Article summary: Erosion of Trust--E-commerce and the Loss of Privacy

This article I found relates to Chapter 4; about how the information system leads to an ethical dilemma. It describes the development of trust by the consumer when doing e-business, and how to maintain it.

Some of the concerns expressed are the usage of cookies and web bugs that collect personal information. This information could be private information or sensitive, opening the possibility for fraud. With the information obtained by e-business, a company must develop a strong trust with consumers by assuring quality and protection.

According to The Federal Trade Commission (FTC), the self-regulation in the United States is failing to provide adequate protection for consumers. Legislation sought by the FTC would be based on four core elements: notice, choice, access and security.
· Clear notice to consumers of what information is collected and use.
· Choice as to how this information will be used for purposes beyond which it was originally collected
· Accessing of the collected information including a reasonable opportunity to correct inaccuracies and delete information.
· Reasonable security precautions to safeguard information collected about consumers.

Concerns over privacy in the US have been further deteriorated by the attempted sale of consumer information by dot-coms. With trust being the core foundation, lack of privacy is threatening the future of e-business. On one hand, e-commerce facilitates the gathering of information; however, many consumers consider such usage of collected information to be an invasion of their privacy.

There is neither a simple solution nor a single view on whether violation of privacy is ethical or not.

Information Systems Control Journal, Volume 3, 2001
By Jonathan D. Andrews, CA, CISA, FCA

Blockbuster vs. Netflix: Which will win out?

1. Blockbuster’s business model is based on rental and sales of DVD’s. Since its operation onset in 1985, Blockbuster has enjoyed a very successful monopoly, opening 9100 stores in 25 countries within 20 years. This established Blockbuster as the market leader. But with the emergence of a new competitor - Netflix in 1998, Blockbusters business was adversely affected.


2. Netflix had challenged the business model of Blockbuster by launching online video rentals. The whole process of accessing video selections, delivery and returns were consolidated into an easy to understand procedure. Anyone can order anytime, anywhere without retail store prices and just mail back in a postage paid envelope.

As such, Netflix forced Blockbuster to reassess its place in the video rental business, creating the list of problems below:
a)This increasing rivalry from Netflix forced Blockbuster to initiate its own online rental market, incurring additional expenses on top of the retail stores.
b)It forced Blockbuster to reduce their subscriber price to $14.99, as compared to NetFlixs’ $19.99.
c)Blockbuster acquired only 1 million subscribers, but Netflix had 3 million by the end of year. This showed a continued downward trend of customers.
d)Blockbuster has to restructure the business model, implementing the new campaign of “No more late fees”, which failed to offset its cost.

4. Since starting the trend of online rental, in 1998, Netflix has attracted more customers and earned higher revenue than Blockbuster. Although Netflix has only 35 distribution centers around the world as compared to 30 such facilities from Blockbuster it generated almost 2 million more customers. Within 5 years of being in business Netflix had gained 2 to 7 percent in market shares, projecting the revenue to reach 1 billion in 2005 and $3 billion by 2009.

With the increasing new technology like cable subscription of movies (VOD), online rentals by Amazon.com and Apple entering into such business model pushes Blockbuster and Netflix to the edge.