Organizations face three strategic challenges: demand risk, innovation risk, and inefficiency risk.
Demand risk
The globalization of the world market increasing deregulation exposes firms to greater levels of competition, and fewer customers want to buy the same firm's products.
To counter it, organizations need to be flexible, adaptive, and stimulating demand for their products and services.
The Web can be used as a market penetration mechanism to attain strategies where neither the product nor the target market is changed.
The Web can be used to develop markets, by facilitating the introduction and distribution of existing products into new markets.
The Web will offer opportunities to tap into global markets and creates a tailored experience for the visitors.
Firefly markets technology for adaptive Web site learning. Its software tries to discover such as what type of music a visitor likes so that it can recommend CDs.
The Web can also be a mechanism that facilitates product development, as companies who know their customers well and create for them.
The Web can be used to diversify a business by taking new products to new markets. For example, American Express was using a Web site to go beyond its traditional traveler's check by providing on-line facilities to purchase annuities, and equities.
Innovation risk
Failure to adapt. Innovation inevitably leads to imitation, and this imitation leads to more oversupply. It's inexorable, just get off this cycle.
E-mail can facilitate frequent communication with the most innovative customers. The advantage of a bulletin board is that another customer reading an idea may contribute to its development and elaboration.
Inefficiency risk
Failure to match competitors' unit costs. A major potential use of the Internet is to lower costs by electronic.
FAQs(frequently asked questions), to lower the cost of communicating with customers.
Disintermediation, the elimination of intermediaries such as brokers and dealers. The next stage is for car manufacturers to sell directly to consumers.
The need to process high volume physical flows is likely to result in economies of scale.
The information flow side relatively easy to scale up and is critical because diversity increases decision complexity.
For car dealers, disintermediation is a high threat. The on-line lot can easily replace the physical lot.
Disintermediation is not a binary event. It is on or off for some linkages in the value network. Some consumers are likely to prefer to interact with dealers.
Internet technology
Transmission Control Protocol/Internet Protocol (TCP/IP) is the communication network protocol used on the Internet. TCP/IP has two parts. TCP handles the transport of data, and IP performs routing and addressing.
Data transport
The two main methods for transporting data across a network are circuit and packet switching.
Circuit switching is commonly used for voice and package switching for data. Each link of a predetermined bandwidth is dedicated to a predetermined number of users for a period of time.
The Internet is a packet switching network. The TCP split a message from the sending computer into packets, uniquely numbering each packet, transmitting the packets, and putting them together at the receiving computer correctly.
Routing
The process of determining the path, the IP, to dynamically determine the best route. It's dynamic and may take different paths. Not necessarily arrive in the sequence.
Addressability
Messages can be sent from one computer to another only when every server on the Internet is uniquely addressable.
The Internet Network Information Center (InterNIC) manages the IP addresses so that TCP/IP networks anywhere in the world can communicate with each other.
An IP address is a unique 32-bit number consisting of four groups of decimal numbers in the range 0 to 255, and difficult to recall.
Domain Name Server (DNS) converts aussie.mgmt.uga.edu to the IP address 128.192.73.60.
The exponential growth of the Internet will eventually result in a shortage of IP addresses. So, the next-generation IP (IPng) is underway.
Infrastructure
Electronic commerce is built on various technology layers. National Information, Message distribution, Electronic publishing, Business services, Electronic commerce applications.
National information infrastructure
The bedrock, NII. Cable TV, telephone networks, cellular communication systems, computer networks, and the Internet.
Message distribution infrastructure
Sending and receiving messages. Its purpose is to deliver a message from a server to a client. Messages can be unformatted or formatted. For example, electronic data interchange (EDI), e-mail, and hypertext text transfer protocol (HTTP).
Electronic publishing infrastructure
To publish a full range of text and multimedia. A uniform resource locator (URL) to uniquely identify any server, a network protocol, and a structured markup language, HTML.
Business services infrastructure
To support business processes, the secure transmission of credit card numbers by providing encryption and electronic funds transfer.
Electronic commerce applications
Applications written in HTML are the messaging protocol. The Internet physically transports messages between the bookseller and customer.
Summary of the electronic commerce applications
Electronic commerce applications > Book catalog
Business services infrastructure > Encryption
Electronic publishing infrastructure > HTML
Message distribution infrastructure > HTTP
National information infrastructure > Internet
Electronic commerce topologies have been used to support electronic commerce.
Cooperation with a range of stakeholders, among employees, or cooperation with a business partner.
Topology Internet Intranet Extranet
Extent Global Organizational Business partnership
Focus Stakeholder Employee Distribution
The Internet is a global network. Any computer connected to the Internet can communicate with any server in the system. Thus, the Internet is well-suited to communicating with a wide variety of stakeholders.
Companies can use its Web site to distribute changes like software updates to customers or provide financial reports to investors.
Intra-organizational network, the intranet that enables people within the organization to communicate and cooperate with each other.
A firewall is used to restrict access so that people outside the organization cannot access the intranet.
An extranet is designed to link a buyer and supplier to facilitate greater coordination of common activities.
Each business has a value chain, and the extranet supports the data transfer between two value chains.
An organization may have multiple extranets to link it with many other organizations and specialized to support partnership coordination.
The cost of linking using Internet technology is lower than the traditional approach, the electronic data interchange (EDI).
EDI
A standardized data format is used to exchange common business documents between trading partners. In contrast to email messages, EDI supports the exchange of repetitive, routine transactions.
Standards mean that routine electronic transactions can be concise and precise. The main standard used in the U.S. and Canada is known as ANSI X.12, and the major international standard is EDIFACT. Firms following the same standard can electronically share data.
Before EDI, many standard messages between partners were generated by computers, printed, and mailed to the other party.
The main advantages of EDI:
Paper handling is reduced.
Data are exchanged in real-time.
Fewer errors.
Greater coordination.
Money flows are accelerated.
Most EDI traffic has been handled by value-added networks (VANs) or private networks. VANs add communication services to those provided by common carriers like AT&T.
Internet communication costs are typically less than with traditional EDI. The Internet is displacing VANs as the electronic transport path between trading partners.
The simplest approach is to use the Internet as a means of replacing a VAN by using a commercially Internet EDI.
The multimedia capability of the Internet creates an opportunity for new applications and information exchange within a partnership.
Security
Electronic commerce poses additional security problems since the Internet is to give people remote access to information.
Access control
Visitor authentication. The common techniques for the Internet are account number, password, and IP address. Personal memory(Name, account number, password), Possessed object(Badge, plastic card, key, IP address), Personal characteristic(Fingerprint, signature).
Firewall
This barrier monitor controls all traffic between the Internet and the intranet, and restrict the access of outsiders to the intranet. The simplest method is to restrict traffic with designated IP addresses or to restrict access to certain applications.
Coding
Coding or encryption techniques. The intruder cannot read the data without knowing the method of encryption and the key.
Encryption
Encryption is the process of transforming messages or data to protect their meaning. The reverse process, decryption, converts it into the original message.
Pretty Good Privacy (PGP) is a public domain implementation of public-key encryption.
A public-key encryption system has two keys: one private and the other public key which can be freely distributed.
To send and receive messages, communicators need to create separate pairs of private and public keys and then exchange their public keys.
The sender encrypts a message with the public key and receives the message with a private key.
Signing
A public-key encryption system can be used to authenticate messages. If communicating electronically, sign the messages so that the receiver could verify it. A sender's private key is used to create a signed message. The receiver then applies the sender's public key to verify the signature. When the purported sender's public key is applied to this message, the identity of the sender can be verified.
4 methods of electronic payment:
• Electronic funds transfer
• digital cash
• Ecash
• Credit card
4 fundamental concerns regarding electronic money:
Security
Authentication
Anonymity
Divisibility
Transactions should remain confidential.
Electronic currency must be spendable in small amounts.
All electronic money systems are potentially divisible.
Electronic funds transfer(EFT)
EFT is essentially an electronic checking transaction.
Clearinghouses facilitate the flow of funds between accounts in different banks.
Electronic checking is fast and flexible, it can handle high volumes of transactions locally and internationally.
The major shortfall of EFT is that all transactions must pass through the banking system, which is legally required to record every transaction. This is a lack of privacy.
Digital cash
Digital cash is an electronic parallel of notes and coins such as prepaid cards and smart cards. Adding a PIN number to a smart card can raise its security level.
Credit card
Do not support person-to-person transfers and do not have the privacy of cash.
SSL
Secure Sockets Layer (SSL) was created by Netscape for managing the security of message transmissions in a network. SSL uses public-key encryption to encode the transmission of secure messages between a browser and a Web server.
SET
Secure Electronic Transaction (SET) is a financial industry innovation. MasterCard and Visa, SET is designed to offer a high level of security for Web-based financial transactions. SET is based on cryptography and digital certificates. Public-key cryptography ensures message confidentiality between parties in a financial transaction. Digital certificates uniquely identify the parties to a transaction. They are issued by banks or clearinghouses. Authenticated users can look up other users' public keys.
The SET components
The digital wallet.
This software plug-in contains a consumer's digital certificate, shipping, and other account information, and protected by a password.
Merchant server
Payment gateway
The bridge between SET and the existing payment network.
Certificate authority
The process
Opens a MasterCard or Visa account with a bank.
A digital certificate, expiration date and has been digitally signed by the bank to ensure its validity.
Merchants' digital certificates from the bank.
Confirms that the merchant's digital certificate is valid.
This message is encrypted with the merchant's public key.
The merchant verifies the customer by checking the digital signature on the customer's certificate.
The merchant sends the order message along to the bank.
The bank verifies the merchant and the message.
The merchant gets paid according to its contract with its bank.
The customer gets a monthly bill from the bank issuing the credit card.
The advantage of SET is that a consumer's credit card number cannot be deciphered by the merchant. Only the bank and card issuer can decode this number.
Cookies
A cookie is a mechanism for remembering details of a single visit or store facts between visits, and stored on your hard disk by a Web application. Visit tracking, Storing information (record personal details), Customization, Marketing.
References
Applegate, L. M., C. W. Holsapple, R. Kalakota, F. J. Rademacher, and A. B. Whinston. 1996. Electronic commerce: building blocks for new business opportunity. Journal of Organizational Computing and Electronic Commerce 6 (1):1-10.
Kalakota, R., and A. B. Whinston. 1996. Frontiers of electronic commerce . Reading, MA: Addison-Wesley.
Watson, R. T., P. G. McKeown, and M. Garfield. 1997. Topologies for electronic cooperation. In Telekoopertion in Unternehmen , edited by F. Lehner and S. Dustdar. Weisbaden, Germany: Deutscher Universitäts Verlag, 1-11.
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