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 © Prentice Hall 2002

 APPLICATIONS via INTERNET

• IT: Internet Technology

• B2C: Business-to-customer
• B2B: Business-to business
• EDI: Electronic Data Interchange
*

7.3 © 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

7.4 © 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
*

7.5 © Prentice Hall 2002

 VALUE CHAIN MODEL
• MARKET STRATEGY
• DEVELOP
• SOURCE
• MANUFACTURE
• SELL
• FULFILL
*
7.6 © Prentice Hall 2002
 FIVE COMPETITIVE FORCES*
THREAT OF
NEW
ENTRAN
TS

SUPPLIER INDUSTRY CUSTOMER

POWER COMPETI POWER
TORS

THREAT OF
SUBSTITUTE
PRODUCTS
*Adapted from Porter, 1985
7.7 © 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
*
7.8 © Prentice Hall 2002
 TECHNOLOGY ENABLERS
• BROWSER
• WEB PRESENCE WITH CONTENT
• SEARCH ENGINES, AGENTS
• PUSH TECHNOLOGY, JAVA APPLETS
• PORTALS & CREDIT CARD PROCESSING
• CUSTOMIZATION & TRACKING
• PEER-TO-PEER DIGITAL SIGNATURE
*
7.9 © Prentice Hall 2002
 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 © 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
*
7.11 © 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
*
7.12 © 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
*

7.13 © 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 END-
CONSUMERS 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
CUSTOMER
INTERFACE
YAHOO!
EGGHEAD

BN.COM

FULFILLMENT
SYSTEMS
AMAZON.COM

ONLINE OFFLINE

*RAYPORT & JAWORSKI, 2000

7.20 © Prentice Hall 2002
 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 e-
mail 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 © Prentice Hall 2002

CHAPTER 7

Electronic Commerce
Applications

7.26 © Prentice Hall 2002