ch06 Human Resources

9th Edition
Information
Technology
for Management
Advancing Sustainable,
Profitable Business Growth
Part II. Digital, Mobile and Social

Commerce
Chapter 6
E-Business and ECommerce Models and

Strategies
Copyright 2013 John Wiley & Sons, Inc.
6-1
Chapter 4 Outline
6.1 e-Business Challenges and Strategies
6.2 Business-to-Consumer (B2C) e-Commerce

6.3 Business-to-Business (B2B) e-Commerce and e-Procurement
6.4 e-Government and Public Sector IT Trends

6.5 e-Commerce Support Services and Digital Marketing
Communications
6.6 e-Business Ethics and Legal Issues
6-2
Chapter 6 Learning Outcomes

Explain how e-business processes improve productivity, efficiency
and competitive advantage for business organizations and the
public sector (government and nonprofit organizations.)
Describe five key challenges faced by online retail businesses in the
business-to-consumer (B2C) marketplace.
Identify various ways that e-businesses are facilitating trade
between buyers and sellers in the business-to-business (B2B)
marketplace.
Describe how government agencies are making use of cloud
computing and mobile technologies to enhance government
services.
Identify some of the ethical and legal issues that regularly confront
e-businesses.
6-3
Quick Look at Chapter 6: E-Business & ECommerce Models and Strategies

Electronic business (e-business) is business that uses the Internet and
online networks as the channel to consumers, supply chain partners,
employees, and so on.
Today, as you know from personal experience, companies are
multichannelingintegrating online and offline channels for maximum
reach and effectiveness.
Retailers are advertising and selling through social channels.
Consumers are using mobile handheld devices to research brands,
products, and services from multiple sources.
Often B2B sites lacked helpful features and capabilities of business-toconsumer (B2C) sites.
Governments and agencies are expanding and refining their governmentto-citizen (G2C) web sites.
Security issues are a chief concern.
6-4
For Class Discussion & Debate

Case 1: The Google Universe
Once known only for its search engine business, today Google is a
mega e-business empire that offers products and services in a wide
range of categories.
While continuing to refine and improve its core search, Google has
steadily expanded into other products and services:
Gmail
Blogger
Google Maps
Google Earth
Google Analytics
YouTube
Google Docs
And More
6-5

Case 1: The Google Universe Business Models
Google has a variety of business models that they employ:
Business-to-Business (B2B) Market
Business-to-Consumer (B2C) Market
Business-to-Government (B2G) Market
But there are challenges:
Domestic and International Business Challenges Privacy
Conflicts with Totalitarian Governments
Anticompetitive Issues
Web Analytics
Ethical and Legal Issues
6-6

Case 1: The Google Universe Business Models Part 1
Discuss
1. How does Googles advertising business require it to operate
from the perspective of both a B2B and a B2C company?
2. Explain how Googles PageRank algorithm led to search
results that users found more helpful than those from earlier
search engines.
3. Describe how Googles advertising model offers advertisers
superior targeting capabilities compared to traditional
advertising channels (e.g., television, radio, and print media).
4. Why is Google increasingly blamed for antitrust violations?
Cite examples of business practices that are of concern to
antitrust regulators around the world.
6-7

Debate
5. Is Googles collection of data for its Street View program unethical?
What specific Street View data collection actions have created
concern for users and regulatory agencies around the world?
6. When Google cooperates with governments like China by restricting
access to information available through its search engine, is it guilty
of human rights violations (e.g., freedom of speech)? Is Google
contradicting its own motto, Dont be Evil, in these situations?
7. Is Google infringing on the rights of authors and publishers when it
includes their copyrighted work in its searchable database of
books?
8. Is Google wrong to set limits on the use of public domain books it
has digitized and stored in its database? Is this an example of
anticompetitive behavior? Is it unethical?
6-8

Read Googles new, consolidated privacy policy:

google.com/policies/privacy/
Discussion
9. What kinds of information were you surprised to learn that
Google collected about users?
10. Does the policy clearly describe the way Google uses the
information it collects?
11. Do you feel that the policy describes practices that are a
violation of personal privacy?
12. Finally, what actions can users take to limit the information
that Google collects about them and do you think options to
limit information collection by Google are adequate?
6-9
6.1 e-Business Challenges and Strategies

Mix of online channels & media gives consumers strong control
over where and how they interact with a business or brand.
Managers need to know how to respond to changing consumer
behavior and needs of business customersand how to deal with IT
software vendors and consulting firms.
Companies may outsource development or hosting of e-business
systems with software as a service (SaaS) or cloud computing.
A key to success is having a clear understanding of the business
model your company is following and making sure that managers
from various functions all operate in a manner consistent with that
model.
If the business model and strategy are wrong, then implementation
wont matter in the long run.
6-10
Dot-com Era, 1995-2002

The new economy was the economy of the dot-com era (or dot-com
bubble), which extended from roughly 1995 to 2000.
Pure-play companies, nicknamed dot-coms, existed only on the
Internet without a physical brick-and-mortar presence. These
Internet-channel companies were set up to capture the new
marketspace. Marketspace was the term used instead of the old
economys marketplace.
Dot-com Bubble Bursts and Deflates. March 10, 2000 is called the
day the bubble burst because it was the turning point for the drop
in value of Dot-com stocks.
Figure 6.8. Changes in the
Nasdaq during the dot-com era,
which burst on March 10, 2000,
and declined until October 2002.
6-11
E-Business and E-Commerce Fundamentals

An e-business process involves the use of electronic or digital
technologies, often based on the Internet or World Wide Web, to
accomplish some business task.
An e-business is a company where a significant or substantial part
of its business is based on the utilization of e-business processes.
E-commerce refers to the use of e-business process for the specific
purpose of buying or selling goods and services. In other words, ecommerce is a form of e-business.
Applications:
Internal communications
Service / self service
Collaboration and training
Supply Chain Management
Research, information gathering, web analytics, and more
6-12
Types of E-Business Markets
Business-to-business (B2B). Over 85% of EC volume is B2B.
Business-to-consumers (B2C). Also called e-tailing.
Consumers-to-business (C2B). Consumers make known a particular

need for a product or service, and then suppliers compete to
provide that product or service at the requested price, e.g.,
Priceline.com
Government-to-citizens (G2C) and to others. A government agency

provides services to its citizens via EC technologies.
Mobile commerce (m-commerce). Transactions and activities are

conducted via wireless networks.
6-13
E-Business Website Requirements
Availability relates to the server side of e-business. An always on

facility is needed to maintain the business critical apps.
Accuracy and quick response. Web software must be capable of
searching, sorting, processing promotions and payments, verifying
that the credit card number belongs to the person trying to use it,
confirming the purchase in real-time, etc. In time-sensitive B2B,
errors that delay delivery are intolerable.
Security and PCI DSS compliance. PCI DSS (Payment Card Industry
Data Security Standard) is a set of infosec requirements to help
prevent credit card fraud.
Integrating EC systems with enterprise systems. Need better
integration across all customer points of interaction.
Web analytics. Learning from Web traffic and log data.
6-14
E-Business Models
Figure 6.10. An Example of an e-commerce Company.

6-15
IT at Work 6.1: Online Auctions for Commerce

An auction is a competitive process in which either a seller solicits
bids from buyers or a buyer solicits bids from sellers. The primary
characteristic of auctions is that prices are determined dynamically
by competitive bidding. There are two major types of auctions:
forward auctions and reverse auctions. See text for full case.
Questions
1. What was the dot-com bubble? What lessons were learned
from it?
2. List some benefits of operating as an e-business.
3. What are the requirements and challenges of e-business?
4. What is the importance of PCI DSS compliance?
5. Define the term business model and list five e-business
models.
6-16
6.2 Business-to-Consumer e-Commerce

Just a short time ago, the idea of purchasing things online was a
novel concept. Now, shopping for things online and finding the best
deal by comparing online prices with those in brick-and-mortar
stores is a common consumer practice.
Several of the leading online service industries are banking, trading
of securities, employment, travel, and real estate services.
Online Banking. Online banking includes various banking activities
conducted via the Internet instead of at a physical bank location.
International and Multiple-Currency Banking. International
banking and the ability to handle trading in multiple currencies are
critical for international trade.
Online Job Market. Most companies and government agencies
advertise job openings, accept rsums, and take applications via
the Internet.
6-17
IT at Work 6.2: Amazon.com and IT Patents

In July 1995, Bezos started Amazon.com, offering books via an electronic
catalog from its web site. Key features offered by the amazon.com mega etailer were broad selection, low prices, easy searching and ordering, useful
product information and personalization, secure payment systems, and
efficient order fulfillment
Amazon has invested heavily in its IT infrastructure, many features of
which it had patented.
Amazon launched the e-reader Kindle in 2007. Its success proved the
viability of the e-book market and led to the entry of numerous
competitors, such as Barnes & Nobles Nook and the Apple iPad.
Questions
1. Why is order fulfillment critical to Amazons success?
2. Why did Amazon patent One-Click and other IT infrastructure
developments?
3. How has Amazon adapted the Kindle to new technologies?
4. Why would other retailers form an alliance with Amazon.com?
6-18
IT at Work 6.3: ING Direct, the Largest Online

Bank
ING Direct, a division of the Dutch financial-services giant ING Group,
surpassed E*Trade Bank to become the largest online bank. ING Direct
first opened for business in Canada in 1997. By 2007, ING Direct had
become the most successful direct bank in the world with more than
17 million customers in nine countries.
Questions
1. How did ING Direct become the worlds largest online bank?
2. Why did ING Direct use both online and offline marketing
campaigns?
3. What attracted customers to online banking at ING Direct?
4. What attracted brick-and-mortar banks into the online banking
segment?
6-19
Issues in E-tailing
1. Resolving channel conflict between an online selling
channel and physical selling channels.

2. Resolving conflicts within click-and-mortar
organizations.
3. Managing order fulfillment, logistics, and reverse
logistics.
4.
Determining viability and risk of online e-tailers.
5. Identifying appropriate revenue (business)

models.
6-20
Online Business and Market Planning

Online marketing planning is very similar to any other marketing plan.
1. Build the marketing plan around the customer, rather than on
products.
2. Monitor progress toward the one-year vision for the business in
order to be able to identify when adjustments are needed, and
then be agile enough to respond.
3. Identify all key assumptions in the marketing plan. When there is
evidence that those assumptions are wrong, identify the new
assumptions and adjust the plan.
4. Make data-driven, fact-based plans.
6-21
6.2 Review Questions

1. Describe how digital content and services can lead to
significantly lower costs.
2. What general features make the delivery of online
services successful for both sellers and buyers?
3. How has Amazon maintained its competitive edge?
4. How did ING Direct attract customers to become the
worlds largest online bank?
5. List the major issues relating to e-tailing.
6. List three online marketing planning
recommendations.
6-22
6.3 B2B e-Commerce & e-Procurement

B2B
Comprises about 85% of e-commerce dollar volume.
Covers apps that enable an enterprise to form
electronic relationships with its distributors,
resellers, suppliers, customers, and other partners.
By using B2B, organizations can restructure their
supply chains and partner relationships.
6-23
B2B Business Models

Sell-side:
Seller can be either a manufacturer (IBM.com), a
distributor (Avnet.com), or a retailer (Walmart.com)
Primary methods are forward auctions and online catalogs,
which can be customized for each buyer
E-sourcing or Buy-side:
E-sourcing refers to the many procurement methods
Primary methods are auctions, RFQ processing, and private
exchanges
6-24
B2B
E-procurement
1. To control costs
2. To simplify processes to make them more efficient
Public and Private Exchanges

1. Vertical exchanges for direct materials, materials that are inputs to
manufacturing, e.g., PlasticsNet.com
2. Vertical exchanges for indirect materials in one industrye.g.,
ChemConnect.com and iSteelAsia.com
3. Horizontal exchanges for indirect materials, such as office
supplies, light bulbs, and cleaning materials used by any industry,
e.g., EcEurope.com and Alibaba.com
4. Functional exchanges. Needed services such as temporary help
or extra space are traded on an as-needed basis, e.g.,
Employease.com
6-25

1. Briefly differentiate between the sell-side
marketplace and e-sourcing.
2. What are the two basic goals of e-procurement?
How can those goals be met?
3. What is the role of exchanges in B2B?
4. Explain why maverick buying might take place and its
impact on procurement costs.
6-26
6.4 E-Government
E-COMMERCE MODELS APPLY TO GOVERNMENT & THE PUBLIC
SECTOR
E-government is the use of Internet technology to deliver

information and public services to citizens, business
partners and suppliers of government entities, and people
who work in the public sector.
Benefits
Improves the efficiency and effectiveness of government
functions, including the delivery of public services
Increases transparency by giving access to government
information
Citizens can provide feedback and more actively
participate in democratic institutions and processes
6-27
E-Government in the Cloud
Budget pressures are a leading factor moving

governments into cloud computing solutions
45% of local governments are using some form of cloud
computing for applications or services
Two iPhone Apps to Curb Drunk Driving

R-U-Buzzed was released by the Colorado DOT to
estimate blood-alcohol content
Mashup program Stumble Safely gives Washington, D.C.,
pedestrians a safe route home after a night at the bar.
6-28
IT at Work 6.5: Apps for Democracy Community

Initiative
In the fall of 2008, the Washington, D.C. Office of the Chief
Technology Officer asked iStrategyLabs how it could make
DC.govs Data Catalog (data.octo.dc.gov/) useful for the citizens,
visitors, businesses, and government agencies. The solution was
the creation of Apps for Democracy (appsfordemocracy.org/), a
contest that had cost $50,000 and returned 47 iPhone,
Facebook, and web applications with an estimated value of
$2,600,000 to the city. See text for full case.
Questions
1. Visit the Data Catalog (data.octo.dc.gov/). What value does it
provide citizens?
6-29
6.5 E-Commerce Support Services: Payment

and Order Fulfillment
B2B and B2C requires support services, e.g., payment, order
fulfillment, and content.
Major e-commerce support services:
e-infrastructure: technology consultants, system developers,
integrators, hosting, security, wireless, and networks
e-processes: payments and logistics
e-markets: marketing and advertising
e-communities: citizens, audiences and business partners
e-services: CRM, PRM, and directory services
e-content: supplied by content providers
6-30
Web Advertising
The Internet introduced the concept of interactive
marketing, which has enabled marketers and advertisers to
interact directly with customers. In interactive marketing, a
consumer can click an ad to obtain more information or send
an e-mail to ask a question.
Most large companies practice integrated marketing
communications, where online and traditional ad campaigns
are coordinated to deliver a consistent message.
Search Engine Marketing (SEM). Search Engine Marketing is
an umbrella term that describes practices associated with
increasing the likelihood that a company will appear in
search results when people conduct Internet searches using
terms or phrases related to a product or company.
6-31
Electronic Payment Table 6.7

Electronic funds transfer (EFT)
Electronic checks
Electronic credit cards
Purchasing e-cards
e-Cashsmart cards
e-Cashperson-to-person
Electronic bill presentment and payments
Pay at ATMs
Micropayments
B2B special methods
6-32
Figure 6.14. Sequence of activities in e-credit card processing

6-33
Electronic Bill Payments

1. Online banking. The consumer pays bills from their
banks online banking web site. Some banks offer the
service for free with a checking account, or if the
account holder maintains a minimum balance.
2. Biller direct. The consumer makes payments at each
billers web site either with a credit card or by giving
the biller enough information to complete an electronic
withdrawal directly from the consumers bank account.
3. Bill consolidator. The customer enrolls to receive and
pay bills for multiple billers with a third-party bill
consolidator.
6-34
Security in Electronic Payments

Security requirements for conducting e-commerce are as follows:
Authentication. The buyer, the seller, and the paying institutions must
be assured of the identity of the parties with whom they are dealing.
Integrity. It is necessary to ensure that data and information
transmitted in e-commerce not be altered or destroyed during
transmission.
Nonrepudiation. Merchants need protection against the customers
denial of placing an order. Customers need protection against
merchants denial of payments made.
Privacy. Customers want their identity to be secured. Some prefer
complete anonymity, as is possible with cash payments.
Safety. Customers want to be sure that it is safe to provide a credit card
number on the Internet. They also want protection against fraud by
sellers or by criminals posing as sellers.
6-35
Order Fulfillment
Any time a company sells a product directly to
customers, one that must be delivered physically, it is
involved in various order fulfillment activities.
It must perform the following activities: quickly find the
products to be shipped; pack them; arrange for the
packages to be delivered speedily to the customers
door; collect the money from every customer, either in
advance, by COD, or by individual bill; and handle the
return of unwanted or defective products.
A typical e-commerce fulfillment process is shown in
Figure 6.16.
6-36
Figure 6.16. Order fulfillment and logistics system

6-37
IT at Work 6.6: E-Money: The Future Currency

The growing e-money lifestyle in
Japan is making life more
convenient for consumers by
allowing transactions via mobiles.
The Mobile Suica system was

debuted by NTT DoCoMo in 2006.
Mobile Suica is a phone-based
smartcard that can be used for
buying rail tickets or accessing
buildings.
Figure 6.15. Contactless

Mobile Suica on mobile
phone; based on RFID
6-38

1. What are the major e-commerce support services?
2. List the security requirements for e-commerce.
3. Describe the issues in e-commerce order fulfillment.
4. Describe the different types of online advertising.
5. What are the key differences in the CPM, CPC, and
CPA methods of paying for advertising?
6. What is the difference between SEO and PPC search
engine marketing?
6-39
6.6 E-Business Ethics and Legal Issues
Privacy: Most e-payment systems know who the buyers are;

therefore, its necessary to protect the buyers identities.
Web tracking: By using tracking software and log files,

companies can track individuals movements on the Internet.
Loss of Jobs: EC may eliminate jobs.
Disintermediation: Technology eliminates the need for

intermediaries, such as travel and insurance agents.
Reintermediation: Travel and insurance agents are providing

value added services in a process called reintermediation.
6-40
6.6 E-Business Ethics and Legal Issues

Antitrust Laws. At one time or another, many wellknown technology companies have faced scrutiny
over business dealings that appeared to be in conflict
with antitrust laws in the United States.
Collection of State Sales Tax by Online Merchants.
In addition to privacy laws and antitrust laws,
perhaps the most hotly debated legal issue
associated with e-commerce today is related to sales
tax.
6-41

1. List some ethical issues in e-commerce.
2. List the major legal issues of e-commerce.
3. Define disintermediation. Give an example.
4. Define reintermediation. Give an example.
6-42

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9th Edition

Part II. Digital, Mobile and Social

E-Business and ECommerce Models and

Copyright 2013 John Wiley & Sons, Inc.

6.2 Business-to-Consumer (B2C) e-Commerce

6.4 e-Government and Public Sector IT Trends

Copyright 2013 John Wiley & Sons, Inc.

Chapter 6 Learning Outcomes

Quick Look at Chapter 6: E-Business & ECommerce Models and Strategies

For Class Discussion & Debate

For Class Discussion & Debate

Copyright 2013 John Wiley & Sons, Inc.

For Class Discussion & Debate

For Class Discussion & Debate

For Class Discussion & Debate

Read Googles new, consolidated privacy policy:

6.1 e-Business Challenges and Strategies

Copyright 2013 John Wiley & Sons, Inc.

Dot-com Era, 1995-2002

E-Business and E-Commerce Fundamentals

Copyright 2013 John Wiley & Sons, Inc.

Types of E-Business Markets

Business-to-business (B2B). Over 85% of EC volume is B2B.

Business-to-consumers (B2C). Also called e-tailing.

Consumers-to-business (C2B). Consumers make known a particular

Government-to-citizens (G2C) and to others. A government agency

Mobile commerce (m-commerce). Transactions and activities are

Copyright 2013 John Wiley & Sons, Inc.

E-Business Website Requirements

Availability relates to the server side of e-business. An always on

Copyright 2013 John Wiley & Sons, Inc.

Figure 6.10. An Example of an e-commerce Company.

IT at Work 6.1: Online Auctions for Commerce

6.2 Business-to-Consumer e-Commerce

IT at Work 6.2: Amazon.com and IT Patents

IT at Work 6.3: ING Direct, the Largest Online

Copyright 2013 John Wiley & Sons, Inc.

channel and physical selling channels.

Determining viability and risk of online e-tailers.

5. Identifying appropriate revenue (business)

Online Business and Market Planning

Copyright 2013 John Wiley & Sons, Inc.

6.2 Review Questions

6.3 B2B e-Commerce & e-Procurement

Copyright 2013 John Wiley & Sons, Inc.

B2B Business Models

Copyright 2013 John Wiley & Sons, Inc.

Public and Private Exchanges

Copyright 2013 John Wiley & Sons, Inc.

6.3 Review Questions

Copyright 2013 John Wiley & Sons, Inc.

E-government is the use of Internet technology to deliver

E-Government in the Cloud

Budget pressures are a leading factor moving

Two iPhone Apps to Curb Drunk Driving

IT at Work 6.5: Apps for Democracy Community

6.5 E-Commerce Support Services: Payment

Electronic Payment Table 6.7

Copyright 2013 John Wiley & Sons, Inc.

Figure 6.14. Sequence of activities in e-credit card processing

Electronic Bill Payments

Security in Electronic Payments

Figure 6.16. Order fulfillment and logistics system

IT at Work 6.6: E-Money: The Future Currency