CHAPTER 7
Electronic Commerce
Applications
7.1
© Prentice Hall 2002
ELECTRONIC COMMERCE
• ELECTRONIC TRANSMISSION
• BUYER/SELLER TRANSACTIONS
• RELATED INFORMATION
• BETWEEN INDIVIDUALS &
BUSINESSES OR BETWEEN TWO OR
MORE TRADING PARTNERS
*
7.2
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APPLICATIONS via INTERNET
• IT: Internet Technology
• B2C: Business-to-customer
• B2B: Business-to business
• EDI: Electronic Data Interchange
*
7.3
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IT REACH*
• INSIDE COMPANY:
– WITHIN SINGLE LOCATION
– DOMESTIC LOCATIONS
– GLOBAL LOCATIONS
• OUTSIDE COMPANY:
– CUSTOMERS, SUPPLIERS WITH SAME PLATFORM
– CUSTOMERS, SUPPLIERS WITH ANY PLATFORM
– ANYONE, ANYWHERE
*
*Adapted from Keen, 1991
7.4
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STRATEGIC ADVANTAGE
• COST: Low cost producer
• DIFFERENTIATION: Customer perceives
superior image, quality, service
• FOCUS: Competing on cost or
differentiation within market niche
*
7.5
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VALUE CHAIN MODEL
• MARKET STRATEGY
• DEVELOP
• SOURCE
• MANUFACTURE
• SELL
• FULFILL
*
7.6
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FIVE COMPETITIVE FORCES*
THREAT OF
NEW
ENTRAN
TS
SUPPLIER
POWER
*Adapted from Porter, 1985
7.7
INDUSTRY
COMPETI
TORS
CUSTOMER
POWER
THREAT OF
SUBSTITUTE
PRODUCTS
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INTERNET TECHNOLOGY
• TOOLS FOR WEB PAGE DEVELOPMENT &
SITE MAINTENANCE
• SEARCH ENGINES FOR PORTALS
• EXTENSIBLE MARKUP LANGUAGE (XML):
Expected to become standard language for ebusiness
• COOKIES: User profiles stored on user’s
computer
*
7.8
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TECHNOLOGY ENABLERS
•
•
•
•
•
•
•
7.9
BROWSER
WEB PRESENCE WITH CONTENT
SEARCH ENGINES, AGENTS
PUSH TECHNOLOGY, JAVA APPLETS
PORTALS & CREDIT CARD PROCESSING
CUSTOMIZATION & TRACKING
PEER-TO-PEER DIGITAL SIGNATURE
*
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METCALFE’S LAW
• VALUE OF NETWORK PROPORTIONAL TO
n, THE NUMBER OF USERS: (n2 - n)/2
• INCREASING RETURNS TO INTERNET
USERS AS MORE JOIN NETWORK
*
7.10
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ELECTRONIC COMMERCE
FRAMEWORK
COMPONENTS ARE SUPPORTED BY TWO
PILLARS
• COMPONENTS: Applications, common business
services, messaging & knowledge distribution,
electronic publication, electronic highway
• PILLAR 1: Public policy, legal environment, privacy
issues
• PILLAR 2: Technological standards,
communications protocols, security technology
*
7.11
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LEGAL & REGULATORY
ENVIRONMENT
• TAX POLICIES: Initially sales tax
enforcement was low to encourage growth.
Currently this is changing
• COPYRIGHT & PATENT LAWS:
Difficult to enforce at international level
• ANTITRUST LAWS: Market share and
mergers could lead to monopolies
*
7.12
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ORGANIZATIONAL
CONCERNS
• SECURITY: Must safeguard proprietary and
customer data. Primary control is
FIREWALL, a barrier between organization’s
network and Internet
• ENCRYPTION: Uses encryption code to
secure communication; uses decryption code
to unscramble it
*
7.13
© Prentice Hall 2002
ORGANIZATIONAL
CONCERNS
• ANTIVIRUS PROTECTION: Use
software to detect and negate viruses
• PRIVACY: Legal requirements to maintain
employee & customer confidentiality. A
major concern is the ability for profiling
habits, selling profiles to others. A related
concern is protecting freedom of expression.
*
7.14
© Prentice Hall 2002
REQUIREMENTS FOR SUCCESSFUL
ONLINE MERCHANTS
• INSTALL FIREWALL
• KEEP SECURITY PATCHES UP-TO-DATE
• ENCRYPT STORED AND TRANSMITTED
DATA
• USE & UPDATE ANTIVIRUS SOFTWARE
• RESTRICT EMPLOYEE ACCESS TO
SENSITIVE DATA
*
7.15
© Prentice Hall 2002
BUSINESS TO CONSUMER
B2C
B2C E-COMMERCE IS ELECTRONIC
TRANSMISSION OF BUYER-SELLER
TRANSACTIONS, RELATED
INFORMATION BETWEEN ENDCONSUMERS AND ONE OR MORE
COMPANIES
*
7.16
© Prentice Hall 2002
B2C BENEFITS
SELLER:
• LOWER COSTS
• GLOBAL REACH
• MULTIMEDIA MARKETING
OPPORTUNITIES
• 24x7 SALES & CUSTOMER SUPPORT
CHANNEL
• DIGITIZED DISTRIBUTION CHANNEL
*
7.17
© Prentice Hall 2002
B2C BENEFITS
BUYER:
• EASY ACCESS TO PRODUCT
INFORMATION
• ANYTIME, ANYWHERE
• AGENTS HELP FIND THINGS, COMPARE
COSTS
• ONLINE DISTRIBUTION OF DIGITIZED
PRODUCT/SERVICE
*
7.18
© Prentice Hall 2002
B2C APPLICATIONS
FORECAST TO GROW AS MORE
CUSTOMERS HAVE INTERNET ACCESS
• PRODUCT RETAILERS: Site allows customers
to browse available wares, select, order, arrange for
payment
• SERVICE RETAILERS: Information intensive.
Buyer may download materials for fee
• RETAILING INTERMEDIARIES: Allows client
to compare models and prices of many vendors
7.19
*
© Prentice Hall 2002
B2C STRATEGIES*
Mc DONALD’S
EGGHEAD
CUSTOMER
INTERFACE
FULFILLMENT
SYSTEMS
YAHOO!
BN.COM
AMAZON.COM
ONLINE
OFFLINE
*RAYPORT & JAWORSKI, 2000
7.20
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BUSINESS-TO-BUSINESS
(B2B)
B2B E-COMMERCE IS ELECTRONIC
TRANSMISSION OF BUYER-SELLER
TRANSACTIONS & INFORMATION
BETWEEN TWO OR MORE
BUSINESSES
• PREDECESSOR WAS
INTERORGANIZATIONAL SYSTEM (IOS)
*
7.21
© Prentice Hall 2002
ELECTRONIC DATA
INTERCHANGE (EDI)
• COMPUTER-TO-COMPUTER
COMMUNICATION BETWEEN
TRADING PARTNERS: Hub
organization and spoke customers &
suppliers use structured formats
• EXAMPLES: Purchase orders, invoices,
shipping notices, price listings
*
7.22
© Prentice Hall 2002
EDI BENEFITS
• REDUCED CYCLE TIMES
• COST SAVINGS: Automated transactions,
reduced paper
• IMPROVED INTER-FIRM
COORDINATION: Reduced coordination
costs
*
7.23
© Prentice Hall 2002
CHANNELS FOR INTERNET EDI*
• WEB EDI: Use EDI templates designed by
Web server
• FTP EDI: EDI transactions stored at spoke
company. Periodically transmitted as batch
to hub company
• E-MAIL EDI: EDI transactions sent as email over Internet
*Senn, 2000
7.24
*
© Prentice Hall 2002
EXTRANET
B2B APPLICATIONS BASED ON WEB
TECHNOLOGY: Business partners use
Web browser on client machine to gain
access to another company’s intranet
*
7.25
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CHAPTER 7
Electronic Commerce
Applications
7.26
© Prentice Hall 2002