Using MIS 3e

Chapter 8
E-Commerce and Web 2.0
David Kroenke

Chapter Preview
Chapter has two major themes: e-commerce and Web 2.0.

1. E-commerce: Begin by discussing how companies use ecommerce and survey important e-commerce technology.
Conclude by discussing the role of e-commerce in supply chain
management.
2. Web 2.0: What it means, and what capabilities does it provide?
How do businesses use social networking, including groups and
applications. Well discuss three primary uses for Twitter in
commerce. After that, well investigate user generated content
and discuss some of the risks of it and social networking as well.
Finally, well wrap up with 2020.

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Study Questions
Q1

How do companies use e-commerce?

Q2

How can information systems enhance supply chain

performance?
Why is Web 2.0 important to business?
How can organizations benefit from social networking?
What are the benefits and risks of user-generated content
(UGC)?
2020?

Q3
Q4
Q5
Q6

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Types of Merchant E-Commerce

Companies
1. B2C transactions occur between a supplier and retail customer.
The supplier generally uses a Web storefront.
2. B2B transactions occur between companies.
3. B2G transactions occur between companies and governmental
organizations.

Fig 8-2 Example of Use of B2B, B2G, and

B2C
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Types of Nonmerchant
E-commerce Companies
1. Auctions match buyers and sellers using the e-commerce
version of standard auction where auction company
receives a commission on each product sold. eBay.com is
the best-known example.
2. Clearinghouse provides goods at a stated price, arranges
for delivery but never takes title to the goods. Company
receives a commission on each product sold. Amazon.com
is the best-known example.
3. Electronic exchanges are a type of clearinghouse similar
to a stock exchange. Company matches up buyers and
sellers and a transaction occurs. Exchange takes a
commission. Priceline.com is the best-known example.

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How Does E-Commerce Market

Efficiency?

E-Commerce improves market efficiencies in a variety of ways,

as this figure shows. Customers benefit from the first two,
disintermediation and increased price information. Businesses
benefit from increasing their knowledge of price elasticity.

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What Economic Factors Disfavor

E-Commerce?
1. Channel conflict
Occurs when a manufacturer competes with its traditional retail
outlets by selling directly to consumer

2. Price conflict
Occurs when a manufacturer sells directly to consumers and
undercuts retailers prices

3. Increased logistics expenses

Occurs when a manufacturer must process thousands of smallquantity orders rather than a few large-quantity orders

4. Increased customer-service expenses

Occurs when a manufacturer must begin dealing directly with
customers rather than relying on retailers direct relationships with
customers

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Study Questions
Q1

How do companies use e-commerce?

Q2

How can information systems enhance

supply chain performance?

Q3
Q4
Q5

Why is Web 2.0 important to business?

How can organizations benefit from social networking?
What are the benefits and risks of user generated content
(UGC)?
2020?

Q6

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Generic Supply Chain

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Four Drivers of Supply Chain

Performance: Facilities, Inventory,
Transportation, and Information

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How Does Supply Chain

Profitability Differ from
Organizational Profitability?
Supply chain profitability is determined by calculating the
difference between revenue generated by a supply chain and
costs that all organizations in supply chain incur to obtain that
revenue.
Maximum profit to a supply chain will not occur if each
organization in a supply chain maximizes its own profits in
isolation from other participants in supply chain.

Usually, profitability of supply chain increases if one or more

organizations operate at less than its own maximum
profitability.
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Study Questions
Q1
Q2

How do companies use e-commerce?

How can information systems enhance supply chain
performance?

Q3

Why is Web 2.0 important to business?

Q4
Q5

How can organizations benefit from social networking?

What are the benefits and risks of user generated content
(UGC)?
2020?

Q6

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What Is Web 2.0?

Specific meaning of Web 2.0 is hard to pin down.
Generally refers to a loose grouping of capabilities,
technologies, business models, and philosophies.
Comparison of Web 2.0 to traditional processing

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Other Characteristics of Web 2.0

Value of site increases with users and use
Organic user interface and mashups
Participation and ownership differences
Traditional Web sites are about publishing
Web 2.0 is about participation
Traditional Web site lock down all legal rights to
content
Web 2.0 sites lock down only some rights

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Study Questions
Q1 How do companies use e-commerce?
Q2 How can information systems enhance supply chain
performance?
Q3 Why is Web 2.0 important to business?

Q4 How can organizations benefit from social

networking?
Q5 What are the benefits and risks of user generated content
(UGC)?
Q6 2020?

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8-15

Fundamentals of Social
Networking
Social networking (SN)interaction of
people connected by friendship, interests,
business association, or other common trait
and supported by Web 2.0 technology

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Sample Viral Social Network

Marketing Outcome

Figure CE15-6

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How Can Businesses Utilize

Social Networking Groups?
Types of SN groups
1. Publicanyone can find the group by
searching and anyone can join it.
2. Invitationanyone can find the group by
searching, but he or she must be invited to join.
3. Privatethe group cannot be found by
searching, and members must be invited to
join.
Businesses can use SN groups to strengthen
relationships among customers and to create
possibility of viral marketing.
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How Can Businesses Utilize

Social Networking Groups?
Traditional business communication is unreliable.
SN communication is more reliable.
Viral messaging reaches more people, faster,
cheaper, and more personal.
MRV could expand its viral marketing by inducing
(viral hook) customers to get their friends to form a
relationship with MRV.
Finding proper viral hook is critical

Common ways companies form SN relationships

with customers are groups and applications.
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Study Questions
Q1 How do companies use e-commerce?
Q2 How can information systems enhance supply chain
performance?
Q3 Why is Web 2.0 important to business?
Q4 How can organizations benefit from social networking?

Q5 What are the benefits and risks of user

generated content (UGC)?
Q6 2020?

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Common Types of UGC and

Discusses Their Business
Applications

Ratings and surveys

Opinions
Customer stories
Discussion groups
Wikis
Blogs
Video
Crowdsourcing specialty
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Benefits of UGC
SN users are three times more likely to trust peers
opinions over advertiser claims.
Increases loyalty to company site and brand loyalty
Increases brand involvement, interaction, intimacy,
influence
Discussion groups share advice and assistance.
Provides useful information for product marketing
and development

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UGC Applications

Figure 8-21

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Impact of UGC
Increases conversion rates
Conversion rates are higher for products with lessthan-perfect reviews than for products with no
reviews at all.
UGC to post answers to questions, articles, best
practices, blogs, code samples, and other
resources
Return rates fall dramatically as number of product
reviews increases
Videos provide bait for advertising
Some sites include UGC as part of the product
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Risks of Using Social Networking

and User-Generated Content?

Junk and crackpots

Inappropriate content
Unfavorable reviews
Mutinous movements
Dependency on SN vendor
Vulnerable to reliability and performance
Vendor may own content
Vendor may remove site

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Study Questions
Q1
Q3
Q4
Q5
Q7

Q8

How do companies use e-commerce?

How can information systems enhance supply chain
performance?
Why is Web 2.0 important to business?
How can organizations benefit from social networking?
What are the benefits and risks of user generated content
(UGC)?

2020?

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2020?
Expect that technology will enable voice and video
to be integrated into social networking.
Speak your tweets and have a program translate
your voice message into text? offers a limited
version of that service.
Tweet your video? 12Seconds.TV
What will social networking do to management?
What will microblogging do to employee evaluation
and compensation?
What will happen to language? Writing skills?

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All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

Copyright 2011 Pearson Education, Inc.

Publishing as Prentice Hall

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

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