Chapter 9

Ralph M. Stair | George W.
Reynolds
Chapter 9
Managing Global Businesses and

Systems
© 2016 Cengage Learning®. All Rights Reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
Why Learn About Electronic and Mobile
Commerce?
• Electronic and mobile commerce have

transformed many areas of our lives and
careers
• One fundamental change has been the
manner in which companies interact with
their suppliers, customers, and others
• E-commerce and m-commerce present
both opportunities and challenges
An Introduction to Electronic Commerce
• Electronic commerce: conducting business

activities electronically over computer
networks
• Business activities that are strong
candidates for conversion to e-commerce
are:
– Paper based
– Time-consuming
– Inconvenient for customers
Business-to-Business (B2B)
E-Commerce
• A subset of e-commerce
• All the participants are organizations
• Useful tool for connecting business
partners in a virtual supply chain to cut
resupply times and reduce costs
• An organization uses both:
– Buy-side e-commerce to purchase goods and
– Sell-side e-commerce to sell products
Business-to-Consumer (B2C)
E-Commerce
• Customers deal directly with an

organization and avoid intermediaries; this
is called disintermediation
• Reasons for steady growth
– Cheaper goods and services via the Web
– Online shoppers can design a personalized
product
– The use of social media networks to promote
products and reach customers
Consumer-to-Consumer (C2C)
E-Commerce
• Electronic transactions between

consumers are facilitated by a third party
• Popular sites include:
– eBay, Bidz.com, Craigslist, eBid, ePier,
Ibidfree, Kijiji, Ubid, and Tradus
• Companies and individuals involved in
C2C must be careful
– Sales must not violate the rules of various
county, state, and country legal jurisdictions
Table 1 Differences Among B2B, B2C,
and C2C
Factors B2B B2C C2C
Value of sale Thousands or millions Tens or hundreds of Tens of dollars
of dollars dollars
Length of sales process Days to months Days to weeks Hours to days

Number of decision Several people to a dozen One or two One or two
makers involved or more
Uniformity of offer Typically a uniform More customized Single product

product offering product offering offering, one of a kind
Complexity of Extremely complex; Relatively simple; Relatively simple;

buying process much room for limited discussion over limited discussion over
negotiation on price, price and payment and payment and delivery
payment and delivery delivery options options; negotiation
options, quantity, over price
quality, and options and
features
Motivation for sale Driven by a business Driven by an Driven by an

decision or need individual consumer’s individual consumer’s
need or emotion need or emotion
E-Government
• Use of information and communications

technology to:
– Simplify the sharing of information
– Speed formerly paper-based processes
– Improve the relationship between citizens and
government
E-Government (cont’d.)
• Forms of e-Government:
– Government-to-consumer (G2C)
– Government-to-business (G2B)
– Government-to-government (G2G)
M-Commerce Web Sites
• Numerous retailers have established

special Web sites for users of mobile
devices
• @IMshopping
– A shopping-related question can be sent from
Twitter
Advantages of Electronic and Mobile
Commerce
• Reach new customers

• Reduce the cost of doing business
• Speed the flow of goods and information
• Increase the accuracy of order-processing
• Improve the level of customer service
Multistage Model for E-Commerce
• Search and identification

• Selection and negotiation
• Purchasing products and services
electronically
• Product and service delivery
• After-sales service
Multistage Model for E-Commerce
(B2B and B2C)
E-Commerce Challenges
• Dealing with consumer privacy concerns

– About one-third of all adult Internet users will
not buy online due to privacy concerns
• Overcoming consumers’ lack of trust in
online sellers
• Overcoming global issues
– Cultural, language, time and distance,
infrastructure, currency, and legal challenges
Electronic and Mobile Commerce
Applications
• Areas in which applications are used

– Retail and wholesale –
Manufacturing
– Marketing and advertising – Bartering
– Price comparison – Couponing
– Investment and finance – Banking
– E-boutiques
Retail and Wholesale
• Electronic retailing (e-tailing): the direct

sale from business to consumer through
electronic storefronts
• Cybermall: a single Web site that offers
many products and services at one
Internet location
• A key sector of wholesale e-commerce
– Spending on manufacturing, repair, and
operations (MRO) goods and services
Manufacturing
• Electronic exchange: an electronic forum

where manufacturers, suppliers, and
competitors buy and sell goods, trade
market information, and run back-office
operations
• Private exchanges are owned and
operated by a single company
Manufacturing (cont’d.)
• Consortium-operated exchanges are run

by a group of traditionally competing
companies with common procurement
needs
• Independent exchanges are open to any
set of buyers and sellers within a given
market
Model of an Electronic Exchange
Marketing
• Market segmentation: the identification of

specific markets to target them with
advertising messages
• Nielsen, the marketing and media
information company:
– Has developed its Business-Facts database,
which provides information for more than 14
million businesses
Advertising
• Methods of buying mobile ad impressions

– Cost per thousand (CPM)
– Cost per click (CPC)
– Cost per action (CPA)
• Three main measures of success
– Number of users reached
– Click through rate (CTR)
– Number of actions users take
Advertising (cont’d.)
• Three types of mobile ad networks

– Blind
– Premium blind
– Premium networks
Table 2 Characteristics of Three Types of
Mobile Advertising Networks
Premium Blind
Characteristic Blind Networks Premium Networks
Networks
Degree to which An advertiser can specify Most advertising is Big brand advertisers
advertisers can country and content channel blind, but for an can secure elite
specify where (e.g., news, sports, or additional charge, the locations on top-tier
ads are run entertainment) on which the advertiser can buy a destinations.
ad will run but not a specific specific spot on a Web
Web site. site of its choice.
Predominant CPC ($0.01 per click) CPM ($20 per CPM ($40 per
pricing model thousand thousand impressions)
and typical rate impressions)
Examples Admoda/Adultmoda Jumptap Advertising.com/

AdMob Madhouse AOL Hands
BuzzCity InMobi Millennial Microsoft Mobile
Media Quattro Advertising Nokia
Wireless Interactive
Advertising
Pudding Media
YOC Group
Bartering
• With economic downturn, many people

and businesses have turned to bartering to
gain goods and services
• A number of Web sites have been created
to support bartering
Table 3 Popular Bartering Web Sites
Web Site Purpose

Craiglist.org Includes a section where users can request an item in exchange for
services or exchange services for services.
Goozez.com Allows users to exchange video games and movies.

Swapagift.com Enables users to buy, sell, or swap merchant gift cards.
SwapHog.com Bartering site that offers a third-party service that first receives all
items and inspects them before finalizing the transaction to
eliminate fraud and ensure a successful transaction.
Swapstyle.com Users can swap, sell, or buy women’s accessories, clothes, cosmetics,
and shoes.
Swaptree.com Users trade books, CDs, DVDs, and video games on a one- for-one
basis.
TradeAway.com Enables users to exchange a wide variety of new or used items,
services, or real estate.
Investment and Finance
• The Internet has revolutionized the world

of investment and finance
• The brokerage business adapted to the
Internet faster than any other arm of
finance
Banking
• Online banking customers can:

– Check balances of their savings, checking,
and loan accounts
– Transfer money among accounts
– Pay their bills
• Many banks enable customers to perform
online banking activities via mobile phone
Strategies for Successful
E-Commerce and M-Commerce
• Companies must develop effective Web

sites that include the following
characteristics:
– Easy to use
– Accomplish the goals of the company
– Safe and secure
– Affordable to set up and maintain
Defining an Effective E-Commerce Model
and Strategy
• First major challenge for a successful

e-commerce site
• Three components of a successful model
– Community
– Content
– Commerce
Content, Commerce, and Community
Defining the Web Site Functions
• Decide which tasks the site must

accomplish
• Create an attractive presence for the
company
• Meet the needs of its visitors
– Example: obtaining information about the
organization and its products
• Redefine the site’s basic business model
as needed to capture new opportunities
Establishing a Web Site
• Web site hosting companies:

– Allow you to set up a Web page and conduct
e-commerce within a matter of days
– Have little up-front cost
• Storefront broker: a company that acts as
an intermediary between your Web site
and online merchants who have the
products and retail expertise
Building Traffic to Your Web Site
• Measures to attract customers

– Obtain and register a domain name
– Make your site search-engine friendly
– Include a meta tag in your store’s home page
– Use Web site traffic data analysis software
– Provide quality, keyword-rich content
– Add new content to the Web site on a regular
basis
– Acquire links to your site from other Web sites
Maintaining and Improving Your Web Site
• Personalization: the process of tailoring

Web pages to specifically target individual
consumers
• Implicit personalization captures data from
customer Web sessions
• Explicit personalization captures user-
provided information
Technology Infrastructure Required to
Support E-Commerce and M-Commerce
• Factors in site performance

– Response time
– Customer support
– Order handling
• Poor Web site performance drives
consumers to abandon some e-commerce
sites in favor of those with better, more
reliable performance
Key Technology Infrastructure
Components
Technology Infrastructure: Hardware
• The Web server’s required storage

capacity and computing power depend on:
– The software that must run on the server
– Volume of e-commerce transactions that must
be processed
• Successful e-commerce solutions are
designed to be highly scalable
– Can be upgraded to meet unexpected user
traffic
Technology Infrastructure:
Hardware (cont’d.)
• Key Web site performance measures

– Response time
– Transaction success rate
– System availability
• Key decision for a new e-commerce
company
– Choosing whether to host its own Web site or
to enlist a third-party Web service provider
Table 4 Key Performance Measures for
Popular Retail Web Sites
Response Time Success Outage Time

Retail Apparel Firm
(seconds) Rate During One Week
Abercrombie 4.64 98.6% 1 hour
Macy’s 6.81 99.5% 0 hours
Sears 12.90 99.1% 1 hour
J Crew 7.89 97.7% 1 hour
Saks Fifth Avenue 10.59 95.7% 2 hours
Technology Infrastructure: Web Server
Software
• Fundamental services needed in Web

server software
– Security and identification
– Retrieving and sending Web pages
– Web site tracking
– Web site development
– Web page development
Technology Infrastructure: E-Commerce
Software
• Five core tasks that must be supported by

e-commerce software
– Catalog management
– Product configuration
– Shopping cart facilities
– E-commerce transaction processing
– Web traffic data analysis
Technology Infrastructure: Mobile
Commerce Hardware and Software
• Limitations of handheld devices that

complicate their use:
– Screens are small
– Input capabilities are limited to a few buttons
– Less processing power and less bandwidth
• The Wireless Application Protocol (WAP)
– A standard set of specifications for Internet
applications that run on handheld, wireless
devices
Technology Infrastructure: Electronic
Payment Systems
• Digital certificate: an attachment to an e-

mail message or data embedded in a Web
site that verifies the identity of a sender or
Web site
• Certificate authority (CA): a trusted third-
party organization or company that issues
digital certificates
Electronic Payment Systems (cont’d.)
• Secure Sockets Layer (SSL) is used to

secure sensitive data during e-commerce
• Electronic cash: an amount of money that
is computerized, stored, and used as cash
for e-commerce transactions
• Credit, charge, debit, and smart cards are
payment systems used for e-commerce
Table 5 Comparison of Payment Systems
Payment Description Advantages Disadvantages

System
Credit card Carries preset spending Each month the user can Unpaid balance
limit based on the user’s pay all or part of the accumulates interest
credit history amount owed charges—often at a high
rate of interest
Charge card Looks like a credit card Does not involve lines of The entire amount
but carries no preset credit and does not charged to the card is
spending limit accumulate interest due at the end of the
charges billing period
Debit card Looks like a credit card Operates like cash or Money is immediately
or automated teller a personal check de- ducted from user’s
machine (ATM) card account balance
Smart card Is a credit card device with Better protected from Not widely used in the
embedded microchip misuse than conventional United States
capable of storing facts credit, charge, and debit
about cardholder cards because the smart
card information is
encrypted
Electronic Payment Systems: P-Card and
Cell Phone Payments
• A p-card (procurement card or purchasing

card) is a credit card used to streamline
the traditional purchase order and invoice
payment processes
• Two options form making payments using
cell phones
– Payments linked to your bank account
– Payments added to your phone bill
Summary – Principle 1
• Electronic commerce is the conducting of

business activities electronically over
computer networks
• Types of e-commerce
– Business-to-consumer (B2C)
– Business-to-business (B2B)
– Consumer-to-consumer (C2C)
Summary – Principle 1 (cont’d.)
• A successful e-commerce system must

address the many stages consumers
experience in the sales life cycle
• Key challenges a business must overcome
in developing e-commerce processes
– Consumer privacy concerns
– Consumers’ lack of trust
– Global issues
• Electronic retailing (e-tailing) is the direct

sale from a business to consumers
through electronic storefronts
• Manufacturers are joining electronic
exchanges
• The Internet has revolutionized the world
of investment and finance
• There are many m-commerce applications
• Businesses and individuals use

e-commerce and m-commerce to:
– Reduce transaction costs
– Speed the flow of goods and information
– Improve the level of customer service
– Enable the close coordination of actions
among manufacturers, suppliers, and
customers
• E-commerce and m-commerce enable

consumers and companies to gain access
to worldwide markets
• E-commerce and m-commerce are global
systems facing cultural, language, time
and distance, infrastructure, currency,
product and service, and state, regional,
and national law challenges
• An effective Web site is one that creates

an attractive presence and meets the
needs of its visitors
• Web site operators must constantly
monitor the traffic and response times
associated with their sites and adjust
software, databases, and hardware to
ensure that visitors have a good
experience when they visit
• M-commerce presents additional

infrastructure challenges including:
– Improving the ease of use of wireless devices
– Addressing the security of wireless
transactions
– Improving network speed
• Electronic payment systems are a key
component of the e-commerce
infrastructure

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Ralph M. Stair | George W.

Managing Global Businesses and

• Electronic and mobile commerce have

• Electronic commerce: conducting business

• Customers deal directly with an

• Electronic transactions between

Length of sales process Days to months Days to weeks Hours to days

Uniformity of offer Typically a uniform More customized Single product

Complexity of Extremely complex; Relatively simple; Relatively simple;

Motivation for sale Driven by a business Driven by an Driven by an

• Use of information and communications

• Numerous retailers have established

• Reach new customers

• Search and identification

• Dealing with consumer privacy concerns

• Areas in which applications are used

• Electronic retailing (e-tailing): the direct

• Electronic exchange: an electronic forum

• Consortium-operated exchanges are run

• Market segmentation: the identification of

• Methods of buying mobile ad impressions

• Three types of mobile ad networks

Examples Admoda/Adultmoda Jumptap Advertising.com/

• With economic downturn, many people

Web Site Purpose

Goozez.com Allows users to exchange video games and movies.

• The Internet has revolutionized the world

• Online banking customers can:

• Companies must develop effective Web

• First major challenge for a successful

• Decide which tasks the site must

• Web site hosting companies:

• Measures to attract customers

• Personalization: the process of tailoring

• Factors in site performance

• The Web server’s required storage

• Key Web site performance measures

Response Time Success Outage Time

Macy’s 6.81 99.5% 0 hours

Sears 12.90 99.1% 1 hour

J Crew 7.89 97.7% 1 hour

Saks Fifth Avenue 10.59 95.7% 2 hours

• Fundamental services needed in Web

• Five core tasks that must be supported by

• Limitations of handheld devices that

• Digital certificate: an attachment to an e-

• Secure Sockets Layer (SSL) is used to

Payment Description Advantages Disadvantages

• A p-card (procurement card or purchasing

• Electronic commerce is the conducting of

• A successful e-commerce system must

• Electronic retailing (e-tailing) is the direct

• Businesses and individuals use

• E-commerce and m-commerce enable

• An effective Web site is one that creates

• M-commerce presents additional

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