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Chapter 5Chapter 5

Electronic Commerce, Electronic Commerce, Intranets, and ExtranetsIntranets, and Extranets

Dr. Hassan ismailDr. Hassan ismail

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Chapter 5 ObjectivesChapter 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

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Electronic Commerce DefinedElectronic Commerce Defined

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

E-CommerceE-Commerce

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Categories of E-CommerceCategories of E-Commerce

• Business-to-Consumer (B2C)• Business-to-Business (B2B)• Consumer-to-Consumer (C2C)

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• Business-to-customer (B2C):Business-to-customer (B2C): Retailing Retailing of products and services directly to of products and services directly to individual customersindividual customers

• Business-to-business (B2B):Business-to-business (B2B): Sales of Sales of goods and services among businessesgoods and services among businesses

• Consumer-to-consumer (C2C):Consumer-to-consumer (C2C): Individuals use Web for private sales or Individuals use Web for private sales or exchangeexchange

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Electronic Commerce Information Electronic Commerce Information FlowsFlows

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Internet and WWW Capabilities Internet and WWW Capabilities

• Expanding market /Extended distribution channels– Multiple channels for attracting and serving customers

• Round-the-clock service– Web sites available to consumers 24 hours a

day

• Wider customer base– Increase sales volumes, which saves

consumers money

• Closer relationships with customers

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• Real-time access to up to date information– Web site linked to corporate database

• Mass customization – Tailoring products to a customers needs

• Interactive communication – Improving firm’s image through responsiveness

……Internet and WWW Internet and WWW Capabilities Capabilities

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• Collaboration• Enhanced operational efficiency• Disintermediation

– Cutting out the “middleman”– Reaching customers directly

……Internet and WWW Internet and WWW Capabilities Capabilities

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Check bank account

traditional Internet

$0.13$1.08

$0.65 - $1.10$2.22 - $3.32Paying Bill

-Reduced transaction costs

- Disintermediation

Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/

Sweater$48.50

$40.34

$20.45

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E-Commerce Business StrategiesE-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

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E-Commerce business strategiesE-Commerce business strategies

Brick & Mortar

Click onlyClick & Mortar

PhysicalPhysical Virtual

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How Electronic Data Interchange WorksHow Electronic Data Interchange Works

• Electronic Data Interchange (EDI):– Definition – EDI refers to the transmission of

business documents between organizations via networks

– Estimated $500 billion worth of goods per year

– EDI: usually over value-added networks (VANs)

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EDI AdvantagesEDI Advantages

• Wide variety of business documents• Streamlines business processes• Reduced document handling• Shortens time of business

transaction• Reduces errors

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… … EDI DisadvantagesEDI Disadvantages

• Disadvantages • Costly to implement• Costly to maintain• Requires skilled technicians• Often too costly for small or medium-sized

companies

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Intranet system architecture: Intranet system architecture: FirewallFirewall

• 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

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Intranet Applications – B2B E-CommerceIntranet Applications – B2B E-Commerce

• 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

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Functional Applications of Functional Applications of IntranetsIntranets

Figure 4-8

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• 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

Extranet architecture – B2B E-CommerceExtranet architecture – B2B E-Commerce

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Extranet System ArchitectureExtranet System Architecture

• Virtual Private Network (VPN)– Authentication– 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

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Extranet Applications in B2B E-CommerceExtranet Applications in B2B E-Commerce

• Supply Chain Management – Example: Dell Computers

• Real-Time Access to Information– Example: CSX railroad

• Collaboration• Example: Caterpillar

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• Problem!: Some companies operate multiple extranets, each designed for particular business!!! Problem to manage, to maintain, to control, to monitor etc….

• Solution: Enterprise PortalsEnterprise Portals– Access points (or front doors) by which a

business partner accesses secured, proprietary information from an organization

– Advantages: reduce the maintenance cost, simplify the process of end-user, manageable, easy to control and monitor

Enterprise Portals in B2B E-CommerceEnterprise Portals in B2B E-Commerce

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Different types of enterprise portalsDifferent types of enterprise portals

• Distribution portals – Automate the business processes that occur before, during

and after sales have been transacted between: supplier and customers.

– Efficient tool for customers to mange all phase of the purchasing cycle, product information->order entry -> customer service.

• Procurement portals– Automate the business processes that occur before, during

and after sales have been transacted between: buyer and suppliers. Efficient tool for supplier.

• Trading Exchanges– Electronic marketplaces run by 3rd-party vendors– Revenues are from commissions on each transaction:

• Usage, association or by advertising revenues.

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Enterprise Portals Enterprise Portals

DistributionPortals

ProcurementPortals

TradingExchange

More buyersMore buyers More Suppliers

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Business-to-Consumer Electronic CommerceBusiness-to-Consumer Electronic Commerce

• B2C: Focus on retail transactions between a company and end consumers.– Electronic retailing (e-tailing)

• Is not limited by physical space restriction only! Store front exist in all kind of business

• Advantages: – Conduct business anywhere at any time (24H - 7 days)– Price effectively by increasing the volume of sells and

turning their inventory for often …

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Stages of B2C E-CommerceStages of B2C E-Commerce

• E-Information Disseminate information globally – E-brochure– 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

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Formula for Electronic Commerce SuccessFormula 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