5-1 Chapter 5 Electronic Commerce, Intranets, and Extranets

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5-3 Chapter 5 Objectives Understand e-commerce and how it evolved Understand e-commerce and how it evolved Understand e-commerce strategies Understand e-commerce strategies Understand the difference between intranets and extranets Understand the difference between intranets and extranets Understand consumer-focused and business-focused e-commerce Understand consumer-focused and business-focused e-commerce Understand key e-commerce applications Understand key e-commerce applications

5-4 Electronic Commerce Defined E-Commerce – online exchange of goods, services, and money between firms, and between firms and their customers 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

5-5 Electronic Commerce Defined E-Commerce E-Commerce  Business-to-Consumer (B2C)  Business-to-Business (B2B)  Business-to-Employee (B2E)  Consumer-to-Consumer (C2C)

5-6 Electronic Commerce Defined Internet and World Wide Web Capabilities Internet and World Wide Web Capabilities  Expanding market  Wider customer base  More products  Closer relationships with customers

5-7 Electronic Commerce Defined Internet and World Wide Web Capabilities Internet and World Wide Web Capabilities  Real-time access to information  Web site linked to corporate database  Example: Alaska Air  Mass customization  Tailoring products to a customers needs  Example: Lands’ End  Interactive communication  Improving firm’s image through responsiveness  Example: E*Trade

5-8 Electronic Commerce Defined Internet and World Wide Web Capabilities Internet and World Wide Web Capabilities  Collaboration  Reduced transaction costs  Enhanced operational efficiency  Disintermediation  Cutting out the “middleman”  Reaching customers directly

5-9 Electronic Commerce Defined Electronic Commerce Business Strategies 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 complexityChallenge: increased IS complexity

5-10 Business-to-Business Electronic Commerce Electronic Data Interchange Electronic Data Interchange  Definition – EDI refers to the transmission of business documents between organizations via networks  “EDI is the forefather of B2B”  Estimated $500 billion worth of goods per year  EDI: usually over value-added networks (VANs)

5-11 Business-to-Business Electronic Commerce Electronic Data Interchange Electronic Data Interchange  Advantages  Wide variety of business documents  Streamlines business processes  Reduced document handling  Shortens time of business transaction  Reduces errors

5-12 Business-to-Business Electronic Commerce Electronic Data Interchange Electronic Data Interchange  Disadvantages  Costly to implement  Costly to maintain  Requires skilled technicians  Often too costly for small or medium-sized companies

5-13 Business-to-Business Electronic Commerce The Internet Changed Everything 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

5-14 Business-to-Business Electronic Commerce Intranet System Architecture 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

5-15 Business-to-Business Electronic Commerce Intranet Applications Intranet Applications  Training  Application Integration  Enterprise Resource Planning (ERP)  Customer Relationship Mangement (CRM)  Sales Force Automation (SFA)  Online Entry of Information  Real-Time Access to Information  Collaboration

5-16 Business-to-Business Electronic Commerce Extranet System Architecture Extranet System Architecture  Extranet  Connects two or more business partners  Like an intranet  Same software, hardware, and networking  Additional component: Virtual Private Network (VPN)Virtual Private Network (VPN) Secure transmission of proprietary infoSecure transmission of proprietary info

5-17 Business-to-Business Electronic Commerce Extranet System Architecture Extranet System Architecture  Virtual Private Network (VPN)  Tunneling A technology that encapsulates, encrypts, and transmits data over the InternetA technology that encapsulates, encrypts, and transmits data over the Internet A secure “tunnel” is created over the VPN connecting the two intranetsA 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 serverConfirms the identity of the remote user who is attempting to access information from the Web server

5-18 Business-to-Business Electronic Commerce Extranet Applications Extranet Applications  Supply Chain Management  Example: Dell Computers  Real-Time Access to Information  Example: CSX railroad  Collaboration  Example: Caterpillar

5-19 Business-to-Business Electronic Commerce Enterprise Portals 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

5-20 Business-to-Business Electronic Commerce Enterprise Portals 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

5-21 Business-to-Consumer Electronic Commerce B2C B2C  Internet – fastest acceptance of any communications technology  Retail transactions between a company and end consumers  Electronic retailing (e-tailing)

5-22 Business-to-Consumer Electronic Commerce Stages of B2C E-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

5-23 Formula for Electronic Commerce Success The Rules for Web Site 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