Electronic Commerce

8th Semester Note

Thanks for downloading this file
Authorized author: <unknown>
File downloaded from: www.shekharkhadka.blogspot.com
Contact: letterstoshekhar@gmail.com for author claim
Twitter: shekharofficial

Unit I: Electronic Commerce Basics:

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 on-line 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-7:
[1] Access Control & Security: E-Commerce processes must establish mutual trust & secure access between the parties in an ecommerce 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.
[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 web-based 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. E-business 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
[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 client-side 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-2: 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 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.
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:
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.
Unit II: 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 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 e-commerce 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 ebusiness 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
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 catalogue- A 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 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 e-commerce 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-4:
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 well-defined, 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 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 re-engineered 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.
Unit III
Emarketing
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.
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
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 several 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 information-hungry 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.
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 advantages of e-mails are its low cost and its ability to reach a wide variety of targeted audiences. Most companies
develop a customer database, to which they send e-mails. 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 Smith Kline Beechams oxy acne
medicine to dose 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 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. 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, data-venders 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.
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 Web-advertising) 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 Internetbased 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 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.
UNIT 4: Mobile Commerce
Mobile Commerce: Mobile commerce is the use of the internet for purchasing goods & services as well as for transmitting messages
using wireless mobile devices. The broad scope of mobile commerce includes hardware, software, and suppliers of network products and
services, with a special concern for content as a primary value, motivating the end wireless users. Initially, m-commerce is viewed as a
channel for wired business. In contrast to conventional business models, the uniqueness of wireless consumer ship lies in a business
model where company must becomes networks. You create a medium that connects a network of subscriber, wherever they happen to be
and whatever they happen to be doing. To widen the reach of a business or its market share, company will provide a wireless channel.
For some companies, building a wireless internet system is simply a matter of doing business, to increase commercial access, to customer
or other businesses.
Mobile commerce is fundamentally about exchanging information of personal value and figuring out how to get message to
handle the routine part of the communication. To share and synchronize contents and interest with a wide area of servers is the basis of a
wireless business. Both commercial and barter models for personal information are at work. In the long run, low costs, micro billed
subscription for personal content and services is likely to succeed.
Growth of Mobile Commerce: Three major segments that can substantially benefit from anywhere and have anything access to
information and services with the use of mobile phones are; financial services providers, healthcare industry, and corporations with a
mobile workforce.
Tightening competition, globalization and change in customer behavior present new challenges to many service organizations.
Combined with advances in technology, they have put several industries into round-the-clock operations. Financial institutions are no
exception. Their distribution systems and customer interfaces have gone through major changes. By innovatively combining mobile
technology with other distribution channels, financial services providers can establish closer, more profitable and more stable customer
relationships.
For financial services providers, the mobile phone has introduced a new channel to reach customers one that is personal, easy-touse, secure, location, and time independent. Bank branches are becoming increasingly expensive to operate, and the established selfservice solutions, such as ATMs and Internet banking, cannot provide competitive efficiency or satisfy the need of the new generation of
customers who want to do business when it is most convenient for them.
Wireless System/Applications-6: A wireless application is software that runs on a wireless device that exchanges content aver a wireless
network. This system will provide the connections anywhere and anytime, making computing devices an even more integral part of our
everyday lives. An array of technologies has emerged to provide high-speed wireless access to the internet for PCs and other wireless
handheld devices as well as cell phone. Consequently, businesses of all sizes are devoting more of their resources to wireless devices,
services and applications.
A wireless system sends through air or space without being tied to a physical line and various parts of electromagnetic spectrum.
Such as microwave or inferred, by nature occupy specific spectrum frequency ranges. Other types of wireless such as cellular telephone
and paging devices have been assigned a specific range of frequencies. Each frequency range has characteristics that have helped
determine the specific function or data communications niche assigned to it.
The actual wireless applications are distinguished from one another based on the wireless devices, network and application
families, which can be summarized as:
1. Web phone: the most common device is the Internet ready cellular phone, which we call a web phone. There are major web phones:
the US HDML and WAP phone, the European WAP phone, and the Japanese I-model phone. With them, you can exchange short
message, access the web with a micro browser, and personal service application such as locating nearby items of interest. Most Web
phones work only when they have a network connection. Never advanced Web Phones can run applications.
2. Wireless handhelds: Another common device, the wireless handheld, such as a palm, can also message and use a micro browser. The
industrial handhelds, such as Symbol or Psion, can perform very complex operations such as completing orders and taking customer
signatures. They have the advantage of working offline.
3. Two-way pagers: A device used often in business is the pager. The most popular is the two-way pager because it lets you receive and
send a message as well as use a micro browser.
4. Voice portals: A recent innovation is the voice portal, which lets you have a conversation with an information service by using a kind
of telephone or mobile phone.
5. Communicating appliances: Such electronic devices are fitted with wireless technology that can participate in the Internet. Examples
include wireless cameras, watches radios, pens, and many other devices.
6. Web PCs: The standard Internet-connected personal computer is still used as an access method to mobile accounts, wirelessly or
otherwise.
Wireless Security: Wireless networks are a major security headache, especially for businesses. With WLANs, you don't have to 'plug in'
like a standard LAN. Anyone with a WiFi device in the general vicinity of an access point could connect. This means there is no physical
security. To control access to WiFi networks, security standards have been developed. One such standard is called Wired Equivalent
Privacy (WEP). WEP provides encryption and authentication sufficient for most users. For more security, there is a newer standard
called WiFi Protected Access (WPA), which provides Temporal Key Integrity Protocol (TKIP) encryption and stronger user
authentication, based on the 802.1x security technology not to be confused with 802.11x.
Technologies for Mobile commerce-2:

1. Wireless Spectrum: The electronic spectrum, or simply spectrum, is the entire range over which communicating devices transmit
energy waves. The electromagnetic spectrum is assigned common groupings of energy waves, commonly called airwaves, that make
bands of the spectrum. Over the airwaves, TV, radio, cell phones, or any wireless Internet devices communicate with a transceiver. Each
kind of transceiver uses dedicated frequency ranges that are measured in hertz; 1Hz is one cycle per second.
An interesting property of the spectrum is that higher frequencies travel shorter distances. They take more power to transmit.
With enough power, they can be life-threatening. Higher frequencies can be modulated to carry more bits per second than longer waves,
but they are subject to atmospheric interference. Broadcasters generally prefer owning a lower frequency because it costs less to transmit
a signal, it carries father, and it is generally safer.
The US Federal Communications Commission (FCC) and similar agencies around the world break up the spectrum and assign
bands for specific purpose. Bands are ranges of frequency with common names. Worldwide bodies, such as the International
Telecommunications Union (ITU), also make frequency agreements, so that devices will operate clearly worldwide. Over the time, the
FCC has been licensing higher and higher spectrum with wireless technology.
2. WAP: Wireless Application Protocol (WAP) was invented and is driven by the WAP forum- a group originally formed by Nokia,
Ericsson. Motorola and phone.com in 1997. WAP is an open specification that offers a standard method to access Internet-based content
and services from wireless devices such as mobile phone and PDAs (Personal Digital Assistants). The WAP mobile is very similar to the
operators network that optimizes the transmission of the content software that connects to a WAP Gateway and makes requests for
information from web server on the internet. Content must be formatted suitably for the mobile phones small screen and low bandwidth
high latency connection. Content is written in a markup language called Wireless Markup Language (WML). WML script enables client
side intelligent. The main benefit of WAP.
1. Non proprietary method to access internet based content and services..
2. It is network independent.
3. It has been adopted by 95% of handset manufacturer and being implemented by the majority of carriers.
4. WAP browser can be built on top of any operating system, including palm OS, EPOC, Windows CE, FLEXOS, OS 9, Java OS etc.
The Wireless Application Protocol is an open, global specification for mobile users with wireless devices to easily access and
interact with information and services. It was brought forward by Ericsson, Motorola, Nokia, and Unwired Planet. Wireless devices
such as mobile phones, pagers, two way radios and smart phones support WAP. Using WAP, these devices can be used for internet
access, emailing, chatting etc. The applications are built using special tools and languages for wireless devices. For example, web pages
have to be written in Wireless Markup Language (WML) in order to be viewed by WAP enabled devices, even though HTML and XML
are supported to an extent. WAP is designed to work with most wireless networks such as CDPD, CDMA, GSM, PDC, PHS, TDMA,
FLEX, ReFLEX, iDEN, TETRA, DECT, DataTAC, Mobitex and GPRS. This protocol is supported by many operating systems including
PalmOS, EPOC, Windows CE, FLEXOS, OS/9, JavaOS etc. It also provides interoperability even between different device families.
Applications of WAP: WAP is being used to develop enhanced firms of existing applications and new versions of todays application.
Existing mobile data software and hardware supplies are adding WAP support to their offering, either by developing their own WAP
interface or more usually, partnering with one of the WAP gateways suppliers. Previously, application developers wrote proprietary
software applications and had to port that application to different network types and bearers within the same platforms. By separating the
bearer from the application, WAP facilitates easy migration of applications between network and bearers. As such, WAP is similar to
java in that, it simplifies application development. This reduces the costs of wireless application development and therefore encourages
entry to the mobile industry by software developers.
Wireless Technologies-5:
1. AMPS: Advanced Mobile Phone Service is voice only analog cellular transport. It operates at 800Mhz. It is slowly been replaced with
various competing digital networks.
2. TDMA: Time Division Multiple Access is a digital transport that divides the frequency range allotted to it into a series of channels.
Each channel is divided into time slots. It has been in use as the basis for GSM for sometimes in Europe. It is possible to overlay
TDMA on top of AMPS, converting an analog network to a hybrid analog/digital network.
3. CDMA: Code Division Multiple Access is a digital transport that has been in use by the US military since 1940. It is new kid on the
block compared to AMPS and TDMA. Its transmitter assigns a unique code to each wireless connection and then broadcast its data out
of the channel simultaneously with all other connections. It is often described as a party in a room where everyone speaks a different
language.
4. GSM: Global system for Mobile Communication has gone on to be the most widely deployed digital network in the world of data.
Using all digital, TDMA based network, every GSM phone has access to a variety of data functions at speed limited to 9600bps. These
services include direct connect internet access without requiring a modem, mobile fax capabilities, and SMS.
5. CDPD: Cellular Digital Packet Data is TCP/IP based mobile data only service that runs on AMPS networks. Since it runs on analog
network, it requires a modem to convert the TCP/IP based data into analog signals when sending and receiving. It has a raw throughput
of 19,200bps.

Unit V: Network infrastructure for Ecommerce:

# Network and Internet: A computer network consists of 2 or more computers that are connected to each other using cables and other
networks devices that handle the flow of data. When you connect 2 or more computer together, you form a network. Later, if you connect
one network to another, you form a internet-work or internet for short. Network technology enables employees to use resources located
in computers of different networks, without being influence by the technology difference behind each of these networks.
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.
Internet: The internet is a collection of millions of computers interconnected over a network. It is a global network connecting millions
of computers. It can be termed as a network of networks. More than 100 countries are linked into exchanges of data, news and opinions.
The Internet is decentralized by design. Each Internet computer, called a host, is independent. Its operators can choose which Internet
services to use. Remarkably, this anarchy by design works exceedingly well.
It was started as a small network by ARPA (Advanced Research Projects Agency) for the US government in 1969 and it was
known as ARPANET. Later, this design was used to create the Internet (or Net) as we know it today. The Net is based on the TCP/IP
(Transmission Control Protocol/ Internet Protocol) protocol. Every computer connected to the Net is independent, and you can decide
what Internet services you want or dont want. To connect to the Internet, you have to contact an Internet Service Provider (ISP); the ISP
gives you access to the Internet. The Internet is a complex organization of networks managed by companies that provide access to
international resources through the use of the TCP/IP protocol suite.
Services provided by Internet:
1: Electronic Mail: Permits you to send and receive mail. It provides access to discussion groups.
2: Telnet/Remote Login: Permits your computer to log onto another computer and use it as if you were there.
3: File Transfer Protocol (FTP): Allows your computer to rapidly retrieve complex files intact from a remote computer and view or
save them on your computer.
4: Gopher: An early, text only method for accessing internet documents. Gopher has been almost entirely subsumed in the WWW, but
you may still find gopher documents linked in web pages.
5: World Wide Web (www): The largest, fastest growing activity on the internet.
6: Chats, Groupware, News, Discussion Lists etc.
Application of Internet:
1: Dealing with government: Overview of the way in which business and government communicate and complete transactions
electronically. Includes links to further information on tenders, government purchasing, export, taxation and grants.
2: E-mail: Introductory guide to the advantages and disadvantages of using email within business, including advice on setting up an
account, storing message and attaching documents. Email guidelines will help with composing professional messages, managing
incoming mail, replying to enquiries and avoiding.
3: Online Banking: Find out about the range of internet and wireless based services offered by financial institutions that help streamline
common business transactions. Includes information on security issues, software required for business banking and the advantages of
managing accounts, payroll and other financial transactions online.
4: Online Purchasing: Issues to consider when locating, comparing, ordering and paying for goods and services using the internet.
Overview of e-purchasing includes tips for introducing online business-to-business trading to staff and other suppliers.
5: Research: Read about method for using the internet to collect, analyze and track online information about our market, competitors and
emerging products and services. Covers search engines, directories, industry associations, discussion forums, email newsletters and
subscription-based reporting.
6: Online Marketing: Latest developments in information and communication technology can open up new and innovative opportunities
for business communications and marketing campaigns. However simply having a web site or email address does not guarantee that new
and existing clients will find our business online. There are a number of e-business advertising strategies that, when used in parallel with
traditional marketing, can increase traffic to our website, keep the people who visit our site engaged, encourage return visits and build
customer loyalty.
7: Advertising Online: Looks at the traditional and internet-based techniques for promoting our business online. Covers advertisement
of web and email addresses, search engine placement, cost-per-click and banner advertisements, online forums and reciprocal links.
8: Privacy & Spam: Discusses privacy legislation and the implications of using personal details in online marketing activities. Also
includes information about complying with laws regarding unsolicited email (spam) and using email legitimately for marketing purposes.
Intranet: As intranet is a private computer network that uses internet protocols network connectivity, and possibly the public
telecommunication systems to securely share part of an organizations information or operations with its employees. Sometimes the term
refers only to the most visible service, the internal website. The same concepts and technologies of the internet such as clients and servers
running on the internet protocols suite are used to build an intranet. HTTP and other Internet Protocol suite are commonly used as well,
especially FTP and e-mail. There is often an attempt to use Internet technologies to provide new interfaces with corporate legacy data
and information systems.
Advantage:
1: Improve Communications: Keeping everyone informed and up to date can consume a significant amount of time. An intranet can
reduce this significant by giving everyone immediate access to project status, team discussions and other project collaboration tools.
2: Document Access: Studies have shown that the employees spend up to 4 hours a week searching for documents. An intranet provides
them easy access to the documents and forms they need to perform their jobs.
3: Knowledge Retention: Every employee represents a significant asset in organizations and them loss of a single employee can mean a
significant knowledge loss for organization. If using the intranet as a repository for that knowledge can reduce the knowledge loss and
getting new employees up to speed much easier.
Disadvantage:
1: Management could lose control of material provided on the internet.
2: There could be security concerns with who accesses the intranet, plus abuse of the intranet by users.
3: Intranets may cause information overload, delivering too much information to handle.

Extranet: An extranet is a private network that uses internet protocols, network connectivity, and possibly the public telecommunication
system to securely share part of a businesss information or operations with suppliers, vendors, partners, customers or other businesses.
An extranet can be viewed as part of a companys intranet that is extended to users outside the company. It has also been described as a
state of mind in which the internet is perceived as a way to do business with other companies as well as to sell products to customers.
Lastly, an extranet can be understood as a private internet over the internet.
Advantages:
1: Extranet can improve organization productivity by automating processes that were previously done manually. Automation can also
reduce the margin of error of these processes.
2: Information on an extranet can be updated, edited and changed instantly. All authorized users therefore have immediate access to the
most up-to-date information.
3: Extranet can improve relationships with key customers, providing them with accurate and updated information.
Disadvantages:
1: Extranet can be expensive to implement and maintain within an organization, if hosted internally instead of via an ASP (Application
Service Provider).
2: Security of extranet can be big concern when dealing with valuable information. System access needs to be carefully controlled to
avoid sensitive information falling into the wrong hands.
3: Extranet can reduce personal contact with customers and business partners. This could cause a lack of connections made between
people and a company, which hurts the business when it comes to loyalty of its business partners and customers.
# Networks Routers: It is a device that forwards data packets along networks. A networks router connects at-least 2 networks commonly
2 LANS or WANS or a LAN and its ISP networks. Routers are located at gateways, the places where 2 or more networks connects, and
are the critical device that keeps data following between networks and keeps the networks connected to the internet when data is sent
between locations on one network or from one networks to second network. The data is always seen and directed to the correct locations
by the router. A router has 2 key jobs.
i. The router ensures that information doesnt go where it is not needed. This is crucial for keeping large volume of data from clogging
the networks.
ii. The router makes sure that information does make it to the intended destination.
In performing these 2 jobs a router joins the 2 networks, passing information from one to other and, in some cases, performing
translation of various protocols between the 2 networks. It also protects the network from one another, preventing the traffic on one from
unnecessarily spilling over to the other.
# The Internet Protocol Suite: It is the set of communication protocols that implement the protocols stack on which the internet and
many commercial networks runs. The internet protocols suite like many protocol suites- can be viewed as a set of layers including the
network layer, the transport layers and the application layers. Each layer solve a set of problems involving the transmission of data, and
provides a well defined services to the upper layer protocols based on using services from some lower layers.
A protocol is mutually agreed upon format for closing something with regard to computers, it must commonly refers a set of
rules that enable computer to connect and transmit data to one another; this is also called a communication protocol. A protocol can be
implemented by hardware, or a combination of the 2.
The internet protocol suite is sometimes called the TCP/IP protocol suite, after TCP/IP, which refers to the most important
protocol in it; transmission control protocol and internet protocol.
Layer of Internet Protocol Suite:
1: Application Layer: Hypertext transfer Protocol (HTTP), File Transfer Protocol (FTP), Secure Shell (SSH) and Telnet at the
application layer. All application processes use the service elements provided by the application layer such as email.
2: Transport Layer: Transmission Control Protocol (TCP) and UDP (User Datagram Protocol) at the transport layer. It provides
transparent transfer of data between system, relieving upper layers from concern with providing reliable and cost effective data transfer.
3: Network Layer: Internet Protocol (IP) at this layer. It provides independence from data transfer technology and relying and routing
considerations.
4: Data Link Layer: Ethernet, Fiber Distributed Data Interface (FDDI) and Point-to-Point Protocol (PPP) at this layer. It provides
functional and procedural means to transfer data between network entities and possibly correct transmission errors and activation,
maintenance and deactivation of the link connection.
5: Physical Layer: Physical 10Base-T, 100Base-T, and Digital Subscriber Line (DSL) at this layer. It provides electrical, functional and
procedural characteristic to activate, maintain, and deactivate physical links that transparently send the bit stream.

# The Internet Naming Conventions: Computers on the internet identify each other by their IP addresses such as 209.194.84.59, and so
on. But most people dont want to remember the IP address so, a naming conventions is used to identify computers. Names like
mail@yahoo.com are preferred in such a situation. That standard is a user name followed by a node name. The node name includes a
computer names followed by a domain name. Some popular domain names are com, edu, org, and gov. The general form is;
user@computer.domain
e.g. mail@wlink.com.np where mail = users, wlink = computer name, com = domain and .np = route level domain.
The @ symbol is used to denote the node name and the period is used as a separator and to specify domain names.
When a user running a web browser enters URLs, the URL is translated into IP address with the help of DNS.
The domain name system (DNS) is a large distributed database of URLs and IP addresses.
DNS converts a computer or domain name to an IP address and converts an IP address to a computer on domain names. The internet
naming convention call for the type of website to be identified by the registry-the portion after the dot in any web addresses. For e.g. the
site that come under .com registry are commercial site, similarly .govt indicates government bodies, .org represents non profit
organization and society and so on.

Uniform/Universal Resource Locator (URLs): It is the unique address for a file that is accessible on the internet. It contains the
name of the protocol to be used to access the file resource, a domain name that identifies a specific computer on the internet, and a path
name, a hierarchical description that specifies the location of a file in that computer.
It was first created by Tim Berners-lee for used on the WWW. The currently used forms are detailed by IETF (Internet
Engineering Task Force) standard.
The first part of the address indicates what the protocol to use and the second part specifies the IP address on the domain name
where the resource is located.
For e.g. the 2 URLs below point to 2 different files at the domain encyclopedia.com the first specifies an executable files that
should be fetched using the FTP protocol, the second specifies webpage that should be fetched using the http protocol.
i. FTP: // www.encyclopedia.com/stuff.exe
ii.http:// www.encyclopedia.com/index.html

TCP: TCP is a set of rules used along with the internet protocol (IP) to send data in the form of message units between computers over
the internet. It solves several problems that can occur in a packets switching system. If a router becomes over run with datagrams, it
must discard them. As a result a data gram can be lost in its trip through the internet. TCP automatically checks for loss data grams and
handles the problem. The internet has a complex structure with multiple paths that datagrams can travel. When hardware in a router fails
or a networks fails the other routers starts sending data grams along a new path. As a result in change in routes, some data grams can
arrive at the destination in a different order then they were actually sent in. TCP automatically checks the incoming datagrams and puts
the data back in order. Network hardware failure sometimes results in duplications of data grams. TCP automatically checks for duplicate
data grams and accepts only the first copy of data that arrives. TCP provides a connection oriented, reliable, byte stream service. It also
provides a flow control.
TCP/IP: TCP/IP stands for Transmission Control Protocol / Internet Protocol. It is the basic set of rules that is used in almost all
networks present today. It has a two layer structure in which TCP forms the higher layer and IP forms the lower layer of the protocol.
TCP handles the transmission of packets over the network, and it makes sure that the original packet is reassembled properly at the
destination node. The lower layer, Internet protocol, is closer to the actual network it handles the address part of the packet.
This layer checks whether the packet reaches the right destination. TCP/IP communication is primarily point to point, which
means that each communication is from one point or node in the network to another point or node. It uses a client/server model of
communication. The address given to each node on a TCP/IP network is called an IP address. This address can be given manually to a
system, or a network can be configured to give an IP address to a machine when it logs on to the network. When an IP is given manually
it is called static IP allocation, and the second method is called dynamic IP allocation.
File Transfer Protocol (FTP): FTP is a protocol developed for transferring files over the Internet. Anonymous FTP is an option that
allows user to transfer files from thousands of hosts computers on internet to their personal computer account. It is based on TCP/IP and
is one of the most reliable and fastest file transferring methods. FTP sites contains books, articles, softwares, games, sound, images,
multimedia, data sets and more. Its transfers can be perform on www without any special software. In this case, the web browser will
suffice.
There are 2 computer involved in an FTP transfer; a server and a client. The FTP server, running FTP server software, listens on
the network for connection request from other computers. The client computer, running FTP client software, initiates a connection to the
server. Once connected the client can do a number of file manipulation operations.
It is compatible with all types of systems be it PC, Mac, or UNIX. Some of the most common FTP commands such as GET,
PWD and PUT are supported by almost all operating systems. Though a user can use these commands at the command line, they are
mainly intended for use in programs. Most of the servers that facilitate file downloads are based on the FTP protocol. HTTP an
improvement over FTP supports a display of HTML pages with images and graphics along with support for file download.
Internet Service Provider (ISP): An ISP is a business or organization that provides 2 consumers access to the internet and related
services in the past, most ISPs were run by the phone companies. Now, ISPs can be started by just about any invididual or groups with
sufficient money and expertise. In addition to internet access via various technologies such as dialup and DSL(digital subscriber line),
they may provide a combination of services including internet transit, domain name registration and hosting, web hosting etc. e.g.
merchantile, worldlink, everest net, cas trading, ntc, via net, subisu cable, info com.
TEL etype NETwork (Telnet): Telnet is a tool for remotely logging on to a computer on the internet and use online database, library
catalogs, chat services and more. It is based on the TCP/IP protocol, and allows one to use a remote computer just like a regular
computer, provided that you have been given the necessary access rights to the programs and data present on that system. When you
login using telnet, the remote system asks for your username and password. Based on that, one gets access to the system. You can then
enter commands (valid name and passwords) on your system that will be executed on the remote system. This enables us to control the
server and communicate with other servers on the network. It is common way to remotely control web servers. For example, \"telnet
computername\" logs you on to the computer called \"computername\". This tool is now mainly used for remote administration the
administrator can configure a server remotely over a network.
# Search Engines: Search engines are websites that allow user to search information stored on a computer system, such as on www,
inside a corporate or proprietary network, or in a personal computer. Web search engine are actually databases that contains references to
thousands of resources. It responds to a specific items or query, of interest with a list of pages that match that query by virtue of
containing the key words that were included in the query. It allows the user to access various level of information. There are many search
engines available on the web. Some of the most popular search engines are google.com, yahoo.com, altavista.com, excite.com,
infoseek.com and lycos.com that enables user to search for documents on the www. E.g. audio galaxy, xolox, kceasy, Napster.
In order to build up a search database the search engine will employ a program known as a spider. This will visit a web site
and access the web documents stored there, keep track of the address of the documents and the word that are stored in them and update

the search engines database. Spider will not visit web site randomly: they will only visit those sites whose developers inform the search
engine they want them linked to the engines database. A developer will interact with the search engine site by requesting and filling in a
form; this from will normally just ask for the address of the document to be indexed and a contract e-mail address. After a few seconds
the spider will visit the web site and start the indexing process usually after a week or two; details of the web site are added to the search
engines database.
Search engines are big business on the internet. They mainly make money by displaying banner adverts or sponsored links.
There are a wide variety of search engines on the internet ranging from those which catalogue any web site to specialized search engines.

#Introduction to broadband technologies: Broadband refers to the transmission medium or the physical connection with which users
can access the internet at speed faster than the ones currently prevalent. Its access can be through any medium copper, fiber or wireless.
According to FCC broadband is defined as the capability of supporting, in both the provider to consumer (downstream) and the consumer
to provider (upstream) a speed (bandwidth) in excess of 200kpbs in the last mile. More bandwidth is needed to download a photograph in
1second than 1 page of text in one second. Computer programs and animated video require even more bandwidth if they are to be
downloaded in the same period of time it takes to download a text. The explosion in the demand for broadband can be due to various
reasons. The raise of the internet during the last decade has spurred demand for high speed data, voice and video from business as well as
residential consumers. Thus for the first time, telecom companies began to contemplate providing broadband services in the so called last
mile-the final link between the end user and the provider of the service.
Broadband technologies are there to offer as a single point access to a host of different services. Consider this; in an office
environment you have local computer network, and EPABX system, a fax line, separate servers for corporate internet access and so on.
Broadband is all about combining all of the seemingly disparate services into a single, unified network.
Types of Broadband network-6:
1. Digital Subscriber Line (DSL): It is comprised of 2 basic parts; a head end device, called a Digital Subscriber Line Access
Multiplexer, and a DSL modem/router, which is found at the subscriber location. The human ear can detect sonic waves up to a
frequency of about 20 kHz. DSL essentially modulates binary data into sonic frequency above 20 kHz. Thus data can ride the phone
line along side an active voice transmission un-detect by the caller.
2. Cable Modems: This technology utilize the Hybrid Fiber Coax (HFC) or the all coaxial infrastructure of the local cable provider.
Cable modems and cable head end devices usually adhere to the Data Over Cable Service Interface System (DOCSIS) initiatives. This
system consists of head end device located at the Multiple Service Operator (MSO) and a cable modem located on the customers
premises. The cable modem provides an Ethernet port for connectivity to the customers PC or network.
3. Passive Optical Networks (PON): They are access networks in which fiber trunks are fed towards end points and split into multipoint
trees along the way, until reaching a termination of the fiber run. It consists of Optical Line Termination (OLT) and Optical Network
Unit (ONU). It is deemed passive because the physical connection between OLT and ONU, refer to as Optical Distribution Network
(ODN), consists only of passive components.
4. Wireless LAN and LMDS: The major applications considered for the future of LMDS are wireless consumers video and wireless
internet access. Some provider are placing fixed antennae throughout metropolitan areas, offering wireless service to the internet
through LMDS. While LMDS is not specifically being deployed for local broadband service to date, it is conceivable that it will be in
the near future.
5. Asynchronous Transformer Mode (ATM): ATM is a layer of 2 technologies that establishes connection oriented Virtual Circuit
(VC) across the network. Once connection is established data packets are segmented into 53 bytes cells which are transmitted across
VC to the egress ATM switch reassemble into the original packets and delivered to the intended destination. It is unbiased to what ever
data packets are to be sent. All data packets are converted into an ATM cell for transport and then reassemble for end note delivery.
6. 10/100/1000 Mbps Ethernet: Ethernet has grown from a shared 10 mbps technology, where all users on the network contend for the
same pool of bandwidth, into a switched technology providing dedicated bandwidth to each subscriber at up to a full gigabyte of
through-put. 1000s of Ethernet devices are available to handle everything from small, home based networks, to wiring closets and even
fortune 500 backbones. World wide shipments of Ethernet devices measure in tens of millions of interfaces.
Extras:
The Internet and World Wide Web: The Internet originated in the early 1960s with the U.S. department of defense ARPNET that was
designed as a method of secure communications in the event of a national disaster or nuclear war. The role of this computer network was
expanded to include a reluctant consortium of universities, which were benefiting from defense department grants. This consortium
expanded the role of the network to include communications between researchers, scientist and engineers affiliated with either the
defense department or the participating universities. The expanded role brought the computer network under the control of the National
Science Foundation, which originally prohibited commercial use of the network. However by 1989, the NSF permitted two commercial
e-mail services, MCI and Compu-Serve, to establish limited connections to the Internet for the sole purpose of exchanging e-mail
transmissions. During 1995, Congress opened the Internet for full commercial use and the number of Internet hosts grew from among 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 World Wide Web and the HTML code, which makes Web service possible, was the necessary component to actualize
this market potential. The Web represents a way of organizing information storage and retrieval to make the Internet easier to use.
Finally the graphical user interface made the PC an easy-to-use connection to the Internet and the World Wide Web.
Website: A web site is a collection of (web) pages that are related in some way, and placed in a distinct structure. A web site could be
about a company and its services, or a personal page about a company and its services, or a personal page about the creator and his or her
specific interest. It could also be a web site offering services such as news or downloads. Web pages are built on a markup language
called Hyper Text Markup Language (HTML). Users can access web pages through a web browser that reads the code off the web server
and draws (renders) the page for display to the user.
Web sites always have a home page or a starting address that is advertised or published. For example, you will find Hotmails
home page at www.Hotmail.com. Web sites are not to be confused with a web server. A web server is a physical computer that serves

pages. A large and complex web site such as Microsoft.com would have different parts of the web site on different severs, in different
locations. The user accessing the web site does not know whether the server is at the other end of the town, or the other end of the world.
A site is said to be hosted on a server and companies that provide space on their servers perform a service called hosting.
World Wide Web(WWW):One of the newest and most interesting Internet developments has been the World Wide Web. Before the
Web, individual Internet computers had windowing systems and graphical capabilities, but network tools, like mail, FTP and TELNET,
were still text-based. The Web changed that by introducing a graphical, point-and-click network interface. Now you can connect to a
Web site, download a graphical page, use your mouse to click on an item of interest, and load another page.
The Web has two main components - the HTML language used to describe web pages, and the HTTP protocol used to transfer
HTML across the net.

Unit VI: 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.
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 arises 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 times 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.
Denial of service threats can also attacks servers, where a user can render the system un-usable 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 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 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.
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-2:
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 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.
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-4:
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.
Security Overview:
The opening vignette discussed the damages caused by the first significant computer network attack executed over the Internet on
November 3, 1998. The attacked was termed the Internet Worm and caused estimated damages between $64 To $100 million dollars.

This alarming vignette leads to an overview of computer security and counter measures. A risk management model is presented in Figure
5-1, which compares cost impact to strategic actions such as Ignore and Threat, prevent it, insurance/backup plan, and contain it.
Computer security can be classified into three categories: Secrecy, integrity and necessity. Secrecy involves protection against
unauthorized data disclosure, while integrity, is concerned with unauthorized data modification, and necessity refers to preventing data
delays, denial or removal. Copyright infringements are narrow and usually have a small impact on an organization.
Computer security policy is a written statement describing the assets to be protected, the procedures to be followed, and the
areas of responsibility. The policy statement should address the following:
1. Physical security
2. Network security
3. Access authorization
4. Virus protection
5. Disaster recovery

Unit VII: Consumer oriented e-commerce

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.
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 knowledgegathering 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.
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.
OR
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 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 transaction-processing 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 the search process. It is evident that an understanding of hedonic and utilitarian shopping

Order Selection & Prioritization

Product service
production & delivery

can provide insight into many ecommerce consumption

behavior that are normally not taken into account in the design and layout of
Order Scheduling
electronic market places.
d. Information Brokers and Brokerages: To facilitate better consumer and organizational search, intermediaries called information
Fulfillment and brokerages
Delivery
brokers or brokerages are coming into existence. Order
Information
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
Order Billing &
Account Management
purchasing and negotiation with merchants for suitable terms such as price, availability and delivery date; and e-payment mechanism that
Post Sale Interaction
integrates payment into the purchasing process. Purchase
consummation includes:
Customer Service and Support
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 Fig:
kept
secured
Order
Management(un-forgeable)
cycle in ecommerce 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

Authorization of Payments

Purchase Consummation

Receipt of Products

Consumer service & support (if not

classified in X day return product)

Post Purchase
Interaction

Fig; Steps taken by customers in product purchasing

Mercantile Process Model from the view point of Merchant or

Order Management Cycle (OMC) from the viewpoint of Merchant in Ecommerce-8: 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:

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 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 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 onattracting 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
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.
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 costeffectiveness 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
Unit VIII: 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.
[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)
[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 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 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.

Credit Card: A credit card is termed as payment 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 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.

Unit IX: E-Strategy

Information and strategy:
All these claims are valid in some ways and therefore, there are diminishing returns to arguing which is the critical motive force
but we can recognize that today every business is an information business. Let us first take the perspective of industrial structure. We see
battles in the marketplace all the time, as "content" companies try to acquire related content businesses, not only because of their thirst for
information but also because of the opportunities for synergy created by repackaging, reuse and navigation. More significantly perhaps,
content companies acquire or build alliances with communication companies and vice versa. Both sides recognize that the command the
airwaves is to command the distribution channels of the information age, and that the high value added opportunities are likely to rely on

selling content and repackaging and reusing it in manifold ways. Sometimes, novels are made into television films. That is an example of
repackaging opportunities.
It is not just the obviously information-intensive companies that are trying out these new strategies. More and more "traditional"
companies follow some of the same logic. So, when Smith Kline Beecham acquired Diversified Pharmaceutical Services in 1994, the
purchase was as much about buying the data embedded in prescriptions and healthcare administration processes- which could then guide
research and development programs and sells management- as about more conventional synergies.
Perspective of Strategy & Information: Today every business is an information business. It consists of two perspectives:
1: Perspective of industrial structure. We can battles in the market place all the time, as content companies try to acquire related
content businesses, not only because of their thirst for information but also because of the opportunities for synergy created by
repackaging, reuse and navigation. More significantly perhaps, content companies acquire or build alliances with communication
companies, and vice-versa. Both sides recognize that to command the airwaves is to command the distribution channels of the
information age, and that the high values added opportunities are likely to rely on selling content and repackaging and reusing it in
manifold ways. Sometimes, novels are made into television films that are an example of repackaging opportunity. It is not just the
obviously informationintensive companies that are trying out these new strategies. Indeed, it becomes difficult in the world of intangible
assets and electronic distribution channels to be clear to define vertical and horizontal integration. Microsoft Corporation takes stakes in
software, communications and information-providing businesses, and America Online acquires Netscape which are may be horizontal &
vertical manoeuvres.
2: Perspective of Information Structure: If we choose to take information perspective, businesses converge, partly because of the
integrated e-strategy. In another words, brand, technology, market and service are the four aspects of e-strategy. In some cases this
happens because the product is information-based, as in the case of Disney and ABC. In other cases, it is because processes are
information-based such as in our pharmaceuticals examples. In still other cases, it is simply because market understanding or decisionmaking is information-based. So retailers, financial services, organizations and airlines will form alliances because of the information and
sales potential of customer cards.
While the price system coordinates the economy, managers integrate activity inside the firm. Increasingly, strategic advantage
requires the integration of external activities and technologies. So, an integrated e-strategy implies integration of technology, brand
standing, customer-service and meeting the needs of the market.
Value Chain: A value chain is a interlink value creating activities performed by an organization. These activities begin with inputs, go
through processing and continue up to outputs. Market to customer. Value chain to internal to the organization. Value chain analysis
helps to understand how value is created or loss. It examines the organization in the context of a chain of value creating activities. It
describes activities within an around an organization which together creates a product or service. It identifies several activity performed
to produce, market, deliver and support a product. It is a primary tool to analyze cost competitiveness and value creation.
The Virtual Value Chain (VVC):
VVC is a business model describing the dissemination of value generating information services throughout an extended
enterprise. This value chain begins with the contents supplied by the provided, which is then distributed and supported by the information
infrastructure; thereupon the context provider supplies actual customer interactions. It supports the physical value chain of procurement,
manufacturing, distribution and sales of traditional companies. The value chain requires a comparison of all the skills and resources the
firm uses to perform each activity. In the virtual value chain the virtual indicates that the value adding steps are performed with
information. The transfer of information between all events and among all members is a fundamental component in using this model.
In the VVC the creation of knowledge involves a series of 5 events; gathering, organization, selection, synthesization and
distribution of information. The completion of these 5 events allows businesses to generate new market and new relationship within
existing market. The process of business refining raw material into something of value and the sequence of events involved is similar to
that of a business collecting information and adding value through its cycle of events. As digital technologies converge, the whole
concept of physical value chain undergoes a change. Today the focus is on the virtual value chain.
Value chain and E-Strategy-2:
1. Value Activities: Value chain activities are the main things that the company does to design, produce, sell and service products.
Typical value activities for a manufacturing firm would be things like:
1. Gathering customer needs
2. Designing products
3. Purchasing products
4. Promoting products
5. Selling products
6. Servicing products
7. Servicing customers
The primary value chain activities are:
1. Inbound logistic: The receiving and warehousing of raw materials, and their distribution of manufacturing as they are required.
2. Operations: The process of transforming inputs into finished products and services.
3. Outbound Logistic: The warehousing and distribution of finished goods
4. Marketing and Sales: The identification of customer needs and the generation of sales.
5. Service: The support of customers after the product and services are sold to them.
2. Assessment of Information Intensity: Assessment of the intensity of information in the value chain and value activities takes the next
priority. The industry that has high information intensity in the value chain would have characteristics like those listed below:
1. A large number of direct suppliers or customers
2. A complex product line
3. A product that needs a lot of information to sell

4. A product composed of many parts

5. Many steps in the production process
6. A long order fulfillment cycle time
Next, if there is high information intensity in the products of your industry, it is reasonable to adopt e-commerce. Characteristics of
high information intensity in the product would be a product that:
1. Provides information
2. Involves information processing
3. Requires the buyer to process a lot of information
4. Has high user training costs
5. Has many alternatives uses.
Components of Commerce Value Chain:
1. Attract Customers: By this we mean, what ever steps we take to draw customer into the primary sites, whether by paid advertisements
on other websites, emails, TV, prints or other formats of advertising and marketing. The point here is to make an impression on
customers and draw them into the detailed catalog or other informations about products and services for sales.
2. Interact with Customers: By this we mean turning customer interest into orders. This phase is generally content oriented and includes
the catalog, publication or other information available to the customer on the internet. The content may be distributed by different
mechanism such as www or email.
3. Act on customer instructions: The next component is to act. Once a buyer has searched through a catalog and wishes to make a
purchase, their must be a way to capture the order, process payment, handled fulfillment and other aspects of order management.
a. Order Processing: Often a buyer wishes to purchase several items at the same time so the order processing must include the ability to
group items for later purchase. Thus, the buyer to discard items adds new ones, change the quantities and so on.
b. Payment: After finalizing the order the buyer makes a payment. There are various methods of payments; credit cards, purchase order
and the like. Other method of payment on internet commerce is online payments system in which the seller collects payment from the
buyer.
c. Fulfillment: After the order has been place and the payment is made, the next step is fulfilling the order. How that happens depends on
type of things purchased. If the items order is a physical good it will be deliver to the buyer. The order is usually forwarded to a
traditional order processing system.
4. React to customer inquiries: Finally, after a sale is complete the customer may have some questions or a difficulty that requires
service. Although many questions require a person to answer, other can be answered with the appropriate information system.
Customers who wonder whether or not their orders have been shipped might check back with the system. Using people to answer
customer service calls can be very expensive so it is worth investing in systems that eliminates question that do nor require the
capabilities of a person.
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. 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 interbusiness 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 tends 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 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 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
Leadershiponly as and when it is needed, and it prefers that the product
market demand. A buyer company prefers to order product from suppliers
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.
Organizational Learning

Infrastructure

7 Dimensions of E-commerce Strategy:

In order to understand the process of e-commerce strategy, systematic examination of the strategic forces involved has to be considered.
Looking at the most successful e-commerce companies. The following are the 7 main dimensions of E-commerce strategy.

1.
2.
3.
4.
5.
6.
7.

Leadership
Technology
Services
Infrastructure
Market
Brand
Organization learning
It is argued that this model can be applied to all forms of organizations in the traditional sectors. However, this model is
specifically applicable to assisting the needs of e-commerce strategies. The bonds of an e-strategy lie in the preparation of the ground
before the functional issues are addressed. Leadership, organizational learning, and infrastructure form the bonds as shown in the
following figure.

The primary drivers and the creators of strategic vision in an organization are the CEO and the senior executives. The market for
intellectual capital in the form of experienced proven and successful leadership has never been extreme. Once the need to develop estrategy is identified, the single most important issue facing the executives is the IT infrastructure. This spans the technology spectrum
from single internet file server connected to an ISP to the information intense online transaction processing. Leadership with vision
facilities encourages and allows an environment to develop within the organization, where institutional learning and memory thrive.

Thanks for downloading this file

Authorized author: <unknown>
File downloaded from: www.shekharkhadka.blogspot.com
Contact: letterstoshekhar@gmail.com for author claim
Twitter: shekharofficial