Midterm Chapter 1,2,3,5

Transcription

1 BIS3587 Principle of E-Commerce 2012/1 Midterm Chapter 1,2,3,5 Chapter 1 Introduction to E-Commerce What is E-Commerce? E-Commerce is the use of Internet and Web to transact business E-Commerce is digitally enable commercial transactions between and among organizations and individuals E-Business is digital enablement of transactions and processes within a firm, involving information systems under firm s control Why Study E-Commerce? E-Commerce technology is different, more powerful than previous technologies E-Commerce bringing fundamental changes to commerce Traditional commerce is a passive consumer, sales force driven, fixed prices, and information asymmetry Information asymmetry is the disparity in relevant market information 8 Unique Features of E-Commerce Technology Ubiquity- Internet technology is available everywhere. Global reach- cross cultural and national boundaries. Universal standards- Internet Standards. Information richness- Voice, audio, text messages Interactivity- Interaction with user Information density- Reduce information costs and raises quality Personalization/Customization- targeting to specific individuals by adjusting the message to a person. Social technology-user content Generation & Social Networking Web 2.0 Technologies that allow users to: o Create and share content, preferences, bookmarks, and online personas o Participate in virtual lives o Build online communities o E.g. Twitter, YouTube, Facebook, Second Life, Wikipedia Types of E-commerce Classified by market relationship o Business to Consumer o Business to Business o Consumer to Consumer Classified by technology used o Peer to Peer o M-Commerce

2 The Internet Worldwide network of computer networks built on common standard Created in late 1960s Services include the Web, , file transfers, etc. Can measure growth by looking at number of Internet hosts with domain names Origins & Growth of E-commerce 1995: Beginning of e-commerce First sales of banner advertisements E-commerce fastest growing form of commerce in United States Technology and E-commerce in Perspective The Internet and Web- Just two of a long list of technologies that have greatly changed commerce E-commerce growth will eventually cap as it confronts its own fundamental limitations. Potential Limitations on the Growth of B2C Expensive technology: Connection charge Sophisticated skill set: To make effective use Persistent cultural attraction of physical markets & traditional shopping experiences: Not yet fully duplicate Persistent global inequality limiting access to telephones and computers: Digital divine Saturation and ceiling effects: Growth slows as approaches the size of the total population. Understanding E-commerce: Organizing Themes Technology : Infrastructure Development and mastery of digital computing and communications technology Business : Basic Concepts: New technologies present businesses with new ways of organizing production and transacting business Society : Intellectual property, individual privacy, public welfare policy Academic Disciplines Concerned with EC Technical approaches o Computer science o Hardware, Software o telecommunications o Management science Mathematical models of business Process To achieve more efficient business operations o Information systems (Professionals) Behavioral approaches o Information systems (Researchers) o Economics o Marketing o Management

3 o Finance/Accounting o Sociology (study of society) Chapter 2: The Internet and World Wide Web The Internet: Technology Background Internet o Interconnected network of thousands of networks and millions of computers o Links businesses, educational institutions, government agencies, and individuals World Wide Web (Web) o One of the Internet s most popular services o Provides access to billions, possibly trillions, of Web pages The Key Technology Concept Packet Switching Slices digital messages into packets Sends packets along different communication paths as they become available Reassembles packets once they arrive at destination Uses routers o Special purpose computers that interconnect the computer networks that make up the Internet and route packets o Routing algorithms ensure packets take the best available path toward their destination Less expensive, wasteful than circuit-switching TCP/IP Transmission Control Protocol (TCP): o Establishes connections among sending and receiving Web computers o Handles assembly of packets at point of transmission, and reassembly at receiving end Internet Protocol (IP): o Provides the Internet s addressing scheme Four TCP/IP layers o Network Interface Layer o Internet Layer o Transport Layer o Application Layer Internet (IP) Addresses IPv4: o 32-bit number o Expressed as series of four sets of separate numbers marked off by periods Example: Domain Names, DNS and URLs

4 Domain name- IP address expressed in natural language Domain name system (DNS)- Allows numeric IP addresses to be expressed in natural language Uniform resource locator (URL)- Address used by Web browser to identify location of content on the Web Client/Server Computing Powerful personal computers (clients) connected in network with one or more servers Servers perform common functions for the clients Hypertext Text formatted with embedded links o Links connect documents to one another, and to other objects such as sound, video, or animation files The Internet and Web: Features Internet and Web features on which the foundations of e- commerce are built include: o Most used application of the Internet Uses series of protocols for transferring messages with text and attachments (images, sound, video clips, etc.,) from one Internet user to another o Instant messaging Displays words typed on a computer almost instantly, and recipients can then respond immediately in the same way o Search engines Identify Web pages that match queries based on one or more techniques o Intelligent agents (bots) Software programs that gather and/or filter information on a specific topic and then provide a list of results o Online forums and chat AKA message board, bulletin board, discussion board, discussion group, board or forum o Streaming media o Cookies Enables music, video and other large files to be sent to users in chunks so that when received and played, file comes through uninterrupted Small text files deposited by Web site on user s computer to store information about user, accessed when user next visits Web site

5 Chapter 3 Building an E-Commerce Web Sites The Systems Development Life Cycle- Methodology for understanding business objectives of a system and designing an appropriate solution Five major steps: o Systems analysis/planning Business objectives: List of capabilities you want your site to have System functionalities: List of information system capabilities needed to achieve business objectives Information requirements: Information elements that system must produce in order to achieve business objectives o Systems design- Description of main components of a system and their relationship to one another Two components of system design: Logical design: Data flow diagrams, processing functions, databases Physical design: Specifies actual physical, software components, models, etc. o Building the system Outsourcing: Hiring vendors to provide services involved in building site Build your own requires team with diverse skill set; choice of software tools; both risks and possible benefits o Testing Unit testing- involves testing the sites program modules one at a time System testing- involves testing the site as a whole Acceptance testing- verifies tat the businesses objectives of the system as originally conceived are in fact working o Implementation Choosing Server Software Benchmarking- process in which the site is compared with those of competitors in terms of response speed, quality of layout and design System architecture o Arrangement of software, machinery, and tasks in an information system needed to achieve a specific functionality Two-tier o Web server and database server Multi-tier o Web application servers o Backend, legacy databases

6 E-commerce Merchant Server Software Provides basic functionality for online sales o Online catalog List of products available on Web site o Shopping cart Allows shoppers to set aside, review, edit selections and then make purchase o Credit card processing Typically works in conjunction with shopping cart Verifies card and puts through credit to company s account at checkout Choosing Hardware for an E-Commerce Site Hardware platform- Underlying computing equipment that system uses to achieve e-commerce functionality Objective- Enough platform capacity to meet peak demand without wasting money Important to understand the different factors that affect speed, capacity, and scalability of a site Right-Sizing Your Hardware Platform: The Supply Side Scalability: o Ability of site to increase in size as demand warrants Ways to scale hardware: o Vertically Increase processing power of individual components o Horizontally Employ multiple computers to share workload o Improve processing architecture Chapter 5 Business Models for E-Commerce Business model o Set of planned activities designed to result in a profit in a marketplace Business plan o Describes a firm s business model E-commerce business model o Uses/leverages unique qualities of Internet and Web 8 Key Elements of a Business Model Value proposition- defines how a company s product or service fulfills the needs of customers Revenue model- describes how to the firm will earn revenue, produce profits, and provide a receives fees from advertisers Market opportunity- refers to the company s intended market space and the overall potential financial opportunities Market space- the area of actual or potential commercial value in which a company intends to operate

7 Competitive environment- refers to the other companies operating in the same market space selling similar products Competitive advantage -achieved when firm produces superior product or can bring product to market at lower price than competitors Market strategy- the plan you put together that details exactly how you intend to enter a new market and attract new customer Organizational Development- plan describes how the company will organize the work that needs to be accomplished Management team- employees are responsible for making the business model work Major Business to Consumer B2C Portal- offers users powerful Web search tools as well as an integrated package of content and services all on one place E-Tailor- online retail stores o Virtual merchant (online only) o Bricks and Clicks (traditional store and online) Market creator- builds a digital environment where buyers and sellers can meet, display products, search for products, and establish a price for products Community Provider- sites that create a digital online environment where people with similar interests can transacts goods B2B Business Model Net marketplaces o E-distributor- Version of retail and wholesale store, MRO goods and indirect goods o E-procurement- Creates digital markets where participants transact for indirect goods o Exchange- Independently owned vertical digital marketplace for direct input o Industry consortium- Industry-owned vertical digital marketplace open to select suppliers Private industrial network- Designed to coordinate flow of communication among firms engaged in business together o Single firm o Industry-wide Other E-commerce Business Models Consumer-to-consumer (C2C) o ebay, Craigslist Peer-to-peer (P2P) o The Pirate Bay, Cloudmark M-commerce: o Technology platform continues to evolve o iphone, smartphones energizing interest in m-commerce apps

8 FINAL Chapter 4,6,7 Chapter 4 E-Commerce Security and Payment Systems The E-commerce Security Environment Overall size and losses of cybercrime unclear o Reporting issues o 2009 CSI survey: 49% of respondent firms detected security breach in last year Underground economy marketplace: o Stolen information stored on underground economy servers What Is Good E-commerce Security? To achieve highest degree of security o New technologies o Organizational policies and procedures o Industry standards and government laws Security is NOT absolute. Other factors o Time value of money : Protect a message for a few hours/days/years. o Cost of security vs. Potential loss : Trade-off o Security often breaks at weakest link The Tension Between Security and Other Values Ease of use : o The more security measures added, the more difficult a site is to use, and the slower it becomes Public safety and criminal uses of the Internet o Use of technology by criminals to plan crimes or threaten nation-state Security Threats in the E-commerce Environment Three key points of vulnerability: o Internet communications channels o Server level o Client level Most Common Security Threats in the E-commerce Environment Malicious code (Malware) o Viruses o Worms o Trojan horses o Bots : Malicious code that can be installed on your computer when attached to the Internet o botnets : Collection of captures computers

9 Unwanted programs o Browser parasites : can monitor and change the settings of browser o Adware o Spyware- A program used to obtain information Phishing o Deceptive online attempt to obtain confidential information Hacking and Cybervandalism o Crackers: A hacker with criminal intent o Cybervandalism: Intentionally disrupting, defacing, destroying Web site Types of hackers- White hats, black hats, grey hats o White hats : good hacker, o Black hats : Intention of causing harm, o Gray hats : Pursuing some greater good by breaking in and reveal system flaws) Credit card fraud/theft o Hackers target merchant servers; use data to establish credit under false identity o Spoofing : Misrepresent themselves o Pharming : Spoofing a Web site o Spam/junk Web sites o Denial of service (DoS) attack o Hackers flood site with useless traffic to overwhelm network o Distributed denial of service (DDoS) attack o Sniffing o Eavesdropping program that monitors information traveling over a network o Insider jobs o Single largest financial threat o Poorly designed server and client software o Mobile platform threats E-commerce Payment Systems Credit cards Debit cards Limitations of online credit card payment o Security o Cost o Social equity Digital wallets o Emulates functionality of wallet by authenticating consumer, storing and transferring value, and securing payment process from consumer to merchant Digital cash o Value storage and exchange using tokens Online stored value systems

10 o Based on value stored in a consumer s bank, checking, or credit card account Digital accumulated balance payment o Users accumulate a debit balance for which they are billed at the end of the month Digital checking: o Extends functionality of existing checking accounts for use online Chapter 6 E-Commerce Marketing Concepts Consumer Behavior Models- study of consumer behavior o Social science o Attempts to explain what consumers purchase and where, when, how much and why they buy Consumer behavior models- predict wide range of consumer decisions o Based on background demographic factors and other intervening, more immediate variables The Online Purchasing Decision Psychographic (psychological + demographic) research o Combines demographic and psychological data o Divides market into groups based on social class, lifestyle, and/or personality characteristics Five stages in the consumer decision process: o Awareness of need o Search for more information o Evaluation of alternatives o Actual purchase decision o Post-purchase contact with firm Trust, Utility, & Opportunism in Online Markets Two most important factors shaping decision to purchase online: 1. Utility Better prices, convenience, speed 2. Trust Asymmetry of information can lead to opportunistic behavior by sellers (The seller knows a lot more about the quality of goods) The Revolution in Internet Marketing Technologies Three broad impacts: o Scope of marketing communications broadened o Richness of marketing communications increased o Information intensity of marketplace expanded Internet marketing technologies: Web transaction logs Cookies and Web bugs Databases, data warehouses, data mining Advertising networks Customer relationship management systems

11 Cookies and Web Bugs Cookies- Small text file Web sites place on visitor s PC every time they visit, as specific pages are assessed Web bugs- Tiny (1 pixel) graphics embedded in and Web sites Database: Stores records and attributes Data warehouse: o Collects firm s transactional and customer data in single location for offline analysis by marketers and site managers Data mining: (Example : Beer and diaper) o Analytical techniques to find patterns in data, model behavior of customers, develop customer profiles Net Pricing Strategies Pricing o Integral part of marketing strategy o Traditionally based on: Fixed cost Variable costs Demand curve Price discrimination o Selling products to different people and groups based on willingness to pay Free and freemium o Can be used to build market awareness Versioning o Creating multiple versions of product and selling essentially same product to different market segments at different prices Bundling o Offers consumers two or more goods for one price Dynamic pricing: The product is perishable o Auctions o Yield management Channel Management Strategies Channels: o Different methods by which goods can be distributed and sold Channel conflict- when new venue for selling products or services threatens or destroys existing sales venues Chapter 7 E- Commerce Marketing Communications Marketing Communications Two main purposes: o Sales promotional sales communications o Branding Branding communications

12 Online marketing communications o Takes many forms o Online ads, , public relations, Web sites Online Advertising Advantages: o Internet is where audience is moving o Ad targeting o Greater opportunities for interactivity Disadvantages: o Cost versus benefit o How to adequately measure results o Supply of good venues to display ads Forms of Online Advertisements Display ads - Rectangular box linking to advertiser s Web site Rich media- Use Flash, DHTML, Java, JavaScript o Interstitials : A way of placing a full-page message b/w the current and destination pages of a user o Superstitials : A rich media ad that is pre-loaded into a browser s cache & does not play until fully loaded & the user clicks to another page Video ads- Fastest growing form of online advertisement Search engine advertising o Paid inclusion or rank o Keyword advertising o Network keyword advertising Social network, blog, and game advertising Sponsorships- Paid effort to tie advertiser s name to particular information, event, venue in a way that reinforces brand in positive yet not overtly commercial manner Referrals (affiliate relationship marketing) marketing- Low cost, primary cost is purchasing addresses Online catalogs- Equivalent of paper-based catalogs o Graphics-intense; use increasing with increase in broadband use Online Marketing Metrics Measuring audience size or market share o Impressions : Number of times an ad is served o Click-through rate (CTR) : %age of times an ad is clicked o View-through rate (VTR) : %age of times an ad is NOT clicked immediately but the Web site is visited within 30 days o Hits : Number of HTTP requested o Page views : Number of pages viewed o Stickiness (duration) : Average length of stay at a Web site o Unique visitors : Number of unique visitors in a period o Loyalty : %age of customers who return to the site in a year o Reach : %age of Web site visitors who are potential buyers

13 o Recency : Time elapsed since the last action take by a buyer The Costs of Online Advertising Pricing models o Barter o Cost per thousand (CPM) o Cost per click (CPC) o Cost per action (CPA) FOR FINAL IT WILL COVER CHAPTER 1,2,3,5,4,6, and 7 (Comprehensive EXAM J )