ISYS6697 – Information

System Concept
Week 5 - E-Business and E-Commerce
Source

Chapter07-E-Business and E-
Commerce - Introduction to
Information Systems,
Supporting and Transforming
Business, fifth Canadian edition,
Rainer, Prince, Cegielski (2020).
John Willey & Sons, Inc.
 Learning Outcome
• LO 3 : Illustrate the application of information systems in the
business world
 Learning Objectives
1. Describe the six common types of electronic commerce.
2. Describe the various online services of business-to-consumer (B2C)
commerce, providing specific examples of each.
3. Describe the three business models for business-to-business
electronic commerce.
4. Identify the ethical and legal issues related to electronic commerce,
providing examples.
 Chapter Outline
1. Overview of E-Business and E-Commerce
2. Business-to-Consumer (B2C) Electronic Commerce
3. Business-to-Business (B2B) Electronic Commerce
4. Ethical and Legal Issues in E-Business
 Overview of E-Business & E-Commerce

Definitions and Concepts:

• Electronic commerce (e-commerce, EC) describes the buying,
selling, transferring or exchanging of products, services or
information via computer networks, including the Internet.
• E-business is a broader definition of EC, including buying and
selling of goods and services, and also servicing customers,
collaborating with partners, conducting e-learning and
conducting electronic transactions within an organization.
 Overview of E-Business & E-
Commerce
Definitions and Concepts:
• Pure vs. Partial EC
• Pure versus Partial Electronic Commerce depends on the degree of digitization
involved.
--The product can be physical or digital.
--The process can be physical or digital.
--The delivery agent can be physical or digital.
• Brick-and-mortar organizations are purely physical organizations.
• Virtual organizations are companies that are engaged only in EC. (Also called pure play)
• Click-and-mortar organizations are those that conduct some e-commerce activities, yet
their business is primarily done in the physical world. i.e. partial EC.
 Overview of E-Business & E-
Commerce
• Types of E-Commerce:
• Business-to-consumer (B2C): the sellers are organizations and the buyers
are individuals.
• Business-to-business (B2B): both the sellers and buyers are business
organizations. B2B represents the vast majority of e-commerce.
• Consumer-to-consumer (C2C): an individual sells products or services to
other individuals.
• Business-to-employee (B2E): An organization uses e-commerce internally
to provide information and services to its employees. Companies allow
employees to manage their benefits, take training classes electronically;
buy discounted insurance, travel packages, and event tickets.
 Overview of E-Business & E-
Commerce
• Types of E-Commerce (continue….):
• E-Government: the use of Internet Technology in general
and e-commerce in particular to deliver information about
public services to citizens (called Government-to-citizen
[G2C EC]), business partners and suppliers (called
government-to-business [G2B EC]),
• Mobile Commerce (m-commerce) refers to e-commerce
that is conducted in a wireless environment. For example,
using cell phone to shop over the Internet.
 Overview of E-Business & E-
Commerce
Major E-Commerce Mechanisms:
• An auction is a competitive buying and selling process in which prices are
determined dynamically by competitive bidding.
• In forward auction, sellers solicit bids from many potential buyers. Usually, sellers
place items at sites for auction, and buyers bid continuously for them. The
highest bidder wins the items. Both sellers and buyers can be either individuals or
businesses. E-Bay is a forward auction.
• In reverse auctions, one buyer, usually an organization, wants to buy a product or
a service. The buyer posts a request for quotation (RFQ) on its Web site or on a
third-party Web site. The RFQ contains detailed information on the desired
purchase. Suppliers study the RFQ and submit bids, and the lowest bid wins the
auction.
 Overview of E-Business & E-Commerce
Major E-Commerce Mechanisms:
Forward and Reverse Auctions:

Bid Bid
price price

Time Time

Forward Auction Reverse Auction

Source: Chapter07-E-Business and E-Commerce - Introduction to Information Systems,

Fifth Canadian Edition, Rainer Prince (2020) John Wiley & Sons Canada.Ltd
 Overview of E-Business & E-Commerce

E-Commerce Business Models:

• Each of the above types of EC is executed in one or more business models.

• A business model is the method by which a company generates revenue to
sustain itself.
• Tabel 7.1. (open page 169) summariez the major EC business models.
• Online direct marketing: manufacturers or retailers sell directly to customers.
• Electronic tendering system: businesses (or governments) request quotes from
suppliers; uses B2B (or G2B) with reverse auctions.
• Name-your-own-price: customers decide how much they want to pay.
 Overview of E-Business & E-Commerce

• E-Commerce Business Models (continue…) :

• Find-the-best-price. customers specify a need and an intermediary
compares providers and shows the lowest price.
• Affiliate marketing: Vendors ask partners to place logos or banners on
partner’s site. If customers click on logo, go to vendor’s site, and buy, then
vendor pays commission to partners.
• Viral marketing: receivers send information about your product to their
friends.
• Group purchasing: small buyers aggregate demand to get a large volume;
then the group conducts tendering or negotiates a lower price.
• Online auctions: companies run auctions of various types on the Internet
 Overview of E-Business & E-Commerce

E-Commerce Business Models (continue…) :

• Product customization: customers use the Internet to self-configure
products or services. Sellers then price them and fulfill them quickly.
• Deep discounters: company offers deep price discounts.
• Membership: only members can use the services provided.
 Electronic Payments

E-payment systems enable you to pay for goods and services electronically.
• Electronic checks (e-checks) are similar to paper checks and are used mostly in
B2B.
• Electronic credit cards allow customers to charge online payments to their
credit card account.
• Purchasing cards are the B2B equivalent of electronic credit cards and are
typically used for unplanned B2B purchases.

• Continue…
 Electronic Payments
Electronic credit cards

Source: Chapter07-E-Business and E-Commerce - Introduction to Information Systems,

Fig_7-1 Fifth Canadian Edition, Rainer Prince (2020) John Wiley & Sons Canada.Ltd..
 Electronic Payments
Electronic Payments

• Step 1: When you buy a book from Amazon, for example, your credit card
information and purchase amount are encrypted in your browser. This way
the information is safe while it is “traveling” on the Internet to Amazon.
• Step 2: When your information arrives at Amazon, it is not opened. Rather,
it is transferred automatically (in encrypted form) to a clearinghouse,
where it is decrypted for verification and authorization.
• Step 3: The clearinghouse asks the bank that issued you your credit card
(the card issuer bank) to verify your credit card information.
• Step 4: Your card issuer bank verifies your credit card information and
reports this to the clearinghouse.
 Electronic Payments
Electronic Payments

• Step 5: The clearinghouse reports the results of the verification of

your credit card to Amazon.
• Step 6: Amazon reports a successful purchase and amount to you.
• Step 7: Your card issuer bank sends funds in the amount of the
purchase to Amazon’s bank.
• Step 8: Your card issuer bank notifies you (either electronically or in
your monthly statement) of the debit on your credit card.
• Step 9: Amazon’s bank notifies Amazon of the funds credited to its
account.
 Electronic Payments

Figure 7.2 Example of virtual credit card

Fig_7-2
 Electronic Payments

Electronic cash
 Stored-value money cards allow you to store a fixed amount of prepaid
money and then spend it as necessary.
 Smart cards contain a chip called a microprocessor that can store a
considerable amount of information and are multipurpose – can be used
as a debit card, credit card or a stored-value money card.
 Person-to-person payments are a form of e-cash that enables two
individuals or an individual and a business to transfer funds without using
a credit card.
 Overview of E-Business & E-
Commerce
Benefits of E-Commerce :
• Benefits to organizations
 Makes national and international markets more accessible
 Lowering costs of processing, distributing, and retrieving information
• Benefits to customers
 Access a vast number of products and services around the clock
(24/7/365)
• Benefits to Society
 Ability to easily and conveniently deliver information, services and
products to people in cities, rural areas and developing countries.
 Overview of E-Business & E-
Commerce
Limitations of E-Commerce :
• Technological Limitations
 Lack of universally accepted security standards
 Insufficient telecommunications bandwidth
 Expensive accessibility
• Non-technological Limitations
 Perception that EC is unsecure
 Unresolved legal issues
 Lacks a critical mass of sellers and buyers
 Business-to-Consumer (B2C)
Electronic Commerce
• An electronic storefront is a Web site that represents a single store.
• Electronic malls are collections of individual shops under a single Internet
address.
• Electronic retailing (e-tailing) is the direct sale of products and services
through electronic storefronts or electronic malls, usually designed around
electronic catalog format and/or auction.

Figure 7.1.
Electronic malls include
products from many vendors.

Source: Chapter07-E-Business and E-Commerce -

Introduction to Information Systems,
Fifth Canadian Edition, Rainer Prince (2020) John Wiley &
Sons Canada.Ltd..
 Business-to-Consumer (B2C)
Electronic Commerce
Online Service Industries :
• Cyberbanking • Travel services
• Online securities trading
• Online job market • Online advertising
Disintermediation
Online service involves customers accessing services via the Web.Intermediaries or
middlemen provide information and/or provide value-added services. When the
function(s) of these intermediaries can be automated or eliminated, this process is called
disintermediation.

Source: Chapter07-E-Business and E-Commerce -

Introduction to Information Systems,
Fifth Canadian Edition, Rainer Prince (2020) John Wiley &
Sons Canada.Ltd..
 Business-to-Consumer (B2C)
Electronic Commerce

• Online Advertising
• Advertising is an attempt to disseminate information in order to influence a
buyer-seller transaction.

• Online Advertising methods :

• Banners are simply electronic billboards.
• Pop-up ad appears in front of the current browser window.
• Pop-under ad appears underneath the active window.
• Permission marketing asks consumers to give their permission to voluntarily
accept online advertising and e-mail.
• Viral marketing refers to online “word-of-mouth” marketing.
 Business-to-Consumer (B2C) Electronic
Commerce

Issues in E-Tailing
• Channel conflict occurs when manufacturers disintermediate their channel
partners, such as distributors, retailers, dealers, and sales representatives,
by selling their products directly to consumers, usually over the Internet
through electronic commerce.
• Multichanneling is a process in which a company integrates its offline and
online channels.
• Order fulfillment involves finding the product to be shipped; packaging the
product; arrange for speedy delivery to the customer; and handle the
return of unwanted or defective products.
Business-to-Consumer (B2C) Electronic
Commerce

Drivers of today’s online advertising :

• The emergence of “communitainment.”
• The increasing popularity of Usites.
• Mainstreaming of the Internet.
• Declining usage of traditional media.
• Fragmentation of content consumption.
• Consumers are multitasking and they do not like ads.
 Business-to-Consumer (B2C) Electronic
Commerce

Eight Types of Web sites for Advertising :

• Portals: most popular; best for reach but not targeting
• Search: second largest reach; high advertising value
• Commerce: high reach; not conducive to advertising
• Entertainment: large reach; strong targetability
• Community: emphasize being a part of something; good for specific advertising
• Communications: not good for branding; low targetability
• News/weather/sports: poor targetability
• Games: good for very specific types of advertising

• Source: PiperJaffrey
• PiperJaffray is an investment bank. See PiperJaffray at http://www.piperjaffray.com.
 Business-to-Business (B2B) Electronic
Commerce
In B2B e-commerce, the buyers and sellers are organizations.

• B2B Sell-Side Marketplace

• In the sell-side marketplace, organizations sell their products or services to other organizations
Electronically from their own Web site and/or from a third-party Web site.
• This model is similar to the B2C model in which the buyer comes to the seller’s site, views
catalogs, and places an order. In the B2B sell-side marketplace, the buyers are organizations.
• Key mechanisms: electronic catalogs and forward auctions

• B2B Buy-Side Marketplace

• Key mechanism: reverse auctions
 Business-to-Business (B2B) Electronic
Commerce

Electronic Exchanges :
• Vertical exchanges connect buyers and sellers in a given
industry.
• Horizontal exchanges connect buyers and sellers across
many industries and are used mainly for MRO materials.
• In functional exchanges, needed services such as temporary
help or extra office space are traded on an “as-needed”
basis.
 Ethical and Legal Issues
Ethical Issues :

• Privacy: ecommerce provides opportunities for

businesses and employers to track individual activities
on the WWW using cookies or special spyware. This
allows private/personal information to be tracked,
compiled, and stored as an individual profile. This
profile can be used or sold to other businesses for target
marketing or by employees to aide in personnel
management decisions (i.e., promotions, raises, layoffs).
• Job Loss
 Ethical and Legal Issues

Legal Issues Specific to E-Commerce :

• Fraud on the Internet i.e. stocks, investments, business opportunities, auctions.
• Domain Names problems with competition.
• Cybersquatting refers to the practice of registering domain names solely for the purpose
of selling them later at a higher price.
• Domain Tasting is a practice of registrants using the five-day "grace period" at the
beginning of a domain registration to profit from pay-per-click advertising.
• Taxes and other Fees when and where (and in some cases whether) electronic sellers
should pay business license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.
• Copyright protecting intellectual property in e-commerce and enforcing copyright laws
is extremely difficult.
Thank You