What is Electronic Commerce?

Learning Objectives

• Internet, Intranet, Extranet• Technology Infrastructure

– How packet-switched networks are combined to form the Internet

– Internet protocols and Internet addressing– The history and use of markup languages on

the Web, including SGML, HTML, and XML• E-commerce• Advantages vs. Disadvantages of EC• Main concerns of EC

Internet/Intranet/Extranet

Internet• A rapidly growing network of thousands of

business, educational, and research networks connecting million of computers and their users in over 100 countries.

• The Internet is accessible to anyone with a modem and the proper communications software on their computer.

Intranets

• An interconnected network that does not extend beyond the organization that created it.

• Intranets are an extremely popular and low-cost way to distribute corporate information.

• An intranet uses Web browsers and Internet-based protocols (including TCP/IP, FTP, Telnet, HTML, and HTTP) and often includes a firewall.

Extranets

• Extranets are intranets that have been extended to include specific entities outside the boundaries of the organization (business partners, specific customers, suppliers, etc.).

• An extranet can be:• a public network, • a secure (private) network, or • a virtual private network (VPN).

Extranets Network• A public network is any computer or

telecommunications network that is available to the public.

• A private network is a private, leased-line connection between two companies that physically connects their intranets to one another.

• A VPN extranet is a network that uses public networks and their protocols to send sensitive data to partners, customers, suppliers, and employees using a system called ‘IP tunneling’ or ‘encapsulation’.

The InternetThe Internet

CompanyCompany

IntranetsIntranets

IntranetsIntranets

IntranetsIntranets

IntranetsIntranets

CustomerCustomer SupplierSupplier

Intranet

Other Company Locations

ExtranetExtranet

ExtranetExtranet

Internetworked EnterpriseInternetworked Enterprise

Technology Infrastructure:

The Internet and the World Wide Web

Technology Overview• The Internet includes:

• The hardware that connects the computers together and

• The hardware that connects the networks together

• The computers in these networks run such software as:• Operating systems, database managers,

encryption software, multimedia creation and viewing software, and the graphical user interface

Types of Networks

• A local area network (LAN) is a network of computers close together.

• A wide area network (WAN) is a network of computers connected over a great distance.

Switched Networks

• The Internet uses packet switching• Files are broken down into small pieces

(called packets) that are labeled with their origin, sequence, and destination addresses.

Routing Packets• The computers that decide how best to

forward each packet in a packet-switched network are called ‘routers’.

• The programs on these routers use ‘routing algorithms’ to determine the best path to send each packet.

• When packets leave a network to travel on the Internet, they are translated into a standard format by the router.

• These routers and the telecommunication lines connecting them are referred to as ‘the Internet backbone’.

Routing Packets

Internet Protocols (IP)

• A protocol is a collection of rules for formatting, ordering, and error-checking data sent across a network.

• ARPANET is the earliest packet-switched network.

• The open architecture of this experimental network used Network Control Protocol (NCP) which later became the core of the Internet.

IP (Four Rules)• Independent networks should not require any

internal changes to be connected to the network.

• Packets that do not arrive at their destinations must be retransmitted from their source network.

• Router computers act as receive-and-forward devices; they do not retain information about the packets that they handle.

• No global control exists over the network.

TCP/IP

• The Transmission Control Protocol (TCP) and the Internet Protocol (IP) are the two protocols that support the Internet operation (commonly referred to as TCP/IP).

• The TCP controls the disassembly of a message into packets before it is transmitted over the Internet and the reassembly of those packets when they reach their destination.

• The IP specifies the addressing details for each packet being transmitted.

IP Addresses

• IP addresses are based on a 32-bit binary number that allows over 4 billion unique addresses for computers to connect to the Internet. Approximately two billion IP addresses are either in use or unavailable for use.

• IP addresses appear in ‘dotted decimal’ notation (four numbers separated by periods).

• They are assigned by three not-for-profit organizations (ARIN, RIPE, and APNIC).

Domain Names

• To make the numbering system easier to use, an alternative addressing method that uses words was created.

• An address, such as www.course.com, is called a domain name.

• The last part of a domain name (i.e., ‘.com’) is the most general identifier in the name and is called a ‘top-level

domain’ (TLD).

Top-level Domain Names

Web Page Delivery

• Hypertext Transfer Protocol (HTTP) is the set of rules for delivering Web pages over the Internet.

• HTTP uses the client/server model• A user’s Web browser opens an HTTP session

and sends a request for a Web page to a remote server.

• In response, the server creates an HTTP response message that is sent back to the client’s Web browser.

• The combination of the protocol name and the domain name is called a uniform resource locator (URL).

URL (Uniform Resource Locator)

• Internet address• Three parts

• Protocol (how file will be sent)• Domains (computer path to file)• File pathname (folders and filename)

Sample URL

http://www.petrozello.com/petrozello/index.html

protocol (HyperText

Transfer Protocol)

domains

file pathname

folder fileextension

Markup Languages and the Web

• Web pages are marked with tags to indicate the display and formatting of page elements.

• SGML is a meta language, which is a language that can be used to define other languages.

• HTML and XML are both derivatives of SGML.

Hypertext Markup Language

• HTML is a simplified subset of SGML (Standard Generalized Markup Language) that includes tags defining the format and style of text elements in a document.

• HTML now includes tags for tables, frames, and other features that help Web designers create more complex page layouts.

HTML Tags• An HTML document contains both

document text and elements.• Tags are codes that are used to define

where an HTML element starts and (if necessary) where it ends.

• In an HTML document, each tag is enclosed in brackets (<>).

• A two-sided tag set has an opening tag and a closing tag.

Basic Structure of a Web Page

<html><head><title>Write the title of the page

here</title></head><body>The text for your web page .</body></html>

Text Formatting<b> …</b>

Make the text inside the tags bold<u> … </u>

Underline the text <i> … </i>

Italicize the text<tt> … </tt>

– Typewriter font

<font size=+2>E</font>XAMPLE

EXAMPLE

Nested Information• Tags work in pairs• Nest the pairs

<B><I><u> for emphasis </I></B></u>

Unknown results!

<B><I><u> for emphasis</u> </I></B>

for emphasis

Text Formatting (<br> & <p>)

Two of my favorite movies are:<p><I>Apollo13<br>&<br>Dead Poets Society</I>

Two of my favorite movies are:

Apollo 13&Dead Poets Society

HTML Links

• Hyperlinks are bits of text that connect the current document to:

• another location in the same document• another document on the same host

machine• another document on the Internet

• Hyperlinks are created using the HTML anchor tag.

Tagging a Hyperlink

<a href = “http://msn.com/new.htm”>Products</a>

< > indicate a tag (instruction)

beginning tag ending tag

hypertext

a instruction means anchor anchor what? hypertext reference

HTML Editors• HTML documents can be created in any

general-purpose text editor or word processor.

• Sophisticated editors can create full-scale, commercial-grade Web sites with database access, graphics, fill-in forms, and display the Web page along with the HTML code.

• Microsoft FrontPage and Macromedia Dreamweaver are examples of Web site builders.

HTML Editors

Extensible Markup Language

• Unlike HTML, XML uses markup tags to describe the meaning of the text rather than its display characteristics.

• XML uses paired start and stop tags in much the same way as database software defines a record structure.

• An XML document can be embedded within an HTML document.

• XML allows a user to ‘extend’ the language by creating their own tags.

Markup Languages and the Web

Scripting Language and Style

Sheet Capabilities• Web designers can use the OBJECT tag

to embed scripting language codes in HTML pages (this is also called client-side scripting).

• Scripts can execute programs on computers that display those pages.

• Cascading Style Sheets (CSS) let designers define formatting styles that can be reapplied to multiple Web pages.

Internet Connection Options

• The Internet is a set of interconnected networks.

• Large firms that provide Internet access to other businesses are called Internet Access Providers (IAPs) or Internet Service Providers (ISPs).

Connectivity Overview

• The most common connection options that ISPs offer to the Internet are telephone, broadband, leased-line, and wireless.

• Bandwidth is the amount of data that can travel through a communication line per unit of time.

• Bandwidth can differ for data traveling to or from the ISP.

Voice-Grade Telephone Connections

• The most common way to connect to an ISP is through a modem connected to your local telephone service provider.

• POTS uses existing telephone lines and an analog modem to provide a bandwidth of 28-56 Kbps.

• ISDN uses the DSL protocol suite to offer bandwidths between 128-256 Kbps.

Broadband Connections• Connections that operate at speeds of greater

than 200 Kbps are called broadband services.• ADSL uses the DSL protocol to provide

bandwidths between 100-640 Kbps upstream and 1.5-9 Mbps downstream.

• Cable modems provide transmission speeds between 300 Kbps-1 Mbps from the client to the server and a downstream rate as high as 10 Mbps.

• Satellite microwave transmissions handle Internet downloads at speeds around 500 Kbps.

Leased-Line Connections

• Large firms can connect to an ISP using higher-bandwidth connections that they can lease from telecommunications carriers.

• A ‘T1’ line operates at 1.544 Mbps and a ‘T3’ line operates at 44.736 Mbps.

Wireless Connections

• Many researchers and business managers see great potential for wireless networks and the devices connected to them.

• The term m-commerce (mobile commerce) is used to describe the kinds of resources people might want to access using devices that have wireless connections.

Internet Options

Electronic Commerce

Economic Forces and Electronic Commerce

• Business activity today occurs within large hierarchical business organizations, referred to as firms or companies.

• Transaction costs are the total of all costs that a buyer and a seller incur as they gather information and negotiate a purchase-sale transaction.

The Role of Electronic Commerce

• Electronic commerce can play a role in – reducing costs– improving product quality– reaching new customers or suppliers– creating new ways of selling existing

products

Electronic Commerce

• To many people, the term electronic commerce means shopping on the part of the Internet called the World Wide Web.

• Although consumer shopping on the Web was running about $130 billion per year in 2002 and is expected to exceed $500 billion by 2004, electronic commerce is much broader and encompasses many more business activities than just Web shopping.

Electronic Commerce

• Electronic commerce refers to business activities conducted using electronic data transmission via the Internet and the World Wide Web.

• The three main elements of e-commerce are:– Business-to-consumer– Business-to-business– The transactions and business processes that

support selling and purchasing activities on the Web

• Other categories include: consumer-to-consumer and consumer-to-government.

Electronic CommerceElectronic Commerce

Manufacturingand

Production

Engineering,and

Research

Accounting, Finance, andManagement

Suppliers and Other Business Partners

Consumer and Business Customers

Procurement, Distribution, and Logistics

Advertising Sales Customer Service

The Internet

Extranets Company Boundary

Intranets

Intranets

Extranets

Electronic Commerce

• Electronic Funds Transfers (EFTs) have been used by banks for many years.

• Electronic Data Interchange (EDI) occurs when one business transmits computer-readable data in a standard format to another business.

Notify orders

GM

Notify bank to transfer money to USX’s account

Purchase orders to order steel for production

Billing

Example of Using EDI

USX

USX Shipping Department

Bank

Notify shipments

Electronic Data Interchange (EDI)

The primary goals of EDI are: Cut the transaction costSpeed up the ordering process

There are two important considerations:Establishing the physical linkTransferring data in a format compatible to all users

Value Added Network (VAN)

• A value added network is an independent firm that offers connection and EDI transaction forwarding services to buyers and sellers engaged in EDI.

• VANs are responsible for ensuring the security of transmitted data.

• VANs charge a fixed monthly fee plus a per-transaction charge to subscribers.

Advantages of E-Commerce

• Cut data handling cost• Easier to search for data and compare

offerings• Electronic commerce increases sale

opportunities for the seller. Web advertising reaches a large amount of potential customers throughout the world.

Disadvantages of E-Commerce

• Some business processes are difficult to be implemented through electronic commerce.

• Computers are needed - Computers are not as portable as catalog

• There are concerns about security provisions on the internet

• Businesses face cultural and legal obstacles to conducting electronic commerce.

Main Concern for E-Commerce

• Enough suppliers available• Method to take orders• Method to deliver product• Method and quality of customer

interaction• Method of information transmittance• Level of work willing to invest