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Chapter 5Electronic Commerce,

Intranets, and Extranets

Information Systems TodayLeonard Jessup and Joseph Valacich

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Today’s agenda

• Chapter 5– 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 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

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businessto

businessB2B

businessto

consumerB2C

consumer to

consumerC2C

Major Types of E-commerce

businessto

employeeB2E

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Electronic Commerce Defined

• Internet and World Wide Web Capabilities– Expanding market– Wider customer base– More products– Closer relationships with customers

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Electronic Commerce Defined• Internet and World Wide Web Capabilities

– Global Information Dissemination• Virtual storefront open 24/7 365 days a year with global

reach

– Integration• Web site linked to corporate database• Example: Alaska Air

– Mass customization• Tailoring products to a customers needs• Example: Lands’ End

– Interactive communication• Improving firm’s image through responsiveness• Example: E*Trade

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Electronic Commerce Defined• Internet and World Wide Web

Capabilities– Collaboration– Transaction Support

• Reduced transaction costs• Enhanced operational efficiency• Disintermediation

– Cutting out the “middleman”– Reaching customers directly

• Typical Cost Savings (1999 report)

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Electronic Commerce Defined• Electronic Commerce

Business Strategies– Brick-and-mortar

• Traditional, physical companies

– Click-only (“virtual”) companies

• Online only• Example: Amazon.com

– Click-and-mortar (“Brick & Click”)

• Both physical and virtual– Challenge: increased IS

complexity

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Revenue and Business Models

• You should review the revenue and Business models on page 164 – might be helpful to your group project.

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Business-to-Business Electronic Commerce

• Electronic Data Interchange– Definition – EDI refers to the

transmission of business documents between organizations via networks

– “EDI is the forefather of B2B”– Estimated $500 billion worth of goods

per year– EDI: usually over value-added

networks (VANs)

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Business-to-Business Electronic Commerce• Electronic Data Interchange

– Advantages• Wide variety of business documents• Streamlines business processes• Reduced document handling• Shortens time of business transaction• Reduces errors

– RJR Nabisco was able to?• Reduce purchase order from $70 to less

than $1

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Business-to-Business Electronic Commerce• Electronic Data

Interchange– Disadvantages

• Costly to implement• Costly to maintain• Requires skilled technicians

• Often too costly for small or medium-sized companies

- ~$100,000- $1000s per month

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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

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Business-to-Business Electronic Commerce

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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

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Business-to-Business Electronic Commerce• Intranet Applications

– 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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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

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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

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Business-to-Business Electronic Commerce

• Extranet Applications– Supply Chain Management

• Example: Dell Computers

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

– Collaboration• Example: Caterpillar

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B2B E-Commerce

• New Technologies for:– XML = eXtensible Markup Language

• May become the standard for electronic data interchange

• Allows you to create your own “tag” language• XBRL = eXtensible Business Reporting Language

– Example of XML based language for publishing finanacial information.

– RFID = Radio Frequency Identification• Passive “bar-code” tags that are cheap• Used to manage inventory• Don’t need “line-of-sight” to read “bar-code”

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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

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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 between a buyer and multiple suppliers

– Trading Exchanges• Electronic marketplaces

run by 3rd-party vendors• Revenues are from

commissions on transactions

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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)

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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

C2C?

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B2C vs C2C – Some Examples

B2C– Dell– Amazon.com– Office Depot– Bn.com– …

C2C– Peer-to-peer

sharing• Kazaa• gnutella

– Auctions:• ebay

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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

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Best Products to Sell on the Web?

• Digital delivery– Lowest distribution costs– Immediate customer satisfaction

• Electronic watermarking?– So that any illegal copy can be traced

to the original purchases to prevent counterfeiting

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Quiz Time

• Clear your desks

• 10 Questions…from Chapter 5

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Grading the Quizzes

1. B

2. D

3. A

4. B

5. C

6. False

7. False

8. True

9. False

10.True