1 / 46

Chapter 3 Business and the Internet

Chapter 3 Business and the Internet. Part 1: Data Communications in the Information Age. Topics Addressed in Chapter 3. Internet services leveraged by businesses Commercial uses of the Internet Internet transaction requirements E-commerce architectures Types of e-commerce

mab
Download Presentation

Chapter 3 Business and the Internet

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 3Business and the Internet Part 1: Data Communications in the Information Age

  2. Topics Addressed in Chapter 3 • Internet services leveraged by businesses • Commercial uses of the Internet • Internet transaction requirements • E-commerce architectures • Types of e-commerce • Key e-business and e-commerce applications • The information superhighway • Business communities and electronic marketplaces

  3. Reasons for Business Presence on the Internet • Major reasons why business presence on the Internet is increasing include: • Number of existing or potential customers who use the Internet is increasing • Number of business partners (vendors, suppliers, customers) connected to the Internet is increasing • Maturation of e-commerce server and application software has made it easier to develop e-commerce applications • Telecommunication costs can be lowered by conducting business over the Internet • Internet has potential to improve company image, expedite access to information, improve direct or personalized marketing, reduce paper-based transactions, and improve worker productivity

  4. Internet Services Used by Businesses • Widely used Internet services/applications include: • Internet e-mail (SMTP) • File transfer (FTP) • World Wide Web • USENET or newsgroups • Online commercial services (including ASPs and online information services) • Electronic journals • Electronic governance services

  5. Commercial Uses of the Internet • Examples of commercial uses of the Internet include: • Intracompany correspondence (e.g. intranets) • Intercompany business transactions (e.g. EDI) • Advertising and marketing (see Figure 3-1) • Selling goods and services • Selling stocks or other financial instruments • Providing (or leveraging) online travel services • Providing reference materials

  6. Figure 3-1

  7. Internet Transaction Requirements • Like other business transactions, desirable characteristics of Internet-based transactions include: • A payment system • Security and verification • Anonymity • Accountability and taxability

  8. Internet Transaction Payment Systems • A variety of payment systems are used for e-commerce transactions including: • Smart card payment systems • Digital cash (e-cash) • Credit card or debit card payments • Micropayment systems are also becoming increasingly common, especially for mobile commerce (m-commerce) applications using smart phones and PDAs • Microcommerce refers to low-value e-commerce transactions for products/services whose prices are too small to be feasibly paid for by credit card • Smart cards and digital cash support micropayments and microcommerce

  9. Smart Cards • Smart cards look like credit cards but have an embedded computer chip that is capable of storing and updating data • The chip is activated by a smart card reader/writer • Smart cards are more widely used outside the U.S. (especially in Europe), but are increasingly in use in the U.S. • Credit card/smart card hybrids (such as the American Express Blue Card) are also becoming more common • Most smart cards are issued by banks, financial services companies • Some, designed for particular applications such as for bus and metro systems, are issued by third-party organizations

  10. Smart Card Payment Processes and Security • Smart card value-loading and cash transfer processes are illustrated in Figure 3-2 • Because cardholder data can be stored on a smart card, biometric identifiers (fingerprints, retina scans, voice prints, hand or facial geometry) can be stored on the card and used for verification and authentication purposes • Biometric images captured at the point of sale can be compared with stored images to verify cardholder identity and reduce fraudulent smart card use

  11. Figure 3-2

  12. Digital Cash • Another form of payment for Internet transactions is digital cash (d-cash or e-cash) • D-cash alternatives include: • Electronic check equivalents • Electronic money certificates obtained from a bank or another authorized distribution system • Electronic scrip that may be exchanged for services/products at particular Web sites or portals • Microcommerce scrip whose monetary equivalent is less than one cent • Examples of digital cash systems and providers include NetBill, Millicent, CyberCash, and VeriSign • Not all merchants accept digital cash for transactions.

  13. Digital Cash Payment Processes • Generally, the digital cash payment process involves: • Customer opens account with digital cash issuer • Digital cash certificates are issued to customer • When used in an Internet payment, digital cash certificates are transferred from customer to merchant • Merchant sends digital cash receipt notification to issuer • Issuer verifies, authenticates digital cash certificates • Merchant account is credited with monetary value of digital cash received from customer

  14. Credit Card Payments • When credit cards are used to pay for Internet transactions, the credit card number must be transferred from buyer to seller and then to a credit card authorization center • Several protocols have been developed to ensure the security of the data that is transferred; all use encryption: • Secure Sockets Layer (SSL) • Secure HTTP (S-HTTP) • Secure Electronic Transaction (SET)

  15. Internet Commerce Architectures • There are several components of e-commerce systems that must interoperate securely and reliably. These include: • A merchant/storefront system that presents buyers with seller’s product catalog and marketing materials, mechanisms for ordering or buying the seller’s products, and access to customer service • Back-office systems that accept, process, and record sales transactions that originate with the merchant/storefront system • A payment gateway for processing credit card transactions or other types of electronic payments • These components are illustrated in Figure 3-3 • Merchant/storefront systems are available from multiple vendors (see Table 3-2); the functions these support are summarized in Table 3-3

  16. Figure 3-3

  17. Table 3-2

  18. Table 3-3

  19. Characteristics of Internet Transactions • A typical Internet transaction includes: • Item selection: items are selected from online catalog and placed in shopping cart • Checkout and payment: buyer provides shipping information for physical products and pays for selected items using a credit card, debit card, smart card, digital cash, or electronic check • Order confirmation/notification: this may be via an order confirmation Web page, e-mail notification, or both

  20. E-commerce vs. E-Business • E-commerce involves the use of computer networks to complete business transactions • The networks involved include the Internet, intranets, extranets, value-added networks, and private networks • Transactions include buying, selling, or exchanging products, services, or information • E-business activities on the Internet include, but go beyond e-commerce • E-business includes using the Internet to improve customer service, coordinate activities with business partners, facilitate communication and knowledge management within organizations, and create electronic marketplaces that serve the collective needs of entire industries

  21. Drivers of E-Commerce Expansion • Among the major drivers of e-commerce and e-business expansion are: • Declining prices for computing and communication technologies have led to increased IT investments by businesses • Emergence of B2B marketplaces • Increases in the number of consumers with Internet access (see Tables 3-5 and 3-6) • Continued expansion of size and content of World Wide Web

  22. Table 3-5

  23. Table 3-6

  24. Types of E-Commerce • Major e-commerce categories include: • Business-to-business (B2B) e-commerce • Business-to-consumer (B2C) e-commerce • Consumer-to-consumer (C2C) e-commerce • Intrabusiness/intracompany e-commerce • These are illustrated in Figure 3-4 and Table 3-7 • Other types of e-commerce include: • Consumer-to-business (C2B) e-commerce • Non-business e-commerce by non-profit organizations • E-governance applications

  25. Figure 3-4

  26. Table 3-7

  27. B2B E-Commerce • B2B transactions account for the lion’s share of commercial activity on the Internet (see Table 3-8) • Most B2B e-commerce involves the creation of interorganizational systems (IOS) • IOSs encompass a wide-range of B2B activities including EDI, extranets, electronic funds transfers among business partners, integrated messaging, shared databases, electronic procurement systems, and supply chain management • Contractual arrangements underlie most B2B e-commerce systems

  28. Table 3-8

  29. Electronic Data Interchange (EDI) • EDI was electronic commerce prior to 1990 • EDI involves the electronic transmission of business documents from one company to another using a standard set of forms, data elements and messages • EDI documents include purchase orders, invoices, shipping notifications, and remittance notices • EDI documents and data can be exchanged over point-to-point connections, proprietary networks, VANs, and the Internet • Web-based EDI is increasing • X.12 and EDIFACT are the two most widely recognized and used EDI standards • XML will have a dramatic influence on EDI’s evolution and future

  30. Extranets • Extranets leverage TCP/IP protocols and applications, especially the Web, to enable business partners to access a company’s computing resources • Web-based EDI is an example of an extranet • Extranets have numerous potential business benefits including: • Reduced costs and enhanced profits for suppliers • Reduced inventories in the supply chain • Reduced prices for customers • Enhanced customer service

  31. Other Important B2B E-Commerce Applications • Buy-side B2B e-commerce applications automate and facilitate business procurement and purchasing processes • Sell-side B2B e-commerce applications include software systems that make it easier for companies to sell their products to other businesses • Electronic marketplaces have emerged in virtually all major industries. These provide an online forum for buyers and sellers, facilitate innovative pricing schemes, and enable complex transactions involving multiple business partners

  32. Business-to-Consumer (B2C) E-Commerce • Like B2B e-commerce, B2C e-commerce is expanding • Table 3-5 summarizes items commonly purchased by consumers • B2C e-commerce is helping consumers be more informed and price-sensitive buyers, both online and offline • Consumers are also benefiting from health care, employment, and consumer-oriented e-governance Web sites • Net-savvy consumers are stimulating businesses to develop new business models

  33. Table 3-5

  34. Intrabusiness/Intracompany E-commerce • Intrabusiness/intracompany e-commerce includes the online exchange of goods, services, and information within an organization often over an intranet • An intranet is a private network that uses Internet technologies to facilitate data and information exchange among employees • Intranet building blocks include Web servers, Web publishing tools, browsers, databases, and TCP/IP networks

  35. Intranets • Organizations are leveraging intranets to: • Facilitate internal exchange of goods and services • Enhance customer service • Improve product development processes • Facilitate knowledge sharing and knowledge management • Facilitate work team collaboration • Empower workers via access to information • Enhance project management • Reduce need for paper-based information delivery • Create/deliver Web-based training and development programs

  36. Major E-Business Applications • Important e-commerce and e-business applications include: • Supply chain management (SCM) • E-procurement • Internet marketing • Customer relationship management systems (CRM)

  37. Supply Chain Management • SCM involves the coordination of material, information, and financial flows between and among business partners in a supply chain (see Figure 3-5) • It supports cooperative arrangements among business partners that enable them to reduce inventories, facilitate order fulfillment, and support JIT and pull manufacturing • Trend is toward Internet-coordinated SCM including Web-enabled collaborative planning processes

  38. Figure 3-5

  39. Internet Marketing and CRM • Internet is widely used for advertising and marketing • It is sometimes used as a direct marketing channel (Dell does this) • Infomediaries and online aggregrators help organizations market products and services via portals and cybermalls • Organizations are increasingly using the Web for personalized direct market including personalized e-mail marketing • Customer relationship management (CRM) systems are being used to increase customer retention rates, improve customer service, and to facilitate up-selling and cross-selling opportunities

  40. Internet Banking and Financial Services • Electronic funds transfer (EFT) has been used to transfer money from one bank account to another since the 1970s (see Figure 3-6) • Internet banking services are supported by most banks and the number of customers using them is increasing • Online lending companies (such as DiTech.com) and online brokers such as E*Trade continue to see increasing use of their services

  41. Figure 3-6

  42. The Information Superhighway • National and regional data communications infrastructure initiatives are underway in many parts of the world • In the U.S., the new information highway system is called the National Information Infrastructure (NII) • The federal government has established the Information Infrastructure Task force (IITF) to oversee the development of the information superhighway • Figure 3-7 provides an example of how the NII might be implemented

  43. Figure 3-7

  44. Information Superhighway Uses • Potential information superhighway uses include: • Videoconferencing applications • Software distribution • On-demand publishing/printing • Personalized information services • Enhancements of all types of electronic commerce • Movies/games/music on demand • High-bandwidth education and training programs • Remote health care delivery (including telesurgery) • Enhanced wireless communication services • Mechanisms to address social issues such as the digital divide

  45. Internet2 • Internet2 is a high-speed network for government, academic and research use • While not part of the public Internet, it provides the testing ground for high-bandwidth technologies and applications that may one day migrate to the Internet • Internet2 is part of the Next Generation Internet (NGI) project and is administered by UCAID (University Corporation for Advanced Internet Development • Internet2 leverages existing networks such as NSF’s vBNS and Abilene

  46. Chapter 3Business and the Internet Part 1: Data Communications in the Information Age

More Related