Chapter 5 Electronic Commerce, Intranets, and Extranets

1. Chapter 5Electronic Commerce, Intranets, and Extranets

2. 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

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. Electronic Commerce Defined • E-Commerce • Business-to-Consumer (B2C) • Business-to-Business (B2B) • Business-to-Employee (B2E) • Consumer-to-Consumer (C2C)

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 • 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

7. Electronic Commerce Defined • Internet and World Wide Web Capabilities • Collaboration • Reduced transaction costs • Enhanced operational efficiency • Disintermediation • Cutting out the “middleman” • Reaching customers directly

8. 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

9. 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)

10. EDI System Architecture

11. Business-to-Business Electronic Commerce • Electronic Data Interchange • Advantages • Wide variety of business documents • Streamlines business processes • Reduced document handling, reduces paperwork • Shortens time of business transaction (from day to second) • Reduces errors

12. Business-to-Business Electronic Commerce • Electronic Data Interchange • Disadvantages • 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

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 • 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

15. Internet Architecture

16. 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

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

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

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 • 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. 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. 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