E-Business and E-Commerce (Chapter 7)

 Electronic Commerce: The process of buying, selling, transferring, or exchanging

products, services or information via computer networks, including the internet
 E-commerce influences organizations in many ways:
- It increases an organization’s reach, defined as the number of potential customers
whom the company can market its products, and E-commerce provides infinite
opportunities for companies to expand worldwide
- Removes barriers that impeded entrepreneurs to start their own business, (Ex. You
can start a business with an e-commerce website)
- Transforming the nature of competition through the development of online
companies, new business models and the diversity of e-commerce products
7.1: Overview of E-Business and E-Commerce
 Those who want to start an e-commerce business must develop a strategy to do so
effectively, and understand why you want to start one over the internet. There are
several reasons for starting websites:
- To sell goods and services
- To encourage people to go to a physical store
- Reduce operational and transition costs
- Enhance your reputation
Definitions and Concepts
 E-Business: A broader definition of e-commerce, including buying and selling of
goods and services, serving customers, collaborating with business partners, and
performing electronic transactions within an organization
 E-commerce can take several forms:
- Bricks-and-mortar organizations: Purely physical organizations
- Virtual (or pure-play) organizations: Companies engaged only in e-commerce
- Click-and-mortar organizations: Conduct some e-commerce activities, but their
primary business is physical
Types of E-Commerce
 Business-to-Consumer:
- The sellers are organizations, and the buyers are individuals
 Business-to-Business:
- Both the sellers and the buyers are organizations
- Comprises the vast majority of the e-commerce volume
  Consumer-to-Consumer:
- An individual sells products or services to other individuals
- Major strategies for conducting this are auctions and classified ads
- Ex. EBay
 Business-to-Employee:
- An organizations uses e-commerce internally to provide info and services to its
employees
- Ex. Employees can buy discounted insurance, travel packages, and tickets to events
on the corporate intranet
 E-Government:
- The use of internet technology in general and e-commerce in particular to deliver
info and public services to citizens and to business partners and supplier
- A way of conducting business transactions with citizens and businesses
- Government-to-Citizen and Government-to-Business
- Ex. Getting a birth certificate online
 Mobile Commerce:
- The e-commerce that is conducted entirely in a wireless setting
- Ex. Using cell phones to shop over the internet
Major E-Commerce Mechanisms
 Business and customers can buy and sell on the internet through a number of
mechanisms:
- Electronic catalogues: Catalogues that are available over the internet. Consist of a
product database, a directory and search capabilities, and a presentation function
- Electronic auctions: Competitive buying and selling process where prices are
determined by bidding
- E-storefronts: A website that represents an entire store
- E-malls: A collection of individual shops consolidated under one internet address
- E-marketplaces A central, virtual market space on the web where many buyers and
sellers can conduct e-commerce and e-business activities
Electronic Payment Mechanisms
 Electronic Payment Mechanisms: Enables buyers to pay for goods and services
electronically, rather than writing a cash or cheque
 Electronic Cheques:
- Similar to real cheques, and they must establish a chequing account with a bank
 - When somebody buys a product, they email an encrypted cheque to the seller,
and the seller deposits the cheque in a bank account, and the funds are
transferred
- Carry a signature that can be verified
 Electronic Cards:
- Allow customers to charge online payments to their credit card account:
 When you make a purchase, you credit card info and purchase account are
encrypted in your browser
 When the info arrives at the seller, it is transferred to a “clearinghouse” where it is
verified
 The clearinghouse asks your bank to verify the info
 Your bank verifies the info and reports it
 The clearinghouse shows the results to the seller
 The seller says that everything is good
 Your bank send the funds to the seller
 Your bank notifies you of the debt on your card
 The seller’s bank tells them of the funds
- Stored-Value Money Cards allow you to store a fixed amount of prepaid money
and then spend it as necessary
- Smart Cards contain a chip that can store a large amount of info. You can use them
as a credit card, debit card, stored-value money card, or a loyalty card. Ideal for
micropayments
 Digital Wallets:
- An application used for making online payments
- These apps can be on users’ desktops or on their smartphones
- Replace the need to carry physical cards (credit, debit, etc.)
- Can store insurance, driver’s licenses, ID cards, passwords, etc.
- Allows the user to pay for products by tapping the phone on the merchant’s
terminal or by scanning a QR code
- Security is provided by the user’s fingerprint or by entering a PIN
- Ex. PayPal, Google Wallet, etc.
Benefits and Limitations of E-Commerce
 Benefits:
- Makes national and international markets more accessible and by lowering the
costs of processing, distributing, and retrieving info
- Customers benefit by being able to access a vast number of products and services,
all the time
 - The ability to easily and conveniently deliver info, services, and products to people
in cities, rural areas, and developing countries
 Limitations:
- Lack of universally accepted security standards
- In less-developed countries, telecommunications bandwidth often is insufficient,
and accessing the web is expensive
- Some people believe that e-commerce is insecure, has unresolved legal issues, and
lacks a critical mass of sellers and buyers
7.2: Business-to-Consumer Electronic Commerce
 B2B is much larger than B2C, but B2C is more complex
 B2C involves a large number of buyers making millions of diverse transactions per
day from a relatively small number of sellers
Electronic Storefronts and Malls
 Electronic Retailing: The direct sale of products and services through electronic
storefronts or electronic malls, usually designed around an electronic catalogue or
auctions
 Electronic Storefronts:
- Internet shoppers can access hundreds of electronic storefronts
- Each storefront has a unique uniform source locator (URL) or internet address,
where buyers can place orders
- Some can be extensions of physical stores such as Best Buy or Walmart
 Electronic Malls:
- A collection of individual shops grouped under a single internet address
- The idea is that it’s the same of that as a regular shopping mall
- May include thousands of vendors (Ex. Amazon)
- Two types of cybermalls:
 Referral malls: They transfer you to a participating storefront (Ex.
shopping.google.com)
 Real Malls: You can actually make a purchase there (Ex. Amazon)
Online Service Industries
 Customers can also access needed services via the web
 Services such as buying an airline ticket and purchasing stocks or insurance, can be
delivered through e-commerce, often with cost reduction
 One of the most pressing EC issues related to online services is disintermediation,
which is the elimination of intermediaries in e-commerce
 - Intermediaries provide info, and the perform value-added services such as
consulting
- With e-commerce, they will provide info for consumers, and intermediaries will be
erased. But intermediaries will always perform better value-added services
 Cyberbanking:
- Involves conducting various banking activities from home, at a place of business, or
on the road instead of a physical place
- Able to pay bills or apply for loans
- Saves time and is convenient, and for banks, offers can inexpensive alternative to
branch banking
 Online Securities Trading:
- Many Canadians use computers to trade stocks, bonds, and other financial
instruments
- Several known securities companies, including E*Trade, offer only online trading
because it is much cheaper
 The Online Job Market:
- The internet offers a promising environment for job seekers and companies
looking to recruit
- Thousands of companies advertise available positions, accepts resumes, and take
applications on the web
 Travel Services:
- The internet is the ideal place to plan, explore, and arrange any trip economically
- Online travel services allow you to purchase airline tickets, reserve hotel rooms,
rent cars, etc.
Online Advertising
 Internet advertising improves on advertising in a number of ways:
- It can be updated anytime and be kept current
- These ads can reach potential buyers all over the world
- They are cheaper than radio, television, and print ads
- Can be targeted to specific groups and targets
 Advertising Methods:
- Banners: Electronic billboards for advertising products or services. They can be
customized to the target audience
- Pop up ads: Ads that appear in front of the browser window
- Pop under ads: Ads that appear under the browser window
- Spamming is the indiscriminate distribution of electronic ads without the
permission of the receiver
  Ways to respond to spamming are permission marketing, where consumers give
permission to receive ads, and viral marketing, which is word of mouth marketing
Issues in Electronic Retailing
 Many e-tailers continue to face serious issues that restrict their growth
 Channel Conflict: The alienation of existing distributors when a company decides
to sell to customers directly online
- With a result of channel conflict, companies may only use e-commerce websites
for info, prices, specials, and store locations
 A conflict arises from the logistics services provided by the offline activities to the
online activities (Ex. How does a company handle the returns of items bought
online)
- To fix this, companies use multichanneling, which a company makes its products
available using both online and offline channels
- Showrooming is when consumers go to a physical store and check the price of a
product, then look up competitive prices online
 Order fulfillment can create problems for e-tailers. They must find the products to
ship, pack them, arrange them, have the packages sent to the buyer’s door, collect
the money, and handle the return of the unwanted or defective products
7.3: Business-to-Business (B2B) Electronic Commerce
 B2B accounts for about 85% of e-commerce volume
 Sell-Side Marketplaces:
- Organizations attempt to sell their products or services to other organizations from
their own private e-marketplace website or from a third party website
- Key mechanisms are forward auctions, and electronic catalogues that can be
customized for large buyers
- Used by many companies, and powerful for companies with good reputations
 Buy-side Marketplaces:
- A model in which organizations attempt to buy needed products or services from
other organizations electronically
- A major method of buying in the buy-side model is reverse auctions
- E-procurement: Procurement by using electronic support. Uses reverse auctions,
particularly group purchasing, which multiple buyers combine their orders so they
have a larger volume and attract more seller attention
 Electronic Exchanges:
- Private exchanges have one buyer and many sellers
 - Public exchanges are independently owned by a third party, and connect many
buyers with many sellers
- Public exchanges are open to all business organizations
- Deal in both direct and indirect materials
 Direct materials are inputs to the manufacturing process (Ex. Safety glass in cars)
 Indirect materials are things that are needed for maintenance, operations, and
repairs (Ex. Office supplies)
- Vertical Exchanges: Buyers and sellers in a given industry
- Horizontal Exchanges: Buyers and sellers across all industries
- Functional Exchanges: Needed services such as temporary help or extra office
space (Ex. Uber)
7.4: Ethical and Legal Issues in E-Business
 Ethical Issues:
- By making it easier to store and transfer personal info, e-commerce presents some
threats to privacy
- Most electronic payment systems know who the buyers are, and it is necessary to
protect their identities. Businesses use encryption to provide the protection
- Tracking, which can happen because of cookies because they store your tracking
history on your computer’s hard drive. Antivirus software always search for
potentially harmful cookies
- E-commerce could be used for a commercial activity of doubtful ethical activity,
such as selling drugs or porn
 Legal Issues related to E-Commerce:
- Internet fraud is a huge problem that is growing larger. Stealing information and
taking somebody’s identity to purchase products or services
- Domain names are also an issue, which are considered to be legal when the person
or business has operated a legit business under the name for some time. Domain
names are assigned by central nonprofit organizations that check for conflicts and
possible trademark problems
- Cybersquatting: The practice of registering or using domain names for the purpose
of profiting from the goodwill or trademark that belongs to someone else
- E-commerce is responsible in Canada to collect the federal and provincial taxes
that correspond to the address of the buyer. There is also a question of whether
electronic sellers should pay various taxes (Ex. license, franchise, privilege, etc.)
- Web copyright is still a problem, where people illegally sell a piece of software to
others
 Wireless, Mobile Computing, and Mobile Commerce (Chapter 8)
8.1: Wireless Technologies
 Wireless: Telecommunications in which electromagnetic waves carry the signal
between devices
 Wireless technologies include both wireless devices, such as smart phones, and
wireless transmission media, such as microwave, satellite, and radio
 Wireless Devices provide 3 major advantages to users:
- They are small enough to carry or wear
- They have sufficient computing power to perform productive tasks
- They can communicate wirelessly with the internet and other devices
 Modern smart phones exhibit dematerialization, which occurs when the functions
of many physical devices are included in a single device (Ex. Smartphone)
Wireless Transmission Media
 Wireless transmission media transmit signals without wires
 Microwave:
- Transmit data via electromagnetic waves. Sued for high volume, long distance,
line-of-sight-communication
- Have a high bandwidth and are relatively inexpensive
- They must have an unobstructed line of sight
- Susceptible to environmental interference
 Satellite:
- Make use of communication satellites
- Must receive and transmit data via line-of-sight, but satellite transmission
overcomes limitations
- Three types of satellites:
 Geostationary-earth-orbit (GEO): Satellites stationary relative to point on earth (Ex.
TV signals)
 Medium-earth-orbit: Satellites move relative to point on earth (Ex. GPS)
 Low-earth-orbit: Satellites move rapidly relative to point on earth (Ex. Telephone)
- High bandwidth, and a large coverage area
- Expensive
- Must have unobstructed line of sight
- Signals experience broadcast delay
- Must use encryption for security
 Radio:
 - Uses radio wave frequencies to send data directly between transmitters and
receivers
- High bandwidth
- Signals pass through walls
- Inexpensive and easy to install
- Creates electrical interference problems
- Susceptible to snooping unless encrypted
8.2: Wireless Computer Networks and Internet Access
 Short Range Wireless Networks:
- Simplify the task of connecting one device to another
- Eliminate wires, and they enable users to move around while they use the devices
- Have a range of 30 meters or less
- Bluetooth: Chip technology that enables short range connection (data and voice)
between wireless devices. Used for applications such as cell phones and portable
music players
- Ultra-wideband: High-bandwidth technology with transmission speeds in excess of
100 MBps. Can be used for such applications as streaming multimedia from such
things as a computer to a television
- Near-field communications: The smallest range of any short-range wireless
network. Designed to be embedded in such devices as cell phones and credit cards
(Ex. Using NFC to place your phone or card near a sale terminal and pay for items)
 Medium-Range Wireless Networks:
- These are wireless local area networks (WLANs)
- Wireless Infidelity (Wi-Fi): A LAN, but without the cables. A transmitter with an
antenna, called a wireless access point connects to a weird LAN or to satellite
dishes that provide an internet connection. A wireless access point provides
service to a number of users in a small geographic perimeter
 Low cost and simple internet access. Many companies utilize it (Ex. McDonalds,
Starbucks, etc.)
 There are problems with Wi-Fi, such as users being unable to roam from hotspot to
hotspot. Security of Wi-Fi connections are a barrier. Cost is an issue, even though it
is inexpensive, what is the point of getting Wi-Fi if everywhere has free Wi-Fi?
 Wi-Fi Direct: enables peer-to-peer communications, and allows users to transfer
content among devices without antennas
 MiFi: Small, portable device that provides users with a permanent hotspot
wherever they go. Range is about 10 meters
 Wide-Area Wireless Networks:
 - Wide-area wireless networks connect users to the internet over a geographically
dispersed territory
- Operate over the licensed spectrum, so they use wireless tech that is regulated by
the government
- Cellular Radio: Provide two-way radio communications over a cellular network of
base stations with seamless handoffs
 1G Cellular network: Analogue signals and had low bandwidth
 2G: Digital signals and provides voice and data communication up to 10 Kbps
 2.5G: Upgraded to 144Kbps
 3G: Upgraded to 384Kbps when at walking pace. Supports video, web browsing,
and instant messaging’
 4G: Upgraded to 100Mbps
 LTE: Wireless broadband technology designed to support roaming internet access
via smart phones and other devices. 1 times faster than 3G
8.3: Mobile Computing and Mobile Commerce
 Mobile Computing:
- The use of real-time connection between a mobile device and other computing
environments, such as the internet or an intranet
- It is spreading at work and at home, in education, etc.
- Two major characteristics that separate it from other computing forms:
 Mobility, which means that users can carry a device with them and can initiate a
real-time contact with other systems from wherever they are
 Broad reach, which means that when users carry an open mobile device, they can
instantly reach across great distances
- Mobility and broad reach can create 5 value added attributes that break the
barriers of geography and time:
 Ubiquity: Provide information regardless of location
 Convenience: Users can boot up the internet, access the web or do anything else
without starting up a PC
 Instant Connectivity: Same as convenience
 Personalization: A company can customize info and send it to individual customers
as a short message service
 Localization: Knowing a user’s location can help a company advertise its products
and services
 Mobile Commerce:
 - Involves electronic commerce transactions that are conducted in a wireless
environment, especially via the internet, private communication lines, smart cards,
etc.
- Driven by many factors:
- Widespread availability of mobile devices: Cell phones are everywhere, and mobile
commerce is easier than ever
- Declining Prices: Wireless prices are lowering and will continue to lower
- Bandwidth Improvement: With bandwidth improving, conducting mobile
commerce is easier
- Applications:
 Location based applications and services: Knowing where you are, and being able
to find something
 Financial Services: Being able to do banking, wireless payments all on your phone
 Intrabusiness Applications: Can be used within organizations (Ex. Assigning jobs to
mobile employees)
 Accessing Information: Getting information on the internet (Ex. Mobile portal,
which is mobile sites, and voice portal, which is getting info through spoken
commands
 Telemetry: Wireless transmission and reception of data gathered from remote
sensors (Ex. Looking for maintenance problems
8.4: The Internet of Things
 Radio-Frequency Identification (RFID) Technology:
- Allows manufacturers to attach tags with antennas and computer chips on goods
and then track their movement via radio signals
- Developed to replace bar codes
- Use tags with embedded microchips, which contain data, and antennas to transmit
radio signals over a short distance to RFID readers. The readers pass the data over
a network to a computer for processing
- Contains info about an item such as its location and where and when it was made
- Two Types:
 Active: Use internal batteries for power, and can be read over greater distances.
Used for more expensive items
 Passive: Rely on readers for their power. Less expensive than active tags, but can
only read up to 6 meters
- Problems with RFID includes expense, and the comparatively large size of the tags
8.5: Wireless Security
 Wireless networks provide numerous benefits for businesses, but they have a huge
lack of security
 Wireless is a broadcast medium, and transmissions can be intercepted by anyone
who is close enough
 Rogue Access Points: An unauthorized access point to a wireless network
- May be a someone in your organization who set up an access point but failed to
inform anybody
- Could also be someone doing it for malicious intent (Evil twin attack). Using a
hotspotter, the attacker simulates a wireless access point with the same wireless
network name, or SSID, and users will connect to that instead
 War Driving: The act of locating WLANs while moving around. The user can gain
access and get information and other resources
 Eavesdropping: Efforts by unauthorized users to access data that are travelling
over wireless networks
 Radio-Frequency Jamming: A person or device intentionally or unintentionally
interfering with wireless network connections