CHAPTER 7 Electronic Commerce Applications 7 Prentice

CHAPTER 7 Electronic Commerce Applications 7. © Prentice Hall 2002

ELECTRONIC COMMERCE • ELECTRONIC TRANSMISSION • BUYER/SELLER TRANSACTIONS • RELATED INFORMATION • BETWEEN INDIVIDUALS & BUSINESSES OR BETWEEN TWO OR MORE TRADING PARTNERS * 7. © Prentice Hall 2002

APPLICATIONS via INTERNET • IT: Internet Technology • B 2 C: Business-to-customer • B 2 B: Business-to business • EDI: Electronic Data Interchange * 7. © Prentice Hall 2002

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. © Prentice Hall 2002

STRATEGIC ADVANTAGE • COST: Low cost producer • DIFFERENTIATION: Customer perceives superior image, quality, service • FOCUS: Competing on cost or differentiation within market niche * 7. © Prentice Hall 2002

VALUE CHAIN MODEL • MARKET STRATEGY • DEVELOP • SOURCE • MANUFACTURE • SELL • FULFILL * 7. © Prentice Hall 2002

FIVE COMPETITIVE FORCES* THREAT OF NEW ENTRANT S SUPPLIER POWER *Adapted from Porter, 1985 7. INDUSTRY COMPETI TORS CUSTOMER POWER THREAT OF SUBSTITUTE PRODUCTS © Prentice Hall 2002

INTERNET TECHNOLOGY • TOOLS FOR WEB PAGE DEVELOPMENT & SITE MAINTENANCE • SEARCH ENGINES FOR PORTALS • EXTENSIBLE MARKUP LANGUAGE (XML): Expected to become standard language for e-business • COOKIES: User profiles stored on user’s computer * 7. © Prentice Hall 2002

TECHNOLOGY ENABLERS • • 7. BROWSER WEB PRESENCE WITH CONTENT SEARCH ENGINES, AGENTS PUSH TECHNOLOGY, JAVA APPLETS PORTALS & CREDIT CARD PROCESSING CUSTOMIZATION & TRACKING PEER-TO-PEER DIGITAL SIGNATURE * © Prentice Hall 2002

METCALFE’S LAW • VALUE OF NETWORK PROPORTIONAL TO n, THE NUMBER OF USERS: 2 - n)/2 (n • INCREASING RETURNS TO INTERNET USERS AS MORE JOIN NETWORK * 7. © Prentice Hall 2002

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. © Prentice Hall 2002

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. © Prentice Hall 2002

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. © Prentice Hall 2002

ORGANIZATIONAL CONCERNS • ANTIVIRUS PROTECTION: software Use 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. © 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. © Prentice Hall 2002

BUSINESS TO CONSUMER B 2 C E-COMMERCE IS ELECTRONIC TRANSMISSION OF BUYER-SELLER TRANSACTIONS, RELATED INFORMATION BETWEEN ENDCONSUMERS AND ONE OR MORE COMPANIES * 7. © Prentice Hall 2002

B 2 C BENEFITS SELLER: • • LOWER COSTS GLOBAL REACH MULTIMEDIA MARKETING OPPORTUNITIES 24 x 7 SALES & CUSTOMER SUPPORT CHANNEL • DIGITIZED DISTRIBUTION CHANNEL * 7. © Prentice Hall 2002

B 2 C BENEFITS BUYER: • • • EASY ACCESS TO PRODUCT INFORMATION ANYTIME, ANYWHERE AGENTS HELP FIND THINGS, COMPARE COSTS • ONLINE DISTRIBUTION OF DIGITIZED PRODUCT/SERVICE * 7. © Prentice Hall 2002

B 2 C APPLICATIONS FORECAST TO GROW AS MORE CUSTOMERS HAVE INTERNET ACCESS • PRODUCT RETAILERS: allows customers to Site 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. * © Prentice Hall 2002

B 2 C STRATEGIES* Mc DONALD’S EGGHEAD CUSTOMER INTERFACE FULFILLMENT SYSTEMS YAHOO! BN. COM AMAZON. COM ONLINE OFFLINE *RAYPORT & JAWORSKI, 2000 7. © Prentice Hall 2002

BUSINESS-TO-BUSINESS (B 2 B) B 2 B E-COMMERCE IS ELECTRONIC TRANSMISSION OF BUYER-SELLER TRANSACTIONS & INFORMATION BETWEEN TWO OR MORE BUSINESSES • PREDECESSOR WAS INTERORGANIZATIONAL SYSTEM (IOS) * 7. © 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. © Prentice Hall 2002

EDI BENEFITS • REDUCED CYCLE TIMES • COST SAVINGS: Automated transactions, reduced paper • IMPROVED INTER-FIRM COORDINATION: Reduced coordination costs * 7. © 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 e-mail over Internet *Senn, 2000 7. * © Prentice Hall 2002

EXTRANET B 2 B APPLICATIONS BASED ON WEB TECHNOLOGY: Business partners use Web browser on client machine to gain access to another company’s intranet * 7. © Prentice Hall 2002

CHAPTER 7 Electronic Commerce Applications 7. © Prentice Hall 2002