Electronic Commerce. Chapter Overview

Transcription

1 Electronic Commerce Chapter Overview This chapter presents an overview of how e-commerce works, from the perspective of the organization and the customer. Businesses and individuals use e-commerce to reduce transaction costs, speed the flow of goods and information, improve the level of customer service, and enable close coordination among manufacturers, suppliers, and customers. It also enables consumers and companies to gain access to worldwide markets. There are three types of e-commerce: business-to-consumer (B2C), in which customers deal directly with an organization and avoid any intermediaries; business-to-business (B2B), in which the participants are organizations, and consumer-to consumer (C2C), which involves consumers selling directly to other consumers. Chapter Outline An Introduction to Electronic Commerce E-Commerce Applications Technology Infrastructure Electronic Payment Systems Threats to E-Commerce Strategies for Successful E-Commerce Mohammad A. Rob Electronic Commerce 1

2 An Introduction to Electronic Commerce E-commerce is a general concept that covers any business transaction, executed electronically between consumers (consumer-to-consumer), companies (business-to-business), or companies and consumers (business-to-consumer). It involves conducting primary business activities using electronic data transmission, telecommunications networks, and streamlined work processes. A successful e-commerce system must address the many stages that consumers experience in the sales life cycle and as a result, a multi-stage model for purchasing over the Internet includes the following components: Search and Identification Selection and Negotiation Purchasing Product and Service Delivery After-Sales Service Mohammad A. Rob Electronic Commerce 2

3 A number of challenges must be overcome in order for a company to convert its business processes from the traditional form to e-commerce processes, and the first involves defining an effective e-commerce model and strategy. See figure above. Another major challenge is that companies often need to change their distribution systems and work processes in order to manage shipments directly to individuals. For example, an electronic order to HP goes to HP as well as to FedEx that keeps all HP products on stock. A third challenge is for IT personnel to integrate the Web-based order processing systems with traditional, mainframe, computer-based inventory control and production planning systems. Mohammad A. Rob Electronic Commerce 3

4 E-Commerce Applications Business-to-business (B2B), Consumer-to-consumer (C2C), and businessto-customer (B2C) e-commerce use is spreading rapidly, especially in the areas of retail and wholesale, manufacturing, marketing, investment and finance, and auctions. There are numerous examples of e-commerce in retail and wholesale. Electronic retailing, sometimes called e-tailing, is the direct sale from business to consumer through electronic storefronts, which are typically designed around the familiar electronic catalog and shopping cart model. One approach taken by many manufacturers to raise profitability and improve customer service is to move their supply chain operations onto the Internet. Here they can form an electronic exchange to join with competitors and suppliers using computers and Web sites to buy and sell goods, trade market information, and run back-office operations, such as inventory control. Mohammad A. Rob Electronic Commerce 4

5 With such an exchange, the business center is not a physical building, but a network-based location where business interactions occur. This approach has greatly speeded the movement of raw materials and finished products among all members of the business community, thus reducing the amount of inventory that must be maintained. It has also led to a much more competitive marketplace. The nature of the Web allows firms to gather much more information about customer behavior and preferences than they could using other marketing approaches. Marketing organizations can measure a large number of activities as customers and potential customers gather information and make their purchase decisions. Analysis of this data is complicated because of the Web s interactivity and because each visitor voluntarily provides or refuses to provide personal data such as name, address, address, telephone number, and demographic data. Internet advertisers use the data they gather to identify specific portions of their markets and target them with tailored advertising messages. Manufacturers are joining electronic exchanges so that they can interact with suppliers and customers on the wholesale market. Web sites are also being used by manufacturers to trade market information, and run back office operations and inventory control. In the area of marketing, e-commerce has enabled firms to gather much more information about customer behavior and preferences. This has begun to revolutionize the way products are marketed. The world of finance and investment has also been revolutionized through on-line trading and banking, and opportunities for online auctions have been created. Mohammad A. Rob Electronic Commerce 5

6 Technology Infrastructure For e-commerce to succeed, a complete technology infrastructure must be in place. These infrastructure components must be chosen carefully and integrated to be capable of supporting a large volume of transactions with customers, suppliers, and other business partners worldwide. Hardware A Web server hardware platform complete with the appropriate software is a key e-commerce infrastructure ingredient. The amount of storage capacity and computing power required of the Web server depends primarily on two things: the software that must run on the server and the volume of e-commerce transactions that must be processed. Thus a powerful PC may be sufficient to an e-commerce server. Many companies use a hosting company to host their e-commerce sites instead of developing their own hardware infrastructure. Mohammad A. Rob Electronic Commerce 6

7 Web Server Software In addition to the operating system, each e-commerce Web site must have a Web server software to perform a number of fundamental services, including: Security and Identification Retrieving and Sending Web Pages Web Site Tracking Web Site Development Web Page Construction E-Commerce Software In order to display products and perform shopping capability for users, a company needs to develop or install an e-commerce software to provide the following five core tasks: Catalog Management Product Configuration Shopping Cart E-Commerce Transaction Processing Web Traffic Data Analysis (See related link for details) Mohammad A. Rob Electronic Commerce 7

8 Electronic Payment Systems Electronic payment systems are a key component of the e-commerce infrastructure and a primary concern is the need to use identification and encryption techniques to safeguard business transactions. Various techniques are available for making on-line payments: Electronic cash Electronic wallets Smart cards Credit cards Debit cards Charge cards Identity of Users and Web sites A user or a web site in the vast Internet may not be what they say. A digital certificate can be used to verify the identity of a sender or Web site. A certificate authority (CA) is trusted third-party organization or company that issues digital certificates. The CA is responsible to guarantee that the users or organizations are in fact what they claim to be. VeriSign is the leading CA in the world. Secure Socket Layer (SSL) In order to prevent the theft of credit card numbers, banking or personal information, the Secure Sockets Layer (SSL) communications protocol is used. SSL provides encryption of transmitted data through a public keyprivate key combination. Companies hold the private key and the browser creates a public key during a secured session. Mohammad A. Rob Electronic Commerce 8

9 Threats to E-Commerce E-commerce is a relatively new technology and as such, a host of issues must be dealt with in order to ensure that transactions are safe and consumers are protected. Among these is security, or ensuring that the identity of interacting parties can be confirmed. Intellectual property issues such as swapping music files and downloading copyrighted materials are becoming constant issues of debate. The following table lists the various types of fraud on the Internet that all organizations should be aware of: On-line auction fraud Spam Pyramid schemes Investment fraud Stock scams Privacy issues are also important to online enterprises. Many Web sites conduct online profiling where clickstream data is collected and matched with other existing databases. Consumers are then pushed with information or advertisement according to the search history. Although the government has not implemented any federal privacy policies, nonprofit organizations such as TRUSTe and the Better Business Bureau have created initiatives to support the e-commerce arena. Mohammad A. Rob Electronic Commerce 9

10 Strategies for Successful E-Commerce Most people agree that an effective Web site is one that creates an attractive presence and meets the need of its visitors, including the following: Obtaining general information about the organization Obtaining financial information for making an investment decision Learning the organization s position on social issues Learning about the products or services that the organization sells Buying the products or services that the company offers Checking the status of an order Getting advice or help on effective use of the products Previously, companies had to develop their sites in-house or find and hire contractors to do the job. This is no longer the case. Web site hosting services and the use of storefront brokers are two options for designing, building, operating, and maintaining a Web site. Visit: Both offer the advantage of getting the site running faster and cheaper than doing it yourself, especially for a firm with few or no experienced Web developers. Mohammad A. Rob Electronic Commerce 10