Principles of

Information
Systems, Tenth Edition
Chapter
Electronic and Mobile
Commerce
 Principles and Learning
Objectives
• Electronic and mobile commerce are
evolving, providing new ways of
conducting business that present both
potential benefits and problems
— Describe the current status of various
forms of e- commerce, including B2B, B2C,
C2C, and e- Government
— Outline a multistage purchasing
model that
describes how e-commerce works
— Define m-commerce and identify
some of its unique
Principles of Information Systems, Tenth
Edition challenges
 Principles and Learning
Objectives
• E-commerce (continued)
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

Principles of Information Systems, Tenth

Edition
 Principles and Learning
Objectives
• (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
and m-commerce
— Outline the key components of a
successful
Principles e- Tenthcommerce and m-
of Information Systems, 4
Edition
commerce strategy
 Principles and Learning
Objectives
• E-commerce (continued)
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 and m- commerce
Principles of Information Systems, Tenth 5
Edition
 Why Learn About Electronic and
Mobile Commerce?
• Electronic and mobile commerce:
— Have transformed many areas of our lives
and
careers
• One fundamental change has been:
— The manner in which companies
interact with their suppliers, customers,
government agencies, and other business
partners

Principles of Information Systems, Tenth 6

Edition
 An Introduction to Electronic
Commerce
• Electronic commerce:
— Conducting business activities
electronically over computer networks
• Business activities that are strong
candidates for conversion to e-commerce:
— Paper based
— Time-consuming
Inconvenient for
customers

Principles of Information Systems, Tenth

Edition
 Business-to-Business (B2B)
E-Commerce
• Subset of e-commerce
• AII the participants are organizations
• Useful tool for connecting business
partners in a virtual supply chain to
cut resupply times and reduce costs
• An organization will use both:
—Buy-side e-commerce to purchase goods
and services and
— Sell—side e—commerce to sell
products to its customers

Principles of Information Systems, Tenth

Edition
 Business-to-Consumer
(B2C) E-
• Commerce
Form of e-commerce in which
customers deal directly with an
organization and avoid intermediaries
• Disintermediation:
— The elimination of intermediate
organizations between the producer
and the consumer

Principles of Information Systems, Tenth Edition 9

 Consumer-to-Consumer
(C2C) E-Commerce
• Subset of e-commerce that involves
consumers selling directly to other
consumers
• Popular sites:
— Bidzcom, Craigslist, eBid, Kijiji
— ePier, Ibidfree, Ubid, and Tradus
• Etsy is a C2C Web site that:
— Specializes in the buying and selling of
handmade and vintage items
— Facilitates sales worth more than $10
million each month
Principles of Information Systems, Tenth Edition 10
 Consumer-to-Consumer
(C2C) E-Commerce
(continued)
•Уațuë.of Thãasandś..or Tans or Tens ôf
satø: :niilłiońš.of.dotlã htind/reds òf dollars..
rš dollars
Lëngth Hours to
öf.šäíes Days to Òays tö days
process. months. w'eéks.
:Ńumbećëf decision .S‹ń'ačăl:ğeopíe to a
.makers inyo.tved ' dozen.or m...ore

Ûnifoćmity Typically a t•fôre. Singteproduct

of.ofÎer uniform product custõrnÏzeô offdririg, one of ä
offering product.o kind
Retatî«aty
fjeririg
simplø,

payment.änd ôëtîvèry
’ qÿałiÏy.’ detñuÏïy
options.hand opfiena
feaŁureš Diller ences Between B2B,
’Nótivatiori fôr Drivërî bÿ'ärt B2C, Drivën by ań individual and C2C
šäíd Driven ğy a individual. consumer's need
büsińess decision ’čorišurnëć's: or emotion
or need ńeéd .ôr
d:mõtiori

Principles of Information Systems, Tenth Edition 11

 e-Government
• Use of information and communications
technology
to:
— Simplify the sharing of information
— Speed formerly paper-based processes
— Improve the relationship between
citizen and government
• Forms of e-Government:
— Government-to-consumer (G2C)
— Government-to-business (G2B)
— Government-to-government (G2G)
Principles of Information Systems, Tenth Edition 12
 Multistage Model for E-
Commerce
• Search and identification
• Selection and negotiation
• Purchasing products and services
electronically
• Product and service delivery
• After-sales service

Principles of Information Systems, Tenth Edition 13

 Multistage Model for E-
Commerce
(continued)
Shlpna
notlflcai nt
on

Product and Information

Flow

Web
Principles of Information Systems, Tenth Edition 14
 E-Commerce Challenges
• Defining an effective e-commerce
model and strategy
• Dealing with consumer privacy
concerns
• Overcoming consumers' lack of
trust
• Overcoming global issues

Principles of Information Systems, Tenth Edition 15

 Defining an Effective E-
Commerce
• Model
First major and Strategy
challenge:
— For the company to define an effective
e-commerce model and strategy
• Three components of a successful model:
— Community, content, and commerce

Principles of Information Systems, Tenth Edition 16

 Defining an Effective E-
Commerce Model and
Strategy
Conte (continued)
nt

Commerc
e

Commlyut
n

Principles of Information Systems, Tenth Edition 17

 Dealing with Consumer Privacy
Concerns
• Identify theft:
— Someone using your personally
identifying information without your
permission to commit fraud
• Companies must be prepared to:
— Make a substantial investment to
safeguard their customers' privacy or run
the risk of losing customers

Principles of Information Systems, Tenth Edition 18

Overcoming Consumers' Lack of
Trust
• Lack of trust in online sellers:
— One of the most frequently cited reasons
that some consumers are not willing to
purchase online
• Online marketers must:
Create specific trust-building strategies for
their Web sites by analyzing their customers,
products, and services

Principles of Information Systems, Tenth Edition 19

 Overcoming Global
Issues
• These include:
— Cultural
challenges
Language
challenges
— Time and distance
challenges
— Infrastructure
challenges
— Currency
challenges
Principles of Information Systems, Tenth Edition
— State, 20
regional,
 An Introduction to Mobile
Commerce
• Mobile commerce (m-commerce/ relies on the use
of wireless devices
• The Internet Corporation for Assigned
Names and Numbers (ICANN)
— Created a .mobi domain to help attract
mobile users
to the Web

Principles of Information Systems, Tenth Edition 21

 Mobile Commerce in
Perspective
• The market for m-commerce in North
America:
— Maturing much later than in Western
Europe and
Japan
• M-commerce spending in the United
States:
— Grew from $369 million in sales in
2008 to $1.2 billion in 2009
• M-commerce sales for 2010 projected
to be $2.4 billion
Principles of Information Systems, Tenth Edition 22
 M-Commerce Web
Sites
• @imshopping:
— Can be accessed from Twitter by
sending a shopping-related question
• mdog.com:
— Portal for your mobile device's Web
browser

Principles of Information Systems, Tenth Edition 23

 Advantages of Electronic and
Mobile
• Reduce costs Commerce
• Speed the flow of goods and
information
• Increase accuracy
• Improve customer service

Principles of Information Systems, Tenth Edition 24

 Electronic and Mobile Commerce
Applications
• Many B2B, B2C, C2C, and m-
commerce applications are being
used in:
— Retail and wholesale
— Manufacturing
— Marketing and advertising
— Price comparison
— Couponing
— Investment and finance
— Banking and e-boutiques

Principles of Information Systems, Tenth Edition 25

 Retail and Wholesale
• Electronic retailing (e-tailing):
— Direct sale from business to
consumer through electronic storefronts
• Cybermall:
Single Web site that offers many
products and services at one Internet
location
• Manufacturing, repair, and operations
(MRO):
— Purchases often approach 40
percent of a manufacturing
Principlescompany's total
of Information Systems, revenues
Tenth Edition 26
 Manufacturing
• Electronic exchange:
— Electronic forum where
manufacturers, suppliers, and competitors
buy and sell goods, trade market
information, and run back-office
operations
• Private exchanges:
Owned and operated by a single
company
• Public exchanges:
— Owned and operated by industry groups
Principles of Information Systems, Tenth Edition 27
 Manufacturing (continued)

.. :.
:

Principles of Information Systems, Tenth Edition 28

 Marketin
g
• Market segmentation:
— Identification of specific markets to target
them with advertising messages
• Nielsen, the marketing and media
information company:
— Has developed its Business-Facts
database that provides information for
more than 13 million businesses

Principles of Information Systems, Tenth Edition 29

 Advertisi
• ng
Mobile ad impressions are generally bought
at:
— Cost per thousand (CPM), cost per
click (CPC), or cost per action (CPA)
• Three types of mobile ad networks:
Blind, premium blind, and premium
networks
• Price comparison:
— Mobile phone services enable shoppers to
compare prices and products on the Web
• Couponing:
— Shoppers
Principles canTenth
of Information Systems, subscribe
Edition to mobile 30
 Investment and Finance
• The Internet:
— Has revolutionized the world of investment
and
finance
• The brokerage business:
—Adapted to the Internet faster than any other arm of
finance

Principles of Information Systems, Tenth Edition 31

 Bankin
g
• Online banking customers:
— Can check balances of their savings,
checking, and loan accounts
— Transfer money among accounts
— Pay their bills

Principles of Information Systems, Tenth Edition 32

 E-Boutiques
• Key to the success of Web sites
such as ShopLaTiDa:
— A philosophy of high customer service
and strong, personal client relationships

Principles of Information Systems, Tenth Edition 33

 Threats to Electronic and Mobile
Commerce
• Businesses must ensure that e-commerce
and m- commerce transactions are safe
and consumers are protected

Principles of Information Systems, Tenth Edition 34

 Security
• Methods to increase security:
— Address Verification System
Card Verification Number technique
— Visa's Advanced Authorization process
— Federal Financial Institutions Examination
Council's "Authentication in an Internet
Banking Environment” guidelines

Principles of Information Systems, Tenth Edition 35

 Theft of Intellectual
Property
• Intellectual propeily:
— Works of the mind that are distinct
somehow and are owned or created by a
single entity
• Digital rights management (DRM):
— The use of any of several technologies
to enforce policies for controlling access to
digital media such as movies, music, and
software

Principles of Information Systems, Tenth Edition 36

 Frau
d
• Phishing:
— Sending bogus messages to pry
personal information from customers by
convincing them to go to a “spoof” Web
site
• Click fraud:
— Can arise in a pay-per-click online
advertising environment when additional
clicks are generated beyond those that
come from actual, legitimate users

Principles of Information Systems, Tenth Edition 37

 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

Principles of Information Systems, Tenth Edition 38

 Lack of Internet
Access
• Digital divide:
— Difference between people who do and do
not use modern technology such as
computers, the Internet, telephone, and
television to improve their standard of living

Principles of Information Systems, Tenth Edition 39

 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

Principles of Information Systems, Tenth Edition 40

 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”

Principles of Information Systems, Tenth Edition 41

 Strategies for Successful
E-Commerce and M-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

Principles of Information Systems, Tenth Edition 42

 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
— Example: Obtaining information
about the organization and its
products
• Redefining your site's basic business
model to capture new business
opportunities

Principles of Information Systems, Tenth Edition 43

 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:
— Company that acts as an intermediary
between your Web site and online merchants
who have the products and retail expertise

Principles of Information Systems, Tenth Edition 44

 Building Traffic to Your Web
Site
• Measures to attract customers:
— Obtain and register a domain name
— Make your site search-engine friendly
— Include a meta tag in your store's home page
— Use Web site traffic data analysis software
— Provide quality, keyword-rich content
— Add new content to the Web site on a
regular basis
— Acquire links to your site

Principles of Information Systems, Tenth Edition 45

 Maintaining and Improving Your
Web Site
• Personalization:
— Tailoring Web pages to specifically
target individual consumers
• Explicit personalization:
Captures user-provided information
• Implicit personalization:
— Captures data from customer Web sessions

Principles of Information Systems, Tenth Edition 46

 Technology Infrastructure
Required to
Support E-commerce and
M-commerce
• Poor Web site performance:
— Drives consumers to abandon some e-commerce
sites in favor of those with better, more reliable
performance

Principles of Information Systems, Tenth Edition 47

 Technology Infrastructure (continued)
Network
Internet
Value- added network
Virtual private network

Principles of Information Systems, Tenth Edition 48

 Web Server Software
• Security and identification
• Retrieving and sending Web
pages
• Web site tracking
• Web site development
• Web page development

Principles of Information Systems, Tenth Edition 49

 E-Commerce Software
• Catalog management
• Product configuration
• Shopping cart
• E-commerce transaction
processing
• Web traffic data analysis

Principles of Information Systems, Tenth Edition 50

 Mobile Commerce Hardware and
Software
• Handheld devices have limitations that
complicate
their use:
— Screens are small
— Input capabilities are limited to a few
buttons
— Less processing power and less bandwidth
• The Wireless Application Protocol (WAP):
— Standard set of specifications for Internet
applications that run on handheld, wireless devices

Principles of Information Systems, Tenth Edition 51

 Electronic Payment
Systems
• Digital certificate:
— Attachment to an e-mail message or
data embedded in a Web site that verifies
the identity of a sender or Web site
• Certificate authority (CA):
— Trusted third-party organization or
company that issues digital certificates

Principles of Information Systems, Tenth Edition 52

 Electronic Payment Systems
(continued)
• Secure Sockets Layer (SSL):
— Used to secure sensitive data
• Electronic cash:
— An amount of money that is
computerized, stored, and used as cash
for e-commerce transactions
• Credit, charge, debit, and smai1 cards:
— Smart card:
• Credit card-sized device with an embedded
microchip to provide electronic memory
and processing capability
Principles of Information Systems, Tenth Edition 53
 Electronic Payment Systems
(continued)
"

Credit Carries preset Each month the Unpaid balance

card standing timit based user can pay atl accumulates
on the user's credit or part of the interest charges—
history amount owed often at a high
rate of interest
Charge Looks like a credit Does not invoíve
card card but carries no íines of credit and The entire
preset spending does not amount charged
limit accumulate to the card is
interest charges due at the end
Debit Looks tik9 à CFRdit Uoney
of thR b1ffing is
card card or automated Operates (ikR CàSh immediately
pRriod
teltar machine | or a personal deducted from
ATïvI) card check user's account
Smart Is a credit card Better protected Not widely used
balance
card device with from misuse than in the U.S.
embedded conventional
microchip capabte credit, charge, and
of storing facts debit cards
about cardholdRF because the
smart-card
information
is encrypted

Principles of lnformation Systems, Tenth 5

Edition 4
 Electronic Payment Systems
(continued)
• P-Card
— Credit card used to streamline the
traditional purchase order and invoice
payment processes
• Payments using cell phones
Available options:
• Payments linked to your bank account
• Payments added to your phone bill

Principles of Information Systems, Tenth 55

Edition
 Summary
• Electronic 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)
• Successful e-commerce system:
— Must address the many stages
consumers experience in the sales
life cycle
Principles of Information Systems, Tenth 56
Edition
 Summary (continued)
• Electronic retailing (e-tailing):
— Direct sale from a business to
consumers through electronic storefronts
• Businesses and people use e-commerce
and m- commerce to:
— Reduce transaction costs
— Speed the flow of goods and information
— Improve the level of customer service
— Enable the close coordination of
actions among manufacturers, suppliers,
and customers
Principles of Information Systems, Tenth 57
Edition
 Summary (continued)
• An effective Web site is one that
creates an attractive presence and
meets the needs of its visitors
• M-commerce presents additional
infrastructure challenges including:
— Improving the ease of use of wireless
devices
— Addressing the security of wireless
transactions
— Improving network speed

Principles of Information Systems, Tenth 58

Edition