Module 3 eBusiness Model eBusiness Models Online Transaction

Module 3 e-Business Model

e-Business Models Online Transaction Grid: is a way of classifying the transactions that take place on the internet ¢ The classification uses two objects: business (organization) and customer (individual)

Online Transaction Grid

Four categories of transaction 1. Business(organization) to Customer(individual) (O-2 -I) this is the typical e-commerce model, where a business sells products to the customer. Ex: Amazon is a good example of such a business on the Internet. 2. Business(organization) to Business(organization) (O-2 -O) many experts think will be the most profitable in the immediate future. This is where businesses use the Internet to provide services or products to other businesses. Ex: the PC manufacturer Dell might provide computers to another business which orders them online. The Internet acts as a standard communication medium linking all the businesses in the chain together.

Four categories of transaction 3. Customer to Business (I-2 -O) it allows a group of customers to get together and buy products in bulk to achieve a cheaper price. For example, parents in a local region could group together into what is termed a buying cartel direct from the supplier at a cheaper rate. This principle has been formalized to make a business Ex: Wetsuit. com. 4. Customer to customer (I-2 -I) the Internet is about communication, so it facilitates interaction between customers. This facilitates selling between people. Ex: it can be seen at online auction sites, such as e. Bay. com.

Not just commerce ¢ The Internet is not just about making money ¢ It would be a mistake to assume that the Internet or the organizations which use it are all about profit ¢ Many online transactions applies to assistances, services, support groups and so forth

Internet bubble ¢ The rapid development and wide use of the Internet resulted in a rise of many companies whose business relied exclusively on the Internet ¢ Due to the rush of people to buy Internet shares, the prices of such companies rise very high in a very short time ¢ With the same speed of rise, the prices of many other companies dropped down very quickly

Internet bubble ¢ After seeing the collapse of such companies, some people might think that business on the internet is dead. This is not true, e-business is now stable and progressing in a steady manner. ¢ Some experts predict that all companies should have an online existence by the year 2005 or face the possibility of going out of business. ¢ The argument here is that the internet is not just another way of communication; rather it is similar to electricity in the sense that everybody should have it.

Internet bubble ¢ You can build your own website or hire someone to do it for you with minimal cost of startup and maintenance. So almost anyone can have his/her own business on the internet ¢ in contrast, starting up a regular business is costly and not affordable by many people

the Encyclopedia Britannica story ¢ It is an illustration that technology can make a big difference in the continuing success of a company. ¢ Encyclopedia Britannica was very famous brand successful. It business is to go door to door and sell high quality books. ¢ Since they were extremely successful, they hesitated to adapt to new technologies. For example, they missed out on putting their products on CD-ROMs. ¢ They almost went out of business because they did not try to utilize the new technologies. ¢ However, they decided to sell their products online which enabled them to dramatically revive their business and be one of the most successful companies that sell encyclopedia type information on the net. See www. eb. com.

Business(organization) to Customer(individual) (O -2 -I) Section 1 Richness vs. Reach

O-2 -I

Section 1 Contents ¢ Trade-off between Richness and Reach of Information. ¢ e-business standards on the Internet and their roles. ¢ Factors that make a product succeed online

Richness of Information Richness is a type of information that has the following aspects: 1. 2. 3. 4. 5. 6. Bandwidth or amount of information. Customization of information to an individual buyer. Interactivity between buyer and seller. Reliability. Security. Currency (up-to-date).

Reach of Information ¢ The Reach of information is defined as: “ the number of people who participate in the sharing of that information”.

Richness vs. Reach Concept ¢ The Richness vs. Reach concept says that: “the Richer the information is the less Reach it has and vice versa”.

Richness versus Reach examples Some examples: n A very good software that offers lots functionality ( more Richness) but is used by only a small number of people (less Rich). n A software standard that has little functionality (little richness) e. g. HTML, but has a lot of users (high rich). n The trade off for richness vs. reach can be done by adding richness and reach.

Richness versus Reach examples ¢ An example on achieving such a trade off is the Amazon which is a very famous online book seller. ¢ The reach of Amazon is extremely large in such a way that anyone who has bought a book online knows about this company.

Richness versus Reach examples ¢ The richness of information for Amazon is provided to the customer in the following forms: l Reviews and exchanges with other readers: before you buy a book from Amazon, you can look at reviews and opinions from other readers about this book. l Personal recommendations: after you buy a book, the site will recommend other books related to the subject of the book based on some statistics of your previous purchases. l Customized login screen: for a regular customer, the login page of the website will display a screen that is particular for you ( might contain interested books for you). l Communication: you get regular emails from store about books and special offers. l interviews and exchanges with authors: Amazon can invite authors to special online events in which interested readers can participate. ¢ the concept of adding richness and reach in e-business is not restricted to Amazon or book sellers. All successful online retailers add richness and reach in some form.

Electronic Shopping (ES) Test ¢ EST is used to evaluate the success of an online product ¢ ES test evaluates the following aspects of a product: 1. Product Characteristics: How a product interacts with the five human senses ( sight, sound, smell, taste and touch). 2. Familiarity: with product brands and Confidence in the product or in the producer. 3. Consumer Attributes: consumers can be divided into many categories and each category behaves differently online. The ES test is just an indicator and doesn’t always guarantee the success or failure of a product. one product might score low in one aspect and scores well in another ex: famous brand perfumes that do well online even though it is based on smell which results in scoring low in product characteristics attribute ¢

Business(organization) to Customer(individual) (O-2 -I) Section 2 Deconstruction

Online Transaction Grid

What is Deconstruction ? ¢ It is the process of Reformulation of Traditional Business Structures ¢ How? ? the Internet would have the ability to affect a big business structure by destroying a small piece of it. ¢ In other words, the internet can make any piece of a Traditional Business Structure weak which leads to its deconstruction.

Why Deconstruction? ¢ Because (someone) might provide the same piece of a big business online cheaper and faster to the public. ¢ Examples of big business structures that can be affected by Deconstruction are: Newspapers and Car Dealers

Examples ¢ Newspapers can be deconstructed to: news reports, advertising, crosswords, TV listings. ¢ Car Dealers can be deconstructed to: new car sales, secondhand car sales, servicing, finance, after sales care, and so forth.

Techno - Optimism & Techno Pessimism Techno-Optimist: the feeling that the internet is going to have a major effect on all our lives and is going to hugely change the way we live and conduct business so that ebusiness will replace any other type of business. Techno-Pessimist: the feeling that the internet effect will be very minimal and might just provide another small scene for an established business.

Impact of Internet on Traditional Businesses ¢ Internet could change traditional business in the following ways: 1. Shopping becomes more of a social experience(feeling of happiness in shopping). Shops become more specialized ( a certain shop provide highly specialized products). Shops become more service oriented ( consumers get more help in some questions they have). Shops use a hybrid approach ( a mix between a physical presence and an online presence). Shops go online only ( for some cases, shops may restrict its presence to online only). 2. 3. 4. 5.

e-business & Security ¢ To succeed, an online business needs to ensure security. ¢ From an e-business viewpoint, it is risky to trade in a non secure environment where somebody may snoop on your communications and get some important data (e. g. read your credit card number)

Internet Security Limitations ¢ Some limitations in the initial design of internet are : Lack of privacy: it is possible for an intermediate node to view the packets and/or listen to the conversation while it is transferring from one end to the other. l Anonymity: your message will be routed regardless of your identity No Authentication. l

e-business & Security protocols ¢ To allows business transactions to take place over the internet in a secure manner, additional security protocols are added to run on top of the original protocols of the internet. ¢ This done by using: Encryption and Digital Certificates

Encryption : is the process of encoding a message sent through some communications medium so that anyone listening to the message cannot understand its contents. ¢ ¢ Only the one who has a key to decode (decrypt) the message will be able to understand the message contents.

The requirements for Encryption ¢ The encryption process should be complex enough to make the encoded message difficult for unauthorized users to decrypt (break the code ). ¢ The intended receiver should be able to decrypt that message back to its original format. ¢ The keys used for encryption and decryption should themselves be secure.

Encryption Types ¢ Symmetrical Encryption l ¢ the key used for encrypting the message is the same as the key used for decrypting it. Asymmetrical Encryption The key used for encrypting a message is different from the key used to decrypt the same message l Asymmetric Encryption is called Public Key Crypto -System or Public Key Cryptography l

Asymmetric Crypto-System Algorithms ¢ Asymmetric Algorithms (Public Key Crypto-System) is the basis for all the data-encryption systems currently used in e-commerce. Here are the 5 steps involved: 1. A user chooses a private key to be used by him (Secret) A mathematical algorithm is applied to that key to create a public key The public key is distributed to people wishing to send to that user encrypted messages Messages are encrypted using the public key and sent to the user The user applies his private key to the encrypted message to decrypt it and then read it. 2. 3. 4. 5. Q. If you know a user's public key, can't you use it to decrypt a message sent to him? A. No. Only the private key, which is kept secret, can be used to decrypt messages.

Asymmetric Crypto-System Algorithms Encrypt message with receiver PU key sender Decrypt message with receiver PR key Receiver

Security Protocols for ebusiness ¢ To allow business transactions to take place over the internet in a secure manner, additional security protocols are needed to run on the top of the original protocols of the Internet. There are two main protocols : Secure Sockets Layer protocol (SSL) l The Secure Electronic Transaction protocol (SET) l

Secure Sockets Layer Protocol (SSL) ¢ This protocol was the first to be used and became the de-facto standard for e-business. ¢ It utilizes the public key cryptography to provide security information exchange between the customer and the merchant.

Secure Sockets Layer Protocol (SSL) Encrypt message with sender PR key sender Decrypt message with sender PU key Receiver

The Secure Electronic Transaction (SET) ¢ SET is more recent protocol allows for more authentication of the user of a credit card. This is done by introducing a third party that authenticates the identity of the customer ¢ Each party should get and use a digital certificate from a certificate authority ¢ Due to its overhead, SET is NOT widely used over the Internet; it is mainly used by Banks and credit cards issuers.

Secured Web Servers The S after http means that this website is on a secured server The padlock symbol lets you know that the website is on a secured server