Transcript Chapter 5 Electronic Commerce, Intranets, and Extranets

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 businessfocused e-commerce
• Understand key e-commerce applications
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 Defined
• E-Commerce
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Business-to-Consumer (B2C)
Business-to-Business (B2B)
Business-to-Employee (B2E)
Consumer-to-Consumer (C2C)
Electronic Commerce Defined
• Internet and World Wide Web Capabilities
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Expanding market
Wider customer base
More products
Closer relationships with customers
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 Defined
• Internet and World Wide Web
Capabilities
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Collaboration
Reduced transaction costs
Enhanced operational efficiency
Disintermediation
• Cutting out the “middleman”
• Reaching customers directly
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
• 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)
EDI System Architecture
Business-to-Business Electronic
Commerce
• Electronic Data Interchange
– Advantages
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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
Commerce
• Electronic Data Interchange
– Disadvantages
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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 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 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
Internet Architecture
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
Commerce
• Extranet System Architecture
– Extranet
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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 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
Commerce
• Extranet Applications
– Supply Chain Management
• Example: Dell Computers
– Real-Time Access to Information
• Example: CSX railroad
– Collaboration
• Example: Caterpillar
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 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
• B2C
– Internet – fastest acceptance of any
communications technology
– Retail transactions between a company and end
consumers
– Electronic retailing (e-tailing)
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
• The Rules for Web Site Success
– 1. Offer something unique
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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