ch06 human resources

Copyright 2013 John Wiley & Sons, Inc.

E-Business and E-Commerce Models and Strategies

Chapter 6

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Part II. Digital, Mobile and Social Commerce

9th Edition

Information

Technology

for Management

Advancing Sustainable,

Profitable Business Growth


Chapter 4 Outline6.1 e-Business Challenges and Strategies

6.2 Business-to-Consumer (B2C) e-Commerce

6.3 Business-to-Business (B2B) e-Commerce and e-Procurement

6.4 e-Government and Public Sector IT Trends

6.5 e-Commerce Support Services and Digital Marketing

Communications

6.6 e-Business Ethics and Legal Issues

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Chapter 6 Learning Outcomes

• Explain how e-business processes improve productivity, efficiency and competitive advantage for business organizations and the public sector (government and nonprofit organizations.)

• Describe five key challenges faced by online retail businesses in the business-to-consumer (B2C) marketplace.

• Identify various ways that e-businesses are facilitating trade between buyers and sellers in the business-to-business (B2B) marketplace.

• Describe how government agencies are making use of cloud computing and mobile technologies to enhance government services.

• Identify some of the ethical and legal issues that regularly confront e-businesses.

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Quick Look at Chapter 6: E-Business & E-Commerce Models and Strategies

Electronic business (e-business) is business that uses the Internet and online networks as the channel to consumers, supply chain partners, employees, and so on.

Today, as you know from personal experience, companies are multichanneling—integrating online and offline channels for maximum reach and effectiveness.

Retailers are advertising and selling through social channels. Consumers are using mobile handheld devices to research brands,

products, and services from multiple sources. Often B2B sites lacked helpful features and capabilities of business-to-

consumer (B2C) sites. Governments and agencies are expanding and refining their government-

to-citizen (G2C) web sites. Security issues are a chief concern.

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For Class Discussion & DebateCase 1: The Google Universe

Once known only for its search engine business, today Google is a mega e-business empire that offers products and services in a wide range of categories. While continuing to refine and improve its core search, Google has

steadily expanded into other products and services:• Gmail• Blogger• Google Maps• Google Earth• Google Analytics• YouTube• Google Docs• And More…

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For Class Discussion & DebateCase 1: The Google Universe – Business Models

Google has a variety of business models that they employ: Business-to-Business (B2B) Market Business-to-Consumer (B2C) Market Business-to-Government (B2G) Market

But there are challenges: Domestic and International Business Challenges – Privacy Conflicts with Totalitarian Governments Anticompetitive Issues Web Analytics Ethical and Legal Issues

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For Class Discussion & DebateCase 1: The Google Universe – Business Models Part 1

Discuss1. How does Google’s advertising business require it to operate

from the perspective of both a B2B and a B2C company?2. Explain how Google’s PageRank™ algorithm led to search

results that users found more helpful than those from earlier search engines.

3. Describe how Google’s advertising model offers advertisers superior targeting capabilities compared to traditional advertising channels (e.g., television, radio, and print media).

4. Why is Google increasingly blamed for antitrust violations? Cite examples of business practices that are of concern to antitrust regulators around the world.

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Debate5. Is Google’s collection of data for its Street View program unethical?

What specific Street View data collection actions have created concern for users and regulatory agencies around the world?

6. When Google cooperates with governments like China by restricting access to information available through its search engine, is it guilty of human rights violations (e.g., freedom of speech)? Is Google contradicting its own motto, “Don’t be Evil,” in these situations?

7. Is Google infringing on the rights of authors and publishers when it includes their copyrighted work in its searchable database of books?

8. Is Google wrong to set limits on the use of public domain books it has digitized and stored in its database? Is this an example of anticompetitive behavior? Is it unethical?

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Read Google’s new, consolidated privacy policy: google.com/policies/privacy/ Discussion9. What kinds of information were you surprised to learn that

Google collected about users?10. Does the policy clearly describe the way Google uses the

information it collects?11. Do you feel that the policy describes practices that are a

violation of personal privacy?12. Finally, what actions can users take to limit the information

that Google collects about them and do you think options to limit information collection by Google are adequate?

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6.1 e-Business Challenges and Strategies Mix of online channels & media gives consumers strong control

over where and how they interact with a business or brand. Managers need to know how to respond to changing consumer

behavior and needs of business customers—and how to deal with IT software vendors and consulting firms.

Companies may outsource development or hosting of e-business systems with software as a service (SaaS) or cloud computing.

A key to success is having a clear understanding of the business model your company is following and making sure that managers from various functions all operate in a manner consistent with that model.If the business model and strategy are wrong, then implementation won’t matter in the long run.

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Dot-com Era, 1995-2002The new economy was the economy of the dot-com era (or dot-com

bubble), which extended from roughly 1995 to 2000.• Pure-play companies, nicknamed dot-coms, existed only on the

Internet without a physical brick-and-mortar presence. These Internet-channel companies were set up to capture the new marketspace. Marketspace was the term used instead of the old economy’s marketplace.

• Dot-com Bubble Bursts and Deflates. March 10, 2000 is called the day the bubble burst because it was the turning point for the drop in value of Dot-com stocks.

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Figure 6.8. Changes in theNasdaq during the dot-com era,which burst on March 10, 2000, and declined until October 2002.


E-Business and E-Commerce Fundamentals An e-business process involves the use of electronic or digital

technologies, often based on the Internet or World Wide Web, to accomplish some business task.

An e-business is a company where a significant or substantial part of its business is based on the utilization of e-business processes.

E-commerce refers to the use of e-business process for the specific purpose of buying or selling goods and services. In other words, e-commerce is a form of e-business.

Applications:• Internal communications• Service / self service• Collaboration and training• Supply Chain Management• Research, information gathering, web analytics, and more

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Types of E-Business Markets

Business-to-business (B2B). Over 85% of EC volume is B2B.

Business-to-consumers (B2C). Also called e-tailing.

Consumers-to-business (C2B). Consumers make known a particular need for a product or service, and then suppliers compete to provide that product or service at the requested price, e.g., Priceline.com

Government-to-citizens (G2C) and to others. A government agency provides services to its citizens via EC technologies.

Mobile commerce (m-commerce). Transactions and activities are conducted via wireless networks.

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E-Business Website Requirements

Availability relates to the server side of e-business. An always on facility is needed to maintain the business critical apps.

Accuracy and quick response. Web software must be capable of searching, sorting, processing promotions and payments, verifying that the credit card number belongs to the person trying to use it, confirming the purchase in real-time, etc. In time-sensitive B2B, errors that delay delivery are intolerable.

Security and PCI DSS compliance. PCI DSS (Payment Card Industry Data Security Standard) is a set of infosec requirements to help prevent credit card fraud.

Integrating EC systems with enterprise systems. Need better integration across all customer points of interaction.

Web analytics. Learning from Web traffic and log data.

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E-Business Models

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Figure 6.10. An Example of an e-commerce Company.


IT at Work 6.1: Online Auctions for CommerceAn auction is a competitive process in which either a seller solicits bids from buyers or a buyer solicits bids from sellers. The primary characteristic of auctions is that prices are determined dynamically by competitive bidding. There are two major types of auctions: forward auctions and reverse auctions. See text for full case.Questions1. What was the dot-com bubble? What lessons were learnedfrom it?2. List some benefits of operating as an e-business.3. What are the requirements and challenges of e-business?4. What is the importance of PCI DSS compliance?5. Define the term “business model” and list five e-business

models.

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6.2 Business-to-Consumer e-Commerce Just a short time ago, the idea of purchasing things online was a

novel concept. Now, shopping for things online and finding the best deal by comparing online prices with those in brick-and-mortar stores is a common consumer practice.

Several of the leading online service industries are banking, trading of securities, employment, travel, and real estate services.

Online Banking. Online banking includes various banking activities conducted via the Internet instead of at a physical bank location.

International and Multiple-Currency Banking. International banking and the ability to handle trading in multiple currencies are critical for international trade.

Online Job Market. Most companies and government agencies advertise job openings, accept résumés, and take applications via the Internet.

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IT at Work 6.2: Amazon.com and IT PatentsIn July 1995, Bezos started Amazon.com, offering books via an electronic catalog from its web site. Key features offered by the amazon.com mega e-tailer were broad selection, low prices, easy searching and ordering, useful product information and personalization, secure payment systems, and efficient order fulfillment• Amazon has invested heavily in its IT infrastructure, many features of

which it had patented.• Amazon launched the e-reader Kindle in 2007. Its success proved the

viability of the e-book market and led to the entry of numerous competitors, such as Barnes & Noble’s Nook and the Apple iPad.

Questions1. Why is order fulfillment critical to Amazon’s success?2. Why did Amazon patent One-Click and other IT infrastructuredevelopments?3. How has Amazon adapted the Kindle to new technologies?4. Why would other retailers form an alliance with Amazon.com?

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IT at Work 6.3: ING Direct, the Largest Online BankING Direct, a division of the Dutch financial-services giant ING Group, surpassed E*Trade Bank to become the largest online bank. ING Direct first opened for business in Canada in 1997. By 2007, ING Direct had become the most successful direct bank in the world with more than 17 million customers in nine countries.Questions1. How did ING Direct become the world’s largest online bank?2. Why did ING Direct use both online and offline marketing

campaigns?3. What attracted customers to online banking at ING Direct?4. What attracted brick-and-mortar banks into the online banking

segment?

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Issues in E-tailing

1. Resolving channel conflict between an online selling channel and physical selling channels.

2. Resolving conflicts within click-and-mortar organizations.

3. Managing order fulfillment, logistics, and reverse logistics.

4. Determining viability and risk of online e-tailers.

5. Identifying appropriate revenue (business) models.

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Online Business and Market Planning

Online marketing planning is very similar to any other marketing plan.

1. Build the marketing plan around the customer, rather than on products.

2. Monitor progress toward the one-year vision for the business in order to be able to identify when adjustments are needed, and then be agile enough to respond.

3. Identify all key assumptions in the marketing plan. When there is evidence that those assumptions are wrong, identify the new assumptions and adjust the plan.

4. Make data-driven, fact-based plans.

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6.2 Review Questions

1. Describe how digital content and services can lead to significantly lower costs.

2. What general features make the delivery of online services successful for both sellers and buyers?

3. How has Amazon maintained its competitive edge?4. How did ING Direct attract customers to become the

world’s largest online bank?5. List the major issues relating to e-tailing.6. List three online marketing planning

recommendations.

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6.3 B2B e-Commerce & e-Procurement

B2B Comprises about 85% of e-commerce dollar volume. Covers apps that enable an enterprise to form

electronic relationships with its distributors, resellers, suppliers, customers, and other partners.

By using B2B, organizations can restructure their supply chains and partner relationships.

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B2B Business Models

Sell-side: Seller can be either a manufacturer (IBM.com), a

distributor (Avnet.com), or a retailer (Walmart.com) Primary methods are forward auctions and online catalogs,

which can be customized for each buyer E-sourcing or Buy-side:

E-sourcing refers to the many procurement methods Primary methods are auctions, RFQ processing, and private

exchanges

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B2BE-procurement1. To control costs2. To simplify processes to make them more efficient

Public and Private Exchanges3. Vertical exchanges for direct materials, materials that are inputs to

manufacturing, e.g., PlasticsNet.com4. Vertical exchanges for indirect materials in one industry—e.g.,

ChemConnect.com and iSteelAsia.com5. Horizontal exchanges for indirect materials, such as office

supplies, light bulbs, and cleaning materials used by any industry, e.g., EcEurope.com and Alibaba.com

6. Functional exchanges. Needed services such as temporary help or extra space are traded on an as-needed basis, e.g., Employease.com

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http://www.plasticsnet.com/

http://www.chemconnect.com/

http://www.isteelasia.com/

http://www.eceurope.com/

http://www.alibaba.com/

http://www.employease.com/



1. Briefly differentiate between the sell-side marketplace and e-sourcing.

2. What are the two basic goals of e-procurement? How can those goals be met?

3. What is the role of exchanges in B2B?4. Explain why maverick buying might take place and its

impact on procurement costs.

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6.4 E-Government E-COMMERCE MODELS APPLY TO GOVERNMENT & THE PUBLIC SECTOR

E-government is the use of Internet technology to deliver information and public services to citizens, business partners and suppliers of government entities, and people who work in the public sector. Benefits Improves the efficiency and effectiveness of government

functions, including the delivery of public services Increases transparency by giving access to government

information Citizens can provide feedback and more actively

participate in democratic institutions and processes

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E-Government in the Cloud Budget pressures are a leading factor moving

governments into cloud computing solutions 45% of local governments are using some form of cloud

computing for applications or services

Two iPhone Apps to Curb Drunk Driving R-U-Buzzed was released by the Colorado DOT to

estimate blood-alcohol content Mashup program Stumble Safely gives Washington, D.C.,

pedestrians a safe route home after a night at the bar.

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IT at Work 6.5: Apps for Democracy Community Initiative

In the fall of 2008, the Washington, D.C. Office of the Chief Technology Officer asked iStrategyLabs how it could make DC.gov’s Data Catalog (data.octo.dc.gov/) useful for the citizens, visitors, businesses, and government agencies. The solution was the creation of Apps for Democracy (appsfordemocracy.org/), a contest that had cost $50,000 and returned 47 iPhone, Facebook, and web applications with an estimated value of $2,600,000 to the city. See text for full case.

Questions1. Visit the Data Catalog (data.octo.dc.gov/). What value does it

provide citizens?

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6.5 E-Commerce Support Services: Payment and Order Fulfillment

B2B and B2C requires support services, e.g., payment, order fulfillment, and content.

Major e-commerce support services: e-infrastructure: technology consultants, system developers,

integrators, hosting, security, wireless, and networks e-processes: payments and logistics e-markets: marketing and advertising e-communities: citizens, audiences and business partners e-services: CRM, PRM, and directory services e-content: supplied by content providers

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Web Advertising The Internet introduced the concept of interactive

marketing, which has enabled marketers and advertisers to interact directly with customers. In interactive marketing, a consumer can click an ad to obtain more information or send an e-mail to ask a question.

Most large companies practice integrated marketing communications, where online and traditional ad campaigns are coordinated to deliver a consistent message.

Search Engine Marketing (SEM). Search Engine Marketing is an umbrella term that describes practices associated with increasing the likelihood that a company will appear in search results when people conduct Internet searches using terms or phrases related to a product or company.

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Electronic Payment – Table 6.7

Electronic funds transfer (EFT) Electronic checks Electronic credit cards Purchasing e-cards e-Cash—smart cards e-Cash—person-to-person Electronic bill presentment and payments Pay at ATMs Micropayments B2B special methods

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Figure 6.14. Sequence of activities in e-credit card processing

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Electronic Bill Payments

1. Online banking. The consumer pays bills from their bank’s online banking web site. Some banks offer the service for free with a checking account, or if the account holder maintains a minimum balance.

2. Biller direct. The consumer makes payments at each biller’s web site either with a credit card or by giving the biller enough information to complete an electronic withdrawal directly from the consumer’s bank account.

3. Bill consolidator. The customer enrolls to receive and pay bills for multiple billers with a third-party bill consolidator.

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Security in Electronic Payments

Security requirements for conducting e-commerce are as follows: Authentication. The buyer, the seller, and the paying institutions must

be assured of the identity of the parties with whom they are dealing. Integrity. It is necessary to ensure that data and information transmitted

in e-commerce not be altered or destroyed during transmission. Nonrepudiation. Merchants need protection against the customer’s

denial of placing an order. Customers need protection against merchants’ denial of payments made.

Privacy. Customers want their identity to be secured. Some prefer complete anonymity, as is possible with cash payments.

Safety. Customers want to be sure that it is safe to provide a credit card number on the Internet. They also want protection against fraud by sellers or by criminals posing as sellers.

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Order Fulfillment

Any time a company sells a product directly to customers, one that must be delivered physically, it is involved in various order fulfillment activities.

It must perform the following activities: quickly find the products to be shipped; pack them; arrange for the packages to be delivered speedily to the customer’s door; collect the money from every customer, either in advance, by COD, or by individual bill; and handle the return of unwanted or defective products.

A typical e-commerce fulfillment process is shown in Figure 6.16.

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IT at Work 6.6: E-Money: The Future Currency

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Figure 6.15. Contactless Mobile Suica on mobile phone; based on RFID

The growing e-money lifestyle in Japan is making life more convenient for consumers by allowing transactions via mobiles.

The Mobile Suica system was debuted by NTT DoCoMo in 2006.

Mobile Suica is a phone-based smartcard that can be used for buying rail tickets or accessing buildings.



1. What are the major e-commerce support services?2. List the security requirements for e-commerce.3. Describe the issues in e-commerce order fulfillment.4. Describe the different types of online advertising.5. What are the key differences in the CPM, CPC, and

CPA methods of paying for advertising?6. What is the difference between SEO and PPC search

engine marketing?

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6.6 E-Business Ethics and Legal Issues

Privacy: Most e-payment systems know who the buyers are; therefore, it’s necessary to protect the buyers’ identities.

Web tracking: By using tracking software and log files, companies can track individuals’ movements on the Internet.

Loss of Jobs: EC may eliminate jobs.

Disintermediation: Technology eliminates the need for intermediaries, such as travel and insurance agents.

Reintermediation: Travel and insurance agents are providing value added services in a process called reintermediation.

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6.6 E-Business Ethics and Legal Issues

Antitrust Laws. At one time or another, many well-known technology companies have faced scrutiny over business dealings that appeared to be in conflict with antitrust laws in the United States.

Collection of State Sales Tax by Online Merchants. In addition to privacy laws and antitrust laws, perhaps the most hotly debated legal issue associated with e-commerce today is related to sales tax.

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1. List some ethical issues in e-commerce.2. List the major legal issues of e-commerce.3. Define disintermediation. Give an example.4. Define reintermediation. Give an example.

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