Lecture 3:

E-Business and E-Commerce

ISIT224 Management Information Systems

Lecture Outline
E-Business (Read chapter 2)

• Information systems (IS) and business

processes
• IS for management and linkage of the
enterprise
• IS in collaboration and social business
•E-Commerce
IS functions in a business
(Read chapter
10)
• E-commerce, digital markets and
digital goods
• m-commerce in business
 E-Business: learning objectives
What are business processes? How are they related to
information systems?

How do systems serve the different management groups

in a business, and how do systems that link the enterprise
improve organisational performance?

Why are systems for collaboration and social business so

important, and what technologies do they use?

What is the role of the information systems function in a

business?
What are business processes?
• Business processes:
•Logically related set of activities/steps that define how
specific business tasks are performed.
•Involves the flow of material, information and
knowledge.
•May be tied to functional area or be cross-functional

• Note that every business is a collection of business

processes.

• Business processes may be assets or

liabilities
Examples of functional business processes

• Manufacturing and production

Assembling the product Challenge yourself: open
• Sales and marketing questions
Identifying customers
Selling the product
• Finance and accounting
Creating financial statements which of this business
Managing accounts receivable processes is an asset
Managing accounts payable and which is a
• Human resources liability?
Hiring employees
Paying staff salary
Order fulfillment: A cross-functional business process
How Information System Improves Business Processes

• Increasing efficiency of existing processes

– Automating steps that were manual
• Enabling entirely new processes
– Changing flow of information
– Replacing sequential steps with parallel steps
– Eliminating delays in decision making
– Supporting new business models
How do systems serve the different management groups?
Transaction processing systems

– Serve operational managers and staff

– Perform and record daily routine transactions
necessary to conduct business
• Examples: sales order entry, payroll, shipping
– Allow managers to monitor status of operations
and relations with external environment
– Serve predefined, structured goals and decision
making
A Payroll TPS

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Systems for business intelligence

– Data and software tools for organising and

analysing data
– Used to help managers and users make
improved decisions
• Management information systems
• Decision support systems
• Executive support systems
Management Information Systems

• Serve middle management

• Provide reports on firm’s current performance,
based on data from TPS
• Provide answers to routine questions with
predefined procedure for answering them
• Typically have little analytic capability
How Management Information Systems Obtain
Their Data from the Organisation’s TPS

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Sample MIS Report

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Decision support systems

• Serve middle management

• Support nonroutine decision making

– Example: What is the impact on production
schedule if December sales doubled?

• May use external information as well TPS / MIS data

• DSS could be model driven or data driven

Executive Support Systems
• Support senior management

• Address nonroutine decisions

– Requiring judgment, evaluation, and insight

• Incorporate data about external events (e.g., new

tax laws or competitors) as well as summarised
information from internal MIS and DSS

• Example: Digital dashboard with real-time view of

firm’s financial performance
how do systems that link the enterprise
improve organisational performance?

To answer this question, we will need to

understand enterprise applications.
Enterprise Applications

• Systems for linking the enterprise

• Span functional areas
• Execute business processes across the firm
• Include all levels of management
• There are four major enterprise applications:
– Enterprise systems
– Supply chain management systems
– Customer relationship management systems
– Knowledge management systems
Enterprise Application Architecture

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Enterprise Systems

• Collect data from different firm functions and

store data in single central data repository
• Resolve problems of fragmented data
• Enable:
– Coordination of daily activities
– Efficient response to customer orders
(production, inventory)
– Decision making by managers about daily
operations and longer-term planning
Supply Chain Management (SCM) Systems

• Manage firm’s relationships with suppliers

• Share information about:
– Orders, production, inventory levels,
delivery of products and services
• Goal:
– Right amount of products to destination
with least amount of time and lowest cost
Customer Relationship Management
(CRM) Systems

• Provide information to coordinate all of the business

processes that deal with customers
– Sales
– Marketing
– Customer service
• Helps firms identify, attract, and retain most
profitable customers
Knowledge Management Systems (KMS)

• Support processes for capturing and applying

knowledge and expertise
– For example, how to create, produce, and
deliver products and services
• Collect internal knowledge and experience
within firm and make it available to
employees
• Link to external sources of knowledge
SAP ERP Modules

24
Network resources used to increase integration
and expedite the flow of information

• Intranets
– Internal company websites accessible only
by employees
• Extranets
– Company websites accessible externally
only to vendors and suppliers
– Often used to coordinate supply chain
Why are systems for collaboration and
social business so important, and what
technologies do they use?
What Is Collaboration?
• Collaboration is the process of two or more people working
together within or across organisations to complete a task or
achieve a goal.
– Short lived or long term
– Informal or formal (teams)

• Growing importance of collaboration

– Changing nature of work
– Growth of professional work—“interaction jobs”
– Changing organization of the firm
– Changing scope of the firm
– Emphasis on innovation
– Changing culture of work
What Is Social Business?

• Social business
– Use of social networking platforms (internal and
external) to engage employees, customers, and
suppliers.
• Aims to deepen interactions and expedite
information sharing.
• “Conversations”
• Requires information transparency
– Driving the exchange of information without
intervention from executives or others
Business Benefits of Collaboration and
Teamwork
• Investments in collaboration technology can bring
about organisational improvements

• Benefits
– Productivity
– Quality
– Innovation
– Customer service
– Financial performance
• Profitability, sales, sales growth
Requirements for Collaboration

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Building a Collaborative Culture and
Business Processes
• “Command and control” organisations
– No value placed on teamwork or lower-level
participation in decisions

• Collaborative business culture

– Senior managers rely on teams of employees
– Policies, products, designs, processes, and
systems rely on teams
– The managers purpose is to build teams
Tools and Technologies for Collaboration
and Social Business
• E-mail and instant messaging (IM)
• Wikis
• Virtual worlds
• Collaboration and social business platforms
– Virtual meeting systems (telepresence)
– Cloud collaboration services (Google Drive,
Google Docs, etc.)
– Microsoft SharePoint and IBM Notes
– Enterprise social networking tools
Checklist for Managers: Evaluating and Selecting
Collaboration and Social Software Tools

• Time/space matrix
• Six steps in evaluating software tools
– Identify your firm’s collaboration challenges
– Identify what kinds of solutions are available
– Analyse available products’ cost and benefits
– Evaluate security risks
– Consult users for implementation and training issues
– Evaluate product vendors
The Time/Space Collaboration and Social Tool Matrix

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Challenge yourself: open questions

Watch the video about Upwork.

https://www.youtube.com/watch?v=ZzfPV8d_w
fk
• Would you consider getting some work through
Upwork? Why?
• If you have an IT project, would you consider
crowdsourcing it through Upwork? Why?
 What is the role of the information
systems function in a business?

36
The Information Systems Department

• Often headed by chief information officer

(CIO)
– Other senior positions include chief security
officer (CSO), chief knowledge officer
(CKO), chief privacy officer (CPO), chief
data officer (CDO)
• Programmers
• Systems analysts
• Information systems managers
• End users
Organising the Information Systems Function

• IT governance: it is about using IT efficiently and

effectively.
– Strategies and policies for using IT in the
organisation
– Decision rights
– Accountability
– Organisation of information systems function
• Centralized, decentralized, and so on
 End of chapter 2.
Have a short break! ☺
 E-commerce: learning objectives
What are the unique features of e-commerce, digital markets, and
digital goods?

What are the principal e-commerce business and revenue models?

How has e-commerce transformed marketing?

How has e-commerce affected business-to-business transactions?

What is the role of m-commerce in business, and what are the most
important m-commerce applications?

What issues must be addressed when building an e-commerce

presence?
Differentiating E-business, E-commerce,
and E-government
• E-business
– Use of digital technology and Internet to drive major
business processes
• E-commerce
– Subset of e-business
– Buying and selling goods and services through
Internet
• E-government
– Using Internet technology to deliver information and
services to citizens, employees, and businesses
E-commerce Today

• Began in 1995 and grew exponentially; still stable even in

a recession

• Companies that survived the dot-com bubble now thrive

• The new e-commerce: social, move from desktop to

smartphone
The Growth of E-commerce

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What are the unique features of e-commerce?

• Ubiquity
– Marketspace is virtual
– Transaction costs reduced
• Global reach
– Transactions across cultural and national
boundaries
• Universal standards
– One set of technology standards: Internet
standards
• Richness
– Supports video, audio, and text messages
What are the unique features of e-commerce?

• Interactivity
• Information density
– Greater price and cost transparency
– Enables price discrimination
• Personalization/customization
– Technology permits modification of messages,
goods
• Social technology
– Promotes user content generation and social
networking
Key Concepts in E-commerce: Digital Markets
and Digital Goods in a Global Marketplace

• Internet and digital markets have changed the way

companies conduct business
• Information asymmetry reduced
• Menu costs, search and transaction costs reduced
• Dynamic pricing enabled
• Switching costs
• Delayed gratification
• Disintermediation
The Benefits of Disintermediation to the Consumer

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Digital Goods

• Goods that can be delivered over a digital

network
• Cost of producing first unit is almost entire cost
of product
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly
variable
• Industries with digital goods are undergoing
revolutionary changes (publishers, record labels,
etc.)
Types of E-commerce

• Three major types

– Business-to-consumer (B2C)
• Example: BarnesandNoble.com

– Business-to-business (B2B)
• Example: ChemConnect

– Consumer-to-consumer (C2C)
• Example: eBay

• E-commerce on mobile platform

– Mobile commerce (m-commerce)
What are the principal e-commerce business models?
• Portal
❑ Provides initial point of entry to the web along with specialiased contents and other services.
❑ Examples are Yahoo, Bing, Google
• E-tailer
❑ Sell physical products online.
❑ Examples are Amazon, Blue Nile
• Content provider
❑ Generates revenue from providing online digital contents like music, news, photos, etc.
❑ Examples are WJS.com, Gettyimages.com, iTunes.com, Games.com
• Transaction broker
❑ Processes online transactions for a fee.
❑ Examples are Etrade.com, Expedia
• Market creator
❑ Provides a digital market environment for buyers and sellers to meet and transact
❑ Examples are eBay, Priceline.com, Exostar
• Service provider
❑ Provides applications as a service such as online data storage and backup, photo sharing, etc.
❑ Examples are Dropbox, Google Apps, Photobucket.com
• Community provider
❑ Provides an online social platform for people of similar interest to share information .
❑ Examples are Facebook, Twitter, Google+
What are the principal e-commerce revenue
models?
• Advertising
❑ Attract visitors with free contents, retain user attention (stickiness) and
show them paid advertisement.
❑ Most widely used revenue model
❑ Examples
❑ Google through AdSence (selling ad space), AdWord (selling
keywords)- now Google Ad, and DoubleClick now under Google
Marketing Platform.
❑ Facebook, Twitter, Yahoo and others
• Sales
❑ Selling goods, information or services to customers
❑ May rely on micropayment (e.g., iTunes Store)
❑ Examples
❑ Amazon, LLBean.com, Gap.com, iTunes, The Iconic, etc.
❑ Twitter (selling historical data through GNIP)
What are the principal e-commerce revenue
models? … continue
• Subscription
❑ Charges (yearly/monthly) subscription fees for access to service or content
❑ Examples
❑ Netflix, Match.com, eHarmony, Wall Street Journal, New York Times
• Free/Freemium
❑ Offer free services or contents on the basic features and charges for more advanced or
special features
❑ Examples
❑ Pandora, Spotify, LinkedIn, Google Drive
• Transaction Fee
❑ Charges a fee for enabling or processing a transaction
❑ Examples
❑ Ebay auction marketplace, WorldRemit, Forex.com
• Affiliate
❑ Websites that send visitors to other websites in return for a referral fee (also called lead
generation fee)
❑ Examples
❑ Blogs, Epinions, Yelp, MyPoints, etc.
Challenge yourself: open questions

Watch the video of the Freshland shopping app that

uses augmented reality.
https://www.youtube.com/watch?v=ZroFBG7-P7Q

• What do you think is the revenue model for the

app?
• In what other ways can augmented reality help to
improve customer experience?
 How Has E-commerce Transformed Marketing?
• Internet provides new ways to identify and communicate with customers.
• Native advertising (also called organic advertisement)
– This is the integration of advertisement with web content
• Long tail marketing:
– delivering product and services to many niche markets
• Behavioral targeting
– Tracking online behavior of individuals
• Programmatic ad buying
– Using computer software to buy digital ads.
– It relies on
• Demand-side platform (DSP): a system that allows buyers of digital
ads inventory to manage multiple ad exchange and data exchange
accounts through one interface. Examples include Adform,
AppNexus, The Trade Desk, etc.
• Ad exchange: a technology platform that facilitates the buying and
selling of media ads inventory from multiple ad networks. Examples
are AOL's Marketplace, Microsoft Ad Exchange, OpenX, Smaato.
Website Visitor Tracking

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Website Personalization

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Social E-commerce and Social Network Marketing

• Social e-commerce based on digital social graph

• Features of social e-commerce driving its growth
– Newsfeed
– Timelines
– Social sign-on
– Collaborative shopping
– Network notification
– Social search (recommendations)
• Social media
– Fastest growing media for branding and marketing
Social E-commerce and Social Network Marketing…continues

• Social network marketing

– Seeks to leverage individuals’ influence over
others
– Targeting a social network of people sharing
interests and advice
– Facebook’s “Like” button
– Social networks have huge audiences
• Social shopping sites, e.g. Pinterest
• Wisdom of crowds
• Crowdsourcing
How Has E-commerce Affected Business-
to Business Transactions?
• U.S. B2B trade in 2015 is $14.6 trillion
– U.S. B2B e-commerce in 2015 is $6.2 trillion (43%)

• Internet and networking helps automate procurement

• Variety of Internet-enabled technologies used in B2B

– Electronic data interchange (EDI)
– Private industrial networks (private exchanges)
– Net marketplaces
– Exchanges
Electronic Data Interchange (EDI)
• Computer-to-computer exchange of standard
transactions such as invoices, purchase orders

• Major industries have EDI standards

– Define structure and information fields of electronic
documents

• More companies are moving toward web-enabled

private networks
– Allow them to link to a wider variety of firms than
EDI allows
– Enable sharing a wider range of information
Electronic Data Interchange

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New Ways of B2B Buying and Selling
• Private industrial networks
– Also called private exchanges
– Large firm using a secure website to link to suppliers and partners
– Example is VW Group Supply used by Volkswagen to coordinate
with its suppliers
• Net marketplaces (e-hubs)
– Single digital marketplace for many buyers and sellers
– May focus on direct goods (used directly for production) or indirect
goods (not used directly for production, e.g., office supplies).
– May be a vertical marketplace (same industry) or horizontal
marketplace (multiple industries)
– An example is Exostar providing industry-specific service
• Exchanges
– Independently owned third-party Net marketplaces for spot
purchasing requiring immediate delivery. An example is Go2Paper for
the paper industry.
A Private Industrial Network

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A Net Marketplace

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What Is the Role of M-commerce in
Business, and What Are the Most Important
M-commerce Applications?
• M-commerce in 2017 is 37% of all e-commerce

• Fastest growing form of e-commerce

• Some areas growing at 50% or more

• Main areas of growth

– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, TV, etc.)
– In-app sales to mobile devices
Location-Based Services and Applications

• Used by 74% of smartphone owners

• Based on GPS map services
• Geosocial services
– Where friends are
• Geoadvertising
– What shops are nearby
• Geoinformation services
– Price of house you are passing
Other Mobile Commerce Services

• Financial account management apps

– Banks, credit card companies
• Mobile advertising market
– Google and Facebook are largest markets
– Ads embedded in games, videos, and
mobile apps
• 55% of online retailers have m-commerce
websites
What Issues Must be Addressed when
Building an E-commerce Presence?
• Most important management challenges
– Developing clear understanding of business objectives
– Knowing how to choose the right technology to achieve those
objectives

• Develop an e-commerce presence map

– Four areas: websites, e-mail, social media, offline media

• Develop a timeline: milestones

– Breaking a project into discrete phases
E-commerce Presence Map

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The End! ☺