Management of Information Flows Study Guide

Chapter 9 Study Guide Course: Title: Textbook Used: Management of Information Flows Chapter 9 Study Guide “Principles of information Systems” (14 edition) Learning Objectives (LO) and Study Questions LO1: Describe the categories of e-commerce 1. Define: B2B e-commerce, B2C e-commerce, and C2C e-commerce Business-to-business (B2B) e-commerce is a subset of e-commerce in which all the participants are organizations. B2B e-commerce is a useful tool for connecting business partners in a virtual supply chain to cut resupply times and reduce costs. Although the business-to-consumer market grabs more of the news headlines, the B2B market is considerably larger and is growing more rapidly. B2B sales within the United States are estimated to reach $1.8 trillion by 2023.* In 2018, almost half of all B2B buyers were millennials and their percentage is rapidly growing.* Popular B2C Web sites have helped raise expectations as to how an e-commerce site must operate, and many B2B companies are responding to those heightened expectations by investing heavily in their B2B platforms. Spending on e-commerce technologies by large U.S. manufacturers, wholesalers, and distributors is expected to top $2 billion in 2019.* Moving more customers online is key to B2B commerce success, so in addition to investing in new technologies, B2B companies are focusing on new ways of engaging their customer across multiple channels—both online and offline. The average B2B buyer uses six different channels in the decision to purchase. Unfortunately, only 36 percent of organizations have even started to support multiple channels for B2B.* Business-to-consumer (B2C) e-commerce is a form of e-commerce in which customers deal directly with an organization and avoid intermediaries. Early B2C pioneers competed with the traditional “brick-and-mortar” retailers, selling their products directly to consumers. For example, in 1995, upstart Amazon.com challenged well-established booksellers Waldenbooks and Barnes & Noble. Amazon did not become profitable until 2003, but since then, it has become a retail giant, selling a wide variety of products through 14 international Web sites (called marketplaces) to customers in more than 180 countries.* According to the U.S. Department of Commerce, B2C commerce accounted for more than 14 percent of total retail sales in 2018. Amazon dominates the U.S. B2C market with 40 1 percent of U.S. B2C sales.* As with B2B sales, B2C revenue is increasingly being driven by customers using mobile devices. A 2018 survey found that 79 percent of customers ordered online within the last six months.* By using B2C e-commerce to sell directly to consumers, producers and providers of consumer products can eliminate the middlemen, or intermediaries, between them and the consumer. In many cases, this squeezes costs and inefficiencies out of the supply chain and can lead to higher profits for businesses and lower prices for consumers. The elimination of intermediate organizations between the producer and the consumer is called disintermediation. More than just a tool for placing orders, the Internet enables shoppers to compare prices, features, and value, and to check other customers’ opinions. Consumers can, for example, easily and quickly compare information about automobiles, cruises, loans, insurance, and home prices to find better values. The user may use multiple channels of Web sites and social media in the search for information. Internet shoppers can unleash shopping bots or access sites such as Google Shopping, Shopzilla, PriceGrabber, and Yahoo! Shopping to browse the Internet and obtain lists of items, prices, and merchants. Increasingly, B2C retailers look to encourage customers to write reviews based on confirmed purchases because reviews by verified shoppers are often more influential than anonymous reviews in terms of generating additional sales. Worldwide, B2C e-commerce sales continue to grow rapidly, reaching $3.5 trillion in 2019.* China is expected to reach almost $2 trillion in 2019, which means more than half of B2C e-commerce will occur in China during 2019.* Table 9.1 shows the top ten countries ranked by e-commerce sales. Consumer-to-consumer (C2C) e-commerce is a subset of e-commerce that involves electronic transactions between consumers using a third party to facilitate the process. eBay is an example of a C2C e-commerce site; customers buy and sell items to each other through the site. Founded in 1995, eBay has become one of the most popular Web sites in the world, with 2018 net revenue of $10.8 billion.* Other popular C2C sites include Craigslist, eBid, Etsy, Fiverr, Ibidfree, Kijiji, Ubid, Facebook Marketplace, and Taobao. The growth of C2C is responsible for a drastic reduction in the use of the classified pages of newspapers to advertise and sell personal items and services, so it has had a negative impact on that industry. On the other hand, C2C has created an opportunity for many people to make a living out of selling items on auction sites. According to eBay, the gross merchandise volume for items sold on its site was expected to exceed $88 billion in 2019.* Companies and individuals engaging in e-commerce must be careful that their sales do not violate the rules of various county, state, or country legal jurisdictions. More than 4,000 Web sites offer guns for sale, and on the Armslist Web site alone, over 20,000 gun ads are 2 posted each week. Extending background checks to the flourishing world of online gun sales has become a highly controversial issue in the United States. Under current law, the question of when a background check must occur depends on who is selling the gun. Federal regulations require licensed dealers to perform checks, but the legal definition of who must be licensed has not been clear.* An executive action signed by President Barack Obama on January 4, 2016, was designed to extend background check requirements to more types of online gun sellers, including more private sellers who had previously been exempted.* 2. Explain the differences between buy-side e-commerce and sell-side e-commerce. LO2: Outline a multistage purchasing model that describes how e-commerce works 3. List and describe the stages in the multistage model for e-commerce. A successful e-commerce system must address the many stages that consumers experience in the sales life cycle. At the heart of any e-commerce system is the user’s ability to search for and identify items for sale; select those items and negotiate prices, terms of payment, and delivery date; send an order to the vendor to purchase the items; pay for the product or service; obtain product delivery; and receive after-sales support. Figure 9.2 shows how ecommerce can support each of these stages. Product delivery can involve tangible goods delivered in a traditional form (e.g., clothing delivered via a shipping company) or goods and services delivered electronically (e.g., software or a movie downloaded over the Internet). LO3: Outline the key components of a successful e-commerce business strategy 4. Outline the key components of a successful e-commerce business strategy LO4: Identify the key components of technology infrastructure that must be in place for ecommerce to work 5. List the key components of technology infrastructure required to support e-commerce LO5: Discuss key features of electronic payment systems needed to support e-commerce 6. Describe the following e-payment methods and technologies: a. TLS (and the handshake process)- Transport Layer Security is a communications protocol or system of rules that ensures privacy between communicating applications and their uses on the internet. 3 b. c. d. e. Digital certificate- is an attachment to an email message or data embedded in a Web site that verifies the identity of a sender or web site. CA- Certificate authority is a trusted third-party organization or company that issues digital certificates. Payment card industry (PCI) security standard- Payment card security standard. Measures and security procedures to safeguard the card issuer, the cardholder, and the merchant. Some of the measures include installing and maintaining a firewall configuration to control access to computers and data, never using software or hardware vendor-supplier defaults for system passwords, and requiring merchants to protect stored data, encrypt transmission of cardholder information across public networks, use and regularly update antivirus software, and restrict access to sensitive data on a need-to-know basis. Electronic cash (and examples)- is an amount of money that is computerized, storedm and used as cash for e-commerce transactions. When the consumers want to withdraw electronic cash to make a purchase, they access the service provider via the Internet and present proof of identity—a digital certificate issued by a certification authority or a username and password. After verifying a consumer’s identity, the system debits the consumer’s account and credits the seller’s account with the amount of the purchase. PayPal, Venmo, Apple Pay Cash, Square Cash, Stripe, and WePay are some popular online payment service providers that facilitate the use of electronic cash. 4