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CHAPTER THREE OVERVIEW
Chapter 3
• 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
3-1
DISRUPTIVE VERSUS
SUSTAINING TECHNOLOGY
Chapter 3
• 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
3-2
EVOLUTION OF THE INTERNET
Chapter 3
• 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
Chapter 3
•
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
Chapter 3
• 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
Chapter 3
•
Four tools for accessing Internet information
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
1.
3-6
PROVIDING INTERNET INFORMATION
Chapter 3
•
Three common forms of service providers
1.
2.
3.
Internet service provider (ISP) –provides individuals and
other companies access to the Internet
Online service provider (OSP) – offers an extensive array
of unique Web services
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?
Chapter 3
Uniform Resource Locator
It provides not only location of a file but also how to access that file
your 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 protocol
Next is the host address, i.e., www.ubalt.edu
Ubalt is university of Baltimore
Edu..i mplies education
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Chapter 3
• 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
Chapter 3
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E-COMMERCE BUSINESS MODELS
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
E-COMMERCE BUSINESS MODELS
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Who Are Your Customers?
Chapter 3
• Business to Business
 Other businesses
• Business to Consumer
 Individuals
• Each is different and has different needs and wants
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
B2C: Convenience Versus Specialty
Chapter 3
• Convenience
 Lower priced
 Purchased frequently
 Example: common food items
• Specialty
 Higher priced
 Purchased less frequently
 Example: Stereos, computers
McGraw-Hill
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B2C: Commoditylike and Digital
Chapter 3
• 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
McGraw-Hill
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B2C: Mass Customization
Chapter 3
• 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)
McGraw-Hill
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B2B: MRO Versus Direct
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
MRO Materials
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Direct Materials
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Direct Materials
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
B2B: Horizontal Versus Vertical
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
E-Marketplaces
Chapter 3
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Business to Consumer
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
B2C Marketing Mix Tools
Chapter 3
• Registering with search engines
• Online ads
• Viral marketing
• Affiliate programs
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Registering with Search Engines
Chapter 3
• 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
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Online Ads
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Viral Marketing
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Affiliate Programs
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Affiliate Programs
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Business to Business Marketing
Chapter 3
• Much more personal
• Not usually done with generic ads designed for mass
distribution
• Often take place in e-marketplaces
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Business to Business Marketing
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
MOVE MONEY EASILY & SECURELY
Chapter 3
• In e-commerce, most money moves electronically
• Security becomes very important
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
B2C Payment Systems
Chapter 3
• Credit cards
• Financial cybermediaries
• Electronic checks
• Electronic Bill Presentment and Payment
• Smart cards
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Financial Cybermediaries
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Electronic Checks
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Electronic Bill Presentment & Payment
Chapter 3
• 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)
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Smart Cards
Chapter 3
• 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
McGraw-Hill
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B2C Payment Systems
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Digital Wallets
Chapter 3
• 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
McGraw-Hill
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B2B Payment Systems
Chapter 3
• 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)
McGraw-Hill
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EDI
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Financial EDI
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Security: The Pervading Concern
Chapter 3
• Security is very important when moving money
• Some security measures…
 Encryption
 Secure Sockets Layers
 Secure Electronic Transactions
 Many, many others
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Encryption
Chapter 3
• 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
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Public Key Encryption
Chapter 3
McGraw-Hill
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Secure Sockets Layers
Chapter 3
• 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”)
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Secure Electronic Transactions
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
THE BROADENING OF E-GOVERNMENT
Chapter 3
• 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)
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
E-Government Focuses
Chapter 3
•
•
•
•
McGraw-Hill
Government to Government (G2G, intra-G2G)
Government to Business (G2B)
Government to Consumer (G2C)
International Government to Government (interG2G)
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Government to Government
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Government to Business
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Government to Consumer
Chapter 3
• 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
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
International Government to Government
Chapter 3
• International government to government (inter-G2G) –
e-commerce performed between two or more
governments
 Providing foreign aid
 Export and import transportation
 Many other applications
McGraw-Hill
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© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
ORGANIZATIONAL STRATEGIES FOR
EBUSINESS
Chapter 3
• Primary business areas taking advantage of
ebusiness include:
 Marketing/sales
 Financial services
 Procurement
 Customer service
 Intermediaries
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MEASURING EBUSINESS SUCCESS
Chapter 3
• 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
Chapter 3
• Ebusiness benefits
include:
• Ebusiness challenges include:
 Protecting consumers
 Highly accessible
 Leveraging existing systems
 Increased customer
 Increasing liability




loyalty
Improved information
content
Increased convenience
Increased global reach
Decreased cost
 Providing security
 Adhering to taxation rules
3-56
EBUSINESS BENEFITS AND CHALLENGES
Chapter 3
• 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
Chapter 3
• Mobile commerce - the
ability to purchase
goods and services
through a wireless
Internet-enabled device
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