1. Principles of Information Systems
Chapter 8
Electronic and Mobile Commerce

2. 2
Principles and Learning Objectives
• Electronic commerce and mobile commerce are
evolving, providing new ways of conducting
business that present both opportunities for
improvement and potential problems
– Describe the current status of various forms of e-
commerce, including B2B, B2C, and C2C
– Outline a multistage purchasing model that
describes how e-commerce works
– Define m-commerce and identify some of its unique
challenges

3. 3
Principles and Learning Objectives
(continued)
• E-commerce and m-commerce can be used in
many innovative ways to improve the operations of
an organization
– Identify several e-commerce and m-commerce
applications
– Identify several advantages associated with the use
of e-commerce and m-commerce

4. 4
Why Learn About Electronic and Mobile
Commerce?
• Most organizations have an Internet presence
– Sales/marketing manager involved with e-commerce
– Customer service employees help develop the Web
site
– Human resource or public relations manager may
provide Web content for employees and investors
• Must learn about e-commerce and m-commerce

5. 5
An Introduction to Electronic
Commerce
• Electronic commerce: conducting business
activities electronically over computer networks
• Types of business activities that are strong
candidates for conversion to e-commerce
– Paper based
– Time-consuming
– Inconvenient for customers

6. 6
Business-to-Business (B2B)
E-Commerce
• Subset of e-commerce
• All the participants are organizations
• Useful tool for connecting business partners in a
virtual supply chain to cut resupply times and
reduce costs

7. 7
Business-to-Consumer (B2C)
E-Commerce
• Form of e-commerce in which customers deal
directly with an organization and avoid
intermediaries
– Squeezes costs and inefficiencies out of supply
chain
– Can lead to higher profits
– Can lead to lower prices for consumers
• E-commerce via the Internet
– Many goods and services are cheaper online
– The Internet allows consumers to easily compare
prices, features, and value

8. 8
Consumer-to-Consumer (C2C)
E-Commerce
• Subset of e-commerce that involves consumers
selling directly to other consumers
• Example: eBay
– Customers buy and sell items directly to each other
through the site
– 181 million users buy and sell items valued at more
than $44 billion
• Other popular online auction Web sites: Craigslist,
uBid, Yahoo! Auctions, Onsale, and WeBidz

9. 9
E-Government
• Use of information and communications technology
to simplify the sharing of information, speed
formerly paper-based processes, and improve the
relationship between citizen and government
• Forms of eGovernment
– Government-to-consumer (G2C)
– Government-to-business (G2B)
– Government-to-government (G2G)

10. 10
Multistage Model for E-commerce
Figure 8.1: Multistage Model for E-Commerce (B2B and B2C)

11. 11
Multistage Model for E-commerce
(continued)
Figure 8.2: Product and Information Flow for HP Printers Ordered over the Web

12. 12
E-Commerce Challenges
• Defining an effective e-commerce model and
strategy
– Community, content, and commerce
• Changing distribution systems and work processes
to manage shipments of individual units directly to
consumers
– B2C systems must be able to handle split-case
distribution
• Integrating Web-based order processing with
traditional systems

13. 13
E-Commerce Challenges (continued)
Figure 8.3: Three Basic Components of a Successful E-Commerce Model

14. 14
E-Commerce Challenges (continued)
Figure 8.4: Web-Based Order Processing Must Be Linked to Traditional
Back-End Systems

15. 15
An Introduction to Mobile Commerce
• Mobile commerce (m-commerce) relies on the use
of wireless devices, such as personal digital
assistants, cell phones, and smart phones, to place
orders and conduct business
• Handset manufacturers are working with
communications carriers to develop appropriate
wireless devices, related technology, and services
• Content providers and mobile service providers are
working together more closely than ever

16. 16
Mobile Commerce in Perspective
• Only 12 to 14 percent of the world’s 1.8 billion
mobile phone users have ever used the Web from
their phones
• Internet Corporation for Assigned Names and
Numbers (ICANN) created a .mobi domain to help
attract mobile users to the Web
• Market for m-commerce in North America is
maturing much later than in Western Europe and
Japan

17. 17
Technology Needed for Mobile
Commerce
• Improved interface between the wireless device
and its user
• Improved network speed
• Security
– Encryption, digital certificates
• Web applications that are accessible for handheld
users

18. 18
Technology Needed for Mobile Commerce
(continued)
• Wireless application protocol (WAP): standard
set of specifications for Internet applications that
run on handheld, wireless devices
– Effectively serves as a Web browser for such
devices
– Uses the Wireless Markup Language (WML), which
is designed for effectively displaying information on
small devices

19. 19
Electronic and Mobile Commerce
Applications
• Many B2B, B2C, C2C, and m-commerce
applications are being used in:
– Retail and wholesale
– Manufacturing
– Marketing
– Investment and finance
– Auction arenas

20. 20
Retail and Wholesale
• Electronic retailing (e-tailing): direct sale from
business to consumer through electronic
storefronts
– Electronic storefronts are typically designed around
an electronic catalog and shopping cart model
• Cybermall: single Web site that offers many
products and services at one Internet location
• Manufacturing, repair, and operations (MRO)
goods and services

21. 21
Manufacturing (continued)
Figure 8.5: Model of an Electronic Exchange

22. 22
Investment and Finance
• Online stock trading
– Online tools for doing research and analysis
• Online banking
– Customers can check account balances, transfer
money among accounts, pay bills, etc.
– Electronic bill presentment

23. 23
Auctions
• eBay
– Has become synonymous with online auctions
– Customer complaints: increased fees and problems
with unscrupulous buyers
– Constantly trying to expand and improve its services:
Skype, Verisign
• Hundreds of other online auction sites
– Example: Priceline.com

24. 24
Anywhere, Anytime Applications of
Mobile Commerce
• M-commerce devices are ideal for accessing
personal information and receiving targeted
messages for a particular consumer
• Through m-commerce, companies can establish
one-to-one marketing relationships with individual
consumers anytime and anywhere
• The most successful m-commerce applications suit
local conditions and people’s habits and
preferences
• Examples: banking, stock trading, information
services, retail, advertisements

25. 25
Advantages of Electronic and Mobile
Commerce
• Global reach: helps reduce gap between rich and
poor countries
• Reduces costs: increases speed and accuracy
• Speeds the flow of goods and information
• Increases accuracy: eliminates human data-entry
error
• Improves customer service: information about
delivery status and ability to meet customer
demand

26. 26
Threats to Electronic and Mobile
Commerce
• Businesses must ensure that e-commerce and m-
commerce transactions are safe and consumers
are protected
• Number of threats to the continued growth of e-
commerce and m-commerce
– Security, theft of intellectual property, fraud, invasion
of privacy, lack of Internet access, return on
investment, legal jurisdiction, taxation

27. 27
Security
• Methods to increase security
– Payment Card Industry security standard
– Address Verification System
– Card Verification Number technique
– Visa’s Advanced Authorization process
– Federal Financial Institutions Examination Council’s
“Authentication in an Internet Banking Environment”
guidelines
– Biometric technology

28. 28
Theft of Intellectual Property
• Intellectual property: works of the mind that are
distinct somehow and are owned or created by a
single entity
– For example: books, films, music, processes, and
software
• Copyright law protects authored works such as
books, film, images, music, and software from
unauthorized copying
• Patents can protect software, business processes,
formulae, compounds, and inventions

29. 29
Lack of Internet Access
• Digital divide: difference between people who do
and people who don’t have access or capability to
use high-quality, modern information and
communications technology to improve their
standard of living
– Exists between:
• More and less developed countries
• Economic classes
• The educated and uneducated
• Those who live in cities and those who live in rural
areas

30. 30
Legal Jurisdiction
• When conducting e-commerce, sales must not
violate county, state, or country legal jurisdictions
• Examples
– Selling stun guns and similar devices
– Selling cigarettes or alcohol to underage customers

31. 31
Strategies for Successful
E-Commerce
• Companies must develop effective Web sites that
include the following characteristics:
– Easy to use
– Accomplish the goals of the company
– Safe and secure
– Affordable to set up and maintain

32. 32
Establishing a Web Site
• Web site hosting companies
– Allow you to set up a Web page and conduct e-
commerce within a matter of days
– Little up-front cost
• Storefront broker: companies that act as
middlemen between your Web site and online
merchants that have the products and retail
expertise

33. 33
Building Traffic to Your Web Site
• Obtain and register a domain name
• Make your site search-engine-friendly
– Meta tag: special HTML tag that contains keywords
representing your site’s content
• Keywords are used by search engines to build
indexes pointing to your Web site
• Web site traffic data analysis software
• Adapting Web site design for global consumers

34. 34
Technology Infrastructure Required To
Support E-commerce and
M-commerce
• Successful implementation of e-business requires
significant changes to existing business processes
and substantial investment in IS technology
• Poor Web site performance drives consumers to
abandon some e-commerce sites in favor of those
with better, more reliable performance

35. 35
Technology Infrastructure Required To
Support E-commerce and
M-commerce (continued)
Figure 8.6: Key Technology Infrastructure Components

36. 36
Hardware
• Storage capacity and computing power required of
the Web server depends on:
– Software that will run on the server
– Volume of e-commerce transactions
• E-commerce solutions should be designed to be
highly scalable

37. 37
E-Commerce Software
• E-commerce software tools
– Catalog management: provides standard format
– Product configuration: build product online to meet
user needs
– Shopping cart facilities
– Transaction processing
– Web traffic data analysis
– Web services: software modules supporting specific
business processes that users can interact with over
a network as needed

38. 38
E-Commerce Software (continued)
Figure 8.7: Electronic Shopping Cart

39. 39
Electronic Payment Systems
• Digital certificate: attachment to an e-mail
message or data embedded in a Web page that
verifies the identity of a sender or a Web site
• Certificate authority (CA): trusted third party that
issues digital certificates
• Secure Sockets Layer (SSL): communications
protocol used to secure sensitive data
• Electronic cash: amount of money that is
computerized, stored, and used as cash for e-
commerce transactions

40. 40
Electronic Payment Systems
(continued)
• Credit card
• Charge card
• Debit card – (bank card or check card)
• Smart card: a credit card–sized device with an
embedded microchip to provide electronic memory
and processing capability
Debit Card Charge Card Credit Card

41. 41
Summary 
• Electronic commerce (or e-commerce): conducting
business activities electronically over computer
networks
• Types of e-commerce: business-to-consumer
(B2C), business-to-business (B2B), and consumer-
to-consumer (C2C)
• E-Government: use of information and
communications technology to simplify the sharing
of information, speed formerly paper-based
processes, and improve the relationship between
citizen and government

42. 42
Summary (continued) 
• Multistage model for e-commerce: includes search
and identification, selection and negotiation,
electronic purchasing, delivery, and after-sales
service
• Mobile commerce (m-commerce): uses wireless
devices to place orders and conduct business
• B2B, B2C, C2C, and m-commerce applications are
being used in retail and wholesale, manufacturing,
marketing, investment and finance, and auction
arenas

43. 43
Summary (continued)
• Issues affecting growth of e- and m-commerce:
security, theft of intellectual property, fraud,
invasion of consumer privacy, lack of Internet
access, return on investment, legal jurisdiction, and
taxation
• An effective Web site should be easy to use,
accomplish the goals of the company, be safe and
secure, and be affordable to set up and maintain
• Successful implementation of e-business requires
significant changes to existing business processes
and substantial investment in IS technology