554 Making Key Strategic Decisions
a computer outside of the company. Remember, the Internet is just one large
party line on which everybody is sending around data.
One manufacturing company provides an intranet facility for its employ-
ees to learn about their health, life and disability insurance, and educational
benefits. The system allows them to sign up for these programs and, in the fre-
quently asked questions (FAQs) section, to inquire about some of the most
common issues specific to the programs. When online, employees can also ac-
cess and sign up for a list of in-house training courses, read an employee
newsletter, and check the current price of the company’s publicly traded stock.
An extranet is a version of the intranet that allows external users to access
data inside of the firewall. For example, part of Wal-Mart’s ordering and logis-
tics system allows its vendors and suppliers to access Wal-Mart’s store sales
data directly from Wal-Mart’s computer systems. If these transactions oc-
curred over the Internet, they would be referred to as extranet transactions.
ELECTRONIC COMMERCE
Electronic commerce is changing the entire landscape in how business is
transacted. While most consumers think just about business to consumer
(B2C) e-commerce, the greatest potential lies in business-to-business (B2B)
e-commerce. International Data Corporation estimates that B2C e-commerce
will generate $300 billion annually by 2004, but B2B e-commerce will generate
$2.2 trillion annually by 2004. Most of the focus of the investor community
during 1999 and 2000 was on the B2C space, with millions of dollars made and
lost as a result of people not understanding the business model. Most of the
money raised in venture capital was used for advertising to gain brand recogni-
tion, whereas very little was invested in infrastructure. As a result, the B2C
landscape is littered with the corpses of failed ventures. Those that have sur-
vived are spending money on the traditional back office functions that brick
and mortar retailers have developed over the years.
All the while, bricks-and-mortar retailers have been experimenting in
selling on the Internet and have adopted a hybrid model for doing so. Cus-
tomers are able to order over the Internet, but they can also return merchan-
dise to traditional stores. The Internet can also make a significant difference
when products, such as music and software, can be ordered—and delivered—
electronically.
These new opportunities create new challenges for those involved in the
operations, accounting, and finance of these virtual-marketplace companies.
The order is being not only processed electronically but also shipped automati-
cally, sometimes from a third party’s fulfillment center. Also, the payment
is being processed electronically. The electronic payment, usually through a
third-party clearance house, must conform to various security standards in
order to protect credit card information that is transmitted over the Web. Fre-
quently, the company selling the goods never receives the credit card number