E-Commerce

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Feb 23, 2014 (3 years and 6 months ago)

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BBA 8
th

Semester, E
-
Commerec. Prepared by:
www.roshank.com.np


Page
1


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 transa
ctions
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 & th
ousands 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 custome
r’s 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 & dev
elopment 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 i
n 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 int
eractive 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), int
ranet 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 partici
pating 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 mu
st establish mutual trust & secure access between
the parties in an e
-
commerce transaction by authenticating users, authorizing access, & enforcing security
features For e.g. these processes establish that a customer & e
-
commerce site are who they say they

are
through user names & passwords, encryption keys, or digital certificates & signatures. The ecommerce site
must then authorize access to only those parts of the site that an individual user needs to accomplish his or her
particular transactions. Thus,
you usually will be given access to all resources of an ecommerce site except for
other peoples account, restricted company data & webmaster administration areas.

[2] Profiling & Personalizing:

Once you have gained access to ecommerce site, profiling proce
sses 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 tracin
g 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 ma
rketing 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:
Efficien
t & 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 acq
uire 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 inform
ation 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
BBA 8
th

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-
Commerec. Prepared by:
www.roshank.com.np


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profili
ng 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 company’s

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 electr
onically 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 accompli
shed. 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 company’s management so they can monitor
their employees responsiveness to ecomme
rce events & customer & supplier feedback. Most ecommerce
applications are event driven systems that respond to a multitude of events


from a new customer’s first
websites access, to payment & delivery processes & to innumerable customer relationship & su
pply 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 transaction
s. 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 s
erver, and any hardware attached to those servers. Active content refers to programs that are
embedded transparently in a client’s 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
ent
ity 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 c
onvenience 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 mod
e, 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 dis
aster 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 po
tential 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 mess
ages; businesses wanted their employees to be able to
communicate with people outside their corporate networks for promoting business. But the national science
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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 a
nd 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 membe
rs 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 th
e 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 20
th

century. Millions of p
eople 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 t
his 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 increa
se 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 p
rocessing 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) effort
s.



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 experienc
es.



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 merchan
dise 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, in
creases 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 ret
urn 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
-
c
ommerce 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 atm
osphere.
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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 t
echnology 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 viewi
ng 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 acc
essibility 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 w
ebsite 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.


Traditi
onal 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 selectio
n, 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 rest
ricting. 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, bu
sinesses are using electronic mechanisms to distribute
information and provide customer support.



















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th

Semester, E
-
Commerec. Prepared by:
www.roshank.com.np


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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 doesn’t 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
follo
ws:

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 part
ies
-
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 elect
ronic 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 e
lectronic 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 exch
ange & 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 fo
r 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 & supplie
rs. 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 wit
h 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 o
ther
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 n
ot 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 com
pany is able to
handle many more customers on a much wider geographical speed if it uses an e
-

business model. The
company can set up a generic parent sites for all location and make regional domains to suit such requirement.
Microsoft is using this model
very successfully. The additional cost of serving larger segment of customers
comes down drastically once a critical mass is reached.

5]
Saving in distribution cost
: A company can make huge saving in distribution, logistic and after sales
support costs by

using e
-
business models. Typically examples are of customer companies, airlines and
telecom companies. This is because the e
-
business models involved the customers in the business interaction
to such a level that companies are able to avoid setting of the

huge backbone of sale and support force, which
ordinarily would have to be set up.


Types of B2B Model:

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1: Maintenance, Repair & Operating (MRO) Hubs:

These hubs concentrate on goods with low value. The
transaction cost is relatively higher. These hubs pr
ovide 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 m
anagers 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 hu
bs 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 bu
yers 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
-
bus
iness 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 catalogu
e
-

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 en
gine, 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 site’s shopper
registry. This allows the
customer to avail of the shop’s complete services. The customer becomes a part of the company’s growing
database and can use the same for knowledge management and data mining.

3]
Customer buys products
: Through a shopping cart sy
stem, 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 chec
k
-
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 g
ateway 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
-
commer
ce.

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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]
Cus
tomer 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
re
lationship 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 thei
r 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 b
y 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)
Custom
er 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 easil
y 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 mont
h 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 media
n.



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 facilitat
e transactions between buyers
and sellers and receive a percentage of the transaction’s 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 si
te 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 partie
s. 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, fo
r example advertisements on
Yahoo!

or
AOL
. When advertisers are trying to reach a smaller group of buyers, they take a
niche

approac
h. 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.


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th

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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 (clas
sified 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 fr
om
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 j
ust 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 sal
e 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 eac
h 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 newspape
r 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 encom
passes 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 identifi
ed 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 cu
stomer
-
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 measu
red, 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 gen
erating 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.


























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Unit III
:
E
-
Marketing


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 desc
ribe 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 e
conomic 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 produc
ts, 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 doesn’t matter if the prospects saw your message or not, in IM with pay
per click (PPC) yo
u 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, promo
ting, 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 mark
eting 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 origination’s presence is the public image it presents to its stakeholders. The stakeholders of a
firm include its customer, suppliers, em
ployees, 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 o
nline 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 today’s marketing mix. It wi
ll add
more interactivity. But it will subtract costs. It will add more customer choices. But it will remove marketing’s
dependence on paper. It will add “information value” to products and services. But it will take away barriers
to starting a business or
t 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 capab
ilities
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.

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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 u
sual, 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 merchant’s 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 t
his 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 c
ard 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
c
urrency and account set up between the currency provider and the participating merchants.



Advantages of Online Marketing

1.

Online marketing offers bottom
-
line benefits that tie in directly to the demands placed on the organization
trying to make transition

into the new economy.

2.

Online marketing can save money and help you stretch your marketing budget. Electronic various of
catalogues, brochures, and specification sheets do not have to be printed, packaged, store, or shipped. These
can be updated online, an
d 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 it
self, 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 a
n
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 entrepr
eneurs 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 ba
sed 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 driver’s 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 wash
es 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 ent
ice them. The marketing
efforts will have to be information
-
rich and user
-
friendly.

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Web
-
bases advertising has become an important part of a company’s media mix Numerous companies
are committing large advertising budgets to the Internet.

Following are the r
easons 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
websit
es 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
de
stinations, whereas a physical book store serves an area of only a few square miles.


Various means of Advertising
:

1. E
-
mail:
The advantage of e
-
mails are its low cost and its ability to reach a wide varity of targeted
audiences. Most companies develop a
customer database, to whom they send 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. Sometime
s, it may also happen the
whenever marketer starts inundating prospects and customers with e
-
mail, the consumers may react
negatively.

2. Mini
-
sites. Pop
-
ups:
These ads burst upon the screens, allowing companies such as Volvo and SmithKline
Beecham’s oxy a
cne medicine to dosh up games and product information. Mini
-
sites allow advertisers to
market without sending people away from the site they are visiting. This type of advertisers to market without
sending people away from the site they 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 whic
h 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 customer’s 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 betw
een websites. To be
precise, company A may agree to display a banner of company B in exchange for company B displaying
company A’s banner


The Browsing Behavior Model
:
The customer behavior while interacting with an ecommerce site has impact
on the IT reso
urces 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 patt
erns, 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
passw
ord, payment information, mailing address, and e
-
mail address for notification of order status and
videos of interest.

5.

Login with a username and password.

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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 b
eing 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, o
r 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 customer’s 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 selectin
g URL for the site’s 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 custom
er 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 lin
ks 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 s
tate.

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.
Exi
t
: 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 exten
ded 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
trans
actions. 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 us
er
-
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
:

Sinc
e, 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 world’s 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 ph
ysical 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 re
tailing transaction on the internet.


Extras:

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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, Intern
et marketing is commonly referred to as Web advertising (also
Webvertising) and Web marketing. 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. Th
e 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).

Interne
t 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 buildi
ng 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 bus
iness 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 custome
r
engagement cycle through search engine marketing (SEM), search engine optimization (SEO),
banner ads

on
specific websites, email marketing and
Web 2.0

strategies. In
2008

The New York Times working with
comScore

published an initial estimate to

quantify the user data collected by large Internet
-
based companies.
Counting four types of interactions with company websites in addition to the
hits

from ads served

from
advertising networks, the authors found the potential for collecting upward of 2,500 pieces of data on average
per user per month.
[1]


Advantage of Internet M
arketing
: 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 adve
rtisers either pay per
web banner impression, per
click

(PPC), per
play

(PPP), or per action accomplis
hed. 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. Because exposure,
response, and overall efficiency of Internet media is easier to track than traditional off
-
line media


through
the use of web a
nalytics 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 sa
les) 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 o
f 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 website
s, 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 makin
g 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 foll
owing barriers to entry for large companies
looking to market online: insufficient ability to measure impact, lack of internal capability, and difficulty
convincing senior management.


UNI
T IV
: Mobile Commerce

Mobile Commerce
: Mobile commerce is the use o
f the internet for purchasing goods & services as well as
for transmitting messages using wireless mobile devices. The broad scope of mobile commerce includes
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hardware, software, and suppliers of network products and services, with a special concern for co
ntent 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 messag
e 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 mob
ile 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 o
ther
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
-
to
-
use, secure, location, and time independent. Bank branches are becoming
increasingly expensive to operate, and the established self
-
service solutions, such as ATMs and Internet
banking, cannot provide competitive efficiency or satisfy the need of t
he 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
elec
tromagnetic 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 cha
racteristics 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 handheld
s:

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. Exam
ples 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.

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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 acc
ess 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 Protect
ed 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 el
ectronic 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 th
e 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 i
s 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
t
he 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 operator’s 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 phone’s small
screen and low bandwidth high latency con
nection. 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 indepen
dent.

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 Applicat
ion 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 ph
ones, 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 b
e 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 i
s being used to develop enhanced firms of existing applications and new
versions of today’s application. Existing mobile data software and hardware supplies are adding WAP support
to their offering, either by developing their own WAP interface or more usua
lly, 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 f
rom 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 encour
ages entry to the mobile industry by software developers.

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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.

TD
MA
: 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 TDM
A. 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
: Globa
l 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.










































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Unit V:
Network infrastructure for Ecommerce
:


#
Network and Internet:

A computer network cons
ists 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 in
ternet
-
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 con
nected 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 use
d 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 don
’t 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 th
rough 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 us
e 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 inco
ming 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 inter
net. 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, competit
ors 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 c
an 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
-
busin
ess advertising strategies that, when used in parallel with traditional marketing,
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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 tra
ditional 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 p
rivacy 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 i
ntranet is a private computer network that uses internet protocols network connectivity, and
possibly the public telecommunication systems to securely share part of an organization’s information or
operations with its employees. Sometimes the term refers o
nly 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 spe
nd 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
si
ngle 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 contro
l 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 extra
net is a private network that uses internet protocols, network connectivity, and possibly the
public telecommunication system to securely share part of a business’s information or operations with
suppliers, vendors, partners, customers or other businesses.

An extranet can be viewed as part of a company’s
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 pro
ducts 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 m
argin 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 custome
rs, 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 ca
n 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 c
ause 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 connec
ts 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 conne
cted 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.

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i.

The router ensures that information doesn’
t 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 inf
ormation 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 P
rotocol 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 net
work 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 proto
col 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 impl
emented 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 Int
ernet 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 effec
tive 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:

Phys
ical 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 don’t 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 name
s.



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 an
d 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 commerc
ial site,
similarly .govt indicates government bodies, .org represents non profit organization and society and so on.




Unifo牭/U湩n敲獡l R敳潵牣o Lo捡co爠(URL猩
: 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 Ber
ners
-
lee for used on the WWW. The currently used forms are detailed
by IETF (Internet Engineering Task Force) standard.

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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 usin
g 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 a
long 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 datagram’s, 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 datagram’s can travel. When hardware in a router
fail
s 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 d
atagram’s 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 w
hich 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
pr
otocol, 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 poin
t 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 transfe
rring files over the Internet.
Anonymous FTP is an option that allows user to transfer files from thousands of host’s computers on internet
to their personal computer account. It is based on TCP/IP and is one of the most reliable and fastest file
transferr
ing methods. FTP sites contains books, articles, software’s, 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 connect
ed 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 tran
sit, domain name registration and hosting, web hosting etc. e.g.
merchantile, worldlink, everest net, cas trading, ntc, via net, subisu cable, info com.




TEL 整祰攠NETw潲欠(T敬湥n)

Telnet is a tool for remotely logging on to a computer on the internet a
nd
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 da
ta present on that system. When you login using telnet, the remote system
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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 corporat
e 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,
excit
e.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 si
te 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 engine’s database. Spider will not visit
web site randomly: they will only visit those sites whose developer
s inform the search engine they want them
linked to the engine’s 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 contr
act 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 engine’s 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
: Broad
band 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 de
fined 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 la
st 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 E
PABX 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 infrastructur
e 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 m
odem 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 mult
ipoint 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 Distrib
ution Network (ODN), consists only
of passive components.

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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
metropo
litan 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 laye
r 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 ori
ginal
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 h
as 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 Interne
t originated in the early 1960’s 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 con
sortium 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 par
ticipating 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, MC
I 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 19
95 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 sit
e 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 he
r 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
we
b 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 Hotmail’s home page at www.Hotmail.com. Web sites are not to be confused w
ith 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 kno
w 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 mo
st 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 i
ntroducing 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 d
escribe web pages, and the HTTP
protocol used to transfer HTML across the net.








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Unit VI:
Network Security
:


Network Security:



A
network
security 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 resour
ces 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 ar
e 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 S
ervice Attacks (D
O
S)
: It is an attack on a network that is designed to disable the network by
flooding it with useless traffic or activity. A distributed D
O
S attack uses multiple computers to launch a
D
OS attack. While a DO
S attack does not do any technica
l 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

i
nstall a
attack programs. Therefore,

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 doesn’t 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 cel
ls. 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

as,

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 doesn’t’ 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/love

letter,
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 othe
r. 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 serve
r, 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. Th
e security threats arises when the downloaded data passes
through local interpreters (such as PostScript) on the client system without the users knowledge. A smaller
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problem existed in the UNIX mail system where by a remote user, through various escape seq
uences, could
invoke the shell program (csh or sh) on the recipients machines. This potential security breach has been
plugged in most of the new mail system.



In short Client threat mostly arise from malicious data or code. Malicious code refers to virus
es,
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 presenc
e of malicious costs have resulted primarily from system outages
and staff time to repair the system. Nonetheless these costs can be significant. Clients must scan for
malicious data and executable program fragments that are transferred from the server to
the clients. It is
conceivable that the client may need to filter out data and programs known to be dangerous. Although it is
not possible to do so conclusively.

2.

Threats to Servers
: It consists of impersonation, eaves dropping, denial of service, packet re
play 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 l
ikely 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 can’t 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 r
ecording 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 des
troyed before the legitimate users can see them.


To counter some of these server’s 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
-
autho
rized 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 com
puter 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 manufac
turers and network administrators might turn it off.) You do not have to
use Windows Firewall

you 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 prev
ents 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 enfo
rcing 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 inher
ently 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 th
e connection, Windows Firewall creates an exception so
that the firewall won't bother you when that program needs to receive information in the future.

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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 th
e 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 organization’s
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 whe
re 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 organization’s 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 organization’s 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 resource
s 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 generall
y
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 c
onfigure 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 sho
uld 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
tr
aditional passwords. The passwords generated by advanced authentication devices can’t 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 Fil
tering
: 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 (ii
i) 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 fr
om 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
fi
rewalls 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. Appl
ication gateway and packet filtering routers can be combined to
provide higher level of security and flexibility than if either were used alone.




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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
prioritized

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 g
ateway, because the feature of access control is
performed at a lower OSI layer.

3: Hybrid Systems:
In an attempt to man
y 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 a
nyone 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 call
ed 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 & Encryptio
n 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 symmetr
ic 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 sys
tem, 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 mach
ines 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 be
fore it can be
examined.

Email Encryption schemes deployed on internet
-
2
:

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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 w
ork 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 bot
h 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 a
s 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 maneuverabili
ty 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 conne
cting 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 netw
ork 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, s
uch 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 user
s 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 workstatio
n 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 pass
words of various users.

2.

Software Security holes:

It results when badly written program or “privileged” software are
“compromised” into doing things they shouldn’t. The most famous e.g. of this is the “send mail” hole,
which brought the internet to its knee
s 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 result
ing 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 unconnecte
d 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 trustwort
hy 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 a
nd 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
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in computing system
s 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, passwo
rd 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 automat
ic 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 som
e unique aspects of a person’s
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
networ
k 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 f
irst 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 thr
ee 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. Copyr
ight 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 Electronic 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 reso
lved. 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. I
deally, 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
r
emains 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 EC
OMMERCE 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 limi
ted 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 stat
ement 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”.

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b.
Intermediate Service
: includes a growing array o
n 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 ca
rd 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 digi
tal 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 dig
ital 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 sh
opping 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 intern
et to launch an
enquiry using a knowledge
-
gathering software assistant (in technical terms a mobile software agent) that
roams the global networks and identifies the items in various vender catalogs that fit certain specified
parameters such as price and q
uality. 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 wat
ch 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
: Entert
ainment 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
conv
ergence 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 fe
e 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
appro
ved.


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 encryp
tion 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 F
inance & 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
-
the
-
clock b
anking 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.

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2: Home Shopping:
It is already in wide use a
nd 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 overni
ght 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 pro
vide 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 ev
ents. 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 what’s on TV.
TV guide on screen lets cable system subscribers download program schedul
es 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 p
roducts 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
-

s
ex, 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 d
ay.


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
electron
ic 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 behi
nd 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 perspectiv
e 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 proces
s
: 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 improv
ed final decisions. This process is determined in part by
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market characteristics and by certain aspects of a firm’s present buying situation. Together, these dimensions
impose a series of demand on the search process used.

c.
Consumer Search Experiences
: I
t 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 can provide in
sight into many ecommerce
consumption behavior that are normally not taken into account in the design and layout of electronic market
places.

d.
Information Brokers and Brokerages
: To facilitate better consumer and organizational search,
intermediaries cal
led information brokers or brokerages are coming into existence. Information brokerages are
needed for three results; a comparison shopping, reduce search costs, and integration.

2.
Purchase Consummation
-
3
:

It includes mercantile protocols that specify th
e flow of information and
documents associated with purchasing and negotiation with merchants for suitable terms such as price,
availability and delivery date; and e
-
payment mechanism that integrates payment into the purchasing process.
Purchase consummati
on includes:

a.
Mercantile process using digital cash
: In this scenario, a bank mints electronic currency (e
-
cash) which is
simply a series of bits that the issuing banks can verify to be valid and is kept secured (un
-
forgeable) by the
use of cryptographic

techniques. E
-
cash issuing banks make money by charging either buyers or sellers a
transaction fee for the user their e
-
cash. It is similar to paper currency and has the benefits of being
anonymous and easily transmitted electronically.

b.
Mercantile Tran
sactions 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, transm
its 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 t
o 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 I
nteraction
:
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 become
s 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.




















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 ass
umptions 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 company’s 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 traditiona
l order to delivery cycle. The typical OMC includes 8 distinct activities
Product/Service search & discovery in the information space

Negotiation of terms e.g. price delivery

Placement of Orders

Authorization of Payments

Receipt of Product
s

Consumer service & support (if not classified in X day return product)

Comparison shopping & product selection based on various attributes

Purchase Consummation

Pre
-
purchase determination

Post Purchase

Interaction

Fig; Steps taken by customers in

product purchasing

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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 custome
r 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 Esti
mation 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 departme
nts 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 company’s capabilities and
offer healthy profits. These orders fall into the sweet s
pot 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 whi
ch
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 produ
ction 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 de
signed 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 increasi
ngly important role in all elements of a company’s 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 di
sposal.
Because of the information conveyed and intimacy involved post sales service can affect customer
satisfaction and company profitability for years.


Fig: Order Management cycle in ecommerce

Customer inquiry & order planning generation

Customer estimation & pricing of product services

Order Receipt & Entry

Order Selection & Prioritization

Order Scheduling

Order Fulfillment and

Delivery

Order Billing & Account Management

Customer Service and Support

Post Sale Interaction

Product service production & delivery

Presales interactions

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Consumer Relationship Management/CRM
: It is defined as the aligning of business strategy with the
co
rporate 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 s
trategy, 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 analysi
s 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 tr
ansactions 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 custome
r 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 gre
ater convenience at
low cost (one stop shopping).

3.

Retention
: Retaining profitable customer for life should be the aim. Retention focuses on service
adaptability i.e. it delivers not what the market wants, but what the customer wants. The value proposition
of the customer enhances a proactive relationship that works well with the best interest of the customer.
Today, leading companies focus on retention of existing customers much more than on
-
attracting new
customers. The reason behind this strategy is simpl
e: 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 t
ie 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.














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 b
usiness 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 an
d
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 s
oon added. Webs extend CRM solutions are established (server
Acquisition

Innovative

Convergence

Enhancement

Reduce cost

Customer Service

Retention

Listen
ing

New Products

Fig: Phases of CRM

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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 Informati
on 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 Orientat
ion
: 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 perc
eived 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 othe
r 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 pr
oviding customer services on the internet means a lot more than just having a
website.


Most companies are focused on today’s most critical business challenges


attracting and retaining
customers. These companies require customer
-
directed e
-
business solut
ions 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 individual’s
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 se
gmentation.

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 technolo
gy 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
every
thing 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 r
apidly emerged to be the most
mission
-
critical function of leading businesses. Everything (products, services, pricing and the like) is a
commodity. Customer retention has replaced cost
-
effectiveness and cost
-
competitiveness as the greatest
concern of busi
ness 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 busin
ess 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 d
eliver 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 conta
ct 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.

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Very soon the ‘e’ fancy will subside. Executive in every industry will recognize that th
e 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 customer’s persisting loyalty and



Expands the relationship to gain a greater share of each customers purchasing potential






















































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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 comme
rce 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 auto
mated 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. Organizati
ons 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 electron
ic 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 elect
ronic
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) syst
ems 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 ba
sed 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 compan
ies 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
: Inf
rastructure 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 E
lectronic Payment System
:
Research into electronic payment system for consumer can be traced
bank to the 1940s. In the early 1970’s the emerging electronic payment technology was labeled electronic
funds transfer (EFT). EFT is defined as “any transfer of f
unds initiated through an electronic terminals,
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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 Finan
cial 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 o
r 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(For
ms)
:
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 set
tled 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 sma
rt 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 che
cks.


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.

Co
nsumer 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 t
he 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 ch
ain 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 ca
sh 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 focuse
s 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 p
hysical control. A smart card is an
example of off
-
line electronic cash storage.

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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 increase
s 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 f
or 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 excha
nge 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 c
ash 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 ba
ck 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
-
ca
sh, 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 retrieva
l 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 can’t be
altere
d 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. Detect
ion 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 mem
ory 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 th
e 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 o
f 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 flo
at 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 C
ards
:

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 m
ore 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.

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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 deli
vers 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 bu
t 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 pu
rchase 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 micro
chip 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 b
usy 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 p
ayments 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 consumer’s fear
and reluctance to buy goods they have not actually seen, from sellers t
hey 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 d
etails 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 v
erification
: 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 accumu
lated 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
user’s confidence.

2.

Transaction costs are hidden from users(i.e. basically met by s
ellers, 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 consumer’s 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. Sec
ond, they cannot be used directly by
individuals to make payments to other individuals (peer to peer transactions). Third, protecting the security of
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transaction is vital, especially in the virtual world there is no payment guarantee to the merchant by a b
ank.
User’s 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 essentia
l 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 iss
ues 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 autom
atic
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 can’t 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 inform
ation
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 ma
jor concern in net settlement systems, because a
bank’s 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 sys
tem 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.



























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Unit IX: E
-
Strategy

Information and strategy
:

All these claims are valid in some ways and therefore, there are diminishing returns to argu
ing 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 acqui
re 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 co
mmunication 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
r
eusing 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 mo
re "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
-

w
hich 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 repackag
ing, 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 a
ge,
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 obvi
ously information

intensive 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 Corpora
tion 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 perspe
ctive, 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 Disn
ey 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 decision
-
making
is information
-
based. So retailers, financial services, or
ganizations 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 int
egration 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 begins 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 pro
curement, 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 activities. In the virtual value chain the virtual indicates that the value adding

steps
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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, select
ion,
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 sequen
ce 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 va
lue 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.

Gatherin
g 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 distr
ibution 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 cus
tomer 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 info
rmation 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 impressi
on on customers and draw them into the detailed catalog or
other information’s 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 pr
ocessing
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.

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b.

Payment
:
After finalizing the order the buyer makes a payment. There are various methods of payments;
cred
it 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 fulfill
ing 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 ord
ers 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 Inte
rchange (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 (organizat
ions & 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 company’s 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 ch
ain 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 slow
ly 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 lin
es 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 co
mpany 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
automatio
n 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 company’s spent to
identify a
nd resolve inter
-
business problems. EDI can improve customer service by enabling the quick transfer
of business documents and a marked decrease in errors and by providing an automatic audit trial that frees
accounting staff for more productive activities.

3. Expanded customers/supplier base
: Many large manufacturers and retailers with the necessary clout are
ordering their suppliers to institute an EDI program. However, these are isolated islands of productivity
because they are unable to build bridges to o
ther 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 d
o 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 (TD
I) 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 pra
ctice 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 gene
ric 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 busines
s application programs, not by the lengthy standards
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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
th
e 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 poten
tial 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 occu
r 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, co
mputer 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 lose
s 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
servic
es, 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 Teln
et. 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 t
he 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 b
oards 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
tran
sform 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 co
mmunity
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.


Ano
ther 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 co
st 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 pa
rtnerships 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 i
s 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 transa
ctions.
The classic application of EDI is in purchasing. A manufacturing or a retail store might use EDI with its
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suppliers to replace paper purchase orders, material releases, shipping notices, and invoices. At a simple level,
the objective of EDI is to r
eplace paper. The creation, shuffling and storage of paper are cumbersome and
expensive. By eliminating paper, EDI allows information to be exchanged between trading partners more
rapidly, more efficiency, and with far fewer errors. But to fully understand

what is driving EDI, one must see
EDI in the contest of a bigger picture. Companies employ EDI as part of broad management strategies, like
just
-
in
-
time manufacturing and quick response retailing. The goal of these strategies is often to reduce
inventory
stocks and to allow companies to be more responsive to changes in market demand. A buyer
company prefers to order product from suppliers only as and when it is needed, and it prefers that the product
arrive quickly after the order is placed. This strategy
calls for the buyer to send suppliers many more order
messages than was necessary in the past, each message covering a smaller quantity of product. Instead of
ordering 200 things every month, the buyer may begin ordering 10 things every business day.


7 Di
mensions 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 dime
nsions of E
-
commerce strategy.

1.

Leadership

2.

Technology

3.

Services

4.

Infrastructure

5.

Market

6.

Brand

7.

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 applic
able 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 followi
ng 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 e
-
strategy 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 tr
ansaction processing. Leadership with vision facilities
encourages and allows an environment to develop within the organization, where institutional learning and
memory thrive.

Infrastructure

Organizational Learning

Leadership