Transcript Chapter 4

Course B: Advanced e-Business
Module 4. e-Commerce
by
Vatcharaporn Esichaikul, AIT
Outline
B2C/B2B e-commerce
 Business models of e-commerce
 Internet shopping
 Selling on the web
 Online customer service
 E-payment systems and security for e-com
 E-auction

B2C/B2B e-commerce
Categories of eCom/eBiz

Business-to-customer (B2C)


Business-to-business (B2B)


Sales of goods and services among businesses
Consumer-to-consumer (C2C)


Retailing of products and services directly to individual
customers
Individuals use Web for private sales or exchange
Business-to-employee (B2E)

Information and services made available to employees
online
Pure vs. Partial EC

Pure vs. Partial EC: based on the degree of
digitization of






Product
[physical/digital]
Process
[physical/digital]
Delivery agent [physical/digital]
Traditional commerce: all dimensions are
physical
Pure EC: all dimensions are digital
Partial EC: all other possibilities include a mix
of digital and physical dimensions
Business Models of e-Commerce
Real-world Cases
Amazon.com
New Business Model:
Amazon.com


Online retailer of books, CDs, electronics, and
other products
Uses software to create detailed customer
profiles and make customer-specific offers
What led to Amazon’s fantastic growth?
What led to Amazon’s
fantastic growth?



First mover – embraced a revolutionary way
to reach end consumers
They made their brand more important than
profit
Customer service focus
Dimensions of Competition:
Price/Cost Example




Amazon cuts costs of retail outlets and
intermediaries.
Amazon’s distribution system is less
expensive than its competitors.
Shipment from an Amazon warehouse is
more costly than visiting a retail outlet.
Amazon gets paid before paying the
distributor, whereas in the traditional
distribution system it is the other way around.
Dimensions of Competition:
Custom Features Example


Amazon uses the data obtained from
customers to offer personal buying
recommendations.
Amazon’s innovations have included oneclick shopping, its popular bestseller list
ranking sales on the site, and the associates
program.
Dimensions of Competition:
Brand Example


More personalized products and Web site
experiences.
Broader offering of products are built into
brand experience, allowing more revenue and
profit per customer.
Dimensions of Competition:
Speed of Delivery Example


For in-stock items, there is no technology
advantage for Amazon.
For out-of-stock items, technology allows
greater order tracking and notification
features.
Dimensions of Competition:
Selection Example


Amazon.com offers 3 million titles compared
with 175,000 for a Barnes & Noble retail
superstore.
Both Amazon.com and BarnesAndNoble.com
offer a similar selection of book titles.
Dimensions of Competition:
Convenience Example





Available 7/24/365.
Easy-to-navigate site.
Excellent use of e-mail for marketing and
customer service.
Skilled at tailoring product recommendations
to individuals.
One-click ordering.
Amazon Implications




B2C example
Technology can be used to compete in many
dimensions
Technology provides more than just new
business models
Will Amazon survive?
What are the Consequences of the
Amazon Business Model?
Immediate
 Dominant Internet
shopping brand.
 A lot of valuable
information about
customer buying.
Future
 Wal-Mart of the
Internet?
 Sub-contract to
other dot com’s
Impact of Technology on Dimensions
of Competition
Dimension
 Price/cost
Technology’s Impact
 Allows personalized pricing, eliminates
middlemen, and shrinks value chain
(removing non-value-added interactions).
 Reduced Transaction costs
 Allows faster product lifecycle, more
customer-specific products, and
changeable and upgradeable products.

Custom features

Distribution


Brand, promotions

Causes disintermediation, reintermediation, and globalization.
Allows 1-to-1 (personalized) marketing.
Impact of Technology on Dimensions
of Competition
Dimension
 Speed of delivery

Selection

Convenience

Service
Technology’s Impact
 Reduces delivery time and inventory,
and causes disintermediation.
 Improved Information
 Allows greater sales, lower inventory,
and customer-driven business systems.
 Allows 24/7 shopping, order tracking,
broader selection, and comparative
pricing.
 Personalizes service using historic
and/or predictive information.
eBay
New Business Model: eBay
Online auction system for individuals.
 People can post items for sale or search
for items being auctioned and make
bids.

Why did eBay’s business model &
strategy work?
What made eBay Work?




Connected people who previously couldn’t be
connected economically (new possibility)
Users motivation to participate was strong
Rapid success
Technology was kept simple instead focusing
on core objectives
What are the Consequences
of the eBay Business Model?
Immediate
 Rapid growth of
person-to-person
auctions.
 Rise of
“questionable”
auction items.
Future
 End of flea markets
and garage sales?
 Creates new
markets
 Specialized trading?
 Facilitate others?
eTrade
New Business Model:
E*TRADE

Top online brokerage company.
Why is stock-trading ideally
suited to online business?
Why E*TRADE?






No physical delivery of goods makes this an
ideal online business
Implication: All information-based services
can benefit from being online
Reduced transaction costs
Effective delivery of services
Customer segmentation
Built a new brand in an industry which
competes on brand..
What are the Consequences of the
E*TRADE Business Model?
Immediate
 More online
customers.
 More day-traders.
 Greater trading
volume.
 More stock market
volatility.
Future
 Disintermediate the
NYSE?
 Create an ECN
(Electronic
Communications
Network) like
Instinet?
Dell
New Business Model: Dell



Largest direct PC manufacturer and one of
the largest PC manufacturers.
Sells directly to customers, bypassing
retailers and passes on the savings.
Has much less inventory than its competitors
and much faster deliveries.
What Rules Did Dell Break?


You can’t customize every order for every
customer, so offer pre-configured models that
can’t be changed.
Retailers recommend specific models to
customers, so the channel cannot be
bypassed.
What are the Consequences of
the Dell Business Model?
Immediate
 Decline of computer
retailer.
 PC industry margin
squeeze –
consolidation and
bankruptcy.
Future
 Offer non-PC
products in an
electronics
marketplace.
Sabre
New Business Model: Sabre


Electronic reservation system for airlines,
hotels, car rental companies.
Sets prices for individual airline tickets to
maximize total company revenue or profit.
What is Optimal Dynamic Pricing?
What Rules Did Sabre Break?


You can’t charge customers different prices
for the same product.
Companies cannot share their complete
pricing strategies with all competitors.
What are the Consequences
of the Sabre Business Model
Immediate
 Travel agent
disintermediation.
 Higher revenue and
profits for airlines,
hotels, and other
travel companies.
Future
 Airline alliances.
 Airline management
by Sabre.
 Single travel
marketplace for all
players.
Hotmail
New Business Model: Hotmail

Free Web-based e-mail.

Spent only $500,000 on initial marketing,
much less than the $20 million spent by its
nearest competitor Juno.
How did they do this?
New Business Model: Hotmail

Used viral marketing (every message ends
with a message stating “Get Your Private,
Free Email at http://www.hotmail.com”).
How did this business make money
as an independent entity?
What Rules Did Hotmail
Break?



You can’t grow a business or brand without
spending a lot on marketing.
Customers won’t like being used as part of a
marketing campaign.
Customers won’t give out personal
information to get a “free” service.
What are the Consequences of
the Hotmail Business Model?
Immediate
 Single standard and
source for e-mail.
 Consumers expect
other free services.
 Traffic for MSN sites.
Future
 Single standard and
source for all
communications?
 Does the online
advertising business
model work?
Priceline.com
New Business Model:
Priceline.com

Online shopping service that allows
customers to “Name Your Own Price” for a
variety of products, like vacations and
electronics.
What Rules Did Priceline.com
Break?

Suppliers determine the price of products and
publish them to customers.
What are the Consequences of the
Priceline.com Business Model?
Immediate
 All prices are
negotiable online.
Future
 End of price setting
by sellers?
Conclusions

Technology allows new ways of doing new
things and new ways of doing old things.

Different businesses – different models &
strategies

“If you’re not changing faster than your
environment, you are falling behind” – Jack
Welsh, CEO of General Electric.
Internet Shopping
Why do people shop online?
 Why don’t people shop online?

Why Internet Shopping?



Enables consumers to shop or do other
transactions 24 hours a day, all year round
from almost any location
Provides consumers with more choices
Provides consumers with less expensive
products and services by allowing them to
shop in many places and conduct quick
comparisons
Why Internet Shopping?




Allows quick delivery of products and services,
especially with digitized products
Consumers can receive relevant and detailed
information in seconds, rather than in days or
weeks
Allows consumers to interact with other
consumers n electronic communities and
exchange ideas as well as compare experiences
Facilitates competition, which results in
substantial discounts
Why not Internet Shopping?

Security and Privacy


Customers do not trust:








Difficult to convince customers that online transactions and
privacy very secure
Unknown faceless sellers
Paperless transactions
Electronic money
Switching from a physical to a virtual store may be
difficult
Lack of touch and feel online
Many unresolved legal issues
Expensive and/or inconvenient accessibility to the
Internet
ePayment is not in place
Online Consumer Behavior Model
Consumer Behavior Online
(cont.)
Consumer types


Individual consumer
Organizational buyers




Governments and public organizations
Private corporations
Resellers
Consumer behavior viewed in terms of


Why is the consumer shopping?
How does the consumer benefit from shopping online?
Consumer Behavior Online

(cont.)
3 categories of consumers



Impulsive buyers—purchase quickly
Patient buyers—make some comparisons first
Analytical buyers—do substantial research
before buying
Online Customer Service and
CRM
Online Customer Service

Customer service


Traditional: do the work for the customer
EC delivered: gives tools to the customer
to do the work for him/herself (log:
tracking, troubleshooting, FAQ) with
Improved communication
 Automated process
 Speedier resolution of problems

Online Customer Service

(cont.)
E-service—online help for online
transactions



Foundation of service—responsible and
effective order fulfillment
Customer-centered services—order tracing,
configuration, customization, security/trust
Value-added services--dynamic brokering,
online auctions, online training and
education
Online Customer Service

(cont.)
Product life cycle and customer service

Phases of product life cycle

Requirements: assisting the customer to determine
needs

Acquisition: helping the customer to acquire a product
or service

Ownership: supporting the customer on an ongoing
basis


Retirement: helping the client to dispose of a service or
product
Service must be provided in all of them
Online Customer Service

(cont.)
Customer relationship management (CRM)

Customer-focused EC




Make it easy for customers to do business online
Business processes redesigned from customer’s point of
view
Design a comprehensive, evolving EC architecture
Foster customer loyalty by:



Personalized service
Streamline business processes
Own customer’s total experience
Customer Relationship Management
(CRM)

Customer service functions





Provide search and comparison capabilities
Provide free products and services
Provide specialized information and services
Allow customers to order customized products
and services
Enable customers to track accounts or order
status
Customer Relationship Management
(cont.)

Customer service tools

Personalized Web pages
Used to record purchases and preference
 Direct customized information to customers efficiently


FAQs
Customers find answers quickly
 Not customized, no personalized feeling and no
contribution to relationship marketing

Customer Relationship Management
(cont.)

Tracking tools



Chat rooms


Customers track their orders saving time and money
for all
Example: FedEx’s package tracking
discuss issues with company experts and with other
customers
E-mail and automated response



Disseminate general information
Send specific product information
Conduct correspondence regarding any topic (mostly
inquiries from customers)
Customer Relationship Management
(cont.)

Help desks and call centers
A comprehensive customer service entity
 EC vendors take care of customer service issues
communicated through various contact channels



Telewebs combine
 Web channels (automated e-mail reply)
 Web knowledge bases (portal-like self service)
 Call center agents or field service personnel
Troubleshooting tools

—assist customers in solving their own problems
Customer Relationship Management
(cont.)

Justifying customer service and CRM
programs—2 problems



Most of the benefits are intangible
Substantial benefits reaped only from loyal
customers, after several years
Metrics—standards to determine
appropriate level of customer support



Response and download times
Up-to-date site and availability of relevant content
Others
Customer Relationship Management
(cont.)
Examples of customer service

Amazon.com




Convenience, selection, value, special services
E-mail order confirmation
Personalized services
Federal Express (FedEx)


Package tracking service
Ability to calculate delivery costs, online shipping
forms, arrange pickup, find local drop bo
Electronic Payment Systems
E-payment
Players and processes involved in using
credit cards online
 Online alternatives to credit card payments
 Key elements in securing an e-payment

Overview of Electronic Payments

E-payment methods



Electronic funds transfer (EFT)
Credit cards
E-payments
Smart cards
 Digital cash
 Digital checks
 E-billing


All have the ability to transfer payment from
one person or party to another
Electronic Payments

Five parties involved in e-payments






(cont.)
Issuer
Customer/payer/buyer
Merchant/payee/seller
Regulator
Automated Clearing House (ACH)
Key issue of trust must be addressed




Privacy
Authentication and authorization
Integrity
Nonrepudiation
Electronic Payments
(cont.)
Crucial factors in determining which method of
e-payment achieves widespread acceptance






Independence
Interoperability and portability
Security
Anonymity
Ease of use
Transaction fees
E-Cards

Three common types of payment cards



Credit cards —provides holder with credit to
make purchases up to a limit fixed by the
card issuer
Charge cards —balance on a charge card is
supposed to be paid in full upon receipt of
monthly statement
Debit card —cost of a purchase drawn
directly from holder’s checking account
(demand-deposit account)
E-Cards (cont.)

The Players






Cardholder
Merchant (seller)
Issuer (your bank)
Acquirer (merchant’s financial institution,
acquires the sales slips)
Card association (VISA, MasterCard)
Third-party processors (outsourcers performing
same duties formerly provided by issuers, etc.)
Online Credit Card
Processing
.
E-Cards (cont.)

E-wallets


A software component in which a user stores
credit card numbers and other personal
information
when shopping online, the user simply clicks the
e-wallet to automatically fill in information
needed to make a purchase
E-Cards (cont.)

Security risks with credit cards



Stolen cards
Reneging by the customer—authorizes a
payment and later denies it
Theft of card details stored on merchant’s
computer
E-Cards (cont.)

Purchase cards



Instrument of choice for B2B purchasing
Special-purpose, non-revolving payment cards
issued to employees solely for purchasing and
paying for nonstrategic materials and services
Purchase cards—operate like other credit cards
Cardholder of corporation places an order for goods
or services
 Supplier processes transaction with authorization of
card issuer
 Issuer verifies purchase authorization

E-Cards (cont.)

Purchase cards
All cardholders’ transactions processed centrally—
one payment for all purchases
 Each cardholder reviews monthly statement
 Card issuer analyzes transactions—standard and
ad hoc reports are made
 Card issuer creates electronic file to upload to
corporation’s ledger system

E-Cards (cont.)

Benefits of purchasing cards






Cost savings
Productivity gains
Bill consolidation
Payment reconciliation
Preferred pricing
Management reports
E-Cards (cont.)
Smart Cards
An electronic card containing an
embedded microchip that enables
predefined operations or the addition,
deletion, or manipulation of information on
the card
E-Cards (cont.)

Categorize smart cards by how they store
data
Contact card —insert in smart card reader
 Contactless(proximity) card —embedded antenna

read by another antenna (mass-transit
applications)
E-Cash and Payment Alternatives


The digital equivalent of paper currency and coins,
which enables secure and anonymous purchase of
low-priced items
E-cash alternatives for credit cards (micropayments—
under $10)

E-cash (eCoin.net)




Identity of user hidden from merchant
Easier to use than earlier e-cash systems
Requires specialized software
Qpass (Qpass.com)



Set up Qpass account
User name and password
What credit card to charge
E-Cash & Payment Alternatives

(cont.)
Stored-value cards and other innovations



Visa Cash: A stored-value card designed to handle
small purchases or micropayments; sponsored by
Visa
Visa Bucks: prepaid card designed for teens
Mondex: A stored-value card designed to handle
small purchases or micropayments; sponsored by
Mondex, a subsidiary of MasterCard
E-Cash & Payment Alternatives

(cont.)
E-loyalty and rewards programs

Electronic script
A form of electronic money (or points),
issued by a third party as part of a loyalty
program
 can be used by consumers to make
purchases at participating stores


MyPoints-CyberGold (mypoints.com)
Customers earn cash
 Cash used for later purchases

E-Cash & Payment Alternatives

(cont.)
Person-to-person (P2P) payments and
gifts

Enable transfer of funds between two
individuals
Repaying money borrowed
 Paying for an item purchased at online auction
 Sending money to students at college
 Sending a gift to a family member

Sending money with PayPal
Source: paypal.com.
E-Checking
The electronic version or representation
of a paper check
 Eliminate the need for expensive
process reengineering
 Can be used by all bank customers who
have checking accounts
 To be integrated with the accounting
information system of business buyers
and with the payment server of sellers
 Used mainly in B2B

E-Checking

(cont.)
Benefits of e-checking



Online check collection process
Online notices of check returns
Truncating paper checks at bank of first
deposit
B2B Electronic Payments

Financial supply chains (FSC)

Follows a buyer’s transaction
activities related to cash flow, which
start with a purchase order and end in
settlement with the seller
E-Billing
Customers are either individuals or
companies
 Two common models of e-billing



Biller direct—customer receives bill from a
single merchant
Third-party consolidators—presents bills
from multiple merchants
E-Bill Presentment
Payment Gateway




server-based transaction processing system which
enables businesses to authorize, process, and
manage credit card transactions securely in a realtime, online environment from any computer with
an Internet connection and a Web browser.
specifically designed to accommodate the
increasing demand by e-commerce companies
offered by banks and companies who are
authorized to accept credit card online payment
Ex: Citibank payment gateway
E-Commerce Security
Need for
E-Commerce Security
Annual survey conducted by the Computer

Security Institute




Organizations continue to experience
cyber attacks from inside and outside of
the organization
The types of cyber attacks that
organizations experience were varied
The financial losses from a cyber attack
can be substantial
It takes more than one type of technology
to defend against cyber attacks
Security Is
Everyone’s Business

Security practices of organizations of various sizes

Small organizations (10 to 100 computers)


The “haves” are centrally organized, devote a sizeable
percentage of their IT budgets to security
Medium organizations (100 to 1,000 computers)


Rarely rely on managerial policies in making security
decisions, and they have little managerial support for their
IT policies
Overall exposure to cyber attacks and intrusion is
substantially greater than in smaller organizations
Security Is
Everyone’s Business (cont.)

Large organizations (1,000 to 10,000 computers)



Complex infrastructures and substantial exposure on
Internet
While aggregate IT security expenditures are fairly large,
their security expenditures per employee are low
Large/Very Large organizations



IT security is part-time and undertrained—sizeable
percentage of the large organizations suffer loss or
damage due to incidents
Base their security decisions on organizational policies
extremely complex environments that are difficult to
manage even with a larger staff
Security Issues

From the user’s perspective



Is the Web server owned and operated
by a legitimate company?
Does the Web page and form contain
some malicious or dangerous code or
content?
Will the Web server distribute
unauthorized information the user
provides to some other party?
Security Issues (cont.)

From the company’s perspective


Will the user not attempt to break
into the Web server or alter the pages
and content at the site?
Will the user will try to disrupt the
server so that it isn’t available to
others?
Security Issues (cont.)

From both parties’ perspectives


Is the network connection free from
eavesdropping by a third party
“listening” on the line?
Has the information sent back and
forth between the server and the
user’s browser been altered?
Security Requirements



Authentication: The process by which one
entity verifies that another entity is who they
claim to be
Authorization: The process that ensures that a
person has the right to access certain resources
Confidentiality: Keeping private or sensitive
information from being disclosed to
unauthorized individuals, entities, or processes
Security Requirements (cont.)



Integrity: As applied to data, the ability to
protect data from being altered or destroyed in
an unauthorized or accidental manner
Auditing: The process of collecting information
about attempts to access particular resources,
use particular privileges, or perform other
security actions
Nonrepudiation: The ability to limit parties
from refuting that a legitimate transaction took
place, usually by means of a signature
Types of Threats and Attacks

Nontechnical attack


An attack that uses chicanery to trick people
into revealing sensitive information or
performing actions that compromise the
security of a network
Technical attack

An attack perpetrated using software and
systems knowledge or expertise
Types of
Threats and Attacks (cont.)

Denial-of-service (DoS) attack


An attack on a Web site in which an attacker
uses specialized software to send a flood of
data packets to the target computer with the
aim of overloading its resources
Distributed denial-of-service (DDoS) attack

Attacker gains illegal administrative access to
as many computers on the Internet as
possible and uses these multiple computers to
send a flood of data packets to the target
computer
Types of
Threats and Attacks (cont.)

Malware: A generic term for malicious
software


The severity of the viruses increased
substantially, requiring much more
time and money to recover
85% of survey respondents said that
their organizations had been the
victims of e-mail viruses in 2002
Types of
Threats and Attacks (cont.)

Malicious code takes a variety of forms—both
pure and hybrid




Virus: A piece of software code that inserts itself into a host,
including the operating systems, to propagate; it requires that
its host program be run to activate it
Worm: A software program that runs independently,
consuming the resources of its host in order to maintain itself
and is capable of propagating a complete working version of
itself onto another machine
Macro virus or macro worm: A virus or worm that is
executed when the application object that contains the macro
is opened or a particular procedure is executed
Trojan horse: A program that appears to have a useful
function but that contains a hidden function that presents a
security risk
Security Risk Management

Definitions involved in risk management




Assets—anything of value worth securing
Threat—eventuality representing danger to
an asset
Vulnerability—weakness in a safeguard
Required to determine security needs

4 phases of risk management




Assessment
Planning
Implementation
Monitoring
Security Risk Management

(cont.)
Assessment phase—evaluation of assets,
threats, vulnerabilities





Determine organizational objectives
Inventory assets
Delineate threats
Identify vulnerabilities
Quantify the value of each risk
Security Risks for EC & Other Internet
Sites
Security Risk Management

(cont.)
Planning phase of risk management—
arrive at a set of security policies



Define specific policies
Establish processes for audit and review
Establish an incident response team and
contingency plan
Security Risk Management

Implementation phase of risk
management


(cont.)
choose particular technologies to deal with
high priority threats
Monitoring phase of risk management

ongoing processes used to determine
which measures are successful,
unsuccessful and need modification
Methods of securing EC

Authentication system


System that identifies the legitimate parties to a
transaction, determines the actions they are
allowed to perform
Access control mechanism

Mechanism that limits the actions that can be
performed by an authenticated person or group
Biometric Controls

Biometric systems


Authentication systems that identify a
person by measurement of a biological
characteristic
fingerprint, iris (eye) pattern, facial
features, or voice
Encryption

Encryption


The process of scrambling (encrypting) a
message in such a way that it is difficult,
expensive, or time-consuming for an
unauthorized person to unscramble
(decrypt) it
Private and public key encryption
Encryption

Plaintext


Ciphertext


An unencrypted message in human-readable
form
A plaintext message after it has been
encrypted into a machine-readable form
Encryption algorithm

The mathematical formula used to encrypt
the plaintext into the ciphertext, and vice
versa
Encryption Methods (cont.)

Key - The secret code used to encrypt

Types of encryption systems
and decrypt a message

Symmetric (private key)



Use the same lkey to encrypt and decrypt message
Shared by sender and receiver of message
Asymmetric (public key)



Use a pair of keys
Public key to encrypt the message
Private key to decrypt the message
Encryption Methods

Public key infrastructure (PKI): A
scheme for securing e-payments using
public key encryption and various
technical components
Elements of PKI

Digital signature: An identifying code
that can be used to
authenticate the identity of the sender
of a document or a message
 ensure the original content of the
electronic message or document is
unchanged
 Cannot be easily repudiated or imitated
 Can be time-stamped

Digital Signatures
Elements of PKI (cont.)

Digital certificate: Verification that the
holder of a public or private key is who
they claim to be
 Certificate authorities (CAs): Third
parties that issue digital certificates
Security Protocols

Secure Socket Layer (SSL)


Transport Layer Security (TLS):


Protocol that utilizes standard certificates for
authentication and data encryption to ensure privacy
or confidentiality
As of 1996, another name for the SSL protocol
Secure Electronic Transaction (SET)

A protocol designed to provide secure online credit
card transactions for both consumers and merchants;
developed jointly by Netscape, Visa, MasterCard, and
others
Securing EC Networks

Technologies for organizational networks

Firewall: A network node consisting of both
hardware and software that isolates a private
network from a public network


Packet-filtering routers: Firewalls that filter data and
requests moving from the public Internet to a private
network based on the network addresses of the
computer sending or receiving the request
Application-level proxy: A firewall that permits
requests for Web pages to move from the public
Internet to the private network
Securing EC Networks (cont.)
Securing EC Networks (cont.)

Personal firewalls:
Personal firewall: A network node
designed to protect an individual
user’s desktop system from the public
network by monitoring all the traffic
that passes through the computer’s
network interface card
Securing EC Networks (cont.)

Virtual private network (VPNs)

A network that uses the public Internet to
carry information but remains private by
using encryption to scramble the
communications, authentication to ensure
that information has not been tampered with,
and access control to verify the identity of
anyone using the network
Securing EC Networks (cont.)

Intrusion detection systems (IDSs):


A special category of software that can
monitor activity across a network or on a
host computer, watch for suspicious
activity, and take automated action based
on what it sees
Network-based IDS uses rules to analyze
suspicious activity at the perimeter of a
network or at key locations in the network
What are the consequences of
poor security?
Dynamic Pricing
and E-auctions
Dynamic Pricing
4 categories




one buyer, one seller -- negotiation,
bargaining
many buyers, many sellers -- dynamic
exchanges
one seller, many potential buyers -forward(regular) auctions
one buyer, many potential sellers -reverse auction, tendering
Online Auction(e-Auction)
..... any system that uses algorithms to competitively
bid price to consummate a transaction between a
seller & a purchaser, including Internet exchanges which
are online markets where auctions take place


Similar to real-life auctions BUT
sellers and bidders don’t go to a physical auction house
--- they go to a web site where bidding takes place
Real-life vs. Online Auctions

Who do buy from?



period of auctions



most online auctions -- buy directly from the seller
traditional, real-life auctions -- buy from an
auctioneer
most online auctions -- last for days, except flash
auction
examine the goods -- can’t for online auctions
buyers & sellers have to arrange for the goods
to be shipped privately
Process of Online Auctions
Activities
Initial buyer/seller registration
 Setting up a particular auction event
 Scheduling and advertising
 Bidding
 Evaluation of bids and closing the
auction
 Trade settlement

Benefits of e-Auction





Create more efficient markets
Relax geographic constraints
Consumers getting a ‘good deal’ / save
money
Make extra money -- one man’ s trash is
another man’ s treasure
Contribute to buyers and sellers sense of
online community
Disadvantages of e-Auction
Blind shopping
 Less competitive
 Vulnerability to bidder collusion
 Vulnerability to a lying auctioneer
 Security
 Untrustworthy

Framework of e-Auction
6 components
auctioneer
 supplier/seller
 customer/buyer
 trade objects
 transaction phase
 rule base
+ the network/Internet covers the entire
auction framework for communication

Forward Auction Formats

English Auction




seller lists an item and an opening bid, also specifies a
bid increment
buyers start bidding
the highest bid wins at their bid price
Yankee Auction


commonly used when a seller places one or more
identical items on sale
all winning bidders pay the identical price -- the lowest
successful bid = bottom of the winning bid range
Auction Formats con’t

Reserve Auction



a reserve price -- the lowest price a seller is willing to
sell an item, not disclosed to bidders
reserve the right to refuse the item beneath
Proxy Format




a buyer sets the maximum price they’ re willing to pay
the site will do your bidding for you
if somebody outbids you, your bid will automatically be
increased by the increment set
continue until someone bids above your max bid or
until the auction is over and you win
Auction Formats con’t

Dutch Auction



prices start at a high level, slowly declined
bidders specify quantity to buy at declining price
Express or Flash Auction


very much like real-life auction, bid against others live
online
held for short amount of time, often last an hour or
less
Reverse Auction
Potential sellers bid, reducing the price
sequentially
 until bidders do not reduce the price
 sealed-bid -- bid only once, silent
auction

Some Issues
Auction or not
 Your own auction site or 3rd Party site
 Auction strategy
 Support services
 Payment
 What is auctioned

e-Bay
www.ebay.com
 the world’s largest online auction
 Main Page of the site



many services
auction listings
e-Bay

con’t
Find what you want to buy



Featured items
Browsing by category
Doing a search
You want to buy the first stamp in the
world
How to Place Your Bids
Steps
Check out the item details page
 Place your bid
 Follow up on your bidding
 Close the deal
