1. 5 COIS11011 WEEK 6 Chapter Enabling Commerce Using the Internet “There is no physical analogy for what Amazon.com is becoming.” Jeff Bezos Cofounder and long-time CEO of Amazon.com Information Systems Today: Managing in the Digital World

2. Learning Objectives Information Systems Today: Managing in the Digital World

3. Learning Objectives Information Systems Today: Managing in the Digital World

4. Electronic Commerce • Online exchange of goods, services and money • Second quarter of 2006 • 2.7% of total retail revenue • $24.8 billion in revenue Information Systems Today: Managing in the Digital World

5. Most Common Types of E-Commerce • Business-to-consumer (B2C) • A person buys a book from Amazon.com • Business-to-business (B2B) • Retailer like Wal-Mart ordering from distributors • Business-to-employee (B2E) • Employee uses the Web to change employee benefits • Consumer-to-consumer (C2C) • One person purchases from another on eBay Information Systems Today: Managing in the Digital World

6. Other Types of E-Commerce • Government-to-citizen (G2C) • A person filing income taxes online • Government-to-business (G2B) • Government purchases supplies using Internet-enabled procurement system • Government-to-government (G2G) • Foreign government accessing U.S. federal regulations Information Systems Today: Managing in the Digital World

7. Key Capabilities of the Web Information Systems Today: Managing in the Digital World

8. Information Dissemination • Firms across the world have access to customers • Economical medium for marketing products and services • Increased geographical reach Information Systems Today: Managing in the Digital World

9. Integration • Integration of information via Web sites • Real-time access to personalized information • No time lag between company decisions and customers’ ability to access these Information Systems Today: Managing in the Digital World

10. Example: Integration • Alaska Airlines customers can access their mileage program any time • Real-time link between company database and customer Information Systems Today: Managing in the Digital World

11. Mass Customization • Meeting particular customers’ needs on a large scale • Timbuk2.com • Custom Messenger Bag Builder • Customers create a virtual bag • Preference-tracking helps Timbuk2 in marketing efforts Information Systems Today: Managing in the Digital World

12. Interactive Communication • Immediate feedback between company and customers • E-mail notifications • Customer service online chat • Best Buy • Geek Squad • 24-hour computer support Information Systems Today: Managing in the Digital World

13. Collaboration • Virgin Entertainment Group • Microsoft SharePoint • Managers: spend more time selling products • Head office: more time for strategic planning Information Systems Today: Managing in the Digital World

14. Transaction Support • Internet and the Web: • Reduced transaction costs • Enhanced operational efficiency • Dell – automated transaction support • Cost savings per sale • Disintermediation Information Systems Today: Managing in the Digital World

15. E-Commerce Business Strategies • Differentiated based on levels of physical/virtual presence Information Systems Today: Managing in the Digital World

16. Brick-and-Mortar Business Strategy • Physical locations only • Traditional stores • Cons: Limited geographical reach Information Systems Today: Managing in the Digital World

17. Click-Only Business Strategy • Business conducted in cyberspace - no physical location • Virtual companies • Cons: Customers uncomfortable with online transactionsNo face-to-face interaction with customers Information Systems Today: Managing in the Digital World

18. Click-and-Mortar Business Strategy • Bricks-and-clicks business strategy • Hybrid strategy • Cons: Added complexity combining 2 different environments Information Systems Today: Managing in the Digital World

19. Example: Click-and-Mortar Company Information Systems Today: Managing in the Digital World

20. Ingredients of a Business Model • A plan of how to achieve EC success Information Systems Today: Managing in the Digital World

21. Common Revenue Models for EC • Most important ingredient of business model • How will the firm earn revenue? Information Systems Today: Managing in the Digital World

22. Learning Objectives Information Systems Today: Managing in the Digital World

23. Business-to-Business E-Commerce • Extranet • Enables firms to do business together (B2B) • One of best ways for organizations to gain return on technology-based investments • Boeing • 1,000 authorized business partners • Nearly all Fortune 1,000 companies deploy some type of B2B applications Information Systems Today: Managing in the Digital World

24. Electronic Data Interchange (EDI) • Used prior to the introduction of the Internet • EDI used for B2B systems • Digital or electronic transmission of business documents between organizations • Value-added networks (VAN) • Dedicated circuit between companies Information Systems Today: Managing in the Digital World

25. Advantages and Disadvantages of EDI • Advantages • Streamlining business processes • Reduction of error rates • Disadvantages • Costly • Mid-size and small companies disadvantaged Information Systems Today: Managing in the Digital World

26. Extranets • New, more affordable alternative to EDI • Advantages • Improved timelines and accuracy of information • Central management of documents • Cross-platform nature • Low cost of adoption • No specific user training required Information Systems Today: Managing in the Digital World

27. Extranet System Architecture • Internet-based application • Virtual private network (VPN) used to secure information transmission • Used to manage supply chains Information Systems Today: Managing in the Digital World

28. Intranets • Business-to-employee (B2E) electronic commerce • Internet based private network using Web technologies • Boeing • More than 1 million pages • 200,000 employees Information Systems Today: Managing in the Digital World

29. Intranet System Architecture • Internet-based application • Firewalls used for security • Software placed between LAN and the Internet • VPN used to access intranet from remote locations Information Systems Today: Managing in the Digital World

30. Intranet: Training • Boeing Company • 200,000 employees get trained • Quality eTraining program • Catalogue of courses • Online course content • Standardized courses • Business improvements • Cost reduction • Eliminated travel cost Information Systems Today: Managing in the Digital World

31. Intranet: Application Integration • Information from separate applications can be consolidated and presented to the user Netegrity SiteMinder Information Systems Today: Managing in the Digital World

32. Intranet: Online Entry of Information • Use of Web browsers to enter information online • E.g., Microsoft MSExpense • Prior to MSExpense • 136 different report templates • Outdated versions • With MSExpense • Online submission of expense records • Easy and centralized updates to templates • Savings of $4.3 million a year • Shortened period for reimbursement from 3 weeks to 3 days • Etc. Information Systems Today: Managing in the Digital World

33. Intranet: Real-Time Access to Information • Manage, update, distribute, and access corporate information • Boeing • News releases uploaded to the Intranet • Previously sent to all corporate offices as video tapes • Reduced distribution costs • Efficient information sharing • Company-wide access Information Systems Today: Managing in the Digital World

34. Intranet: Collaboration • Boeing • Information shared between employees across the world • Reduced product development cycles • Ability to stay current on projects • Ability to stay current with the changing market conditions Information Systems Today: Managing in the Digital World

35. Learning Objectives Information Systems Today: Managing in the Digital World

36. Use of Internet Technologies • Characteristics of the Internet, intranet and extranet • B2B, B2E rely on extranet and intranet • Internet provides an opportunity for B2C commerce Information Systems Today: Managing in the Digital World

37. Stages of B2C E-Commerce • Websites range from passive to active Information Systems Today: Managing in the Digital World

38. E-Tailing • Selling goods and services online • Click-and-mortar • Walmart.com • Click only • Amazon.com • Virtual company • Priceline.com • Reverse pricing vs. menu-driven pricing Information Systems Today: Managing in the Digital World

39. E-Tailing Benefits • Product benefits • Unlimited number and variety of products • Easier comparison shopping • E.g., AllBookstores, BizRate, or SideStep • Place benefits • Anywhere, anytime • Purchasing on global scale • Price benefits • Higher inventory turnover rate • No expenditures for physical retail space Information Systems Today: Managing in the Digital World

40. The Long Tail • Traditional stores • Focus on mainstream needs • Target the average customer • E.g., Blockbuster • E-Tailers • Can focus on niche markets • E.g., Netflix Information Systems Today: Managing in the Digital World

41. E-Tailing Drawbacks • Product delivery drawbacks • Delay between product order and delivery • Except for products that can be downloaded • Direct product experience drawbacks • Lack of sensory information • Smell, taste, feel • Lack of the social element • Cannot replace going to the mall with friends Information Systems Today: Managing in the Digital World

42. Attracting and Retaining Online Customers • Basic rule of commerce • Offer valuable products/services at fair prices • Additional e-commerce rules • The Web site should offer something unique • The Web site must be aesthetically pleasing • The Web site must be easy to use and fast • The Web site must motivate people to visit, stay and return • You must advertise your presence on the Web • You should learn from your Web site Information Systems Today: Managing in the Digital World

43. Web Site Rules: Rule 1 • Offer something unique • Offer hard-to-find goods • Global audience • Reasonable prices Information Systems Today: Managing in the Digital World

44. Web Site Rules: Rule 2 • Website must be aesthetically pleasing • Use of color schemes, backgrounds, high quality images • Clear, concise and consistent layout • Increases chances of return • Can separate a Web site from the competition Information Systems Today: Managing in the Digital World

45. Web Site Rules: Rule 3 • Website must be easy to use and fast • Easy navigation • Fast download speed • Average user will wait only a couple of seconds for a website to download • Present brief summary information with hyperlinks • Allows users to “drill down” Information Systems Today: Managing in the Digital World

46. Web Site Rules: Rule 4 • Web site must motivate people to visit stay and return • Create a community • GardenWeb • Users share tips • Buy from each other Information Systems Today: Managing in the Digital World

47. Web Site Rules: Rule 5 • Advertise your presence on the Web • Pull marketing • A passive method of attracting to a specific site • Include the Web site address on all promotional materials • Advertise your Web site on other sites Information Systems Today: Managing in the Digital World

48. Web Site Rules: Rule 5 Advertise your presence on the Web (II) Pay-per-click Only pay for advertising when user clicks on it Affiliate marketing – Web site owners post ads on their site Problem: click fraud – artificially clicking on ads to create revenue Network click fraud Competitive click fraud Information Systems Today: Managing in the Digital World 5-48

49. Web Site Rules: Rule 6 • Learn from your Web site • Who are your customers? • What are they doing? • Web analytics • Analyze behavior of visitors • Path the visitors take • Length of the visit • Number of pages viewed • Page from which they exit Information Systems Today: Managing in the Digital World

50. Search Engine Marketing • Paid inclusion • Fee paid to the search engine to appear in the results • Cannot influence order, thus companies may use: • Search engine advertising • Search engine optimization Information Systems Today: Managing in the Digital World