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CHAPTER THREE OVERVIEW

• SECTION 3.1 - BUSINESS AND THE INTERNET Disruptive Technology Evolution of the Internet Accessing Internet Information Providing Internet Information

• SECTION 3.2 - EBUSINESS Ebusiness Basics Ebusiness Models Organizational Strategies for Ebusiness Measuring ebusiness Success Ebusiness Benefits and Challenges New Trends in Ebusiness: Egovernment and Mcommerce

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DISRUPTIVE VERSUS SUSTAINING TECHNOLOGY

• Disruptive technology – a new way of doing things that initially does not meet the needs of existing customers• Sustaining technology – produces an improved product customers are eager to buy

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EVOLUTION OF THE INTERNET

• The Internet began as an emergency military communications system operated by the Department of Defense

• Gradually the Internet moved from a military pipeline to a communication tool for scientists to businesses

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EVOLUTION OF THE WORLD WIDE WEB

• The Internet’s impact on information Easy to compile Increased richness and reach Improved content

• The Internet makes it possible to perform business in ways not previously imaginable• It can also cause a digital divide

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EVOLUTION OF THE WORLD WIDE WEB

• World Wide Web (WWW) – a global hypertext system that uses the Internet as its transport mechanism

Web 2.0 Mashups Web 3.0

• Hypertext transport protocol (HTTP) – the Internet standard that supports the exchange of information on the WWW

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ACCESSING INTERNET INFORMATION

• Four tools for accessing Internet information

1. Intranet – internalized portion of the Internet, protected from outside access, for employees

2. Extranet – an intranet that is available to strategic allies

3. Portal – website that offers a broad array of resources and services

4. Kiosk – publicly accessible computer system that allows interactive information browsing

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PROVIDING INTERNET INFORMATION

• Three common forms of service providers1. Internet service provider (ISP) –provides

individuals and other companies access to the Internet

2. Online service provider (OSP) – offers an extensive array of unique Web services

3. Application service provider (ASP) – offers access over the Internet to systems and related services that would otherwise have to be located in organizational computers

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What’s a URL?

Uniform Resource LocatorIt provides not only location of a file but also how to

access that fileyour browser, uses the URL to retrieve a file from the

host computer where it is stored Ex:http://www.ubalt.edu

http: is the protocol hypertext transfer protocolNext is the host address, i.e., www.ubalt.eduUbalt is university of BaltimoreEdu..i mplies education

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• E-commerce is changing everything• Electronic commerce (e-commerce) – commerce, but it is commerce accelerated and enhanced by IT Build powerful relationships with customers Build powerful relationships with suppliers Build powerful relationships with partners

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EGOVERNMENT AND MCOMMERCE

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E-COMMERCE BUSINESS MODELS

• There are 2 that are most prominent• Business to Business (B2B) – when a business sells products and services to customers who are primarily other businesses• Business to Consumer (B2C) – when a business sells products and services to individuals

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E-COMMERCE BUSINESS MODELS

• B2B is where most of the money is About 97%

• B2C is the most well-known Amazon, eBay, etc.

• B2B and B2C differences require that you know your customers well, develop the right marketing mix, and move money easily

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Who Are Your Customers?

• Business to Business Other businesses

• Business to Consumer Individuals

• Each is different and has different needs and wants

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B2C: Convenience Versus Specialty

• Convenience Lower priced Purchased frequently Example: common food items

• Specialty Higher priced Purchased less frequently Example: Stereos, computers

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B2C: Commoditylike and Digital

• Commoditylike Same no matter where you purchase it Examples: books, music, movies Price and ease of ordering are important

• Digital Purchased and delivered over the Internet Best product type for B2C e-commerce Examples: Music, software

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B2C: Mass Customization

• Mass customization – the ability of an organization to give its customers the opportunity to tailor its products or services Dell – customized computer purchases Apple iTunes – only the music you want

(not necessarily the whole album)

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B2B: MRO Versus Direct

• Maintenance, repair, and operations (MRO) materials (indirect materials) – materials necessary for running a company but do not relate to the company’s primary business activities Similar to convenience items in B2C Office supplies, repair parts, lubricating oils

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MRO Materials

• Buyers in B2B make large purchases• Can then demand a discount (not true in B2C)• Can team up with other buyers to create demand aggregation• Demand aggregation – combining purchase requests from multiple buyers which justifies a larger discount

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Direct Materials

• Direct materials – materials that are used in production in a manufacturing company or are placed on the shelf for sale in retail environments Relate directly to a company’s primary

business activities Quality, quantity, and delivery timing are

important

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Direct Materials

• Buyers can participate in reverse auctions for direct materials• Reverse auction – process in which a buyer posts its interests in buying items and sellers compete by submitting successively lower bids The lowest bidder wins

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B2B: Horizontal Versus Vertical

• B2B e-commerce takes advantage of e-marketplaces• Electronic marketplace (e-marketplace) – interactive business providing a central market where multiple buyers and sellers can engage in e-commerce Horizontal e-marketplaces Vertical e-marketplaces

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E-Marketplaces

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Business to Consumer

• Need to determine your marketing mix• Marketing mix – set of marketing tools your organization will use to pursue its marketing objectives in reaching and attracting potential customers There are many such tools for B2C

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B2C Marketing Mix Tools

• Registering with search engines• Online ads• Viral marketing• Affiliate programs

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Registering with Search Engines

• Some search engines will list your site for free• Others charge a fee• For an additional fee, your site can appear at top of a search list (every time)

McGraw-Hill © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Online Ads

• Online ads (banner ads) – small advertisements that appear on other sites• Two variations are:

Pop-up ad – small Web page advertisement that appears on your screen outside the current Web site

Pop-under ad – pop-up ad you do not see until you close your current browser window

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Viral Marketing

• Viral marketing – encourages users of a product or service supplied by a B2C business to encourage friends to join in as well Blue Mountain Arts (

www.bluemountain.com) Send a card Card has link so the other person can send

you a card back

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Affiliate Programs

• Affiliate program – arrangement between two e-commerce sites that directs viewers from one site to another If viewers buy at the second site, the

second site pays a small fee to the first site Usually a percentage of the sale

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Affiliate Programs

• Click-throughs and conversion rates are important• Click-through – count of the number of people who visit one site and use an ad to get to another• Conversion rate – percentage of potential customers who actually buy something

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Business to Business Marketing

• Much more personal• Not usually done with generic ads designed for mass distribution• Often take place in e-marketplaces

McGraw-Hill © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Business to Business Marketing

• Once a contact is made, the relationship must be established• This often requires face-to-face meetings• Must also integrate the IT systems to the supplier business and customer business

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MOVE MONEY EASILY & SECURELY

• In e-commerce, most money moves electronically• Security becomes very important

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B2C Payment Systems

• Credit cards• Financial cybermediaries• Electronic checks• Electronic Bill Presentment and Payment• Smart cards

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Financial Cybermediaries

• Financial cybermediary – Internet-based company that makes it easy for one person to pay another person or organization over the Internet PayPal (www.paypal.com) is the most well-

known

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Electronic Checks

• Electronic check – mechanism for sending money from your checking or savings account to another person or organization Many implementations Most common implementation is online

banking

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Electronic Bill Presentment & Payment

• Electronic Bill Presentment and Payment (EBPP) – system that sends bills over the Internet and provides an easy-to-use mechanism (perhaps a button) to pay for them if the amount looks correct Available through Checkfree (

www.checkfree.com) and Quicken (www.quicken.com)

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Smart Cards

• Smart card – plastic card (the size of a credit card) that contains an embedded chip on which digital information can be stored and updated Debit cards are an implementation

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B2C Payment Systems

• Must move money and other information such as shipping address• Digital wallets can help• Digital wallet – software and information Software provides transaction security Information includes delivery information

and other forms of necessary information

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Digital Wallets

• Can be… Client-side – you create this digital wallet

and keep it on your computer Server-side (also called a thin wallet) – an

organization creates this for you and keeps it on its servers

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B2B Payment Systems

• Business customers… Make large purchases Will not pay with credit card or financial

cybermediary Use financial EDI Pay for many purchases at once (perhaps

the end of the month)

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EDI

• Electronic data interchange (EDI) – direct computer-to-computer transfer of transaction information in standard business documents, such as invoices and purchase orders, in a standard format How businesses communicate with each

other Used in e-marketplaces and VANs

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Financial EDI

• Financial EDI – an electronic process used primarily within B2B for the payment of purchases This is electronic money in B2B Often occurs through an automated

clearing house

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Security: The Pervading Concern

• Security is very important when moving money• Some security measures…

Encryption Secure Sockets Layers Secure Electronic Transactions Many, many others

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Encryption

• Encryption – scrambles the contents of a file so that you can’t read it without having the right decryption key• Often through public key encryption (PKE) – uses two keys: a public key for everyone and private key for only the recipient of the encrypted information

McGraw-Hill © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Public Key Encryption

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Secure Sockets Layers

• Secure Sockets Layer (SSL)… Creates a secure connection between a

Web client and server Encrypts the information Sends the information over the Internet

• Denoted by lock icon on browser or https:// (notice the “s”)

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Secure Electronic Transactions

• Secure Electronic Transaction (SET) – transmission method that ensures transactions are legitimate as well as secure Helps verify use of a credit card, for

example, by sending the transaction to the credit issuer as well as the seller/supplier

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THE BROADENING OF E-GOVERNMENT

• Electronic government (e-government) – use of digital technologies to transform government operations in order to improve efficiency, effectiveness, and service delivery• Make the government click-and-mortar• Click-and-mortar – Presence in the real world (mortar) and also in the virtual world (click)

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E-Government Focuses

• Government to Government (G2G, intra-G2G)

• Government to Business (G2B)• Government to Consumer (G2C)• International Government to

Government (inter-G2G)

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Government to Government

• Government to government (G2G, intra-G2G) – e-commerce activities performed within a single nation’s government Vertical – up and down among federal,

state, and local levels Horizontal – integration of agencies within a

specific level

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Government to Business

• Government to Business (G2B) – e-commerce performed between a government and businesses Purchasing direct and MRO materials Soliciting bids for work Licensing applications Meeting regulations Many other applications

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Government to Consumer

• Government to consumer (G2C) – e-commerce performed between a government and its citizens or consumers Paying taxes Registering vehicles Providing information and services Student loans Many other applications

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International Government to Government

• International government to government (inter-G2G) – e-commerce performed between two or more governments Providing foreign aid Export and import transportation Many other applications

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ORGANIZATIONAL STRATEGIES FOR EBUSINESS

• Primary business areas taking advantage of ebusiness include: Marketing/sales Financial services Procurement Customer service Intermediaries

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MEASURING EBUSINESS SUCCESS

• Most companies measure the traffic on a website as the primary determinant of the website’s success

• Clickstream data tracks the exact pattern of a consumer’s navigation through a website

• Website metrics include visitor metrics, exposure metrics, visit metrics, and hit metrics

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EBUSINESS BENEFITS AND CHALLENGES

• Ebusiness benefits include: Highly accessible Increased customer

loyalty Improved information

content Increased

convenience Increased global

reach Decreased cost

• Ebusiness challenges include: Protecting consumers Leveraging existing

systems Increasing liability Providing security Adhering to taxation

rules

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EBUSINESS BENEFITS AND CHALLENGES

• There are numerous advantages and limitations in ebusiness revenue models including: Transaction fees License fees Subscription fees Value-added fees Advertising fees

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EGOVERNMENT AND MCOMMERCE

• Mobile commerce - the ability to purchase goods and services through a wireless Internet-enabled device