Lecture 3 The Internet Objectives n Basic knowledge

Lecture 3 The Internet

Objectives n Basic knowledge about Internet (e. g. , TCP/IP, IP Address, Intranet) n Internet Economy & Internet Ecosystem n General knowledge about e-commerce (e. g. , models, B 2 B, B 2 C, security) n Dot-com company

What is Internet? n International computer network of networks n Collection of hundreds of thousands of private and public networks n Internet was established as a result of the Cold War, to organize the country after the “A Bomb”

SPUTNIK First WAN ARPA INTERNET WWW E-MAIL! EVERYWHERE!!! ARPANET

TCP/IP Protocol n Protocol: an agreement that specifies a common language of two computers exchanging messages n Internet is an open system n TCP/IP is the protocol for Internet and is publicly available and any company can build a compatible technology

Message Transmission Control Protocol TCP Packet of Data Message Packet of Data IP Packet of Data Envelop 204. 127. 135. 37 Packet of Data IP Internet Protocol Packet of Data TCP The Internet Packet of Data Envelop 204. 127. 135. 37

Packet n Message is arranged into packets to be sent over the Internet n Packet structure: • Header – controls how the message is transmitted • Data Area – actual message to be transmitted • Trailer – used to detect errors in transmission

Name, IP Address, and DNS Each computer connecting to the Internet will be assigned its name and IP address n Name: information about type of organization and country code n IP address: a set of four groups of numbers separated by periods (e. g. , 123. 567. 55. 2) n Domain Name System (DNS): Worldwide distributed database that maintains names and IP addresses of the computers on the Internet n

Internet Services and Systems n Net Tools: Web Browsers, FTP, HTML and Scripting Language (e. g. , Java. Script), Search Engines n End-User Communications: E-mail, Listserve, Usenet newsgroup n Education: learning resources, on-line degrees n Entertainment: movie, game

Intranet n Internal network applies the same network technologies (e. g. , TCP/IP, Web browser) as the Internet does n Companies use Intranets to distribute information and speed data exchange among their employees: access to corporate databases and documents

Extranet n When a company opens its Intranet network to selected business partners, the Intranet becomes an “Extranet” n Suppliers, distributors, or other selected business partners can now connect to the company’s network

Firewall n Hardware and software placed between a company’s internal network and an external network to prevent unwanted outsiders from invading the internal network

Retail Stores Internet Electronic Auction of Liquidation Purchasing e-commerce Banking Firewall Product Design Distributors Contract Manufacturers Extranet Independent Retailers Suppliers Law and Ad Firms Intranet Retirement Benefits Employee Health Care Options Retail Stores Internal Information

Internet Economy n Any company that generates revenue from the Internet creates wealth in the Internet Economy n Made up of firms directly or indirectly generating revenues from Internet or related products/services – not just high -tech companies

Internet Ecosystem n. A business model made up of users, customers, infrastructure, solution providers, producers, and suppliers n Organized into four layers: L 1 – Infrastructure layer L 2 – Application layer L 3 – Intermediary layer L 4 – Commerce layer

Internet Ecosystem Formerly simply an alternative marketing channel n Now a complete economic system including: n – Ubiquitous, low cost networks (L 1) – Applications and knowledge (L 2) – Interconnected electronic markets and intermediaries (L 3) to facilitate efficient market and liquidity – Producers (L 4) – Newly emerging legal frameworks for conducting business

Infrastructure Layer n Companies that manufacture or provide products/services: – infrastructure (backbone) of Internet – telecomm providers – computer networks (privately owned) – hardware n Example: AT&T, Sprint, Cisco, Dell, IBM, Compaq

Application Layer n Firms providing application software tools: – – – Internet applications Multimedia software for Web use Web development software Search engine software Web-ready databases Consulting services and training Make it possible for e-commerce to exist n Example: Microsoft, Netscape, Photo. Shop, Macromedia, Oracle n

Intermediary Layer n Firms whose purpose is to increase efficiency of markets – serve as middlemen by helping buyers/sellers meet and interact on the Web n Example: online brokers (e. g. , Ameritrade), market makers (e. g. , e. Bay), travel agents (e. g. , Priceline. com)

Commerce Layer n Firms that generate products and services – sales to consumers (B 2 C) – sales to other businesses (B 2 B) n Example: Toys-R-Us, Levi, Hertz, Ford

E-Commerce n. A method to seek, manage, and operate business transactions applying computers and telecommunications networks n Focusing on use of computer and telecommunications networks to simplify business procedures and increase efficiency among business participants

E-Commerce n Systems supporting e-commerce – Electronic Data Interchange (EDI) – Electronic Fund Transfer (EFT) – E-mail – Web applications n However, e-commerce became popular because of the Web applications

E-Commerce Business Models n n E-commerce business model is still evolving as the Internet applications continue to develop Brokerage Model – market makers bring buyers/sellers together Advertising Model – Website allows ads to be placed on content pages Infomediary Model – data on consumers collected and sold Merchant Model – wholesalers and retailers (e-tail)

E-Commerce Business Models n n n Manufacturing Model – manufacturing-direct sales to end-user Affiliate Model – Websites offer click through to merchants and receive a fee Community Model – loyal members visit often and can be targeted Subscription Model – members pay for highquality content Utility Model – metered use

E-commerce covers any form of computerized buying and selling, both by consumers and from company to company n Business-to-Customer (B 2 C) n Business-to-Business (B 2 B)

Business-to-Customer (B 2 C) n Electronically supported selling of goods and services by vendors to consumers n Increase sellers’ ability to know their buyers n Buyers know more than ever – comparison shopping has never been easier

Business-to-Business (B 2 B) n Supporting the traditional long-term business relationships n Also the new kinds of ad hoc deals n Main implication of B 2 B is for managing supply chain to re-engineer and streamline traditional processes – For example, e-procurement

Payment Systems n n E-commerce triggered the development of several innovative payment systems Off-line method Credit-based payments – credit cards Debit-based payments – debit cards or digital checks Digital currency – digicash or e-cash, e-wallet or wallet card (good for micropayments)

E-Commerce Security Methods Encryption – mathematical formula used to encrypt plaintext into ciphertext n Digital signature – use encryption to authenticate the identity of sender and receiver n Secure Socket Layer (SSL) – protocol allowing browser and Web server to select encryption algorithm and establish an encrypted connection n Secure Electronic Transaction (SET) – using SSL for credit card number n

What are the “dot-com” companies? n The companies that offer their services or products exclusively on the Internet n The. com domain represents more than 70% of the World Wide Web n Examples: Amazon. com, Yahoo. com, e. Bay. com,

Dot-Com Opportunities n Internet permits virtually everyone with an entrepreneurial spirit to start a new business n Internet provides access to broader customer markets than the firms that are limited by geography n High rate of sales growth helps dot-com firms to draw more venture-capital for further expansion

Dot com All electronic All physical “Click and Click” “Brick ‘n Mortar” Click ‘n Brick ‘n Click

Winning Formula n Old industrial companies fought back with highly successful “brick’n click” strategies n True blending of traditional and Internet business models – and not the pure dot-com model – will be the winning formula