1. Chapter 14-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College Prepared by Coby Harmon University of California, Santa Barbara Westmont College SECOND EDITION

2. Chapter 14-2 E-Commerce and E-Business

3. Chapter 14-3 1. 1.An introduction to e-commerce and e-business 2. 2.The history of the Internet 3. 3.The physical structure and standards of the Internet 4. 4.E-commerce and its benefits 5. 5.The privacy expectations in e-commerce 6. 6.E-business and the IT enablement 7. 7.E-business enablement examples 8. 8.Intranets and extranets to enable e-business 9. 9.Internal controls for the Internet, intranets, and extranets 10. 10.XML and XBRL as e-business tools 11. 11.The ethical issues in e-business and e-commerce Study Objectives

4. Chapter 14-4 Real World A few years ago, Wal-Mart affected a huge change in the EDI (Electronic Data Interchange) approach to business-to-business transactions. Although EDI had been around for many years, the technology had advanced to allow it to be conducted for free over the Internet. Yet many were concerned about the lack of secure transmission over the Internet. By 2002, Wal-Mart felt the new security standards, called AS2, were adequate. It announced to its 10,000 small and mid-size suppliers that the suppliers had one year to begin using Internet EDI (EDIINT AS2). This was a tremendous change from its traditional EDI and value-added networks, and it had a dramatic impact not only on Wal-Mart’s suppliers but on many other large companies and their suppliers worldwide. Some call Wal-Mart the market maker for Internet EDI. Its change to EDIINT led to a revolution of adoption of Internet EDI around the world. Since the buyer and seller have to use the same EDIINT AS2 protocol, Wal-Mart forced a huge number of companies to switch to EDIINT, and in turn, those suppliers used EDIINT with other business customers.

5. Chapter 14-5 SO 1 An introduction to e-commerce and e-business. Introduction to E-commerce and E-business E-commerce - electronically enabled transactions between a business and its customers. E-business - includes not only electronic trade with customers, but also ► servicing customers and vendors, ► trading information with customers and vendors, and ► electronic recording and control of internal processes.

6. Chapter 14-6 SO 1 An introduction to e-commerce and e-business. Introduction to E-commerce and E-business Exhibit 14-1 E-business and E-commerce The most common method of conducting e-commerce and e-business is to use the Internet to electronically exchange data.

7. Chapter 14-7 SO 1 An introduction to e-commerce and e-business. Introduction to E-commerce and E-business Which of the following statements is true? a. E-business is a subset of e-commerce. b. E-commerce is a subset of e-business. c. E-business and e-commerce are exactly the same thing. d. E-business and e-commerce are not related. Concept Check

8. Chapter 14-8 SO 2 The history of the Internet. The History of the Internet  In 1965, a computer at MIT (Massachusetts) was connected to a computer in California, using dial-up telephone lines.  In 1969, computers at four major universities were connected via leased telephone lines. ► Grew into a network called ARPANET. ► Purpose was to share military research data among UCLA, UC Santa Barbara (UCSB), Stanford, and the University of Utah. ► Over time, many other universities, NASA, and the Rand Corporation were connected to this network.

9. Chapter 14-9 SO 2 The history of the Internet. The History of the Internet  Two technologies developed for ARPANET: ► Packet switching ► Router  E-mail was adapted to ARPANET in 1972.  BBN Technologies, ► developed the use of the @ symbol in e-mail address. ► developed a communication protocol to use in ARPANET. ► in the 1970s, helped develop the TCP/IP protocol.

10. Chapter 14-10 SO 2 The history of the Internet. The History of the Internet  In 1986, the National Science Foundation (NSF) began to develop a backbone set of servers, gateways, and networks that eventually became the Internet.  Internet serves as backbone for World Wide Web.  In 1992, commercial enterprises began offering Internet access to subscribers.  In 1993, first graphical user interface (GUI) browser was developed.  In 1995, the NSF relinquished control of the Internet. Since that time, all Internet traffic has been routed through commercial networks.

11. Chapter 14-11 The History of the Internet Exhibit 14-2 Chart of the Number of Web Servers

12. Chapter 14-12 An electronic hardware device that is located at the gateway between two or more networks is a a.packet switch. b.URL. c.router. d.protocol. SO 2 The history of the Internet. The History of the Internet Concept Check

13. Chapter 14-13 SO 3 The physical structure and standards of the Internet. The Physical Structure and Standards of the Internet The Network Types of organizations that make up the Internet. Exhibit 14-3 Architecture of the Internet

14. Chapter 14-14 SO 3 The physical structure and standards of the Internet. The Physical Structure and Standards of the Internet The Network The Internet comprises, ► backbone providers, ► network access points, ► regional ISPs, ► local ISPs, and ► Internet subscribers.

15. Chapter 14-15 SO 3 The physical structure and standards of the Internet. The Physical Structure and Standards of the Internet The Common Standards of the Internet ► HTML - language to present data on websites. Exhibit 14-4 A Simple Web Page and the HTML Source Code

16. Chapter 14-16 SO 3 The physical structure and standards of the Internet. The Physical Structure and Standards of the Internet The Common Standards of the Internet Exhibit 14-4 A Simple Web Page and the HTML Source Code

17. Chapter 14-17 ► URL - uniform resource locater address. ► Domain Name - http://www.google.com.http://www.google.com ► Common suffix portions of domain names: SO 3 The physical structure and standards of the Internet. The Physical Structure and Standards of the Internet Exhibit 14-4 A Simple Web Page and the HTML Source Code.gov - governmental.mil - military.net - network.com - commercial.edu - educational.org - nonprofit ► URL system actually uses IP addresses. The Common Standards of the Internet

18. Chapter 14-18 SO 3 The physical structure and standards of the Internet. The Physical Structure and Standards of the Internet Concept Check The type of organization that serves as the main trunk line of the Internet is called a a.local ISP. b. regional ISP. c. global ISP. d. backbone provider.

19. Chapter 14-19 SO 4 E-commerce and its benefits. E-Commerce and its Benefits Benefits of E-commerce for the Customer ► Access to broader market for goods and services. ► More convenient times for shopping. ► More choices to the customer. ► Lower prices. ► Exchange information with businesses before, during, and after the purchase. ► Quicker delivery of the product. ► Receive targeted marketing from businesses.

20. Chapter 14-20 E-Commerce and its Benefits Disadvantages of E-commerce for the Customer ► Opportunity for fraud. ► Theft of assets. ► Theft of data. ► Inability to handle or try out the product. SO 4 E-commerce and its benefits.

21. Chapter 14-21 SO 4 E-commerce and its benefits. E-Commerce and its Benefits Benefits of E-commerce for the Business ► Access to broader market. ► Reduced marketing costs. ► Potential for much richer marketing concepts. ► Quickly react to changes in market conditions. ► Likely to experience reduced order-processing and distribution costs. ► Customer convenience likely to result in higher sales. ► Higher sales with reduced marketing, order processing, and distribution costs can lead to higher profits.

22. Chapter 14-22 E-Commerce and its Benefits Disadvantages of E-commerce for the Business ► IT system usually more complex and costly. ► World Wide Web opens a business to: chances for fraud, hackers, and compromised customer privacy. SO 4 E-commerce and its benefits.

23. Chapter 14-23 E-Commerce and its Benefits E-commerce and Traditional Commerce ► Brick and mortar. ► E-tailers. ► Clicks and mortar (bricks and clicks). SO 4 E-commerce and its benefits.

24. Chapter 14-24 E-Commerce and its Benefits SO 4 E-commerce and its benefits. Concept Check Which of the following is not a direct advantage for the consumer from e-commerce? a. Access to a broader market b. More shopping convenience c. Reduced order-processing cost d. Information sharing from the company

25. Chapter 14-25 E-Commerce and its Benefits SO 4 E-commerce and its benefits. Concept Check Each of the following represents an application of B2C commerce except a. software sales. b. electronic retailing. c. data exchanges. d. stock trading.

26. Chapter 14-26 SO 5 The privacy expectations in e-commerce. Personal information to be protected: ► Name, address, Social Security number, or other government ID numbers ► Employment history. ► Personal or family health conditions. ► Personal or family financial information. ► History of purchases or other transactions. ► Credit records. Privacy Expectations of Business in E- commerce

27. Chapter 14-27 SO 5 The privacy expectations in e-commerce. Ten privacy practices to ensure adequate customer confidence regarding privacy of information: 1.Management. 2.Notice. 3.Choice and consent. 4.Collection. 5.Use and retention. Privacy Expectations of Business in E- commerce 6.Access. 7.Disclosure to third parties. 8.Security for privacy. 9.Quality. 10.Monitoring and enforcement.

28. Chapter 14-28 SO 5 The privacy expectations in e-commerce. Privacy Expectations of Business in E- commerce Concept Check Before forwarding customer data, an organization should receive explicit or implicit consent of the customer. This describes which of the AICPA Trust Services Principles online privacy practices? a. Consent b. Use and retention c. Access d. Onward transfer and disclosure

29. Chapter 14-29 SO 6 E-business and the IT enablement. E-Business and IT Enablement The supply chain is the set of linked processes that take place from the, ► acquisition and delivery of raw materials, ► through the manufacturing, ► distribution, ► wholesale, and ► delivery of the product to the customer.

30. Chapter 14-30 SO 6 E-business and the IT enablement. E-Business and IT Enablement B2B: A Part of E-Business Exhibit 14-6 E-commerce B2C vs. E-Business B2B4

31. Chapter 14-31 SO 6 E-business and the IT enablement. E-Business and IT Enablement Concept Check Which of the following processes within a supply chain can benefit from IT enablement? a. All processes throughout the supply chain b. Only internal processes within the supply chain c. Only external processes within the supply chain d. Exchange processes between a company and its suppliers

32. Chapter 14-32 SO 7 E-business enablement examples. E-Business Enablement Examples

33. Chapter 14-33 SO 8 Intranets and extranets to enable e-business. Intranets and Extranets to Enable E-Business Exhibit 14-7 Internet, Extranet, and Intranet Three levels of network platforms

34. Chapter 14-34 SO 8 Intranets and extranets to enable e-business. Intranets and Extranets to Enable E-Business Concept Check Intranets are used for each of the following except a. communication and collaboration. b. business operations and managerial monitoring. c. Web publishing. d. customer self-service.

35. Chapter 14-35 SO 9 Internal controls for the Internet, intranets, and extranets. Internal Controls for the Internet, Intranets and Extranets Exhibit 14-8 Controls to Limit Access to Intranets and Extranets

36. Chapter 14-36 SO 9 Internal controls for the Internet, intranets, and extranets. Internal Controls for the Internet, Intranets and Extranets Exhibit 14-8 Controls to Limit Access to Intranets and Extranets

37. Chapter 14-37 SO 9 Internal controls for the Internet, intranets, and extranets. Internal Controls for the Internet, Intranets and Extranets Concept Check Which of the following IT controls would not be important in an extranet? a. Encryption b. Password c. Antivirus software d. Penetration testing e. All of the above are important IT controls.

38. Chapter 14-38 SO 10 XML and XBRL as e-business tools. XML and XBRL as Tools to Enable E-Business Two languages as tools to enable e-business: ► XML (eXtensible Markup Language) ► XBRL (eXtensible Business Reporting Language) XML In Internet EDI ► Internet EDI is alternative to traditional EDI. ► Uses the Internet to transmit business information between companies. ► XML allows data exchange over Internet in a rich format.

39. Chapter 14-39 SO 10 XML and XBRL as e-business tools. XML and XBRL as Tools to Enable E-Business Exhibit 14-9 Traditional EDI and VAN versus Internet EDI

40. Chapter 14-40 SO 10 XML and XBRL as e-business tools. XML and XBRL as Tools to Enable E- Business XBRL for Financial Statement Reporting Major advantages: Easily used in several formats. ► Printed in paper format. ► Displayed as an HTML web page. ► Sent electronically to the SEC. ► Transmitted to banks or regulatory agencies. ► Computer program can extract pieces of information from the XBRL file.

41. Chapter 14-41 An extensible markup language designed specifically for financial reporting is a. Internet EDI b. XML c. XBRL d. XFRL SO 10 XML and XBRL as e-business tools. XML and XBRL as Tools to Enable E- Business Concept Check

42. Chapter 14-42 SO 11 The ethical issues in e-business and e-commerce. Ethical Issues Related to E-business and E-commerce Online privacy policies of the AICPA Trust services Principles represent ethical obligations to customers. Ethical obligations would dictate that companies take adequate care to guard the security and privacy of data collected through e-commerce.

43. Chapter 14-43 Real World Gateway Learning Corporation, the company behind Hooked on Phonics®, was charged by the Federal Trade Commission with deceptive and unfair practices. Starting in the year 2000, Gateway disclosed a privacy policy on its www.hop.com Website stating that it would not share customers’ personal information with any third parties without explicit consent from the customer. In April 2003, Gateway allegedly began violating this policy by renting to telemarketers customer information such as name, address, phone number, age, and gender of children. A retroactive change was posted to the company’s privacy statement on its Website. To settle this charge out of court, Gateway was required to pay a fine, was restricted from using deceptive claims regarding its privacy policy, and cannot materially change its privacy policy without customers’ consent.

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