Electronic

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Chapter 5 Electronic Commerce, Intranets, and
Extranets www.prenhall.com/jessup
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Learning Objectives

• Describe electronic commerce and how it has
  evolved
• Describe the strategies that companies are
  adopting to compete in cyberspace
• Explain the differences between extranets and
  intranets as well as show how organizations
  utilize these environments

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Learning Objectives
4. Describe the stages of business-to-consumer
electronic commerce and the key drivers for the
emergence of mobile commerce 5. Understand the
keys to successful electronic commerce
applications
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Electronic Commerce
The online exchange of goods, services, and money
among firms, and between firms and their customers
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Types of Electronic Commerce
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Internet and the World Wide Web Capabilities
Information Dissemination
Integration
Transaction Support
World Wide Web
Collaboration
Interactive Communication
Mass Customization
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Internet and the World Wide Web Capabilities

• Information Dissemination
• A relatively economical mechanism to disseminate
  information globally to compete in new markets
  24/7
• Example Electronic company brochures

• Integration
• Web technologies allow Websites to integrate with
  corporate database to provide real-time
  information
• Example checking bank balances

• Interactive Customization
• The ability to tailor products and services to
  meet a customers particular needs
• Example Configuring a PC online

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Internet and the World Wide Web Capabilities

• Interactive Communication
• Build customer loyalty by providing immediate
  feedback to/and from the customer demonstrating
  responsiveness
• Example Customer support through email and chat

• Collaboration
• A mechanism allowing users to interact, share,
  and store information and tools for specific
  purposes
• Example Product RD site with tools, storage,
  etc.

• Transaction Support
• Provides way for buyers and sellers to conduct
  business online without human assistance
• Example Buy a book online

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Impact of the Web Disintermediation

• Disintermediation
• Removal of the intermediary (middleman) in a
  sale.
• Companies can sell directly to customers (retail
  or wholesale) without assistance using the
  Internet

Manufacturer or Service Provider
Intermediary (Middleman)
Customer (Consumer or Business)
Sell Direct - Disintermediation

• Example
• Airlines selling directly to flyers without a
  travel agent or customer service representative

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Electronic Commerce Business Strategies
Business Strategies come in one of the following
three types. All require a sound business models
to be successful (see next)
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Key Ingredients of a Business Model
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Brick-and-Mortar Click-and-Mortar Strategies

• Brick-and-Mortar
• Operate a firm solely in traditional physical
  markets
• Approach business activities traditionally by
  operating physical locations (e.g. stores,
  offices, manufacturing plants)

• Click-and-Mortar
• Operate a firm in physical locations and has
  added an EC component to their business
• Requires maximization of business opportunities
  in both the physical and virtual environments
• This strategy requires a significant investment
  in systems and space

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Click-Only Strategy

• Business transactions are only conducted
  virtually
• Can require significant expertise and investment
  in technology and systems staff
• There are many different revenue models

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Extranets Business to Business Ecommerce

• Extranets enable two or more firms to use the
  Internet to do business together
• They are an excellent use of B2B to allow
  companies to achieve a positive return on their
  tech investments

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Electronic Data Interchange

• Electronic Data Interchange
• The transmission of electronic business forms
  between business partners (e.g. purchase order)
• Typically used by large organizationsvery
  expensive
• The internet has opened this technology to
  smaller firms

• How it works
• EDI transactions are system generated by the
  sender and then transmitted to the receiver by a
  VAN
• VAN (Value Added Network) providers are private
  network operators that provide guaranteed delivery

• Standards
• Document types and formats are universally
  standardized
• Two standards exist ANSI X.12 and UN/EDIFACT

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Electronic Data Interchange (EDI) Example
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Extranets

• Extranets
• Extranets are secure networks that provide
  customers, suppliers, and employees with access
  to internal systems
• Have replaced EDI for smaller firms allowing them
  to participate in B2B markets directly

• Extranet Benefits
• Improves timeliness and accuracy of
  communications reducing errors and
  misunderstandings
• Allows central management of documents allowing
  single updates which are then available to all
  interested parties
• Uses standard web protocols allowing disparate
  computing platforms to communicate without
  additional investments
• Easy to use, requires little training
• Used to automate transactions, reducing cost and
  cycle time

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Extranet System Architecture

• Virtual Private Network
• (VPN) is a secure network technique to protect
  extranet communications
• Uses a technique called tunneling to encapsulate,
  encrypt, and transmit data over the Internet
• Requires server authentication (verify user with
  password) to allow operation

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Extranet Applications
Supply Chain Management
Real-Time Info Access
Procurement Portals
Exchanges
Distribution Portals
Collaboration
Enterprise Portals
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Extranet Applications

• Supply Chain Management
• Used to exchange supply and manufacturing
  information between customers and suppliers
• The extranet contains features allowing
  participants to purchase online, check supplier
  inventory, transfer design specifications, and
  other business related tasks

• Real-time Access to Information
• Allowing business partners and customers access
  to real-time system information
• This reduces customer service needs by giving all
  authorized and interested parties direct system
  access

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Extranet Applications

• Collaboration
• Allows companies to respond proactively to
  marketplace changes by working directly with
  suppliers and customers
• Allows for shorter development cycle times
• Allows for reorganization of the purchasing
  function turning buyers into supplier
  relationship managers

• Enterprise Portals
• These are access points (front doors) combined
  from multiple extranets where business partners
  access secured, proprietary company information
• This provides a single point of access for
  information that comes from a variety of
  disparate systems
• Benefits include faster access for business
  partners, reduced maintenance cost by reduction
  in total extranets

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Extranet Applications Exchanges and Portals
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Extranet Applications

• Trading Exchanges (Electronic Marketplaces)
• Allow many buyers and many sellers to come
  together
• Offer transaction processing, industry
  information, best sourcing, info resources, and
  invoicing (e.g. SciQuest.com)
• Revenues made through advertising and transaction
  fees

• Distribution Portals
• Designed to automate the business processes that
  occur before, during, and after a sales
  transaction between a supplier and multiple
  buyers
• Portal can be customized and personalized by the
  buyer or seller
• (e.g. Premier.Dell.com)

• Procurement Portals
• Designed to automate the business processes that
  occur before, during, and after a sales
  transaction between a buyer and multiple
  suppliers
• Provides supplier tools to update products,
  process orders, service buyers (e.g. Ford
  Supplier Portal)

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New Technologies for B2B Electronic Commerce

• XML - Extensible Markup Language
• Developed by the World Wide Web Consortium (W3C)
  to provide a global standard for documents
• Used for transmission of data between computers
• The Web documents contain tags, enabling
  definition, validation, transmission, and
  interpretation of data
• May potentially replace all forms of EDI
• EBRL - Extensible Business Reporting Language
• An XML-based specification for publishing
  financial information making it easier for
  companies to share information with each other,
  analysts, shareholders
• Includes tags such as annual and quarterly
  reports, general ledger information, SEC filings,
  and accounting schedules

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New Technologies for B2B Electronic Commerce

• RFID - Radio Frequency Identification
• Used for tagging and tracking physical items
• RFID system uses a transceiver and antenna to
  transfer information to a processing device or
  RFID tag

• RFID Benefits
• RFID is more powerful than bar-code technology
  because it does not require visual line-of-sight
  reading
• RFID tags can be placed anywhere (e.g. clothes,
  pets, cars, parts, store items, etc.)

• RFID Issues
• Deployment is growing rapidly but it is still
  expensive
• There are no clear set of data standards
• Global radio frequencies differ between countries

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Intranets

• Intranets
• An internal, private network using Web
  technologies to securely transmit information
  with the organization.
• This private internal Web limits viewing access
  to authorized users within the organization

• Extranet Benefits (Similar to Extranet)
• Improved information access to authorized user
• Improved timeliness and accuracy of information
• Global reach allowing employees access from
  anywhere
• Cross-platform integration
• Low cost deployment
• Positive return on investment

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Intranet Architecture
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Intranet Applications
Collaboration
Training
Intranet Hub
Online Entry of Information
Application Integration
Real-time Access To Information
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Intranet Applications

• Training
• Provides online access to a host of training
  functions including course catalogs,
  registration, content (video, slides, other
  materials), and evaluation
• Provides significant increases in productivity
  and standardization, and cost reductions (e.g.
  travel costs)

• Application Integration
• Allows for integration and consolidation of
  information from disparate systems into a single
  point of access
• Increases employee productivity and output quality

• Real-time Access to Information
• Allows employees access to real-time system
  information.
• This reduces customer service needs by giving all
  authorized and interested parties direct system
  access

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Intranet Applications

• Online Entry of Information
• Allows for direct online input to streamline
  routine business processes (e.g. expense
  reporting)
• Provides for significant cost reductions from
  reducing administrative support and shifting
  maintenance functions back to the employee (e.g.
  updating 401K selections)

• Collaboration
• Allows employees to communicate business
  activities across geographic and departmental
  boundaries
• Allows for shorter development cycle times
• Allows employees to stay abreast of current
  projects, corporate, and market conditions

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Business to Consumer Electronic Commerce
Online retailing or e-tailing provides many
consumer advantages over brick-and-mortar
business strategies but there are also drawbacks
Business to Consumer Advantages Product
unlimited choices are available Place commerce
can be conducted from anywhere Price lower
prices driven by higher turns/lower costs
Business to Consumer Disadvantages Time the
time lag between the time of purchase and
receipt Physical lacks sensory experience of
touch, smell, etc. Social online shopping lacks
the social interaction of malls
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Stages of Business-to-Consumer Transactions
Web sites that globally disseminate only static
information about the company and its products
available 24/7. (e.g. Electronic Brochure)
Web sites that are integrated with corporate
databases to extract and display the appropriate
information for a customer request. (e.g.
displaying a bank balance)
Web sites that allow customers to enter orders
and make payments directly online (e.g. buying a
book)
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M-Commerce and the Key Drivers for Growth
Any electronic transaction or information
interaction conducted using a wireless, mobile
device, and mobile networks, that leads to
transfer of real or perceived value in exchange
for information, service, or goods (MobileInfo,
2004)
Driver One Interest in the Internet The
exponential growth of consumer interest and
adoption of the Internet and electronic commerce
Driver Two Deployment of High Speed Networks The
development and deployment of 2.5G 3G cellular
networks enabling faster data transmission
Driver Three Growth in Mobile Devices The
tremendous growth in mobile telephony and
availability of powerful wireless, handheld
devices
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M-Commerce Applications
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Issues in M-Commerce
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The Formula for Electronic Commerce Success
Rule 1 The Web site Should Offer Something
Unique Providing visitors with something they
can find nowhere else leads to success. Hard to
find goods are popular on the Web Rule 2 The
Web site Must Be Aesthetically Pleasing Successful
firms have Web sites that are nice to look at.
People are more likely to visit, stay at, and
return to a site that looks good Rule 3 The
Web site Must Be Easy to Use and Fast! Users are
less likely to stay at, or return to a site, if
they have trouble finding things, navigating the
links, or have to wait for screens
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The Formula for Electronic Commerce Success
Rule 4 The Web site Must Motivate People to
Visit/Return People use web sites that provide
useful information and links or free goods and
services Rule 5 You Must Advertise Your
Presence on the Web Companies must draw, or pull
visitors to their website by 1) publish address
on company materials 2) register with a search
engine advertise on other commerce sites e.g.
Yahoo (very expensive) Rule 6 You Should Learn
from your Web site A firm can track the path that
user take though the site and information about
date, time, etc. and use this information to
improve the site