McGraw-Hill/Irwin

Copyright 2008,The McGraw-Hill Companies, Inc. All rights reserved. 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

9
Electronic Commerce Systems

McGraw-Hill/Irwin

Copyright 2008,The McGraw-Hill Companies, Inc. All rights reserved. 2008 The McGraw-Hill Companies, Inc. All rights reserved.

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 ecommerce
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Learning Objectives
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 eBays playbook concept?
Why do they call it a playbook?

Is eBays move into the international arena a good long-term strategy?

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The Scope of e-Commerce

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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 peoples 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 customers 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

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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

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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
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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 eBays 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

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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

Insert Figure 9.18 here

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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 Nobles 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

Yahoos 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 multibilliondollar targeted search ads market?
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Case 4: Todays Web; Anything but Usual

Customers arent just reading these days
Theyre 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 dont
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Case 4: Todays 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 companys newspaper, radio, and TV ads Pay invoices Ship ads to publications Manage marketing expenses against the companys budget

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Case 4: Todays Web; Anything but Usual

Dells 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

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Case Study Questions

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

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