1 Chapter 5 Electronic Commerce, Intranets, and Extranets Information Systems Today Leonard Jessup and Joseph Valacich

2 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

3 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

4 business to business B2B business to consumer B2C consumer to consumer C2C Major Types of E-commerce business to employee B2E

5 Electronic Commerce Defined Internet and World Wide Web Capabilities –Expanding market –Wider customer base –More products –Closer relationships with customers

6 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

7 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)

8 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

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

10 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)

11 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

12 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

13 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

14 Business-to-Business Electronic Commerce

15 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

16 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

17 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

18 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

19 Business-to-Business Electronic Commerce Extranet Applications –Supply Chain Management Example: Dell Computers –Real-Time Access to Information Example: CSX railroad –Collaboration Example: Caterpillar

20 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”

21 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

22 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

23 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)

24 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?

25 B2C vs C2C – Some Examples B2C –Dell –Amazon.com –Office Depot –Bn.com –…–… C2C –Peer-to-peer sharing Kazaa gnutella –Auctions: ebay

26 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

27 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

28 Quiz Time Clear your desks 10 Questions…from Chapter 5

29 Grading the Quizzes 1.B 2.D 3.A 4.B 5.C 6.False 7.False 8.True 9.False 10.True

30 Even With its Explosive Growth, E-Commerce is Still in its Infancy While Estimated Revenues from E- Commerce Vary ($330 Billion Vs. $1.2 Trillion in 2001), the Current Revenue is Small Compared to the Overall Marketplace Return

31 E-Commerce Can Be Used to Achieve Significant Distribution Cost Savings Source: "The Economic and Social Impact of Electronic Commerce" Return

32 Disintermediation Traditional E-Commerce Manufacturer Distributor Retailer Consumer Manufacturer Back