Unit 4 Internet, E-commerce, and E-Business PDF

Management Information System – LLC 3215 UNIT 4 INTERNET, E-COMMERCE AND E-BUSINESS Unit Structure 4.0 Overview 4.1 Learning Outcomes 4.2 Introduction 4.3 The Internet 4.3.1 The Internet as a Tool for Trade 4.3.2 Benefits of the Internet 4.4 Elec...

Management Information System – LLC 3215 UNIT 4 INTERNET, E-COMMERCE AND E-BUSINESS Unit Structure 4.0 Overview 4.1 Learning Outcomes 4.2 Introduction 4.3 The Internet 4.3.1 The Internet as a Tool for Trade 4.3.2 Benefits of the Internet 4.4 Electronic Business and Electronic Commerce 4.4.1 Types of tools used for E-commerce and E-business 4.4.2 Types of E-commerce 4.5 Improved Customer Service Through E-commerce 4.6 The Virtual Work Environment 4.6.1 Advantages & Challenges 4.7 Privacy and Security Issues over the Internet 4.8 Activities 4.9 Discussion Questions 4.10 Summary 4.0 OVERVIEW For many enterprises, the Internet has become a vital tool for performing transactions and for trading. In this unit, we will explore the different aspects of the Internet, especially Internet as a tool for trade. We shall see how businesses make use of e-commerce to provide novel ways of trading and to provide better services to customers. Some privacy and security issues when performing transactions over the Internet will also be discussed. Unit 4 1  Management Information System – LLC 3215 4.1 LEARNING OUTCOMES By the end of this unit, you should be able to do the following: 1. Clearly explain the benefits of the Internet. 2. Clearly distinguish between E-Commerce and E-business. 3. Explain the different types of e-commerce. 4. Discuss the how e-commerce can provide better services to the client. 5. Identify the different types of tools used for e-business or e-commerce. 6. Explain what is a virtual organisation. 7. Discuss the advantages and disadvantages of a virtual organisation. 8. Discuss the privacy and security issues when making transactions over the Internet. 4.2 INTRODUCTION The Internet has become an integrated part of many people’s lives today. Being composed of a network of networks, the Internet consists of computers spread all over the world. These computers can belong to different network topologies and are connected through wired and wireless transmission media. Special protocols are required to allow these computers to “talk” to each other. Usually, people or companies will get access to the Internet through Internet Service Providers (ISP) such as Telecom Plus, DCL or Network Plus in Mauritius. Internet is now widely used to connect businesses digitally and to perform different types of trades online. 4.3 THE INTERNET When Internet started to become popular, it was mainly used as a rich information source. Nowadays, the Internet is also used to allow businesses to trade around the world and also provide businesses with novel ways of doing business. Many transactions that we see today would never have been possible without the advent of the Internet. Just think about transactions carried over the Net: banking, purchasing goods and services, making payments, among others. Unit 4 2  Management Information System – LLC 3215 Virtual companies are also a reality today. However, the Internet has not come with blessings only. There are many threats associated with the use of the Internet. 4.3.1 The Internet as a Tool for Trade As outlined in Unit 1 (Section 1.8), in a company, Internet can be used for advertising as well as to connect different stakeholders. It also provides an easy medium for companies to create intranets and extranets. Many businesses have adopted the Internet as a tool for trading and to reach a larger pool of customers. Internet has allowed businesses to stay operational 24/7 and to reach customers around the world. For many organisations, the time-zone difference is no more a problem. They can continue trading by having branches spread across different countries and relying on a robust network. It has now become common to make purchases online from local companies as well as from foreign companies, which also ensure privacy and security of the transaction taking place. 4.3.2 Benefits of the Internet The main benefits of the Internet can be summarised in the following table: Benefit Description Global Connectivity Allows businesses to remain connected, irrespective of their physical location. Lower Communication Cost Digital data can be communicated very quickly at reduced communication costs. Reduced Agency Cost Intermediaries can be removed allowing businesses to trade directly with their customers. Flexibility Allows customers to surf or to trade from independent locations at their preferred time. Accelerated Knowledge There is an information burst with the Internet where a huge pool of information is made available within a few clicks. Personalised service to Personalised web pages can be provided to customers, thus customers providing improved services to customers. Table 4.1: Benefits of the Internet Unit 4 3  Management Information System – LLC 3215 Further Reading Note that you can obtain more details about the Internet on the wikipedia website: www.wikipedia.org 4.4 ELECTRONIC BUSINESS AND ELECTRONIC COMMERCE Electronic business implies to digitally enable the links and processes of a company. Its focus is more on the use of electronic capabilities to support the functions of an enterprise. E-business can be carried out using the Internet, intranet or extranet or a combination of these. “E-business software solutions allow the integration of intra and inter-firm business processes.” Thus firms can make use of intranets to link different departments and branches of the company (local or remote) for:  performing business transactions,  group collaboration,  electronic communication,  sharing documents and linking to company portals. Moreover, extranets can be used to link suppliers, customers and business partners. E-business provides facilities for customer support as well as for the buying of goods from suppliers or the selling of products to customers. The last part about the buying and selling is known as e- commerce. E-commerce is only a subset of e-business. Unit 4 4  Management Information System – LLC 3215 “Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks.” In section, 4.4.2 we will elaborate on the different types of e-commerce. 4.4.1 Types of Tools used for E-commerce and E-business [2 & 4] Tools with network capabilities are required to make e-commerce or e-business a reality. Firms should be able to communicate easily, to share ideas and document and to have group meetings from remote locations. Facilities should also be provided whereby transactions can be carried out smoothly between customers, suppliers and other business partners. Table 4.2 provides a list of some of these tools with a brief description of their functionality. Tool Functionality Email and Groupware Provides easy way to distribute digital content and sharing of ideas. Voice mail Provides possibility to store spoken messages which can be replayed later. Fax Easy way to transmit text and graphical information. Teleconferencing Allows a group of people to talk simultaneously, using communication technologies. Dataconferencing Allows group of people to confer documents simultaneously. Videoconferencing Allows a group of people to talk and see each other at the same time. Electronic conferencing Combines functionality of data and video conferencing. Electronic Data Provides cost-effective medium for businesses to communicate Interchange (EDI) formal documents digitally, e.g. invoices, delivery notes, etc. Electronic Fund Provides facility to transfer funds electronically from one bank to Transfer (EFT) another or from one account to another. Group calendaring and Assists a group of people in coordinating their time and in working scheduling on a document from different places and different timings. Table 4.2: Tools for E-commerce and e-business Unit 4 5  Management Information System – LLC 3215 4.4.2 Types of E-commerce We can basically identify three types of e-commerce as outlined in Table 4.3 below. Type of e-commerce Description Example 1. Business to Business Sales of goods or services among One company selling (B-2-B) businesses. its old equipment to another one. 2. Business to Business selling goods or services to Business selling books Consumer (B-2-C) individual customers. to customers over the Web. E.g. Amazon.com 3. Consumer to Customers selling goods or services to E-bay which allows Consumer (C-2-C) other customers. customers to sell their products by setting auctions and bids. Table 4.3: Types of E-commerce We can argue that there is a fourth type of e-commerce which is Consumer-to-Business (C2B). However, a customer could be visiting an e-commerce website without actually making any transaction and the definition of e-commerce that we have seen in section 4.4 states that there needs to be a monetary transaction in e-commerce. Further Reading The following website provides a useful link to businesses which want to set up a new website: http://managementhelp.org/infomgnt/e_cmmrce/e_cmmrce.htm Unit 4 6  Management Information System – LLC 3215 4.5 IMPROVED CUSTOMER SERVICE THROUGH E-COMMERCE E-commerce has provided new ways of trading and allows businesses to provide improved services to their clients to increase customer satisfaction, retain existing customers and attract new ones. Some of the improved services provided to customers are discussed below: 1. Direct Sales Via the Internet, products can be sold directly to customers, thus removing intermediaries. This process is called disintermediation. Products can thus be sold at lower price to customers. NOTE: Reintermediation is the inverse of disintermediation. In some cases, new processes have been added as a result of changes in the way of doing business. For example, a company who has an e-commerce website may have an online helpdesk (which is a new process). 2. Customer Self-service E-commerce implies that customers can obtain details about the product they wish to buy without relying on sales representatives. Usually, these websites would provide enough information about each product, with the possibility for the customer to send email or get in forums to request more information. Some websites offer the possibility for viewing products in 3-D, giving customers a better idea of their products. 3. Online Helpdesks Many companies also provide online helpdesks to assist customers in their queries. Some companies have online helpdesks which operate 24/7. Unit 4 7  Management Information System – LLC 3215 4. Personalised Services By using complex software which can analyse the tastes and preferences of customers, companies can offer personalised products to customers. For example, if you visit a website repeatedly, after some time, a personalised webpage might be displayed in front of you which lists products you would be mostly interested to buy. 5. Mobile-Commerce With the advent of wireless technologies, mobile-commerce or m-commerce has also become a reality. M-commerce refers to the ability to conduct commerce, using devices like PDA, cell phones, laptops etc. The emerging technology behind m-commerce is based on WAP (Wireless Application Protocol). Given the necessary supporting infrastructure, m-commerce can be carried out anywhere and at anytime and can increase customer satisfaction and improve flexibility. Customers can make use of mobile devices to make their purchases. Moreover, many adverts can be sent directly to mobile phones of potential customers informing them about a new product or a sale. Currently, this is not common in Mauritius but we do expect that it would be integrated in our society in the near future. Some industries influenced by m-commerce include financial services (e.g mobile banking), telecommunications, services, retailing and information services amongst others. 4.6 THE VIRTUAL WORK ENVIRONMENT With the advances in technology and telecommunication, virtual working environments can now be created. A virtual company is one which does not have any specific location for people to meet and carry out business transactions. In a virtual environment, employees could be working from anywhere at any time. This type of working environments can bring lots of advantages to the company but there are lots of challenges which have to be considered. The next section will Unit 4 8  Management Information System – LLC 3215 elaborate on these advantages and challenges with respect to the company, as well as for the employees. 4.6.1 Advantages & Challenges For the Company Advantages Disadvantages  Companies are not tied up with rental  It is difficult to monitor employees. costs, travelling costs, etc.  It is difficult to set up meetings.  No time is lost in travelling, which  There is no face-to-face interaction with improves the productivity of employees. employees.  It is an easy way to carry out business in different parts of the world. For Employees  Employees have the flexibility to work at  There is no interaction with other employees their own preferred time and place. of the company.  There is no stress associated with  Such low socialisation can lead to travelling and traffic jams. frustration.  Employees are flexible in how they carry  It is difficult to have a sense of belonging to out their work to meet targets. the company, as personal interaction is very  There is no one to “boss” around. low. Further Reading The following website provides you with an article on how to create a virtual company: http://www.inc.com/magazine/19951215/2647.html Unit 4 9  Management Information System – LLC 3215 4.7 PRIVACY AND SECURITY ISSUES OVER THE INTERNET Trading over the Internet has led to a lot of privacy and security issues. When making purchases over the Internet, customers have to submit their personal data. This can lead to the misuse of personal data. For example, many companies are using these data to provide personalised services to customers by using a process called data mining (to be discussed in Unit 6). However, the question which is often raised is: Is there any consideration for the privacy of personal information? Moreover, by giving credit card numbers for payments over the Internet, one is vulnerable to frauds. Recently in Mauritius, there was a group of foreigners who were making illegal transfers of money by using fake credit cards. This raises concern with regards the safety provided over the Net when making payments through credit cards. Security measures and controls are therefore required to limit the above damages. Unit 10 elaborates on the different types of controls which can be used in an organisation for preventing privacy and security issues over the Net. Further Reading For more details about Internet security, you can check the wikipedia website: www.wikipedia.org Unit 4 10  Management Information System – LLC 3215 4.8 ACTIVITIES A. True/False Questions True False 1. E-commerce involves the buying and selling of goods/services to customers and suppliers, respectively, via the Web. 2. C2B can be identified as one type of e-commerce. 3. Re-intermediation is the process of bypassing intermediary steps in a value chain. 4. Web personalisation allows customers to buy goods via the Web at cheaper prices. 5. The use of e-payment systems for e-commerce does not pose any security threats for customers. B. SAMPLE TEST/EXAM TYPE QUESTIONS Question 1 E-Governance is defined as "the use of Information and Communication Technologies (ICTs) and the Internet to streamline and improve government processes and enhance the internal and external communications of government." It involves not only the automation of back-end government systems such as financial management and procurement, but also the front-end, online government presence for the dissemination of government information and service delivery. E-governance also involves the use of ICT for improving citizen participation in government. E-governance is gaining a lot in importance in Mauritius and around the world. Some of the advantages of e-governance are: over-the-clock availability, lesser processing time, better response and no need for customers to travel to the location(s) concerned. Unit 4 11  Management Information System – LLC 3215 (a) Name three stakeholders who would be involved in e-governance. [3 marks] (b) What, according to you, are three strategic decisions that must have been made to strive towards e-governance? [6 marks] (c) Name three visible effects of e-governance you have noticed in Mauritius. [3 marks] Question 2 How can the Internet facilitate sales and marketing to individual customers? Describe the role played by Web personalisation in achieving the above. [4 + 2 marks] Question 3 Case Study to be provided by Tutor 4.9 DISCUSSION QUESTIONS 1. Identify companies which are involved in the three different types of e-commerce. 2. By referring to a particular company in Mauritius which has an e-commerce website, identify the security issues and threats that might crop up for the customers. 3. By referring to a particular company in Mauritius which has an e-commerce website, identify the different types of threats and security issues which the company might be prone to. 4. Investigate about the existence of virtual companies in Mauritius Unit 4 12  Management Information System – LLC 3215 4.10 SUMMARY In this unit, the benefits of the Internet have been explored and we have seen how the Internet can be used as a tool for trade. We have then elaborated on e-commerce and e-business and we have seen the different types of e-commerce that exist. The different ways in which e-commerce can be used to provide better services to the customer have also been explored. This unit also provided insights of the virtual working environment and the advantages and threats to such an environment. We closed this unit with a brief discussion on privacy and security issues associated with trading over the Net. Unit 4 13