E-Com and Web 2.0 - ch08

Using MIS 3e Chapter 8
E-Commerce and Web 2.0 David Kroenke
Chapter Preview
Chapter has two major themes: e-commerce and Web 2.0.
1. E-commerce: Begin by discussing how companies use ecommerce and survey important e-commerce technology. Conclude by discussing the role of e-commerce in supply chain management. 2. Web 2.0: What it means, and what capabilities does it provide? How do businesses use social networking, including groups and applications. Well discuss three primary uses for Twitter in commerce. After that, well investigate user generated content and discuss some of the risks of it and social networking as well.
Finally, well wrap up with 2020.
Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall
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Study Questions
Q1
Q2 Q3 Q4 Q5 Q6 Q7 Q8
How do companies use e-commerce?

What technology is needed for e-commerce? How can information systems enhance supply chain performance? Why is Web 2.0 important to business? How can organizations benefit from social networking? How can organizations benefit from Twitter? What are the benefits and risks of user-generated content (UGC)? 2020?
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How Do Companies Use E-commerce?
E-commerce is buying and selling goods and services over public and private computer networks. Merchant companies take title to the goods they sell. Nonmerchant companies arrange for purchase and sale of goods without owning or taking title to those goods. Types of merchant and nonmerchant companies
Fig 8-1 E-Commerce Categories

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-4
Types of Merchant E-Commerce Companies

1. B2C transactions occur between a supplier and retail customer. The supplier generally uses a Web storefront. 2. B2B transactions occur between companies. 3. B2G transactions occur between companies and governmental organizations.
Fig 8-2 Example of Use of B2B, B2G, and B2C

Types of Nonmerchant E-commerce Companies

1. Auctions match buyers and sellers using the e-commerce version of standard auction where auction company receives a commission on each product sold. eBay.com is the best-known example. 2. Clearinghouse provides goods at a stated price, arranges for delivery but never takes title to the goods. Company receives a commission on each product sold. Amazon.com is the best-known example. 3. Electronic exchanges are a type of clearinghouse similar to a stock exchange. Company matches up buyers and sellers and a transaction occurs. Exchange takes a commission. Priceline.com is the best-known example.
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How Does E-Commerce Market Efficiency?
E-Commerce improves market efficiencies in a variety of ways, as this figure shows. Customers benefit from the first two, disintermediation and increased price information. Businesses benefit from increasing their knowledge of price elasticity.
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What Economic Factors Disfavor E-Commerce?

1. Channel conflict
Occurs when a manufacturer competes with its traditional retail outlets by selling directly to consumer
2. Price conflict
Occurs when a manufacturer sells directly to consumers and undercuts retailers prices
3. Increased logistics expenses

Occurs when a manufacturer must process thousands of smallquantity orders rather than a few large-quantity orders
4. Increased customer-service expenses

Occurs when a manufacturer must begin dealing directly with customers rather than relying on retailers direct relationships with customers
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Study Questions
Q1 How do companies use e-commerce?
Q2
Q3 Q4 Q5 Q6 Q7 Q8
What technology is needed for e-commerce?

How can information systems enhance supply chain performance? Why is Web 2.0 important to business? How can organizations benefit from social networking? How can organizations benefit from Twitter? What are the benefits and risks of user generated content (UGC)? 2020?
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Three-tier Architecture
Each tier relates to a particular class of computers
1. User tier uses personal computers and browser software that requests and processes Web pages. Web page documents are coded in HTML and are transmitted using HTTP protocols. 2. Server tier uses Web server computers and processes application programs that help manage HTTP traffic between Web servers and users. 3. Database tier uses computers that run a DBMS to process SQL requests for retrieving and storing data.
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Commerce Server and Web Farm

Commerce server is part of server tier An application program that receives requests from users via a Web server. When the program receives a request, it takes some action, like coordinating a customer checkout process, and then returns a response to the user via a Web server. A Web farm is a facility that houses numerous Web server computers.
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How Three-tier Architecture Operates
Fig 8-5 Three-Tier Architecture

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Sample of Commerce Server Pages: Product Offer Pages
Examples of Web pages on an e-commerce Web site
Fig 8-6(a) Sample of Commerce Server Pages
Fig 8-6(b) Shopping Cart Page

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Hypertext Markup Language (HTML)

Language used to structure the layout of Web pages HTML includes these elements:
Tagsnotation that defines a data element <h2> and </h2> are tags that indicates that text will be formatted as a level two heading. Hyperlinks Serve as pointers to other Web pages. They include a URL for another document within same Web site or a different Web site. http://www.prenhall.com/kroenke is a hyperlink to another Web site. Attributes provide properties for tags. In the sample HTML document on the next slide, the attribute href= provides the value of the hyperlink that follows.
HTML Document (Left) Rendered (Right) Using Internet Explorer
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eXtensible Markup Language (XML)

HTML is workhorse for Web pages and e-commerce sites. HTML is effective when one party is human. But what if two computer programs want to exchange data? HTML has major disadvantages that are overcome with a different markup language called XML. XML tutorial
Whats Wrong with HTML?

1. HTML tags have no consistent meaning, therefore are used inconsistently. 2. HTML has a fixed number of tags and no way for users to define new ones. 3. HTML mixes format, content, and structure rather than separating them.
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How Does XML Fix These Problems?

Provides superior means for computer programs to exchange documents Requires content, structure, and format be separated into different documents Document designers can create custom tags and specify arrangement of tags in metadata. Metadata stored in XML schema document A computer program can read content document to find data to process, it can reference a metadata document to verify that content is correct and complete, and it can use a formatting document to transform content into a particular form that it needs.
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How Can Suppliers Use XML?

Improve efficiency of operations of distributors and suppliers REI prepares inventory count document according to its own design. Browser checks design against its XML Count_schema. REI shares its XML schema with its suppliers. Suppliers can use Count_schema to validate orders are from REI. Automates process of sending, receiving, and validating order data
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How Can Industries Use XML?
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How Can Industries Use XML?
New Figure 8-8 here
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Study Questions
Q1 Q2 How do companies use e-commerce? What technology is needed for e-commerce?
Q3
Q4 Q5 Q6 Q7 Q8
How can information systems enhance supply chain performance?

Why is Web 2.0 important to business? How can organizations benefit from social networking? How can organizations benefit from Twitter? What are the benefits and risks of user generated content (UGC)? 2020?
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Generic Supply Chain
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REI Supply Chain Example
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Four Drivers of Supply Chain Performance: Facilities, Inventory, Transportation, and Information
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Information Influences Supply Chain Performance Three Ways:

1. Purpose: transactional or informational? 2. Availability: ways in which information is shared 3. Means: methods used to transmit information E-commerce systems commonly use three-tier architecture with HTML and XML. Increasingly such systems are using SOA standards as means as well.
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How Does Supply Chain Profitability Differ from Organizational Profitability?

Supply chain profitability is determined by calculating the difference between revenue generated by a supply chain and costs that all organizations in supply chain incur to obtain that revenue.
Maximum profit to a supply chain will not occur if each organization in a supply chain maximizes its own profits in isolation from other participants in supply chain.
Usually, profitability of supply chain increases if one or more organizations operate at less than its own maximum profitability.
What Is the Bullwhip Effect?

Bullwhip effect occurs when variability in size and timing of orders increases at each stage up chain. Distributors, manufacturers, and suppliers must carry larger inventories than necessary to meet real demand because of large fluctuations in orders. Reduces overall profitability of supply chain Can be eliminated by giving all supply chain participants consumer-demand information directly from retailers through interorganizational information systems
Fig 8-13 The Bullwhip Effect

Study Questions
Q1 Q2 Q3 How do companies use e-commerce? What technology is needed for e-commerce? How can information systems enhance supply chain performance?
Q4
Q5 Q6 Q7 Q8
Why is Web 2.0 important to business?

How can organizations benefit from social networking? How can organizations benefit from Twitter? What are the benefits and risks of user generated content (UGC)? 2020?
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What Is Web 2.0?

Specific meaning of Web 2.0 is hard to pin down. Generally refers to a loose grouping of capabilities, technologies, business models, and philosophies. Comparison of Web 2.0 to traditional processing
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Software as a (Free) Service (SaaS)

Software as a Service, part of the Web 2.0 movement, changes traditional thinking about how software is created, provided to users, and used to create value. Its characteristics include:
Uses thin-client programs in browsers Bulk of processing occurs on servers throughout the Internet Companies rely on advertising or revenue rather than license fees. Perpetual beta software because features and functions constantly changing SaaS companies clash with traditional software vendors that rely on traditional software programs to provide the bulk of their revenue. Relies on viral marketing. Users spread word about its virtues rather than the company that provides it. More a Web 2.0-based site is used, the more value it attains
Other Characteristics of Web 2.0

Value of site increases with users and use Organic user interface and mashups Participation and ownership differences Traditional Web sites are about publishing Web 2.0 is about participation Traditional Web site lock down all legal rights to content Web 2.0 sites lock down only some rights
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How Can Businesses Benefit from Web 2.0?

Advertising is specific to user interests. Two popular programs from Google are: AdWords in which advertisers pay for particular search words. AdSense in which Google inserts ads on a Web site that match content on site. When someone clicks on the ad, Google pays site owner a fee. Providing social networking services that connect people with similar interests Providing mashups between a business and its partners which combine content of their products. Watch a movie, see a piece of jewelry you like, click on a link, and purchase the product.
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Study Questions
Q1 How do companies use e-commerce? Q2 What technology is needed for e-commerce? Q3 How can information systems enhance supply chain performance? Q4 Why is Web 2.0 important to business?
Q5 How can organizations benefit from social networking?

Q6 How can organizations benefit from Twitter? Q7 What are the benefits and risks of user generated content (UGC)? Q8 2020?
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Fundamentals of Social Networking

Social networking (SN)interaction of people connected by friendship, interests, business association, or other common trait and supported by Web 2.0 technology SN support N:M communication and social collaboration
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Viral Marketing with SN

Traditional marketing at MRV
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News About You Registering for MRV Trip Broadcast to Your Friends
Social Network Marketing at Majestic River Ventures
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You, Your Friends, Their Friends, and so on Form a Relationship with MRVs SN
Viral Social Network Marketing Possibility
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Sample Viral Social Network Marketing Outcome
Figure CE15-6
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How Can Businesses Utilize Social Networking Groups?

Types of SN groups 1. Publicanyone can find the group by searching and anyone can join it. 2. Invitationanyone can find the group by searching, but he or she must be invited to join. 3. Privatethe group cannot be found by searching, and members must be invited to join. Businesses can use SN groups to strengthen relationships among customers and to create possibility of viral marketing.
How Can Businesses Utilize Social Networking Groups?

Traditional business communication is unreliable. SN communication is more reliable. Viral messaging reaches more people, faster, cheaper, and more personal. MRV could expand its viral marketing by inducing (viral hook) customers to get their friends to form a relationship with MRV.
Finding proper viral hook is critical
Common ways companies form SN relationships with customers are groups and applications.
Strengthening Relationships Among Customers to Create Viral Marketing Opportunities

Invitation or private group
MRV could invite the customer to group for each river trip. Place photos and videos of prior trips on Web site Provide equipments lists, advice tips, weather forecasts Start discussion lists among guides and group members before trips Members could post pictures, videos, documents, reflections
Create pubic version for alumni to share with friends
Management use of SN: Groups of employees use SN to build cohesion with their teammates.
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Strengthening Ties with Social Networking
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How Can Businesses Utilize Social Networking Applications?

Social networking application
A computer program that interacts with and processes information in a social network Examples:
Survey Hurricane, a Facebook application created by Infinistorm (www.infinistorm.com).
Users who install that application on their page can survey their friends on topics of interest.
New York Times quiz Applications for buying and selling items, comparing movies, and so on
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SN Applications Run on Servers

When you run an application on a Facebook page, Facebook passes your application request, via a service, to application vendors server. Application service issues callbacks to Facebook (or other SN vendors) to create friend requests, find your existing friends, generate email, make requests, poke your friends, or take other actions. Can collect data about you and your friends for individualized marketing or for data mining
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MRV SN Application
Figure 8-19
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SN Application vs. Web Sites

Share many features and functions Why have SN?
Depends on degree to which the application requires a social graph Does application use or benefit from N:M communication? Is there a need for social collaboration? Is there a need for feedback and iteration?
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Study Questions
Q1 How do companies use e-commerce? Q2 What technology is needed for e-commerce? Q3 How can information systems enhance supply chain performance? Q4 Why is Web 2.0 important to business? Q5 How can organizations benefit from social networking?
Q6 How can organizations benefit from Twitter?

Q7 What are the benefits and risks of user generated content (UGC)? Q8 2020?
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Microblogs
Hundreds of businesses are now using Twitter for legitimate business purposes. Twitter is a microbloga Web site where users can publish their opinions. More people microblog than blog because it is less intimidating. You dont have space to spell well or write a well constructed paragraph. Microblog competitors to Twitter are emerging.
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We Are All Publishers Now

Microblogs make everyone a publisher. Anyone can join, for free, and immediately publish ideas, worldwide. Microblogging enables two-way publishing, worldwide. Microblogging enables users with like minded interests to find one another.
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How Can Businesses Benefit from Microblogging?

Three business applications have emerged so far: 1. Public Relations Product manager whos excited about a new use for his product. He can publish the idea and a summary of instructions. Coaches can increase fan awareness by blogging with insider details, how the practice went, comments about the recent game, and so forth. New public relations capability are stressing existing institutions.

2. Relationship Sales Pure sales pitches are ineffective when microblogging. People stop following sources that only publish ads and sales pitches. Instead, people look for tweeters who offer something they value such as advice, links to resources, and interesting and thought-provoking opinions. Twitter Revolution: How Social Media and Mobile Marketing is Changing the Way We Do Business and Market Online. Warren Whitlock and Deborah Micek. Xeno Press, 2008.

3. Market Research Want to know what people think of your product? Search Twitter to find out.
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Study Questions
Q1 How do companies use e-commerce? Q2 What technology is needed for e-commerce? Q3 How can information systems enhance supply chain performance? Q4 Why is Web 2.0 important to business? Q5 How can organizations benefit from social networking? Q6 How can organizations benefit from Twitter?
Q7 What are the benefits and risks of user generated content (UGC)?
Q8 2020?
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Common Types of UGC and Discusses Their Business Applications

Ratings and surveys Opinions Customer stories Discussion groups Wikis Blogs Video Crowdsourcing specialty (Spore-create creator)
Benefits of UGC
SN users are three times more likely to trust peers opinions over advertiser claims. Increases loyalty to company site and brand loyalty Increases brand involvement, interaction, intimacy, influence Discussion groups share advice and assistance. Provides useful information for product marketing and development
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UGC Applications
Figure 8-21
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Crowdsourcing
Crowdsourcing organizations involve their users in the design and marketing of their products. For example, as shown in Figure 8-24, shoe startup company RYZ (ryzwear.com) sponsors shoe design contests to help it understand which shoes to create and how to market those designs. Crowdsourcing combines social networking, viral marketing, and open-source design, saving considerable cost while cultivating customers. With crowdsourcing, the crowd performs classic in-house market research and development and does so in such a way that customers are being set up to buy.
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Design by Crowdsourcing
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UGC Videos
YouTube is famous for hosting UGC videos provided as bait for advertising. Finally, some sites include UGC as part of the product. The magazines Fine Woodworking and Wooden Boat both include UGC video as part of their product offerings
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Impact of UGC
Increases conversion rates Conversion rates are higher for products with lessthan-perfect reviews than for products with no reviews at all. UGC to post answers to questions, articles, best practices, blogs, code samples, and other resources Return rates fall dramatically as number of product reviews increases Videos provide bait for advertising Some sites include UGC as part of the product
Risks of Using Social Networking and User-Generated Content?

Junk and crackpots Inappropriate content Unfavorable reviews Mutinous movements Dependency on SN vendor
Vulnerable to reliability and performance Vendor may own content Vendor may remove site
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Study Questions
Q1 Q2 Q3 Q4 Q5 Q6 Q7 How do companies use e-commerce? What technology is needed for e-commerce? How can information systems enhance supply chain performance? Why is Web 2.0 important to business? How can organizations benefit from social networking? How can organizations benefit from Twitter? What are the benefits and risks of user generated content (UGC)?
Q8
2020?
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2020?
Expect that technology will enable voice and video to be integrated into social networking. Speak your tweets and have a program translate your voice message into text? Jott.com already offers a limited version of that service. Tweet your video? 12Seconds.TV What will social networking do to management? What will microblogging do to employee evaluation and compensation? What will happen to language? Writing skills?
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Ethics Guide: Hiding the Truth?

Is it unethical to post a false picture or false information about yourself on Facebook? Is it unethical for you to encourage your employees to write positive reviews about MRV? One of those clients writes a poor review of your firm because of a bad experience. Is it ethical for you to delete that review from your site? You think you were wrongly terminated by MRV. To get even, you use Facebook to spread rumors to your friends (many of whom are river guides) about the safety of MRV trips. Are your actions unethical? Are they illegal?
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One employee invites his MySpace friends to a party at which he shows photos of prior rafting trips. On the way to the party, one of the friends has an automobile accident and dies. His spouse sues Majestic. Should you be held accountable? Does it matter if you knew about the presentation? Would it matter if you had not encouraged your employees to be creative?
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You create a Facebook account for someone youve known for many years and have dozens of photos of, some of which were taken at parties and are unflattering and revealing. You post those photos along with critical comments that she made about clients or employees. Most of the comments were made when she was tired or frustrated, and they are hurtful, but because of her wit, also humorous. You send friend invitations to people whom she knows, many of whom are the target of her biting and critical remarks. Are your actions unethical?
Guide: Blending the Personal and the Professional

Many businesses are beginning to use social networking sites like Facebook, MySpace, and Twitter for professional purposes. Every business social function is a business function, so even sharing photos and pages of work softball team begins to blur the personalprofessional boundary. Our work is portable and always onand judged by results, not hours logged. In a work universe like that, the lines sort of slowly and inevitably blur You should be careful if youre in the introductory months of a new job.
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GUIDE: Interorganizational Information Exchange

Basic guidelines for participating in business meetings with people in other firms: Apply stronger limits on your conversation than when you meet with employees in your own firm Assume that whatever you say to an employee of another company could be general knowledge in your industry the next day Reveal exactly what you must and no more Have a clear and common understanding of the purpose of the meeting Understand your organizations policy concerning nondisclosure agreements before the meeting starts
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GUIDE: Interorganizational Information Exchange

Stick to the purpose of the meeting. Avoid conversations about your company or about third parties that do not relate to the meeting topic. There is simply no reason, other than carelessness or stupidity, to discuss topics with another company that do not relate to the matter at hand. Dont embarrass yourself or the employees of the other company by discussing in a public place anything other than the weather
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Active Review
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 How do companies use e-commerce? What technology is needed for e-commerce? How can information systems enhance supply chain performance? Why is Web 2.0 important to business? How can organizations benefit from social networking? How can organizations benefit from Twitter? What are the benefits and risks of user generated content (UGC)? 2020?
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Case Study 8: You, Inc.

Interorganizational information systems enable small businesses to avoid time and expense of building infrastructure, thus reducing capital requirements and shortening time to market. People often pay more for new items on eBay than they would pay if they shopped for bargains on Internet. There is often an inefficiency in flow of price information among eBay users. Using the Internet, you find sources for motorcycle parts. Sourcing is a typical supply-chain activity; and by using the Internet, you have avoided hiring someone else to do this work for you.
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You search for sites that offer products you want, have free shipping, and (if possible) you do not need to pay taxes. When you find an item offered at a bargain price, you set up an auction for that item on eBay. You have not yet purchased the item; you just know where you can buy it. Set a price and terms of auction so whatever price the item sells, you will make some profit You download pictures of item from your vendor and copy those photos into your auction. Your only financial exposure if the item does not sell is the cost of the auction.
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The item sells. You then buy it from the vendor. Pay for it using PayPal or a credit card Have vendor ship the item directly to your customer, a process called drop shipping. If you pay with a credit card, it is possible you will receive payment from your customer before you pay for the item you sold. Because the item is new, and because you sell only highquality items, all service and support are handled by manufacturer.
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Review This Scenario in Terms of Porters Value Chain Model Primary value chain activities
You did market research, but you outsourced all of the data-gathering activities to eBay, PriceGrabber, and so on. Set up the auction on eBay, and thus outsourced the sales infrastructure to eBay Did product-sourcing yourself with considerable help from the Internet Outsourced all inventory, operations, and shipping activities to vendor If customer pays before you pay your credit card, you can even earn interest on customers money. Outsourced service and support to manufacturer
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Support activities
Avoided building infrastructure, you have only one part-time employee, yourself; you have no payroll or other compensation needs. Want insurance? If you sell enough using eBay you can buy life and medical insurance from eBay at attractive terms. Accounting: eBay, PayPal, credit card company, and vendor do most of the work. All you do is maintain records to track your income for tax reporting. You can even pay your taxes online.
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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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Using MIS 3e Chapter 8

E-Commerce and Web 2.0 David Kroenke

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How do companies use e-commerce?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Do Companies Use E-commerce?

Fig 8-1 E-Commerce Categories

Types of Merchant E-Commerce Companies

Fig 8-2 Example of Use of B2B, B2G, and B2C

Types of Nonmerchant E-commerce Companies

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Does E-Commerce Market Efficiency?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

What Economic Factors Disfavor E-Commerce?

3. Increased logistics expenses

4. Increased customer-service expenses

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

What technology is needed for e-commerce?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Commerce Server and Web Farm

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Three-tier Architecture Operates

Fig 8-5 Three-Tier Architecture

Sample of Commerce Server Pages: Product Offer Pages

Examples of Web pages on an e-commerce Web site

Fig 8-6(a) Sample of Commerce Server Pages

Fig 8-6(b) Shopping Cart Page

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Hypertext Markup Language (HTML)

HTML Document (Left) Rendered (Right) Using Internet Explorer

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

eXtensible Markup Language (XML)

Whats Wrong with HTML?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Does XML Fix These Problems?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Can Suppliers Use XML?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Can Industries Use XML?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Can Industries Use XML?

New Figure 8-8 here

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How can information systems enhance supply chain performance?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Generic Supply Chain

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

REI Supply Chain Example

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Information Influences Supply Chain Performance Three Ways:

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

How Does Supply Chain Profitability Differ from Organizational Profitability?

What Is the Bullwhip Effect?

Fig 8-13 The Bullwhip Effect

Why is Web 2.0 important to business?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

What Is Web 2.0?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Software as a (Free) Service (SaaS)

Other Characteristics of Web 2.0

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall