Chapter 5

Electronic Commerce and Enterprise Systems

 An Introduction to Electronic Computers
• 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 E-Commerce
• B2B e-commerce is 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
• Many organizations use both:
• Buy-side e-commerce to purchase goods and services
from suppliers
• Sell-side e-commerce to sell products to their customers
 Business-to-Consumer E-Commerce
• 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 E-Commerce
• C2C e-commerce
• Involves electronic transactions between consumers are facilitated by
a third party
• Popular sites include:
• eBay, Bidz.com, Craigslist, eBid, Etsy, Fiverr, Ibidfree, Kijiji, Ubid,
and Taobao
• Companies and individuals involved in C2C must be careful
• Sales must not violate the rules of various county, state, and country
legal jurisdictions
 E-Government
• E-government is the use of information and
communications technology to:
• Simplify the sharing of information
• Speed formerly paper-based processes
• Improve the relationship between citizens and government
• Forms of e-Government:
• Government-to-consumer (G2C)
• Government-to-business (G2B)
• Government-to-government (G2G)
 Mobile Commerce
• Mobile commerce (m-commerce) relies on the use of
wireless devices
• The Internet Corporation for Assigned Names and
Numbers (ICANN):
• Created a .mobi domain to help attract mobile users to the Web
• The market for m-commerce in North America
• Maturing much later than in Western Europe and Japan
• Worldwide, m-commerce accounted for 35 percent of all
retail e-commerce sales in the fourth quarter of 2015
• The number of mobile Web sites worldwide is growing
rapidly
• Because of advances in wireless broadband technologies
 Advantages of Electronic and Mobile Commerce
• 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
• 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 – Advertising
• Bartering – Retargeting
• Price comparison – Couponing
• Investment and finance – Banking
 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
• 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
Manufacturing
 Marketing
• Market segmentation: the identification of specific
markets to target them with advertising messages
• Divides the pool of potential customers into subgroups usually
defined in terms of demographic characteristics
• eXelate (a subsidiary of Nielson)
• Provides data as a service solution that customers can use to
access a database of more than 250 million business records
 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
 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
 Retargeting
• An average of 74 percent of all online shopping carts are
abandoned
• Retargeting is used by advertisers to recapture those shoppers by
using targeted and personalized ads to direct shoppers back to a
retailer’s site
• Price Comparison
• Mobile phone apps enable shoppers to compare prices and
products online
• In some cases, shopper can simply scan an item’s barcode or
snap a photo of the item
• Couponing
• In 2015, over $515 billion in consumer incentives were distributed in
North America
• Less than one percent were redeemed
• Shoppers can subscribe to mobile coupon aggregators
• Mobile coupon redemption rate is expected to increase due to coupon
integration in social networks
 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
Technology Infrastructure Required to Support
E-Commerce and M-Commerce
• Poor Web site performance drives consumers to abandon
some e-commerce sites in favor of those with better,
more reliable performance
 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
• 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
 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
 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
 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 than desktop or laptop computers
• Operate on limited-life batteries
• For these reasons
• Web developers must often rewrite Web applications so users with mobile devices
can access them
 Electric Payment Systems
• Authentication technologies are used by many
organizations to confirm the identity of a user requesting
access to information or assets
• 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
 Electric Payment Systems
• Various measures are being implemented to increase the security
associated with the use of credit cards
• Address Verification System is a check built into the payment
authorization request
- Compares the address on file with the address provided by the
cardholder
• Card Verification Number
- A check of the additional digits typically printed on the back of the
card
• Transport Layer Security (TLS) is a communications protocol 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
Electric Payment Systems
 Transaction Processing Systems
• Transaction processing systems (TPSs):
• Capture and process detailed data necessary to update the
organization’s records about fundamental business operations
• Include order entry, inventory control, payroll, accounts payable,
accounts receivable, general ledger, etc.
• A TPS provides valuable input to:
• Management information systems
• Decision support systems
• Knowledge management systems
 Traditional Transaction Processing Methods and
Objectives
• Batch processing system
• Business transactions are accumulated over a period of time and
prepared for processing as a single unit or batch
• Essential characteristic: the delay between an event and the
processing of the related transaction to update the organization’s
records
• Online transaction processing (OLTP)
• Data processing in which each transaction is processed
immediately
• At any time, the data in an online system reflects the current
status
• Many organizations find that OLTP enables them to provide
faster, more efficient service
Traditional Transaction Processing Methods and
Objectives
Traditional Transaction Processing Methods and Objectives
 Traditional Transaction Processing Methods and Objectives

• Organizations expect their TPSs to:

• Capture, process, and update databases
• Ensure that the data is processed accurately and completely
• Avoid processing fraudulent transactions
• Produce timely user responses and reports
• Reduce clerical and other labor requirements
• Help improve customer service
• Achieve competitive advantage
 Traditional Transaction Processing Methods and Objectives
• A TPS includes:
• Order processing systems
- Processing flow begins with receipt of customer order, then finished product
inventory is checked to see if sufficient inventory is on hand to fill the order
- Product pick list is printed at the warehouse and inventory is adjusted
- Customer invoice is created and copy included in the customer shipment
• Accounting systems
- Must track the flow of data related to all the cash follows that affect the
organization
• Purchasing systems
- Systems that support the purchasing business function
- Inventory control, purchase order processing, receiving, and accounts
payable
Traditional Transaction Processing Methods and Objectives
 Transaction Processing Systems for Entrepreneurs and Small
and Medium-Sized Enterprises
• Many software packages:
• Provide integrated transaction processing system solutions for small and
medium-size enterprises (SMEs)
• Are easy to install and operate with a low total cost of ownership
• Have an initial cost of a few hundred to a few thousand dollars
 Transaction Processing Activities
• The transaction processing cycle
• Data collection
• Data editing
• Data correction
• Data manipulation
• Data storage
• Document production
 Data Collection
• Capturing and gathering all data necessary to complete the
processing of transactions
• Data collection can be:
• Manual
• Automated via special input devices
• Source data automation
• Involves capturing data at its source and recording it accurately
in a timely fashion with minimal manual effort and in an
electronic or digital form so that it can be directly entered into
the computer
• Example: a scanner reading a UPC code
• Cloud-based POS systems provide a range of capabilities
• Including advanced integration with digital loyalty programs,
various accounting tools, and the ability to generate gift cards
and coupons
Data Collection
 Data Editing and Data Correction
• Data editing
• Checking data for validity and completeness to detect any problems
• Examples
• Quantity and cost data must be numeric
• Names must be alphabetic
• Codes associated with an individual transaction are edited against a database
containing valid codes
• Data Correction
• Systems should provide error messages that alert those responsible
for editing the data
• Error messages should specify the problem so proper corrections can be made
• Data correction involves reentering data that was not typed or
scanned properly
 Data Processing and Data Storage
• Data processing:
• Performing calculations and other data transformations
related to business transactions including:
• Classifying data
• Sorting data into categories
• Performing calculations
• Summarizing results
• Storing data in the organization’s database for further processing
• Data Storage
• Involves updating one or more databases with new transactions
• After being updated, this data can be further processed
and manipulated by other systems
 Document Production
• Document Production involves generating output records,
documents, and reports
• Hard-copy paper reports
• Displays on computer screens (soft copy)
• Results from one TPS can be input to another system
• Most TPSs provide other useful management
information, such as:
• Printed or on-screen reports that help managers and employees
perform various activities
• Reports showing current inventory
• Reports required by local, state, and federal agencies
 Enterprise Systems
• An enterprise system is central to individuals and organizations of
all sizes
• Ensures that information can be shared across all business functions and all
levels of management to support the running and managing of a business
• The ultimate goal is to satisfy customers and provide significant
benefits by reducing costs and improving service
• Businesses rely on enterprise systems to perform daily activities in
areas such as:
• Product supply and distribution
• Sales and marketing
• Human resources
• Manufacturing
• Accounting and taxes
 Enterprise Resource Planning
• Enterprise resource planning (ERP)
• A set of integrated programs that manage a company’s vital
business operations for an entire organization
• Business process
• A set of coordinated and related activities that takes one or more
kinds of input and creates an output of value to the customer of
that process
 Enterprise Resource Planning
• ERP systems evolved from materials requirement
planning systems (MRP) developed in the 1970s
• Large organizations were the first to take on the challenge
of implementing ERP
• Advantages of ERP
• Improved access to quality data for operational decision
making
• Elimination of costly, inflexible legacy systems
• Improvement of work processes
• Opportunity to upgrade and standardize technology
infrastructure
 Leading ERP Systems
• ERP vendors are classified as:
• Tier I vendors – target large multinational firms with multiple
geographic locations and annual revenues in excess of $1 billion
• Tier II vendors – target medium-sized firms with annual
revenues in the $50 million to $1 billion range operating out of
one or more locations
• Tier III vendors – target smaller firms with annual revenues in
the $10 million to $50 million range that typically operate out of
a single location
Leading ERP Systems
 Leading ERP Systems
• Many large companies employed ERP on large
mainframe computers in the 2000s
• ERP software vendors created new solutions for smaller
companies
• Cloud-based solutions are available
• Examples: Plex and NetSuite
• Compiere offers an open-source ERP system
• Vendor’s ERP software may require customization to:
• Integrate other business systems
• Add data fields or change field sizes from those in the standard
system
• To meet regulatory requirements
 Customer Relationship Management
• Customer relationship management (CRM) system
• Helps a company manage all aspects of customer encounters,
including marketing, sales, distribution, accounting, and
customer service
• The goal of CRM is to understand and anticipate the
needs of current and potential customers
• CRM is used primarily in sales, marketing, and service
organizations:
• To capture and view data about customers and to improve
communications
• CRM software:
• Automates and integrates the functions of sales, marketing, and
service in an organization
Customer Relationship Management
Customer Relationship Management
• Key features of a CRM system include:
• Contact management
• Sales management
• Customer support
• Marketing automation
• Analysis
• Social networking
• Access by smartphones
• Import contact data
Customer Relationship Management
Customer Relationship Management
 Customer Relationship Management
• Due to the popularity of mobile devices
• Shoppers can easily compare products and prices on their mobile
phones
• Shopper can also tweet their experiences with a brand to dozens
of friends
• Savvy retailers use their CRM systems to stay on top of
what these customers are saying on social networks
• Most CRM systems can now be accessed via
smartphones
 Product Lifecycle Management
• Product lifecycle management (PLM)
• An enterprise business strategy that creates a common repository
of product information and processes
• Supports the collaborative creation, management, dissemination,
and use of product and packaging definition information
• Product lifecycle management (PLM) software
• Provides a means for managing the data and processes associated
with the various phases of the lifecycle of a product
• The scope of PLM software may include computer-aided design,
computer-aided engineering, and computer-aided manufacturing
Product Lifecycle Management
 Product Lifecycle Management
• Computer-aided design (CAD):
• The use of software to assist in the creation, analysis, and modification of the
design of a component or product
• Computer-aided engineering (CAE):
• The use of software to analyze the robustness and performance of components
and assemblies
• Computer-aided manufacturing (CAM)
• The use of software to control machine tools and related machinery in the
manufacture of components and products
Product Lifecycle Management
 Product Lifecycle Management
• Discrete manufacturing
• The production of distinct items e.g., autos, airplanes, furniture,
or toys that can be decomposed into their basic components
• Process manufacturing
• The production of products that are the result of a chemical
process, e.g., gasoline and pharmaceutical drugs that cannot be
easily decomposed into its basic components
Overcoming Challenges in Implementing Enterprise Systems
 Overcoming Challenges in Implementing Enterprise Systems
• Tips for avoiding a failed implementation
• Assign a full-time executive to manage the project
• Appoint an experienced, independent resource to provide project
over- sight and to verify and validate system performance
• Allow sufficient time to transition from the old way of doing
things to the new system and new processes
• Allocate sufficient time and money training people
• Define metrics to assess project progress and to identify project-
related risks
• Keep the scope of the project well defined and contained to
essential business processes
• Be wary of modifying the enterprise system software to conform
to your firm’s business practices
 Hosted Software Model for Enterprise Software
• Many business application software vendors are pushing the use of
the hosted software model for businesses
• The goal is to help customers acquire, use, and benefit from the new
technology while avoiding much of the associated complexity and high
start-up costs
• Using the hosted software model enables businesses to:
• Experiment with powerful software capabilities without making a major
financial investment
• Avoid employing a full-time IT person to maintain key business
applications
 Summary
• Electronic and mobile commerce are evolving, providing new
ways of conducting business that present both potential benefits
and problems
• E-commerce and m-commerce require the careful planning and
integration of a number of technology infrastructure components
• An organization must have information systems that support
routine, day-to-day activities and that help a company add value to
its products and services
• An organization that implements an enterprise system is creating a
highly integrated set of systems, which can lead to many business
benefits
 THE END!
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