Chapter 3
Using Information Technology to
Using Information Technology to
Engage in Electronic
Engage in Electronic
Commerce
Commerce
Electronic Commerce
Electronic Commerce
Electronic commerce is the use of Electronic commerce is the use of
computers to facilitate the firm’s operations
computers to facilitate the firm’s operations – internal (finance, marketing, internal (finance, marketing,
manufacturing, ...)
manufacturing, ...)
– external (customers, suppliers, external (customers, suppliers,
government, ...)
Environmental
Environmental
Responsibilities
Responsibilities
of Functional Areas
of Functional Areas
Customers Suppliers Stockholders Labor Unions Government Financial Community Global Community
Finance Resources Services Manufacturing Marketing
Human Information
Electronic Commerce
Electronic Commerce
Benefits
Benefits
Improved service, especially to
Improved service, especially to
customers
customers
Improved relationships to suppliers and
Improved relationships to suppliers and
the financial community
the financial community
Increased return on stockholder and
Increased return on stockholder and
owner investments
Electronic Commerce
Electronic Commerce
Constraints
Constraints
High costs
High costs
Security concerns
Security concerns
New Electronic Commerce
New Electronic Commerce
Era
Era
Instead of specialized software, firms
Instead of specialized software, firms
are designing systems to use Internet
are designing systems to use Internet
Browsers
Browsers
Making a common interface for
Making a common interface for
customers and electronic commerce
customers and electronic commerce
partners
Selection of Electronic Commerce
Selection of Electronic Commerce
Strategy, Methodology, and
Strategy, Methodology, and
Technology
Technology
Business
Intelligence CompetitiveAdvantage Strategic Business Plan
Business Intelligence (BI)
Business Intelligence (BI)
Evolved from simply gathering data
Evolved from simply gathering data
about competitors to data gathering
about competitors to data gathering
about all environmental elements
Data
Collect data
2
Evaluate data
Analyze data
4
Store
intelligence Intelligence
5
Disseminate intelligence
Intelligence
The Five Basic Intelligence Tasks
Data
External Databases
External Databases
Important commercial databases that Important commercial databases that
provide information on virtually any subject
provide information on virtually any subject
– LEXIS-NEXIS, DIALOG, DOWJONES.COMLEXIS-NEXIS, DIALOG, DOWJONES.COM – Over 1,000 data service sites listed by Over 1,000 data service sites listed by
YAHOO.COM YAHOO.COM
Less expensive to use database services Less expensive to use database services
than to perform research
Search Engines
Search Engines
Special computer programs that ask users Special computer programs that ask users
for a word or group of words to be found at
for a word or group of words to be found at
Internet sites
Internet sites
Yahoo, Excite, AltaVista, HotBot, Lycos, Yahoo, Excite, AltaVista, HotBot, Lycos,
and Webcrawler are examples
and Webcrawler are examples
Extranets
Extranets
Allow sharing of sensitive computer-based Allow sharing of sensitive computer-based
information using Internet technology
information using Internet technology
Limited to trusted suppliers and large Limited to trusted suppliers and large
customers
customers
Security and privacy issuesSecurity and privacy issues
Interorganizational System
Interorganizational System
(IOS)
(IOS)
These link two or more firms so that they These link two or more firms so that they function as a single
function as a single systemsystem to accomplish a to accomplish a common goal
common goal
Generate internal efficiency in addition to Generate internal efficiency in addition to interorganizational efficiency
interorganizational efficiency
Provides customers with unique product Provides customers with unique product features, reduced search-related costs, and
features, reduced search-related costs, and
raises the customer’s switching costs
Electronic Data
Electronic Data
Interchange (EDI)
Interchange (EDI)
Consists of direct computer-to-computer Consists of direct computer-to-computertransmissions among multiple firms of data in a
transmissions among multiple firms of data in a
machine-readable, structured format
machine-readable, structured format
Typical linkagesTypical linkages
– Supply sideSupply side – Customer sideCustomer side – Transaction setTransaction set
Vendor stock replenishment (VSR)Vendor stock replenishment (VSR)
Electronic Data
Electronic Data
Interchange (EDI)
Interchange (EDI)
Adheres to Standard
Adheres to Standard
Formats
Formats
Suppliers The
Firm
Request
for a price quote
Price quot e
Purchase order
Acknowled
ge P.O. receipt Invoice
Selected EDI Transaction
Selected EDI Transaction
Sets and Sample Invoice
Sets and Sample Invoice
Data
Data
104 Air Shipment Information 130 Student Educational Record (Transcript)
152 Statistical Government Information 300 (Booking Request) (Ocean)
311 Canadian Customs Information 810 Invoice Name
Address Information
Marking, Packaging, Loading Industry Code
Quantity Currency
Tax Information Pricing Information Item Physical Details
Terms of Sale / Deferred Terms of Sale Carrier Detail
Mapping Software Translates
Mapping Software Translates
Data to and from Standard
Data to and from Standard
Formats
Formats
Sending firm’s computer
Application software
Mapping software
Standard EDI format
Receiving firm’s
computer
Application software
Degree of EDI
Degree of EDI
Implementation
Implementation
Level-one usersLevel-one users
– One or two transmission sets sent to limited trading partnersOne or two transmission sets sent to limited trading partners
Level-two usersLevel-two users
– Many transaction sets transmitted to large number of Many transaction sets transmitted to large number of
trading partners
trading partners
Level-three usersLevel-three users
– Many transaction sets transmitted to large number of Many transaction sets transmitted to large number of
trading partners and firm’s computer applications are
trading partners and firm’s computer applications are
tailored to EDI approach
Adoption Influences
Adoption Influences
Competitive pressure, Competitive pressure, this is reactivethis is reactive
Exercised power, Exercised power, this is proactivethis is proactive
Internal need, Internal need, this is proactivethis is proactive
Top management support, Top management support, this is both this is both
proactive and reactive
Internal and
Internal and
Environmental Influences
Environmental Influences
on EDI Adoption
on EDI Adoption
Environmental Influences
Pressure Exercised Power Internal Influences
Internal Need
Top
Management Support
Competitors Trading
EDI Benefits
EDI Benefits
DirectDirect
– Reduced errorsReduced errors – Reduced costsReduced costs
– Increased operational efficiencyIncreased operational efficiency
IndirectIndirect
– Increased ability to competeIncreased ability to compete
EDI Direct and Indirect
EDI Direct and Indirect
Benefits
Benefits
Indirect Benefits
Direct Benefits
Reduced Errors
Increased Operational
Efficiency
Reduced Costs
Competitors Trade Partners
Increased Ability to Compete
Improved Service
Improved
A Challenge to EDI
A Challenge to EDI
Extensible markup language (XML)Extensible markup language (XML)
– Extension of HTMLExtension of HTML
– Provides file formatting structure and means for Provides file formatting structure and means for describing data
describing data
– Allows Web pages to perform many EDI Allows Web pages to perform many EDI functions
Electronic Commerce
Electronic Commerce
Technology
Technology
Direct Connectivity
Direct Connectivity
– Uses dial-up or private lines to connectUses dial-up or private lines to connect
Value-Added Networks (VANs)
Value-Added Networks (VANs)
– Circuit provided by vendorCircuit provided by vendor
– Vendor provides additional servicesVendor provides additional services
Internet Evolution
Internet Evolution
Derived from the Advanced Research Projects
Agency network (ARPANET)
Designed to let computer-to-computer
communications continue even during military attacks
ARPANET joined with Computer Science
Internet Evolution [cont.)
Internet Evolution [cont.)
During the 1970’s various other networks were connected
This led to the 1980’s Internet concept which means each network can seamlessly
interconnect with other networks
Businesses began using the new Internet with workstations and local area networks
Internet Evolution (cont.)
Internet Evolution (cont.)
In 1989, Tim Berners-Lee of CERN came up In 1989, Tim Berners-Lee of CERN came up with the hypertext concept
with the hypertext concept
World-Wide Web is really the application of World-Wide Web is really the application of hypertext documents and other materials
hypertext documents and other materials
Hypertext is conceptually a ‘speed dial’ Hypertext is conceptually a ‘speed dial’
feature in that a user points to and presses the
feature in that a user points to and presses the
hypertext link and the system automatically
hypertext link and the system automatically
goes to that location
Key Web Terminology
Key Web Terminology
WebsiteWebsite
Hypertext linkHypertext link Web pageWeb page
Home pageHome page
Universal resource locator (URL)Universal resource locator (URL)
– Protocol Protocol
– Domain nameDomain name – PathPath
BrowserBrowser
Parts of a URL
Parts of a URL
http://aisvm1.ais.com/abra7883/index.html
hypertext
transmission protocol
domain name path
(directory and file name on the web server)
Internet Client/Server
Internet Client/Server
Information Retrieval
Information Retrieval
Systems
Systems
GopherGopher Wide Area Information Servers (WAIS)Wide Area Information Servers (WAIS)
Terminal Emulator PC or Macintosh Unix X11 NextStep
Addressing schema, Protocols, Format negotiation
FTP
News
Gopher
WAIS
HTTP Gateway isHTTP server
plus other application.
Database, info
Internet Security
Internet Security
Any resources linked to data communications Any resources linked to data communications
have risk
have risk
Security by physically separating the Web site Security by physically separating the Web site
from the firm’s computer resources
from the firm’s computer resources
Security by using passwords that allow access Security by using passwords that allow access
to computing resources
to computing resources
An Application-Level Firewall
An Application-Level Firewall
External External Services Services Border Router Border Router IP Choke IP Choke Protocol Filter Protocol Filter Internal/External Internal/External Service Gateway Service Gateway Internal Router Internal Router Router Router Isolation Mechanism Isolation Mechanism Internet Connectivity Internet Connectivity Supplier’s Network Supplier’s Network Internet Internet
Incoming packets from the Internet pass
Incoming packets from the Internet pass
through the connectivity supplier’s network
through the connectivity supplier’s network
to a router and to the organization
to a router and to the organization
The packet goes to a router box that duplicates
The packet goes to a router box that duplicates
the function of the external router
the function of the external router
Rather than routing the packet directly to its destination, the
Rather than routing the packet directly to its destination, the
router redirects traffic through an external services host and
router redirects traffic through an external services host and
an IP “choke” host
an IP “choke” host
The external services host runs desired apps such as E-mail
The external services host runs desired apps such as E-mail
interface
interface
The IP choke performs actual protocol filtering
The IP choke performs actual protocol filtering
Traffic is sent through a gateway to a separate router box
Traffic is sent through a gateway to a separate router box
on the internal network, configured according to internal
on the internal network, configured according to internal
security policy
Intranet
Intranet
Internet technology used for internal Internet technology used for internal
communications and applications
communications and applications
Used for many business applications Used for many business applications
requiring communication
Business Applications
Business Applications
for the Internet
for the Internet
Marketing researchMarketing research
Competitive intelligenceCompetitive intelligence
Retailing applicationsRetailing applications
The future impact of the Internet on The future impact of the Internet on
business is enhanced as the National
business is enhanced as the National
Information Infrastructure programs
Information Infrastructure programs
become established
Successful Internet Use
Successful Internet Use
Make sure your Web Make sure your Web site is robust
site is robust
Make sure your Make sure your
browser and database
browser and database
structure are both
structure are both
flexible and intuitive
flexible and intuitive
Update oftenUpdate often
Look beyond Look beyond
Target content to Target content to
specific users’ needs
specific users’ needs
Make the interface Make the interface
intuitive
intuitive
Be in the right Web Be in the right Web
location
location
Create a sense of Create a sense of
community
Summary
Summary
E-Commerce begins with business intelligenceE-Commerce begins with business intelligence
Primary and secondary data comprise business Primary and secondary data comprise business
intelligence
intelligence
Reasons for IOSReasons for IOS
– Comparative efficiencyComparative efficiency – Bargaining powerBargaining power
Summary [cont.]
Summary [cont.]
Internet Internet
– Network of networksNetwork of networks – Security concernsSecurity concerns
– FirewallsFirewalls
IntranetsIntranets
