Managing Business with Electronic Commerce: Issues and Trends Aryya Gangopadhyay University of Maryland Baltimore County, USA Hershey • London • Melbourne • Singapore • Beijing Idea Group Publishing Information Science Publishing Acquisition Editor: Mehdi Khosrowpour Managing Editor: Jan Travers Development Editor: Michele Rossi Copy Editor: Maria Boyer Typesetter: LeAnn Whitcomb Cover Design: Deb Andree Printed at: Integrated Book Technology Published in the United States of America by Idea Group Publishing 1331 E. Chocolate Avenue Hershey PA 17033-1117 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: cust@idea-group.com Web site: http://www.idea-group.com and in the United Kingdom by Idea Group Publishing 3 Henrietta Street Covent Garden London WC2E 8LU Tel: 44 20 7240 0856 Fax: 44 20 7379 3313 Web site: http://www.eurospan.co.uk Copyright © 2002 by Idea Group Publishing. All rights reserved. No part of this book may be reproduced in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher. Library of Congress Cataloging-in-Publication Data Managing business with electronic commerce : issues and trends / [edited by] Aryya Gangopadhyay. p. cm. Includes index. ISBN 1-930708-12-2 (paper) 1. Electronic commerce Management. I. Gangopadhyay, Aryya, 1962- HF5548.32 .M355 2001 658.8'4 dc21 2001024744 eISBN 1-591400-07-4 British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library. NEW from Idea Group Publishing Excellent additions to your library! Receive the Idea Group Publishing catalog with descriptions of these books by calling, toll free 1/800-345-4332 or visit the IGP Online Bookstore at: http://www.idea-group.com! • Data Mining: A Heuristic Approach Hussein Aly Abbass, Ruhul Amin Sarker and Charles S. 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Haynes/1-930708-21-1 • Enterprise Resource Planning: Global Opportunities and Challenges Liaquat Hossain, Jon David Patrick and M.A. Rashid/1-930708-36-X • The Design and Management of Effective Distance Learning Programs Richard Discenza, Caroline Howard, and Karen Schenk/1-930708-20-3 • Multirate Systems: Design and Applications Gordana Jovanovic-Dolecek/1-930708-30-0 • Managing IT/Community Partnerships in the 21st Century Jonathan Lazar/1-930708-33-5 • Multimedia Networking: Technology, Management and Applications Syed Mahbubur Rahman/ 1-930708-14-9 • Cases on Worldwide E-Commerce: Theory in Action Mahesh Raisinghani/ 1-930708-27-0 • Designing Instruction for Technology-Enhanced Learning Patricia L. Rogers/ 1-930708-28-9 • Heuristic and Optimization for Knowledge Discovery Ruhul Amin Sarker, Hussein Aly Abbass and Charles Newton/1-930708-26-2 • Distributed Multimedia Databases: Techniques and Applications Timothy K. Shih/1-930708-29-7 • Neural Networks in Business: Techniques and Applications Kate Smith and Jatinder Gupta/ 1-930708-31-9 • Information Technology and Collective Obligations: Topics and Debate Robert Skovira/ 1-930708-37-8 • Managing the Human Side of Information Technology: Challenges and Solutions Edward Szewczak and Coral Snodgrass/1-930708-32-7 • Cases on Global IT Applications and Management: Successes and Pitfalls Felix B. Tan/1-930708-16-5 • Enterprise Networking: Multilayer Switching and Applications Vasilis Theoharakis and Dimitrios Serpanos/1-930708-17-3 • Measuring the Value of Information Technology Han T.M. van der Zee/ 1-930708-08-4 • Business to Business Electronic Commerce: Challenges and Solutions Merrill Warkentin/1-930708-09-2 Managing Business with Electronic Commerce: Issues and Trends Table of Contents Preface vi SECTION I: TECHNOLOGY DEVELOPMENT Chapter I. Supporting Electronic Negotiation for Intelligent Trading 1 Leila Alem, Ryszard Kowalczyk and Maria R. Lee CSIRO Mathematical and Information Sciences, Australia Chapter II. E-Commerce Software: From Analysis to Design 17 Peter Rittgen, University Koblenz-Landau, Germany Chapter III. Towards a Methodology for the Development of Web-Based Systems: Models, Methods and Activities for Conceptual Design of Large Web-Based Information Systems 37 Bernhard Strauch and Robert Winter University of St. Gallen, Switzerland Chapter IV. Retriever: Improving Web Search Engine Results Using Clustering 59 Anupam Joshi, University of Maryland Baltimore County, USA Zhihua Jiang, American Management Systems, Inc., USA Chapter V. Digital Asset Management: Concepts and Issues 82 Ramesh Subramanian and Minnie Yi-Miin Yen University of Alaska Anchorage, USA SECTION II: MARKETING Chapter VI. Pricing and Service Quality in Electronic Commerce 100 Kemal Altinkemer, Purdue University,USA Kerem Tomak,University of Texas at Austin, USA Chapter VII. Delivery and Tracking of Rotating Banner Advertisements on the World Wide Web: An Information System Model 116 Subhasish Dasgupta, George Washington University, USA Rajesh Chandrashekaran, Fairleigh Dickinson University, USA Chapter VIII. The On-Demand Delivery Services Model for eCommerce 131 Merrill Warkentin, Mississippi State University, USA Akhilesh Bajaj, Carnegie Mellon University, USA SECTION III: FINANCE Chapter IX. Electronic Payment Systems: An Empirical Investigation of Customer and Merchant Requirements 151 Pat Finnegan, University College Cork, Ireland John Kilmartin, Deloitte and Touche Consultants, Ireland Chapter X. E-Commerce in the Financial Services Industry 167 Richard Holowczak Baruch College, City University of New York, USA Chapter XI. E-Capital Budgeting: Managing Strategic Investments in a World of Uncertainty 182 Parvez Ahmed, Penn State Harrisburg, USA SECTION IV: BUSINESS STRATEGIES Chapter XII. A Concept for the Evaluation of E-Commerce-Ability 199 Ulrike Baumoel, Thomas Fugmann, Thomas Stiffel and Robert Winter University of St. Gallen, Switzerland Chapter XIII. Strategies for Bricks to Beat Clicks–How Established Business Can Incorporate the New Technologies 214 Martin Barnett and Janice M. Burn, Edith Cowan University, Australia Chapter XIV. Cyber Shopping and Privacy 235 Jatinder N. D. Gupta and Sushil K. Sharma Ball State University, USA About the Authors 250 Index 258 Preface vi Electronic commerce refers to any business activity that takes place using an electronic medium, frequently the Web. Electronic commerce has been widely cited as the fastest growing area in the computer industry. For example, Forester research has predicted that electronic commerce will be a $3.2 trillion industry by 2003. There are many reasons for the rapid adoption of electronic commerce across industry sectors, including increase in cus- tomer outreach, reduction of production cycle time and cost, ability to provide customized service and many others. Electronic commerce is being con- ducted for business transactions between business to business (B2B) as well as business to consumer (B2C). Business applications in electronic com- merce include, but are not limited to, digital storefronts, electronic banking, digital financial markets, electronic auctions, supply chain management and electronic commerce services. Many challenges are being formed along with the opportunities created by electronic commerce. For example, large, estab- lished companies are facing increasing competition from fast and nimble startups because of low barriers of entry, customer demand is increasing for customizable interfaces and better content management, price compe- tition is forcing companies to operate at lower profit margins, retaining customer loyalty is becoming difficult due to increased competition. Myriad of social and legal issues are also emerging due to the differences between electronic commerce and traditional commerce models. Ap- proaches to solutions for these issues are coming from business innova- tions, technological solutions, and policy makers. Thus, electronic com- merce is a new and rapidly growing area that is of interest to both practitioners and the academic community. The overall mission of the book is to compile a collection of papers that represent some of the best thinking from researchers and practitioners who specialize in the various facets of electronic markets—namely computer technology, finance and banking, marketing, and logistics. The book will be of interest to practitioners in the computer industry as well as other business sectors who have an interest in electronic commerce, researchers in business schools, information systems, policy sciences and computer science, and government agencies that are in the process of mplementing electronic commerce applications. vii The book is divided into four sections, dealing with issues related to technology development, marketing, finance and business strategies. The first chapter, written by Alem, Kowalczyk and Lee, reports on solutions for addressing the issues of negotiations with incomplete and imprecise information, dynamic coalition formation and negotiation ontolo- gies. The authors introduce the concept of fuzzy negotiation in electronic commerce and describe a prototype system of intelligent agents to support fully autonomous multi-issue negotiations in the presence of limited common knowledge and imprecise information. In the second chapter, Rittgen describes a methodology for mod- eling an enterprise called Multi-perspective Enterprise Modeling (MEMO). The methodology allows for the description of an enterprise on three levels: strategy, organization and information system, and from four angles: process, structure, resources and goals. All partial models for the views are integrated via a common object-oriented core. In this frame- work the author suggests a modeling language for the IS layer, the Event- driven Method Chain (EMC), a process-oriented language based on Event-driven Process Chains (EPCs), which is adapted to fit both the MEMO framework and the object-oriented paradigm. The methodology described in this chapter is suitable for the development of Web-based applications in an object-oriented programming language. The third chapter, written by Strauch and Winter, tries to identify the “essence” of a Web-based information system and proposes a comprehensive conceptual model that captures the hierarchical document structure and hypertext semantics, as well as dynamic page generation from databases and various approaches to explicit and implicit navigation. The proposed model comprises several classes of information objects, various types of associa- tions, activities for the design and quality checks. The authors illustrate the model using an existing Web-based information system. In the fourth chapter, Joshi and Jiang describe a system to cluster search engine results based on a robust relational fuzzy clustering algorithm. They compare the use of the Vector Space-based and N-Gram-based dissimi- larity measures to cluster the results from the search engines, such as MetaCrawler and Google. The chapter starts with a brief background on the clustering algorithm, followed by a description of the system and experimen- tal results. In Chapter Five, Subramanian and Yen examine Digital Asset Man- agement (DAM) concepts, identify the desirable features and components of DAM, develop a taxonomy of the DAM systems, describe the e-commerce aspects of digital assets and discuss the various open research issues associated with Digital Asset Management. In the Sixth Chapter, Altinkemer and Tomak adopt a four-layer description of the Internet economy. They analyze the pricing structures in each of the four layers of the Digital Economy, and analyze the relationship between different pricing strategies and customer service quality concept. In Chapter Seven, Dasgupta and Chandrashekaran develop a frame- work for the delivery and tracking of rotating banner advertisements for e- commerce applications. They describe the pricing strategies for online banner advertisements, explain the reason for using rotating banner advertisements, and develop IS models for delivery and measurement of banner ads. In Chapter Eight, Warkentin and Bajaj propose a new business model enabled by electronic commerce called the on-demand delivery services (ODDS) model. They sub-categorize the ODDS model into three submodels and analyze these models with structured interviews with key senior manag- ers and survey of recent literature. In Chapter Nine, Finnegan and Kilmartin study electronic pay- ment systems. They describe five main categories of payment systems: credit card payment, electronic check, electronic cash, smart cards and micro-payments. The authors categorize the requirements of stakeholders into high, medium and low priorities, and compare electronic payment against these categorizes. In Chapter Ten, Holowczak presents an overview of some of the current financial services and products in electronic commerce. He then discusses some important issues related to the application of electronic commerce and their strategic implications for financial services. In Chapter Eleven, Ahmed shows how techniques used in valuing financial options can be used to evaluate projects or firms involving electronic commerce. He describes the real options theory in corporate finance with examples and illustrates how it can be applied to evaluate e-commerce projects under uncertainty. Baumoel, Fugmann, Stiffel and Winter, in Chapter Twelve, develop the concept of e-commerce-ability and describe a methodology for measuring it for organizations. Their analysis consists of a four-dimensional framework for comparing the patterns of e-commerce role profiles and analyzing the success of e- commerce activities. The methodology can support management decisions regarding the medium and long-term strategies regarding e-commerce activities. Burnett and Burn look at models for organizational development using the potential of virtual organization for established firms in Chapter Thirteen. The viii authors provide a definition of virtual organizations and models of virtuality, and propose six models of virtual organizations within a dynamic framework of change. In Chapter Fourteen, Gupta and Sharma discusses the privacy issues in cyber shopping. They identify the privacy concerns, including spamming, surveil- lance and unauthorized access, personal information protection, intellectual prop- erty rights, and possible remedies and future trends. In closing, I would like to thank all the authors for their excellent contributions to the book. I would also like to extend thanks to all the reviewers, without whom this book could not have, been completed. Many thanks to Michele Rossi, Jan Travers and Natasa Milanovic at Idea Group Publishing for continued support and help at all stages of this publication. Special thanks to Mehdi Khosrowpour for his help and guidance in preparing the book. Last but not the least, I would like to thank my wife Semanti and two sons Anirban and Abhiroop for making everything I do worthwhile. Aryya Gangopadhyay Baltimore, Maryland, USA March 2001 ix Section I Technology Development TEAMFLY Team-Fly ® [...]... agent, each with its own agenda and preferences and have the agents electronically negotiate with each other within a predefined set of rules We are mostly interested in the question of which procedure the agents should use to coordinate their actions, cooperate and form a coalition Constrains such as communication cost and limited computational time are taken into account This Supporting Electronic. .. make data exchange meaningful INTRODUCTION E -commerce is growing at a staggering rate globally Systems, which make ecommerce processes more efficient and competitive, will deliver huge benefits to Copyright © 2002, Idea Group Publishing 2 Alem, Kowalczyk & Lee these businesses and to their customers Support for negotiations is becoming a widespread feature of electronic trading on the Internet Recently... experimented with scenarios for car-trading and document translation negotiation The results of the initial experiments with the coalition formation work indicates that simple artificial agents formulate effective strategies for negotiating the formation of coalition in mixed motive and multilateral negotiations contexts and therefore seems appropriate for developing practical applications in electronic commerce. .. was presented at the International Conference on Advances in Infrastructure for Electronic Business, Science and Education on the Internet, SSGRR’00 (Alem, Kowalczyk and Lee, 2000) REFERENCES Alem, L., Kowalczyk, R., Lee, M., Ni, Y., Van, B., Wong, W and Zhang, D (1999) Next generation of negotiation agents for electronic commerce trading: A CMIS research agenda perspective Proceeding of CollECTer’99,... Facilitating interoperability and electronic commerce NIST ATP Workshop Available on the World Wide Web at: http://www.atp.nist.gov/ elec-com/interop/ritter.htm Rosenschein, J and Zlotkin, G (1994) Rules of Encounter: Designing Conventions for Automated Negotiation Among Computers MIT Press Sandholm, T and Lesser, V (1998) Issues in automated negotiation and electronic commerce: Extending the contract... on-line negotiation agents for truly assisting electronic trading can only be realized if such agents have means for direct party-to-party negotiation without the need for a central marketplace, means for multi-party/multi-issue negotiations, means to negotiate based on incomplete and imprecise information, means for dynamically forming coalitions in order to deal with mixed motive type of bargaining situation... was negotiating with; it can make a counter offer to this same agent; or it can ask a third agent to better the offer received by the agent it was initially negotiating with Each agent makes use of the coalition formation algorithm presented below: Begin A –> (B, Payoff B) Begin Loop If B 'accept' End Game [(A, UAB-Payoff B), (B, Payoff B)], (C,0) If B 'reject' A begins negotiations with C If B –> (A,... Repeat Loop Supporting Electronic Negotiation for Intelligent Trading 9 This algorithm has been used in the experimental Intelligent Trading Agency for the user car trading test-bed (ITA) for three buyers trying competitively to negotiate between which two a coalition will form in order to get a better deal with the car dealer We have tested this algorithm on a number of scenarios (each with different agent... widely cooperative problems such as the postmen problem While both works are certainly of useful value, their range of potential applicability does not cover all the requirements for electronic commerce ONTOLOGY-BASED NEGOTIATION Electronic negotiations, where multiple parties are involved, need to exchange information for negotiation decision making One of the big issues is how agents communicate In order... (http:// www.cmis.csiro.au/aai/projects) The FeNAs have also been tested with different negotiation scenarios for document translation services (Kowalczyk and Bui, 1999; Kowalczyk, 2000) The results of the initial experiments with the fuzzy e-negotiation work indicate that the FeNAs system can handle a variety of e-negotiation problems with incomplete common knowledge and imprecise/soft constraints In particular . van der Zee/ 1-930708-08-4 • Business to Business Electronic Commerce: Challenges and Solutions Merrill Warkentin/1-930708-09-2 Managing Business with Electronic Commerce: Issues and Trends Table. many others. Electronic commerce is being con- ducted for business transactions between business to business (B2B) as well as business to consumer (B2C). Business applications in electronic com- merce. means, electronic or mechanical, including photocopying, without written permission from the publisher. Library of Congress Cataloging-in-Publication Data Managing business with electronic commerce