5-1 Chapter 5 Electronic Commerce, Intranets, and Extranets

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Chapter 5

Electronic Commerce, Intranets, and Extranets

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Chapter 5 Objectives

Understand e-commerce and how it evolvedUnderstand e-commerce and how it evolved Understand e-commerce strategiesUnderstand e-commerce strategies Understand the difference between intranets Understand the difference between intranets

and extranetsand extranets Understand consumer-focused and Understand consumer-focused and

business-focused e-commercebusiness-focused e-commerce Understand key e-commerce applicationsUnderstand key e-commerce applications

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Electronic Commerce Defined

E-CommerceE-Commerce – online exchange of goods, – online exchange of goods, services, and money between firms, and services, and money between firms, and between firms and their customersbetween firms and their customers More than just buying and selling:More than just buying and selling:

Pre-sale events and marketingPre-sale events and marketingAfter-sale customer serviceAfter-sale customer service

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E-CommerceE-Commerce Business-to-Consumer (B2C)Business-to-Consumer (B2C) Business-to-Business (B2B)Business-to-Business (B2B) Business-to-Employee (B2E)Business-to-Employee (B2E) Consumer-to-Consumer (C2C)Consumer-to-Consumer (C2C)

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Internet and World Wide Web CapabilitiesInternet and World Wide Web Capabilities Expanding marketExpanding market Wider customer baseWider customer base More productsMore products Closer relationships with customersCloser relationships with customers

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Electronic Commerce Defined Internet and World Wide Web CapabilitiesInternet and World Wide Web Capabilities

Real-time access to informationReal-time access to information Web site linked to corporate databaseWeb site linked to corporate database Example: Alaska AirExample: Alaska Air

Mass customizationMass customization Tailoring products to a customers needsTailoring products to a customers needs Example: Lands’ EndExample: Lands’ End

Interactive communicationInteractive communication Improving firm’s image through responsivenessImproving firm’s image through responsiveness Example: E*TradeExample: E*Trade

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Electronic Commerce Defined Internet and World Wide Web Internet and World Wide Web

CapabilitiesCapabilities CollaborationCollaboration Reduced transaction costsReduced transaction costs Enhanced operational efficiencyEnhanced operational efficiency Disintermediation Disintermediation

Cutting out the “middleman”Cutting out the “middleman”Reaching customers directlyReaching customers directly

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Electronic Commerce Business StrategiesElectronic Commerce Business Strategies Brick-and-mortarBrick-and-mortar

Traditional, physical companiesTraditional, physical companies Click-only (“virtual”) companiesClick-only (“virtual”) companies

Online onlyOnline only Example: eBayExample: eBay

Click-and-mortarClick-and-mortar (or “Brick & Click”) (or “Brick & Click”) Both physical and virtualBoth physical and virtual

• Challenge: increased IS complexityChallenge: increased IS complexity

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Business-to-Business Electronic Commerce

Electronic Data InterchangeElectronic Data Interchange Definition – Definition – EDI refers to the transmission of business EDI refers to the transmission of business

documents between organizations via networksdocuments between organizations via networks ““EDI is the forefather of B2B”EDI is the forefather of B2B” Estimated $500 billion worth of goods per yearEstimated $500 billion worth of goods per year EDI: usually over value-added networks (VANs)EDI: usually over value-added networks (VANs)

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Electronic Data InterchangeElectronic Data Interchange AdvantagesAdvantages

Wide variety of business documentsWide variety of business documents Streamlines business processesStreamlines business processes Reduced document handlingReduced document handling Shortens time of business transactionShortens time of business transaction Reduces errorsReduces errors

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Electronic Data InterchangeElectronic Data Interchange DisadvantagesDisadvantages

Costly to implementCostly to implement Costly to maintainCostly to maintain Requires skilled techniciansRequires skilled technicians

Often too costly for small or medium-sized companiesOften too costly for small or medium-sized companies

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The Internet Changed EverythingThe Internet Changed Everything B2B now available to companies of all sizesB2B now available to companies of all sizes IntranetIntranet – internal, private network using Web – internal, private network using Web

technologies to facilitate transmission of technologies to facilitate transmission of proprietary information within the organizationproprietary information within the organization

ExtranetExtranet – two or more firms using the Internet – two or more firms using the Internet to do business togetherto do business together

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Intranet System ArchitectureIntranet System Architecture Firewalls – hardware devices with special Firewalls – hardware devices with special

software that prevent unauthorized accesssoftware that prevent unauthorized access An intranet server is placed behind the firewallAn intranet server is placed behind the firewall Packets are never routed outside the firewall, but Packets are never routed outside the firewall, but

remain within the organizations networkremain within the organizations network

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Intranet ApplicationsIntranet Applications TrainingTraining Application IntegrationApplication Integration

Enterprise Resource Planning (ERP)Enterprise Resource Planning (ERP) Customer Relationship Mangement (CRM)Customer Relationship Mangement (CRM) Sales Force Automation (SFA)Sales Force Automation (SFA)

Online Entry of InformationOnline Entry of Information Real-Time Access to InformationReal-Time Access to Information CollaborationCollaboration

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Extranet System ArchitectureExtranet System Architecture Extranet Extranet

Connects two or more business partners Connects two or more business partners Like an intranetLike an intranetSame software, hardware, and networkingSame software, hardware, and networkingAdditional component:Additional component:

• Virtual Private Network (VPN)Virtual Private Network (VPN)

• Secure transmission of proprietary infoSecure transmission of proprietary info

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Business-to-Business Electronic Commerce Extranet System ArchitectureExtranet System Architecture

Virtual Private Network (VPN)Virtual Private Network (VPN)TunnelingTunneling

• A technology that encapsulates, encrypts, A technology that encapsulates, encrypts, and transmits data over the Internetand transmits data over the Internet

• A secure “tunnel” is created over the VPN A secure “tunnel” is created over the VPN connecting the two intranetsconnecting the two intranets

AuthenticationAuthentication• Confirms the identity of the remote user Confirms the identity of the remote user

who is attempting to access information who is attempting to access information from the Web serverfrom the Web server

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Extranet ApplicationsExtranet Applications Supply Chain ManagementSupply Chain Management

Example: Dell ComputersExample: Dell Computers Real-Time Access to Information Real-Time Access to Information

Example: CSX railroadExample: CSX railroad CollaborationCollaboration

Example: CaterpillarExample: Caterpillar

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Enterprise PortalsEnterprise Portals Enterprise portalsEnterprise portals

Extranets for business partnersExtranets for business partnersAccess points (or front doors) by which a Access points (or front doors) by which a

business partner accesses secured, proprietary business partner accesses secured, proprietary information from an organizationinformation from an organization

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Enterprise PortalsEnterprise Portals Distribution portalsDistribution portals

Automate the business processes in selling products Automate the business processes in selling products to multiple buyersto multiple buyers

Procurement portalsProcurement portals Automate the business processes that occur before, Automate the business processes that occur before,

during, and after sales have been transactedduring, and after sales have been transacted Trading ExchangesTrading Exchanges

Electronic marketplaces run by 3rd-party vendorsElectronic marketplaces run by 3rd-party vendors Revenues are from commissions on transactionsRevenues are from commissions on transactions

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Business-to-Consumer Electronic Commerce

B2CB2C Internet – fastest acceptance of any Internet – fastest acceptance of any

communications technologycommunications technology Retail transactions between a company Retail transactions between a company

and end consumersand end consumers Electronic retailing (e-tailing)Electronic retailing (e-tailing)

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Business-to-Consumer Electronic Commerce

Stages of B2C E-CommerceStages of B2C E-Commerce E-InformationE-Information

Disseminate information globallyDisseminate information globally Example: FerrariExample: Ferrari

E-IntegrationE-Integration Consumer-driven access to informationConsumer-driven access to information Example: Allstate and Burlington Northern Santa FeExample: Allstate and Burlington Northern Santa Fe

E-TransactionE-Transaction Interactive communication and transaction supportInteractive communication and transaction support Example: eBay and Priceline.comExample: eBay and Priceline.com

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Formula for Electronic Commerce Success

The Rules for The Rules for Web SiteWeb Site Success Success 1. 1. Offer something uniqueOffer something unique 2. Web site must be aesthetically pleasing2. Web site must be aesthetically pleasing 3. Easy to use and fast3. Easy to use and fast 4. Motivate people to visit, stay, and return4. Motivate people to visit, stay, and return 5. Advertise your Web presence5. Advertise your Web presence 6. Learn from your Web site6. Learn from your Web site

Documents

5-1 Chapter 5 Electronic Commerce, Intranets, and Extranets