Electronic Commerce

1. Electronic Commerce Rev: Feb, 2012 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management EngineeringPOSTECH

2. Contents

3. Discussion Questions What is E-commerce? How is it different from the traditional commerce? What are elements of E-commerce? Give more than two examples for each one Classify E-commerce by transaction type and explain each type Explain the flow of E-commerce architecture What is clicks and bricks strategy? Why do you think does a company need it? Choose a question on the E-commerce strategy check list and explain your own opinion about why the question should be examined What are the problems of E-commerce? To solve them, to what direction shouldE-commerce go in the future?

4. Definition and Characteristics of E-Commerce 1. Introduction of E-Commerce • Definition • Every commercial transaction and its supporting action (buying and selling of products or services) over electronic systems such as the Internet and other computer networks • Traditional Commerce vs. E-Commerce

5. Scope of E-Commerce (1/2) 1. Introduction of E-Commerce Selling Acceptingpayments Marketing Delivering E-commerce encompassesthe online process of… Servicing Developing Internet and other information technologiessupport every step of the process

6. Scope of E-Commerce (2/2) 1. Introduction of E-Commerce

7. Background of E-Commerce 1. Introduction of E-Commerce Importance ofE-Commerce Growth of Internet Increase ofE-Commerce Market Size • Market Situation • America: Private organization centered EC • Government: Law, Policy, Fund, etc. • Private: Economic/technical aspect • Japan: Government centered EC • Government: Standardization, Technical development • Private: Inducting private participation • Korea: private organization centered EC with government’s political support • Government: Industrial informationalization project • Private: Developing application and standard of technology

8. Elements of E-Commerce 1. Introduction of E-Commerce Order Processing, Marketing, Sales, Customer Service… Institution Process Government, Producer, Retailer, Customer,Supplier… EC Intranet, Extranet, Internet… Network

9. Classification of E-Commerce (1/2) 2. Classification of E-Commerce C2G B2C C2C B2G B2C B2B Transaction Type

10. Classification of E-Commerce (2/2) 2. Classification of E-Commerce M-Commerce Stationary Wireless Cable EC Network Site Connecting Method

11. 2. Classification of E-Commerce 1) B2C B2C E-Commerce • Definition • A transaction conducted over the Internet between a business and a consumer • Business which sell products to a customer, ship it to him/her, and receive payment, all without ever meeting the customer. • B2C E-Commerce Success Factors • Security and reliability • Performance and service • Great consumer communications • Advertising and incentives • Differences in Marketing

12. 2. Classification of E-Commerce 1) B2C Web Store Requirements

13. 2. Classification of E-Commerce 2) B2B B2B E-Commerce • Definition • The wholesale and supply side of the commercial process • Business which buy, sell, or trade with other businesses • Reliance on Multiple Electronic Information Technologies • Electronic funds transfers • Data interchange • Trading systems • Catalog systems

14. 2. Classification of E-Commerce 2) B2B B2B E-Commerce Web Portal

15. 2. Classification of E-Commerce 3) E-Commerce Application Trends of B2C & B2B Application Trends

16. E-Commerce Technologies 3. Technology & Architecture of E-Commerce

17. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

18. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community • EC processes must establish mutual trust, secure access between parties • User names and pass words • Encryption key • Digital certificates and signatures • Restricted access areas • Other people’s accounts • Restricted company data • Webmaster administration areas Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

19. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking • Profiling gathers data on you and your website behavior and choices • User registration • Cookie files and tracking software • User feedback • Profiling is used for • Personalized (one-to-one) marketing • Authenticating identity • Customer relationship management • Marketing planning • Website management Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

20. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups • Search processes help customers find the specific product or service they want • EC software packages often include a website search engine • Customized search engine may be acquired from companies like Google or Requisite Technology • Searches are often on content or by parameters Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

21. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community • Helps develop, generate, deliver, update, and archive text and multimedia information at e-commerce websites • Product configuration and mass customization Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

22. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking • Helps generate and manage catalog content • Product configuration and mass customization Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

23. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures • E-business & e-commerce management depends on a workflow software engine • Software model of business processes • Workflow models express predefined • Sets of business rules • Roles of stakeholders • Authorization requirements • Routing alternatives • Databases used • Task sequences Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

24. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking • Most e-commerce applicants are event driven • Responds to customer’s first website visit, payments, and so on • Monitors all e-commerce processes • Records all relevant events, including problem situations • Notifies all involved stakeholders • Works in tandem with user-profiling software Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

25. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community • Processes support vital collaboration arrangements and trading services • Needed by customers, suppliers, and other stakeholders to accomplish e-commerce transactions • Online communities of interest • E-mail, chat, discussion groups • Enhances customer service • Builds loyalty Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

26. Essential E-Commerce Architecture 3. Technology & Architecture of E-Commerce Access Controland Security Access Control Authentication Security Measures Content Management Dynamic Content Generation Data Repository Collaborationand Trading Mediation Negotiation Bidding/Auctioning Collaborative Buying Online Community • Electronic Payment Example • Securing Electronic Payments • Network sniffers easily recognize credit card formats • Encrypt data between customer and merchant • Encrypt data between customer and financial institution • Take sensitive information off-line Workflow Management Buying Process Automation Document Management Rule- and Role-Based Content Routing CatalogManagement Pricing Calculation Product Configuration Catalog Generation Profiling and Personalizing Profile Management Personalization Behavior Tracking Event Notification Event-Driven Transaction Messaging Message to e-MailMessage to BoardsNewsgroups Search Management Content-Based Search Parametric-Based Search Role- and Rule- Based Search Payment Shopping Cart Payment Method Support Payment Verification

27. E-Commerce Marketplaces 4. Marketplaces of E-Commerce

28. 5. Strategies of E-Commerce 1) Click and Bricks Clicks and Bricks Success InternetInitiatives TraditionalOperations • Merging operations has trade-offs

29. 5. Strategies of E-Commerce 1) Click and Bricks Integrated vs. Separate e-Business

30. 5. Strategies of E-Commerce 1) Click and Bricks Other Clicks and Bricks Strategies • Partial e-commerce integration • Joint ventures and strategic partnerships • Complete separation • Spin-off of an independent e-commerce company • Barnes and Noble’s experience with spin-off • Gained venture capital, entrepreneurial culture, flexibility • Attracted quality management • Accelerated decision making • Failed to gain market share

31. 5. Strategies of E-Commerce 2) Channel Choices E-Commerce Channel Choices E-CommerceChannel • The marketing or sales channel created by a companyfor its e-commerce activities • No universal strategy or e-commerce channel choice • Major business pros and cons in both e-commerce integration and separation • Most businesses’ implementing some measure of clicks-and-bricks integration

32. 5. Strategies of E-Commerce 3) Checklist E-Commerce Strategy Checklist • Questions to ask and answer • What audiences are we attempting to reach? • What action do we want audiences to take? • Who owns the e-commerce channel within the organization? • Is the e-commerce channel planned alongside other channels? • Is there a process for generating, approving, releasing, and withdrawing content? • Will our brand translate to the new channel? • How will we market the channel itself?

33. eBay 6. Successful Case of E-Commerce Cyber auction site (www.ebay.com) ② Bidding Buyer A ③ Decide a bidder ② Bidding Buyer B ② Bidding ④ Notifyingthe bidder ① Enroll products ④ Notifying the Bidder Seller Buyer C ⑤ Remittance ⑥ Delivery Concept of Cyber Auction

34. personal key public key eBay 6. Successful Case of E-Commerce <Digital Signature> C2C Regulation & Security System

35. eBay 6. Successful Case of E-Commerce • CRM (Community) • News • Chat • Information • Personal data management

36. Problem of E-Commerce 7. Problem & Future of E-Commerce Flood of Information Problem Traditional Marketing Strategy Security Problem Improved encoding technology Using agent and more efficient search engine Application of one-to-one marketing

37. Future of E-Commerce 7. Problem & Future of E-Commerce Combination of Various contents Improved Infrastructure Rapid expansion of internet network Positive

38. Case Study 8. Case Study

39. Reference O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”, McGraw – Hill, Chapter 8, pp. 311~348 EuihoSuh, “E-Commerce (PPT Slide)” THE FREE DICTIONARY BY FARLEX, “B2C E-Commerce financial definition”