Chapter 9 – E - Commerce

Electronic commerce (e-commerce) is defined as sharing business information, maintaining business relationships, and conducting business transactions through the use of telecommunication networks. What is referred to as traditional e-commerce has been conducted using EDI, enterprise-wide messaging systems, fax communication, bar coding, and other private local area network and wide area network systems. E-commerce is also about reorganizing internal business processes and external business alliances and creating new consumer-oriented products and services globally. The term e-business is sometimes used interchangeably with the term e-commerce to refer to this broader concept.

Internet-based electronic commerce is developing at an astounding rate. It’s estimated that e-commerce will account for 8.6 percent of worldwide sales of goods and services within just a few years. The expected benefits of e-commerce for a company are enormous. A company can create a competitive advantage by dramatically expanding its market from local to national, to international, and to global. Ultimately, the company may be able to reduce infrastructure costs by closing down physical shops in favour of a pure e-commerce business model.

The phases of learning how to use the Internet an organization can go through are as follows:

Phase 1—when a company decides to use e-mail as a communication tool.

Phase 2—when a company decides to create a public Web site.

Phase 3—when a company decides to develop a private intranet (a self-contained intraorganizational network designed using Internet technology and TCP/IP protocols).

Phase 4—when a company learns to use the Internet to actually conduct business transactions with its customers, suppliers, and other organizations.

There are several forms of e-commerce, or e-commerce models, based on who is involved in the transaction:

Business-to-business (B2B). The business-to-business (B2B) model represents inter-organizational information systems in which a company handles transactions within its own value chain or with other businesses and organizations.

Business-to-consumer (B2C). The business-to-consumer (B2C) model represents retailing transactions between a company and individual customers.

Consumer-to-consumer (C2C). The consumer-to-consumer (C2C) model represents individuals who are selling and buying directly with each other via a Web site.

9.2.1 Characteristics of an Intranet An intranet is made up of physical

technology and information content. The communication software for an intranet includes middleware and TCP/IP. Middleware is software that handles the actual physical communication connections between the computers, scanners, printers, and other devices on the network.

A firewall protects the intranet against unauthorized access by users on a network external to the organization. The information The information content of an intranet is designed just as a public Web site on the Internet.

An extranet, or extended intranet, is a private inter-organizational information system connecting the intranets of two or more companies in a business alliance. An extranet extends the cross-functional activities between trusted business partners and facilitates their working relationships.

There are three types of extranets: An extranet can be set up as a secure private

network by physically attaching the intranets with private, leased telephone lines.

An extranet can be set up as a public network by using a public communications network, such as a public utility telecommunication network or the Internet.

An extranet can be set up as a virtual private network (VPN) by using a public network with special protocols that provide a very secure, private “tunnel” across the network between the business partners’ intranets. An extranet is called an Internet VPN when the public network used is the Internet.

Top managers, particularly in large companies, are challenged ethically when they consider using e-commerce, especially to gain competitive advantage. A major e-commerce ethical issue is top managers’ responsibility for their organizations to develop a code of ethics and professional conduct, especially in the area of the Internet.

Incorporating the following areas into the company’s information code of ethics ensures that users of the Web site will be aware of the company’s electronic commerce policies:

A clear, explicit statement of the organization’s privacy policy. • A policy statement addressing situations in which

a person’s permission must be secured before his or her ID, photo, ideas, or communications are used or transmitted.

A clear policy stating how the company will inform customers of the intended uses of personal information gathered during an on-line transaction and how to secure permission from customers for those uses.

• A statement that addresses issues of ownership with respect to network postings and communications.

• A policy of how the company monitors, or tracks, user behaviours on the Web site. Currently, a Webmaster can tell which files, pictures, and other resources you are most interested in based on how long you examine a particular page, image, or file.