I ch12

Introduction to Information TechnologyTurban, Rainer and Potter

Chapter 12 Electronic Commerce1

CHAPTER 12ELECTRONIC COMEMRCE



Learning Objectives Describe electronic commerce, its dimensions, benefits,

limitations, and process Describe the major applications of electronic commerce,

both business-to-customer and business-to-business Discuss the importance and activities of market research and

customer service Describe the electronic commerce infrastructure and support

services Compare the various payment systems and describe the role

of smart cards Discuss legal and other implementation issues



Case : Intel Corporation Embracing the Web The Business Problem

Intense competition in the ICs market

The Solution E-customer service E-selling E-purchasing E-business programs using extranet and EDI

Orders from thousands of customers,distributors and business partners worldwide were received by fax and phone; errors, delays, high cost



The Results

Case (continued…)

Enhances competitive advantage by giving customers better tools for managing transactions

The system brings substantial saving to Intel What have we learned from this case??

Demonstrates that electronic commerce involves not just selling electronically, but also providing customer service and improving organization’s internal business processes

Illustrates a new and effective way for conducting business



Definitions Business-to-business EC

two (or more) businesses make transactions electronically major benefits include: reduced cost, reduced cycle time,

increased customer base and sales, and improved customer service

Business-to-consumer EC companies sell directly to consumers over the Internet major benefits include increased revenues, the creation of new

sources of revenues, and the elimination of costly intermediaries

Intrabusiness transactions take place within an organization major benefits include increased productivity, speed, and

quality and reduced cost



Definitions (continued…) Electronic Business (E-business)

a broad definition of EC, not just buying and selling, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization

all about time cycle, speed, globalization, enhanced productivity, reaching new customers, and sharing knowledge across institutions for competitive advantage

a very diverse and interdisciplinary topic, with issues ranging form technology, addressed by computer experts, to consumer behavior, addressed by behavioral scientists and marketing research experts



History and Scope History

Began in the early 1970s innovations such as electronic transfer of funds (EFT) were limited to large corporations and a few daring small businesses

Electronic Data Interchange (EDI) added other kinds of transaction processing and extended the types of

participating companies Over the last five years

innovative applications, from advertisement to auctions and procurement Scope

home banking, shopping in electronic stores and malls, buying stocks, finding a job, conducting an auction, collaborating electronically with business partners around the globe, and providing customer service



A Framework for ECElectronic Commerce Applications

• Direct Marketing • Stocks, Jobs • On-line banking • Procurement and purchasing • Malls • Procurement • Auctions • Travel

• On-line publishing • Customer Services • Intrabusiness Transactions

People:Buyers, Sellers,Intermediaries,

Services, IS Peopleand Management

Public Policy :Taxes, Legal,

Privacy Issues, Regulations, and

Technical Standards

Marketing andAdvertisement:

Market Research,Promotions, and

Web content

Supply Chain:Logistics and

Business Partners

Infrastructure

(1)Common business

services infrastructure(security, smart

cards/authenticationelectronic payments,directories/catalogs

(2)Messaging and

information distributioninfrastructure

(EDI, e-mail, Hyper TextTransfer Protocol, Chat

Rooms)

(3)Multimedia content

and networkpublishing infrastructure

(HTML, JAVA, WorldWide Web, VRML)

(4)Network infrastructure

(Telecom, cable TVwireless, Internet)(VAN, WAN, LAN,Intranet, Extranet)

Access (cell phones)

(5)Interfacing

infrastructure(The databases,

logistics,customers, and

applications)

Management



Benefits of EC to Organizations Expands a company’s marketplace to national and international markets Allows a vendor to reach a large number of customers, anywhere around the globe, at a

very low cost Enable companies to procure material and services from other companies, rapidly and at

less cost Shortens or even eliminates marketing distribution channels; marketing products cheaper

and vendors’ profits are higher Decrease the cost of creating, processing, distributing ,storing, and retrieving paper-based

information Allows lower inventories by facilitating “pull”-type supply chain management, which

starts from customer orders and uses just-in-time production and delivery processing Reduces the time between the outlay of capital and the receipt of products and services Lowers telecommunications costs because the Internet is much chapter than value-added

networks (VANs) Helps small businesses compete against large companies Enables very specialized markets (e.g. www.dogtoys.com)

http://www.dogtoys.com/





Benefits of EC to Consumers Frequently provides less expensive products and services by allowing consumers to

shop in many places and conduct online quick comparisons Gives consumers more choices - they can select from many vendors and many

more products than they could locate otherwise Enables customers to shop or make other transactions 24 hours a day, year round,

from almost any location Delivers relevant and detailed information in seconds, rather than in days or weeks Enables consumers to get customized products, from PCs to cars, at competitive or

bargain prices Makes possible virtual auctions, in which consumers can find unique products and

collectors’ items that might otherwise require them to travel long distances to a particular auction place at a specific time

Allows consumers to interact with other consumers in electronic communities and to exchange ideas as well as compare experiences



Benefits of EC to Society Enables more individuals to work at home and to do less traveling,

resulting in less traffic on the roads and lower air pollution Allows some merchandise to be sold at lower prices, so less

affluent people can buy more and increase their standard of living Enables people in less developed countries and rural areas to enjoy

products and services that otherwise are not available to them Facilitates delivery of public services, such as government

entitlements, reducing the cost of distribution and fraud, and increasing the quality of the social services, police work, health care and education



Technical Limitations of EC Lack of universally accepted standards for quality, security,

and reliability Insufficient telecommunications bandwidth Still-evolving software development tools Difficulties in integrating the Internet and EC software with

some existing (especially legacy) applications and databases There is a need for special Web servers in addition to the

network servers (added cost) Internet accessibility is still expensive and/or inconvenient

for many people



Non-Technical Limitations of EC Many legal issues are yet unresolved Lack of national and international regulations and standards for

many circumstances Difficulty in measuring benefits of EC, such as Web advertising.

Lack of mature methodologies for justifying EC Distrust of the new: Many sellers and buyers are waiting for EC to

stabilize before they take part Customer resistance to the change from a physical to virtual stores Perception that electronic commerce is expensive and unsecured,

so many do not want even to try it Insufficient number (critical mass) of sellers and buyers which

needed for profitable EC operations



Electronic Retailing and Malls Electronic Commerce enables consumers to buy

from home 24 hours a day, 7 days a week Electronic Commerce offers consumers a wide

variety of products and services, including the most unique items, usually at lower prices

Consumers can easily search for what they really want to buy, not just what is shown on television or in paper catalogs

Consumers can get very detailed information on products, in seconds, and can easily search for and compare competitors’ products and prices

Consumers can reduce (or eliminate) the pile of paper catalogs



Electronic Retailing Direct sale (business to consumers) through

electronic storefronts or malls, usually designed around an electronic catalog format

Solo storefronts maintain their own Internet name and Web site may or may not be affiliated with electronic malls may be extensions of a physical store, or it is a new

businesses started by entrepreneurs who saw a niche on the Web

can be found easily on the Internet - directories and hyperlinks from other Web sites and intelligent agents



Electronic Malls (Cybermall) A collection of individual shops under one Internet

address Vendors that locate in brick-and-mortar shopping

malls, or locate themselves in a virtual mall, give up a certain amount of independence

Success depends on the popularity of the entire collection of stores as well as on its own efforts

Malls generate streams of prospective customers who otherwise might never have stopped at the store

The Process of Electronic Shopping



A user gains access to an online service or the internet and goes to a merchant’s Web site. He may know the address, find it in another Web site (refer to it by a search engine), or find it by browsing.

At any time, the user can review the items in the shopping cart and change quantities or delete items, This review continues until a final selection is made.

The user enters the merchant’s storefront and goes to the product displays.

If the user does not find anything of interest, or want to do more shopping he or she may browse some additional merchant storefronts to search for the desired products or services.

When the user does find something of interest, he or she may elect to purchase it online. To finalize the decision, the user may need more information that can be found on the Web pages or obtained by e-mail.

The item is typically stored in a shopping cart. This allows the user to continue looking through this store, or even to visit other merchants, before paying for the items.

When the user is ready to pay he is advised about the payment options the user makes a section and provides payment information (e.g., the credit care number)

The payment authorization is either approved or denied. If denied, the user is prompted for another form of payment .If approved, the transaction is executed.

Shipment is made, if needed, or permission to download products from the Internet is granted. Warranty is established.

Customer service is established. Product may be returned or exchanged, for example maintenance information may be found on the Web site as needed.



Advertisement an attempt to disseminate information in order to

attract buyers Internet Advertisement

can be updated any time at a minimal cost and therefore can always be timely

can reach very large numbers of potential buyers, all over the world

can be cheaper can efficiently use the convergence of text, audio,

graphics, and animation can be interactive and targeted to specific interest

groups and/or individuals

Advertising Online



Banners - Electronic Billboards the most commonly used form of advertising on

the Internet, links to advertiser's site contains a short text or graphical message to

promote a product or a vendor Keyword banners

appear when a predetermined word is queried from the search engine

effective for companies who want to narrow their target to consumers interested in particular topics

Random banners appear randomly might be used to introduce new products to the widest

possible audience, or to keep a well-known brand in the public memory

Advertising Methods



E-mail - emerging as an Internet advertising and marketing channel that permits cost-effective implementation and a better and quicker response rate than other advertising channels marketers develop or purchase a list of e-mail addresses marketers employing e-mail must take a long-term view and

work towards the goal of motivating consumers to continue to open and read messages they receive

marketers must decide what portion of their target market can be reached by e-mail and must supplement existing database information with data relevant to e-mail campaigns

marketers should integrate inbound customer service e-mail with their outbound marketing efforts

marketers must develop e-mail-specific editing skill and the ability to deliver multimedia-rich e-mail

Advertising Methods (continued …)



Customizing Ads - Filtering the Irrelevant Information BroadVision : One-to-One system/ads

allows the rapid creation of secure Web sites that are visitor-friendly, using a customer database, with registration data and information gleaned from site visits

Webcast : push technology delivers only the information users want or need users get the information they want; at the same time they

also get the banner ads related to that information marketers will get a more customized audience if they place

banners on a system that delivers via push technology

Advertising Issues



Attracting Visitors to a Site Making the top list of a search engine

the search engine’s spider crawls through the submitted site, following and indexing all related content and links

a company can get to the top of a search engine’s list by adding, removing, or changing a few sentences

Online events, promotions, and attractions people generally like the idea of something funny or

something free (or both) contests, quizzes, coupons, and free samples are an integral

part of Internet commerce as much, or even more than, they are of offline commerce

designed to attract visitors and to keep their attention

Advertising Issues (continued …)



Attracting Visitors to a Site (CONT’)


ATTRACTION HOW IT WAS USEDGive away games and discount contests. Also, games sponsored by multiple companies

Yoyodyne Inc. sponsors games and contests to get users to read product information of advertisers, ranging form Major League Baseball to Sprint Communication. In one contest, tax-preparer H&R Block paid $20,000 towards the winner’s federal taxes.

Free Internet access Netzero and other offer this in exchange for viewing adsPersonal, nonautomated selling

www.egghead.com uses real people to help you online. www.lucent.com connects a sales rep with a customer over the phone and then “pushes” material and ads to your computer

Monetary payment Cybergold (www.cybergold.com), Goldmine (www.goldmine.com), and others connect users with advertisers who pay them real money to read ads and explore the Web

Sweepstakes Netstakes runs sqeepstakes that requires no skills. Users register only once and can randomly win prizes in different categories (see http://webstakes.com). The site is divided into channels, and each channel has several sponsors. The sponsors pay Netstakes to send traffic. Netstakes runs online ads, both on the Web and in many email lists that people request to be on.



Profiling Customers Using Intelligent Agents Product brokering

some companies collect information about consumers for the purpose of creating a customer’s profile

with this profile, the company can tailor ads to the specific customers, or offer them product information

Example - Fujitsu’s agents profile consumers : is using a new agent-based technology called Interactive

Marketing Interface (iMi) that allows advertisers to interact directly with targeted customers

personal profiles submitted to iMi by consumers product announcements, advertisements, and marketing surveys

are sent to customers via e-mail based on their profiles by answering marketing surveys or acknowledging receipt of

advertisements, consumers earn iMi points, redeemable for gift certificates and phone cards




On CD-ROM and On the Web can be searched quickly with the help of special search

engines effective comparisons involving catalog products customized catalogs

a catalog assembled specifically for a company, usually for a regular customer of the catalog owner

can be tailored to individual consumers let the system automatically identify customer

characteristics based on their transaction records involve cookie technology and data mining technology

Electronic Catalogs



Interactive Advertising and Marketing advertisers present customized, one-on-one

advertising, which is followed by sales interactive : the ability to address an individual, to

gather and remember that person’s response, and to serve that customer based on his or her previous, unique responses

Coupons Online consumers can gather any discount coupons they want

by accessing sites like www.hotcoupons.com or www.supermarkets.com, selecting the store where they plan to redeem the coupons

Advertising Online

http://www.hotcoupons.com/



http://www.supermarkets.com/



Services Online

Cyberbanking names : electronic banking, virtual banking,

home banking, and banking online capabilities ranging form paying bills to

securing a loan for customers : saving time and convenience for banks : offering an inexpensive alternative

to branch banking and a chance to enlist remote customers



Cyberbanking (CONT’) SFNB puts security first

www.sfnb.com the first virtual bank offering secure banking transactions on the Web

Hong Kong Bank grows without branches www.hongkongbank.com using HEXAGON, the bank has leveraged its reputation and

infrastructure in the developing economies of Asia to become a major international bank rapidly

Mark Twain supports foreign currency trading www.marktwain.com using electronic cash to support trading in 20 foreign

currencies

Services Online (continued…)

http://www.sfnb.com/



http://www.hongkongbank.com/



http://www.marktwain.com/

http://www.marktwain.com/



Services Online (continued…) Online Stock Trading

an online trade typically costs between $5 and $30, compared to an average fee of $100 from a full-service broker and $25-50 from a discount broker

no waiting on busy telephone lines small chance of making mistakes which are made in oral

communication orders can be placed from anywhere, any time can find considerable amount of information regarding investing

in a specific company or in a mutual fund



Services Online (continued…) The Online Job Market

Job seekers can reply to employment ads online can take the initiative and place resumes on their own home pages

or on others’ Web sites, send messages to members of newsgroups asking for referrals, and use recruiting firms

Job offerers advertise openings on their Web site use sites ranging form Yahoo!, to online services, bulletin boards,

and recruiting firms Recruiting firms

use their own Web pages to post available job descriptions and advertise their services in electronic malls and in other Web sites

Newsgroups jobs in a certain category or location are posted, discussions are

conducted, and resumes can be sent



Services Online (continued…) Travel

Internet is an ideal place to plan, explore, and arrange almost any trip

potential savings are available through special sales, auctions, and the elimination of travel agents

allows to purchase airline tickets, reserve hotel rooms, and rent cars

supports an itinerary-based interface ,including a fare-tracker feature

links to weather sites, currency converters, adventure magazines, and chat forums, where users can share travel tips

allows to set a price that people are willing to pay for an airline ticket or hotel accommodations, and the company then attempts to find a vendor for that price (www.priceline.com)

http://www.priceline.com/





Services Online (continued…) Real Estate

consumers can view many properties on the screen, saving time for themselves and the brokers

consumers can sort and organize properties according to their criteria and preview the exterior and interior designs of the properties, shortening the search process

consumers can find detailed information about the properties and frequently get even more details than brokers usually provide

homebuilders now use virtual reality technology on their Web sites to demonstrate three-dimensional floor plans to potential home buyers



Services Online (continued…) Auctions

Specialized auction sites ( www.onsale.com ) Auctioning cars to dealers ( www.manheim.com ) Art auctions ( www.onlineart.com &

www.auctions-on-line.com ); collectors’ items ( www.ebay.com )

Airlines ( www.americanair.com & www.cathey.usa.com )

Bartering the exchange of goods and/or services without a

monetary transaction ( www.barterbrokers.com )

http://www.onsale.com/



http://www.manheim.com/



http://www.onlineart.com/



http://www.auctions-on-line.com/

http://www.ebay.com/



http://www.americanair.com/



http://www.cathey.usa.com/





http://www.barterbrokers.com/





Business-to-Business Applications Product - specifications, prices, sales history Customer - sales history and forecasts Supplier - product line and lead times, sales terms and conditions Product process - capacities, commitments, product plans Transportation - carriers, lead times, costs Inventory - inventory levels, carrying costs, locations Supply chain alliance - key contracts, partners’ roles and responsibilities,

schedules Competitor - benchmarking, competitive product offerings, market share Sales and marketing - point-of-sale (POS), promotions Supply chain process and performance - process descriptions, performance

measures, quality, delivery time, customer satisfaction



Seller-Oriented Marketspace Organizations attempt to sell their products (services) to other

organizations electronically (e-selling) The buyer is expected to visit the seller’s site or a mall, view

catalogs, and place orders The buyer is an organization that may be a regular customer of the

sellers Key Mechanisms : electronic catalog that can be customized for each

large buyer, the ordering system, the payment system, and the integration of the incoming orders with the vendor’s logistics system

EC is used to increase sales, reduce selling expenditures, increase delivery speed, and reduce administrative costs



Buyer-Oriented Marketspace EC technology is used to reduce both the cost of items purchased and the

administrative cost of procurement Request For Quotation (RFQ) on Buyer’s Web Site

businesses submit bids electronically, and the bids are routed via the buyer’s intranet to the engineering and finance departments for an evaluation

clarifications are made via e-mail the winner is notified electronically saves 10-15 percent on the cost of the items placed for bid saves up to 85 percent on the administrative cost saves about 50 percent on cycle time known as e-purchasing or e-procurement



Intermediary-Managed Marketspace

Electronic Intermediaries A link between buyers and sellers Main function : market making PART - about 300 parts suppliers and dozens of airlines

participate (by Boeing Aircraft Corp.) ProcureNet - more than 150,000 products, known as

MROs (maintenance, repairs, and operations) Some of the online services make money, some of them

only improve service for customers



Customers and Their Behavior Examples of the importance of learning about

customers Peapod providing supermarket products online

the company was still incurring losses in 2000 problems :

» small customer base» customers like to see and feel items before they buy them

Amazon selling books published by others assesses the potential customers’ reaction, and correctly

predicts books to be a desirable items for online sale



Market Research : Behavioral Model

Decision Making Process

Personal CharacteristicsAge, Gender, Ethnicity, Education, Lifestyle, Psychological, Knowledge, Values, Personality

Environmental CharacteristicsSocial, Family, Communities

Vendors’ Controlled SystemsLogistic SupportPayments, Delivery

Technical SupportWeb Design, Intelligent Agents

Customer ServiceFAQs, E-mail, Call Centers,One-to-One

Buyers’ DecisionsBuy or NotWhat to BuyWhere (Vendor)When How Much to SpendRepeat Purchases

StimuliMarketingPricePromotionProductQuality

OthersEconomicalTechnologyPoliticalCultural



Market Research (continued …) To find out what motivates consumers to buy To developed models that explain consumer behavior

regarding purchasing decisions To identify new markets To investigate competitors and their products To test consumer interest in new products To help one-to-one marketing (allows one-to-one personal contact

with customers, and provides marketing organizations with greater ability to understand consumers, the market, and the competition)



Market Research (continued …)

Asking Customers What They Want interacting directly with consumers filling in electronic questionnaires

vendors need to use inducements to motivate consumers to participate and be honest

learning what consumer want from the directly obtained answers

trying to infer from consumers’ preferences on other preferences



Market Research (continued …)

Tracking Customer Activities on the Web observing consumers’ behavior on the internet site-tracking services, based on cookies or other

approaches one of the most interesting tools for tracking

customers on the Internet as well as helping them to shop with intelligent agents

possible invasion of privacy



Electronic Commerce Agents Intelligent agents

computer programs that conduct routing tasks, search and retrieve information ,support decision making, and act as domain experts

sense the environment and act autonomously without human intervention

Software agents with no intelligence

Learning agents exhibit some intelligent behavior



EC Agents (continued …)

Intelligent agents for information search and filtering help to determine what to buy to satisfy a specific need Personalogic uses filtering process - consumers specify

requirements and constraints, and the system returns a list of products that best meet the desired product

Firefly used (until recently) a collaborative filtering process that can be described as “word of mouth” to build the profile (not available any more) its Passport generates a customer’s personal profile



EC Agents (continued …) Intelligent agents for Product and Vendor Finding

help consumers decide where to buy by comparing merchants’ offers Bargainfinder from Andersen Consulting queried the price of a

specific CD from a number of online vendors and returned the list of vendors and prices (Not in use any longer)

Jango form NetBot/Excite originates the requests form the user’s site instead of Jango’s, so vendors can not block it

Kasbah from MIT Laboratories allows users who want to sell or buy a product, assign the task to an agent that is sent out to actively seek buyers or sellers



EC Agents (continued …) Negotiation Agents

help to take away some of the frustration some customers experience in the negotiating process and the technical limitations of being in different locations

AuctionBot allows users create auction agents by specifying a number of parameters that vary depending on the type of auction selected

Kasbah allows users create agents for the purpose of selling or buying process

Tele-@-tete uses a number of different parameters: price, warranty, delivery time, service contracts, return policy, loan option, and other value-added services



Organizational Buyers

Make purchase decisions in business-to-business situations

More formalized purchasing decision The purchasing process may be more

important than advertising activities in swaying purchase decisions

Decisions may be made by a group



Customer Service

Phases in the Customer Service Life Cycle Phase 1 : Requirements

assisting the customer to determine needs Phase 2 : Acquisition

helping the customer to acquire a product or service Phase 3 : Ownership

supporting the customer on an ongoing basis Phase 4 : Retirement

helping the client to dispose of a service or product



Customer Service (continued …) Facilitating Customer Service

Personalized Web pages - customers build individualized pages at the vendor’s site

Chat rooms - customers can interact with each other and with vendor’s personnel who monitor the chat room

E-mail - send confirmations, product information, and instructions to customers

FAQs - provide online answers to questions customers ask most Tracking capabilities - enable customers to track the status of their orders,

services, or applications Web-based call centers - a comprehensive communication center takes

customers’ inquiries in any form they come and answers them quickly



EC InfrastructureCOMPONENT DESCRIPTION AND ISSUESNetworks A shift from VANs to the Internet. Increased use of VPNs (virtual

private networks) to enhance security and capabilities over the Internet.Web severs Special Web servers are usually superior to dual-purpose servers.

Available for rent. The interface to legacy systems may be a problemWeb server support and software

1. Web site activity tracking. 2. Database connectivity. 3. Software for creating electronic forms. 4. Software for creating chat rooms and discussion groups.

Electronic catalogs Product description, multimedia use, customized catalogs, inclusion in Web site design and construction, templates for construction.

Web page design and construction software

Web programming languages (HTML, JAVA, VRML, XML)

Transactional software

1. Search engines for finding and comparing, products. 2. Negotiating software. 3. Encryption and payment. 4. Ordering (front office) inventory and back office software.

Internet access components

TCP/IP package, Web browsers, remote access server, client dial-in software, Internet connection device, leased line connection, connection to leased line, Internet kiosks

Others Firewalls, e-mail, HTTP (transfer protocols), smart cards



Electronic Payment Systems Electronic credit cards

Payments using unencrypted credit card the buyer e-mails her or his credit card number to the seller on the

Internet risk here is that hackers will be able to read the credit card number

Encrypted payments using public/private key encryption, credit card details can be

encrypted for better security this can be done by simply using the SSL protocol in the buyer’s

computer



Electronic Payment Systems (continued …)

Electronic checks secured by public-key cryptography and may be suitable for

some micropayments Step 1 : the customer establishes a checking account with a bank Step 2 : the customer contacts a seller, buys a product or a

service, and e-mails an encrypted electronic check signed with a digital signature

Step 3 : the merchant deposits the check in his or her account: money is debited in the buyer’s account and credited to the seller’s account




Electronic cash in your PC Step 1 : the customer opens an account with a bank and receives special

software for his or her PC Step 2 : the customer buys “electronic money” from the bank by using the

software Step 3 : the bank sends an electronic money note to this customer,

endorsing it with a digital signature Step 4 : the money is stored on the buyer’s PC and can be spent in any

electronic store that accepts e-cash Step 5 : the software is also used to transfer the e-cash from the buyer’s

computer to the seller’s computer Step 6 : the seller can deposit the e-cash in a bank, crediting his or her

regular or electronic account, or use the e-cash to make a purchases elsewhere




Electronic payment cash (Smart Cards) with e-cash credit cards using magnetic strips contain only limited

information , such as the card’s ID number cards to pay photocopies in the library, or to pay telephone calls

storing a fixed amount of prepaid money card used by New York Metropolitan Transportation Authority

(MTA) in buses, trains, interstate toll bridges, and tunnels cards containing microprocessor storing a considerable amount of

information (more than 100 times more than a regular credit card) and allowing money to be stored in quantities that can be decreased as well as increased



Security Security Requirements

Authentication - the buyer, the seller, and the paying institutions must be assured of the identity of the party with whom they are dealing

Integrity - it is necessary to assure that data and information transmitted in EC, such as orders, reply to queries, and payment authorization, are not accidentally or maliciously altered or destroyed during transmission

Non-repudiation - merchants need protection against the customer’s unjustifiable denial of placing an order; buyer needs protection against the vendor denial of shipment, or sending wrong order

Privacy - many customers want their identity to be undisclosed Safety - customers want to be sure that it is safe to provide a credit card

number on the Internet



Security (continued …) Security Protection

Encryption - a process of making messages indecipherable except by those who have an authorized decryption key Single-key encryption

» the sender of the electronic message (or payment) encrypted the information with a key

» the receiver used an identical key to decrypt the information to a readable form

» the same code had to be in the possession of both the sender and the receiver

» problems : if a key were transmitted and intercepted illegally, it could be used to read all encrypted messages or to steal money



Security (continued …)

Security Protection : Encryption (continued …) Public/private key encryption

uses two different keys - public key and private key several authorized people may know the public key, but

only its owner knows the private key every person has one private key and one public key encryption and decryption can be done with either key if encryption is done with the public key, the decryption

can be done only with the private key and vice versa



Security (continued …) Security Protection :Encryption (continued …)

Public/private key encryption

MessageText

MessageText

Sender Receiver

Encryption Decryption

Public Key of Recipient

Private Key ofRecipient

Signature Signature

Private Key of Sender

Public Key of Sender

CipheredText



Security (continued …) Security Protection : Protocols

Secure Socket Layer (SSL) the most common protocol used in EC main capability is to encrypt messages

Secure Electronic Transaction Protocol (SET) the major proposed standard for credit card processing allows consumers to shop anywhere as conveniently and

securely as possible by incorporating digital signatures, certification, encryption, and an agreed-upon payment gateway



Market Practices Fraud on the Internet

internet fraud and its sophistication have grown as much and even faster than the Internet itself

stocks manipulations, selling bogus investments and phantom business opportunities

examples: stock promoters falsely spread positive rumors about the

prospects of the companies they touted the information provided might have been true, but the

promoters did not disclose that they were paid to promote the companies



Buyer Protection Tips for safe electronic shopping include:

look for reliable brand names at sites like Wal-Mart Online, Disney Online, and Amazon.com

search any unfamiliar selling site for company’s address and phone and fax number check out the seller with the local Chamber of Commerce and/or Better Business

Bureau investigate how secure the seller’s site is by reading the posted privacy notice, and

evaluate how well the site is organized examine the money-back guarantees, warranties, and service agreements compare prices to those in regular (suspect the too cheap sites) ask friends what they know about the vendor find out what your rights are in case of a dispute consult the National Fraud Information Center check www.consumerworld.org for a listing of useful resources

http://www.consumerworld.org/





Seller Protection

Be protected against consumers who refuse to pay or pay with bad checks and buyers’ claims that the merchandise did not arrive

Be protected against the use of their name by others as well as use of their unique words and phrases, slogans and Web address

Have legal recourse against customer who download copyrighted software and/or knowledge and sell it to others



Ethical Issues Privacy

most electronic payment systems know who the buyers are; therefore, it may be necessary to protect the buyers’ identity

The Human Element the technology is new to many IS directors and employees and so

many require new sets of skills Web Tracking

by using sophisticated software it is possible to track individual movements on the internet

Disintermediation the use of EC may result in the elimination of some of a company’s

employees as well as brokers and agents



Legal Issues Domain Names

several companies that have similar or same names (in different countries) compete over a domain name that is not a registered trademark

Taxes and Other Fees particularly complex for interstate and international commerce (A

tax moratorium until October 2001) Copyright

intellectual property is protected by copyright laws and cannot be used freely



For Accounting The implications of replacing paper documents by electronic

may impact many of the accountants’ tasks, especially the auditing of EC activities and systems

For Finance The world of banking ,stocks, and commodities markets, and

other financial services are being reengineered due to EC For Marketing

The revolution is affecting many marketing theories, ranging form consumer behavior to advertisement strategies

What’s in it for Me?



What’s in IT for Me? (continued …)

For Production/Operations Management EC is changing the manufacturing system form a

product-push mass production to an order-pull mass customization

For Human Resource Management Modern HRM has tremendous opportunities to

exploit Internet capabilities to improve the productivity of HRM personnel, recruit and maintain top employees, and increase job satisfaction to very high levels