Ch08-Electronic and Mobile Commerce

Principles of Information
Systems
Eighth Edition
Chapter 8
Electronic and Mobile Commerce
2 Principles of Information Systems, Eighth Edition
Principles and Learning Objectives
Electronic commerce and mobile commerce are
evolving, providing new ways of conducting
business that present both opportunities for
improvement and potential problems
Describe the current status of various forms of e-
commerce, including B2B, B2C, and C2C
Outline a multistage purchasing model that
describes how e-commerce works
Define m-commerce and identify some of its unique
challenges
(continued)
E-commerce and m-commerce can be used in
many innovative ways to improve the operations of
an organization
Identify several e-commerce and m-commerce
applications
Identify several advantages associated with the use
of e-commerce and m-commerce
(continued)
Although e-commerce and m-commerce offer many
advantages, users must be aware of and protect
themselves from many threats associated with this
technology
Identify the major issues that represent significant
threats to the continued growth of e-commerce and
m-commerce
Organizations must define and execute a strategy
to be successful in e-commerce
Outline the key components of a successful e-
commerce strategy
(continued)
E-commerce and m-commerce require the careful
planning and integration of a number of technology
infrastructure components
Identify the key components of technology
infrastructure that must be in place for e-commerce
and m-commerce to work
Discuss the key features of the electronic payment
systems needed to support e-commerce

Why Learn About Electronic and Mobile
Commerce?
Most organizations have an Internet presence
Sales/marketing manager involved with e-commerce
Customer service employees help develop the Web
site
Human resource or public relations manger may
provide Web content for employees and investors
Must learn about e-commerce and m-commerce
An Introduction to Electronic
Commerce
Electronic commerce: conducting business
activities electronically over computer networks
Types of business activities that are strong
candidates for conversion to e-commerce
Paper based
Time-consuming
Inconvenient for customers
Business-to-Business (B2B)
E-Commerce
Subset of e-commerce
All the participants are organizations
Useful tool for connecting business partners in a
virtual supply chain to cut resupply times and
reduce costs

Business-to-Consumer (B2C)
E-Commerce
Form of e-commerce in which customers deal
directly with an organization and avoid
intermediaries
Squeezes costs and inefficiencies out of supply
chain
Can lead to higher profits
Can lead to lower prices for consumers
E-commerce via the Internet
Many goods and services are cheaper online
The Internet allows consumers to easily compare
prices, features, and value
Consumer-to-Consumer (C2C)
E-Commerce
Subset of e-commerce that involves consumers
selling directly to other consumers
Example: eBay
Customers buy and sell items directly to each other
through the site
181 million users buy and sell items valued at more
than $44 billion
Other popular online auction Web sites: Craigslist,
uBid, Yahoo! Auctions, Onsale, and WeBidz
eGovernment
Use of information and communications technology
to simplify the sharing of information, speed
formerly paper-based processes, and improve the
relationship between citizen and government
Forms of eGovernment
Government-to-consumer (G2C)
Government-to-business (G2B)
Government-to-government (G2G)
Multistage Model for E-commerce
Figure 8.1: Multistage Model for E-Commerce (B2B and B2C)
Multistage Model for E-commerce
(continued)
Figure 8.2: Product and Information Flow for HP Printers Ordered over the Web
E-Commerce Challenges
Defining an effective e-commerce model and
strategy
Community, content, and commerce
Changing distribution systems and work processes
to manage shipments of individual units directly to
consumers
B2C systems must be able to handle split-case
distribution
Integrating Web-based order processing with
traditional systems
E-Commerce Challenges (continued)
Figure 8.3: Three Basic Components of a Successful E-Commerce Model
E-Commerce Challenges (continued)
Figure 8.4: Web-Based Order Processing Must Be Linked to Traditional
Back-End Systems
An Introduction to Mobile Commerce
Mobile commerce (m-commerce) relies on the use
of wireless devices, such as personal digital
assistants, cell phones, and smart phones, to place
orders and conduct business
Handset manufacturers are working with
communications carriers to develop appropriate
wireless devices, related technology, and services
Content providers and mobile service providers are
working together more closely than ever
Mobile Commerce in Perspective
Only 12 to 14 percent of the worlds 1.8 billion
mobile phone users have ever used the Web from
their phones
Internet Corporation for Assigned Names and
Numbers (ICANN) created a .mobi domain to help
attract mobile users to the Web
Market for m-commerce in North America is
maturing much later than in Western Europe and
Japan
Technology Needed for Mobile
Commerce
Improved interface between the wireless device
and its user
Improved network speed
Security
Encryption, digital certificates
Web applications that are accessible for handheld
users
Technology Needed for Mobile
Commerce (continued)
Wireless application protocol (WAP): standard
set of specifications for Internet applications that
run on handheld, wireless devices
Effectively serves as a Web browser for such
devices
Uses the Wireless Markup Language (WML), which
is designed for effectively displaying information on
small devices

Electronic and Mobile Commerce
Applications
Many B2B, B2C, C2C, and m-commerce
applications are being used in:
Retail and wholesale
Manufacturing
Marketing
Investment and finance
Auction arenas
Retail and Wholesale
Electronic retailing (e-tailing): direct sale from
business to consumer through electronic
storefronts
Electronic storefronts are typically designed around
an electronic catalog and shopping cart model
Cybermall: single Web site that offers many
products and services at one Internet location
Manufacturing, repair, and operations (MRO)
goods and services

Manufacturing
To raise profitability and improve customer service,
many manufacturers move their supply chain
operations onto the Internet
Electronic exchange: electronic forum where
manufacturers, suppliers, and competitors buy and
sell goods, trade market information, and run back-
office operations

Manufacturing (continued)
Figure 8.5: Model of an Electronic Exchange
Marketing
Market segmentation: identification of specific
markets to target them with advertising messages
Technology-enabled relationship management:
use of detailed information about a customers
behavior, preferences, needs, and buying patterns
to customize the entire relationship with that
customer
Investment and Finance
Online stock trading
Online tools for doing research and analysis
Online banking
Customers can check account balances, transfer
money among accounts, pay bills, etc.
Electronic bill presentment

Auctions
eBay
Has become synonymous with online auctions
Customer complaints: increased fees and problems
with unscrupulous buyers
Constantly trying to expand and improve its services:
Skype, Verisign
Hundreds of other online auction sites
Example: Priceline.com

Anywhere, Anytime Applications of
Mobile Commerce
M-commerce devices are ideal for accessing
personal information and receiving targeted
messages for a particular consumer
Through m-commerce, companies can establish
one-to-one marketing relationships with individual
consumers anytime and anywhere
The most successful m-commerce applications suit
local conditions and peoples habits and
preferences
Examples: banking, stock trading, information
services, retail, advertisements
Advantages of Electronic and Mobile
Commerce
Global reach: helps reduce gap between rich and
poor countries
Reduces costs: increases speed and accuracy
Speeds the flow of goods and information
Increases accuracy: eliminates human data-entry
error
Improves customer service: information about
delivery status and ability to meet customer
demand
Threats to Electronic and Mobile
Commerce
Businesses must ensure that e-commerce and m-
commerce transactions are safe and consumers
are protected
Number of threats to the continued growth of e-
commerce and m-commerce
Security, theft of intellectual property, fraud, invasion
of privacy, lack of Internet access, return on
investment, legal jurisdiction, taxation
Security
Methods to increase security
Payment Card Industry security standard
Address Verification System
Card Verification Number technique
Visas Advanced Authorization process
Federal Financial Institutions Examination Councils
Authentication in an Internet Banking Environment
guidelines
Biometric technology
Theft of Intellectual Property
Intellectual property: works of the mind that are
distinct somehow and are owned or created by a
single entity
For example: books, films, music, processes, and
software
Copyright law protects authored works such as
books, film, images, music, and software from
unauthorized copying
Patents can protect software, business processes,
formulae, compounds, and inventions
Theft of Intellectual Property
(continued)
Trade secrets
Digital Rights Management (DRM): use of any of
several technologies to enforce policies for
controlling access to digital media
Fraud
Phishing: sending bogus messages purportedly
from a legitimate institution to pry personal
information from customers by convincing them to
go to a spoof Web site
Click fraud: arises in a pay-per-click online
advertising environment when additional clicks are
generated beyond those that come from actual,
legitimate users
Online auction fraud
Invasion of Consumer Privacy
Online profiling: practice of Web advertisers
recording online behavior to produce targeted
advertising
Clickstream data: data gathered based on the
Web sites you visit and the items you click on
Lack of Internet Access
Digital divide: difference between people who do
and people who dont have access or capability to
use high-quality, modern information and
communications technology to improve their
standard of living
Exists between:
More and less developed countries
Economic classes
The educated and uneducated
Those who live in cities and those who live in rural
areas
Return on Investment
The investment required for a large firm to
establish and operate a B2B or B2C Web site can
be in the millions of dollars
Common problem with determining return on
investment: difficult to forecast project costs and
benefits
Legal Jurisdiction
When conducting e-commerce, sales must not
violate county, state, or country legal jurisdictions
Examples
Selling stun guns and similar devices
Selling cigarettes or alcohol to underage customers
Taxation
U.S. Supreme Court ruling: Internet-based
merchants must apply sales tax only when buyers
live in a state where the company has physical
facilities, or nexus
Most businesses set up separate companies to
avoid dealing with nonstandard rules of the more
than 7,500 taxing districts nationwide
Consumers are responsible for voluntarily remitting
sales taxes
Difficult for states to collect sales taxes on Internet
purchases
Strategies for Successful
E-Commerce
Companies must develop effective Web sites that
include the following characteristics:
Easy to use
Accomplish the goals of the company
Safe and secure
Affordable to set up and maintain
Defining the Web Site Functions
Decide which tasks the site must accomplish
Create an attractive presence for the company
Meet the needs of its visitors
Examples: obtaining information about the
organization and its products, buying products or
services, getting advice, registering complaints
Redefining your sites basic business model to
capture new business opportunities
Establishing a Web Site
Web site hosting companies
Allow you to set up a Web page and conduct e-
commerce within a matter of days
Little up-front cost
Storefront broker: companies that act as
middlemen between your Web site and online
merchants that have the products and retail
expertise
Building Traffic to Your Web Site
Obtain and register a domain name
Make your site search-engine-friendly
Meta tag: special HTML tag that contains keywords
representing your sites content
Keywords are used by search engines to build
indexes pointing to your Web site
Web site traffic data analysis software
Adapting Web site design for global consumers
Maintaining and Improving Your Web
Site
Be alert to new trends and developments in e-
commerce
Be prepared to take advantage of new
opportunities
Personalization: tailoring Web pages to
specifically target individual consumers
Explicit: captures user-provided information
Implicit: captures data from customer Web sessions

Technology Infrastructure Required To
Support E-commerce and
M-commerce
Successful implementation of e-business requires
significant changes to existing business processes
and substantial investment in IS technology
Poor Web site performance drives consumers to
abandon some e-commerce sites in favor of those
with better, more reliable performance

Technology Infrastructure Required To
Support E-commerce and
M-commerce (continued)
Figure 8.6: Key Technology Infrastructure Components
Hardware
Storage capacity and computing power required of
the Web server depends on:
Software that will run on the server
Volume of e-commerce transactions
E-commerce solutions should be designed to be
highly scalable
Web site hosting: third-party Web service provider

Web Server Software
Security and identification
Access controls
Encryption
Retrieving and sending Web pages
Web site tracking
Web log file
Web site development
HTML/visual Web page editor, software
development kits
Web Server Software (continued)
Web page construction
Web editors and extensions
Static Web page: contains same information
Dynamic Web page: responds to a specific Web
users request
Examples of Web server software packages:
Apache HTTP Server, Microsoft Internet
Information Server

E-Commerce Software
E-commerce software tools
Catalog management: provides standard format
Product configuration: build product online to meet
user needs
Shopping cart facilities
Transaction processing
Web traffic data analysis
Web services: software modules supporting specific
business processes that users can interact with over
a network as needed
E-Commerce Software (continued)
Figure 8.7: Electronic Shopping Cart
Electronic Payment Systems
Digital certificate: attachment to an e-mail
message or data embedded in a Web page that
verifies the identity of a sender or a Web site
Certificate authority (CA): trusted third party that
issues digital certificates
Secure Sockets Layer (SSL): communications
protocol used to secure sensitive data
Electronic cash: amount of money that is
computerized, stored, and used as cash for e-
commerce transactions
Electronic Payment Systems
(continued)
Credit card
Charge card
Debit card
Smart card: a credit cardsized device with an
embedded microchip to provide electronic memory
and processing capability
Summary
Electronic commerce (or e-commerce): conducting
business activities electronically over computer
networks
Types of e-commerce: business-to-consumer
(B2C), business-to-business (B2B), and consumer-
to-consumer (C2C)
eGovernment: use of information and
communications technology to simplify the sharing
of information, speed formerly paper-based
processes, and improve the relationship between
citizen and government
Summary (continued)
Multistage model for e-commerce: includes search
and identification, selection and negotiation,
electronic purchasing, delivery, and after-sales
service
Mobile commerce (m-commerce): uses wireless
devices to place orders and conduct business
B2B, B2C, C2C, and m-commerce applications are
being used in retail and wholesale, manufacturing,
marketing, investment and finance, and auction
arenas
Summary (continued)
Issues affecting growth of e- and m-commerce:
security, theft of intellectual property, fraud,
invasion of consumer privacy, lack of Internet
access, return on investment, legal jurisdiction, and
taxation
An effective Web site should be easy to use,
accomplish the goals of the company, be safe and
secure, and be affordable to set up and maintain
Successful implementation of e-business requires
significant changes to existing business processes
and substantial investment in IS technology

Ch08-Electronic and Mobile Commerce

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