Sharlyn May Nas

ELECTRONIC COMMERCE The use of computer to facilitate all of the firms operations. Many of the operations are internal—they are performed within the firm by the five business areas. Other operation involves the firm’s interfaces with all eight environmental elements. Anticipated Benefits from Ecommerce Improved customer service Improved relationship with suppliers and the financial community Increased return on stockholder and owner investment. Electronic Commerce Constraints High costs Security concerns Immature or unavailable software The Pathway to Electronic Commerce The strategic palnning embodies the commitment to use electronic commerce to achieve competitive advantage. The firm first gathers business intelligence so that it can understand the potential role each and every environmental elements will play. When firms interact with each other the next step is to establish a interoganizational system (IOS) by means of electronic data interchange (EDI) or an extranet. Extranets are special type of internet system where standard web page browsers and web servers are used, just like traditional internet systems, but a limited number of trusted external entities are allowed access to sensitive firm data and applications. The IOS is achieved by following the system life cycle (SLC) or engaging in business process redesign (BPR). The result is a network-oriented system that employs direct connectivity, value-added networks, the internet, or some combination. BUSINESS INTELLIGENCE Originally, the application was dedicated to gathering information on the firm’s competitors, and thus, the terms competitive intelligence (CI) was coined. When defined broadly to include on all environmental elements, the proper term is business intelligence (BI). The information that describes the elements in the environment of the firm is given the name intelligence. Basic Intelligence Tasks Collect Data- the firm may acquire either primary or secondary data. Primary data is gathered by the firm. Secondary data is gathered by someone else and made available to the firm. Evaluate Data- all of the data should be evaluated prior to use to ensure its accuracy. Analyze Data- the term lateral thinking describes how you examine the data from a variety of angles, looking for patterns. The purpose of analysis step is to transform data into intelligence. Store Intelligence- if the intelligence is purchased in a machine-readable form, entry into the computer is no problem. However if the intelligence exist in a printed for, it must be entered either by optical character recognition (OCR) or by keying. Once in the computer, the intelligence must be stored in a way that allows easy retrieval. Disseminate Intelligence- a sophisticated approach to dissemination is to prepare an intelligence profile for each user, describing in a coded form the intelligence topics that the user wants to monitor. This profile is stored in the computer, and when a piece of intelligence comes along that matches the profile, the intelligence is made available to user. This technique is called selective dissemination of information (SDI). External Database There are a number of important commercial databases that provide online information on virtually any subjects. Firms use these databases to gather business intelligence because it is less expensive than trying to research a wide array of information sources. The value that these commercial databases bring to the firm is their wide knowledge of information sources. Firms are becoming more inclined to initiate their own external searches for market intelligence. Search Engines It is a special computer program that asks a user for a word or group of words to be found. The program then searches the content of internet sites to see if the word or words exist in the sites. The program then estimates the usefulness of the sites that contain the words ang present the requestor with the addresses of internet sites and documents that contain the chosen words. The first step toward achieving electronic commerce is to gain a thorough understanding of the environment in which the commerce will be conducted. Much of this intelligence can be gathered by non computer means, such as through surveys, observations, informal conversations, field reports, news paperand trade paper articles, and so on. However, computer databases make it possible to scan large volumes of information quickly, easily, and thoroughly. In a word that can be characterized by the term “informal explosion,” this retrieval ability is believed by many firms to be well worth the price. ELECTRONIC COMMERCE STRATEGY Interorganizational Strategy (IOS)—the strategy that is most often mentioned is one in which the elements ar elinked with the transmission of electronic data. Electronic Data Interchange (EDI)—means for achieving an interorganizational system. These two terms often are used interchangeably, but when a distinction is drawn, EDI is considered a subset of IOS. Extranets—allow the sharing of sensitive computer-based information with other firms using information technology that commonly associated with the internet. Security and privacy are serious concerns so the extranets are genrally secured behind a firewall. A firewall is computer software that only allows authorized users access typically via a user name and passwo THE INTERORGANIZATION SYSTEM (IOS) An IOS, sometimes called interorganizational information system, is a combination of firms that are linked so that they can function as a single system; they work together to achieve a common objective. The firms that form IOS are called trading partners or business partners. The organization that is the driving force behind an IOS is the IOS sponsor. The organizations are called IOS participants. IOS Benefits Comparative Efficiency—by joining an IOS, the trading partners can provode their goods and services at lower costs than their competitors. Internal Efficiency—improvement on the firms operation Interorganizational Efficiency—improvements that are gained by working with other firms Bargaining Power—the ability of a firm to resolve disagreements with its suppliers and customers to its own advantage. Unique Product Feature Reduced search-related cost Increased switching costs ELECTRIONIC DATA INTECHANGE It consists of direct computer-to-computer transmissions among multiple firms of data in a machine-readable, structured format. The transmissions enable the data to be transmitted and received without rekeying. Typical EDI Linkages Typical linkages establish connections between the firm and its suppliers and its customers. Connections with suplliers are reffered to as supply side of the system, and the connections with customers go by the name customer side. Vendor Stock Replenishment The vendor, or supplier, can initiate the replenihment process by electronically monitoring the firm’s inventory levels. This can require the frm to grant database access to the supplier. When the on-hand balance for an item reaches the reaorder point, the supplier automatically generates the purchase order and fills the order. Stock replenishment in turn affects what inventory needs to be maintained, or not maintained in a warehouse. It also affects the manufacturing schedule of the supplier. Electronic Funds Transfer Data representing money is transmitted over a computer network. EPT is used by many firms and also by individuals who have their payroll checks deposited into their bank accounts and who [ay their bills with electronic payments. EDI Standards The data that flows along each path between the firm and its trading partners adheres to a standard format. The standard format enables the trading partners to exchange data but require a translation prior to sending and receipt. The translation is required because the partners’ computer applications typically do not handle data in the same format as the standards. Special software called mapping software performs the translation process. Degree of EDI Implementation Level-one users—only one or two transactions are transmitted to limited number of trading partners. Level-two users—many transaction sets are transmitted to a large number of trading partners, perhaps crossing industry lines Level-three users—the firm’s computer applications are tailored to the EDI approach Proactive and Reactive Business Partners The IOS sponsor typically takes a proactive approach, stimulating interest in the IOS and encouraging participation in an EDI network. The participants on the other hand, typically respond in a reactive manner the sponsors offer to adopt EDI. Adoption Influences In 1995, MIS professors G. Premkumar and K. Ramamurthy studied the factors that can influence the EDI decision and identified four that determine wether the firm will be proactive or reactive. There are two external and internal environmental influences. Competitive pressure—when the firm is in a poor position in relation to its competitors or when industry or trade associations provide strong pressure, the firm will adopt EDI in a reactive way. Exercised Power—when a firm can exert power over other members of the IOS, it will be proactive. Internal Need—when the firm sees that participation in the IOS is a way to improve its own operations; it will approach EDI in a proactive manner. Top Management Support—regardless of wether the firm acts in a proactive or reactive manner, the top management support always influences the decision. The Premkumar and Ramamurthy study concluded that proactive firms tend to: 1. Do a better job of planning the EDI project 2. Establish linkages with larger numbers of trading partners, and 3. Do a better job in integrating EDI into the rest of their applications EDI Benefits Direct Benefits Reduced errors—if incoming data does not have to be keyed into the system, data entry errors can be greatly reduced. Error rate can decline from 10.1 to 4.4% with EDI. Reduced costs—cost reuction can be realized by eliminating redundants steps, eliminating paper documents, and reducing the manual labor of routing paper documents through the organization. Increased operational efficiency—by replacing paper documents in each of the flows with electronics, many opportunities for improved efficiency are possible. Indirect Benefits Increased ability to compete—the combination of reduced cost and unique product features made by the IOS make it exceedingly difficult for competitiors to match the firm’s product and service offerings. Improved relationship with trading partners—all participants realize that they are working toward the same ends. Improved customer service—the speed of Ecommerce enables the firm to respond quickly to customer orders and request for services. A Challenge to EDI Although EDI is currently stimulating much interest in the global business community, it is being challenged by a new tool called extensive markup language (XML). It is an extension of the hypertext markup language that is the code used in most current web pages. The feature of great interest is that it can provide file formatting structure and ameans for describing data in the file. This characteristic will allow web pages to perform many of the functions currently performed by the EDI. There is a debate as to wehter XML, is a rival of EDI or merely a new way of bringing the best features of EDI to common internet users. ELECTRONIC COMMERCE TECHNOLOGY Technology Choices Direct Connectivity—the firm can establish data communications links with its trading partnersusing circuits provided by such common carriers. The circuits take the form of dial-up or private lines and can use a variety of such circuitry as fiber-optics and microwave transmission. Value-Added Networks (VAN)—provided by a vendor that not only furnishes the circuits but also provides many of the services that are necessary to use the circuits for EDI. The Internet—the internet makes available a global communications network that not only links the trading partner but also can include the customers. EVOLUTION OF THE INTERNET The origin of the Internet can be traced to 1969, when the US government established a network called ARPANET, and to the efforts begginning in 1989 that led to what is known today as the World Wide Web. Arpanet The purpose of ARPANET was to make it possile for the military personnel and civilian packets. During the 1970’s, work on ARPANET consisited of connecting the various networks and developing the necessary Internetwork software. ARPANET still exist and in fact, along with other networks—CSNET (Computer Science Network) and NSFNET (National Science Foundation Network). During the early 1980’s, the network became known as the Intennet, and it was during this period that business firms began using it from work-stations and local area networks. Internet is the name given to the largest collection of computer networks, each of which is composed of a collection of computer networks. The World Wide Web Also called the Web, WWW, and W3, is information space on the internet where hypermedia documents are stored and can be retrieved by means of a unique addressing scheme. In 1989, Tim Bernes-Lee came up with a better way for physicist to communicate. The idea was to use hypertext—documents in an electronic form that are linked together in some fashion. The idea became a reality in 1992 in the form of World Wide Web. World Wide Web Terminologies WEB SITE – This refers to a computer linked to the internet containing hypermedia that can be accessed from any other computer in the network by means of hypertext links. HYPERTEXT LINK – This refers to a pointer consisting of text and a graphic that is used to accessed hypertext stored at any website. The tetx is typically underlined and displayed in blue. WEB PAGE – This refers to a hypermedia file stored at a website which is identified by a unique address. HOME PAGE – This refers to the first page of a website. URL (Universal Resource Locator) – This refers to the address of a Web page. A protocol is a set of standards that govern the communication of data. HTTP is the protocol for hypertetx, and the letter stands for Hypertext Transport Protocol. The domain name is the address of the web site where the web page is stored. The path can identify a certain directory/subdirectory and file at the web site. BROWSER – this refers to a software system that enables you to retrieve hypermedia by typing in seacrh parameters or clicking on a graphic. FTP (File Transfer Protocol) – this refers to software that enables you to copy files on your computer from any web site. CYBERSPACE AND THE INFORMATION SUPERHIGHWAY The term cyberspace was coined in 1984, when author William Gibson used it in his book Neuromancer to describe a society that had become a slave to technology. Today, cyberspace means the world of the internet and the World Wide Web. The term inforamtion superhighway is also used in the same context, but there is not complete agreement concerning its eventual impact on society. The term is normally used to describe a positive force that gives everyone access to the wealth of information that exist in our modern society. AN INTERNET MODEL This is currently the most popular way to use an enterprise-wide network in business, and it involves the central computer performing the role of server and the users at their workstations representing the clients. On the internet, the web sites are the servers and the users are the clients. In addition to the Web, there are other client/server information retrieval systems that can use the internet. Three of these systems include Gopher, WAIS, and USENET. These systems predate the web and show a clear distinct between the Internets. Each of the following represents a major step forward in the ability to use the internet to retrieve meaningful information from a vasr sea of facts. They are important because they show the evolution of technological communications connection into a web of internet related repositories of needed information. Gopher—was developed by the University of Minnesota as a means of retrieving documents. Over time, it has been modified to its present form: a menu-drive system used to retrieve files. WAIS—Wide Area Information System, a server used for locating and retrieving textual material. It has limited navigational ability, and for that reason it has not enjoyed as much popularity as Gopher and the Web. USENET—the name given to the sites that have agreed to participate in the transimission of messages among thousands of newsgroups. Newsgroups are persons with similar interests. INTERNET STANDARDS A major reason why the web and theinternet and the Web have been received with open arms by computer users around the world is because the two work together as a single system that can be used from any computer platform. Everyone contributing to the Internet and Web page architecture must follow the same rules. Two organizations have assumed roles of leadership in establishing Internet and Web standards. The Internet society was formed in 1992 to promote commercial Internet use and has delegated responsibility for Internet standards to the IETF (Internet Engineering Task Force). Web standards come from the World Wide Web Consortium. (W3C). IINTERNET SECURITY Computer resources are exposed to more risk when they are linked to a data communications network. Firms engaging in e-commerce may find that hackers are attempting to get into their computer systems more frequently than they expect. One approach to security is to physically separate the Web site from the firm’s internal network, which contains its data and information resources. Another is to provide trading partners with passwords that enables them to enter the internal network through the internet. A third approach is to build a protective wall. Network security specialists have applied a contractor strategy, including the terminology. Internet security can be achieved by means of a firewall, which is a filter that restricts the flow of data between the firm’s internal network and the Internet. Firewalls can provide varying degrees of security, depending on the type. There are three types: Packet-Filtering Firewall—a type of device that is normally included in a network is a router, which directs the flow of traffic. When router is positioned between the Internet and the internal network, it can serve as a firewall. The router accesses the tables for each transmission, enabling it to allow only ceratin types of messages or messages from certain location to pass through. If a computer criminal slips through the filter, the firm can be in trouble. This method is known as “IP spoofing”—an unauthorized person uses an Internet protocol of a trusted site to trick the router into believing the messages comes from a trusted site. Circuit-Level Firewall—a computer is installed between the Internet and the internal network. The computer makes it possible to integrate a higher level of authentication logic into the filtering process. Application-Level Firewall—a security zone is created between the Internet and the internal network. This zone consists of an isolation mechanism, one separated from the Internet by a router. The isolation mechanism conists of several devices, including an externalservices host that screening tailored to each application. BUSSINESS APPLICATIONS OF THE INTERNET The internet offers several advantages over the types of networks that firms have used for years—networks given such names as Local Area Network and Wide Area Network. Unlike these other networks, the internet can be used with any computer platform without making a special effort. In addition, the Internet makes it possible to transmit a wider variety of media than many firms handle over their conventional network. The Internet Software Consortium (www.isc.org) has charted the rise in domain names from a handful in a handful in early 1990s to more than 50 million today. All areas of the firm can use the Internet, but if one had to pick the area with most potential, it would be marketing. That is because so many of the Internet users are potential consumers of the firm’s product and services. Marketing Research The Golden Rule of marketing would be: “Know your customer.” The reasoning is that if you don’t know what the customer needs, you cannot meet those needs. A big segment of marketing is industrial marketing, in which one firm sells to another. In this setting, the Internet can help the industrial marketing firm know its customers and potential customers. PR Newswire and MSNBC maintain web pages that contain press releases and news stories full of rich information on company activities. By taking advantage of this new source of information, industrial marketers gain new roads to their markets. Competitive Intelligence The Internet business application which the general public is most familiar is retailing. Most of the large retail chains have already established an Internet presence. Wal-Mart opened its Web site in mid-1996 and intended to target its products to a more upscale audience than the customer who normally shop its stores. While this activity is good, the retailers recognize that the Internet does not provide sufficient marketing coverage to reach all their customers. In 1996 survey, the research firm Intelliquest found that 24 million Americans over the age 16 accessed the Web at least one time between March and May. This constraint on market reach should be eased considerably with the marketing of low-cost devices and TVs with an internet capabilty. SUGGESTIONS FOR SUCCESSFUL INTERNET USE Make sure your Web is robust. Make sure your browser and database structure are both flexible and intuitive. Emphasize content. Update often. Look beyond ustomers. Target content to specific users’ need. Make the interface intuitive. Be in the right web location. Create a sense of community. Get help if you need. FUTURE IMPACT OF THE INTERNET ON BUSINESS The Internet is seen as the beginning of a National Information Infrastructure. Each country would have an NII, and each one would be linked in some manner that is yet to be defined. Assuming that the NII becomes reality, it will affect commerce in different countries in varying ways. Within a single country, the effect can vary from one industry to another.