Chapter 5 Electronic Commerce, Intranets, and Extranets.
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Transcript of Chapter 5 Electronic Commerce, Intranets, and Extranets.
Chapter 5
Electronic Commerce, Intranets, and Extranets
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
Electronic Commerce Defined
• E-Commerce– Business-to-Consumer (B2C)– Business-to-Business (B2B)– Business-to-Employee (B2E)– Consumer-to-Consumer (C2C)
Electronic Commerce Defined
• Internet and World Wide Web Capabilities– Expanding market– Wider customer base– More products– Closer relationships with customers
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
Electronic Commerce Defined
• Internet and World Wide Web Capabilities– Collaboration– Reduced transaction costs– Enhanced operational efficiency– Disintermediation
• Cutting out the “middleman”• Reaching customers directly
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
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)
EDI System Architecture
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
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
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
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
Internet Architecture
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
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
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
Business-to-Business Electronic Commerce
• Extranet Applications– Supply Chain Management
• Example: Dell Computers
– Real-Time Access to Information • Example: CSX railroad
– Collaboration• Example: Caterpillar
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
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
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)
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
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