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Chapter 14 – E-Commerce and E-Business
Instructor Manual
➢ An Introduction To E-Commerce And E-Business. E-business is the use of
electronic means to enhance business processes. E-business encompasses all
forms of on-line electronic trading, consumer-based e-commerce, plus business-to–
business electronic trading and process integration, as well as the internal use of IP
and related technologies for process integration inside organizations. E-commerce
lines or value-added networks (VAN) to connect companies together electronically.
➢ The History Of The Internet. In 1965, a researcher at MIT connected a computer
in Massachusetts to a computer in California using dial-up telephone lines. In 1969,
the large computers at four major universities were connected via leased telephone
lines. This network grew into a network used by the United States Defense
Advanced Research Project Agency and was called ARPANET. Packet switching
and routers are necessary to send data over the network. Packet switching is the
method used to send data over a computer network. A router is an electronic
communication method, or protocol is needed. A protocol is a standard data
communication format that allows computers to exchange data. In the 1970’s, BBN
technologies helped develop the TCP/IP protocol that continues in use in the
Internet today. In 1986, the National Science Foundation funded and began to
develop a backbone set of servers, gateways, and networks that eventually became
➢ The Physical Structure And Standards Of The Internet.
o The Network. The Internet is comprised of backbone providers, network access
points, regional Internet Service Providers (ISPs), local ISPs, and Internet
subscribers. A backbone provider is an organization that supplies access to
high-speed transmission lines that make up the main network lines of the
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o The Common Standards Of The Internet. Since any computer can
theoretically link to any other computer on the Internet, there must be common
and standard methods to display and communicate the data transmitted via the
Internet. The standard protocol is TCP/IP. HTML is hypertext markup language.
Nearly all Web sites use HTML to format the words, data, and pictures that you
see on a Web page. In addition to a standard communication protocol and a
data in encrypted form.
➢ E-Commerce and Its Benefits. In our context, e-commerce will refer to web-based
e-commerce. Also, e-commerce will refer to business to consumer (B2C) sales.
Conversely, e-business will include business to business (B2B) electronic
transactions. B2C sales are usually conducted between a retail or service company
and a consumer, wherein the consumer interacts with the business via the website.
Both parties benefit from the increased access to the market, the speed and
convenience of e-commerce, and ability to share information.
o Benefits Of E-Commerce For The Customer. .
1. Access to broad market for goods and services. By using e-commerce, the
customer is not constrained by geography or geographic boundaries.
2. E-commerce provides more convenient shopping for customers.
frequently purchase from.
o Benefits Of E-Commerce For The Business.
1. A broader market, including the potential of a global market for even small
businesses
2. Dramatically reduced marketing costs.
3. The potential for much richer marketing concepts that include video, audio,
product comparisons, and product testimonials or product tests.
o The Combination Of E-Commerce And Traditional Commerce. Traditional
forms of commerce are catalog and store commerce. However, in the retail
environment of today, most retailers or service businesses use a combination of
traditional commerce and e-commerce. Traditional forms of commerce have
changed to incorporate e-commerce. However, the reverse is true also. Many e–
➢ Privacy Expectations in E-Commerce. The fourth risk area of IT systems
described in the AICPA Trust Services Principles is “Online Privacy”. The Trust
Services Principles say that the “online privacy principle focuses on protecting the
personal information an organization may collect from its customers through its e-
commerce systems.” The Trust Services Principles explain ten privacy practices
that an organization should follow to insure adequate customer confidence regarding
privacy of information, as follows:
▪ Management
▪ Notice
▪ Choice and Consent
➢ E-Business and IT Enablement. The business processes enabled by IT systems
can be internal processes and external processes. Examples of internal processes
are the movement of raw materials within a company, the timekeeping and labor
management of workers, the dissemination of employee information such as health
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point at which e-business can be applied. E-business can streamline or reduce
costs along any of these interactions within the supply chain.
o B2B – A Part Of E-Business. B2B is the sale of products or services between a
business buyer and a business seller that is electronically enabled by the
Internet. In B2B sales, neither buyer nor seller is an end-user customer. B2B
transactions between supplier and buyer conducted via the Internet offer many
advantages to both parties. Internet based transactions offer a wider potential
order into the computer system, mailing documents to initiate the order, entering
receipt of goods, and the keying of documents to initiate payment. This
eliminates data errors since data may longer be manually keyed into the system.
When comparing B2C and B2B, the following is true of B2B:
• The order would have many line items and the dollar amount of each sale is
usually large.
• A B2C sale might be a single item, while a B2B sale might be tons of raw
➢ E-Business Enabling Examples. The Internet can be used in so many different
ways to streamline business processes, reduce operational costs, and enhance
efficiency that it is difficult to describe the entire range of e-business possibilities.
Some examples are:
▪ General Electric using e-business to affect the four areas of “buy, make, sell,
and strategic”.
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reactions to advertisements.
➢ Intranets And Extranets To Enable E-Business. An intranet is a private network
accessible only to the employees of a particular company. The purposes of an
➢ Internal Controls for the Internet, intranets, and extranets. Customers, suppliers,
and employees need different levels of access, and access to different types of data.
➢ XML And XBRL As E-Business Tools. XML is eXtensible Markup Language. XML
is a rich language designed specifically to facilitate the exchange of Web
documents. Using XML, designers create customized data tags that enable the
definition, transmission, validation, and interpretation of data between applications
and between organizations via Web pages. Internet EDI (referred to as EDIINT)
uses the Internet to transmit business information between companies. There are
XBRL is eXtensible Business Reporting Language, which is a XML-based markup
language developed for financial reporting. XBRL provides a standards-based
method to prepare, publish, reliably extract, and automatically exchange financial
statements. Using XBRL, dynamic financial statements can be published and
➢ The Ethical Issues In E-Business And E-Commerce. The online privacy
principles within the AICPA Trust Services Principles address the ethical obligation
for management to treat customer information with due care. Companies should
honestly and fully disclose to customers the data they will collect, how they will
protect it, use it, and share it. Management has an ethical obligation to create and
enforce policies and practices that insure private customer data is not misused.