Electronic Commerce

Meaning of E-Commerce: Electronic commerce is defined as the use of electronic data

transmission to implement or enhance any business process. E-Commerce is a new way of
conducting, managing, & executing business transactions using computer &
telecommunications networks. Electronic commerce is expected to improve the productivity
& competitiveness of participating businesses by providing unprecedented access to an online global marketplace with millions of customer & thousands of products & services.
Frequently people use ecommerce to refer commerce on the Internet or Web because they are
the most extensive data transmission networks. The more generic definition includes
electronic funds transfers which most bank customers use at their ATM, as well as electronic
data interchange in business to business communications or intranet and extranet networks. It
provides participating companies with new, more cost & time efficient means for working
with customer, suppliers & development partners.
The internet & related technologies & e-commerce websites on the world wide web &
corporate intranets & extranets serve as the business & technology platform for e-commerce
marketplaces for customers & businesses in the basic categories of business to consumer
(B2C), business to business (B2B) and customer to customer (C2C) ecommerce. The
essential processes that should be implemented in all ecommerce applications access
control & security, personalizing & profiling, search management, payment system,
workflow management, and collaboration & trading.
# Scope of Ecommerce: The range of business process involved in marketing, buying,
selling & servicing of products or services in companies that engage in e-commerce.
Companies involved in e-commerce as either buyers or sellers rely on internet based
technologies & ecommerce applications & services to accomplish marketing, discovery,
transaction processing, product & customer service processing. For e.g. electronic commerce
can include interactive marketing, payment & customer support processes at e-commerce
catalog & auctions sites on the www. But ecommerce also includes e-business process such
as extranet access of inventory databases by customer & suppliers (transactions processing),
intranet access of customer relationship management system by sales & customer service
reps (service & support), & customer collaboration in product development via e-mail
exchanges & internet newsgroups (marketing/discovery). Many companies today are
participating in or sponsoring three basic categories of electronic commerce applications:
business to consumer (B2C), business to business (B2B) & customer to customer (C2C)
ecommerce.
E-Commerce Process-:
[1] Access Control & Security: E-Commerce processes must establish mutual trust &
secure access between the parties in an e-commerce transaction by authenticating users,
authorizing access, & enforcing security features For e.g. these processes establish that a
customer & e-commerce site are who they say they are through user names & passwords,
encryption keys, or digital certificates & signatures. The ecommerce site must then authorize
access to only those parts of the site that an individual user needs to accomplish his or her
particular transactions. Thus, you usually will be given access to all resources of an
ecommerce site except for other peoples account, restricted company data & webmaster
administration areas.
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[2] Profiling & Personalizing: Once you have gained access to ecommerce site, profiling
processes can occur that gather data on you & your websites behavior & choices, & build
electronic profiles of your characteristics & preferences. User profiles are developed using
profiling tools such as user registration, cookie files, website behavior tracing software &
user feedback. These profiles are then used to recognize you as an individual user & provide
you with a personalized view of the contents of the site, as well as product recommendations
& personalized web advertising as part of a one to one marketing strategy. Profiling
processes are also used to help authenticate your identify for account management &
payment purposes & to gather data for customer relationship management, marketing
planning & website management.
[3] Search Management: Efficient & effective search process provides a top ecommerce
website capabilities that help customer find the specific product & service they want to
evaluate or buy. E-commerce software packages can include a website search engine
component, or a company may acquire a customized e-commerce search engine from search
technology companies like Excite & Requisite technology. Search engines may use a
combination of search techniques, including searches based on content (a product description
for e.g.) or by parameters (above, below or between a range of values for multiple properties
for a product, for e.g.)
[4] Content & Catalog Management: Content management software helps ecommerce
companies develop, generate, deliver, update, & archive text data & multimedia information
at e-commerce websites. E-commerce content frequently takes the form of multimedia
catalogs of product information. So, generating & managing catalog is a major subset of
content management. Content & catalog management software work with the profiling tools
to personalize the content of web pages seen by individual users. Finally, content & catalog
management may be expanded to include product configuration processes that support webbased customer self service & the mass customization of a companys products.
[5] Workflow Management: Many of the businesses process in ecommerce applications can
be managed & partially automated with the help of workflow management software. Ebusiness workflow systems for enterprise collaboration help employees electronically
collaborate to accomplish structured work tasks within knowledge based business processes.
Workflow management in both e-business & ecommerce depends on a workflow software
engine containing software models of the business processes to be accomplished. The
workflow models express the predefined sets of business rules, roles of stakeholders,
authorization require for each ecommerce process. Thus, a workflow system ensures that the
proper transactions, decisions & work activities are performed & the correct data &
documents are routed to the right employees, customer, suppliers & other business
stakeholders.
[6] Event Notification: Event notification includes notifying a companys management so
they can monitor their employees responsiveness to ecommerce events & customer &
supplier feedback. Most ecommerce applications are event driven systems that respond to a
multitude of events from a new customers first websites access, to payment & delivery
processes & to innumerable customer relationship & supply chain management activities.
They is why event notification processes play an important role in ecommerce systems, since
customer, suppliers, employees & other stakeholders must be notified of all events that might
affect their status in a transactions. Event notification software woks with the workflow
management software to monitor all ecommerce processes & record all relevant events,
including unexpected changes or problems
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[7] Collaboration & Trading: This major category of ecommerce processes are those that
support the vital collaboration arrangements & trading services needed by customer,
suppliers & other stakeholders to accomplish ecommerce transactions. The essential
collaboration among business trading partner in ecommerce may also be provided by internet
based trading system.
# Electronic Commerce Threats: Electronic commerce threats involve security throughout
the commerce chain, including the client computers, the messages traveling
on the channel communication, both the Web and commerce server, and any
hardware attached to those servers. Active content refers to programs that are
embedded transparently in a clients Web pages that engender some action to
occur such as moving graphics or downloads and play audio. Malicious active
content delivered by means of Internet coolies can reveal the contents of clientside files. The designer language of active contents called Java Script can be
used maliciously to destroy the hard disk, disclose e-mail contents or send
sensitive information to a particular Web server on the Internet.
Cyber vandalism and masquerading pose serious integrity threats to Web sites. The
former violation involves electronic defacing of an existing Web site while the latter is
pretending to be the Web site of another entity to spread misinformation or fraud. Slowing
or disrupting a computer process such as an ATM can render the service unusable or
unattractive to consumers, which is a threat to the necessities of the system.
The server is a vulnerable threat through its own software, or backend programs
containing data, or through common gateway interface programs or utility programs residing
on the server. Web servers can be structured to run at various privilege levels, which permit
varying degrees of flexibility and convenience to the user. High privilege levels may be able
to execute all machine instructions and have unrestricted access to any part of the system. A
malevolent person trying to compromise the system could execute instructions in the high
privilege mode, which would be very costly to the organization.
# Emergence of Internet: The internet originated in the early 1960s with the US department
of defense as ARPNET. Actually that a designed as a method of secure communities in the
event of a national disaster or nuclear war. The role of this network was explained to the
universities, which were benefiting from defense department grants which were used for
researches & scientific development & other engineering work. Later on this network is
came under the control of the National Science Foundation (NSF), which originally
prohibited the commercial use of the network. However by 1989, the NSF permitted 2
commercial Email services, MCI & CompuServe to establish limited connection to the
internet for the sole purpose of exchanging Email transmission. During 1995, the internet
was opened for full commercial use & the no. of internet hosts grew from 5 million in 1995
to 50 million in 1999. This explosive growth of hosts to the internet created a vast marketing
potential for most businesses. The www & html code, which make web service possible, was
the necessary component to actualize this market potential. The web represents a way of
organizing information storage & retrieval to make the internet easier to use.
1. Commercial use of Internet: As personal computer became more powerful, affordable
and available during the1980s, companies increasingly use them to construct their own
internal network which included email software that enabled the employees to send
messages; businesses wanted their employees to be able to communicate with people outside
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their corporate networks for promoting business. But the national science foundation (NSF)
prohibited commercial network traffic on its networks and so businesses turned to
commercial email services providers to handle their email needs. Large firms build their own
network that used leased telephone lines to connect field offices to corporate headquarters.
In 1989, the NSF permitted 2 commercial email services, MCI mail and CompuServe
to establish limited connections to the internet for the sole purpose of exchanging email
transmission with users of the internet. These connections allowed commercial enterprises to
send email directly to internet addresses and allowed members of the research and education
committees on the internet to send email directly to MCI mail and CompuServe addresses.
The NSF justified this limited commercial use of internet as a service that would primarily
benefit the internet non commercial users.
2. Growth on Internet: The internet was a phenomenon that truly sneaked into a
unsuspecting world. The researcher who had been so involved in the creation and growth of
the internet just accepted it as a part of their working environment. People outside the
research community were largely unaware of the potential offered by a large interconnected
set of computer networks.
Within 30 years the internet became one of the most amazing technological and social
accomplishments of the 20th century. Millions of people are using today this complex,
interconnected network of computers. These computers run thousands of different software
packages. Every year, billions of dollars change hands over the internet in exchange in all
kind of products and services. All of this activity occurs with no central coordination point or
control, which is specially interesting, given that the internet began as a way for the military
to maintain control while under attack.
The opening of internet to business activities helped increase the internets growth
dramatically; however, there was another development that work hand in hand with the
commercialization of internet to spur its growth. That development was www.
Advantage/Benefits of Ecommerce:
A. Benefits to Organization:
Expands the marketplace to national and international markets.
Decrease the costs of creating, processing, distribution and reviewing paper based
information
Allow reduced inventories and overhead by facilitating pull type supply chain
management.
The pull type processing allows customization of products and services which provides
competitive advantage to its implementers.
Reduces the time between the outlay of capital and the receipt of product and services.
Support business processing reengineering (BPR) efforts.
Lowers telecommunication costs the internet is much cheaper than value added networks
(VANs).
B. Benefits to Consumers:
Enables consumers to shop or do other transactions 24 hours a day, all year round from
almost any location.
Provides consumers with more choices
Provides consumers with less expensive products and services by allowing them to shop in
many places and conduct quick comparison.
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 Allow quick delivery of products and services (in some case) especially with digitized
products.
Consumers can receive relevant and defined information in seconds, rather than days or
weeks.
Makes it possible to participate in online auctions.
Allows consumers to interact with other consumers in electronic communities and
exchange ideas as well as compose experiences.
Facilitates competition which results in substantial discounts.
C. Benefits to Society:
Enables more individual to work at home and to do less traveling for shopping, resulting in
less traffic on the roads, and lower air pollution.
Allows some merchandise to be sold at lower prices, benefiting less affluent people.
Enables people in third world countries and rural area to enjoy products and services which
otherwise are not available to them.
Facilitates delivery of public services at a reduced cost, increases effectiveness and
improves quality.
Disadvantages of Electronic Commerce: Most of the disadvantages of e-commerce today
however, stem from the newness and rapidly developing pace of the underlying technologies.
Businessman often calculates the return on investment before commitment to any new
technology. This has been difficult to do with e-commerce, since the costs and benefit have
been hard to quantify. Costs, which are a function of technology, can change dramatically
even during short lived e-commerce implementation projects because the underlying
technologies are changing rapidly. Many firms have had troubled in recruiting and retaining
employees with technological, design and business process skills needed to create an
effective e-commerce atmosphere. Another problem facing firms that want to do business on
the internet is the difficulty of integrating existing databases and transaction processing
software design for traditional commerce into a software that enables ecommerce.
In addition to technology and software issue, many business face obstacles in
conducting ecommerce. Some consumers are still somewhat fearful of sending their credit
card number over the internet. Another consumer are simply resistant to change and are
uncomfortable viewing merchandise on a computer screen rather than in person. Customers
are unable to inspect the product through ecommerce. Cost/benefit of employing electronic
commerce is hard to quantify in traditional accounting terms for managers and investors to
grasp.
OR
Limitations/Disadvantages of E-Commerce: The limitations of e-commerce are divided
into 2 parts:
A. Technical limitations:
1. There is a lack of universally accepted standards for quality, security and reliability.
2. Software development tools are still evolving.
3. There are difficulties in integrating the internet and EC software with some existing
(especially legacy) applications and databases.
4. Especially web servers in addition to the network servers are needed (added costs).
5. Internet accessibility is still expensive and inconvenient.
B. Non-Technical Limitations:
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1. Lack of physical infrastructure.

2. Requirement of information technology
3. Language barriers
4. Lack/limited financial transaction system.
5. Trust- how to trust whether a website is authentic or not.
6. E-Commerce can still be considered as expensive transaction process when we are looking
at it from the perspective of third world countries.
7. Governmental rules and regulations not clear on electronic transactions.
Traditional commerce Vs electronic commerce: Traditional commerce involves
aggregating business activities such as transferring funds, placing orders, sending invoices,
shipping goods, and taking sales orders into elements such as market research, vendor
selection, site planning, sales promotion, and payment processing. Electronic commerce
employs electronic data transmissions to implement, enhance or integrate any business
activity.
Electronic Commerce vs. Electronic Business: Electronic Commerce is the use of
electronic transmission mediums (telecommunications) to engage in the exchange, including
buying and selling, of products and services requiring transportation, either physically or
digitally, from location to location. The term electronic commerce is restricting. It does not
fully encompass the true nature of the many types of digital information exchanges.
The term electronic business also includes the exchange of information not directly
related to the actual buying and selling of goods. Increasingly, businesses are using
electronic mechanisms to distribute information and provide customer support.
Business Models for Ecommerce:
Business Models: Business model can be defined as architecture for product, service and
information flow, including a description of business, player, their roles and revenue sources.
It is the method of doing business by which a company can sustain itself, i.e. generate
revenue. Business model spell out how a company makes money by specifying where it is
positioned in the value chain. In the new economy companies are creating new business
models and reinventing old models. However a business model doesnt discuss how the
business mission of the company will be realized. For e.g. some of the most popular revenue
generating model adopted are (i) charge fees for advertising (ii) sell goods & services (iii)
sell digital contents and (iv) charge for processing the transaction that occur between 2
parties on the web. E-Business Model can be classified as follows:
1.
E-Business model based on relationship of transaction parties
2.
E-Business model based on relationship of transaction types
3.
Classification by revenue model
4.
Classification by distribution channel
E-Business model based on relationship of transaction parties-4:
1. Business to Business (B2B) E-Commerce: is that model where by a company conducts
its trading and other commercial activity through the internet and the customer is another
business itself. This category of electronic ecommerce involves both electronic business
marketplaces & direct market links between businesses. This is supposed to be the huge
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opportunity area on the web. It is the wholesale & supply side of the commercial process,
where businesses buy, sell or trade with other businesses. B2B electronic commerce relies on
may different information technologies, most of which are implemented at eCommerce
websites on the www & corporate intranets & extranets. B2B application include electronic
catalog system, electronic trading system such as exchange & auction portals, electronic data
interchange, electronic funds transfer & so on. Companies need to setup a backbone of B2B
applications, which will support the customer requirements on the web. Many B2B ecommerce portals are developed & operated for a variety of industries by third party maker
companies called info-mediaries, which may represent consortiums of major companies.
For e.g. many companies offer secure internet or extranet e-commerce catalog
websites for their business customer & suppliers. Also very important are B2B e-commerce
portals that provide auction & exchange marketplaces for businesses. Others may rely on
electronic data interchange (EDI) via the internet or extranets for computer to computer
exchange of e-commerce documents with their business customer & suppliers.
Measure advantage of B2B:
1] Direct interaction with customers: This is the greatest advantage of e-business. The
unknown and faceless customer including other businesses, buying the products of a large
MNC like say HLL or proctor and gamble through the distributors, channels, shops and the
like, now has name, face and profile. Large MNCs pay a fortune for this information on
customer buying patterns.
2] Focused sales promotion: This information gives authentic data about the likes, dislikes
and preferences of clients and thus helps the company bring out focused sale promotion
drives which are aimed at the right audience.
3] Building customer loyalty: it has been observed that online customers can be more loyal
than other customers if they are made to feel special and their distinct identity is recognized
and their functions about privacy and respected. It has also been found that once the
customers develop a binding relationship with a site and its products, they do not like to shift
loyalties to another site or product.
4] Scalability: This means that the web is open an offer round the clock access. This
provides an access never known before, to the customer. This access is across location and
time zones. Thus, a company is able to handle many more customers on a much wider
geographical speed if it uses an e- business model. The company can set up a generic parent
sites for all location and make regional domains to suit such requirement. Microsoft is using
this model very successfully. The additional cost of serving larger segment of customers
comes down drastically once a critical mass is reached.
5] Saving in distribution cost: A company can make huge saving in distribution, logistic
and after sales support costs by using e-business models. Typically examples are of customer
companies, airlines and telecom companies. This is because the e-business models involved
the customers in the business interaction to such a level that companies are able to avoid
setting of the huge backbone of sale and support force, which ordinarily would have to be set
up.
Types of B2B Model:
1: Maintenance, Repair & Operating (MRO) Hubs: These hubs concentrate on goods
with low value. The transaction cost is relatively higher. These hubs provide value by
increasing the efficiency in the procurement process. These hubs use third party logistics
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supplier to deliver goods, thus enabling them to bypass existing middlemen in the channel.
For examples of hubs operating in this category are mro.com, bizbuyer.com.
2: Yield Managers: This type of E-market creates spot markets for common operating
resource like manufacturing capacity, labor or advertising. This functionality allows the
companies to expand or contract their operations at a short notice. Yield managers add great
value in situations where there is high degree of price and demand volatility, and where fixed
assets can not be liquidated or acquired quickly. Utility sector is one such example.
3: Exchanges: Online exchange allows purchasing managers to effectively manage peaks
and ebbs in demand and supply by allowing them to exchange commodities or near
commodities for production. These exchanges maintain relationships with buyer and sellers,
making it very convenient for business to conduct over exchanges. In many case buyers and
sellers never see each other. Paper exchange and e-steel are examples of this of E-market.
4: Catalog Units: These are industry specific hubs that bring many suppliers together at one
easy-to-use web site. These hubs automate the sourcing of non-commodity manufacturing
inputs and create value by reducing transaction costs. Catalog hubs can be either buyer or
seller focused for examples some hubs would work as distributors for suppliers while others
would work for buyers in their negotiations with sellers.
2. Business to Consumer (B2C) E-commerce: In this form of electronic ecommerce,
businesses must develop attractive electronic marketplaces to entice & sell products &
services to consumers. It serves end consumers with products and or services. It is often
associated with electronic commerce but also encompasses financial institutions and other
types of businesses. B2C relationships are often established and cultivated through some
form of Internet marketing. B2C includes retail sales often called e-retail and other online
purchases such as airline ticket, entertainment venue ticket, hotels room and shares of stock.
It also provides high value contents to consumer for a subscription fees. B2C e-business
model includes virtual malls which are websites that hosts many online merchants. It is
inexpensive and also has big opportunity. It reduces operational costs and is also customer
convenience.
Advantages of B2C e-commerce
Shopping can be faster and more convenient.
Offerings and prices can change instantaneously.
Call centers can be integrated with the website.
Broadband telecommunications will enhance the buying experience.
How does B2C work?
B2C ecommerce is more than just an online store. It really is about managing the
entire process, but just using technology as a tool for order processing and customer support.
The B2C process is explained as follows:
1] Visiting the virtual mall: The customer visits the mall by browsing the online catalogueA vary organized manner of displaying products and their related information such as price,
description and availability. Finding the right product becomes easy by using a key word
search engine. Virtual malls may include a basic to an advance search engine, product rating
system, content management, customer support system, bulletin boards, newsletters and
other components which make shopping convenient for shoppers.
2] Customer registers: the customer has to register become part of the sites shopper
registry. This allows the customer to avail of the shops complete services. The customer
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becomes a part of the companys growing database and can use the same for knowledge
management and data mining.
3] Customer buys products: Through a shopping cart system, order details, shipping
charges, taxes, additional charges and price total are presented in a organized manner. The
customer can even change the quantity of a certain product. Virtual mall have a very
comprehensive shopping system, complete with check-out form.
4] Merchant processes the order: The merchant then processes the order that is receipt
from the previous stage and fills of the necessary forms.
5] Credit card is processed: The credit card of the customer is authenticated through a
payment gateway or a bank. Other payment methods can be used as well, such as debit card,
prepaid cards, or bank to bank transfers.
6] Operations management: When the order is passed on the logistics people, the
traditional businesses operations will still be used. Things like inventory management, total
quality management, warehousing, optimization and project management should still be
incorporated even through it is an e-business. Getting the product to the customer is still the
most important expect of e-commerce.
7] Shipment and delivery: The product is then ship to the customer the customer can tract
the order- delivery as a virtual mall have a delivery tracking module on the web sites which
allows a customer to check the status of a particular order.
8] Customer receives: The product is received by the customer, and it is verified. The
system should then tell the firm that the order has been fulfilled.
9] After sale service: After the sale has been made, the firm has to make sure that it
maintains a good relationship with it customers. This is done through customer relationship
management or CRM.
Reasons why one should opt for B2C are:
1) Inexpensive costs, big opportunities: Once on the internet, opportunities are immense as
companies can market their products to the whole world without much additional cost.
2) Globalization: Even being in a small company, the Web can make you appear to be a big
player which simply means that the playing field has been leveled by e-business. The
internet is accessed by millions of people around the world, and definitely, they are all
potential customs.
3) Reduced operational costs: Selling through the Web means cutting down on paper costs,
customer support costs, advertising costs, and order processing costs.
4) Customer convenience: Searchable content, shopping carts, promotions, and interactive
and user friendly interfaces facilitate customers convenience, thus generating more business.
Customers can also see order status, delivery status and get their receipts online.
5) Knowledge management: Through database systems and information management, you
can find out who visited your site, and how to create, better value for customers.
# Challenges faced by B2C E-commerce: The two main challenges faced by B2C ecommerce are building traffic and sustaining customer loyalty. Due to the winner-take-all
nature of the B2C structure, many smaller firms find it difficult to enter a market and remain
competitive. In addition, online shoppers are very price-sensitive and are easily lured away,
so acquiring and keeping new customers is difficult.
A study of top B2C companies by McKinsey found that:

 Top performers had over three times as many unique visitors per month as the median. In
addition, the top performer had 2,500 times more visitors than the worst performer.
Top performers had an 18% conversion rate of new visitors, twice that of the median.
Top performers had revenue per transaction of 2.5 times the median.
Top performers had an average gross margin three times the median.
There was no significant difference in the number of transactions per customer and the
visitor acquisition cost.
Essentially, these masters of B2C e-commerce (Amazon, etc.) remain at the top because of
effective communication and value to the customer.
Classifications of B2C e-commerce-:
1. Online Intermediaries: Online intermediaries are companies that facilitate transactions
between buyers and sellers and receive a percentage of the transactions value. These firms
make up the largest group of B2C companies today. There are two types of online
intermediaries: brokers and infomediaries. An infomediary is a Web site that provides
specialized information on behalf of producers of goods and services and their potential
customers.
2. Advertising-based models: In an advertising-based system, businesses websites have an
inventory, which they sell to interested parties. There are two guiding philosophies for this
practice: high-traffic or niche. Advertisers take a high-traffic approach when attempting to
reach a larger audience. These advertisers are willing to pay a premium for a site that can
deliver high numbers, for example advertisements on Yahoo! or AOL. When advertisers are
trying to reach a smaller group of buyers, they take a niche approach. These buyers are welldefined, clearly identified, and desirable. The niche approach focuses on quality, not
quantity. For example, an advertisement on WSJ.com would chiefly be viewed by business
people and executives.
3. Community-based shrimp models: In a community-based system, companies allow
users worldwide access to interact with each other on the basis of similar areas of interest.
These firms make money by accumulating loyal users and targeting them with advertising.
4. Fee-based models: In a fee-based system, a firm is able to charge a subscription fee for
viewers to view its content. There are varying degrees of content restriction and subscription
types ranging from flat-fees to pay-as-you-go.
3. Consumer to Consumer (C2C) E-commerce: C2C electronic commerce involves the
electronically-facilitated transactions between consumers through some third party. In this
model consumer sell directly to other consumers via online classified ads on auctions, or by
selling personal services or expertise online. E.g. of consumer selling directly to consumer
are ebay.com (auctions) and TradeOnline.com (classified ads)
This type of e-commerce is expected to increase in the future because it cuts out the
costs of using another company. An example on how it could change in the future from
Management Information Systems, if you are driving around in a car, someone having a
garage sale can transmit to your GPS advertising their garage sale. This will reach a larger
population than just signs. (i) No quality control (ii) No payment guarantee (iii) Hard to pay
for using cheques, ATM cards, etc. but in the future this is likely to change.
A common example is the online auction, in which a consumer posts an item for sale
and other consumers bid to purchase it; the third party generally charges a flat fee or
commission. The sites are only intermediaries, just there to match consumers. They do not
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have to check quality of the products being offered. The huge success of online auctions like
eBay, where consumer as well as business can buy & sell with each other in an auction
process at an auction websites, makes this e-commerce model an important e-commerce
alternative for B2C, C2B, & B2B e-commerce. Electronic personal advertising of products
or services to buy or sell by consumers at electronic newspaper sites, consumer e-commerce
portals, or personal websites is also an important form of C2C e-commerce.
4. Business to Government (B2G): (B2G) is a derivative of B2B marketing and referred to
as a market definition of "Public Sector Marketing" which encompasses marketing products
and services to the U.S. Government through Integrated Marketing Communications
techniques such as strategic public relations, branding, marcom, advertising, web-based
communications to Uncle Sam.
According to Gal Borenstein, CEO of The Borenstein Group (Fairfax-Based B2G
Marketing Communications Firm), [1], the majority of government spending has been focus
on fulfilling three mission areas identified in the Presidential Management Agenda (PMA)
of current and past presidents: [2]
1. Empower government agencies with better Business Process to help make it more
efficient. 2. Become a better customer-service provider to Public Citizen and promote visible
accessibility to public records via electronic records management. 3. Create visible
accountability by reducing disparate systems and centralizing functions that can be reengineered to be measured, accounted for, and controlled by tighter oversight and controls.
Consumer to Business: The C2B model, also called a reverse auction or demand collection
model, enables buyers to name their own price, often binding, for a specific goods or service
generating demand. The websites collects the demand bids and then offers the bids to the
participating sellers. Reverse auction.com and priceline.com are e.g. of C2B business
models.
E-Marketing: E-marketing can include any Internet-based promotion, including websites,
targeted e-mail. Internet bulletin boards, site where customers can dial-in and download files,
and so on. The term does not have a strict meaning though, and many marketing managers
use it to describe any computer-based marketing tool.
The accelerating confluence of traditional print and broadcast media with new digital
media like the Internet has created dynamic new channels for markets. At the same time,
advertisers have begun demanding greater economic efficiency in reaching target customers.
The Internet is changing the design and implementation of marketing strategies. This
dynamic technology provides marketers with efficient and powerful methods of designing,
promoting, and distributing products, conducting research, and gathering market
information.
Traditional Vs Internet Marketing:
1.
In TM the contents is static. In IM the content is dynamic.
2.
TM has limited reach, IM has global reach.
3.
TM requires a lot of preparation time, an IM campaign can be implemented much
faster because it is much simpler.
4.
TM is hard to measure effectiveness; IM allows you to measure everything.
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5.
In TM you pay for the publication it doesnt matter if the prospects saw your message
or not, in IM with pay per click (PPC) you pay only when your prospects enters your sight.
6.
TM requires big investment; IM can be adjusted at an affordable budget.
Traditional Marketing: Traditional Marketing is a social and managerial associated with
the process of researching, developing, promoting, selling and distributing a product or
service. Marketing is an organizational function and a set of processes for creating,
communicating and delivering value to customers and for managing customer relationship in
ways that benefits the organization and its stakeholders.
Traditional marketing seems to fall far short of three features. There are certain problems
associated with it, which can be listed as follows:
1.
Traditional marketing is often expensive. It can cost a lot of money to produce and
print broachers, product sheet, and catalogues. It is also expensive to keep support
personnel on hnd to answer inquires from customers, and it costs a lot of money in postage
and shipping fees to send information to prospective customers.
2.
Traditional marketing can be a very time-consuming process. Mistakes have to be
corrected; you have to go back to the ad agency or printer to revise, add or delete, and you
often have to wait for months for an ad that you have place to appear in a publication.
3.
Traditional marketing often has a hit and miss quality. Marketers often send out bulk
of mails to customers and yet receive a tiny response. Moreover they feet that they do not
cater to the taste of the customers or rather that they do not come across the right customer.
Business has always made their presence felt by establishing shops, factories,
warehouse, and office buildings. An originations presence is the public image it presents to
its stakeholders. The stakeholders of a firm include its customer, suppliers, employees,
stakeholders, neighbors, and the general public. Companies tend not to worry much about
the image they project until they make their mark. Initially, they focus only on their survival.
Online Marketing: Online marketing means using the power of online networks, computer,
communications, and digital interactive media to reach your marketing objectives. Online
marketing will not replace traditional forms of marketing anyway. Instead, it will both add to
and subtract from todays marketing mix. It will add more interactivity. But it will subtract
costs. It will add more customer choices. But it will remove marketings dependence on
paper. It will add information value to products and services. But it will take away barriers
to starting a business ort extending a business into international markets. And most
importantly, it will turn upside down some ald notions e have held of what marketing is all
about. Three new market segments are:
1. Cyber buyers: These are professionals who spend a good deal of time online, mainly at
their places of businesses. These professionals often have to make complex purchasing
decision that requires reams of data and difficult to locate sources of supply, all within a tight
time frame. That is a perfect fit with the capabilities of online technology.
2. Cyber consumers: These are the home computer users wired up to commercial online
services and the Internet. The group represents the pot of gold, and marketers simply need to
ways to make it more attractive to shop and buy online than to go to the local store.
3. Cyber surfers: They use online technology to expand their horizons, challenge their
abilities, and for fun. This segment is typically younger, and possesses shorter attention
spans. Some of the important aspects of marketing are advertising, sales security of the

12

transactions and the mode of payment used for payments. And all of these have had to adapt
and change themselves according to the demands of the Internet.
How Should Buyers Pay Online?
The marketplace, as usual, is responding quickly to this concern. A few basis models or
approaches to net-based sales transactions are beginning to come into focus. They are:
1.
The consumer, responding to net-based marketing presentation, sends in a cheque or
calls and verbally transmits a credit card number, over the merchants telephone. This is a
fairly traditional approach, and financial transaction takes place on the Internet.
2.
The consumer (1) sets up an account with a merchant or a third party organization,
(2)Leaves his or her credit number by means other that the Internet, and(3) gives the
merchant the authorization to bill the account, whenever the consumer chooses to buy
something.
3.
The consumer leaves his or her credit card number on an unsecured online order from.
With this approach, the consumer is put at some risk that the credit card number will be
compromised, but the risk is perhaps not much than giving it out over the phone.
4.
The consumer uses a secure client software program to transfer his or her encrypted
credit card number to a secure merchant server.
5.
The consumer exchanges traditional currency for some form of digital currency, and
then spends units of the currency whenever and wherever he or she likes. This requires
some from of electronic wallet to hold the currency and account set up between the
currency provider and the participating merchants.
Advantages of Online Marketing
1.
Online marketing offers bottom-line benefits that tie in directly to the demands placed
on the organization trying to make transition into the new economy.
2.
Online marketing can save money and help you stretch your marketing budget.
Electronic various of catalogues, brochures, and specification sheets do not have to be
printed, packaged, store, or shipped. These can be updated online, and hence you need not
have to send them back to the printer for changes. This saves a lot of money.
3.
Online marketing can save time and cut steps from the marketing process. Marketers
no longer have to wait for one of their sales representatives to give them the desired
information.
4.
Online marketing gives customers another way to buy, while enabling them to take
control of the purchasing process. Today, customers want more. They want more
information about the products they buy, more input into the product itself, and support
after the sale.
5.
Online marketing can be information-rich and interactive. It appeals to informationhungry buyers and analytical buyers.
6.
Online marketing can offer you instant international reach and indeed, online networks
have created an instant global community.
7.
Online marketing can lower barriers to entry and offer equal opportunity for access.
The online world is a great leveler. And online marketing helps to lower many of the
marketplace barriers that have held some would-be entrepreneurs from full participation in
the free market system.

13

E-Advertising: Advertising is a message from a company (the advertiser) to potential

customers that attempts to influence or reinforce the customers' attitudes and/or behavior
toward purchasing the advertiser's products or services, or towards obtaining more
information, including further marketing messages. Advertisers hoped that potential buyers
would remember their slogan or jingle long enough to make a trip to the store and purchase
the product.
Electronic advertising is probably the best method to advertise on the internet, as
people visit sites & pages and download whatever materials is in them only if they want to.
Banners ads are common on such free services, such as search engines and web based email
accounts which is a service to internet community, as those free services would not without
the income from those advertisements.
This has changed with the advent of interactivity. The new concept of interactivity has
overpowered the traditional concept of advertising, by putting the buyer in the drivers seat.
Interactivity allows consumers to increase their control over the buying process. We are all
deluged with an overflow of data. We long for a sense of mastery over the information that
washes over us. Given the opportunity, we will be more selective about the kind of
information we choose to receive. I interactivity give us that option. Thus, the audience is not
captive any more, and the marketers would have to work harder than before to entice them.
The marketing efforts will have to be information-rich and user-friendly.
Web-bases advertising has become an important part of a companys media mix
Numerous companies are committing large advertising budgets to the Internet.
Following are the reasons for the growing importance of e-advertisements:
1.
People increasingly prefer to surf the internet rather than watch TV.
2.
The target audience goes to the advertising, rather than the other way around.
3.
Development of business search engines by companies such as C2B Technologies,
which aim to link buyers with online bargain sites for over a million products for
comparison-shopping purposes.
4.
Yahoo! has a business unit which offers contests and prizes to online participants,
which drive players to the websites of different clients.
5.
The growth of e-business. Del computers, for example, estimate that by 2005, 85
percent of its sales will be through the Internet.
6.
The Internet is not geographically restricted. Amazon.com sells 20pecent of its books
to foreign destinations, whereas a physical book store serves an area of only a few square
miles.
Various means of Advertising:
1. E-mail: The advantage of e-mails are its low cost and its ability to reach a wide varity of
targeted audiences. Most companies develop a customer database, to whom they send emails. E-mail is emerging as a marketing channel that affords cost-effective implementation
and batter quicker response rates than other advertising channels. Marketers should be racing
to embrace the medium. Sometimes, it may also happen the whenever marketer starts
inundating prospects and customers with e-mail, the consumers may react negatively.
2. Mini-sites. Pop-ups: These ads burst upon the screens, allowing companies such as Volvo
and SmithKline Beechams oxy acne medicine to dosh up games and product information.
Mini-sites allow advertisers to market without sending people away from the site they are
visiting. This type of advertisers to market without sending people away from the site they

14

are visiting. This type of advertising also gets higher click rates. Sometimes, these can be
intrusive and annoying.
3. Partnerships: While many offline companies arrange partnerships, the use of partnership
is more pervasive un the New Economy. Similar to the manner in which complementary
companies often collaborate to push a new technology, web companies often partner with
complementary sites to quickly provide a more value-enhanced service to site visitors. One
prevailing strategy is to select a customer niche and provide services that encompass the
customers entire needs in that area.
4. Providing Information: The Web allows sites to instantly offer information that is
relevant to their customer base. Many sites provide instantly accessible information to their
customers as form of marketing and product differentiation. The e-commerce market for
travel is very competitive, with many well-funded players. Sites try to differentiate
themselves by offering vast amounts of information to their customers. Travel information
can range from top restaurant and hotel information targeted towards expense account
business travelers, to time-sensitive travel information to budget-minded leisure travelers.
5. Banner Swapping: Banner swapping is nothing but a direct exchange of links between
websites. To be precise, company A may agree to display a banner of company B in
exchange for company B displaying company As banner
The Browsing Behavior Model: The customer behavior while interacting with an
ecommerce site has impact on the IT resources of the site and on the revenue of the e-store.
Thus, it is important to be able to characterize the behavior of customer or groups of
customers of an ecommerce site. The customer model captures elements of user behavior in
terms of navigational patterns, e-commerce functions used, frequency of access to the
various e-commerce functions, and times between access to the various services offered by
the site. A customer model can be used for navigational and workload predication, so that
websites can be modeled.
Browsing Behavior Model of an Online Video Store: Let us use an example of an online
video store to give an informal introduction to the user behavior model of an e-commerce
site. Consider an online video store in which customers can perform the following functions;
1.
Connect to the home page and browse the site by following likes to bestseller videos
and promotions of the week per video category.
2.
Search for titles according to various criteria including keywords and title.
3.
Select one of the videos that results from a search and view additional information
such as a brief description of the products, price, shipping time, ranking and reviews.
4.
Register as a new customer of the virtual video store. This allows the user to provide a
username and a password, payment information, mailing address, and e-mail address for
notification of order status and videos of interest.
5.
Login with a username and password.
6.
Add items to the shopping cart
7.
Pay for the items added to the shopping cart.
Thus, during a visit to the online video store, a customer issues requests that will cause
these functions to be executed. For example, a customer may cause a search to be executed
by submitting a URL that specifies the name of an application to be run the server through a
server Application Programming Interface (API) and the keywords to be used in the search.

15

The application will then execute a search in the site database and return an HTML page
with all the video that match the search criteria.
A customer may be classified as being in different states, according to the type of
function requested during a session. For example, the customer may be browsing, searching,
registering as a new customer, logging in, adding videos to the shopping cart, selecting the
result of a search, or paying for the order. The possible transitions between states depend on
the layout of the site.
Browsing Behavior Model Graph (BBMG): This model is in the form of graph and is
called the Browser Behavirour Model Graph (BBMG).
1. Entry: This is a special state that immediately processed a customers entry to the online
store. This stage is part of the BBMG as a modeling convenience and does not correspond to
any action initiated by the customer.
2. Home: this is the state a customer is in, after selecting URL for the sites home page.
3. Login: A customer move to this state after requesting a login to the site. Sometimes, even
a home page may ask him to login.
4. Register: To have an account created by registering with the online video-store, the
customer selects the proper link for the registration page, thus making a transaction to the
register state.
5. Search: A customer goes to this section after issuing a search request.
6. Browse: this is the state reached after a customer selects one of the links available at the
site to view any of the pages of the site. These links include the list of best sellers and weekly
promotion.
7. Select: A search returns a list of zero or more link to videos. By selecting one of these
links a customer moves to this state.
8. Add to cart: A customer moves to this stage upon selecting the button that adds a
selecting video to the shopping cart.
9. Pay (billing): When ready to pay for the items in the shopping cart, the customer moves to
the billing section.
10. Exit: Customers may leave the sites from any state. Thus, there is a transition from all
states, except the entry state, to the exit state.
Various businesses that can flourish on the internet:
1. Banking: The advent of automated teller machine has long extended banking into the
realm of computer-network-enabled services. Now, online banks are being setup exclusively
to serve client through the internet, with the full range of banking services-deposits,
withdrawals, fund transfer, loans and other form of transactions. Simultaneously, online
financial services are being offered by other companies, bringing investment opportunities to
customers. And several companies are offering e-cash services.
2. Databanks: IN the information economy, pure data is emerging as a hot commodity with
the ease and low cost of delivery information over the internet pushing down prices, datavenders are building profitable businesses in the market-space. Convenient mechanisms for
searching databases are making information services user-friendly as well. And importantly,
businesses are also springing up to enable data shoppers to hunt for the information they
need, in the form of search engines which search millions of document on the internet to
track down information.

16

3. Music: Since, it is recorded and stored digitally; music as well as the other audio product
is the perfect product for distribution over the internet. Instead of buying cassettes or CDs,
customer can simply download the recording from the sites. The worlds top music levels are
setting up websites form which internet shopper can buy their favorite pieces. They are also
creating customer involvement by setting up virtual communities of music aficionados who
can access sample, trivia, and other value added information, such as lyrics and scores,
directly through the internet.
4. Retailing: Two genres of online shopping mall are being setup by digital entrepreneurs.
The first consist of multimedia catalog which shopper can down load through the internet
without taking physical delivery. The second verity is a super market service that offer
getaways to the websites of scores of other shops, acting as a single window for virtual
suppers. With electronic payment systems becoming secure, customer will soon complete
entire retailing transaction on the internet.
Extras:
Internet Marketing: Internet marketing, also referred to as online marketing, Internet
advertising, or e-Marketing, is the marketing of products or services over the Internet. When
applied to the subset of website-based advertisement placements, Internet marketing is
commonly referred to as Web advertising (also Webvertising) and Web marketing.[citation
needed] The Internet has brought many unique benefits to marketing, one of which being
lower costs for the distribution of information and media to a global audience. The
interactive nature of Internet marketing, both in terms of providing instant response and
eliciting response, is a unique quality of the medium. E-marketing is sometimes considered
to have a broader scope since it refers to digital media such as web, e-mail and wireless
media, but also includes management of digital customer data and electronic customer
relationship management systems (E-CRM systems).
Internet marketing ties together creative and technical aspects of the Internet,
including design, development, advertising, and sales. Internet marketing methods and
strategies encompass a wide range of services:
Internet marketing does not simply entail building or promoting a website, nor does it
mean placing a banner ad on another website. Effective Internet marketing requires a
comprehensive strategy that synergizes a given company's business model and sales goals
with its website function and appearance, focusing on its target market through proper choice
of advertising type, media, and design.
Internet marketing also refers to the placement of media along different stages of the
customer engagement cycle through search engine marketing (SEM), search engine
optimization (SEO), banner ads on specific websites, email marketing and Web 2.0
strategies. In 2008 The New York Times working with comScore published an initial
estimate to quantify the user data collected by large Internet-based companies. Counting four
types of interactions with company websites in addition to the hits from ads served from
advertising networks, the authors found the potential for collecting upward of 2,500 pieces of
data on average per user per month.[1]
Advantage of Internet Marketing: Internet marketing is relatively inexpensive when
compared to the ratio of cost against the reach of the target audience. Companies can reach a
wide audience for a small fraction of traditional advertising budgets. The nature of the
medium allows consumers to research and purchase products and services at their own
17

convenience. Therefore, businesses have the advantage of appealing to consumers in a

medium that can bring results quickly. The strategy and overall effectiveness of marketing
campaigns depend on business goals and cost-volume-profit (CVP) analysis.
Internet marketers also have the advantage of measuring statistics easily and
inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured,
and tested. The advertisers either pay per web banner impression, per click (PPC), per play
(PPP), or per action accomplished. Therefore, marketers can determine which messages or
offerings are more appealing to the audience. The results of campaigns can be measured and
tracked immediately because online marketing initiatives usually require users to click on an
advertisement, visit a website, and perform a targeted action. Such measurement cannot be
achieved through billboard advertising, where an individual will at best be interested, then
decide to obtain more information at a later time.
Internet marketing as of 2007 is growing faster than other types of media.[citation
needed] Because exposure, response, and overall efficiency of Internet media is easier to
track than traditional off-line media through the use of web analytics for instance
Internet marketing can offer a greater sense of accountability for advertisers. Marketers and
their clients are becoming aware of the need to measure the collaborative effects of
marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising
medium. The effects of multichannel marketing can be difficult to determine, but are an
important part of ascertaining the value of media campaigns.
Limitations of Internet Marketing: Internet marketing requires customers to use newer
technologies rather than traditional media. Low-speed Internet connections are another
barrier: If companies build large or overly-complicated websites, individuals connected to
the Internet via dial-up connections or mobile devices may experience significant delays in
content delivery.
From the buyer's perspective, the inability of shoppers to touch, smell, taste or "try on"
tangible goods before making an online purchase can be limiting. However, there is an
industry standard for e-commerce vendors to reassure customers by having liberal return
policies as well as providing in-store pick-up services.
A survey of 410 marketing executives listed the following barriers to entry for large
companies looking to market online: insufficient ability to measure impact, lack of internal
capability, and difficulty convincing senior management.

18

Network Security:
Network Security:
Security issues become more complex in a network environment. We must ensure that
access to the network is controlled and that data is not vulnerable to attack during
transmission across the network. A security threats is defined as a circumstance, condition or
event with the potential to cause economic hardship to data or network resources in the form
of destruction, modification of data, denial of service or fraud, waste and abuse.
Client-server security uses various authorization methods to make sure that only valid
user and programs have access to information resources such as database.
Data and transaction security ensure the privacy and confidentially in electronic
message and data packets, including the authentication of remote users in the network
transactions for activities such as on line payments. The goals are to defeat any attempt to
assume another identity while involved with electronic mail or other forms of data
communication. Preventive measures include data encryption using various cryptographic
methods.
Network & Web site security risks-4:
1.
Denial of Service Attacks (DoS): It is an attack on a network that is designed to
disable the network by flooding it with useless traffic or activity. A distributed DoS attack
uses multiple computers to launch a DoS attack. While a DoS attack does not do any
technical damage, it can do substantial, financial damage to an e-business because every
second an e-business network or a website is down, it may lost in lost revenues.
The attacker first break into 100 or 1000 of random, en-secure computers on the
internet and install a attack programs. Thereafter, the target is attack from many places at
once; the traditional defenses just do not work, and the system crashes. In a distributed
attack there is no single source. The computer should shut down all connections except the
ones it knows to be trust worthy, but that doesnt work for a public internet site.
2.
Viruses: Viruses is a small program that inserts itself into other program files that then
become infected, just as a virus in nature embeds itself in normal human cells. The virus is
spread when an infected program is executed. The virus may include additional pay load
that triggers when specific conditions are met. For e.g. inability to boot, deletion of files, or
entire hard drives, inability to create or save files and thousands of other possibilities.
Viruses are generally introduced into a computer system via e-mail or by unauthorized
network access. Viruses e.g. include stealth, polymorphic, variants etc.
3.
Trojan Horse: It is a special type of virus that emulates a benign application. It
appears to do something useful or entertaining but actually does something else as well,
such as destroying files or creating a backdoor entry point to give and intruder access to
the system. A Trojan horse may be an email in the form of attachment or a downloaded
program. E.g. of Trojan horse are back Orifice, VBS/free link, and backDoor-G.

19

4.
Worms: It is a self replicating program that is self contained and doesnt require a
host program. The program a creates a copy of itself and cause it to execute; no user
intervention is required. Worms commonly utilize network services to propagate to other
hosts system. Worms e.g. includes VBS/loveletter, a VBS/Godzilla.worm and happy 99.
5.
Data modification: Sensitive and important data are modified during transfer.
Hackers try to correct data that may damage the interest of the legitimate party for example
a hacker changes a credit transaction amount from Rs.1000 to Rs.10.
6.
Information gathering: Using some scanning tools hackers collects the information
and creak them.
7.
Masquerade: The attacker pretends to be some legitimate server or company by
creating a website of similar address, thereby to collect information or insult a company.
Network/Networking: Two or more computers connected to each other form a
computer network. Based on its size, a network can be classified as LAN, WAN, MAN.
The medium used to connect them could be twisted pair, coaxial, wireless, etc. A network
protocol is the language used by the systems to talk to each other. Some of the common
protocols used are TCP/IP, Ethernet, ATM, etc. Client/Server is a computer network in which
the server is a powerful system with lots of resources and the client is a comparatively less
powerful. The client sends requests to the server, which processes it and sends back a reply.
A server can accept requests from many clients simultaneously.
# Emerging (Client server) Security Threats-2:
1.
Software Agents and Malicious Code Threats: The major threat to security for
running client software results because of the nature of the internet, clients programs
interpret data downloaded from arbitrary server from the internet. In the absence of check
on imported data, the potential exists for this data to subvert programs running on the
systems. The security threats arises when the downloaded data passes through local
interpreters (such as PostScript) on the client system without the users knowledge. A
smaller problem existed in the UNIX mail system where by a remote user, through various
escape sequences, could invoke the shell program (csh or sh) on the recipients machines.
This potential security breach has been plugged in most of the new mail system.
In short Client threat mostly arise from malicious data or code. Malicious code refers
to viruses, worms, Trojan hoses, logical bombs and other deviant software programs.
Malicious code is sometimes mistakenly associated only with stand alone PCs but can also
attack computer networks easily. In the latter case, actual costs attributed to the presence of
malicious costs have resulted primarily from system outages and staff time to repair the
system. Nonetheless these costs can be significant. Clients must scan for malicious data
and executable program fragments that are transferred from the server to the clients. It is
conceivable that the client may need to filter out data and programs known to be
dangerous. Although it is not possible to do so conclusively.
2.
Threats to Servers: It consists of impersonation, eaves dropping, denial of service,
packet replay and packet modification.
Hackers can use electronic eavesdropping to trap user name and unencrypted passwords
sent over the network. They can monitor the activity on a system continuously and
impersonate a user when the impersonation attack is less likely to be detected. Encryption
can prevent eavesdroppers from obtaining data traveling over unsecured network.

20

 Denial of service threats can also attacks servers, where a user can render the system unusable for legitimate users by hugging a resource or by damaging resources so that they
cant be used. The 2 common dental of service attack are service overloading and
message flooding.
Other sophisticated threats like packet replay and modification are harder to guard
against. Packet replay refers to the recording and retransmission of message packets in
the networks. This is a significant threats for programs that require authentication
sequences, because the hacker could replay legitimate authentication sequence message to
gain access to a secure system. It is frequently undetectable.
Packet modification is an integrity threat involving one computer intercepting and
modifying a message packets destined for another system. In many cases packet information
may not only be modified but its contents may be destroyed before the legitimate users can
see them.
To counter some of these servers threats, a new concept is emerging in the area of network
security on the internet called firewalls.
# The Firewall Concept: A firewall is a system that prevents un-authorized access to or
from a private network. It examines each message entering and leaving the network, and
allows only those authorized messages to pass through. It can be implemented in hardware,
software or both. A firewall helps to keep your computer more secure. It restricts information
that comes to your computer from other computers, giving you more control over the data on
your computer and providing a line of defense against people or programs (including viruses
and worms) that try to connect to your computer without invitation.
You can think of a firewall as a barrier that checks information (often called traffic)
coming from the Internet or a network and then either turns it away or allows it to pass
through to your computer, depending on your firewall settings.
In Microsoft Windows XP Service Pack 2 (SP2), Windows Firewall is turned on by
default. (However, some computer manufacturers and network administrators might turn it
off.) You do not have to use Windows Firewallyou can install and run any firewall that you
choose. Evaluate the features of other firewalls and then decide which firewall best meets
your needs. If you choose to install and run another firewall, turn off Windows Firewall.
Why Firewalls?/Importance: It prevents from denial of service attacks. It prevents illegal
modification/access of internet data. It allows only authorized access to inside network. It
prevents insider attacks on critical systems. A firewall as a barrier, checks information
coming from the Internet or a network and allows it to pass through to your computer,
depending on your firewall settings. It provides the means for implementing and enforcing
the network access policy. In effect, firewall provides access control to users and services. It
provides the ability to control access to site system. It can greatly improve network security
and reduce risks to hosts on the subnet by filtering inherently insecure services.
How does it work?
When someone on the Internet or a network tries to connect to your computer, we call that
attempt an "unsolicited request." When your computer gets an unsolicited request, Windows
Firewall blocks the connection. If you run a program such as an instant messaging program
or a multiplayer network game that needs to receive information from the Internet or a
network, the firewall asks if you want to block or unblock (allow) the connection. If you
21

choose to unblock the connection, Windows Firewall creates an exception so that the firewall
won't bother you when that program needs to receive information in the future.
For example, if you are exchanging instant messages with someone who wants to send
you a file (a photo, for example), Windows Firewall will ask you if you want to unblock the
connection and allow the photo to reach your computer. Or, if you want to play a multiplayer
network game with friends over the Internet, you can add the game as an exception so that
the firewall will allow the game information to reach your computer.
Although you can turn off Windows Firewall for specific Internet and network
connections, doing this increases the risk that the security of your computer might be
compromised.
Benefits of an Internet Firewall: Internet firewalls manage access between the internet and
an organizations private network.
1: Internet firewalls allow the network administrator to define a centralized choke point
that keeps unauthorized users such as hackers, crackers, vandals and spies, out of the
protected networks, prohibits potentially vulnerable services from entering or leaving the
protected network, and providers protection from various types of routing attacks.
2: Firewalls offer a convenient point where internet security can be monitored and alarms
generated.
3: An internet firewall is a logical place to deploy a Network Address Translator (NAT) that
can help alleviate the address space shortage and eliminate the need to re-number when an
organization changes its ISPs.
4: An internet firewall is the perfect point to audit or log internet usage. This permits the
network administrator to justify the expense of the internet connection to management.
Pinpoint potential bandwidth bottlenecks, and provide a method for departmental chargeback
if this fits the organizations financial model.
5: An Internet firewall can also offer a central point of contract for information delivery
service to customers. The internet firewall is the ideal location for deploying WWW and FTP
servers.
6: Some might argue that the deployment of an internet firewall creates a single point of
failure. It should be emphasized that if the connection to the internet fails, the organizations
private network will still continue to operate though the internet access is lost. If there are
multiple points of access, each one becomes a potential point of attack that the network
administrator must firewall and monitor regularly.
Firewall Components-4:
1.
Network Policy: There are 2 levels of network policy.
(i)
Service access policy: This policy should focus on internet specific use and perhaps
all outside network access as well. This policy should be an extension of an overall
organizational policy regarding the protection of information resources in the organization.
For a firewall to be successful this policy must be realistic and sound and should be drafted
before implementing a firewall.
(ii)Firewall design policy: It defines the rules used to implement the service access policy.
Firewall generally implement the following 2 basic designed policy.(a) Default permit: In
this, conditions are specified that will result in data being blocked; only host or protocol not
covered by these conditions will pass through default. It is simpler to use, easy to configure
and is more dangerous. (b) Default deny: The particular protocol allowed through and hosts
22

that may pass data or be contacted are specified; all other are denied. It tends to be more
secure.
2.
Advanced Authentication Mechanism: The external user should pass the firewall to
access internal hosts, so firewalls are good point for authentication. Advanced
authentication measures such as smart cards, authentication tokens, biometric and software
based mechanism are designed to counter the weaknesses of traditional passwords. The
passwords generated by advanced authentication devices cant be reuse by an attacker who
has monitored a connection. Advanced authentications are more practical and manageable
to centralize the measures at the firewalls.
3.
Packet Filtering: Packet filtering routers are designed for filtering packets, as they
pass between the routers interfaces. A packet filtering router usually can filter IP packets
based on the following fields. (i) Source IP addresses (ii) Destination IP Address (iii)
TCP/UDP Source Port (iv) TCP/UDP destination port.
Not all packet filtering router currently filter the source TCP/UDP port, though
vendors have now stated incorporating this capability. Filtering can be used in a variety of
ways to block connections from or to specific hosts or networks, and to block connection to
specific ports. A site may wish to block connection from all addresses external to the site.
4.
Application Gateways: To counter some of the weaknesses associated with packet
filtering routers firewalls needs to use software applications to forward and filter
connections for services such as telnet and FTP. Such an application is referred to as a
proxy service, while the host running the proxy service is referred to as an application
gateway. Application gateway and packet filtering routers can be combined to provide
higher level of security and flexibility than if either were used alone.
Types of Firewall:
1: Application Gateways: The first firewalls were application gateways, and are sometimes
known as proxy gateways. These are run with special software to act as a proxy server. This
software runs at the application layer of OSI Model. Clients behind the firewall must be
proxitized in order to use internet services.
2: Packet Filtering: Packet filtering is a technique whereby routers have ACLs (Access
Control Lists) turned on. By default, a router will pass all traffic sent it, and will do so
without any sort of restrictions. There is less overload in packet filtering than with an
application gateway, because the feature of access control is performed at a lower OSI layer.
3: Hybrid Systems: In an attempt to marry the security of the application layer gateways
with the flexibility and speed of packet filtering, some vendors have created systems that use
the principles of both. In some of these systems, new connections must be authenticated and
approved at the application layer. Other possibilities include using both packet filtering and
application layer proxies.
E mail: E mail or email stands for electronic mail. More and more companies and
individuals are making extensive use of e mail because it's cheap, fast, flexible, and reliable.
Any electronic document as well plain text can be sent over the Internet through e mail. Most
e mail systems have a text editor for users to enter text messages and attach other files to the
message. The e mail address is composed of two parts that are separated with the '@' sign.
The second part is the name of the server that hosts the user's electronic mail box and the
first part is the username on that server.

23

There are two kinds of e mail accounts Web based mail accounts and POP mail
accounts. Web based mail accounts, such as those provided by Yahoo!, need the user to log
on to the server whenever he or she wants to read or send emails. In the case of POP mail
accounts, the mails are downloaded to the user's computer using such software as Outlook.
Encryption & Decryption:
Encryption is the process of transforming information so it is unintelligible to anyone
but the intended recipient. Decryption is the process of transforming encrypted information
so that it is intelligible again. A cryptographic algorithm, also called a cipher, is a
mathematical function used for encryption or decryption. In most cases, two related
functions are employed, one for encryption and the other for decryption.
With most modern cryptography, the ability to keep encrypted information secret is
based not on the cryptography algorithm, which is widely known, but on a number called a
key that must be used with the algorithm to produce an encrypted result or to decrypt
previously encrypted information.
The used of keys for encryption and decryption.
1: Symmetric-Key Encryption: With symmetric-key encryption, the encryption key can be
calculated from the decryption key and vice versa. With most symmetric algorithms, the
same key is used for both encryption and decryption.
2: Public-Key Encryption: It involves a pair of keys and a private key- associated with an
entity that needs to authenticate its identity electronically or to sign or encrypts data. Each
public key is published and the corresponding private key is kept secret. Data encrypted with
your public key can be decrypted only with your private key.
3: Key Length & Encryption Strength: Encryption strength is often described in terms of
the size of the keys used to perform the encryption; in general, longer keys provide stronger
encryption. Key length is measured in bits. For example, 128-bits keys for use with the CR4
symmetric key cipher supported by SSL (Secure Socket Layer) provide significantly better
cryptographic protection than 40-bit keys for use with the same cipher.
Encrypted documents & Emails: Email user would desire confidentiality and sender
authentications are using encryption. Encryption is simply intended to keep personal
thoughts personal. E-mail is typically encrypted for the reason that all network
correspondence is open for eavesdropping. Internet email is obviously far-less secure than
the postal system, where envelops protects correspondence from casual snooping. A glance
at the header area of any email message by contrast, will show that it has passed through a
number of nodes on its way to you. Every one of these nodes presents the opportunity for
snooping. Everyday communication over phone and fax line entails security risks. Despite
leaps in technology and wide uses, fax transmission are not yet widely encrypted. The main
reason is the inconvenience of equipping both the sending and receiving machines with
compatible encryption before facsimile transmission.
Email software is increasingly incorporating specific options that simplify encryption
and decryption. Examination of encrypted information is non trivial; each file must be
decrypted even before it can be examined.
Email Encryption schemes deployed on internet:
1.
Privacy enhanced mail standard (PEM): It is designed purposed but not yet
officially adopted by the internet activities board to provide secure e-mail over the internet.
Design to work with current internet emails formats, PEM includes encryption
authentication and key management, and allows use of both public key and secret key
24

cryptosystems. PEM explicitly supports only a few cryptographic algorithms; other may
be added later. It also provides supports for non-repudiation, which allows the third party
recipient of a forwarded message to verify the identity of the message originator and to
verify whether any of the original text has been altered.
2.
Preety Good Privacy (PGP): It is an implementation of public key
cryptography based on RSA. It is a free software package that encrypts email. PGP is
widely used, and its growth is being fueled by the rapid growth in internet use and the
increasing reliance on email for everything from legal documents to any letter. It provides
secure encryption of documents and data files that even advanced super computers are hard
pressed to crack. PGP provides confidentially by encrypting message to be transmitted or
to be stored locally as files. In both cases, the conventional encryptions algorithm known as
IDEA (International Data Encryption Algorithm) is used. Any secret key encryption
system must address the problem of key distribution; in PGP each key is used only ones i.e.
a new key is generated as a random number for each message. Many people routinely
include their PGP finger print in email message.
Client Server Network Security: It is one of the biggest headaches system administrator
face as they balance the opposing goal of user maneuverability and easy access and site
security and confidentiality of local information. Network security on the internet is a major
concern for commercial organizations, specially top management. Recently the internet has
raised many new security concerns. By connecting to the internet, a local network
organization may be exposing itself to the entire population on the internet. An internet
connection effectively breaches physical security perimeter of the corporate network and
opens itself to access from other network comprising the public internet.
That being the case, the manger of even the most relaxed organization must pay some
attention to security. For many commercial operation, security will simply be a matter of
making sure that existing system features, such as password and privileges, are confined
properly. They need to audit all access to the network. A system that records all log on
attempts- particularly the un-success ones-can alter manager to the need for stronger
measures. However where secrets are at stake or were important corporate assets must be
made available to remote users, additional measures must be taken. Hackers can use
password guessing, password trapping, security holes in programs, or common network
access procedures to impersonate users and thus pose a threat to the server.
Client server network security problem manifest themselves in 3 ways:
1.
Physical security holes: It results when individual gains unauthorized physical access
to the computer. A good e.g. would be a public workstation room, where it would be easy
for a wandering hacker to reboot a machine into single user mode and temper with the files,
if precautions are not taken. On the network this is also a common problem, as hackers gain
access to network system by guessing passwords of various users.
2.
Software Security holes: It results when badly written program or privileged
software are compromised into doing things they shouldnt. The most famous e.g. of this
is the send mail hole, which brought the internet to its knees in 1988. A more recent
problem was the (a malicious hackers) to create a root shell or super user access mode.
This is the highest level of access possible and could be used to delete the entire file system
or create new account or password file resulting in in-calculable damage.

25

3.
Inconsistent uses holes: It results when system administrator assembles combination
of hardware and software such that the system is seriously flawed from a security point of
view. The incompatibility of attempting 2 unconnected but useful things creates the
security holes. Problems like this are difficult to isolate ones a system is setup and running
so it is better to carefully build the system with them in mind. This type of problem is
becoming common as software becomes more complex.
Protection from Client Server Network Security Problem:
1.
Trust based security: means to trust everyone and do noting extra for protection. It is
possible not to provide access restriction of every kind and to assume that all users are
trustworthy and competent in their use of the shared network. This approach assumes that
no-one ever makes an expensive breach such as getting route access and deleting all files (a
common hacker tricks). This approach in the past, when the system administrator had to
worry about limited threats. Today there is no longer the case.
2.
Security through obscurity (STO): It is the notation that any network can be secure
as long as nobody outside its management is allows to find-out any thing about its
operational details and users are provide information on a need-to-no basis. Hiding account
passwords in binary files or script with the presumptions that nobody will ever find them
is a primary case of STO. In-short STO provides a false sense of security in computing
systems by hiding information. Although admittedly sound in theory, this philosophy can
mean life long trust of a small group of people.
3.
Passwords schemes: This security solution erects a first level barrier to accidental
intrusion. In actuality, however, password schemes do little about deliberate attack,
specially, when common words or proper names are selected as passwords. Having distinct
passwords for a distinct device is somewhat a problem, because will write them down,
share them or include them in automatic script. To counter these threats various approaches
have been suggested for creating one time passwords, including smart cards, randomized
tokens and challenge response schemes.
4.
Biometric system: It is the most secure level of authorization, involve some unique
aspects of a persons body. It is very expensive to implement: at a cost of several thousands
dollar per reader station, they may be better suited for controlling physical access where
one biometric unit can serve for many worker-then for network or workstation access. Past
biometric authentication was based on comparison of finger prints, palm prints, retinal
patterns or on signature verification or voice recognition.
Digital signature
A digital signature (not to be confused with a digital certificate) is a mathematical technique
used to validate the authenticity and integrity of a message, software or digital document.
The digital equivalent of a handwritten signature or stamped seal, but offering far more
inherent security, a digital signature is intended to solve the problem of tampering and
impersonation in digital communications. Digital signatures can provide the added
assurances of evidence to origin, identity and status of an electronic document, transaction or
message, as well as acknowledging informed consent by the signer.
In many countries, including the United States, digital signatures have the same legal
significance as the more traditional forms of signed documents. The United States
Government Printing Office publishes electronic versions of the budget, public and private
laws, and congressional bills with digital signatures.
26

How digital signatures work

Digital signatures are based on public key cryptography, also known asasymmetric
cryptography. Using a public key algorithm such as RSA, one can generate two keys that are
mathematically linked: one private and one public. To create a digital signature, signing
software (such as an email program) creates a one-way hash of the electronic data to be
signed. Theprivate key is then used to encrypt the hash. The encrypted hash -- along with
other information, such as the hashing algorithm -- is the digital signature. The reason for
encrypting the hash instead of the entire message or document is that a hash function can
convert an arbitrary input into a fixed length value, which is usually much shorter. This saves
time since hashing is much faster than signing.
The value of the hash is unique to the hashed data. Any change in the data, even changing or
deleting a single character, results in a different value. This attribute enables others to
validate the integrity of the data by using the signer's public key to decrypt the hash. If the
decrypted hash matches a second computed hash of the same data, it proves that the data
hasn't changed since it was signed. If the two hashes don't match, the data has either been
tampered with in some way (integrity) or the signature was created with a private key that
doesn't correspond to the public key presented by the signer (authentication).A digital
signature can be used with any kind of message -- whether it is encrypted or not -- simply so
the receiver can be sure of the sender's identity and that the message arrived intact. Digital
signatures make it difficult for the signer to deny having signed something (non-repudiation)
-- assuming their private key has not been compromised -- as the digital signature is unique
to both the document and the signer, and it binds them together. A digital certificate, an
electronic document that contains the digital signature of the certificate-issuing authority,
binds together a public key with an identity and can be used to verify a public key belongs to
a particular person or entity.

If the two hash values match, the message has not been tampered with, and the receiver
knows the message is from sender.
Most modern email programs support the use of digital signatures and digital certificates,
making it easy to sign any outgoing emails and validate digitally signed incoming messages.
Digital signatures are also used extensively to provide proof of authenticity, data integrity
and non-repudiation of communications and transactions conducted over the Internet.
27

Business to Consumer Oriented Electronic Commerce:

Consumer - oriented ecommerce is still in its early stages, but the question is no longer
whether it will occur but rather how widely it will spread. Consumer application such as on
line stores and electronic shopping malls are burgeoning but access is still cumbersome and
basic issues need to be resolved. Customers can browse at their PCs, traveling through
electronic shops viewing products, reading descriptions, and sometimes trying samples.
These early systems sometimes provide information only and lack the means to accept orders
via the keyboard. Ideally, consumers should be able to execute a transaction by clicking on
the BUY button to authorize payment, and the online store's bank account would then
automatically receive it from the customer's preferred payment mode. Security of on line
payments remains major barrier to this feature. Customers could pay by credit card,
transmitting the necessary data via modem, but intercepting messages on the internet is easy
for a smart hacker, so sending a credit card number in an unscrambled message is inviting
trouble. It would require either adoption of encoding (or encryption) standards or ad hoc
arrangements between buyers and sellers.
CONSUMER ORIENTED ECOMMERCE APPLICATION-4:
1. Personal Finance and Home Banking Management-3: The technology for paying bills,
whether by computer or telephone is infinitely more sophisticated than any on the market a
few years ago. The 1980s were the day of stone age technology compared to what exists
today. In that days, technology choice for accessing services were limited to touch tone
phone and in some very advance cases PCs. The range of options has expanded to include
PCs, interactive TV and even personal digital assistance (PDAs). Customer interest in home
banking has resumed, fueled by growing comfort or at least familiarity with electronics,
by greater demands on consumer time and by the expanding needs for information to
manage the increasing complexity of house hold finances.
a. Basic Services: are related to personal finance; checking and saving account statement
reporting, round the clock banking with automated tailor machine (ATM), funds transfer, bill
payment, account reconciliation (balancing check books) and status of payments or stop
payment request.
b. Intermediate Service: includes a growing array on home financial management services,
which include household budgeting, updating stock portfolio values and text return
preparation.

28

c. Advance Services: include stock and mutual funds brokerage or trading services, currency
trading and credit or debit card management.
2. Home Shopping: It has generated substantial revenues for many companies racing to
develop online malls. These malls will enable a "customer" to enter online stores, look at
products, try on computerized clothes, see a reflection in a digital mirror, and purchase with
overnight delivery against credit card billing. The exact operating methods of these services
has yet to be determined, but the retailers are well aware of the potential opened up by the
ability to transmit huge amounts of digital information into the home and to provide
interactive control to the shopper. And the current television and catalog based shopping
processes are expected to undergo major changes to take advantage of the technology.
a. Television based Shopping: TV shopping has evolved over the years to provide a wide
variety of goods ranging from collectibles, clothing, small electronics, warehouses, jewelry
and computers. A customer uses his/her remote control to shop different channels with the
touch of a buttons,. To target customers, channels are often specialized. In this shopping you
may be able to scan your picture into the TV and see how the latest outfits look on your body
before making a decision. Television based shopping enjoyed revenues of $1.2 billion in
1993. To put this into perspective, consider that in 1992 US consumers bought $42 billion of
merchandise from home through mail order houses and television channels.
b. Catalog Based Shopping: For this shopping a computer should be connected to the
internet to launch an enquiry using a knowledge-gathering software assistant (in technical
terms a mobile software agent) that roams the global networks and identifies the items in
various vender catalogs that fit certain specified parameters such as price and quality. The
online catalog business consists of brochures, CD-ROM catalog and online interactive
catalog.
3. Home Entertainment: Another application area of ecommerce is that of home
entertainment. Consider the following scenario. A customer wishes to watch a movie. He/she
browses through an online movie archive guide containing thousands of movies, music
videos, award winning documentaries, soap opera episodes, concerts, and sporting events.
After selecting an artistic or movies he/she sends a request to the movie distributor with the
cost of the movie (eg $2.99) in the form of electronic tokens or credit card. The distributor
validates the credit card and transfers the movie to their TV set-top with the necessary
safeguards.
a. Size of Home Market: Entertainment services are expected to play a major role in
ecommerce. This prediction is underscored by the changing trends in consumer behavior.
Notice the critical importance of home video to Hollywood revenues.
b. Impact of Home Entertainment on Traditional Industries: The impact of the new
forms of entertainment on the traditional movie industry presents a case study that is likely to
be repeated in many other industries. The movie exhibition industry clearly needs to
understand the implications of the convergence of several technologies into a functioning
"home theater".
4. Micro transactions of information: One significant change in traditional business forced
by the online information business is the creation of a new transaction category called small
fee transactions for micro services. The complexity of selling micro services increases
further when additional activities like account re-verification are factored in. Re verification
means checking on the validity of the transaction after it has been approved.

29

Functional small money transactions require an inexpensive safety and

settlement process or a major portion of the transaction value will be consumed in the
verification process. Also, most of the argument in favor of using encryption is aimed at
ensuring the integrity of transactions and authentication of transactions, not at economic
issues that form a significant factor of business thinking. This is one of the reasons banks are
reticent about electronic commerce, fearing it will not be profitable. Banks would rather deal
with the evil they understand, like credit card fraud, than the lesser evil they don't
comprehend, like a tamper-proof electronic cash system based on encryption.

Consumer-Oriented Application:
1: Personal Finance & Home Banking Management: The newest technologies, home
banking services are often categorized as basic, intermediate, and advanced. Basic services
are related to personal finance: checking and savings account statement reporting, round-theclock banking with automated teller machines (ATM), funds transfer, bill payment, account
reconciliation, and status of payments or stop payment requests. Intermediate services
include a growing array of home financial management services, which include household
budgeting, updating stock profile values, and tax return preparation. More advanced services
include stock and mutual fund brokerage or trading services, currency trading, and credit or
debit card management.
2: Home Shopping: It is already in wide use and has generated substantial revenues for
many companies racing to develop online malls. These malls will enable a customer to enter
online stores, look at products, try on computerized cloths, see a reflection in a digital mirror,
and purchase with overnight delivery against credit card billing. The exact operating method
of these services has yet to be determined, but the retailers are well aware of potential
opened up by the ability to transmit huge amounts of digital information into the home and
to provide interactive control to shopper. And the current television and catalog-based
shopping processes are expected to undergo major changes to take advantage of the
technology.
3: Home Entertainment: Another application area of e-commerce is that of home
entertainment. Consider the following scenario. A customer wishes to watch a movie. S/he
browses through an online movie archive guide containing thousands of movies, music
videos, award-winning documentaries, soap opera episodes, concerts, and sporting events. In
addition to game technology, we are witnessing the emergence of entertainment support
functions such as on-screen catalogs, such as TV guide, that inform users whats on TV. TV
guide on screen lets cable system subscribers download program schedules and other
information from cable system satellite feeds. The system will customize a personalized
electronic menu of entertainment options.
4: Micro-transactions of Information: To serve the information needs of the consumer,
service providers whose products is information delivered over the I-way are creating an
entirely new industry. Most sell any form of digital information that can be sent down a
network of one sort or another; data, pictures, computer programs and services. A few sell
products - sex, music, books, lingerie - through online catalogs. Online business is the
creation of a new transaction category called small-fee transactions for micro-servers. For
e.g. if company Z charged Rs.5 to download a customer service file cs123.txt from its FTP
server and 20000 people chose to do it every day, then Z would have Rs.1000 added to its
30

bank account just for that one file. Now assume that there are 1000 files with similar activity.
This volume of activity entails Rs1000000 changing hands in one day.
MERCANTILE PROCESS MODEL: Mercantile processes define interaction model
between consumers and merchants for online commerce. This is necessary because to buy
and sell goods, a buyer, seller, and other parties most interact in ways that represents some
standard business processes. We, like many others, believe that a common way of doing
business over the I-way will be essential to the future growth of ecommerce. A well
established standard process for processing credit card purchases has contributed to the
widespread dissemination of credit cards. The war against escalating online transactionprocessing costs requires new weapons. And designing and implementing new mercantile
processes is the most powerful weapon variable to wage that war effectively.
The establishment of a common mercantile process (or set of processes) is
expected to increase convenience for consumers who won't have to figure out a new business
process for every single vendor. The absence of a common process for managing and
completing transactions will result in electronic commerce being entangled in a mesh of
bilateral ad hoc mechanism that are specific to every company doing business online.
Before rushing off and developing new mercantile process models, it is prudent to
review existing business process models used in the manufacturing and retailing industries.
The review would provide the understanding required to determine the features needed in an
architectural model designed specifically for electronic commerce. Then, of course, within
the scope of such architecture, we must demonstrate the ability to solve all the problems that
the current consumer oriented business process require and any new ones we may have
identified for the future. The idea behind a general architecture is that it would lead to a set
of methods and tools from which specific protocols can be easily implemented.
MERCANTILE MODELS FROM THE VIEWPOINT OF CONSUEMRS
PERSPECTIVE-3: The business process model from a consumer's perspective consists of 7
activities that can be grouped into 3 phases: Pre-purchase phase, Purchase consummation,
and post purchase interaction.
1. Pre-Purchase Phase-4: It includes search and discovery for a set of products in the large
information space, capable of meeting customer requirements and product selection from the
smaller set of products based on attributes comparison. The terms such as price, delivery
times are also negotiated. The pre purchase phase includes:
a. The consumer information search process: Information search is defined as the degree
of care, perception and effort directed toward obtaining data or information related to they
decision problem. The nature of consumer research behavior is undocumented in the existing
literature and represents an area that must be better understood before ecommerce
applications can be effectively designed.
b. The organizational search process: Organizational search is an activity designed to
balance the cost of acquiring information with the benefits of improved final decisions. This
process is determined in part by market characteristics and by certain aspects of a firms
present buying situation. Together, these dimensions impose a series of demand on the search
process used.
c. Consumer Search Experiences: It requires an examination that how particular aspects of
the buyers present buying situation and the shopping experience that is being sought affects
31

the search process. It is evident that an understanding of hedonic and utilitarian shopping can
provide insight into many ecommerce consumption behavior that are normally not taken into
account in the design and layout of electronic market places.
d. Information Brokers and Brokerages: To facilitate better consumer and organizational
search, intermediaries called information brokers or brokerages are coming into existence.
Information brokerages are needed for three results; a comparison shopping, reduce search
costs, and integration.
2. Purchase Consummation-3: It includes mercantile protocols that specify the flow of
information and documents associated with purchasing and negotiation with merchants for
suitable terms such as price, availability and delivery date; and e-payment mechanism that
integrates payment into the purchasing process. Purchase consummation includes:
a. Mercantile process using digital cash: In this scenario, a bank mints electronic currency
(e-cash) which is simply a series of bits that the issuing banks can verify to be valid and is
kept secured (un-forgeable) by the use of cryptographic techniques. E-cash issuing banks
make money by charging either buyers or sellers a transaction fee for the user their e-cash. It
is similar to paper currency and has the benefits of being anonymous and easily transmitted
electronically.
b. Mercantile Transactions Using Credit Cards: It comprises 2 components electronic
authorization and settlement. Here is a quick overview of the authorization, process. In a
retail transaction, a third party processor (TPP) captures information at the point of sale,
transmits the information to the credit card issue for authorization, communicates a response
to the merchant, and electronically stores the information for settlement and reporting.
c. Cost of Electronic Purchasing: On the surface, cash seems to be preferable to electronic
payments. Firms are accepting debit less expensive than pocketing cash for transactions.
Firms are attracted to electronic payment options because the consumers appear to spend
more when using cards than when spending cash.
3. Post Purchase Interaction: It includes customer service and support to address customer
complaints, product returns and products defects. In the ongoing relationship with the
customers, this step can produce some of the most heated disagreements; every interaction
becomes a zero-sum-game that either the company or the customer wins. To compound the
problems, most companies designed their mercantile processes for one way merchandise
flow; outbound to the customer.
Product/Service search & discovery in the information space

Comparison shopping & product selection based on various

attributes

Pre-purchase determination

Negotiation of terms e.g. price delivery

Placement of Orders
Purchase Consummation

Authorization of Payments
Receipt of Products
Consumer service & support (if not classified in X day return
product)
Fig; Steps taken by customers in product purchasing

32

Post Purchase
Interaction

Mercantile Process Model from the view point of Merchant or

Order Management Cycle (OMC) from the viewpoint of Merchant in Ecommerce-:
The order to delivery cycle from merchant perspective has been manufactured with an eye
toward standardization and costs. This model is developed on the assumptions that an
organization must create a set of operating standards for service and productivity, and then
perform to those standards while minimizing costs of doing so. The strength of this
philosophy lie in a companys ability to take the position of low cost provider, its stress on
benchmarking service and its emphasis on responsiveness as well as continuous
improvements.
To achieve better understanding, it is necessary to examine the order management
cycle (OMC) that encapsulates the more traditional order to delivery cycle. The typical OMC
includes 8 distinct activities although overlapping may occur. The actual details of OMC
vary from industry to industry and may differ for individual products and services. However
the OMC has the following steps:
Customer inquiry & order planning generation
Presales interactions
Customer estimation & pricing of product services
Order Receipt & Entry

Order Selection & Prioritization

Product service production &

delivery

Order Scheduling
Order Fulfillment and Delivery
Order Billing & Account Management
Post Sale Interaction
Customer Service and Support
Fig: Order Management cycle in ecommerce

1.
Order Planning and Order Generation: The business process begins long before an
actual order is place by the customer. Order planning shows how and why lack of cohesive
operation can cripple a company. Those farthest from the customer may crucial decisions
and open up debt between interdependent functions right from the start.
Order planning leads to order generation. The sales and marketing functions worry
about order generation, and the other functions stay out of the way.
2.
Cost Estimation and Pricing: Pricing is the bridge between customer needs and
company capabilities. Pricing at the individual order level depends on the value of
33

customer that is generated by each order, evaluating the costs of filling each order and
instituting a system that enables the company to price each order based on its value and
costs.
3.
Order Receipts and Entry: After an acceptable price quote the customer enters the
order receipts and entry phase of OMC. Traditionally this was under the purview of
departments variously title customer service, order entry, the inside sales desk, or customer
liaison.
4.
Order Selection and Prioritization: Those orders are selected which fits the
companys capabilities and offer healthy profits. These orders fall into the sweet spot
region which represents a convergence of great customer demand and high customer
satisfaction, which in turn translates into customer retention. In addition the company can
make gains by the way they handle order prioritization i.e. how they decide which order to
execute faster.
5.
Order Scheduling: During this phase the prioritized orders get slotted into an actual
production or operational sequence. This task is difficult because the different functional
departments sales, marketing, operation or production may have conflicting goals,
compensation system and organizational imperatives.
6.
Order Fulfillment and Delivery: During this phase the actual provision of the
product or service is made. While the details vary from industry to industry in almost every
company this step has been increasing complex. Often, order fulfillment involves multiple
function and locations; different parts of an order may be created in different
manufacturing facilities and merged at yet another side, or order may be manufactured in
one location, warehoused in the second, and installed in the third.
7.
Order Billing and Account/Payable Management: Billing is handled by the finance
staffs who view their job as getting the bill out efficiently and collecting quickly. It is
basically designed to serve the need and interest of the company, not the customer. The bill
may not be in accurate, but is usually constructed in a way more convenient for the billing
department than for the customer.
8.
Post Sales Services: This phase plays an increasingly important role in all elements of
a companys profit equation; customer value, price and costs. Depending on the specific of
business, it can include such elements as physical installation of a product, repair and
maintenance, customer training and disposal. Because of the information conveyed and
intimacy involved post sales service can affect customer satisfaction and company
profitability for years.
Consumer Relationship Management/CRM: It is defined as the aligning of business
strategy with the corporate culture of the organization, along with customer information and
a supporting information technology of the customer interactions that promote a mutually
beneficial relationship between the customer and the enterprise. Primarily CRM is a business
strategy, but it is a business strategy enabled by the advances in technology. Wide spread
implementation customer information, enterprise resource planning system, sales force
automation and integrated point of sale systems have made customer information readily
available in large volume. Reduced costs and higher level of performance for database
management platforms allows us to gain access to this customer information and gain new
insights into our customer and their behavior through a variety of analysis method.
CRM involves retaining both business and individual customer through strategies that
ensures their satisfaction with the firm and its products. It also seeks to keep customer for a
34

long time and to increase the number of change, the timing of transactions that the conduct
with the firm. As it relates to E-business, CRM uses digital processes and integrates
customer information collected at every customer touch point. Customer interact with
firms in person at retain stores or company offices, by mail via telephone or over the internet.
Phases of CRM-3:
1.
Acquisition: You acquire new customers by promoting product/service leadership that
pushes performance boundaries with respect to convenience and innovations. The value
proposition to the customer is the offer of a superior product back by excellent service.
2.
Enhancement: You enhance the relationship by encouraging excellence in cross
selling an up selling. This deepens the relationship the value proposition to the customer is
an advantage with greater convenience at low cost (one stop shopping).
3.
Retention: Retaining profitable customer for life should be the aim. Retention focuses
on service adaptability i.e. it delivers not what the market wants, but what the customer
wants. The value proposition of the customer enhances a proactive relationship that works
well with the best interest of the customer. Today, leading companies focus on retention of
existing customers much more than on-attracting new customers. The reason behind this
strategy is simple: If you want to make money hold on to your good customer. But do not
be fooled; it is not as easy as it seems.
All the phases of CRM are inter-related. Each of the phases has a different impact on
the customer relationships, and each can more closely tie a company with the customer life.
However performing the task well in all the 3 phases is a difficult proposition, even for the
best of companies. Companies often have to choose which one of these dimensions will be
their primary focus.
Acquisition
Innovative
Convergence

Enhancement
Reduce cost
Customer Service

Retention
Listening
New Products

Fig: Phases of CRM

E-Commerce Relationship Management (ECRM) Solutions: ECRM solutions are

especially valuable to companies that face the following circumstances:
1.
Business is driven by mission critical customer service requirements
2.
Current costs for CRM run high
3.
Large volumes of information is distributed
35

4.

A complete customer care solution is needed.

ECRM solution can be deployed and managed to prove increased revenues and decreased
costs for companies while improving customer service. E-CRM goals can be achieved with
Internet business strategies, web based CRM specification development, web systems
design, project management, interactive interface design and electronic publishing.
To help organize the chaos, ECRM solutions can be grouped into 2 categories; web base
solutions and web extended solutions. The web base CRM solutions are designed from the
bottom up, exclusively for the internet. These are very innovative products, initially focused
on the sales (E-commerce) functions. More marketing and service capabilities will be soon
added. Webs extend CRM solutions are established (server based) CRM suites, originally
designed for enterprise users with extensions, to include web interface functions.
The Strategy of E-CRM can be visualized in 3 stages:
Stages 1: Customer Information Environment: In this stage, building up of a customer
information environment and acting on it forms the strong point. It consists of metrics
programmes, customer information repository and monitoring customer behaviors.
Stage 2: Customer Value Orientation: In this second stage, operational effectiveness is the
focus. Customers want value for their money. They believe that they have got value, when
the perceived benefits they receive from something exceed the costs of owning it. These
components are perceived quality (obtained) and perceived sacrifice (given), which forms
perceived value. Perceived quality is combination of core product & benefits and customized
service benefits; in the same way perceived sacrifice is a combination of price and costs
other than price.
Stage 3: Customer Loyalty: In this stage, the focus is on the integration of internal process
of the organization with the customer in creating a community. Moving costly customer
services to the internet is critical to staying competitive providing customer services on the
internet means a lot more than just having a website.
Most companies are focused on todays most critical business challenges attracting
and retaining customers. These companies require customer-directed e-business solutions
and E-CRM to meet those requirements. Companies benefits from huge costs savings and
increased revenues. Customers benefit from on-demand access to information, less hassles
with better support and less expensive services.
The strategy of the portals is to become global supermarkets providing everything for
individuals families and organizations. Their customer base is what stock market considers
being the most important assets of these companies.
ECRM Vs CRM:
1.
The distribution channels are direct or through intermediaries; customer choice in
ECRM while distribution channel are through intermediaries chosen by the seller in CRM.
2.
Advertising provides information in response to specific customer inquiries.
Advertising push and sell a uniform message to all customer.
3.
Promotion and discount offers are individually tailored to customer. Promotion and
discounts are offered same for all customers.
4.
ECRM targets to identify and response to specific customer, behaviors and
preferences. CRM targets for market segmentation.
5.
Price of products and services are negotiated with each customer. Price of products
and services are set by the seller for all customers.

36

6.
New product features are created in response to customer demands. New products
features are determined by the seller based on R&D.
7.
ECRM measurements used to manage the customer retention; total value of the
individual customer relationships. CRM measure used to manage the customer relationship
market share; profit.
Converting Clicks to Customers: To leverage technology and thereby realize the greatest
benefit from a web presence, a business must first know what it is after, in terms of a
relationship with its customers. Assuming that the goal is to provide a website with an
Emotionally Intelligent and technology management also has to appreciate possibilities with
the business resources and technology constraints. Note that the technologies with the
greatest degree of interactivity provide the greatest potential for a scale. A business model
needs to pull everything together in a way that harmonizes with its customers; the business
should use the technology at its disposal so that the odds of creating a loyal customer
following are maximized.
The Customer Retention Goal: Attracting and retaining customers has rapidly emerged to
be the most mission-critical function of leading businesses. Everything (products, services,
pricing and the like) is a commodity. Customer retention has replaced cost-effectiveness and
cost-competitiveness as the greatest concern of business executives today. It consists 5 or 10
times more to get new customers than to retain the existing ones. It is going to involve more
efforts than web interactions to keep the customer brand loyal.
The Power Shift: Customer are more important than business people. Companies need to do
business with them in their own way. The key is integration of the various points of customer
contact, including the web, contact centers, wireless and others. All customer interaction
must be consistent, with clear value deliver to the customer and the company. Customer
should be segmented based on the assumptions that they will predominantly choose one
point of contact with business. More likely the customer will have multiple point of contact,
including our websites contact centers, sales and field service representatives. They expect a
consistent experience from point to point. They expect the company to be easy to do business
with.
Very soon the e fancy will subside. Executive in every industry will recognize that
the next major phase of the web phenomenon is actually integration with other points of
contact. Blended media is a true killer solution for business. From the perspective of
customer it is necessary to realize how the customer interacts with the enterprise over time,
as the enterprise;
Acquires the initial customer relationship
Works to earn the customers persisting loyalty and
Expands the relationship to gain a greater share of each customers purchasing potential

37

E-payment System
Electronic Payment Systems (EPS): EPS are becoming central to ecommerce as company
looks for ways to serve customer faster and at low costs. Emerging innovation in the
payment of goods and services in electronic commerce promise to offer a wide range
of new business opportunities. EPS and commerce are intricately linked given that
online consumer must pay for product and services. EPS includes wholesale
payments, wire transfer, recurring bill payment transfer, the automated clearing
house, electronic draft captures and electronic check presentment.
Electronic payments systems are proliferating in banking, retail, health care, online
markets and even governments. In-fact, anywhere money needs to change hands.
Organizations are motivated by the need to deliver products and services more cost
effectively and to provide a higher quality of service to customers. Electronic payments are
an excellent example of a radical reduction in transaction costs as opposed to traditional
payment methods. Traditional commerce payments involve cash, check or credit cards,
where as electronic cash disbursements can be handled by software wallets, smart cards,
electronic cash or debit/credit cards. The above statement assumes a business-to-customer
model. Business-to-business transactions frequently employ their own network (extranet)
and rely upon electronic data interchange (EDI) to exchange documents with each other.
Electronic Payment Process-3:
[1] Web payment processes: Most electronic system on the web involving business &
consumer (B2B) depend on credit card payment processes. But many B2B ecommerce
systems rely on more complex payment processes based on the use of purchase orders.
However both types of ecommerce typically use electronic shopping card processes, which
enables customer to select products from website catalog displays & put them temporarily in
a virtual shopping basket for later checkout & processing.
[2] Electronic Funds Transfer: Electronic fund transfer (EFT) systems are a major form of
electronic payments system in banking & retailing industries. EFT system uses a variety of
information technologies to capture & process money & credit transfer between banks,
business & their customer.
Very popular also are web based payment services, such as Pay-Pal & Bill-Point for
cash transfer, & check-free & pay-trust for automatic bill payment which enables the
customer of banks & other bill payment sale terminals in retail stores are networked to bank
EFT system.
38

[3] Secure Electronic Payments(SET): When you make an online purchase on the internet,
your credit card information is vulnerable to interception by network sniffers, software that
easily recognizes credit card formats. Several basic security measures are being used to solve
this security problem:
(I) Encrypt (code & scramble) the data passing between the customer & merchant;
(II) Encrypt the data passing between the customer & the company authorizing the credit
card transaction, or
(III) Take sensitive information offline
The Secure Electronic Transaction, standard for electronic payment security extends
this digital wallet approach. In this method, EC software encrypts a digital envelope
certificate specifying the payment details for each transaction. SET has been agreed to by
VISA, Master card, IBM, Microsoft, Netscape & most other industry players. Therefore,
SET is expected to eventually become the standard for secure electronic payment s on the
internet. However, SET has been stalled by the reluctance of companies to incur its increased
hardware, software & cost requirements.
Digital Payments Requirements: The following are the requirements of digital payments
requirements:
1.
Acceptability: Payment infrastructure needs to be widely accepted.
2.
Anonymity: Identity of the customers should be protected.
3.
Convertibility: Digital money should be convertible to any type of fund.
4.
Efficiency: Cost per transaction should be near zero.
5.
Integration: Interfaces should be created to support the existing systems.
6.
Scalability: Infrastructure should not breakdown if new customers and merchants join.
7.
Security: Should allow financial transactions over open network.
8.
Reliability: Should avoid single point of failure.
9.
Usability: Payment should be as easy as in the real world.
Types of Electronic Payment System: Research into electronic payment system for
consumer can be traced bank to the 1940s. In the early 1970s the emerging electronic
payment technology was labeled electronic funds transfer (EFT). EFT is defined as any
transfer of funds initiated through an electronic terminals, telephonic instrument, or
computer or magnetic tape so as to order, instruct or authorize a financial institution to debit
or credit an account. EFT can be segmented into 3 broad categories:
1.
Banking and Financial payments:
Large-Scale or wholesale payments (e.g. bank to bank transfer)
Small-Scale or Retail payments (e.g. automated teller machine and cash dispenses)
Home banking (e.g. bill payment)
2.
Retailing payments:
Credit cards (e.g. VISA or Master card)
Private label credit/debit cards (e.g. J.C. Penney card)
Charge cards (e.g. American expenses)
3.
On-Line Electronic Commerce Payments
[i] Token Based Payments system:
Electronic cash (e.g. Digital cash)
Electronic checks (e.g. Net-Checks)
Smart Cards or debit cards (e.g. Mondex Electronic Currency Card)
39

[ii] Credit card based payment system:

Encrypted credit cards (e.g. World Wide Web from based encryption)
Third party authorized numbers (e.g. first virtual)
Digital Token based E-Payment System-3(Forms): Electronic tokens are designed as
electronic analog of various forms of payments backed by a bank or financial institutions to
handle micro payments, i.e., payments for small snippets of information and some are
designed for more traditional products. Simply, stated, electronic tokens are equivalent to
cash i.e. backed by a bank. Electronic token vary in the protection of privacy and
confidentiality of the transactions. Electronic tokens are of 3 types. They are:
1.
Cash or real time: Transactions are settled with the exchange of electronic currency.
An examples of online currency exchange is electronic cash (i.e. e-cash)
2.
Debit or prepaid: Users pay in advance for the privilege of getting information.
Examples of prepaid payment mechanism are stored in smart cards and electronic purses
that store electronic money.
3.
Credit or postpaid: The server authenticates the customer and verifies with the bank
that funds are adequate before purchase. E.g. of post paid mechanisms are credit/debit
cards and electronic checks.
Benefits of Digital Token Based payment System-2:
A. Benefit to buyer:
1.
Convenience of global acceptance, a wide range of payment options, and enhanced
financial management tools.
2.
Enhance security and reduce liability for stolen or miss used cards.
3.
Consumer protection through and established system of dispute resolution.
4.
Convenient and immediate access to funds on deposit via debit cards.
5.
Accessibility to immediate credit, intuitively, the comparative cost of arranging for a
consumer loan related to the ability to obtain credit at the point of sell is substantial in
considering both the direct processing costs as well as the implicit opportunities costs to
borrower and lender.
B. Benefit to Seller:
1. Speed and security of the transaction processing chain from verification and authorization
to clearing and settlement.
2. Freedom for more costly labour, materials and accounting services that are required in
paper based processing.
3. Better management of cash flow, inventory and financial planning due to swift bank
payment.
4. Incremental purchase power on the part of the consumer.
5. Cost and risk saving by eliminating the need to run an in house credit facility.
Forms of digital token based E-payment system-3:
1. Electronic Cash (E-Cash): Electronic cash is a new concept in online payment systems
because it combines computerized convenience with security and privacy that improve on
paper cash. Its versatility open up a host of new market and application. It presents some
interesting characteristics that should make it attractive alternative for payment over the
internet. E-Cash is based on cryptographic systems called digital signature. This method
involves a pair of numeric keys that work in tandem; one for locking and the other for
40

unlocking. It focuses on replacing cash as the principal payment vehicle in consumer

oriented payments system. Two approaches to holding electronic cash are online storage
where the consumer does not personally have possession of it and off-line where the
consumer does have physical control. A smart card is an example of off-line electronic cash
storage.
Advantages:
More efficient than cash, checks or credit cards for both the consumer and the merchant.
Lower transaction costs, and perhaps product costs related to increases in efficiency.
The distance which electronic cash must travel in a transfer does not effect the
transmission costs or the time as it does with traditional payment methods.
Electronic cash does not require any special authorization, so anyone may use it for
almost any kind of transaction, large or small.
Disadvantages:
Potential collection problems if an Internet tax is ever enacted.
Since electronic cash does not leave an audit trail, it could be used in money laundering
operations or as a medium of exchange in other illegal activities.
Electronic cash is susceptible to forgery and double spending abuses.
Some of the disadvantages may disappear as security measures improve. Complex
cryptographic algorithms are the keys to creating tamperproof electronic cash that can be
traced back to its source. These algorithms form a two-part lock, which provides anonymous
security that also signals when someone is attempting to double spend cash.
Properties of E-Cash-4:
a.
E-Cash must have monetary value: It must be back by either cash, a bank authorized
credit, or a bank certified cashier Cheque. When e-cash created by one bank is accepted by
others, reconciliation must occur without any problem.
b.
E-Cash must be interoperable, i.e. exchangeable as payment for other e-cash, paper
cash, goods or services, lines of credit, deposit in banking account, bank notes or
obligation, electronic benefit transfer and the like. Most e-Cheque proposal use a single
bank.
c.
E-Cash must be storable and retrieval. Remote storage and retrieval would allow user
to exchange e-cash from home or office or while traveling. The cash could be stored on the
remote computer memory, in smart cards or special purpose devices. It is preferable that
cash is stored on a dedicated device that cant be altered and should have suitable interface.
To facilitate personal authentication using passwords or other means.
d.
E-Cash should not be easy to copy or temper with while being exchanged. This
includes preventing or detecting duplication or double spending. Detection is essentially in
order to audit whether prevention is working or not. Then there is a tricky issue of double
spending. Preventing double spending from occurring is extremely difficult if multiple
banks are involved in the transactions.
2. Electronic Cheque (E-Cheque): Electronic Cheque are designed to accommodate the
many individuals and entities that might prefer to pay on credit or through some mechanism
other than cash. In e-Cheque system, consumer posses an e-Cheque book on a Personal
computer memory card International Associations (PCMCIA Card). The buyers must register
41

with a third party account server before they are able to write e-Cheque. As needed, Cheque
are return electronically from an e-Cheque book on the card. They are then sends over the
internet to the retailer, who in turn sends the e-Cheque to the customer banks. Settlement is
made through a financial network such as ACH. E-Cheque method was deliberately created
to work in much the same way as a conventional paper Cheque.
Advantages of E-Cheque-4:
1. They work in the same way as traditional Cheque, thus simplifying customer education.
2. E-Cheque are well suited for clearing micro payments; their use of conventional
cryptography makes it much faster than e-cash.
3. E-Cheque creates float and the availability of float is an important requirement for
commerce.
4. Financial risk is assume by the accounting server and may result in easier acceptance.
Reliability and scalability are providing by using multiple accounting servers.
3. Smart Cards:
Smart cards are credit and debit cards and other card products enhanced with
microprocessors capable and holding more information than the traditional magnetic tape.
Smart cards are a plastic card with embedded microchips containing a broad spectrum of
information about the user, including electronic cash available for tender. It contains a
microprocessor and a single storage unit. The chip, at its current state of development, can
store significantly greater amount of data, estimated to be 80times more than magnetic stripe.
It is more durable but is less expensive. Intelligent smart cards have additional feature of
greater storage and processing capabilities. The smart card technology is widely used in
countries such as Japan, Germany, Singapore and France to pay for public phone calls,
transportation and shopper loyalty programs.
Types of Smart Cards-2:
1.
Relationship-based smart cards: It is an enhancement of existing card services and or
the addition of new services that a financial institution delivers to its customers via a chip
based card or other devices. These new services may include access to multiple financial
accounts, value added marketing programs, or other information, card holder may want to
store on their card. The chip based card is but one tool that will help alter mass marketing
technique to addresses each individuals specific, financial and personal requirements.
Enhanced credit card store card holder information including name, birth date, personal
shopping preferences and actual purchase records. This information will enable merchants
to accurately track consumer behavior and develop promotional programs designed to
increase shopper loyalty.
2.
Electronic purses/Debit card: It a wallet sized smart cards embedded with
programmable microchip that stores sums of money for people to use instead of cash for
everything from buying food, to making photocopies, to pay sub way fares. Electronic
purse, which replace money, are also known as debit cards and electronic money. E-purse
work when the purse is loaded with money at an ATM or through the use of an inexpensive
special telephone, it can be used to pay for, say, candy in a vending machine equipped with
a card reader. E-purse would virtually eliminate fumbling for change or small bills in a
busy store or rush hour toll booth, and waiting for a credit card purchase to be approved.
When the balance on an e-purse is depleted, the purse can be recharge.

42

Credit Card: A credit card is termed as payments cards, representing the majority of online
payments because people are familiar with them, and merchants avoid the expense of a paper
invoicing system. In this card payments is simple anywhere and in any currency, thus it
matches the global reach of the internet. The transaction costs are hidden for users i.e.
basically met by sellers and passed on to all customers, not just credit card user. The credit
issuing company shares the transaction risk; helping overcome consumers fear and
reluctance to buy goods they have not actually seen, from sellers they do not know.
Credit Card based payment system: To avoid the complexity associated with digital cash
and electronic checks, consumers and vendors are also looking at credit card payment on the
internet as one possible time tested alternative. There is nothing new in the basic process.
Without doubt, the basic means of payment used and initiated via the internet for consumer
transactions till date is the credit card. If consumers want to purchase a product or service,
they simply send their credit card details to the service provider involved and the credit card
organization will handle this payment like any other. We can break credit cards payment on
online networks into 3 basic categories.
1.
Payments using plain credit card details: The easiest method of payment is the
exchange of unencrypted credit cards over a public network such as telephone line or the
internet. The low level of security inherent in the design of the internet makes this method
problematic. Authentication is also a significant problem, and the vendor is usually
responsible to ensure that the person using the credit card is its owner. Without encryption
there is no way to do this.
2.
Payments using encrypted credit card details: It would make sense to encrypt your
credit card details before sending them out, but even then there are certain factors to
consider. One would be the cost of credit card transactions itself. Such cost would prohibit
low value payments (micro-payments) by adding costs to the transactions.
3.
Payments using third party verification: One solution to security and verification
problems is the introduction of a third party; a company that collects and approves
payments from one client to another. After a certain period of time, one credit card
transaction for the total accumulated amount is completed.
Advantages/Why Credit cards popular?:
1.
The system is familiar to users and was widely used before the advent of e-commerce,
thus bolstering the users confidence.
2.
Transaction costs are hidden from users(i.e. basically met by sellers, and passed on to
all customers, not just credit card users)
3.
Payment is simple anywhere and in any currency, thus matching the global reach of
the internet.
4.
The credit issuing company shares the transaction risk; helping overcome consumers
fear and reluctance to buy goods they have not actually seen, from sellers they do not
know.
Disadvantages of Credit Cards: Credit cards have their own disadvantages. First, the
relatively high transaction cost makes them impractical for small value payments. Second,
they cannot be used directly by individuals to make payments to other individuals (peer to
peer transactions). Third, protecting the security of transaction is vital, especially in the
virtual world there is no payment guarantee to the merchant by a bank. Users fears about
43

security issues seem to be consequences of the newness and relative unfamiliarity of the
medium, rather than the real risks involved in the system.
Risk Factors in electronic payments system/ Risk and E-payment system: One essential
challenges of e-commerce is risk management. Operation of the payment system incurs
major risks: fraud or mistake, privacy issues, and credit risks. Preventing mistakes might
require improvements in the legal framework. Dealing with privacy and fraud issues requires
improvements in the security framework. Curtailing credit risk requires devising procedures
to constrict or moderate credit and reduce float in the market. The major types of risks are
mentioned below:
1.
Risks from Mistake and Disputes (Consumer protection): All e-payment system
needs some ability to keep automatic records for obvious reasons. From a technical stand
point, this is not a problem for electronic system. Credit and debit card have them, and
even the paper based Cheque create an automatic records. Once information has captured
electrically, it is easy and inexpensive to keep. Given the intangible nature of electronic
transactions and dispute resolutions relying solely on records, a general law of payment
dynamic and banking technology might be that no data never ever be discarded. A segment
of payment making public always desired transactions anonymity, many beliefs that
anonymity runs counter to the public welfare because too many tax, smuggling or money
laundering possibilities exists.
2.
Managing Information privacy: The e-payment system must ensure and maintain
privacy. Privacy must be maintained against eavesdroppers on the network and against
unauthorized insiders. The users must be assured that they cant be easily duped, swindled
or falsely implicated in fraudulent transactions. This protection must apply through out the
whole transaction protocol by which a goods and services are purchase and delivered using
a credit card, subscribes to a magazine, or accesses a server that information goes into the
databases. Furthermore, all these records, can be linked so that they constitute in effect, a
single dossier. This dossier would reflect what items were bought and where and when.
3.
Managing Credit Risk: Credit or systematic risk is a major concern in net settlement
systems, because a banks failure to settle its net position could lead to a chain reaction of
banks failures. The digital central bank must develop policies to deal with this possibility.
Various alternatives exist, each with advantage and disadvantages. A digital central bank
guarantee on settlement removes the insolvency test from the system because banks will
more readily assume risks from other banks.
Without such guarantees, the development of clearing and settlements system and
money markets may be impeded. A middle road is also possible. For e.g. setting controls on
banks exposures (bilateral or multilateral) and requiring collateral. If the central bank does
not guarantee settlement, it must define, at least internally, the conditions and terms for
extending liquidity to banks in connection with settlements.

44

E-Commerce B2B Model

Website following B2B business model sells its product to an intermediate buyer who then
sells the product to the final customer. As an example, a wholesaler places an order from a
company's website and after receiving the consignment, sells the end product to final
customer who comes to buy the product at wholesaler's retail outlet.

B2B implies that seller as well as buyer is business entity. B2B covers large number of
applications which enables business to form relationships with their distributors, resellers,
suppliers etc. Following are the leading items in B2B e-Commerce.

Electronics

Shipping and Warehousing

Motor Vehicles

Petrochemicals

Paper

Office products

Food

Agriculture

45

Key technologies
Following are the key technologies used in B2B e-commerce:

Electronic Data Interchange (EDI) - EDI is an inter organizational exchange of

business documents in a structured and machine processable format.
Internet - Internet represents world wide web or network of networks connecting
computers across the world.
Intranet
- Intranet represents a dedicated network of computers within a single organization
Extranet - Extranet represents a network where outside business partners, supplier or
customers can have limited access to a portion of enterprise intranet/network.
.
Back-End Information System Integration - Back End information systems are
database management systems used to manage the business data.
Architectural Models
Following are the architectural models in B2B e-commerce:

Supplier Oriented marketplace - In this type of model, a common marketplace

provided by supplier is used by both individual customers as well as business users. A
supplier offers an e-stores for sales promotion.
Buyer Oriented marketplace - In this type of model, buyer has his/her own market
place or e-market. He invites suppliers to bid on product's catalog. A Buyer company opens a
bidding site.
Intermediary Oriented marketplace - In this type of model, an intermediary
company runs a market place where business buyers and sellers can transact with each other.

E-Commerce EDI
Electronic Data Interchange (EDI): EDI was one of the earliest uses of information
technology for supply chain management. EDI involves the electronic exchange of business
transaction documents over the internet & other networks between supply chain trading
partner (organizations & their customer & suppliers). Data representing a variety of business
transaction documents (such as purchase orders, invoices, requests for quotations & shipping
notices) are automatically exchanged between computers using standard documents message
formats. Typically, EDI software is used to covert a companys own document formats into
standardized EDI formats as specified by various industry & international protocols. Thus,
EDI is an e.g. of the almost complete automation of an e-commerce supply chain process &
EDI over the internet using secure virtual private network, is a growing B2B ecommerce
application.
EDI is still a popular data transmission format among major trading partners primarily
to automate repetitive transaction, through it is slowly being replaced by XML based web
services. EDI automatically tracks inventory changes; triggers orders, invoices & other
documents related to transaction & schedules & confirms delivery & payment. By digitally
integrating the supply chain, EDI stream lines processes, saves times & increases accuracy.
46

And by using internet technologies, lower cost internet based EDI services are now available
to smaller businesses.
Benefits of EDI :
1. Reduced paper based system: EDI can impact the effort and expense a company devots
to maintaining records, paper related supplies, filing cabinets, or other storage system and to
the personnel required to maintain all of the systems. Electronic transactions take over must
of the functions of paper forms and through automation drastically, reduce the time spent to
process them. EDI can also reduce postage bills because of the amount of paper that no
longer need be sent.
2. Improved problem resolution and customer service: EDI can minimize the time
companys spent to identify and resolve inter-business problems. EDI can improve customer
service by enabling the quick transfer of business documents and a marked decrease in errors
and by providing an automatic audit trial that frees accounting staff for more productive
activities.
3. Expanded customers/supplier base: Many large manufacturers and retailers with the
necessary clout are ordering their suppliers to institute an EDI program. However, these are
isolated islands of productivity because they are unable to build bridges to other companies.
With the advent of ecommerce, the bridge is now available. Today, when evaluating a new
product to carry, the availability to implement EDI is a big plus in their eyes. These same
companies tend to stop doing business with suppliers what do not comply.

Types of EDI-2:
1.
Traditional EDI: It replaces the paper forms with almost strict one to one mapping
between parts of a paper form to fields of electronic forms called transaction sets. It covers
2 basic areas (i) Trade data interchange (TDI) encompasses transactions such as purchase
orders, invoices and acknowledgements (ii) Electronic Funds Transfer (EFT) is the
automatic transfer of funds among banks and other organizations. EDI is divided into 2
camps;
a.
Old EDI: refers to the current practice of automating the exchange of
information pertinent to the business activities. It is used to refer the current EDI
standardization process (X12, EDIIFACT) where tens of thousands of people in groups all
around the world are attempting to define generic documents interchanges that allow every
company to choose its own unique proprietary version.
b.
New EDI: is really a refocus of the standardization process. With new EDI the
structure of interchanges is determined by the programmer who writes the business
application programs, not by the lengthy standards process. New EDI makes EDI work for
ecommerce by removing long standardization process i.e. impeding it.
To make new EDI work, we have to address a standard bridge between the language
of business and the programming languages used in expressing the interchange standards.
This is where a database that captures business semantics comes it in.
2.
Open EDI: It provides a framework where 2 potential trading partner can whip out an
EDI structure for their potential partnership in the short time frame that it takes them to
draw up and negotiate the legal contracts. The increased interest in open EDI is a result of
dissatisfaction with traditional EDI. It is also a business procedure that enables ecommerce
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to occur between organization where the interactions is of short duration. Its goal is to
sustain ad hock business or short term trading relationships using simpler legal codes.
To implement open EDI the ISO has developed an open EDI reference model
consisting of 2 distinct views (i) the Business Operational View (BOV) and (ii) the
Functional Service View (FSV).
Comparing EDI and the Internet
In the field of Electronic Commerce (EC) technologies, there is much confusion ab out
the roles of EDI, the internet, computer bulletin board systems, and other online services.
This is included to clarify the distinctions. EDI is just now being conducted over the internet
as advances are made in security of online transactions. While this is may be less expensive,
one loses some of the benefits brought by the VANs such as:
-Archival of transactions
-Verification that transactions have been sent/received
-Standard EDI software
A lot of information on EC/EDI (ANSI X12 standards, implementation conventions,
products and services, etc) is currently distributed through the internet. Therefore, it is in
your interest to become Internet capable so you may have access to Internet tools and
facilities such as electronic mail, the World Wide Web, File Transfer Protocol (FTP), and
Telnet. The easiest way to become Internet capable is to subscribe to one of the online
services currently available.
EDI is not just a bulletin board. You may already have experience using a computer
bulletin board for conducting some of your business. In the typical bulletin board
environment, one party posts a Request for Quotation; eligible suppliers read it and submit
standard paper quotes for review. But most of the remaining documentation is still paper.
Some government agencies already use bulletin boards for some acquisitions, but EDI is
much more than a bulletin board, because it enables transfer of nearly all key business
documents in standardized format.
EDI and Electronic commerce
The economic advantages of EDI are widely recognized. But until recently,
companies have been able to improve only discrete processes such as automating the
accounts payable function or the funds transfer process. While important in their own right,
such improvements are limited in their ability to help businesses transform themselves.
Companies are realizing that to truly improve their productivity they need to automate their
external processes as well as their internal processes. This is the trust of new directions in
EDI.
New EDI services for electronic commerce are seen as the future bridge that
automates external and internal business processes, enabling companies to improve their
productivity on scale never before possible. They present information management solutions
that allow companies to link their trading community electronically-order entry, purchasing,
accounts payable, funds transfer and other systems interact with each other throughout the
community to link the company with its suppliers, customers, banks, and transportation and
logistics operations.
Another goal of new EDI services is to reduce the cost of setting up and an EDI
relationship. These costs are still very high because of the need for detailed essays technical
agreements. EDI links in short-term partnerships are rarely realized because the cost of the
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establishment of such an agreement is to high. EDI links with many partners are also rarely
realized, because the negotiation and agreement between partners is not easily manageable.
Therefore most successful EDI implementation is in long-term partnerships or among a
limited number of partners. With the advent of inter organizational commerce, several new
types of EDI are emerging that can be broadly categorized as traditional EDI and open EDI.
Application of EDI
Some application areas where it is used: banking, finance, national trade, international trade,
industry, manufacturing, transport, travel, tourism, warehousing, government, and statistical
data.
Businesses, government agencies, and other organizations use EDI for a vast range of
transactions. The classic application of EDI is in purchasing. A manufacturing or a retail
store might use EDI with its suppliers to replace paper purchase orders, material releases,
shipping notices, and invoices. At a simple level, the objective of EDI is to replace paper.
The creation, shuffling and storage of paper are cumbersome and expensive. By eliminating
paper, EDI allows information to be exchanged between trading partners more rapidly, more
efficiency, and with far fewer errors. But to fully understand what is driving EDI, one must
see EDI in the contest of a bigger picture. Companies employ EDI as part of broad
management strategies, like just-in-time manufacturing and quick response retailing. The
goal of these strategies is often to reduce inventory stocks and to allow companies to be
more responsive to changes in market demand. A buyer company prefers to order product
from suppliers only as and when it is needed, and it prefers that the product arrive quickly
after the order is placed. This strategy calls for the buyer to send suppliers many more order
messages than was necessary in the past, each message covering a smaller quantity of
product. Instead of ordering 200 things every month, the buyer may begin ordering 10 things
every business day.
EDI stands for Electronic Data Exchange. EDI is an electronic way of transferring business
documents in an organization internally between its various departments or externally with
suppliers, customers or any subsidiaries etc. In EDI, paper documents are replaced with
electronic documents like word documents, spreadsheets etc.

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EDI Documents
Following are few important documents used in EDI:

Invoices

Purchase orders

Shipping Requests

Acknowledgement

Business Correspondence letters

Financial information letters

Steps in an EDI System
Following are the steps in an EDI System.

A program generates the file which contains the processed document.

The document is converted into an agreed standard format.

The file containing the document is send electronically on network.

The trading partner receives the file.

An acknowledgement document is generated and sent to the originating organization.

Advantages of an EDI System
Following are the advantages of an EDI System.

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Reduction in data entry errors. - Chances of errors are much less being use of
computer in data entry.
Shorter processing life cycle - As orders can be processed as soon as they are entered
into the system. This reduced the processing time of the transfer documents.
Electronic form of data - It is quite easy to transfer or share data being in electronic
format.
Reduction in paperwork - As lot of paper documents are replaced with electronic
documents there is huge reduction in paperwork.
Cost Effective - As time is saved and orders are processed very effectively, EDI
proves to be higly cost effective.
Standard Means of communication - EDI enforces standards on the content of data
and its format which leads to clearer communication.
VAN

A value added network (VAN) is an independent firm that offers connection &
transaction-forwarding services to buyers & sellers engage in EDI.
Before the Internet came into existence as, VANs provided the connections
between most trading partners & were responsible for ensuring the security of the data
transmitted.
VANs usually charged a fixed monthly fee plus a per-transaction charge adding to
the already significant expense of implementing EDI.
The companies that operated VANs have gradually moved EDI traffic to the
Internet, but many other companies have developed other way to do EDI types of
transaction on the Internet.

E-Marketing
Marketing has pretty much been around forever in one form or another. Since the day when
humans first started trading whatever it was that they first traded, marketing was there.
Marketing was the stories they used to convince other humans to trade. Humans have come a
long way since then, (Well, we like to think we have) and marketing has too.
The methods of marketing have changed and improved, and we've become a lot more
efficient at telling our stories and getting our marketing messages out there. eMarketing is
the product of the meeting betweenmodern communication technologies and the age-old
marketing principles that humans have always applied.
That said, the specifics are reasonably complex and are best handled piece by piece. So
weve decided to break it all down and tackle the parts one at a time. This week well be
looking at the "what" and "why" of eMarketing, outlining the benefits and pointing out how
it differs from traditional marketing methods.
By the end of the series we're pretty sure you'll have everything you need to tell better
marketing stories.
What is eMarketing?
Very simply put, eMarketing or electronic marketing refers to the application of marketing
principles and techniques via electronic media and more specifically the Internet. The
terms eMarketing, Internet marketing and online marketing, are frequently interchanged, and
can often be considered synonymous.
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eMarketing is the process of marketing a brand using the Internet. It includes both direct
response marketing and indirect marketing elements and uses a range of technologies to help
connect businesses to their customers.
By such a definition, eMarketing encompasses all the activities a business conducts via the
worldwide webwith the aim of attracting new business, retaining current business and
developing its brand identity.
Why is it important?
When implemented correctly, the return on investment (ROI) from eMarketing can far
exceed that of traditional marketing strategies.
Whether you're a "bricks and mortar" business or a concern operating purely online, the
Internet is a force that cannot be ignored. It can be a means to reach literally millions of
people every year. It's at the forefront of a redefinition of way businesses interact with their
customers.
The benefits of eMarketing over traditional marketing
Reach
The nature of the internet means businesses now have a truly global reach. While traditional
media costs limit this kind of reach to huge multinationals, eMarketing opens up new
avenues for smaller businesses, on a much smaller budget, to access potential consumers
from all over the world.
Scope
Internet marketing allows the marketer to reach consumers in a wide range of ways and
enables them to offer a wide range of products and services. eMarketing includes, among
other things, information management, public relations, customer service and sales. With the
range of new technologies becoming available all the time, this scope can only grow.
Interactivity
Whereas traditional marketing is largely about getting a brand's message out there,
eMarketing facilitates conversations between companies and consumers. With a two-way
communication channel, companies can feed off of the responses of their consumers, making
them more dynamic and adaptive.
Immediacy
Internet marketing is able to, in ways never before imagined, provide an immediate impact.
Imagine you're reading your favourite magazine. You see a double-page advert for some new
product or service, maybe BMW's latest luxury sedan or Apple's latest iPod offering. With
this kind of traditional media, it's not that easy for you, the consumer, to take the step from
hearing about a product to actual acquisition.
With eMarketing, its easy to make that step as simple as possible, meaning that within a few
short clicks you could have booked a test drive or ordered the iPod. And all of this can
happen regardless of normal office hours. Effectively, Internet marketing makes business
hours 24 hours per day, 7 days per week for every week of the year.
By closing the gap between providing information and eliciting a consumer reaction, the
consumer's buying cycle is speeded up and advertising spend can go much further in creating
immediate leads.
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Demographics and targeting

Generally speaking, the demographics of the Internet are a marketer's dream. Internet users,
considered as a group, have greater buying power and could perhaps be considered as a
population group skewed towards the middle-classes.
Buying power is not all though. The nature of the Internet is such that its users will tend to
organise themselves into far more focussed groupings. Savvy marketers who know where to
look can quite easily find access to the niche markets they wish to target. Marketing
messages are most effective when they are presented directly to the audience most likely to
be interested. The Internet creates the perfect environment for niche marketing to targeted
groups.

I. The Legal Environment of Electronic Commerce

Businesses that operate on the Web must comply with the same laws and regulations that govern
the operations of all businesses. If they do not, they face the same set of penalties-fines,
reparation payments, court-imposed dissolution, and even jail time for officers and owners-that
any business faces.
Businesses operating on the web face two additional, complicating factors as they try to comply
with the law. First, the Web extends a companys reach beyond traditional boundaries. A business
that that uses the Web immediately becomes an international business. Second, the Web
increases the speed and efficiency of business communications. Web businesses that violate the
law or break ethical standards can face rapid and intense reactions form many customers and
other stakeholders who become aware of the business activities.

Borders and Jurisdiction

Territorial borders in the physical world serve a useful opu4opse in traditional commerce. They
mark the range of culture and reach of applicable laws very clearly. When people travel across
international borders, they are made aware of the transition in many ways. Exiting one country and
entering another usually requires a formal examination of documents, such as passports and
visas. In the physical world, geographic boundaries almost always coincide with legal and cultural
boundaries.

Power: a form of control over physical space and the people and objects that reside in that
space. For laws to be effective, a government must be able to enforce them. The ability of a
government to exert control over a person or corporation is called jurisdiction.

Effects: laws in the physical world are grounded in the relationship between physical
proximity and the effects, or impact, of a persons behavior. Personal or corporate actions
have stronger effects on people and things that are nearby them on those that are far away.
Legitimacy: the idea that those subject to laws should have some role in the formulating
them. Some cultures allow their governments to operate with a high degree of autonomy
and unquestioned authority.
Notice: the expression of a change in rules. Borders provide this notice in the physical
world.

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Jurisdiction on the Internet

Defining, establishing and asserting jurisdiction are much more difficult on the Internet than they
are in the physical world, mainly because traditional geographic boundaries to not exist. The
Internet does not provide anything like the obvious international boundary lines in the physical
world. The four considerations that work so well in the physical world-power, effects, legitimacy,
and notice-do not translate very well to the virtual world of electronic commerce.
Governments that want to enforce laws regarding business conduct on the Internet must establish
jurisdiction over that conduct. A contract is a promise or set of promises between two or more
legal entities-people or corporations-that provide for the exchange of value (goods, services or
money) between or among them.

Subject-Matter Jurisdiction is a court's authority to decide a particular type of dispute. Few

disputes arise over this type of jurisdiction.

Personal Jurisdiction is determined by the residence of the parties. A court has personal
jurisdiction over a case if the defendant is a resident of the state in which the court is
located.
Jurisdiction in International Commerce issues that arise are even more complex that the
rules governing personal jurisdiction across state lines within the U.S. The exercise of
jurisdiction across international borders is governed by treaties between the countries
engaged in the dispute.
Courts asked to enforce the laws of other nations sometimes follow a principle
called judicial comity which means that they voluntarily enforce other countries' laws or
judgments out a sense of comity, or friendly civility.

Contracting and Contract Enforcement in Electronic Commerce

Any contract includes three essential elements:

Offer-a commitment with certain terms made to another party, such as a declaration of
willingness to buy or sell a product or service.

Acceptance-Expression of willingness to take an offer, including all of its stated terms.

Consideration agreed upon exchange of something valuable, such as money, property or
future service.

Contracts are a key element of traditional business practice, and they are equally important on the
Internet.

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