Chapter 7

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© Prentice Hall 2002

7.
1

CHAPTER 7

Electronic Commerce

Applications


© Prentice Hall 2002

7.
2

ELECTRONIC COMMERCE


ELECTRONIC TRANSMISSION


BUYER/SELLER TRANSACTIONS


RELATED INFORMATION


BETWEEN INDIVIDUALS &
BUSINESSES OR BETWEEN TWO OR
MORE TRADING PARTNERS

*


© Prentice Hall 2002

7.
3

APPLICATIONS
via
INTERNET


IT:
Internet Technology


B2C:
Business
-
to
-
customer


B2B:
Business
-
to business


EDI:
Electronic Data Interchange

*


© Prentice Hall 2002

7.
4

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


© Prentice Hall 2002

7.
5

STRATEGIC ADVANTAGE


COST:
Low cost producer


DIFFERENTIATION:
Customer perceives
superior image, quality, service


FOCUS:
Competing on cost or
differentiation within market niche

*


© Prentice Hall 2002

7.
6

VALUE CHAIN MODEL


MARKET STRATEGY


DEVELOP


SOURCE


MANUFACTURE


SELL


FULFILL

*


© Prentice Hall 2002

7.
7

FIVE COMPETITIVE FORCES*

*Adapted from Porter, 1985

INDUSTRY

COMPETI
TORS


SUPPLIER
POWER


CUSTOMER
POWER


THREAT OF
NEW

ENTRAN
TS


THREAT OF
SUBSTITUTE
PRODUCTS



© Prentice Hall 2002

7.
8

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

*


© Prentice Hall 2002

7.
9

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

*


© Prentice Hall 2002

7.
10

METCALFE’S LAW


VALUE OF NETWORK PROPORTIONAL TO
n
, THE NUMBER OF USERS:
(n
2

-

n)/2


INCREASING RETURNS TO INTERNET
USERS AS MORE JOIN NETWORK

*


© Prentice Hall 2002

7.
11

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

*


© Prentice Hall 2002

7.
12

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

*


© Prentice Hall 2002

7.
13

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

*


© Prentice Hall 2002

7.
14

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.

*


© Prentice Hall 2002

7.
15

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

*


© Prentice Hall 2002

7.
16

BUSINESS TO CONSUMER
B2C


B2C E
-
COMMERCE IS ELECTRONIC
TRANSMISSION OF BUYER
-
SELLER
TRANSACTIONS, RELATED
INFORMATION BETWEEN END
-
CONSUMERS AND ONE OR MORE
COMPANIES

*


© Prentice Hall 2002

7.
17

B2C BENEFITS

SELLER:


LOWER COSTS


GLOBAL REACH


MULTIMEDIA MARKETING
OPPORTUNITIES


24x7 SALES & CUSTOMER SUPPORT
CHANNEL


DIGITIZED DISTRIBUTION CHANNEL

*


© Prentice Hall 2002

7.
18

B2C BENEFITS

BUYER:


EASY ACCESS TO PRODUCT
INFORMATION


ANYTIME, ANYWHERE


AGENTS HELP FIND THINGS, COMPARE
COSTS


ONLINE DISTRIBUTION OF DIGITIZED
PRODUCT/SERVICE

*


© Prentice Hall 2002

7.
19

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

*


© Prentice Hall 2002

7.
20

B2C

STRATEGIES*

ONLINE OFFLINE

CUSTOMER
INTERFACE

FULFILLMENT
SYSTEMS

*RAYPORT & JAWORSKI, 2000

EGGHEAD

YAHOO!

BN.COM

AMAZON.COM

Mc DONALD’S


© Prentice Hall 2002

7.
21

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)

*


© Prentice Hall 2002

7.
22

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

*


© Prentice Hall 2002

7.
23

EDI

BENEFITS


REDUCED CYCLE TIMES


COST SAVINGS:
Automated transactions,
reduced paper


IMPROVED INTER
-
FIRM
COORDINATION:
Reduced coordination
costs

*


© Prentice Hall 2002

7.
24

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


© Prentice Hall 2002

7.
25

EXTRANET


B2B

APPLICATIONS BASED ON WEB
TECHNOLOGY:
Business partners use
Web browser on client machine to gain
access to another company’s intranet

*


© Prentice Hall 2002

7.
26

CHAPTER 7

Electronic Commerce

Applications