UNIT-3

Electronic Commerce,
Intranets, and Extranets
 Objectives
• 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
 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
 Electronic Commerce Defined
• E-Commerce
– Business-to-Consumer (B2C)
– Business-to-Business (B2B)
– Business-to-Employee (B2E)
– Consumer-to-Consumer (C2C)
 Electronic Commerce Defined
• Internet and World Wide Web Capabilities
– Expanding market
– Wider customer base
– More products
– Closer relationships with customers
 Electronic Commerce Defined
• Internet and World Wide Web Capabilities
– Real-time access to information
• Web site linked to corporate database
• Customers can check the balances of their frequent flier accounts
• Customers do not have to wait for monthly statement
• Example: Alaska Airlines
– Mass customization
• Tailoring products to a customers needs
• Example: Lands’ End (Clothing retailer) developed a virtual model
so that customers can dress the model to select clothing
– Interactive communication
• Improving firm’s image through responsiveness
• Firms are augmenting telephone-based ordering, Web-based
customer support (Web chat)
• Example: E*Trade
 Electronic Commerce Defined
• Internet and World Wide Web
Capabilities
– Collaboration
– Reduced transaction costs
– Enhanced operational efficiency
– Disintermediation
• Cutting out the “middleman”
• Reaching customers directly
 Electronic Commerce Defined
• Electronic Commerce Business Strategies
– Brick-and-mortar
• Traditional, physical companies
– Click-only (“virtual”) companies
• Online only
• Example: eBay
– Click-and-mortar (or “Brick & Click”)
• Both physical and virtual
 Business-to-Business Electronic
Commerce

• Electronic Data Interchange

– Definition – EDI refers to the electronic transmission of business
documents between organizations via networks
– “EDI is the forefather of B2B”
– EDI: usually over value-added networks (VANs)
EDI System Architecture
 Business-to-Business Electronic
Commerce

• Electronic Data Interchange

– Advantages
• Wide variety of business documents
• Streamlines business processes
• Reduced document handling, reduces paperwork
• Shortens time of business transaction (from day to second)
• Reduces errors
 Business-to-Business Electronic
Commerce

• Electronic Data Interchange

– Disadvantages
• Costly to implement
• Costly to maintain
• Requires skilled technicians
• EDI can cost up to $100,000 and monthly
telecommunications charges associated with VANs
can be several thousand dollars per month
• Often too costly for small or medium-sized companies
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
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
Internet Architecture
 Business-to-Business Electronic Commerce
• Intranet Applications
– Training: Employee can access video lectures,
presentation slides from their desktop
– Application Integration: Intranet integrates all
disparate applications installed in different
environments to consolidate information
• Enterprise Resource Planning (ERP)
• Customer Relationship Management (CRM)
• Sales Force Automation (SFA)
– Online Entry of Information
– Real-Time Access to Information
– Collaboration
 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
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
 Business-to-Business Electronic
Commerce

• Extranet Applications
– Supply Chain Management
• Example: Dell Computers
– Real-Time Access to Information
• Example: CSX railroad
– Collaboration
• Example: Caterpillar
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
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
– Trading Exchanges
• Electronic marketplaces run by 3rd-party vendors
• Revenues are from commissions on transactions
 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)
 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
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