Chapter 5 Electronic Commerce, Intranets, and Extranets

1. Chapter 5Electronic Commerce, Intranets, and Extranets Information Systems Today Leonard Jessup and Joseph Valacich

2. Today’s agenda • Chapter 5 • 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

3. 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

4. Major Types of E-commerce business to business B2B business to consumer B2C consumer to consumer C2C business to employee B2E

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

6. Electronic Commerce Defined • Internet and World Wide Web Capabilities • Global Information Dissemination • Virtual storefront open 24/7 365 days a year with global reach • Integration • 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

7. Electronic Commerce Defined • Internet and World Wide Web Capabilities • Collaboration • Transaction Support • Reduced transaction costs • Enhanced operational efficiency • Disintermediation • Cutting out the “middleman” • Reaching customers directly • Typical Cost Savings (1999 report)

8. Electronic Commerce Defined • Electronic Commerce Business Strategies • Brick-and-mortar • Traditional, physical companies • Click-only (“virtual”) companies • Online only • Example: Amazon.com • Click-and-mortar (“Brick & Click”) • Both physical and virtual • Challenge: increased IS complexity

9. Revenue and Business Models • You should review the revenue and Business models on page 164 – might be helpful to your group project.

10. Business-to-Business Electronic Commerce • 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)

11. Business-to-Business Electronic Commerce • Electronic Data Interchange • Advantages • Wide variety of business documents • Streamlines business processes • Reduced document handling • Shortens time of business transaction • Reduces errors • RJR Nabisco was able to? • Reduce purchase order from $70 to less than $1

12. Electronic Data Interchange Disadvantages Costly to implement Costly to maintain Requires skilled technicians Often too costly for small or medium-sized companies ~$100,000 $1000s per month Business-to-Business Electronic Commerce

13. 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

14. Business-to-Business Electronic Commerce

15. 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

16. Business-to-Business Electronic Commerce • Intranet Applications • 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

17. 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

18. 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

19. Business-to-Business Electronic Commerce • Extranet Applications • Supply Chain Management • Example: Dell Computers • Real-Time Access to Information • Example: CSX railroad • Collaboration • Example: Caterpillar

20. B2B E-Commerce • New Technologies for: • XML = eXtensible Markup Language • May become the standard for electronic data interchange • Allows you to create your own “tag” language • XBRL = eXtensible Business Reporting Language • Example of XML based language for publishing finanacial information. • RFID = Radio Frequency Identification • Passive “bar-code” tags that are cheap • Used to manage inventory • Don’t need “line-of-sight” to read “bar-code”

21. 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

22. 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 between a buyer and multiple suppliers • Trading Exchanges • Electronic marketplaces run by 3rd-party vendors • Revenues are from commissions on transactions

23. 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)

24. C2C? 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

25. B2C Dell Amazon.com Office Depot Bn.com … C2C Peer-to-peer sharing Kazaa gnutella Auctions: ebay B2C vs C2C – Some Examples

26. 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

27. Best Products to Sell on the Web? • Digital delivery • Lowest distribution costs • Immediate customer satisfaction • Electronic watermarking? • So that any illegal copy can be traced to the original purchases to prevent counterfeiting

28. Quiz Time • Clear your desks • 10 Questions…from Chapter 5

29. B D A B C False False True False True Grading the Quizzes