Chapter 5 Electronic Commerce, Intranets, and Extranets Dr. Hassan ismail

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 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

Categories of E-Commerce Business-to-Consumer (B2C) Business-to-Business (B2B) Consumer-to-Consumer (C2C)

Business-to-customer (B2C): Retailing of products and services directly to individual customers Business-to-business (B2B): Sales of goods and services among businesses Consumer-to-consumer (C2C): Individuals use Web for private sales or exchange

Electronic Commerce Information Flows

Internet and WWW Capabilities Expanding market /Extended distribution channels Multiple channels for attracting and serving customers Round-the-clock service Web sites available to consumers 24 hours a day Wider customer base Increase sales volumes, which saves consumers money Closer relationships with customers

…Internet and WWW Capabilities Real-time access to up to date information Web site linked to corporate database Mass customization Tailoring products to a customers needs Interactive communication Improving firm’s image through responsiveness

…Internet and WWW Capabilities Collaboration Enhanced operational efficiency Disintermediation Cutting out the “middleman” Reaching customers directly

Reduced transaction costs - Disintermediation traditional Internet Check bank account $1.08 $0.13 $2.22 - $3.32 $0.65 - $1.10 Paying Bill Manufacturer Distributor Retailer Customer Cost/ Sweater $48.50 $40.34 $20.45

E-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

E-Commerce business strategies Physical Virtual Click & Mortar Click only Brick & Mortar

How Electronic Data Interchange Works Electronic Data Interchange (EDI): Definition – EDI refers to the transmission of business documents between organizations via networks Estimated $500 billion worth of goods per year EDI: usually over value-added networks (VANs)

Wide variety of business documents Streamlines business processes EDI Advantages Wide variety of business documents Streamlines business processes Reduced document handling Shortens time of business transaction Reduces errors

Requires skilled technicians … EDI Disadvantages Disadvantages Costly to implement Costly to maintain Requires skilled technicians Often too costly for small or medium-sized companies

Intranet system architecture: Firewall 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

Intranet Applications – B2B E-Commerce Training Application Integration Enterprise Resource Planning (ERP) Customer Relationship Management (CRM) Sales Force Automation (SFA) Online Entry of Information Real-Time Access to Information Collaboration

Functional Applications of Intranets Figure 4-8

Extranet architecture – B2B E-Commerce 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

Extranet System Architecture Virtual Private Network (VPN) Authentication Tunneling A technology that encapsulates, encrypts, and transmits data over the Internet A secure “tunnel” is created over the VPN connecting the two intranets Confirms the identity of the remote user who is attempting to access information from the Web server

Extranet Applications in B2B E-Commerce Supply Chain Management Example: Dell Computers Real-Time Access to Information Example: CSX railroad Collaboration Example: Caterpillar

Enterprise Portals in B2B E-Commerce Problem!: Some companies operate multiple extranets, each designed for particular business!!! Problem to manage, to maintain, to control, to monitor etc…. Solution: Enterprise Portals Access points (or front doors) by which a business partner accesses secured, proprietary information from an organization Advantages: reduce the maintenance cost, simplify the process of end-user, manageable, easy to control and monitor

Different types of enterprise portals Distribution portals Automate the business processes that occur before, during and after sales have been transacted between: supplier and customers. Efficient tool for customers to mange all phase of the purchasing cycle, product information->order entry -> customer service. Procurement portals Automate the business processes that occur before, during and after sales have been transacted between: buyer and suppliers. Efficient tool for supplier. Trading Exchanges Electronic marketplaces run by 3rd-party vendors Revenues are from commissions on each transaction: Usage, association or by advertising revenues.

Enterprise Portals More buyers More Suppliers Trading Exchange Procurement Portals Distribution Portals

Business-to-Consumer Electronic Commerce B2C: Focus on retail transactions between a company and end consumers. Electronic retailing (e-tailing) Is not limited by physical space restriction only! Store front exist in all kind of business Advantages: Conduct business anywhere at any time (24H - 7 days) Price effectively by increasing the volume of sells and turning their inventory for often …

Stages of B2C E-Commerce E-Information Disseminate information globally E-brochure 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 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