Differences between electronic commerce and traditional commerce Advantages and disadvantages of using electronic commerce to conduct business

s activities The international nature of electronic commerce How the growth of the Internet and the World Wide Web have stimulated the emergence of electronic commerce Economic forces that have created an environment that fosters electronic commerce How businesses use value chains to identify electronic commerce opportunities

Traditional Commerce1. The Buyer (elements)2. The Seller (elements) 3. Activities as Business Processes Electronic Commerce (by comparison) 1. Advantages of Electronic Commerce a. Increase Sales b. Decrease Costs c. Reach Narrow Market sd. Create Virtual Communities as Market Segments 2. Disadvantages a. Customer Cannot Inspect Product b. Cost/Benefit Hard to Quantify c. Current Lack of Universal Acceptance for Transactions International Electronic Commerce1. Currency2. Tariffs and Restrictions 3. Local Customs 4. Regional Law of Sovereign States the Internet and the www. Origins of the Internet New Uses for the Internet Commercial Use of the Internet Growth of the Internet and the Web Economic Forces and Electronic Commerce Transactions Costs Market and Hierarchies Role of Electronic Commerce Value Chains in Electronic Commerce Strategic Business Unit Value Chains Industry Value Chains Role of Electronic Commerce

Electronic commerce is defines as the use of electronic data transmission to implement or enhance any business process. Frequently people use this term to Refer to commerce on the Internet or Web because they are the most extensive data transmission networks. The more generic definition includes electronic funds transfers which most bank customers use at their ATM, as well as electronic data interchange in business to business communications or intranet and extranet networks.

The advantages of electronic commerce may be increase sales, decreased transaction costs, the capacity to reach narrow market segments and the potential to create Virtual communities as markets. Certain business processes are well suited to benefit from these advantages. Among the industries, which have benefited are the ones that depend on the following business processes:

Sales/purchase of books and CDs Online delivery of software Advertising and promotion of travel and financial services Online tracking of shipments Sales/purchase of commodity items, especially branded commodities

Customer cannot inspect the product Cost/benefit of employing electronic commerce is hard to quantify in traditional accounting terms for managers and investors to grasp Current lack of universal standards for transaction processing Industries specialized in perishable products, high cost products such as jewelry or product lines which depend heavily upon buyer inspection before the sale face difficult challenges attempting to adapt electronic commerce to their operations. Also, some firms may encounter difficulty integrating existing databases and transaction processing software designed for traditional commerce into the software that enables electronic commerce. In particular, firms engaged in international business face the additional challenges of currency conversion, tariffs, import/export restrictions, local business customs and the law of the host nation.

The internet originated in the early 1960s with the U.S. department of defense ARPNET that was designed as a method of secure communications in the event of a national disaster or nuclear war. The role of this computer network was expanded to include a reluctant consortium of universities, which were benefiting from defense department grants. This consortium expanded the role of the network to include communications between researchers, scientist and engineers affiliated with either the defense department or the participating universities. The expanded role brought the computer network under the control of the National Science Foundation, which originally prohibited commercial use of the network. However by 1989, the NSF permitted two commercial e-mail services, MCI and Compu- Serve, to establish limited connections to the Internet for the sole purpose of exchanging e-mail transmission. During 1995, Congress opened the Internet for full commercial use and the number of Internet hosts grew from among 5 million in 1995 to 50 million in 1999. This explosive growth of hosts to the Internet created a vast marketing potential for most businesses. The World Wide Web and the HTML code, which makes Web service possible, was the necessary component to actualize this market potential. The Web represents away of organizing information storage and retrieval to make the Internet easier to use. Finally the graphical user interface made the PC a easy-to-use connection to the Internet and the World Wide Web.

Transaction costs represent the sum of all the costs that a buyer and a seller incur as they gather information and negotiate a purchase sales agreement. Electronic commerce has the potential to significantly reduce transaction costs, and offer superior market information. Leading to a more efficient market is the driving force currently underlying economic change. Business organizations, especially those involved in manufacturing and assembly operations, form hierarchical structures that were substantially vertically integrated to take advantage of the economies of scale inherit in mass production or mass distribution as well as large-scale administrative oversight. While this trend characterized business organizations involved in major industries during the twentieth century, electronic commerce will give many firms competitive advantage for operations in the economic structure that exists between market sand the producers hierarchies. In this network economic structure successful firms will coordinate their strategies, resources and technical skills by forming long term, stable relationships based on a shared purpose.

Michael Porters concept of the value chain, expressed in his book Competitive Advantage is used to identify the specific business processes that could benefit the most from an introduction or electronic commerce. A strategic business unit can be broken down into a series of primary value adding activities or supporting activities to identify candidates for electronic commerce enhancement. Primary activities would include such tasks as Identifying customers Product/production system design Purchasing material and supplies Marketing and selling activities Transportation, logistics and delivery activities Provide after sale service and support Supportive activities would include Human Resources, improving technology, finance and administrative activities. Porter makes a similar argument for an industrial value chain and the role of electronic commerce in reducing costs, improving product quality, reaching new customers or suppliers and creating new ways of selling existing products. The value chain analysis highlights the point that electronic commerce should be a business solution, not merely information technology implement for its own sake.

The general structure of the network of networks supporting the Internet and electronic commerce Protocols that move commerce across the Internet and that send and receive electronic mail Internet utility programs to trade, located, and verify the status of Internet host sites Popular Internet applications, including electronic mail, Telnet, and File Transfer Protocol The history and use of Web markup languages, including SGML, HTML, and XML HTML tags and links Web client and server architectures and the messages they send to each other The differences and similarities between the Internet, intranets, and extranets Options for connecting to the Internet and their cost and bandwidth tradeoffs

A number of technologies must be in place for electronic commerce to exist. The Internet and the World Wide Web require support from database software, network switches and hubs, encryption hardware and software, multimedia structures and a way to integrate each of these technologies. This chapter is concerned with analyzing each of these technologies that support electronic commerce.

 The Internet would not be possible without packet switching networks. In comparison to single connection circuit switching, packet switching networks break files and messages into packets that are labeled electronically with codes that indicate both their origin and destination. Single circuit switching is like using

highway, which stretches across the USA that can only accommodate one automobile for an entire trip. By, analogy, packet switching networks would resemble the traffic that we would expect on such a long highway. Highways must have rules such as speed limits, directional lanes, stopping and existing procedure. The network also requires a set of rules for formatting, ordering and error checking data.

Establish the fundamental rules about how data is moved across networks and how network connections are made or broken. For example of OP address is a 128-bit number which is difficult for most people language (HTTP), is used for addresses and domain names. A URL frequently begins with HTTP indicating the protocol in which the address is written, the WWW which defines the domain as the World Wide Web followed by the name of the entity or some sound bit which suggests their product or service. Other internet protocols include Simple mail transfer protocol (STMP) Post Office protocol (POP) Interactive mail access protocol (IMAP) File transfer protocol (FTP)

Internet utility programs permit more convenient and efficient use of the Internet. Finger is such a program, which runs on UNIX computers and allows a user to determine which users are logged on to a particular network or gather some information about a particular user. Packet Internet Groper (PING) provides network connection performance measurements such as the time it takes to send a message or the number of hosts on the network. TRACERT is a utility program, which allows the user to trade the round trip path between users and Internet, connected computer and another computer on the Internet.

Electronic mail is the most popular application of the Internet except for the annoyance caused by unsolicited mail called SPAM. Telnet is an application that allows you to log on to a remote computer that is attached to the Internet Telnet exposes you to the commands and programs of the remote host. FTP, discussed above is used commercially for the sale, distribution and update of software products because it is the fasters, most efficient way to deliver digital business information

The most popular use of the Internet is the World Wide Web. Web pages are marked with tags, which govern the display and formatting of text elements. Standard Generalize Markup Language (SGML) is a programming language, which represents a system of marking up documents that is independent of any software application. Hypertext Markup Language (HTML) is a page linking system that interconnects related pages regardless of use; therefore it proliferated on the Web to the exclusion of SGML. This system uses codes called tags to describe, format and display documents on the network. All of the web pages elements such as graphic positioning, tables, frames, heading and title bars are created by HTML. Most web pages will permit you to view this language by right clicking on the Web page. There is an industry wide effort to define which data is displayed on a Web page and a relatively new extensible markup language (XML) is trying to fill that market. XML can describe a pages actual content, track data, and reduce data processing software costs.

Are use by all formatting languages that store documents as text files. Consider HTML formatted document. It contains document content such as text, graphics and video that will appear on the computer screen. In addition, the document contains HTML codes called tags, which have been inserted to specify how a document should be formatted and displayed on screen. Hyperlinks connect the user to other pages in the same document, or to other documents on the same machine or to another document somewhere else on the Internet. Hyper linking collectively comprises the World Wide Web. HTML anchor tags are use to create hyperlinks. Another popular application of HTML code is the HTML editors, which allow Web site designers to drag and drop objects such as graphics, buttons or lines onto a Web page. The Website builder software uploads the pages to the Internet web server from the PC, which developed the,. Commercially available Web site building software include Microsoft Front Page, Dreamweaver and Storefront.

When an Internet user connects to the World Wide Web, the user computer becomes a Web client in a worldwide client/server network. The Internet connects many different types of computer running different operating systems software and permits them to communicate effectively as well as exchange files that are publicly available through the Web server. The client/server model divides the work load responsibilities between the client and server in the network connection whether it is LANs, WANs or the Web.

A firm with a commercial Internet presence may consider the development of a Web based private network that hosts Internet applications on a company wide or local area network. This private network, called an intranet, can be used to disseminate company information within the various locations of the firm. An extranet extend the intranet concept to network connections with business partners, suppliers or customers. The infrastructure for a private network should include TCP/IP network, Web authoring software, Web server hardware and software, Web clients and a firewall server. Since many of these requirements are probably in place at a firm already using electronic commerce, additional cost can be minimized. The benefits of a private network include less expensive and more timely and accessible internal information.

Internet service providers offer several technologies to connect their clients to the internet. Plain old telephone service and an analog modem is the least expensive method. Broadband coaxial cable provides internet access through television cable at relatively high speed. T1 and T3 lines are high volume and high priced connections, which are used by businesses which require fast access to a large number of communications. Internet 2 is expected to provide faster service for everyone in the near future.