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Chapter 5 Electronic Commerce, Intranets, and Extranets. Chapter 5 Objectives. Understand e-commerce and how it evolved Understand e-commerce strategies Understand the difference between intranets and extranets Understand consumer-focused and business-focused e-commerce

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chapter 5 objectives
Chapter 5 Objectives
  • Understand e-commerce and how it evolved
  • Understand e-commerce strategies
  • Understand the difference between intranets and extranets
  • Understand consumer-focused and business-focused e-commerce
  • Understand key e-commerce applications
electronic commerce defined
Electronic Commerce Defined
  • E-Commerce – online exchange of goods, services, and money between firms, and between firms and their customers
    • More than just buying and selling:
      • Pre-sale events and marketing
      • After-sale customer service
electronic commerce defined1
Electronic Commerce Defined
  • E-Commerce
    • Business-to-Consumer (B2C)
    • Business-to-Business (B2B)
    • Business-to-Employee (B2E)
    • Consumer-to-Consumer (C2C)
electronic commerce defined2
Electronic Commerce Defined
  • Internet and World Wide Web Capabilities
    • Expanding market
    • Wider customer base
    • More products
    • Closer relationships with customers
electronic commerce defined3
Electronic Commerce Defined
  • Internet and World Wide Web Capabilities
    • Real-time access to information
      • Web site linked to corporate database
      • Customers can check the balances of their frequent flier accounts
      • Customers do not have to wait for monthly statement
      • Example: Alaska Airlines
    • Mass customization
      • Tailoring products to a customers needs
      • Example: Lands’ End (Clothing retailer) developed a virtual model so that customers can dress the model to select clothing
    • Interactive communication
      • Improving firm’s image through responsiveness
      • Firms are augmenting telephone-based ordering, Web-based customer support (Web chat)
      • Example: E*Trade
electronic commerce defined4
Electronic Commerce Defined
  • Internet and World Wide Web Capabilities
    • Collaboration
    • Reduced transaction costs
    • Enhanced operational efficiency
    • Disintermediation
      • Cutting out the “middleman”
      • Reaching customers directly
electronic commerce defined5
Electronic Commerce Defined
  • Electronic Commerce Business Strategies
    • Brick-and-mortar
      • Traditional, physical companies
    • Click-only (“virtual”) companies
      • Online only
      • Example: eBay
    • Click-and-mortar (or “Brick & Click”)
      • Both physical and virtual
        • Challenge: increased IS complexity
business to business electronic commerce
Business-to-Business Electronic Commerce
  • Electronic Data Interchange
    • Definition – EDI refers to the electronic transmission of business documents between organizations via networks
    • “EDI is the forefather of B2B”
    • Estimated that U.S. companies buy about $500 billion worth of goods and services electronically per year via EDI networks
    • EDI: usually over value-added networks (VANs)
business to business electronic commerce1
Business-to-Business Electronic Commerce
  • Electronic Data Interchange
    • Advantages
      • Wide variety of business documents
      • Streamlines business processes
      • Reduced document handling, reduces paperwork
      • Shortens time of business transaction (from day to second)
      • Reduces errors
business to business electronic commerce2
Business-to-Business Electronic Commerce
  • Electronic Data Interchange
    • Disadvantages
      • Costly to implement
      • Costly to maintain
      • Requires skilled technicians
      • EDI can cost up to $100,000 and monthly telecommunications charges associated with VANs can be several thousand dollars per month
      • Often too costly for small or medium-sized companies
business to business electronic commerce3
Business-to-Business Electronic Commerce
  • The Internet Changed Everything
    • B2B now available to companies of all sizes
    • Intranet – internal, private network using Web technologies to facilitate transmission of proprietary information within the organization
    • Extranet – two or more firms using the Internet to do business together
business to business electronic commerce4
Business-to-Business Electronic Commerce
  • Intranet System Architecture
    • Firewalls – hardware devices with special software that prevent unauthorized access
    • An intranet server is placed behind the firewall
    • Packets are never routed outside the firewall, but remain within the organizations network
business to business electronic commerce5
Business-to-Business Electronic Commerce
  • Intranet Applications
    • Training: Employee can access video lectures, presentation slides from their desktop
    • Application Integration: Intranet integrates all disparate applications installed in different environments to consolidate information
      • Enterprise Resource Planning (ERP)
      • Customer Relationship Management (CRM)
      • Sales Force Automation (SFA)
    • Online Entry of Information
    • Real-Time Access to Information
    • Collaboration
business to business electronic commerce6
Business-to-Business Electronic Commerce
  • Extranet System Architecture
    • Extranet
      • Connects two or more business partners
      • Like an intranet
      • Same software, hardware, and networking
      • Additional component:
        • Virtual Private Network (VPN)
        • Secure transmission of proprietary info
business to business electronic commerce7
Business-to-Business Electronic Commerce
  • Extranet System Architecture
    • Virtual Private Network (VPN)
      • Tunneling
        • A technology that encapsulates, encrypts, and transmits data over the Internet
        • A secure “tunnel” is created over the VPN connecting the two intranets
      • Authentication
        • Confirms the identity of the remote user who is attempting to access information from the Web server
business to business electronic commerce8
Business-to-Business Electronic Commerce
  • Extranet Applications
    • Supply Chain Management
      • Example: Dell Computers
    • Real-Time Access to Information
      • Example: CSX railroad
    • Collaboration
      • Example: Caterpillar
business to business electronic commerce9
Business-to-Business Electronic Commerce
  • Enterprise Portals
    • Enterprise portals
      • Extranets for business partners
      • Access points (or front doors) by which a business partner accesses secured, proprietary information from an organization
business to business electronic commerce10
Business-to-Business Electronic Commerce
  • Enterprise Portals
    • Distribution portals
      • Automate the business processes in selling products to multiple buyers
    • Procurement portals
      • Automate the business processes that occur before, during, and after sales have been transacted
    • Trading Exchanges
      • Electronic marketplaces run by 3rd-party vendors
      • Revenues are from commissions on transactions
business to consumer electronic commerce
Business-to-Consumer Electronic Commerce
  • B2C
    • Internet – fastest acceptance of any communications technology
    • Retail transactions between a company and end consumers
    • Electronic retailing (e-tailing)
business to consumer electronic commerce1
Business-to-Consumer Electronic Commerce
  • Stages of B2C E-Commerce
    • E-Information
      • Disseminate information globally
      • Example: Ferrari
    • E-Integration
      • Consumer-driven access to information
      • Example: Allstate and Burlington Northern Santa Fe
    • E-Transaction
      • Interactive communication and transaction support
      • Example: eBay and Priceline.com
formula for electronic commerce success
Formula for Electronic Commerce Success
  • The Rules for Web Site Success
    • 1. Offer something unique
    • 2. Web site must be aesthetically pleasing
    • 3. Easy to use and fast
    • 4. Motivate people to visit, stay, and return
    • 5. Advertise your Web presence
    • 6. Learn from your Web site