiatives
 Redesign of its website to make it easier to
use
 Make IT costs smaller by being more efficient
 Combine the website re-launch with an
e-commerce consolidation

Chapter 9 Electronic Commerce Systems 46

Case Study Questions
 What is the primary driver behind the Web
upgrade activities of Microsoft and Dell?
 What is the business value of Microsoft’s
Web-based, live-feedback program?
 What lessons on developing successful
e-commerce projects can be gained from the
information in this case?

Chapter 9 Electronic Commerce Systems 47