WESTERN COLLEGES INC.

NAIC CAVITE

“E-Commerce Internet Marketing”

Submitted by:
Piedraverde, Cyril A.
BSBA-3

Submitted to:
Ms. Victoria O. Ordoñez
Professor

SUMMER CLASS 2019

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 CHAPTER 1 – OVERVIEW OF ELECTRONIC COMMERCE
1. EC, Electronic commerce, is the process of buying, selling, or exchanging products, services, and
information, via computer networks, mostly the Internet.
E-business refers to a broader definition of EC that includes servicing customers, collaborating with
business partners, and conducting electronic transactions within an organization.
E-Commerce is just a part of E-Business
2. The major benefits of EC are:
Organizational (sellers).
- EC expands the market place with minimum capital outlay.
- More customers can be reached and there are more suppliers to buy from.
- EC allows low inventories, customized products/services, reduced cycle time, better customer
service, and lower communication cost.
Consumer.
- Shop from anywhere anytime.
- Get a large variety of products from many countries.
- Usually pay less.
- Can get customized products/services.
- Can search quickly for detailed information.
Societal.
- Less traffic, pollution, improved public services, improved quality of life.
3. The major technological limitations are: security, reliability, standards and protocols (need to be
improved) and insufficient bandwidth.
Intangible – non-technological limitations are: lack of trust, resistance to change, not enough support
services, accessibility problems.
4. The major EB activities that are taken by organizations:
- continuous productivity improvements,
- forming business alliances
- development of top quality electronic commerce applications,
- BPR (business process restructuring) by utilization of strategic IS (CRM, SCM, ERP,
Intranets/Extranets),
5. An intranet is an enterprise internal network which uses Internet technology (TCP/IP protocol, search
engines, browsers, etc). An extranet is a secured network that uses the Internet infrastructure to connect
the intranets of business partners, or to allow customers and others to access a corporate intranet.
6. Intranet/Extranet web site also known as a corporate portal is a network configuration in which
employees, business partners, and the public can access corporate information, communicate, and
collaborate.
The main types of EC are:
- E2E – Exchange-to-exchange – A system that connects electronic exchanges to each other.
- C2C – Consumer-to-consumer – A category of electronic commerce in which consumers sells
directly to other consumers. Examples include online auction sites, such as e-bay.
- G2C – Government-to-citizens – A category of electronic commerce in which a government
organization buys or sells goods, services, or information to businesses and citizens.
- B2B – Business-to-business – A category of electronic commerce in which all of the participants are
businesses or other organizations (e.g., non-profit).
- B2C – Business-to-consumer – A category of electronic commerce in which businesses sell goods
or services directly to the consumer.
Mobile commerce, also called M-commerce, occurs when electronic commerce is conducted via wireless
communications (i.e., cellular phones and personal digital assistants).

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 CHAPTER 2 – THE DIGITAL ECONOMY
Learning Objectives
1. Describe the major characteristics of the digital economy
2. Compare marketplaces with marketspaces
3. Describe the nature of competition in marketspaces
4. Describe some economic rules of the digital economy
5. Describe the impacts of the digital economy on trading and intermediaries
6. Describe the impacts of the digital economy on business processes and functional areas in organizations

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7. Understand the role of m-commerce in the digital economy
The Digital Economy
- Complete change of business models and strategies for success in digital economy
- Web-based IT and EC facilitate competitive advantage
- Global competition: price, quality, service
- Extensive networked computing infrastructure is expensive
- Web-based applications provide customer service, online selling, and procurement support
- Innovative systems must be patented
Digital Economy Defined
- Also Known As: Internet economy, new economy, Web economy
- Economy based largely on digital technologies
- Software - Related information technologies
- Digital communication networks (Internet, intranets) - Computers
- Economic revolution
- Unprecedented economic growth (USA)
- IT growth more than doubles that of overall economy
- Provided over ¼ of total economic growth
- Longest period of uninterrupted economic expansion in history
- High-paying jobs
- Very low to negative unemployment in IT industry
Marketspaces vs. Marketplaces
- Marketplace: 3 main objectives
1. Match buyers and sellers
2. Facilitate exchange of information, goods, services, payments (transactions)
3. Provide institutional infrastructure enabling efficient functioning of the market
- EC in the marketplace
- Increased efficiencies
- Decreased cost of executing business functions
- Marketspaces: electronic marketplaces (especially Internet-based)
- Changed processes used in trading and supply chains
- Changes driven by IT
- Increased effectiveness
- Lower transaction and distribution costs
- More efficient markets
- Doing business with EC
- Gathering information
- Selecting information
- Synthesizing information
- Distributing information
- Doing business in the real world
- Process raw materials
- Distribute raw materials
Components of Digital Ecosystems
- Digital products
- Information and entertainment products
- Paper-based products: books, newspapers, magazines
- Product information: catalogs, training manuals
- Graphics: photographs, maps, calendars
- Video: movies, TV programs
- Software: programs, games, development tools
- Symbols, tokens, icons

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 - Tickets and reservations: airline, concert
- Financial instruments: checks, credit cards, electronic currencies
- Processes and services
- Government services: forms, benefits, licenses - E-messaging: letters, faxes
- Business processes: ordering, inventorying - Auctions: bidding, bartering
- Others
- Consumers
- Search for detailed information - Compare products/prices
- Bid or negotiate prices
- Sellers
- Innumerable products and services available
- Web sites, marketplaces
- Intermediaries
- Create and manage online markets - Match buyers and sellers
- Provide infrastructure services - Aid transactions
- Support services: address implementation issues
- Certification and trust services - Knowledge providers
- Infrastructure companies: provide hardware, software, EC support
- Content creators: create and maintain Web sites
- Business partners: Internet collaboration usually along the supply chain
- Electronic marketplaces
- Exchanges—many-to-many
- Sell-side—one-seller-many-buyers
- Buy-side—one-buyer-many-sellers
- Public—open to all
- Private—open to invited traders only
Competition in Marketspaces
- Competition in the Internet ecosystem (business model of the online economy)
- Inclusive with low barriers to entry - Self-organizing
- Old rules may no longer apply
- Competition is tense
- Lower buyers’ search cost - Speedy comparisons
- Differentiation and personalization
- Consumers like differentiation and personalization
- Lower prices - Customer service
- Size of company no longer significant
- Geographical location insignificant
- Language barriers are being removed
- Digital products do not have normal wear and tear
Cost Curve of Regular and Digital Products
- Cost curves
- Bundling products/services
- Buying vs. renting
Issues and Success Factors
- Critical Mass of Buyers & Sellers
- High fixed costs of deploying EC
- Market efficiency
- Development of strong, fair competition
- Quality uncertainty and quality assurance
- Provide free samples
- Return if not satisfied

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 - Pricing on the Internet
- Determines: sales volume, market share, product profitability
- Price discrimination: different prices to different buyers through customization of products
- Product differentiation: price based on value to the customer, not cost of production
- Online vs. off-line pricing
- Click-and-mortar—available online and off-line
- Brokerage houses—50% commission discount for online trades
- Economic Impacts of EC
- Production function—can substitute capital for labor for same quantity of production
- Lower the labor needed, higher required investments
- EC lowers amount of labor/capital needed to produce the product
- Contributors to E-market success
- Product characteristics
- Type: digitized, non-digitized
- Price
- Standards and product information available allows sale of most items: cars, computers,
groceries
- Industry characteristics
- Brokers currently necessary
- Intelligent systems may replace brokers
- Seller characteristics
- Consumers find sellers with the lowest prices
- Low-volume, higher-profit-margin transactions
- Consumer characteristics
- Impulse buyers
- Patient buyers
- Analytical buyers
 Impacts on Trading Processes and Intermediaries
- Industry structure
- Consumers are aware of competitor’s prices through searches; intermediaries become obsolete
- Digitization of more products; reduction in shipping costs
- Seller and customer activities converge in 1 place
- Marketing
- Order processing

- Distribution
- Payments
- Product development
- Roles and value of intermediaries in e-markets
- Search costs: brokers with access to customer preferences can predict demand for
products
- Lack of privacy: anonymity of buyer and/or seller
- Incomplete information: gathers product information from many sources
- Contracting risk
- Pricing inefficiencies
- Disintermediation and reintermediation
- Disintermediaries: match and provide information
- Reintermediatiaries: provide value-added services (consulting)
- Syndication: sale of the same good to many customers, who integrate it with other offerings and
redistribute it (virtual stock brokers)
- Syndication supply chain
- Syndication of information is critical to the success of EC
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 - Distributors provide free information to consumers and package and sell the same information
- Content creators sell the same information to many syndicators and distributors
- Potential Winners and Losers in EC
- Winners
- Internet access providers - Diversified portal service providers
- EC software companies - Proprietary network owners
- Others
- Winners in EC
- Internet access providers - Diversified portal service providers
- EC software companies - Proprietary network owners
- Others
- Losers in EC
- Wholesalers (particularly small ones) - Brokers
- Salespeople - Nondifferentiated manufacturers
Impact on Business Processes and Organizations
- Improving direct marketing
- Product promotion - New sales channels
- Direct savings - Reduced cycle time
- Customer service - Brand or corporate image
- Other marketing-related impacts
- Customization - Advertising
- Ordering systems - Markets
- Transforming organizations
- Technology and organization learning - Changing nature of work
- Redefining organizations
- New product capabilities - New business models
- Impacts on manufacturing
- Build-to-order
- Impact on finance and accounting
- Human resource management, training, and education
Mobile Commerce
- Applications of M-commerce
- Online stock trading - Ordering and service
- Online banking - Online auctions
- Micropayments - Others
- Online gambling
- A successful vendor
- I-mode customers can
- Receive train timetable - Discount coupons for shopping and restaurants
- Purchase music online - Send or receive photos
- Purchase airline tickets - Locate information about books and buy them

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 CHAPTER 3 – RETAILING IN ELECTRONIC COMMERCE (E-TAILING)
Learning Objectives
1. Define and describe the primary business models of electronic retailing (“e-tailing”)
2. Discuss various e-tail consumer aids, including comparison-shopping aids
3. Discuss various e-tail markets, such as groceries, music, cars, and others
4. Identify the critical success factors of direct marketing and e-tailing, along with mistakes to avoid
5. Identify the principles of “click-and-mortar” strategies for traditional retailers
6. Describe the issue of disintermediation, reintermediation, and channel conflicts in e-tailing
Opening Case
- For E-tailer EC can be classified as B2C or B2B
- Most companies used both classifications.
- B2C business model where customers look for a:
- Low price - Fast shipment
- Good return policy - Helpful customer service
Opening Case: Amazon.com
- Largest Bookstore in the world(billions of books)
- Begin since 1995
- Offers millions of items
- Books and music - DVDs and videos
- Toys and video games - Electronics and software
- Home improvement products
- Started business in 1995
- Sale
- 1996 = $15.7 million
- 2000 = $1.8 billion
- Products
- 1999 = 5 million titles
- 2000 = 13 million books, music, DVD/video titles
- Auctions
- Hosts and operates auctions for individuals and small businesses

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 - zShops, Amazon marketplace, Amazon payment processing
- Provide the opportunity for small businesses to develop custom storefront
- Storefronts are supported by Amazon’s back-end order fulfillment processing
- Key Features of Amazon
- Easy browsing and searching - Useful product information
- Reviews, recommendations, and personalization - Broad selection and low prices
- Secure payment system1 -Click order technology
- Gifts department - Online community
- Secured payments
- Customer relationship management (CRM)
- Creates interesting and informative front-end
- Highly automated and efficient back-end support
- Personalized service
- Return customers are welcomed back by name
- Customer wish lists available
- E-mail customers purchase recommendations based on their purchasing history
- Financial performance
- Overall losses rather than profits
- Ability to move into new areas of business should move them toward profitability, but makes money
from books
- High level of customer service and customer loyalty adds value
- Diversification through business alliances that provide knowledgeable entry into new markets
- Online sale of cars - greenlight.com
- Online health and beauty aids - drugstore.com
- Wireless phones – multiple business partners
- Toys - ToysrUs.com
E-Tailing and B2C Market Growth
- Business-to-business (B2B)
- Requires precise record keeping, trackability, accountability, and formal contracts, usually with high
volume of transactions and large amount payments
- Also online retailing
- Business-to-consumer (B2C)
- Ability to create direct relationships with consumer without intermediaries like distributors, wholesalers,
or dealers
- The early days of retailer used Brochureware with no interactivity
- Physical retailer store or “brick-and-mortar” can combine to online…
- Then become online and offline prsence or “click-and-mortar” (sometime call “brick-and-click”)
- The B2C Market success is derived from:
- Offering quality merchandise at good prices
- Excellent customer service
- Convenience
Some statistic
- During 2001, estimated about 75 million of users participated online shopping
- 2000, worldwide B2C revenue $53 to $238 billion
- 2004, forecasted $428 to $2,134 billion
- Men are likely to purchase consumer electronics and computer HW/SW and Women likely to purchase
apparel items (by Goldman Sachs research)
- Characteristics of goods leading to high online sales volumes
- Brand recognition and guarantees - A guarantee is provided by reliable vendors
- Digitized products - Inexpensive items
- Frequently purchased, inexpensive items - Well-known items with standard specifications

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 - Well-known package item which cannot open even in department store
Consumer Purchase Process and Marketing Plan
- Purchase decision process
- Prepurchase steps
- Awareness of need for purchase
- Identify basic need or want
- Actual purchase
- Establish decision criteria
- Seek recommendations and information
- Make purchase
- Postpurchase steps
- Assistance with installation or setup
- Online help desks and instruction manuals
- Types of online shoppers
- Time-starved consumers: willing to pay higher price to save time on shopping
- Shopping avoiders: dislike shopping, people, traffics
- New technologists: “because it’s cool”
- Time-sensitive materialists or click-and-mortar consumers: use online to look for products, and make a
purchase at traditional store
- Traditionalists: prefer store and may never adapt to online shopping behavior
- Hunter-gatherers: 20% of online shoppers enjoy the process of price comparison and search a good
value
- Brand loyalists: shop online for particular brand
- Single shoppers: 16% of online shoppers prefer internet for shopping, banking, communication, game
playing, news and other activities
Decision Criteria
- Value proposition—customer service, better prices, higher quality
- Personal service—treats the customer as a unique individual
- Convenience—self-contained site that serves all the customer’s needs
- Other criteria—service after the sale, Telephone support 24/7, and return policy
A Marketing Plan
- E-tailer must identical all possible ways to …
- Influence the consumer’s decision process through the “marketing mix”
Product—portfolio of items available
Price of the products
Promotion of products (advertisements and giveaways)
Packaging and delivery, place
Online Purchasing Aids
- Shopping portals: advice and rating products or e- tailers
- Comprehensive portals e.g. shopping.yahoo.com
- Links to many different sellers
- Shopping comparison sites
- Comparison tools are available
- Niche oriented e.g. bsilly.com
- Specialize in a certain line of products (dogtoys.com)
- Some collect referral fee only
- Others have formal relationships with affiliates
- Shopbots and agents—tools that scout the Web for specific search criteria requested by consumers (include
negotiation and auction agents)
- Mysimon.com - best prices on multiple items using SKU (Stock Keeping Unit)
- AutoBytel.com – cars

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 - Zdnet.com/computershopper – computers
- Office.com – office supplies
- Business ratings sites—sites that rate e-tailers
- Bizrate.com—compiles results provided by a network of shoppers
- Gomez.com—consumer identifies relative importance of different criteria
- Trust verification sites—evaluate and verify trustworthiness and integrity of e-tailers
- TRUSTe seal of assurance
- E-tailers pay TRUSTe for use of seal
- Hope consumers use seal as proxy for actual research about their site
- BBBOnLine
- Yearly license fees based on company’s annual revenue
- Secure Assure
- Yearly license fees based on company’s annual revenue
- Ernst and Young
- Created its own service for auditing e-tailers
- Offers some guarantee of integrity of business practices
- Other shopping tools
- Escrow services—3rd party to assure quality
- Proper exchange of money and goods
- Research information
- Payment-processing support
- Communities of consumers
- Epinions.com—searchable recommendations on products
- PriceGrabber.com—comparison shopping
E-Tailing Business Models
- Subscription models: charge monthly or annual subscription fee for service
- Transaction fee models: charge service fee based on the level of transaction offered
- Advertising-supported models: charge fee to advertisers instead of customers
- Sponsorship models: companies sponsor the business through donations (usually supplemental income)
- Direct marketing—sell directly to consumers
- Manufactures can sell directly to customers
- Disintermediation—removal of business process layers in the value chain
- Shortens the distribution chain
- Eliminates inefficiencies
- Shortens delivery time
- Builds closer relationships with consumers
- As Click-and-mortar
- Additional marketing channel to the conventional one
- Effectively supports build-to-order requests
- Pure-play e-tailers—sell over the Internet without a physical sales channel
- General purpose e-tailers (Amazon.com)
- Broad range of products
- Large number of consumers
- Specialty or niche e-tailers (CatToys.com)
- One specific product area
- High demand items in the area
- Effective practices for customer appeal
- Traditional retailers with Web sites
- Physical store
- May include mail-order or catalog sales
- Multichannel store operates both

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 - Physical store
- E-tail site
ODDS: Grocery Market Case
- On-Demand Delivery Services (ODDS): use common carrier to handle outbound logistics/distribution
- Own fleet of delivery vehicles
- Regular deliveries (weekly bases)
- Delivery within short time period (1 hour or same day)
- Potential online grocery shoppers
- Shopping avoiders
- Necessity users—limited by their ability to shop
- New technologists
- Time-starved consumers
- Responsible consumers
- Traditionals
- Repeat customers: provide help for repetitive orders, items
- Example: Parknshop in Hong Kong, peapod.comPrentice Hall, 2002
Digital Delivery
- Digital (“soft”) goods: customer may prefer physical distribution
- Music, movies, videos, software, newspapers, magazines, graphics, etc.
- Can be delivered in “hard” or “soft” form
- Computer program on CD-ROM with owner’s manual and warranty card
- Download from Web site after payment
Digital Goods
- Napster experience—person-to-person sharing tool
- Enables individual users to download music files from each other’s computer
- Phenomenal growth of Napster community
- New version of its file-swapping software includes a “buy button” linked to CDNow
- May be beneficial to overall music sales as individuals easily sample a broader range of music
- New developments: invented on Internet
- Custom-publishing music CD sites—collection of personal favorites in CD shiped to customer
- Disintermediation of traditional print media
- Journals and magazines: paper only subscription, online only subscription or dual-mode
- Newspapers (e.g., Wall Street Journal)
Successful Click-and-Mortar Strategies
- Click-and-mortar hybrid strategies (mature)
- Speak with one voice—link all back-end systems to create an integrated customer experience
- Empower the customer—powerful channel for service and information
- Leverage the channels—offs advantages of each channel to customers from all channels
- Return item purchased online at physical store
- Order via the Web at the physical store items not available there
- Circuit City Case: transform to click-and-mortar (CircuitCity.com) electronic store
- Educates customers about features and capabilities of products
- Customers can perform powerful searches to find most appropriate products
- Offers extensive amount of information on electronics etc., organized very flexibly
- Online purchases are smooth, secure and seamless
- Amazon and Toys R Us: alliance of pure-play with traditional retailer (new model)
- Toys R Us had limited logistics capabilities including distribution centers
- Amazon failed in the toy market lacking supplier relationships with toy manufacturers
- Alliance allows each partner to leverage each other’s core strengths
- Innovative model still working out problems
Disintermediation & Reintermediaries in E-tailing

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- Disintermediation—manufacturer sells directly to consumer so customers need to select among a large number
of manufacturers online
- Reintermediaries—new intermediary roles in the digital environment (online assistance) offer new ways to:
- Reach new customers
- Bring value to customer
- Generate revenues
Channel Conflict & Personalization
- Channel conflict—members antagonistic over:
- Incentives
- Rewards
- Policies
- Support
- Personalization—custom designed marketing plan
- Tailored to buying patterns
- Appeal to sense of value
- Excellent customer service
- Mass customization

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 CHAPTER 4 – ONLINE CONSUMER BEHAVIOR, MARKET RESEARCH AND PROMOTION
Learning Objectives
1. Understand the decision-making process of consumer purchasing online.
2. Describe how companies are building one-to-one relationships with customers.
3. Explain how personalization is accomplished online.
4. Discuss the issues of e-loyalty and e-trust in EC.
5. Describe consumer market research in EC.
6. Describe Internet marketing in B2B, including organizational buyer behavior.
7. Describe the objectives of Web advertising and its characteristics.
8. Describe the major advertising methods used on the Web.
9. Describe various online advertising strategies and types of promotions.
10. Describe permission marketing, ad management, localization, and other advertising-related issues.
Learning about Consumer Behavior and Purchasing Decisions Online
- The Consumer Purchase Decision-making Process
- A Generic Purchasing-Decision Model
- Product brokering - Deciding what product to buy.
- Merchant brokering
- Deciding from whom (from what merchant) to buy a product.
- A Customer Decision Model in Web Purchasing
- Mass Marketing, Market Segmentation, and One-to-one Marketing
- One-to-one marketing - Marketing that treats each customer in a unique way.
Personalization, Loyalty, Satisfaction, and Trust in EC
- Personalization - The matching of services, products, and advertising content with individual consumers
and their preferences.
- User profile - The requirements, preferences, behaviors, and demographic traits of a particular customer.
Major strategies used to compile user profiles:
- Solicit information directly from the user
- Observe what people are doing online
- Cookie - A data file that is placed on a user’s hard drive by a remote Web server, frequently
without disclosure or the user’s consent that collects information about the user’s activities at a
site.
- Build from previous purchase patterns
- Perform marketing research
- Make inferences
- Behavioral targeting - The use of information collected on an individual’s Internet-browsing
behavior to select which advertisements to display to that individual.
- Personalized services
- Individual services
- Universal services
- Customer Loyalty
- E-loyalty - Customer Loyalty to an E-tailer Or Loyalty Programs Delivered Online or Supported
Electronically.
- Trust in Ecommerce
- Trust - The psychological status of willingness to depend on another person or organization.
Market Research for EC
- Methods for Conducting Market Research Online
- What Are Marketers Looking For In EC Market Research?
- Market Segmentation Research
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 - Market Research For One-to-one
- Direct Solicitation of Information
- Implementing web-based surveys
- Online focus groups
- Hearing directly from customers
- Observing Customers
- Transaction log - A record of user activities at a company’s Web site.
- Clickstream behavior - Customer movements on the Internet.
- Web bugs - Tiny graphics files embedded in messages and in Web sites that transmit
information about users and their movements to a Web server.
- Spyware - Software that gathers user information over an Internet connection without the user’s
knowledge.
- Clickstream data - Data that occur inside the Web environment; they provide a trail of the user’s
activities (the user’s clickstream behavior) in the Web site.
- Web mining - Web mining explores both Web content data mining techniques for discovering
and extracting information from Web documents and Web usage.
- Collaborative filtering - A market research and personalization method that uses customer data
to predict, based on formulas derived from behavioral sciences, what other products or services a
customer may enjoy; predictions can be extended to other customers with similar profiles.
- Rule-based filtering
- Content-based filtering
- Activity-based filtering
- Limitations of Online Market Research and How to Overcome Them
- Biometric Marketing
- Biometrics - An individual’s unique physical or behavioral characteristics that can be used to
identify an individual precisely (e.g., fingerprints).
Internet Marketing in B2B
- Organizational Buyer Behavior - A Behavioral Model of Organizational Buyers
- The Marketing and Advertising Processes in B2B
- Methods for B2B Online Marketing
- Targeting Customers
- Electronic Wholesalers
- Other B2B Marketing Services
Web Advertising
- Overview of Web Advertising
- Interactive marketing - Online marketing, facilitated by the Internet, by which marketers and
advertisers can interact directly with customers and consumers, can interact with
advertisers/vendors.
- Some Internet Advertising Terminology
- Ad views - The number of times users call up a page that has a banner on it during a specific
period; known as impressions or page views.
- Button - A button is a small banner that is linked to a Web site. It can contain downloadable
software.
- Page - A page is an HTML (Hypertext Markup Language) document that may contain text,
images, and other online elements, such as Java applets and multimedia files. It can be generated
statically or dynamically.
- Click (click-through or ad click) - A count made each time a visitor clicks on an advertising
banner to access the advertiser’s Web site.
- CPM (cost per thousand impressions) - The fee an advertiser pays for each 1,000 times a page
with a banner ad is shown.
- Conversion rate - The percentage of clickers who actually make a purchase.

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 - Click-through rate - The percentage of visitors who are exposed to a banner ad and click on it.
- Click-through ratio - The ratio between the number of clicks on a banner ad and the number of
times it is seen by viewers; measures the success of a banner in attracting visitors to click on the
ad.
- Hit - A request for data from a Web page or file.
- Visit - A series of requests during one navigation of a Web site; a pause of a certain length of
time ends a visit.
- Unique visits - A count of the number of visitors entering a site, regardless of how many pages
are viewed per visit.
- Stickiness - Characteristic that influences the average length of time a visitor stays in a site.
- Advertising networks - Specialized firms that offer customized Web advertising, such as brokering ads
and targeting ads to select groups of consumers.
Online Advertising Methods
- Banner - On a Web page, a graphic advertising display linked to the advertiser’s Web page.
- Keyword banners - Banner ads that appear when a predetermined word is queried from a search engine.
- Random banners - Banner ads that appear at random, not as the result of the user’s action.
- Banner swapping - An agreement between two companies to each display the other’s banner ad on its
Web site.
- Banner exchanges - Markets in which companies can trade or exchange placement of banner ads on
each other’s Web sites.
- Pop-up and Similar Ads:
- Pop-up ad - An ad that appears in a separate window before, after, or during Internet surfing or
when reading.
- Pop-under ad - An ad that appears underneath the current browser window, so when the user
closes the active window the ad is still on the screen.
- Interstitial - An initial Web page or a portion of it that is used to capture the user’s attention for
a short time while other content is loading.
- E-mail Advertising
- E-mail Advertising Management
- E-mail Hoaxes
- Fraud
- E-mail Advertising Methods and Successes
- Newspaper-like And Classified Ads
- Classified Ads
- Search Engine Advertisement
- Improving a Company’s Search-Engine Ranking (Optimization)
- Paid Search-Engine Inclusion
- Advertising in social networks
- Google—the Online Advertising King
- Advertising in Chat Rooms, Blogs, and Social Networks
- Advertise In Videos
- Other Forms of Advertising
- Advertorial - An advertisement “disguised” to look like editorial content or general information.
- Web 2.0 and Advertising
- Advertising in Newsletters
- Posting Press Releases Online
- Advergaming - The practice of using computer games to advertise a product, an organization, or a
viewpoint.
Advertising Strategies and Promotions Online
- Affiliate marketing - A marketing arrangement by which an organization refers consumers to the selling
company’s Web site.

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 - Ads as a Commodity
- Viral marketing - Word-of-mouth marketing by w/c customers promote a product or service by telling
others about it.
- Viral Marketing in Social Networks
- CUSTOMIZING ADS
- Webcasting - A free Internet news service that broadcasts personalized news and information,
including seminars, in categories selected by the user.
- ONLINE EVENTS, PROMOTIONS, AND ATTRACTIONS
- Live Web Events
- Admediaries - Third-party vendors that conduct promotions, especially large-scale ones.
- Selling Space by Pixels: The Case of Million Dollar Homepage
- Advertising in Second Life and Other Virtual Worlds
Special Advertising Topics
- Permission Advertising
- Spamming - Using to send unwanted ads (sometimes floods of ads).
Permission advertising (permission marketing) - Advertising (marketing) strategy in which
customers agree to accept advertising and marketing materials (known as “opt-in”).
- Advertisement as a Revenue Model
- Measuring Online Advertising’s Effectiveness
- Wireless Advertising
- Ad Content
- Software Agents in Marketing and Advertising Applications
Managerial Issues
1. Do we understand our customers?
2. Who will conduct the market research?
3. Are customers satisfied with our Web site?
4. How can we use social networks for advertising?
5. How do we decide where to advertise?
6. What is our commitment to Web advertising, and how will we coordinate Web and traditional advertising?
7. Should we integrate our Internet and non-Internet marketing campaigns?
8. What ethical issues should we consider?
9. Are any metrics available to guide advertisers?
10. Which Internet marketing/advertising channel to use?

CHAPTER 5 - B2B E-Commerce

Learning Objectives
1. Describe the B2B field.
2. Describe the major types of B2B models.
3. Discuss the characteristics of the sell-side marketplace, including auctions.
4. Describe the sell-side models.
5. Describe the characteristics of the buy-side marketplace and e-procurement.
6. Explain how reverse auctions work in B2B.
7. Describe B2B aggregation and group purchasing models.
8. Describe other procurement methods.
9. Define exchanges and describe their major types.
10. Describe B2B portals.
11. Describe third-party exchanges.
12. Describe partner relationship management (PRM).
Concepts, Characteristics, and Models of B2B EC

17
 BASIC B2B CONCEPTS
Business-to-business e-commerce (B2B EC)
Transactions between businesses conducted electronically over the Internet, extranets, intranets,
or private networks; also known as eB2B (electronic B2B) or just B2B.
THE BASIC TYPES OF B2B TRANSACTIONS AND ACTIVITIES
Sell-side
Buy-side
Exchanges
Supply chain improvements and collaborative commerce
THE BASIC TYPES OF B2B E- MARKETPLACES AND SERVICES
One-to-Many and Many-to-One: Private E- Marketplaces
Company-centric EC - E-commerce that focuses on a single company’s buying needs (many-to-
one, or buy-side) or selling needs (one- to-many, or sell-side).
Private e-marketplaces - Markets in which the individual sell-side or buy-side company has
complete control over participation in the selling or buying transaction. 
Many-to-Many: Exchanges
exchanges (trading communities or trading exchanges) - Many-to-many e-marketplaces, usually
owned and run by a third party or a consortium, in which many buyers and many sellers meet
electronically to trade with each other.
public e-marketplaces - Third-party exchanges open to all interested parties (sellers and buyers).
Supply Chain Improvers and Collaborative Commerce 
B2B CHARACTERISTICS
Parties to the Transaction: Sellers, Buyers, and Intermediaries
Online intermediary - An online third party that brokers a transaction online between a
buyer and a seller; may be virtual or click-and-mortar. 
Types of Transactions
Spot buying - The purchase of goods and services as they are needed, usually at prevailing market
prices.
Strategic (systematic) sourcing - Purchases involving long-term contracts that usually are based
on private negotiations between sellers and buyers.
Types of Materials Traded
Direct materials - Materials used in the production of a product (e.g., steel in a car or paper in a
book).
Indirect materials - Materials used to support production (e.g., office supplies or light bulbs).
MRO (maintenance, repair, and operation) - Indirect materials used in activities that support
production. 
Direction of Trade
Vertical marketplaces - Markets that deal with one industry or industry segment (e.g., steel,
chemicals).
Horizontal marketplaces - Markets that concentrate on a service, material, or a product that is
used in all types of industries (e.g., office supplies, PCs). 
SUPPLY CHAIN RELATIONSHIPS IN B2B
VIRTUAL SERVICE INDUSTRIES IN B2B
THE BENEFITS OF B2B 
One-to-Many: Sell-side E-Marketplaces
SELL-SIDE MODELS AND ACTIVITIES
sell-side e-marketplace - A Web-based marketplace in which one company sells to many business
buyers from e-catalogs or auctions, frequently over an extranet.
B2B Sellers
Customer Service 
DIRECT SALES FROM CATALOGS

18
 Configuration and Customization
Benefits and Limitations of Direct Sales from Catalogs
DIRECT SALES: THE EXAMPLE OF CISCO SYSTEMS 
Selling Via Intermediaries and Distributors
Manufacturers frequently use intermediaries to distribute their products to a large number of buyers.
The intermediaries (known as distributors) usually buy products from many vendors and aggregate them
into one catalog from which they sell. 
Selling Via Auctions
USING AUCTIONS ON THE SELL SIDE
Revenue generation
Cost savings
Increased “stickiness”
Member acquisition and retention 
AUCTIONING FROM THE COMPANY’S OWN SITE
USING INTERMEDIARIES IN AUCTIONS
EXAMPLES OF B2B FORWARD AUCTION 
One-from-Many: Buy-Side E-Marketplaces and E-Procurement
buy-side e-marketplace - A corporate-based acquisition site that uses reverse auctions, negotiations, group
purchasing, or any other e- procurement method. 
PROCUREMENT METHODS
E-sourcing
E-tendering
E-reverse auctioning
E-informing
Web-based ERP (electronic resource planning)
E-MRO (maintenance, repair, and operating) 
INEFFICIENCIES IN TRADITIONAL PROCUREMENT MANAGEMENT
Procurement management - The planning, organizing, and coordinating of all the activities relating to
purchasing goods and services needed to accomplish the organization’s mission.
Maverick buying - Unplanned purchases of items needed quickly, often at higher prices, not pre-
negotiated. 
THE GOALS AND BENEFITS OF E- PROCUREMENT
E-procurement - The electronic acquisition of goods and services for organizations. 
Buy-Side E-Marketplaces: Reverse Auctions
Request for quote (RFQ) - The “invitation” to participate in a tendering (bidding) system.
CONDUCTING REVERSE AUCTIONS - E-Tendering by Governments
GROUP REVERSE AUCTIONS
Other E-Procurement Methods
Internal procurement marketplace - The aggregated catalogs of all approved suppliers combined into a
single internal electronic catalog.
Benefits of Internal Marketplaces
Desktop purchasing - Direct purchasing from internal marketplaces without the approval of
supervisors and without the intervention of a procurement department. 
BUYING AT E-AUCTIONS
Group purchasing - The aggregation of orders from several buyers into volume purchases so that
better prices can be negotiated.
Internal Aggregation
External Aggregation 
BUYING FROM E-DISTRIBUTORS
PURCHASING DIRECT GOODS
ELECTRONIC BARTERING

19
 Bartering exchange - An intermediary that links parties in a barter; a company submits its surplus
to the exchange and receives points of credit, which can be used to buy the items that the
company needs from other exchange participants. 
B2B Electronic Exchanges: Definitions and Concepts
Dynamic pricing - A rapid movement of prices over time and possibly across customers, as a result of
supply and demand matching.
FUNCTIONS OF EXCHANGES
Matching buyers and sellers
Facilitating transactions
Maintaining exchange policies and infrastructure 
Revenue Models of Exchanges
Transaction fees
Fee for service
Membership fees
Advertising fees
Other revenue sources
B2B portals - Information portals for businesses.
Vortals - B2B portals that focus on a single industry or industry segment; “vertical portals”. 
THIRD-PARTY AND DIRECTORIES EXCHANGES
Consortium trading exchange (CTE) - An exchange formed and operated by a group of major companies
in an industry to provide industry-wide transaction services. 
Partner and Supplier Relationship Management
Partner relationship management (PRM) - Business strategy that focuses on providing comprehensive
quality service to business partners.
E-COMMUNITIES AND PRM 
Managerial Issues
1. Can we justify the cost of B2B applications?
2. Which vendor(s) should we select?
3. Which B2B model(s) should we use?
4. What are the ethical issues in B2B?
5. Will there be massive disintermediation?
6. How can trust and loyalty be cultivated in B2B?
7. Will joining an exchange force restructuring?
8. Which exchange to join?
9. What are the benefits and risks of joining an exchange?

20
 CHAPTER 6 – INNOVATIVE EC SYSTEM: FROM E-GOVERNMENT AND E-LEARNING TO
CONSUMER COMMERCE
Learning Objectives
1.Describe various e-government initiatives.
2.Describe e-learning, virtual universities, and e- training.
3.Describe online publishing and e-books.
4.Discuss wikis and blogging.
5.Describe knowledge management and dissemination as an e-business.
6.Describe C2C activities.
7.Describe peer-to-peer networks and applications.
E-Government: An Overview
- E-government - E-commerce model in which a government entity buys or provides goods, services, or
information to businesses or individual citizens 8-3 
Several major categories fit within this broad definition of e-government
– Government-to-citizens (G2C) - E-government category that includes all the interactions
between a government and its citizens
- Electronic voting - Voting process that involves many steps ranging from registering,
preparing, voting, and counting (voting and counting are all done electronically)
- Netizen - A citizen surfing the Internet
- Electronic benefits transfer
– Government-to-business (G2B) - E-government category that includes interactions between
governments and businesses (government selling to businesses and providing them with services
and businesses selling products and services to government)
– Government e-procurement
– Group purchasing
– Forward e-auctions
– Tax collection and management
– Government-to-government (G2G) - E-government category that includes activities within
government units and those between governments
– Internal Efficiency and Effectiveness (IEE)
– Government-to-employees (G2E) - E-government category that includes activities and services
between government units and their employees

21
 – Internal efficiency and effectiveness
- E-payroll
- E-records management
- E-training
- Enterprise case management
- Integrated acquisition
- Integrated human resources
- One-stop recruitment
- Facilitating Homeland Security
Implementing E-Government
Six stages in the transformation to e-government:
1. Information publishing/dissemination
2. “Official” two-way transactions with one department at a time
3. Multipurpose portals
4. Portal personalization
5. Clustering of common services
6. Full integration and enterprise transformation
Implementation Issues of E-Government
– Transformation speed
– G2B implementation
– Security and privacy issues
– Wireless applications
– Business aspects
Citizen Adoption of E-Government
Non–Internet E-Government
E-Learning
- E-learning - The online delivery of information for purposes of education, training, or knowledge
management
Benefits of E-Learning
– Time reduction
– Large volume and diversity
– Cost reduction
– Higher content retention
– Flexibility
– Updated and consistent material
– Fear-free environment
Drawbacks and Challenges of E-Learning
– Need for instructor retraining
– Equipment needs and support services
– Lack of face-to-face interaction and campus life
– Assessment
– Maintenance and updating
– Protection of intellectual property
– Computer literacy
– Student retention
Distance learning - Formal education that takes place off campus, usually, but not always, through online
resources
Virtual university - An online university from which students take classes from home or other off-site
locations, usually via the Internet
Online Corporate Training
– The drivers of e-training

22
 - Technological change - Competition and cost pressures
- Globalization - Continual learning
- Network connectivity
Edutainment - The combination of education and entertainment, often through games
E-Learning Tools
– IBM Workplace Collaborative Learning 2.6
– ComputerPREP
– Macromedia
– eCollege
– Artificial Life
Online Publishing and E-Books
- Online publishing - The electronic delivery of newspapers, magazines, books, news, music, videos, and
other digitizable information over the Internet
- E-zines Electronic magazine or newsletter delivered over the Internet via e-mail 8-20 
Approaches and Methods to Online Publishing
– Online-archive approach
– New-medium approach
– Publishing-intermediation approach
– Dynamic approach
– Content providers and distributors
– Publishing of music, videos, games, and entertainment
– Webcasting - A free Internet news service that broadcasts personalized news and information,
including seminars, in categories selected by the user
– Webinars Seminars on the Web (Web-based seminars)
– Podcast - A media file that is distributed over the Internet using syndication feeds for playback
on mobile devices and personal computers. As with the term radio, it can mean both the content
and the method of syndication
– Podcaster - The host or author of a podcast
- E-Books - A book in digital form that can be read on a computer screen or on a special device
- E-books can be delivered and read via:
– Web download – A dedicated reader
– A general-purpose reader – A Web server
Types of E-Books
– Traditional book format
– Online bookshelf
– The download
– The Rubics-cube hyperlink book
– The interactive, build-your-own (BYO) decision book
– The online reference book model 8-25 
Print-on-Demand
1. A publisher creates a digital master, typically in Adobe Systems’ Acrobat format, and sends it to a
specialized print-on-demand company. The files are stored on the printing company’s network
2. When an order is placed, a print-on-demand machine prints out the text of the document or book and
then covers, binds, and trims it. The entire process can take about a minute for a 300-page book
3. The book is packaged and shipped to the publisher or the consumer
Blogs and Wikis
Weblogging (blogging) - Technology for personal publishing on the Internet
Blog - A personal Web site that is opens to the public to read and to interact with; dedicated to specific
topics or issues
Seven principles for building effective blogs:

23
 1. Focus intently on a narrow niche, ideally one whose audience has a predilection for high-margin
products
2. Set up blogs so that each post gets its own permanent URL
3. Think of a blog as a database, not a newspaper-like collection of dispatches
4. Blog frequently and regularly, at least half a dozen posts every weekday
5. Use striking images that liven up the pages and attract readers
6. Enable comments and interact with readers
7. Make friends with other bloggers, online and off 8-29 
- Wikilog (wikiblog or wiki) - A blog that allows everyone to participate as a peer; anyone may add,
delete, or change content.
- Commercial uses of blogs
- Potential risks of blogs
1. Establish comprehensive, written rules and policies
2. Educate employees about blog-related risks, rules, and regulations
3. Enforce blog policy with disciplinary action and technology
- Bloggers and politics
Knowledge Management and E-Commerce
- Knowledge management (KM) - The process of capturing or creating knowledge, storing it, updating it
constantly, interpreting it, and using it whenever necessary
- Organizational knowledge base - The repository for an enterprise’s accumulated knowledge
- KM has four tasks:
1. Creating knowledge repositories where knowledge can be stored and retrieved easily
2. Enhancing a knowledge environment in order to conduct more effective knowledge creation, transfer,
and use
3. Managing knowledge as an asset so as to increase the effective use of knowledge assets over time
4. Improving knowledge access to facilitate its transfer between individuals
- Core knowledge management activities for companies doing EC should include the following
electronically supported activities:
– Knowledge creation
– Knowledge capture and codification
– Knowledge classification
– Knowledge distribution
– Knowledge utilization
– Knowledge evolution
- Knowledge portal - A single-point-of-access software system intended to provide timely access to
information and to support communities of knowledge workers
- Information intelligence Information, data, knowledge, and semantic infrastructure that enable
organizations to create more business applications
- Online Advice and Consulting
– Medical advice
– Management consulting
– Legal advice
– Gurus and answers to queries
– Financial advice
– Other advisory services
- Employees’ Knowledge Networks and Expert Advice within Organizations
– Expert location systems - Interactive computerized systems that help employees find and
connect with colleagues who have expertise required for specific problems— whether they are
across the country or across the room—in order to solve specific, critical business problems in
seconds

24
 - Desktop search - Search tools that search the contents of a user’s or organization’s computer files rather
than searching the Internet. The emphasis is on finding all the information that is available on the user’s
PC, including Web browser histories, e-mail archives, and word-processor documents, as well as in all
internal files and databases
Customer-to-Customer E-Commerce
- customer-to-customer (C2C) - E-commerce model in which consumers sell directly to other consumers
- C2C Auctions
- Classified Ads
- Personal Services
- C2C Exchanges
- Selling Virtual Properties
- Support Services for C2C
- Managerial Issues
1. Can we blog for business?
2. Are there e-learning and e-training opportunities?
3. Can we capitalize on C2C?
4. How well are we managing our knowledge?
5. What are the e-government opportunities?

25
 CHAPTER 7 – WEB 2.0 ENVIRONMENTAL AND SOCIAL NETWORK
WEB 2.0 DEFINED
- The popular term for advanced Internet technology and applications, including blogs, wikis, RSS, and social
bookmarking. One of the most significant differences between Web 2.0 and the traditional web is greater
collaboration among Internet users and other users, content providers, and enterprises.
CHARACTERISTICS OF WEB 2.0
- The ability to tap into the collective intelligence of users
- Data is made available in new or never-intended ways
- Web 2.0 relies on user-generated and user-controlled content and data
- The virtual elimination of software-upgrade cycles makes everything a work in progress and allows rapid
prototyping (perpetual beta)
- Users can access (rich) applications entirely through a browser
- An Architecture of participation encourages users to add value to the application (ie APIs, frameworks)
- A major emphasis on social networks and computing
- Strong support of information sharing and collaboration (interactivity)
- Rapid and continuous creation of new business models
WEB 2.0 BUSINESS MODELS
- Social media - The online platforms and tools that people use to share opinions, experiences, insights,
perceptions, and various media, including photos, videos, and music, with each other.
- INDUSTRY AND MARKET DISRUPTORS
- Disruptors - Companies that introduce a significant change in their industries, thus causing a disruption
in normal business operations.
- Virtual (Internet) community - A group of people with similar interests who interact with one another using the
Internet.
“hybrid” communities – communities that use the Internet to interact, but occasionally meet face to face.
VIRTUAL COMMUNITIES
CHARACTERISTICS OF TRADITIONAL ONLINE COMMUNITIES AND THEIR CLASSIFICATION
- Types of Communities
- Public versus Private Communities
- Internal (to the organization) and External Private Communities
- Other Classifications of Virtual Communities
ONLINE SOCIAL NETWORKING: BASICS AND EXAMPLES
- Social networks and activities conducted in social networks. It also includes activities conducted using Web 2.0
(e.g., wikis, microblogs) not within social networks.
- REPRESENTATIVE SOCIAL NETWORKS SITES AND SERVICES
- Classmates Online
- Digg
- Delicious
Mobile social networking
Members converse and connect with one another using cell phones or other mobile devices.
“Is there an advantage to having mobile-only SNs?”
BUSINESS SOCIAL NETWORKS

26
- Business network - A group of people who have some kind of commercial relationship; for example, sellers and
buyers, buyers among themselves, buyers and suppliers, and colleagues and other colleagues.
- Business social network - A social network whose primary objective is to facilitate business connections and
activities.
- The major reasons to use or deploy a business social network are to:
- Build better customer relationships - Improve knowledge management
- Facilitate recruiting and retention - Increase business opportunities
- Build a community - Gain expert advice
- Improve trade show experiences - Improve communication and collaboration
BUSINESS-ORIENTED SOCIAL NETWORKING
- Ryze
- The Business Social Network
- Viadeo
- APSense
- LinkedIn
ENTERPRISE SOCIAL NETWORKS
- Allow employees to collaborate and communicate in an employee-driven system
- Promote the use of enterprise wikis via demonstrations
- Set up internal blogs and incorporate them into internal directories so users can see who has a blog
- Set up enterprise social bookmarking systems so users can see what sort of content their colleagues are tagging
OTHER SOCIAL NETWORKING STRUCTURES
Enterprise 2.0 - Technologies and business practices that free the workforce from the constraints of legacy
communication and productivity tools such as . Provides business managers with access to the right information at
the right time through a Web of interconnected applications, services, and devices.
Social marketplace - The term is derived from the combination of social networking and marketplace. An online
community that harnesses the power of one’s social networks for the introduction, buying, and selling of products,
services, and resources, including one’s own creations. Also may refer to a structure that resembles a social
network but is focused on individual members.
COMMERCIAL ASPECTS OF WEB 2.0 AND SOCIAL NETWORKING APPLICATIONS
WHY IS THERE AN INTEREST?
- Web 2.0 applications are spreading rapidly, and many of them cater to a specific segment of the population
(e.g.,music lovers, travelers, game lovers, and car fans), enabling segmented advertising
- Many users of Web 2.0 tools are young, and they will grow older and have more money to spend
ADVERTISING USING SOCIAL NETWORKS, BLOGS, AND WIKIS
- Viral (Word-of-Mouth) Marketing
- Viral blogging - Viral (word-of-mouth) marketing done by bloggers.
- Classified Ads, Job Listings, and Recruitment
- Special Advertising Campaigns
- Mobile Advertising
SHOPPING IN SOCIAL NETWORKS
FEEDBACK FROM CUSTOMERS: CONVERSATIONAL MARKETING
-Customer Feedback with Twitter
COMMERCIAL ACTIVITIES IN BUSINESS AND ENTERPRISE SOCIAL NETWORKS
- Finding and Recruiting Workers
- Management Activities and Support
- Training
- Knowledge Management and Expert Location
- Enhancing Collaboration
- Using Blogs and Wikis Inside the Enterprise
ENTERTAINMENT WEB 2.0 STYLES: FROM SOCIAL NETWORKS TO MARKETPLACES
ENTERTAINMENT AND SOCIAL NETWORKS

27
- Mixi - Last.fm
- Pandora - eFans
- Internet Series and Movie Streaming
- Adult Entertainment in Virtual Worlds
- MOBILE WEB 2.0 DEVICES FOR ENTERTAINMENT AND WORK
- iPhone, Android

CHAPTER 8 – WIRELESS, MOBILE COMPUTING AND COMMERCE

Wireless Technologies
How many smart phones are now being used worldwide? 
28
Capabilities of Wireless Devices
- Cellular telephony - E-mail access - Bluetooth - Short message service
- Wi-Fi - Instant messaging - Digital camera - Text messaging
- Global positioning system - Organize - MP3 music player - Video player
- Address book - Internet access
Wireless Transmission Media
- Radio - Satellite Radio - Infrared 
Wireless Computer Networks and Internet Access
1. Short range wireless networks
- Bluetooth - Near-field Communications
2. Medium range wireless networks
- Wireless fidelity (Wi-Fi)
- Wireless access point; Hotspot; Wireless network interface card
3. Wide area wireless networks 
- Cellular Radio
- 1st Generation; 2nd Generation; 3rd Generation (3G); 4th Generation (4G)
- Wireless Broadband or WiMax (WiFi on steroids) 
Mobile Computing
- Basis of mobile computing:
- Mobility - Broad reach
- Five value-added mobile computing attributes:
Ubiquity; Convenience; Instant connectivity; Personalization; Localization of products and services
Mobile Commerce
- The development of m-commerce is driven by the following factors:
- Widespread availability of mobile devices - No need for a PC
- The “Cell phone culture” - Declining prices - Bandwidth improvement 
Mobile Commerce Applications
- Location-Based Applications and Services
- Shopping from Wireless Devices
- Location-based Advertising (goggle map, etc…)
- Location-based Services (facebook, twitter, etc…)
- Financial Services
- Wireless Electronic Payment System - Mobile Banking
- Wireless Bill Payments - Mobile Wallet
- Micropayments
- Intrabusiness Applications
- Example: UPS (application)
- Accessing Information
- Mobile Internet (Apps vs. Web Browser: who’s winning?)
- Telemetry Applications
- Examples of Telemetry Applications: Medicine Automobiles, Find My iPhone,
Telemedicine predicted in 1924
Pervasive Computing
- Radio frequency identification (RFID) - Wireless Sensor Networks (WSNs) 

Wireless Security
- Four major threats
Rogue access point; War driving; Eavesdropping; RF (Radio frequency) jamming

29
 CHAPTER 9 – E-COMMERCE SECURITY AND FRAUD PROTECTION
THE INFORMATION SECURITY PROBLEM
Computer security refers to the protection of data, networks, computer programs, computer power, and other
elements of computerized information systems
THE DRIVERS OF EC SECURITY PROBLEMS
The Internet’s Vulnerable Design

30
 - Designed for efficiency, security an afterthought
The Shift to Profit-Induced Crimes
- I.e. Personal/fin/banking data can be sold
Internet Underground Economy
- Selling info, piracy
Dynamic Nature and the role of Insiders
- People change roles, new systems added
THE SECURITY BASIC TERMINOLOGY
Business continuity plan - A plan that keeps the business running after a disaster occurs. Each function in the
business should have a valid recovery capability plan.
Cybercrime - Intentional crimes carried out on the Internet.
Exposure - The estimated cost, loss, or damage that can result if a threat exploits vulnerability.
Fraud - Any business activity that uses deceitful practices/devices to deprive another of property/other rights
Malware (malicious software) - A generic term for malicious software.
Phishing - A crimeware technique to steal the identity of a target company to get the identities of its customers.
Risk - The probability that vulnerability will be known and used.
Social engineering - A type of nontechnical attack that uses some ruse to trick users into revealing information or
performing an action that compromises a computer or network.
Spam - The electronic equivalent of junk mail.
Vulnerability - Weakness in software or other mechanism that threatens the confidentiality, integrity, or
availability of an asset. It can be directly used by a hacker to gain access to a system or network.
Zombies - Computers infected with malware that are under the control of a spammer, hacker/other criminal.
Threats and Attacks
Unintentional Threats
Human error
Environmental hazards
Malfunctions in the computer system
Intentional Attacks and Crimes
Criminals and Social Engineering
TECHNICAL AND NONTECHNICAL ATTACKS
Examples
Technical
Malicious code: Virus, worm, Trojan horses
DOS or DDOS: bombardment
Hijacking: changing webpage
Botnets: get target computer to do work

Nontechnical
Phishing
Fraud: ID theft
Spam, spyware, splog
EC Security Requirements
Authentication - Process to verify (assure) the real identity of an individual, computer, computer program, or EC
Web site.
Authorization - Process of determining what the authenticated entity is allowed to access and what operations it is
allowed to perform.
Auditing
Availability
Nonrepudiation - Assurance that online customers or trading partners cannot falsely deny (repudiate) their
purchase or transaction.Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

31
THE INFORMATION ASSURANCE MODEL AND DEFENSE STRATEGY
E-COMMERCE SECURITY STRATEGY
- Prevention and deterrence
- Detection
- Containment (contain the damage)
- Recovery
- Correction
- Awareness and compliance
EC security programs
- All the policies, procedures, documents, standards, hardware, software, training, and personnel that
work together to protect information, the ability to conduct business, and other assets.
THE DEFENSE I: ACCESS CONTROL, ENCRYPTION, AND PKI
Access control - Authentication and Passwords, biometrics
Encryption
Secure Socket Layer and Certificates
Firewall: packet inspection and allow
Virtual Private Network
THE DEFENSE II: SECURING E-COMMERCE NETWORKS
Intrusion detection system (IDS) - A special category of software that can monitor activity across a network or on
a host computer, watch for suspicious activity, and take automated action based on what it sees.
Honeynet - A network of honeypots.
Honeypot - Production system (e.g., firewalls, routers, Web servers, database servers) that looks like it does real
work, but that acts as a decoy and is watched to study how network intrusions occur.
Penetration test (pen test) - A method of evaluating the security of a computer system or a network by simulating
an attack from a malicious source, (e.g., a cracker).
THE DEFENSE III: GENERAL CONTROLS AND OTHER DEFENSE MECHANISMS
General control - i.e. control access to data center
Application controls - Controls that are intended to protect specific applications.
System alerts – for phishing, intrusion, attacks
BUSINESS CONTINUITY, SECURITY AUDITING, AND RISK MANAGEMENT
BUSINESS CONTINUITY AND DISASTER RECOVERY PLANNING
- Including exercises, simulations
EC SECURITY POLICIES AND TRAINING
EC SECURITY PROCEDURES AND ENFORCEMENT
INDUSTRY STANDARDS FOR CREDIT CARD PROTECTION (PCI DSS)
IMPLEMENTING ENTERPRISE-WIDE E-COMMERCE SECURITY
WHY IS IT DIFFICULT TO STOP INTERNET CRIME?
Making Shopping Inconvenient
Shoppers’ Negligence
Ignoring EC Security Best Practices
Design and Architecture Issues
Standard of due care
Cost is sometimes hard to justify if there are no attacks...

32
 CHAPTER 10 - ELECTRONIC COMMERCE PAYMENT SYSTEM
Learning Objectives
In this chapter, you will learn:
• What the most common online payment systems are and how they function
• How payment cards are used in online retail transactions
• What stored-value cards are and how they are used in electronic commerce
• What challenges and opportunities are presented by the use of digital cash
• How digital wallets facilitate online transactions through computers and mobile devices
• How the banking industry uses Internet technologies
Introduction
• Financial technology (fintech) is the use of powerful Internet-connected computers that use tools to improve
quality and reduce cost of services
– Existing and entirely new financial products
– Includes online payment system not operated by banks
• Facilitates purchases and other money transfers

33
 • Convenient and becoming widely adopted
– Has also revolutionized lending
• Online loan services takes banks out of value chain at a reduced cost
Common Online Payment Methods
• Cash, checks, credit cards, debit cards are the most common world methods used to pay for purchases
– More than 90% of all US consumer payments
• Electronic transfer is a small percentage
– Mostly automated payments from checking accounts
• Credit and debit cards used for more than 60% of online payments with alternative systems such as PayPal used
for the remainder
– Convenient for customers and cost effective for businesses and provides a significant environmental
impact
Electronic Bill Presentment and Payment Systems
• Designed to deliver bills and accept payments
– Success depends on ease of use and time required
• Consumers choosing this option is increasing
– 70% of bills paid by check are now paid electronically which is a huge savings in paper, postage and
time
• Biller-direct systems are used by large companies who want to manage the systems themselves
• Consolidator systems aggregate all a customer’s bills on one system mostly via banks
– Not as attractive to billers because it requires a fee and delays receipt of funds
Micropayments and Small Payments
• Micropayments are Internet payments for items costing few cents to a dollar
– Barrier is people prefer to buy small value items in fixed price chunks rather than small payments in
varying amounts
– Many companies have developed micropayment systems but none gained broad acceptance
• Small payments are payments of less than $10
– Offered through mobile telephone carrier but held back by substantial charges for providing service
• One of the largest markets is music downloads
Payment Cards
• Payment cards are plastic cards used for purchases
– Categories: credit cards, debit cards, charge cards, prepaid cards, and gift cards
• Credit cards (Visa, MasterCard) have a spending limit based on user’s credit history
– Pay off entire credit card balance or minimum amount with interest charged on unpaid balances
– Widely accepted and provides consumer protection: 30- day dispute period
– Card not present transactions include an extra degree of risk for merchant and bank
• Debit card (electronic funds transfer at point of sale (EFTPOS) cards) removes funds from cardholder’s bank
account and transfers it to seller’s account
– Issued by bank with major credit card issuer's name
• Charge card (American Express) has no spending limit with entire amount due at end of billing period
• Retailers may offer their own store charge cards
• Prepaid cards are called gift cards • Single-use cards had disposable numbers, valid for one transaction, but not
adopted by consumers
Advantages and Disadvantages of Payment Cards
• Advantage for merchants include fraud protection
– Can authenticate and authorize purchases using a payment card processing network
• Interchange network is a set of connections between banks and associations owning credit cards
• Advantage for U.S. consumers is limited fraud liability of $50 which is often waived if card is stolen
• Merchants view the per-transaction and monthly processing fees as a cost of doing business
• Consumers pay a slightly higher cost for goods due to these cards and some charge an annual fee
Payment Acceptance and Processing

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• US online and mail order stores must ship merchandise within 30 days of charging payment
– Significant violation penalties so most stores charge account when order shipped
• Processing payment card transactions online is a two step process
– Payment acceptance is establishing card validity and verifying card’s limit not exceeded by transaction
– Clearing the transaction includes all steps to move funds from card holder’s bank account into the
merchant’s bank account
Open and Closed Loop Systems
• With a closed loop system the card issuer pays merchant directly without a bank or clearinghouse
– American Express, Discover Card
– Issue cards directly to consumers
• Open loop systems add additional payment processing intermediaries to the closed loop system
– Visa, MasterCard issued by local bank
– Visa and MasterCard are credit card associations operated by customer issuing banks who evaluate
credit standing, establish credit limits and absorb nonpayment losses
Merchant Accounts
• Acquiring bank does business with sellers that want to accept payment cards
– Business must set up a merchant account with acquiring bank to process Internet transactions
• One type similar to a checking account with bank collecting accounts net of processing fees
• Commonly account acts like a credit line where the acquiring bank makes a non-interest bearing
loan in the amount of daily net receipts, reduced by collections
• Obtaining account requires merchant to provide business information and the bank to assess risk
• Chargeback occurs when cardholder successfully contests charge
– Acquiring bank must retrieve money from merchant account which may have funds on deposit
• Acquirer fees are charges for providing payment card processing service
– Per month and transaction, set by the acquiring bank
• Interchange fees are charged at rates that depend on the merchant’s industry
– Set by card association, charged to acquiring bank and usually passed along to merchant
• Level of fraud is higher online
– Under 15% of all credit card transactions responsible for 64% percent of total dollar amount of credit
card fraud (declining since 2008)
• Antifraud measures include
– Scoring services that provide risk ratings for individual transactions in real time
– Shipping only to card billing address and requiring card card verification numbers (CVNs) for card not
present transactions
• Three- or four-digit number printed on the credit card but not encoded on the card’s magnetic
strip
Payment Card Transaction Processing
• Most online merchants accept both closed loop and open loop system cards and some accept direct deductions
from customers’ checking accounts
– Automated Clearing House (ACH) is a network of banks involved in direct deduction transactions
• Processing depends on size of business
– Large build and manage their own systems
– Mid-size use purchased software with skilled staff to manage system
– Small rely on service payment processing service providers
• Front-end processor (payment gateway) obtains and stores transaction authorization
• Back-end processor takes front-end processor transactions and coordinates information flows
– Handles chargebacks, other reconciliation items through the interchange network and acquiring and
issuing banks, including ACH transfers
• Some processors handle all elements of payment processing and others specialize in one element or a particular
industry
– Known company provides level of comfort to buyers

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Stored-Value Cards
• Plastic card with embedded microchip that can store information and perform calculations
– Most incorporate near field communication (NFC) technology which allows for contactless data
transmissions over short distances
• Allows interacts with readers and other devices
• Can hold much more data than a magnetic card
– Safer because data can be encrypted
• Used in Europe and Asia but less successful in U.S.
– U.S. use has increased in recent years but still not widespread

Digital Cash
• Also called electronic cash or e-cash
• Describes any value storage and exchange system created by private (nongovernmental) entity
– Does not use paper documents or coins
– Can serve as substitute for government-issued physical currency
– No common standard adopted so far
– None adopted so far • Can be held in online storage or offline storage
• With online cash storage consumer has no personal possession of digital cash
– Trusted third party (online bank) involved in all transfers, holds consumers’ cash accounts
– Merchant contacts consumer’s bank for payment
– Helps prevent fraud (confirm valid cash)
• Fills a need in developing countries that rely on cash as they conduct B2C electronic commerce
– Need does not exist here because U.S. consumers already have payment cards
• Bitcoin is the most well-known provider today
– Online ledger book that tracks balances while participants remain anonymous
– Public-key cryptography is used (cryptocurrency)
– Large percentage of uses involve illegal purchases and currency speculation
• Concerns include privacy and security, independence, portability, convenience
– Must be impossible to spend more than once, easy to use and not traceable to the person who spent it
• Anonymous digital cash
The Double-Spending Issue
• Spending electronic cash twice by submitting the same electronic currency to two different vendors
– Not enough time to prevent fraudulent act
– Main deterrent is threat of detection and prosecution so system must provide traceability back to origin
• Two-part lock provides anonymous security and signals an attempt to double-spend cash
Advantages and Disadvantages of Digital Cash
• Can be more efficient (less costly) than traditional payment methods
– Less than processing credit card transactions or conventional money exchange systems
– Does not require authorization • No audit trail (similar to physical cash) makes it nontraceable which
can lead to money laundering
– Convert illegally-obtained money into money spendable without being linked to illegal activity
Digital Wallets and Software-Based Digital Wallets
• Allows customer to store name, address, credit card information on an electronic device or software
– Benefit is customer enters information just once
• Server-side digital wallet stores information on remote server of merchant or wallet publisher
– Security breach can reveal thousands of users’ personal information to unauthorized parties
• Google Wallet, Microsoft Windows Live ID, Yahoo! Wallet
• Client-side digital wallet stores information on consumers computers
– Must download wallet software onto every computer

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Hardware-Based Digital Wallets
• Implemented using smart phones or tablets
• Store owner’s identity credentials (driver’s license, medical insurance card, store loyalty cards, etc.)
• Transmit portions of information using Bluetooth or wireless transmission to nearby terminal
• Near field communication (NFC) technology can be used if equipped with NFC chip
• Google Wallet, Android Pay and Apple Pay • Security and privacy are major concerns – Must prevent
unauthorized access
Internet Technologies and the Banking Industry
• Paper checks still the largest dollar volume of payments in the word today
– Processed through world’s banking system
• Other major payment forms also involve banks
• Internet technologies are providing new tools and creating new threats for the banking industry
Check Processing
• Old method of physical check processing
– Person wrote check which was deposited by retailer and sent to clearinghouse to manage funds transfer
– Paper check transported to consumer’s bank and cancelled check sent to consumer
– Disadvantages include transportation cost and float
• Delay between time check is written and clears
• Check Clearing for the 21st Century Act (Check 21) permits bank to eliminate movement of physical checks and
use image scanning technology
– Instant check clearing eliminates float
Mobile Banking
• Banks exploring mobile commerce potential
• Most banks offer apps for mobile devices
– Check and transfer balances between accounts
– View statements
– Find an ATM
• Some bank apps allow checks to be deposited by taking a picture
• Vendors such as GoPayment and Square offer a tiny credit card reader that can be attached to a mobile device to
take payments
Payment System Threats: Phishing and Identity Theft
• Online payment systems offer attractive arena for criminals and criminal enterprises
• Phishing attacks are techniques for committing fraud against online businesses customers
– Particular concern to financial institutions
Phishing Attacks
• Attacker sends e-mail message to accounts with potential for an account at targeted Web site
– E-mail message tells recipient account compromised and recipient must log in to correct problem
• Includes link that appears to be Web site login page
• Actually leads to perpetrator’s site so that victim’s log in information can be captured and used
• Spear phishing is a carefully designed phishing attack targeting a particular person or organization
– Requires considerable research which increases change of e-mail being opened
• Example: 2008 government stimulus checks
– Phishing e-mails that seemed to be from the IRS appeared within one week of passage
• E-mail link disguise the real URL by using “@” which causes the Web site to ignore characters before it
– https://www.paypal.com@218.36.41.188/fl/login.html
– Phony site invisible due to JavaScript code
• Pop-up windows look exactly like browser address bar including Web site graphics to make it even more
convincing
Using Phishing Attacks for Identity Theft
• Organized crime (racketeering) is unlawful activities conducted by highly organized, disciplined association for
profit

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 – Differentiated from less-organized groups
– Internet providing new criminal activity opportunities
• Generates spam, phishing, identity theft
• Identity theft is a criminal act where perpetrator gathers victim’s personal information
– Goal is to obtain credit
– Perpetrator runs up account charges and disappears
• Large criminal organizations can be highly efficient perpetrators of identity theft
• Zombie farm is a large number of computers implanted with zombie programs
– Pharming attack is the use of a zombie farm, often by organized crime, to launch a massive phishing
attack
• Phishing needs both collectors and cashers (users) of information which requires different skills
– Crime organizations increase efficiency and volume by facilitating and participating in these
transactions
– Over a million victims and $1.5 billion lost annually
Phishing Attack Countermeasures
• Spam is a key element of phishing attacks
– Any protocol changes that improve e-mail recipients’ ability to identify message source reduces
phishing
• Educate Web site users
• Contract with consulting firms specializing in anti-phishing work
– Monitor online chat rooms used by criminals
• Incidence of phishing has grown rapidly over the past two years and experts expect it will continue
– Extremely profitable criminal activity

CHAPTER 11 – EC STRATEGY AND IMPLEMENTATION: JUSTIFICATION, GLOBALIZATION,

SME’s, AND REGULATORY AND ETHICAL ISSUES
LEARNING OBJECTIVES
1. Describe the strategic planning process.
2. Describe the purpose and content of a business plan in e-commerce.
3. Describe EC strategy implementation including the use of metrics.
4. Describe the need for justifying EC investments, how it is done, and how metrics are used to determine
justification.
5. Understand the difficulties in measuring and justifying EC investments.
6. Evaluate the issues involved in global EC.
7. Analyze the impact of EC on SMEs.
8. Understand the foundations for legal and ethical issues in EC.
9. Explain privacy, free speech, and defamation and their challenges.
10. Discuss the challenges caused by spam, splogs, and pop-ups.
11. Describe the importance of green EC and the major issues of concern.

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12. Describe the anticipated future of EC.
STRATEGY, PLANNING, AND IMPLEMENTATION OF E-COMMERCE
Strategy - A broad-based formula for how a business is going to accomplish its mission, what its goals should be,
and what plans and policies will be needed to carry out those goals.
Strategy initiation - The initial phase of strategic planning in which the organization examines itself and its
environment.
- Specific outcomes:
- Value proposition - The benefit that a company’s products or services are provided to a
company and its customers.
- Core competencies
- Forecasts
- Competitor (industry) analysis
Strategy formulation - The development of strategies to exploit opportunities and manage threats in the business
environment in light of corporate strengths and weaknesses.
- Specific activities and outcomes:
- Business opportunities
- Cost-benefit analysis
- Risk analysis, assessment, and management
- Business plan
Strategy implementation - The development of detailed, short-term plans for carrying out the projects agreed on in
strategy formulation.
- Specific activities and outcomes:
- Project planning
- Resource allocation
- Project management
Strategy assessment- The continuous evaluation of progress toward the organization’s strategic goals, resulting in
corrective action and, if necessary, strategy reformulation.
Business case - A business plan for a new initiative or large, new project inside an existing organization.
E-COMMERCE STRATEGY: CONCEPTS AND OVERVIEW
- Strategy in the Web 2.0 Environment and in Social Networking
JUSTIFICATION AND COST-BENEFIT ANALYSIS
- Companies need to justify their EC investments as part of strategy formulation in order to achieve the optimal
level of investment
- OTHER REASONS WHY EC JUSTIFICATION IS NEEDED
- EC is not necessarily the solution to all problems
- Formal evaluation of requests for funding mandated
- Need to assess the success of EC projects after completion
- Success of EC projects assessed in order to pay bonuses
- Pressure from top management
- Large amount of money
- Weak business conditions exist
- EC INVESTMENT CATEGORIES AND BENEFIT
- SHOW IS AN EC INVESTMENT JUSTIFIED?
- Cost-benefit analysis - A comparison of the costs of a project against the benefits.
- WHAT NEEDS TO BE JUSTIFIED? WHEN SHOULD JUSTIFICATION TAKE PLACE?
- USING METRICS IN EC JUSTIFICATION
- Metric - A specific, measurable standard against which actual performance is compared.
- Key performance indicators (KPIs)- The quantitative expression of critically important metrics.
DIFFICULTIES IN MEASURING AND JUSTIFYING E-COMMERCE INVESTMENTS AND SUCCESS
- THE EC JUSTIFICATION PROCESS
- DIFFICULTIES IN MEASURING PRODUCTIVITY AND PERFORMANCE GAINS

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 - Data and Analysis Issues
- EC Productivity Gains May Be Offset by Losses in Other Areas
- Incorrectly Defining What Is Measured
- Other Difficulties
- DETERMINING E-COMMERCE SUCCESS
- Product Characteristics
- Industry Characteristics
- Seller Characteristics
- Consumer Characteristics
GLOBAL E-COMMERCE
- BENEFITS AND EXTENT OF OPERATIONS
- The major advantage of EC is the ability to do business at any time, from anywhere, and at a reasonable
cost
- BARRIERS TO GLOBAL EC
- Cultural Issues and Language Translation
- Machine Translation of Web Pages
- Administrative and Legal Issues
- Geographic Issues and Localization
- Economic and Financial Issues
- BREAKING DOWN THE BARRIERS TO GLOBAL EC
- Be strategic
- Know your audience
- Localize
- Think globally, act consistently
- Value the human touch
- Clarify, document, explain
- Offer services that reduce barriers
E-COMMERCE IN SMALL AND MEDIUM-SIZED ENTERPRISES
- Some of the first companies to take advantage of Web-based electronic commerce were SMEs
- SMEs consider the Internet to be a valuable business tool
INTELLECTUAL PROPERTY AND OTHER REGULATORY ISSUES
LAWS ARE SUBJECT TO INTERPRETATION
PERSONAL AND PROPERTY RIGHTS
- Civil litigation - An adversarial proceeding in which a party (the plaintiff) sues another party (the
defendant) to get compensation for a wrong committed by the defendant.
- Regulatory compliance - Systems or departments in an organization whose job is to ensure that
personnel are aware of and take steps to comply with relevant laws, standards, policies, and regulations.
- Compliance data - All data belonging or pertaining to an enterprise included in the law, which can be
used for the purpose of implementing or validating compliance.
Intellectual property - Creations of the mind, such as inventions, literary and artistic works, and symbols, names,
images, and designs, used in commerce.
- Copyright - An exclusive right of the author or creator of a book, movie, musical composition, or other
artistic property to print, copy, sell, license, distribute, transform to another medium, translate, record,
perform, or otherwise use.
- Infringement - Use of the work without permission or contracting for payment of a royalty.
- Digital rights management (DRM) - An umbrella term for any of several arrangements that allow a
vendor of content in electronic form to control the material and restrict its usage.
- Fair use - The use of copyrighted material for noncommercial purposes.
- Patent - A document that grants the holder exclusive rights to an invention for a fixed number of years.
- Trademark - A symbol used by businesses to identify their goods and services; government registration
of the trademark confers exclusive legal right to its use.

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ETHICS IN E-COMMERCE
Ethics - The branch of philosophy that deals with what is considered to be right and wrong.
Privacy - The right to be left alone and free of unreasonable personal intrusions.
ETHICAL PRINCIPALS AND GUIDELINES
Example: Who Owns User-Generated Content at Facebook?
Business ethics - A form of applied ethics that examines ethical principles and moral or ethical problems that arise
in a business environment.
EC ETHICAL ISSUES
- Nonwork-Related Use of the Internet
- Codes of Ethics
PRIVACY, VIOLATION AND PROTECTION, AND THE CONFLICT WITH FREE SPEECH
PRIVACY RIGHTS AND PROTECTION
- opt-out - Business practice that gives consumers the opportunity to refuse sharing information about
themselves.
- opt-in - Agreement that requires computer users to take specific steps to allow the collection of personal
information.
FREE SPEECH ONLINE VERSUS PRIVACY PROTECTION
- Free Speech Online Versus Child Protection Debate
- Children’s Internet Protection Act (CIPA)
U.S. law that mandates the use of filtering technologies in schools and libraries that
receive certain types of federal funding.
THE PRICE OF PROTECTING AN INDIVIDUAL’S PRIVACY
- Example: Sheriff Sues Craigslist to Curb Prostitution
HOW INFORMATION ABOUT INDIVIDUALS IS COLLECTED
- Web Site Registration
- Cookies
- RFID’s Threat to Privacy
- Privacy of Employees
- Darknets - Private online community that is only open to those who belong to it.
PRIVACY ISSUES IN WEB 2.0 TOOLS AND SOCIAL NETWORKS
- Presence, Location, and Privacy
- Free Speech via Wikis and Social Networks
PRIVACY PROTECTION USING ETHICAL PRINCIPLES
- Platform for Privacy Preferences Project (P3P) - A protocol allowing Web sites to declare their intended
use of information they collect about browsing users.
USA PATRIOT Act - Uniting and Strengthening America by Providing Appropriate Tools to Intercept and
Obstruct Terrorism Act passed in October 2001, in the aftermath of the September 11 terrorist attacks. Its intent is
to give law enforcement agencies broader range in their efforts to protect the public.
EC AND GREEN COMPUTING
- Green computing - The study and practice of ecofriendly computing resources; is now a key concern of
businesses in all industries—not just environmental organizations.
- Green IT - Green IT begins with manufacturers producing environmentally friendly products and
encouraging IT departments to consider more friendly options like virtualization, power management, and
proper recycling habits.
- How to Operate Greener Businesses, Data Centers, and Supply Chains
- Global Green Regulations
- Electronic Product Environmental Assessment Tool (EPEAT) - A searchable database of computer hardware
that meets a strict set of environmental criteria.
THE FUTURE OF ELECTRONIC COMMERCE
- INTEGRATING THE MARKETPLACE WITH THE MARKETSPACE
- SOCIAL NETWORKS

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- FUTURE TRENDS
- Security concern
- Lack of Net neutrality
- Copyright complaints
- Choppy connectivity
MANAGERIAL ISSUES
1. What is the strategic value of EC to the organization?
2. Who determines EC strategy?
3. What are the benefits and risks of EC?
4. What metrics should we use?
5. How do we measure the value of EC investment?
6. How can we go global?
7. Can we learn to love smallness?
8. What legal and ethical issues should be of major concern to an EC enterprise?
9. What are the most critical ethical issues?
10. How shall we approach EC green computing?

CHAPTER 12 – LAUNCHING A SUCCESSFUL ONLINE BUSINESS AND EC PROJECTS

Learning Objectives
1. Understand the fundamental requirements for initiating an online business.
2. Describe the process of initiating and funding a startup e- business or large e-project.
3. Understand the process of adding EC initiatives to an existing business.
4. Describe the issues and methods of transforming an organization into an e-business.
5. Describe the process of acquiring websites and evaluate building versus hosting options.
6. Understand the importance of providing and managing content and describe how to accomplish this.
7. Evaluate websites on design criteria, such as appearance, navigation, consistency, and performance.
8. Understand how search engine optimization may help a website obtain high placement in search engines.
9. Understand how to provide some support e-services.
10. Understand the process of building a webstore.
11. Know how to build a webstore with templates.
Getting into E-Commerce and Starting a New Online Business
- GETTING INTO E-COMMERCE
- STARTING A NEW ONLINE BUSINESS
- AN E-STARTUP IS A STARTUP
- CREATING A NEW COMPANY OR ADDING AN ONLINE PROJECT
1. Identify a consumer or business need in the marketplace.
2. Investigate the opportunity.
3. Determine the business owner’s ability to meet the need.
- Some Tips for Success
1. Do your homework.
2. Aim for excitement.
3. Whittle, shape, iterate, and repeat.
4. Get real.
5. Avoid creating a gizmo. Cloning
- PANNING ONLINE BUSINESSES
Business plan - A written document that identifies a company’s goals and outlines how the company intends to
achieve the goals and at what cost
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Business case - A document that justifies the investment of internal, organizational resources in a specific
application or project
- FUNDING A NEW ONLINE BUSINESS
- First Round of Initial Funding
- Angel investor - A wealthy individual who contributes personal funds and possibly expertise at
the earliest stage of business development
- Incubator - A company, university, or nonprofit organization that supports businesses in their
initial stages of development
- Second Round Finance
- Venture capital (VC) - Money invested in a business by an individual, a group of individuals
(venture capitalists), or a funding company in exchange for equity in the business
- Additional Funding: A Large Partner
- The Initial Public Offer (IPO)
Adding E-Commerce Initiatives or Transforming to an E-Business
- ADDING EC INITIATIVES TO AN EXISTING BUSINESS
- A webstore - A portal
- E-procuremen - Auctions and reverse auctions
- M-commerce - Social commerce
- TRANSFORMATION TO AN E-BUSINESS
- What Is Organizational Transformation?
- How an Organization Can Be Transformed into an E-Business
- Business Process Reengineering (BPR)
- Business process management (BPM) - Method for business restructuring that combines workflow systems and
redesign methods; covers three process categories—people-to-people, systems-to- systems, and systems-to-people
interactions
- Software Tools for Facilitating the Transformation to E-Business
- Change Management
Building or Acquiring a Website
- CLASSIFICATION OF WEBSITES
- Informational website - A website that does little more than provide information about the business and its
products and services
- Interactive website - A website that provides opportunities for the customers and the business to
communicate and share information
- Attractors - Website features that attract and interact with visitors in the target stakeholder group
- Transactional website - A website that sells products and services
- Collaborative website - A site that allows business partners to collaborate
- Social-oriented website - A site that provides users online tools for communication and sharing information
on common interests
- BUILDING A WEBSITE
- Steps in Building a Website
1. Select a Web host.
2. Register a domain name.
3. Create and manage content.
4. Design the website.
5. Construct and test the website.
6. Market and promote the website.
Website Hosting and Obtaining a Domain Name
- WEB HOSTING OPTIONS
- Storebuilder service - A hosting service that provides disk space and services to help small and
microbusinesses build a website quickly and cheaply
- A Dedicated Hosting Service

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 - Web hosting service - A dedicated website hosting company that offers a wide range of hosting services
and functionality to businesses of all sizes
- Mirror site - An exact duplicate of an original website that is physically located on a Web server on
another continent or in another country
ISP Hosting Combined with Web Designer
- ISP hosting service - A hosting service that provides an independent, stand-alone website for small and
medium-sized businesses
- Self-hosting - When a business acquires the hardware, software, staff, and dedicated telecommunications
services necessary to set up and manage its own website
REGISTERING A DOMAIN NAME
- Domain name - A name-based address that identifies an Internet- connected server; usually it refers to the
portion of the address to the left of .com and .org, etc.
- Domain Name System (DNS) - A hierarchical naming system for computers, services, or any resource
participating in the Internet; it is like a directory
Content Creation, Delivery, and Management
- Content - The text, images, sound, and video that make up a Web page
- CATEGORIES AND TYPES OF CONTENT
- Dynamic Web content - Content that must be kept up-to-date
- Primary and Secondary Content
- Cross-selling - Offering similar or complementary products and services to increase sales
- Up-selling - Offering an upgraded version of the product in order to boost sales and profit
- Promotion
- Comment
- CREATION OR ACQUISITION OF CONTENT
- Buying Content
- Syndication - The sale of the same good (e.g., digital content) to many customers, who then integrate it
with other offerings and resell it or give it away free
Web syndication - A form of syndication in which a section of a website is available for other sites to use
- Really Simple Syndication (RSS) - A family of Web-feed formats used to publish frequently updated
digital content
- Podcast - A media file that is distributed over the Internet using syndication feeds for playback on
mobile devices and personal computers; as with the term radio, it can mean both the content and the
method of syndication A collection of audio files in MP3 format
- Representative Content-Related Vendors
- Content Delivery Networks
- Personalized content - Web content that matches the needs and expectations of the individual visitor
- E-newsletter - A collection of short, informative articles sent at regular intervals by e-mail to individuals
who have an interest in the newsletter’s topic
- Content management - The process of adding, revising, and removing content from a website to keep
content fresh, accurate, compelling, and credible
- Content Testing and Updating - Measuring Content Quality
- Pitfalls of Content Management - Content Removal
- Content Management Software
- CATALOG CONTENT AND ITS MANAGEMENT
- CONTENT MAXIMIZATION AND STREAMING SERVICES
- Content for Large EC Sites
Website Design
- Guidelines for a successful Website:
1. Build it for users (useful for the user, not necessarily the company).
2. Make it useful (e.g., usability test).
3. Make information easy to find.

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 4. Accommodate all users, including those with disabilities.
5. Build a comprehensive, responsive, and effective site.
6. Measure the site against the best of its peer group.
7. Build trust; be up front about security, privacy, and marketing policies.
8. Assign ownership to users, but work as a team with the technical people.
9. Set priorities; do the most beneficial stuff first.
10. Watch for new developments and encourage innovation.
- Information architecture - How the site and its Web pages are organized, labeled, and navigated to
support browsing and searching throughout the website
- SITE NAVIGATION
- Site navigation - Aids that help visitors find the information they need quickly and easily
- Site Map and Navigation
- PERFORMANCE (SPEED)
- COLORS AND GRAPHICS
- Usability (of website) - The quality and usefulness of the user’s experience when interacting with the website
- What Annoys EC Customers?
Providing E-Commerce Support Services
- WHO BUILDS THE WEBSITE?
- PAYMENTS: ACCEPTING CREDIT CARDS
- Card-not-present (CNP) transaction - A credit card transaction in which the merchant does not verify the
customer’s signature
- WEBSITE PROMOTION
- Internal Website Promotion
- Signature file - A simple text message an e-mail program automatically adds to outgoing messages
- Web analytics - The measurement, collection, analysis, and reporting of Internet data for the purposes of
understanding and optimizing Web usage
- Search engine optimization (SEO) - The application of strategies intended to position a website at the
top of Web search engines
- CUSTOMER RELATIONSHIP MANAGEMENT
- Using Content to Build Customer Relationships
Opening a Webstore
- OPTIONS FOR ACQUIRING WEBSTORES
- Build them from scratch - Build them from components
- Build with templates (storebuilders)
- Selecting a Development Option. Consider:
- Customers - Merchandising
- Sales service - Promotion
- Transaction processing - Marketing data and analysis
- Branding
- YAHOO! SMALL BUSINESS
- Getting Started
- Take a Tour and See the Videos
- Using the Templates
Managerial Issues
1. What does it take to create a successful online business?
2. Is creating a website a technical task or a management task?
3. How do we attract visitors to the website?
4. How do we turn visitors into buyers?
5. Are best practices useful?
6. What should my new business give to funders?
7. What are important factors for successful Web management?

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Summary
1. Fundamental requirements for initiating an online business
2. Funding options for a startup online business
3. Adding e-initiatives
4. Transformation to e-business
5. Website hosting options for an online business
6. Provide content that attracts and keeps website visitors.
7. Design a visitor-friendly site.
8. High placement in search engines is key.
9. Provision of support services.
10. The process of building a webstore.
11. Using templates to build a webstore.

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