Business Driven Information Systems 2 e CHAPTER 3 EBUSINESS Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved
SECTION 3. 1 BUSINESS AND THE INTERNET Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved
3 -3 Amazon. com • The “worlds biggest (virtual) bookstore” turned the industry upside down. – There are no physical stores – Comments and recommendations of buyers are captured, customer traffic is monitored all in an effort to evaluate buying and selling patterns and the success of promotions • It’s more than just a website, it’s an intelligent, global digital business. – – Personalized recommendations Online customer reviews 1 -click ordering Amazon marketplace where customers sell their own items
3 -4 DISRUPTIVE TECHNOLOGY • How can a company like Polaroid go from $60 share in 1997 to $. 08 a share in 2002 and eventual bankruptcy? They had a 50% market share with their instant camera. – Using Porter’s Five Forces, they may have seen two threats: one-hour film processing and digital cameras • Digital Darwinism – implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction
3 -5 Disruptive versus Sustaining Technology • What do steamboats, transistor radios, and Intel’s 8088 processor all have in common? – Disruptive technology – a new way of doing things that initially does not meet the needs of existing customers but tends to open new markets – Sustaining technology – produces an improved product in an established market that customers are eager to buy
3 -6 Disruptive versus Sustaining Technology
3 -7 Disruptive versus Sustaining Technology
3 -8 Disruptive versus Sustaining Technology • Disruptive technologies: – Disruptive technologies redefine the competitive playing fields of their respective markets – Disruptive technologies tend to open new markets and destroy old ones – Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace highend competitors and their reigning technologies • Sustaining technologies: – Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets – Sustaining technologies virtually never lead in markets opened by new and disruptive technologies
3 -9 Disruptive versus Sustaining Technology • The Innovator’s Dilemma - discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers, partners, and stakeholders – Xerox, IBM, Sears and DEC all listened to their existing customers and invested aggressively in technology but still lost their dominant positions in the market. – Too much emphasis on satisfying the current needs of their customers rather than looking to meet the customers’ future needs
3 -10 Companies that Capitalized on Disruptive Technology
3 -11 The Internet – Business Disruption • One of the biggest forces changing business is the Internet – Was this always the case? • Organizations must be able to transform as markets, economic environments, and technologies change • Focusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technology
3 -12 The Internet – Business Disruption • There were 1 billion Internet users in 2005 • How will 2 billion additional Internet users change the competitive landscape for businesses over the next few years? – Greater access to a larger number of customers – More competitors – Location and distance becomes a smaller factor for businesses
3 -13 The Internet – Business Disruption Estimates predict more than 3 billion Internet users by 2010
3 -14 The Internet – Business Disruption Estimates predict more than 3 billion Internet users by 2010
3 -15 The Internet – Business Disruption Estimates predict more than 3 billion Internet users by 2010
3 -16 The Internet – Business Disruption • The Internet has had an impact on almost every industry including: – – – – Travel Entertainment Electronics Financial services Retail Automobiles Education and training
3 -17 The Internet – Business Disruption • The Internet has had an impact on almost every industry including: – Travel site Expedia. com is now the biggest leisure-travel agency, with higher profit margins than even American Express. Thirteen percent of traditional travel agencies closed in 2002 because of their inability to compete with online travel. – Entertainment The music industry has kept Napster and others from operating, but $35 billion annual online downloads are wrecking the traditional music business. U. S. music unit sales are down 20 percent since 2000. The next big entertainment industry to feel the effects of e-business will be the $67 billion movie business. – Electronics Using the Internet to link suppliers and customers, Dell dictates industry profits. Its operating margins have risen from 7. 3 percent in 2002 to 8 percent in 2003, even as it takes prices to levels where rivals cannot make money.
3 -18 The Internet – Business Disruption – Financial services Nearly every public e-finance company left makes money, with online mortgage service Lending Tree growing 70 percent a year. Processing online mortgage applications is now 40 percent cheaper for customers. – Retail Less than 5 percent of retail sales occur online. e. Bay is on track this year to become one of the nation’s top 15 retailers and Amazon. com will join the top 40. Wal-Mart’s ebusiness strategy is forcing rivals to make heavy investments in technology. – Automobiles The cost of producing vehicles is down because of SCM and Web-based purchasing. e. Bay has become the leading U. S. used-car dealer, and most major car sites are profitable. – Education and training Cisco saved $133 million last year by moving training sessions to the Internet, and the University of Phoenix online college classes please investors.
3 -19 What Was This Technology? • “An almost instantaneous communication system that would allow people and governments all over the world to send and receive messages about politics, war, illness, and family events. The government has tried and failed to control it. ”
3 -20 What Was This Technology? • It was the humble telegraph • The parallels between the now-ubiquitous Internet and the telegraph are amazing, offering insight into the ways new technologies can change the very fabric of society within a single generation. • With the invention of the telegraph, the world of communications was forever changed. The telegraph gave rise to creative business practices and new forms of crime. Romances blossomed over its wires. In addition, attitudes toward everything from news gathering to war had to be completely rethought. The saga of the telegraph offers many parallels to that of the Internet in our own time, and is a remarkable episode in the history of technology. • The telegraph was eventually replaced by another disruptive technology. What was it?
3 -21 EVOLUTION OF THE INTERNET • The Internet began in the late 1960 s as an emergency military communications system operated called the ARPANet by the Department of Defense • Gradually the Internet moved from a military pipeline to a communication tool for scientists to businesses – Internet – computer networks that pass information from one to another using common computer protocols – Protocol – standards that specify the format of data as well as the rules to be followed during transmission
3 -22 EVOLUTION OF THE INTERNET
3 -23 EVOLUTION OF THE INTERNET 1969 - 1972
3 -24 Evolution of the World Wide Web • Two events changed the history of the Internet 1. On August 6, 1991 Tim Berners-Lee built the first Web site using HTML and HTTP 2. Marc Andreesen built and distributed Mosaic • World Wide Web (WWW) – a global hypertext system that uses the Internet as its transport mechanism • Hypertext transport protocol (HTTP) – the Internet standard that supports the exchange of information on the WWW
3 -25 INTERNET ≠ WWW • People often interchange the terms Internet and the World Wide Web, but these terms are not synonymous – The Internet is a global public network of computer networks that pass information from one to another using common computer protocols – The World Wide Web is a global hypertext system that uses the Internet as its transport mechanism – The World Wide Web operates on the Internet
3 -26 Evolution of the World Wide Web
3 -27 Internet’s Impact on Information • Easy to compile - Searching for information on products, prices, customers, suppliers, and partners is faster and easier when using the Internet. • Increased richness - refers to the depth and breadth of information transferred between customers and business. – Businesses and customers can collect and track more detailed information when using the Internet.
3 -28 Internet’s Impact on Information • Increased reach - refers to the number of people a business can communicate with, on a global basis. – Businesses can share information with customers all over the world. • Improved content - A key element of the Internet is its ability to provide dynamic relevant content. – Buyers need good content descriptions to make informed purchases, and sellers use content to properly market and differentiate themselves from the competition.
3 -29 Evolution of the World Wide Web • The Future of the Web – The Semantic or Intelligent Web – http: //news. bbc. co. uk/nolavconsole/ukfs_news/hi/newsid_5010000/newsid_5018 400/nb_wm_5018452. stm – http: //news. bbc. co. uk/nolavconsole/ukfs_news/hi/newsid_5010000/newsid_5014 600/nb_wm_5014644. stm – http: //www. ted. com/talks/tim_berners_lee_on_the_next_web. html
3 -30 ***Evolution of the World Wide Web • How can each of these file formats improve business?
3 -31 Evolution of the World Wide Web • The Internet makes it possible to perform business in ways not previously imaginable • It can also cause a digital divide – Digital divide – when those with access to technology have great advantages over those without access to technology
3 -32 Evolution of the World Wide Web – People living in the village of Siroha, India, must bike five miles to find a telephone. – For over 700 million rural people living in India, the digital divide was a way of life, until recently. – Media Lab Asia attempted to sell telephony and e -mail services via a mobile Internet kiosk mounted on a bicycle, which is known as an “info -thelas. ” • The kiosk has an onboard computer equipped with an antenna for Internet service and a specially designed all-day battery. • Over 2, 000 villages had purchased the kiosk for $1, 200, and another 600, 000 villages were interested
3 -33 Infothela – Media Lab Asia
3 -34 One Laptop Per Child • One Laptop Per Child http: //laptop. org/en/index. shtml It's an education project, not a laptop project. ” Nicholas Negroponte http: //olpc. com/videos. html – The goal: To provide children around the world with new opportunities to explore, experiment and express themselves http: //www. youtube. com/watch? v=rp. RRiv. Qgpjc&feature=channel • OLPC is a non-profit organization providing a means to an end—an end that sees children in even the most remote regions of the globe being given the opportunity to tap into their own potential, to be exposed to a whole world of ideas, and to contribute to a more productive and saner world community.
3 -35 One Laptop Per Child
3 -36 WEB 2. 0 • Web 2. 0 - a set of economic, social, and technology trends that collectively form the basis for the next generation of the Internet
3 -37 WEB 2. 0 • A more mature, distinctive medium characterized by user participation, openness, and network effects. • Although the term suggests a new version of the Web, it refers to changes in the ways software developers and end-users use the Web as a platform. • According to Tim O’Reilly, “Web 2. 0 is the business revolution in the computer industry caused by the move to the Internet as platform, and an attempt to understand the rules for success on that new platform. ”
3 -38 WEB 2. 0 • More than just the latest technology buzzword, Web 2. 0 is a transformative force that is propelling companies across all industries toward a new way of doing business. • Those who act on the Web 2. 0 opportunity stand to gain an early-mover advantage in their markets. What is causing this change? Consider the following raw demographic and technological drivers: – One billion people around the globe now have access to the Internet. – Mobile devices outnumber desktop computers by a factor of two. – Nearly 50 percent of all U. S. Internet access is now via always-on broadband connections.
3 -39 WEB 2. 0 • Combine these drivers with the fundamental laws of social networks and lessons from the Web’s first decade, and you get Web 2. 0, the next-generation, user-driven, intelligent Web: – In the first quarter of 2006, My. Space. com signed up 280, 000 new users each day and had the second most Internet traffic of any web site. – By the second quarter of 2006, 50 million blogs were created—new ones were added at a rate of two per second. – In 2005, e. Bay conducted 8 billion API-based Web services transactions.
3 -40 WEB 2. 0 Timeline of Web 1. 0
3 -41 Mashups • Web mashup - a website or web application that uses content from more than one source to create a completely new service – The Web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries and so on. – Content used in mashups is typically sourced from an Application programming interface (API) - a set of routines, protocols, and tools for building software applications – Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups
3 -42 Mashups • http: //www. programmableweb. com/mashups – 1001 Secret Fishing Holes: Over a thousand fishing spots in national parks, wildlife refuges, lakes, campgrounds, historic trails etc. (Google Maps API). – 25 Best Companies to Work For: Map of the 100 best U. S. companies to work for as rated by Fortune magazine. (Google Maps API). • This amusing viral video casts the Iraq war alliance between George W. Bush and Tony Blair in a whole new light. Created by Johan Söderberg for a Swedish television program called 'Kobra, ' this parody synchs up images of Bush and Blair singing Diana Ross and Lionel Richie's breathless ballad "Endless Love. " Their war may have gone horribly awry, but their hearts still beat as one. http: //politicalhumor. about. com/od/bushvideos/youtube/bushblairlove. htm
3 -43 THE FUTURE – WEB 3. 0 • Think of Web 1. 0 as a library which serves as a source of information which you can not add to or change. • Web 2. 0 is more like a big group of friends and acquaintances. – – You can still use it to receive information, but you also contribute to the conversation and make it a richer experience. Its structure is geared for humans for whom it’s easy to see a web page understand what it's all about. • A search engine might be able to scan for keywords, but it can't understand how those keywords are used in the context of the page.
3 -44 THE FUTURE – WEB 3. 0 • Tim Berners-Lee's vision of the future Web is called the Semantic Web. – Computers will scan and interpret information on Web pages using software agents. • These software agents will crawl through the Web, searching for relevant information. • They'll be able to do that because the Semantic Web will have collections of information called ontologies. – An ontology is a file that explains how things are related – It’s hard work to define a complete ontology and update it when needed. That’s a challenge to Web 3. 0
3 -45 THE FUTURE – WEB 3. 0 • Web 3. 0 will use the Internet to make connections with semantic information. – A Web 3. 0 search engine could find not only the keywords in your search, but also interpret the context of your request. – See http: //computer. howstuffworks. com/web-30. htm • Semantic web encompasses the following: – – Transforming the web into a database An evolutionary path to artificial intelligence The realization of semantic web and SOA Evolution toward 3 D
3 -46 THE FUTURE – WEB 3. 0 Transforming the Web into a Database • The first step toward a Web 3. 0 is the emergence of the data-driven Web as structured data records are published to the Web in formats that are reusable and able to be queried remotely. • The full semantic Web stage will widen the scope such that both structured data and even what is traditionally thought of as unstructured or semi-structured content (such as Web pages, documents, email, etc. ) will be widely available in common formats.
3 -47 THE FUTURE – WEB 3. 0 An Evolutionary Path to Artificial Intelligence • Use artificial intelligence that can reason about the Web in a quasi-human fashion – IBM and Google are implementing new technologies that are yielding surprising information, such as predicting hit songs by mining information on college music Web sites. – Collaborative filtering services like del. icio. us, Flickr, and Digg that extract meaning and order from the existing Web and how people interact with it.
3 -48 THE FUTURE – WEB 3. 0 The Convergence of the Semantic Web and Service Oriented Architecture (SOA) • SOA is a collection of services that communicate with each other – e. g. , passing data from one service to another or coordinating an activity between one or more services • Companies have longed to integrate existing systems in order to implement information technology support for business processes that cover the entire business value chain. • – The main drivers for SOA adoption are that it links computational resources and promotes their reuse. Enterprise architects believe that SOA can help businesses respond more quickly and cost-effectively to changing market conditions. This style of architecture can simplify interconnection to—and usage of—existing IT (legacy) assets.
3 -49 THE FUTURE – WEB 3. 0 Evolution Toward 3 D • Another possible path for Web 3. 0 is toward the threedimensional vision championed by the Web 3 D Consortium. • This would involve the Web transforming into a series of 3 D spaces, taking the concept realized by Second Life further. This could open up new ways to connect and collaborate using 3 D shared spaces. • http: //secondlife. com/whatis/? sourceid=0909 -sergoog-sl. Second. Life-wisl&gclid=CM 73 hp. Xzn 6 ACFct. Y 2 gody. Fh. HZg
3 -50 Second Life • • • IBM - Two IBM Academy of Technology inworld events were not only extremely successful, but also saved hundreds of thousands of dollars in travel and meeting costs. Plus, the 300+ team members also had the opportunity to meet, socialize, and network. The National Oceanic and Atmospheric Administration (NOAA) NOAA has used Second Life as a marketing channel to reach new audiences in new and meaningful ways. In fact, 40 percent of visitors to NOAA in Second Life reported that they hadn’t heard of the organization prior to their Second Life visit and 94 percent recommended that NOAA expand their virtual presence. Northrop Grumman Corporation (NGC) has established a sophisticated five region presence in Second Life that enables the company to simply and inexpensively prototype products, conduct simulations, and train employees in environments that would be prohibitively dangerous, expensive, or even impossible in the physical world. The Open University, based in the UK, enable their students the flexibility of learning in Second Life with their extended virtual world campus. Loyalist College Case Study: Loyalist College in Canada massively improves test scores and training outcomes using Second Life.
3 -51 ACCESSING INTERNET INFORMATION • Four tools for accessing Internet information 1. Intranet – internalized portion of the Internet, protected from outside access, for employees 2. Extranet – an intranet that is available to strategic allies 3. Portal – website that offers a broad array of resources and services 4. Kiosk – publicly accessible computer system that allows interactive information browsing
3 -52 PROVIDING INTERNET INFORMATION • Three common forms of service providers 1. Internet service provider (ISP) –provides individuals and other companies access to the Internet 2. Online service provider (OSP) – offers an extensive array of unique Web services 3. Application service provider (ASP) – offers access over the Internet to systems and related services that would otherwise have to be located in organizational computers
3 -53 PROVIDING INTERNET INFORMATION • Internet Service Provider (ISP) – a company that provides individuals and other companies access to the Internet along with additional related services, such as Web site building. – Many but not all ISPs are telephone companies. ISPs provide services such as Internet transit, domain name registration and hosting, dial-up or DSL access, leased line access, and collocation. ISPs mostly provide access to the Internet and charge a monthly access fee to the consumer.
3 -54 PROVIDING INTERNET INFORMATION • Online service provider (OSP) – offers an extensive array of unique services such as its own version of a Web browser. – An OSP offers services such as access to private computer networks and information resources such a bulletin boards, downloadable programs, news articles, chat rooms, and electronic mail services.
3 -55 PROVIDING INTERNET INFORMATION • Application service provider (ASP) – a company that offers an organization access over the Internet to systems and related services that would otherwise have to be located in personal or organizational computers. – Software offered using an ASP model is also sometimes called On-demand software. The most limited sense of this business is that of providing access to a particular application program (such as medical billing) using a standard protocol such as HTTP.
3 -56 PROVIDING INTERNET INFORMATION – The need for ASPs has evolved from the increasing costs of specialized software that have far exceeded the price range of small to medium sized businesses. – Also, the growing complexities of software have lead to huge costs in distributing the software to end-users. – Through ASPs, the complexities and costs of such software can be cut down. • In addition, the issues of upgrading have been eliminated from the end-firm by placing the onus on the ASP to maintain up-to-date service.
3 -57 PROVIDING INTERNET INFORMATION • Common ISP services include: – Web hosting. Housing, serving, and maintaining files for one or more Web sites is a widespread offering. – Hard-disk storage space. Smaller sites may need only 300 to 500 MB (megabytes) of Web site storage space, whereas other e-business sites may need at least 10 GB (gigabytes) of space or their own dedicated Web server. – Availability. To run an e-business, a site must be accessible to customers 24 x 7. ISPs maximize the availability of the sites they host using techniques such as load balancing and clustering many servers to reach 100 percent availability. – Support. A big part of turning to an ISP is that there is limited worry about keeping the Web server running. Most ISPs offer 24 x 7 customer service.
3 -58 PROVIDING INTERNET INFORMATION Wireless Internet service provider (WISP) WISP - an ISP that allows subscribers to connect to a server at designated hotspots or access points using a wireless connection
3 -59 PROVIDING INTERNET INFORMATION • ISPs, OSPs, and ASPs use service level agreements (SLA) which define the specific responsibilities of the service provider and set the customer expectations – Availability, accessibility, performance, maintenance, backup/recovery, upgrades, equipment ownership, software ownership, security, confidentiality – ASP market is expected to grow worldwide from around $13 billion in 2005 to $23 billion by 2008
3 -60 Top ISPs, OSPs and ASPs
3 -61 OPENING CASE QUESTIONS Amazon 1. How has Amazon used technology to revamp the bookselling industry? Personalization on its Web site, customers are offered suggestions for other titles. Technology to predict what his customers want to buy next before they even know it. 2. Is Amazon using disruptive or sustaining technology to run its business? – In the beginning Amazon was using disruptive technology to sell its books – the Internet. The Internet is no longer a disruptive technology, but Amazon is still finding ways to use it to disrupt the way it does business. 3. How is Amazon using intranets and extranets to run its business? – Amazon uses intranets to help its employees perform their jobs, find corporate information, and communicate with each other more effectively. Amazon uses extranets to partner with third-party providers who are interested in selling products through Amazon’s Web site, such as z. Shops and the Amazon. com Marketplace. 4. How could Amazon use kiosks to improve its business? – Amazon could place a kiosk outside physical bookstores allowing customers to check Amazon inventory to compare prices prior to making a purchase. Amazon could also place kiosks in airports allowing passengers to browse Amazon’s inventory while waiting for their flight.
SECTION 3. 2 EBUSINESS Mc. Graw-Hill/Irwin © 2009 The Mc. Graw-Hill Companies, All Rights Reserved
3 -63 EBUSINESS BASICS • How do ecommerce and ebusiness differ? – Ecommerce – the buying and selling of goods and services over the Internet (online transactions only) – Ebusiness – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners – http: //www. ted. com/index. php/talks/view/id/105
3 -64 EBUSINESS BASICS Industries Using Ebusiness
3 -65 ebusiness Business • How are different industries are using ebusiness – Manufacturing and Retail: RFID, online payments and orders, sales via the Internet, customer service via the Internet – Financial: online banking, online mortgages, online loans – Telecommunications: Voice over the Internet (Vo. IP) – Healthcare: digital hospitals, pharmacy orders via the Internet – Travel: online reservations, Travelocity, Expedia
3 -66 EBUSINESS MODELS • Ebusiness model – an approach to conducting electronic business on the Internet – Can a business operate with more than one e-business model?
3 -67 EBUSINESS MODELS
3 -68 EBUSINESS MODELS B 2 B: Electronic marketplace, Google search marketing B 2 C: Progressive insurance, Carfax, Best Buy, Amazon C 2 B: e. Bay, Amazon C 2 C: e. Bay, Amazon
3 -69 Business-to-Business (B 2 B) • Electronic marketplace (emarketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in ebusiness activities
3 -70 Business-to-Business (B 2 B) • Electronic marketplace (e-marketplace) – present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels • Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers • Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials
3 -71 Business-to-Consumer (B 2 C) • Common B 2 C e-business models include: – e-shop – a version of a retail store where customers can shop any time without leaving their home – e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e -shops • Business types include: – Brick-and-mortar business: operates in a physical store without an Internet presence. – Pure-play business: a business that operates on the Internet only without a physical store – Click-and-mortar business: a business that operates in a physical store and on the Internet
3 -72 Consumer-to-Business (C 2 B) • Priceline. com is an example of a C 2 B ebusiness model • The demand for C 2 B ebusiness will increase over the next few years due to customer’s desire for greater convenience and lower prices
3 -73 Consumer-to-Consumer (C 2 C) • Online auctions – Electronic auction (eauction) - sellers and buyers solicit bids and prices are determined dynamically – Forward auction - a selling channel to many buyers and the highest bid wins – Reverse auction - buyers use to purchase a product or service, selecting the seller with the lowest bid
3 -74 Consumer-to-Consumer (C 2 C) • C 2 C Communities – Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting – Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts – Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan
3 -75 ORGANIZATIONAL STRATEGIES FOR EBUSINESS • Primary business areas taking advantage of ebusiness include: – Marketing/sales – Financial services – Procurement – Customer service – Intermediaries
3 -76 Marketing/Sales • Generating revenue on the Internet – An online ad (often called banner ad) is a box running across a Web page that is often used to contain advertisements. The banner generally contains a link to the advertiser’s Web site. Web-based advertising services can track the number of times users click the banner, generating statistics that enable advertisers to judge whether the advertising fees are worth paying. Banner ads are like living, breathing classified ads. – A pop-up ad is a small Web page containing an advertisement that appears on the Web page outside of the current Web site loaded in the Web browser. A popunder ad is a form of a pop-up ad that users do not see until they close the current Web browser screen.
3 -77 Marketing/Sales • Generating revenue on the Internet – Associate programs (affiliate programs) allow businesses to generate commissions or royalties from an Internet site. • For example, a business can sign up as an associate of a major commercial site such as Amazon. The business then sends potential buyers to the Amazon site using a code or banner ad. The business receives a commission when the referred customer makes a purchase on Amazon.
3 -78 Marketing/Sales – Viral marketing is a technique that induces Web sites or users to pass on a marketing message to other Web sites or users, creating exponential growth in the message’s visibility and effect. • One example of successful viral marketing is Hotmail, which promotes its service and its own advertisers’ messages in every user’s e-mail notes. • Viral marketing encourages users of a product or service supplied by an e-business to encourage friends to join. Viral marketing is a word-of-mouth type advertising program. – Mass customization is the ability of an organization to give its customers the opportunity to tailor its products or services to the customers’ specifications. For example, customers can order M&M’s with customized sayings such as “Marry Me. ”
3 -79 Marketing/Sales – Personalization occurs when a Web site can know enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person. • Personalization involves tailoring a presentation of an e-business Web site to individuals or groups of customers based on profile information, demographics, or prior transactions. • Amazon uses personalization to create a unique portal for each of its customers.
3 -80 Marketing/Sales – A blog (the contraction of the phrase “Web log”) is a Web site in which items are posted on a regular basis and displayed in reverse chronological order. – Like other media, blogs often focus on a particular subject, such as food, politics, or local news. Some blogs function as online diaries. • A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. • Since its appearance in 1995, blogging has emerged as a popular means of communication, affecting public opinion and mass media around the world.
3 -81 Marketing/Sales – Real simple syndications (RSS) is a family of Web feed formats used for Web syndication of programs and content. – RSS is used by (among other things) news Web sites, blogs, and podcasting, which allows consumers and journalists to have news constantly fed to them instead of searching for it. – In addition to facilitating syndication, RSS allows a Web site’s frequent readers to track updates on the site.
3 -82 Marketing/Sales – Podcasting is the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devices and personal computers. – Podcasting’s essence is about creating content (audio or video) for an audience that wants to listen when they want, where they want, and how they want. – Podcasters’ Web sites also may offer direct download of their files, but the subscription feed of automatically delivered new content is what distinguishes a podcast from a simple download or real-time streaming. – Usually, the podcast features one type of show with new episodes either sporadically or at planned intervals such as daily, weekly, etc.
3 -83 Marketing/Sales – Search engine optimization (SEO) is a set of methods aimed at improving the ranking of a Web site in search engine listings. – Search engines display different kinds of listings in the search engine results pages (SERPs), including: payper-click advertisements, paid inclusion listings, and organic search results. – SEO is primarily concerned with advancing the goals of Web sites by improving the number and position of search results for a wide variety of relevant keywords. – SEO strategies can increase the number of visitors and the quality of visitors, where quality means visitors who complete the action the site intends (e. g. , purchase, sign up, learn something).
3 -84 Marketing/Sales – Spamdexing (black hat SEO) uses a variety of deceptive techniques in an attempt to manipulate search engine rankings, whereas legitimate, white hat SEO focuses on building better sites and using honest methods of promotion. – What constitutes an honest, or ethical, method is an issue that has been the subject of numerous debates.
3 -85 Financial Services • Online consumer payments include: – Financial cybermediary - an Internet-based company that facilitates cybermediary payments over the Internet. Pay. Pal is the best-known example of a financial cybermediary. – Electronic check - a mechanism for sending a payment from a checking or savings account. There are many implementations of electronic checks, with the most prominent being online banking.
3 -86 Financial Services – Electronic bill presentment and payment (EBPP) - a system that sends presentment and bills over the Internet and provides an easy-touse mechanism (such as payment (EBPP) clicking on a button) to pay the bill. EBPP systems are available through local banks or online services such as Checkfree and Quicken. – Digital wallet - both software and information— the software provides security for the transaction and the information includes payment and delivery information (for example, the credit card number and expiration date).
3 -87 Financial Services • There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. • Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created. Information systems will greatly help the achievement of this goal. • What will be the driving force that changes online consumer payments in the future? – Security – Ease of use – Common formats
3 -88 Financial Services • Online business payments include: – Electronic data interchange (EDI) - a standard format for exchanging business data. One way an organization can use EDI is through a value-added network. – Value-added network (VAN) - a private network, provided by a third party, for exchanging information through a high-capacity connection. VANs support electronic catalogs (from which orders are placed), EDIbased transactions (the actual orders), security measures such as encryption, and EDI mailboxes. – Financial EDI (financial electronic data interchange) is a standard electronic process for B 2 B market purchase payments. National Cash Management System is an automated clearinghouse that supports the reconciliation of the payments.
3 -89 Financial Services • Why do businesses use different forms of online payments than consumers? – Business payments are typically much larger than consumer payments and need additional security – With supply chain management systems online business payments are automated using EDI
3 -90 Financial Services • Electronic trading network
3 -91 Financial Services • A recent report has concluded that the providers of ETNs are most competitive over, and often share different opinions on, three areas of ETN services: – Speed of implementation – Services provided, including overall service and integration management – Product applicability to small and mediumsize enterprises
3 -92 Procurement • Maintenance, repair, and operations (MRO) materials (also called indirect materials) – materials necessary for running an organization but do not relate to the company’s primary business activities • Web-based procurement of maintenance, repair, and operations (MRO) supplies is expected to reach more than $200 billion worldwide by the year 2009 – E-procurement - the B 2 B purchase and sale of supplies and services over the Internet – Electronic catalog - presents customers with information about goods and services offered for sale, bid, or auction on the Internet
3 -93 Customer Service • Customer service is the business process where the most human contact occurs between a buyer and a seller • E-business strategists are finding that customer service via the Web is one of the most challenging and potentially lucrative areas of e-business – Availability 24 x 7 to help customers – Detailed customer service information can cut down on phone calls to the company – More convenient for the customer • The primary issue facing customer service departments using e-business is consumer protection
3 -94 Consumer Protection • Issues for consumer protection – Unsolicited goods and communications – Illegal or harmful goods, services, and content – Insufficient information about goods – Invasion of privacy – Cyberfraud and cybercrime • Identity theft is already so common that there are entire units within law enforcement that deal with this issue every day
3 -95 Consumer Protection • E-business security – Encryption - scrambles information into an alternative form that requires a key or password to decrypt. Encryption is achieved by scrambling letters, replacing letters with numbers, and other ways. – Secure socket layer (SSL) - (1) creates a secure and private connection between a client and server computer, (2) encrypts the information, and (3) sends the information over the Internet. SSL is identified by a Web site address that includes an “s” at the end—https.
3 -96 Consumer Protection – Secure electronic transaction (SET) a transmission security method that ensures transactions are secure and legitimate. Similar to SSL, SET encrypts information before sending it over the Internet. – SET also enables customer authentication for credit card transaction; endorsed by major e-commerce players including Master. Card, American Express, Visa, Netscape, and Microsoft.
3 -97 Intermediaries • Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance ebusiness • Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways
3 -98 MEASURING EBUSINESS SUCCESS • Most companies measure the traffic on a Web site as the primary determinant of the Web site’s success • However, a large amount of Web site traffic does not necessarily equate to large sales • Many organizations with high Web site traffic have low sales volumes • The Yankee Group reports that 66 percent of companies determine Web site success solely by measuring the amount of traffic – New customer acquisition ranked second – Revenue generation ranked third
3 -99 MEASURING E-BUSINESS SUCCESS • Web site traffic analysis can include: – Cookie – a small file deposited on a hard drive by a Web site containing information about customers and their Web activities – Click-through – a count of the number of people who visit one site and click on an advertisement that takes them to the site of the advertiser – Banner ad – a small ad on one Web site that advertises the products and services of another business, usually another dot-com business – Interactivity – visitor interactions with the target ad
3 -100 MEASURING E-BUSINESS SUCCESS • Prior to computers there was no way for the advertiser to know if the customer actually read or even looked at an ad in a newspaper or magazine – Interactivity measures allow advertisers to know exactly how long a customer spends viewing an ad – How do these types of Web traffic analysis tools invade user privacy? • Analyzing Web site traffic is one way organizations can understand the effectiveness of Web advertising
3 -101 Website Metrics • Clickstream data tracks the exact pattern of a consumer’s navigation through a website • Clickstream data can reveal: – – – Number of pageviews Pattern of websites visited Length of stay on a website Date and time visited Number of customers with shopping carts Number of abandoned shopping carts
3 -102 Website Metrics • Web site metrics include: – Visitor metrics • Unidentified visitor, session visitor, tracked visitor, identified visitor – Exposure metrics • Page exposure, site exposure – Visit metrics • Stickiness (visit duration), total web pages exposure per session, total unique web page exposure per session – Hit metrics • Hits (each element of a requested page including graphics, text, interactive items is a hit), qualified hits (exclude less important hits such as error messages
3 -103 EBUSINESS BENEFITS AND CHALLENGES • E-business benefits include: – Highly Accessible - Businesses can operate 24 hours a day, 7 days a week, 365 days a year – Increased Customer Loyalty - Additional channels to contact, respond to, and access customers helps contribute to customer loyalty – Improved Information Content- In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and prices
3 -104 EBUSINESS BENEFITS AND CHALLENGES – Increased Convenience - E-business automates and improves many of the activities that make up a buying experience – Increased Global Reach - Businesses, both small and large, can reach new markets – Decreased Cost - The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication
3 -105 EBUSINESS BENEFITS AND CHALLENGES • E-business challenges include: – Protecting consumers – Leveraging existing systems – Increasing liability – Providing security – Adhering to taxation rules
3 -106 EBUSINESS BENEFITS AND CHALLENGES
3 -107 EBUSINESS BENEFITS AND CHALLENGES
3 -108 NEW TRENDS IN EBUSINESS: EGOVERNMENT AND MCOMMERCE • E-government - involves the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizenconsumer within all branches of government – C 2 G – e. Gov. com – B 2 G – lockheedmartin. com – G 2 B – export. gov, – G 2 C – medicare. gov – G 2 G – disasterhelp. gov
3 -109 NEW TRENDS IN EBUSINESS: EGOVERNMENT AND MCOMMERCE
3 -110 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE • Mobile commerce the ability to purchase goods and services through a wireless Internetenabled device
3 -111 OPENING CASE QUESTIONS Amazon What is Amazon’s ebusiness model? –Amazon. com is a B 2 B, C 2 C, and a B 2 C. Amazon. com does business with other businesses (B 2 B), such as Borders, Target, and Office Depot. –Amazon. com also supports a huge business-toconsumer model with their main website interface. –Amazon also supports customers doing business with other customers (C 2 C).
3 -112 OPENING CASE QUESTIONS Amazon How can Amazon use m-commerce to influence its business? – m-commerce enables consumers to buy on the fly, from handheld devices and mobile phones. – Using Amazon. com’s one-click, customers could search for and buy any of Amazon's offerings, from DVDs and CDs to books and toys, and do it anywhere. • Which means customers would have the use of shopping in a traditional brick-and-mortar store, use comparative shopping methods, search Amazon. com for its price, and make a purchasing decision accordingly.
3 -113 OPENING CASE QUESTIONS Amazon • Which metrics could Amazon use to assess the efficiency and effectiveness of Amazon’s website? –click-through – to determine how many customers visit the site from another site –banner-ad – to determine how many customers visit the site from a banner ad on another site –the number of page views to determine the number of pages presented to a visitor, the pattern of websites visited, including most frequent exit page and most frequent prior website
3 -114 OPENING CASE QUESTIONS Amazon –length of stay on the website, dates and times of visits to determine customer spending habits –number of abandoned shopping carts to determine why customers are leaving the site –identified visitors who purchase recommended products to determine if personalization is working
3 -115 OPENING CASE QUESTIONS Amazon • Business challenges facing Amazon? –protecting its customers from unsolicited goods and illegal or harmful communication. • Amazon offers a number of third-party services and it must ensure those parties are operating as expected. If a customer purchases a product from a third-party seller on Amazon and the goods are never shipped, Amazon is held responsible. –It must also deal with security issues such as identity theft if there was a breach in its customer systems since it maintains customer credit card numbers. – It must also ensure it is adhering to tax laws
3 -116 CLOSING CASE ONE e. Bay – The Ultimate e-business 1. e. Bay is one of the only major Internet “pure plays” to consistently make a profit from its inception. What is e. Bay’s ebusiness model and why has it been so successful? – e. Bay began in the C 2 C space, using the brokerage value model and collecting transaction fees in consumer-toconsumer auctions. – Rapid user growth created community, content, and search value streams, which in turn created the critical mass for substantial advertising revenue.
3 -117 CLOSING CASE ONE e. Bay – The Ultimate e-business – B 2 B followed by offering the Small Business Exchange. In addition, there is nothing that would prevent e. Bay from licensing its technology in the B 2 B space, for industryspecific auctions. – e. Bay could potentially expand into the B 2 C space, providing firms the option of auctioning merchandise directly to consumers using the e. Bay infrastructure. – Finally, while this would be the greatest stretch for e. Bay, it could choose to move into the C 2 B space, allowing consumers to “name their own price” for merchandise and services.
3 -118 CLOSING CASE ONE e. Bay – The Ultimate ebusiness 2. Other major websites, like Amazon. com and Yahoo!, have entered the e-marketplace with far less success than e. Bay. How has e. Bay been able to maintain its dominant position. – e. Bay's first-mover advantage allowed it to dominate the online auction space. – e. Bay also has an excellent reputation for superior customer service.
3 -119 CLOSING CASE ONE e. Bay – The Ultimate e-business – Two priorities dominate e. Bay's operational strategy: keeping its buyer/seller community happy, and keeping its massive website up and running. – Consumers flock there because of the great product selection. – The result is a juggernaut that has vanquished latecomers, such as Yahoo! Auctions and Amazon Auctions. Both of those operations are still in business, but they have reduced expectations and make relatively small contributions to their parent companies' balance sheets.
3 -120 CLOSING CASE ONE e. Bay – The Ultimate e-business 3. e. Bay has long been an emarketplace for used goods and collectibles. Today, it is increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set up shop on e. Bay? – The so-called "network effect" has bred a critical mass of customers, a group divided into buyers and sellers. Large and small merchants gravitate to e. Bay because that is where buyers are clustered.
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