McGraw-Hill/Irwin ©2008,The McGraw-Hill Companies, All Rights Reserved

Chapter 8

Electronic Commerce Systems

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Learning Objectives

1. Identify the major categories and trends of e-commerce applications

2. Identify the essential processes of an e-commerce system, and give examples of how they are implemented in e-commerce applications.

3. Identify and give examples of several key factors and Web store requirements needed to succeed in e-commerce.

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Learning Objectives

4. Identify and explain the business value of several types of e-commerce marketplaces.

5. Discuss the benefits and trade-offs of several e-commerce clicks and bricks alternatives.

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Case 1: eBay versus Google and Microsoft: The Competitive Battle for e-Commerce Supremacy

• eBay enjoyed virtual monopoly in online auction for almost a decade.

• Now it is facing competition from Google & Microsoft.• Analysts think that search and advertising will define the

future of e-Commerce.• Windows Live Expo is Microsoft’s competitive weapon in

its battle with eBay and Google for the online classifieds market.

• eBay is addressing these challenges by acquiring companies like Skype, Shopping.com, and other international classified sites.

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Case Study Questions

1. Do you agree with Google and Microsoft that eBay is now vulnerable to their assaults via Google Base and Windows Live Expo? Why or why not?

2. What are the major advantages and limitations of Google Base and Windows Live Expo? Which do you prefer, or would you use both? Why? Go to their Internet Web sites and read reviews at other sites to help you answer.

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Case Study Questions

3. Are eBay’s development of Kijiji, acquisition of Skype, alliance with Yahoo, and other acquisitions as noted in this case enough to ward off the competitive assaults of Google and Microsoft? Defend your position.

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Real World Internet Activity

1. Go to the Internet to discover the latest developments in eBay’s auctions performance and its use of its acquisitions in its battle for the online classifieds market with Google and Microsoft. Have any new entrants appeared to seriously challenge these major players, including Craigslist? Which players appear to be the winners and losers in this competition? Defend your position to the class.

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Real World Group Activity

2. Personalized online classifieds Web pages that are accessible to others online have a great potential for serious security, privacy, fraud, and spam assaults by online criminals, hackers, and spammers.

– Use the Internet to research how the companies in this case are protecting users of their products from such assaults.

– Discuss this issue, your research results, and other steps that users and the companies could take to improve the security of online classifieds.

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Electronic Commerce

• More than just buying and selling products online• Includes the entire online process of

– Developing, marketing, selling, delivering, servicing and paying for products and services

– Transacted on the internetworked global marketplaces of customers

– With the support of a worldwide network of business partners

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Processes involved in E-commerce

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E-commerce technologies

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Categories of e-Commerce

• Business-to-Consumer (B2C) – businesses develop attractive electronic marketplaces to sell products and services to consumers

• Business-to-Business (B2B) – involves both electronic business marketplaces and direct market links between businesses

• Consumer-to-Consumer (C2C) – online auctions where consumers can buy and sell with each other

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Essential e-commerce process architecture

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Access Control and Security

• E-commerce processes must establish mutual trust and secure access

• Between the parties in an e-commerce transaction

• By authenticating users, authorizing access, and enforcing security features

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Profiling and Personalizing

• Gather data on you and your website behavior and choices

• Build electronic profiles of your characteristics and preferences

• Profiles are used to recognize you and provide you with a personalized view of the contents of the site with product recommendations and personalized advertising

• One-to-one marketing strategy

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Search Management

• Search processes that helps customers find the specific product or service they want to evaluate or buy

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Content and Catalog Management

• Content Management – software that helps e-commerce companies develop, generate, deliver, update, and archive text data and multimedia information at e-commerce websites

• Catalog Management – software that helps generate and manage catalog content

• May support customer self-service and mass-customization of products, e.g., Dell Computer configuration management

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Workflow Management

• Software that helps employees electronically collaborate to accomplish structured work tasks within knowledge-based business processes

• Ensure proper transactions, decisions, and work activities are performed and the correct data and documents are delivered to the right employee, customer, or supplier

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Catalog/content management and workflow example

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Event Notification

• Most e-commerce applications are event-driven• Respond to events such as customer’s first

website access, payment, delivery• Event notification software monitors e-commerce

processes• Records all relevant events including problem

situations• Notifies all involved stakeholders

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Collaboration and Trading

• Processes that support the vital collaboration arrangements and trading services

• Needed by customers, suppliers, and other stakeholders

• Online communities of interest– E-mail, chat, and discussion groups – Enhance customer service and build customer loyalty

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Electronic Payment Processes

• Web Payment Processes– Shopping cart process– Credit card payment process– Other more complex payment processes

• Electronic Funds Transfer (EFT) – Capture and process money and credit transfers

between banks and businesses and their customers

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Secure Electronic Payment Example

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Securing Electronic Payments

• Network sniffers– Software that recognizes and intercepts credit card

number formats

• Security measures to combat– Encrypt (code and scramble) data between customer

and merchant– Encrypt credit card authorizations– Take sensitive information off-line

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Case 2: Entellium, Digg, Peerflix, Zappos, and Jigsaw: Success for Second Movers in e-Commerce

• For many internet companies, the second-mover advantage seems even more substantial.

• Entellium is an example of a company that has successfully implemented a second mover strategy on the Web.

• The second-movers can use the same approach as first mover with better products and services at much lower cost.

• Another strategy is to use combinations of business models that are successful.

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Case Study Questions

1. Is the second-mover advantage always a good business strategy? Defend your answer with examples of the companies in this case.

2. What can a front-runner business do to foil the assaults of second movers? Defend your answer using the examples of the front-runner companies in the case.

3. Do second movers always have the advantage in Web based business success? Why or why not? Evaluate the five strategies given in the case and the companies that used them to help defend your answer.

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Real World Internet Activity

1. Use the Internet to research the current business status of all of the many companies in this case. Are the second movers still successfully using their strategies, or have the first movers foiled their attempts? Have new strong players entered the markets of the first and second movers, or have business, economic, or societal developments occurred to change the nature of competition in these markets?

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Real World Group Activity

2. Assume you will start an Internet-based business similar to one of those mentioned in this case or another one of your choice. Would you be a first, second, or later mover in the market you select?

• How would you differentiate yourself from other competitors or prospective new entrants?

• Share your ideas and attempt to agree on the best Web-based business opportunity of the group.

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e-Commerce Trends

Source: Adapted from Jonathan Rosenoer, Douglas Armstrong, and J. Russell Gates, The Clickable Corporation:Successful Strategies for Capturing the Internet Advantage (New York: The Free Press, 1999), p. 24.

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e-Commerce Success Factors

• Selection and Value– Attractive product selections, competitive prices,

satisfaction guarantees, and customer support after the sale

• Performance and Service– Fast, easy navigation, shopping, and purchasing, and

prompt shipping and delivery

• Look and Feel– Attractive web storefront, website shipping areas,

multimedia product catalog pages, and shopping features

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e-Commerce Success Factors

• Advertising and Incentives– Targeted web page advertising and e-mail promotions, discounts

and special offers, including advertising at affiliate sites

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e-Commerce Success Factors

• Personal Attention– Personal web pages, personalized product

recommendations, Web advertising and e-mail notices, and interactive support for all customers

• Community Relationships – Virtual communities of customers, suppliers, company

representatives, and others via newsgroups, chat rooms, and links to related sites

• Security and Reliability– Security of customer information and website

transactions, trustworthy product information, and reliable order fulfillment

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Web Store Requirements

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Developing a Web Store

• Build website– Use simple website design tools– Predesigned templates– Build your own website or use outside contractor

• Market website to attract visitors and transform them into loyal customers

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Serving Customers

• Serve customers by creating user profiles, personal Web pages and promotions that help develop a one-to-one relationship

• Transact with customers by providing an attractive, friendly, and efficient Web store

• Support customers with– Self-help menus, tutorials, FAQs – E-mail correspondence with customer service

representatives

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Managing a Web Store

• Manage both the business and the website– Record and analyze traffic, inventory and sales– Link to accounting system

• Operate twenty-four hours a day, seven days a week

• Protect transactions and customer records, use firewalls, and repel hacker attacks

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B2B e-Commerce

• B2B e-commerce is the wholesale and supply side of the commercial process, where businesses buy, sell, or trade with other businesses.

• Factors for building a successful retail website also apply to websites for B2B e-commerce.

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e-Commerce Marketplaces

• One to Many – sell-side marketplaces host one major supplier who dictates product catalog offerings and prices

• Many to One – buy-side marketplaces attract many suppliers that flock to these exchanges to bid on the business of a major buyer

• Some to Many – distribution marketplaces unite major suppliers who combine their product catalogs to attract a larger audience of buyers

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e-Commerce Marketplaces

• Many to Some – procurement marketplaces unite major buyers who combine their purchasing catalogs to attract more suppliers and thus more competition and lower prices

• Many to Many – auction marketplaces used by many buyers and sellers that can create a variety of buyers’ or sellers’ auctions to dynamically optimize prices

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e-Commerce Portals

• B2B e-commerce portal can provide several types of marketplaces in one site

• Often developed and hosted by third-party market-maker companies who serve as infomediaries that bring buyers and sellers together in catalog, exchange, and auction markets.

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B2B e-Commerce Web Portal

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Clicks and Bricks

• Should we integrate our e-commerce business operations with our traditional physical business operations

• Or should we keep them separate?

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e-Commerce Channel

• The marketing or sales channel created by a company to conduct and manage its chosen e-commerce activities

• Issue is whether the e-commerce channel should be integrated with traditional sales channel.

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Checklist for Channel Development

• What audiences are attempting to reach?• What action do we want these audiences to

take? – Learn about us, give us information, make an inquiry, to

buy something from website, or buy through another channel?

• Who owns the e-commerce channel within the organization?

• Is the e-commerce channel planned alongside other channels?

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Checklist for Channel Development

• Do we have a process for generating, approving, releasing, and withdrawing content?

• Will our brands translate to the new channel or will they require modification?

• How will we market the channel itself?

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Case 3: Yahoo and Flickr: Will Social Media and Social Networking Give Yahoo a Competitive Edge on the Web?

• Flickr is the online photo management and sharing application where people make their photos available to their family and friends.

• Flickr also helps people give their friends and family to organize their photos and add comments, notes, & tagas.

• User-generated content, or “social media,” or “social networking” that provides information sharing and personal connecting experience is becoming a key competitive weapon.

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Case Study Questions

1. How does the Web foster the growth of social media and social networking Web sites? What potential benefits could such Web sites offer a business? Visit several sites like Flickr, MySpace, Facebook, and YouTube to support your answer.

2. What business benefits does Yahoo hope to gain from its acquisition of Flickr and drive to “Flickrize” its business? How realistic are such planned benefits for Yahoo at the present time, given the acquisition of MySpace by News Corp. and YouTube by Google? Defend your position.

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Case Study Questions

3. Can social media and social networking serve as a strategic competitive differentiator for Yahoo, enabling it to overtake Google in the multibillion-dollar targeted search ads market? Why or why not?

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Real World Internet Activity

1. Visit the main Yahoo Web site and evaluate the status of Yahoo’s current integration of social networking into its many Web-based businesses such as Yahoo Autos, Local, Shopping, Travel, My Web, and Yahoo Search. Is such integration easily apparent? Does it seem to improve the value of the services offered? Present your findings to the class.

2. How are News Corp. and Google capitalizing on their respective acquisitions of MySpace and YouTube? Visit their Web sites and search the Internet for information that will enable you evaluate how these companies are integrating social networking into their business initiatives.

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Real World Group Activity

3. As in personalized online classifieds Web pages, social media and social networking sites offer personalized Web pages that are accessible to others online. Unfortunately, this ability may provide the potential for serious security, privacy, fraud, and spam assaults by online criminals, hackers, and spammers. Use the Internet to research how Yahoo and others are protecting users of their social networking sites from such assaults.

– Discuss this issue, your research results, and other steps that users and the companies could take to improve the security of social networking sites.