E-Commerce (IT430) - Notes

E-Commerce (IT430) Short Notes
LE
CTURE NO. 27
E-CASH PAYMENT SYSTEM

HOW ANONYMITY IS ENSURED IN E-CASH PAYMENT SYSTEM?
Anonymity in E-Cash System:

- Minting Stage: Bank signs serial numbers without knowing them, breaking the link between
client and serial number.
- Deposit Stage: Bank knows serial numbers but can't link them to specific clients, ensuring
client anonymity.
Withdrawing Coins:
- Client requests coins with a signed request containing serial numbers, encrypted for security.
E-Cash Purchase:
- Merchant sends payment request to client's cyber wallet.
- Wallet auto-assembles payment amount and securely pays the merchant.
Making the Payment:

- Coins are encrypted with the bank's public key, keeping them hidden from the merchant.
- Payment info, with a hash of the order description, is sent to the bank.
Proving the Payment:

- Client generates a secret payer code, hashed and sent to the bank.
- In case of disputes, client can provide the code to verify the payment.
Payment Deposit:
- Encrypted deposit request accompanies payment info to the bank for validation.
- Bank checks validity and prevents double spending, credits the merchant's account.
Lost Coins:
- In case of network failure, client retrieves signed blinded coins from the bank.
- Client reveals serial numbers for verification of unspent coins, gets credited accordingly.
E-Cash & the Web:

- Client's wallet and web browser interact with server-side merchant software.
- Payment request, coin transfer, and validation occur between client, merchant, and e-cash
bank.
- Confirmation messages and goods delivery follow once payments are confirmed.
Lesson 28
SECURE SOCKET LAYER (SSL)
SSL encrypts data between clients and servers and is built into browsers. "https" in a URL indicates
SSL. To configure SSL on a client using Internet Explorer: Tools -> Internet options -> Advanced -
> Security (enable SSL). This ensures encrypted data exchange with web servers.
SSL Handshake
SSL Handshake initiates secure communication between a client and a server by negotiating
encryption methods and authenticating parties via digital certificates. In this process, the client
generates a secret symmetric key, encrypts it using the server's public key, and sends it. Once
decrypted by the server, both sides use this key for encrypted communication. SSL, commonly used
in online shopping, ensures secure transmission of credit/debit card information through encryption.
While its simplicity, built into browsers, aids widespread use, a drawback is the potential access to
decrypted card data stored in a merchant's database by unauthorized parties.
Secure Electronic Transaction (SET)

SET was developed in 1997 by Visa, MasterCard, Netscape, and Microsoft to address the limitation
of SSL, where credit/debit card data remains with the merchant. In a SET transaction, involving
cardholder, merchant, certification authority, and payment gateway, the latter connects internet
entities with offline banking networks, ensuring secure data transmission. Merchants need
specialized SET software, while customers require digital wallets storing certificates and card data
for transactions.
Dual Signature in SET

In SET, dual signatures protect privacy by concealing credit card details from merchants and order
information from banks. This involves creating a Dual Signature Message Digest (DSMD) by
combining two message digests (MD1 and MD2) obtained by hashing order and account
information separately.
SETCo.
SETCo. Enforces SET standards for software vendors, overseeing compliance. Merchants hold
brand certificates allowing card payments; customers possess bank-issued certificates. SETCo. acts
as the primary certification authority.
SSL vs. SET

 SSL only handles secured transmission of credit card no. but SET is designed to handle the
whole transaction in a secured manner using dual signatures.
 SSL is a general purpose protocol built into the browser, whereas SET requires software on,
both, the client and the merchant side.
 SET uses a hierarchy of certificates for authentication.
 SET is complex and distribution of certificates is sometimes not stable. SET increases
transaction cost.
 SET transactions are slower than SSL.
 SET uses a payment gateway for secured transmission of information.
E-Business
E-businesses operate online, selling, trading, or transacting, making them part of e-commerce.
Their model encompasses policies, operations, technology, and ideology.
Advantages of E-business
Some of the major advantages of an e-business as compared to a traditional business are as under:
 Personalized service
 High-quality customer service No inventory cost
 Worldwide reach of the business
 Electronic catalogues (convenient and quick transaction) Bulk transactions
 Improved supply chain management
Lesson 29
E-BUSINESS
Advantages of E-business:
1. Personalized service: Gathering and using customer data for tailored service.
2. High-quality customer service: Easy feedback collection for service improvement.
3. No inventory cost: Minimal overheads, no physical storage needed.
4. Worldwide reach: Global accessibility and 24/7 availability.
5. Electronic catalogues: Quick, convenient, and adaptable shopping experiences.
6. Bulk transactions: Ability to handle large-scale purchases efficiently.
7. Improved supply chain management: Streamlined processes from suppliers to customers.
Disadvantages of E-business:
1. Less security: Vulnerability to hacking and potential data misuse.
2. Less privacy: Collection and use of customer data might breach privacy.
3. No physical proximity with items purchased: Inability to physically examine items before
purchase.
Online catalogues vs. Paper catalogues:

- Paper catalogs: Easy to create, portable, but hard to update and limited in products.
- Online or electronic catalogs: Easier to update, integrate with purchasing, provide more
information, but difficult to develop and require customer tech skills.
E-Business Models:
Various models include storefronts, auctions, online banking, trading/lending, recruiting, news
services, travel services, entertainment, automotive/energy sales, intellectual property sales, art
dealing, e-learning, service providers, online malls, and portals.
Brick-and-Mortar vs. Click-and-Mortar businesses:

- Brick-and-Mortar: Traditional offline businesses.
- Click-and-Mortar: Businesses operating both online and offline but facing challenges in
integrating both channels effectively.
Lesson 30
E-BUSINESS REVENUE MODELS
Web Catalogue Revenue Model

- Primary aim: Generate revenue and profit.
- Utilizes electronic catalogue and shopping cart for global customer access.
- Businesses: Online sellers of various items.
- Revenue source: Payments from customers.
Digital Content Revenue Model

- Efficient content distribution via the web.
- Offers information services (legal, news, academic resources).
- Revenue source: Subscription fees, credit card charges for access.
Advertising-Supported Revenue Model

- Provides free services/information, generates revenue from ads.
- Example: Yahoo's portal offering free services funded by ads.
Advertising-Subscription Mixed Revenue Model

- Combines subscriber fees with advertising revenue.
- Subscribers encounter minimal ads compared to free users.
- Example: Certain online newspapers offering subscription-based services.
Fee-for-Transaction Revenue Model

- Charges fees based on transaction volume/size.
- Businesses facilitate transactions and charge for provided information.
- Examples: Online travel agents, stock brokerage firms.
Fee-for-Service Revenue Model

- Charges fees based on the value of services rendered.
- Professional services online (legal, medical, entertainment).
- Revenue from subscriptions or one-time purchases.
Internet Marketing
- Market Segmentation: Dividing customers based on demographics, geography, and
psychographics.
- Geographic, Demographic, Psychographic segmentation explained.
- Market Segmentation on the web: Tailoring online experiences for different customer
segments.
- Behavioral segmentation: Catering to browsing, buying, and shopping modes online.
Choosing a Domain Name

- Select a recognizable, memorable, easy-to-type domain name for global recognition.
Marketing Research
- Using interviews, surveys, and online investigations to analyze strengths, weaknesses,
opportunities, and threats.
- Quick access to industry, customer, and competitor information online.
Web Design
- Crucial for customer interaction and retention.
- Considerations: Easy navigation, FAQs, contact info, multimedia use, privacy policy.
- Attractive design to retain visitors and compete effectively online.
Lesson 31
E-MAIL MARKETING
E-mail Marketing
E-mail marketing campaigns are a cost-effective way to target potential customers globally. They
provide instant communication, reaching distant areas. Personalized direct e-mails enhance
engagement by catering to specific customer information like names, products of interest, or
special promotions. For global outreach, translation software can personalize messages in different
languages. Data mining improves response rates by tailoring content based on customer
preferences. Outsourcing e-mail campaigns is an option for businesses lacking resources. Effective
use of e-mails can enhance customer service by addressing complaints and updating customers
about order statuses. However, insufficient handling of incoming e-mails can harm a business's
reputation.
Promotions in E-Business
Various promotional methods exist in e-business, including frequent-flyer miles, point-based
rewards, discounts, free trials, free shipping, and coupons. These incentives attract and retain
customers, encouraging purchases and building loyalty.
E-Business Advertising
Advertising in e-business involves one-way mass communication. Creating a unique and
memorable brand is crucial. Banner ads on popular websites generate income for both the host site
and the advertiser. Techniques such as flashing text or pop-ups grab viewers' attention. Different
payment modes for advertising include monthly charges, CPM (cost per thousand impressions),
Pay-Per-Click, Pay-Per-Lead, and Pay-Per-Sale. Monitoring web server logs helps track visitor
traffic from host sites and assesses advertising efficacy.
Web Casting
Web casting allows the internet-based broadcasting of audio and video content. It facilitates two-
way communication between broadcasters and viewers. Marketers need to consider varying
internet speeds to ensure accessibility for all users.
Interactive Advertising
This form of advertising combines rich media with traditional forms to engage customers actively.
For instance, involving customers in the advertising process through interactive content increases
brand recognition and customer interaction.
E-Business Public Relations

Public Relations (PR) in e-business keeps customers and employees updated about products,
services, and relevant issues. PR activities can include press releases, speeches, special events, e-
mails, chat sessions, bulletin boards, presentations, and exhibitions. Video clips and other
multimedia materials can effectively contribute to publicity efforts.
Lesson 32
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
CRM encompasses a company's customer service solutions, adapted to online traffic and resources. It
ensures prompt service, includes call handling and sales tracking, and uses tools like log file analysis
and cookies for improved customer service. CRM aims to build lasting customer relationships,
progressing through five stages of loyalty, intensifying until commitment, and then potentially
declining.
Let us briefly examine these stages:
Awareness: Customers recognize the company or its products through proper advertising without
prior interaction.
Exploration: Potential customers learn more about the company, possibly by visiting its website and
exchanging information.
Familiarity: Customers engage in multiple transactions, understanding the company's policies

regarding refunds, privacy, and discounts.
Commitment: Satisfactory transactions foster strong loyalty, leading customers to advocate for the
brand. Companies may offer concessions to solidify this stage.
Separation: Changes in conditions lead to dissatisfaction with products or services. Loyalty might
decline, leading to the termination of the relationship. The marketing objective is to swiftly move
customers to the committed stage and maintain their loyalty.
Life Cycle Segmentation

Life Cycle Segmentation categorizes customers based on the five stages of the customer life cycle. It
helps companies understand customer relationships, allowing customized product/service strategies to
enhance connections.
B2B Marketing on the Web

In B2B web marketing, full integration across customer transaction steps is crucial for effective CRM.
Unlike B2C, B2B lacks direct contact with end users, impacting feedback collection. For instance,
businesses supplying raw materials to manufacturing firms have limited direct customer feedback.
This distinction shapes different marketing strategies for B2B compared to B2C.
Search Engines
Search engines scan the web for relevant sites based on keywords, helping users find specific
information. Registering your e-commerce site with popular search engines like Google, Altavista, or
Yahoo ensures visibility in search results.
Lesson 33
META INFORMATION
1. Meta Information:
- Key details about a webpage used by search engines for ranking.
- Search engines use keywords from Meta tags to match user queries.
- Misusing competitor's Meta info to improve ranking is illegal.
2. Partnerships:
- Strategic alliances between businesses for mutual benefit.
- Providing complementary services/products and exchanging resources or information.
- Can improve customer access to related products/services.
3. Affiliate Programs:
- Agreement between parties for commission based on customer action.
- Temporary arrangement, often seen in banner advertising.
4. Branding:
- Emotional connection between a company and its customers.
- Comprised of Differentiation, Relevance, and Perceived Value.
5. Product Differentiation:
- Essential to establish a unique identity for a product/service.
- Highlights distinct features from competitors.
6. Relevance:
- Focuses on the usefulness of a product/service to potential customers.
- The product/service should easily relate to the target audience.
7. Perceived Value:
- Customers won't buy unless they find value, despite differentiation and relevance.
- Emotional and rational aspects influence perceived value.
8. Emotional vs. Rational Branding:

- Emotional branding is passive, while rational branding suits active mediums like the web.
- On the web, offering something valuable in exchange for viewing ads is common.
9. Global Marketing:
- Considerations for marketing globally, including multilingual content and varied pricing.
- Infrastructure, distribution, and payment compatibility are crucial.
- Tools exist for translation and currency conversion on websites.
Lesson 34
DATA MINING
Data mining is the extraction of meaningful patterns from extensive datasets. In a business setting, it
helps identify customer behaviors, allowing targeted marketing. For instance, recognizing
demographics inclined to buy specific products aids in efficient and cost-effective marketing
strategies.
Data Warehouse
A data warehouse is a central storage system for long-term data from diverse sources. It undergoes
cleaning, transformation, and integration processes, enabling clients to access it for tasks like data
mining and pattern evaluation.
Knowledge Discovery
The knowledge discovery process involves sequential steps such as data cleaning, integration,
selection, transformation, data mining, pattern evaluation, and knowledge presentation. Data mining is
a crucial step, but before that, data must undergo cleaning, transformation, selection, and integration.
Cleaning involves handling missing or erroneous values, selection discards problematic rows, and
transformation ensures uniform data format. Integration consolidates data into a warehouse. The
majority of time in this process is spent on preparing data for mining - cleaning, transforming, and
selecting - approximately 80%.
Types of Data Mining

There are four main types of data mining as follows:
 Classification
 Association
 Characterization
 Clustering
Classification and association are predictive types of data mining while characterization and clustering
represent the descriptive type.
Classification
Classification in data mining involves creating predictive models to assign samples to different
classes. Common representations include if-then rules, decision trees, and neural networks.
Algorithms like ID3 and Bayesian classification are employed. The decision tree visually displays
classification results. Typically, data is divided into training and test sets. Using predictors like age,
education, and income, a model can increase the accuracy of predicting a class (e.g., male or female).
Efficiency is assessed by comparing predicted and actual values in the test data. An efficiency close to
80% is generally considered good, influencing the decision on future model use. Classification mining
aids targeted marketing, improving the probability of reaching the desired audience.
Association
Association analysis discovers frequently co-occurring attribute-value conditions, commonly applied
in market basket analysis. The Apriori algorithm is a notable tool for this purpose, revealing
relationships between items in sales data.
Lesson 35
CONFIDENCE AND SUPPORT
Association mining analyzes item relationships using support and confidence. Confidence measures
how often a relationship holds true, while support reflects overall item co-occurrence. High confidence
with low support suggests a strong but rare association. Marketers use association mining results,
depicted with double arrows, to optimize shelf arrangements and create targeted promotions,
enhancing customer service and informing strategic marketing decisions.
Characterization
Characterization involves discovering generalized concepts in data to understand its overall behavior.
In the context of a university database, it helps answer questions like the number of students from a
specific country studying a particular subject. Algorithms like Version Space Search and Attribute-
Oriented Induction are commonly used for characterization, providing concise insights into data
patterns, such as the count of Pakistani students studying arts.
Clustering
Clustering involves grouping similar data objects into clusters, distinct from objects in other clusters.
It is a preprocessing step for algorithms like classification and characterization. The K-means
algorithm is commonly used for clustering. For instance, customers can be clustered based on income
levels, facilitating subsequent analysis and decision-making.
Online Analytical Processing (OLAP)

OLAP (Online Analytical Processing) leverages domain knowledge to present data at different
abstraction levels, aiding decision-makers. It differs from data mining by not predicting patterns.
OLAP results are displayed in data cubes, with dimensions like time, item type, and location.
Common tools include SAS (Enterprise Miner) and DB Miner.
Processes like drill-down, roll-up, slice, and dice enhance data exploration. Drill-down provides
specific information, like monthly furniture sales, while roll-up integrates data, such as yearly sales.
OLAP is suitable for numeric data, while characterization, applicable to any data type, differs in
scope.
In summary, OLAP offers structured, multi-dimensional insights for decision-making, utilizing data
cubes and various exploration processes.
Lesson 36
ELECTRONIC DATA INTERCHANGE (EDI)
EDI streamlines regular business transactions through electronic exchange of documents like purchase
orders and invoices, eliminating paperwork and human intervention. It operates swiftly, typically
within seconds, using specialized software. EDI was prevalent before e-commerce, connecting trading
partners on private electronic networks. Key features include paperless processes and adherence to
standards such as ANSI X12 and EDIFACT.
EDI Example
Before implementing Electronic Data Interchange (EDI), E-Pens, a pen and ballpoint manufacturing
company, manually generated monthly orders in a specific format. After adopting EDI, the production
control system automatically generates orders when reviewing schedule amendments. In the
EDIFACT format, the order includes headers like UNB for the start of interchange, BGM for the
beginning of the message (order), DTM for date and time, NAD for name and address (buyer and
supplier), UNS for section control, LIN for line items, QTY for quantity, UNT for message trailer, and
UNZ for interchange trailer. The EDI system streamlines the ordering process, improving efficiency
and allowing for quick adjustments in the production plan.
Value Added Network (VAN)

Value Added Networks (VANs) are third-party networks that facilitate authorized EDI transactions.
They use a centralized computer system with postboxes for outgoing messages and mailboxes for
incoming messages. Nice Store places orders through EDI messages, storing them temporarily in its
postbox. The VAN inspects and forwards these messages to the intended suppliers' mailboxes.
Recipients retrieve and process the orders, sending acknowledgments stored in their postboxes. The
VAN manages this secure electronic document exchange between trading partners, ensuring efficient
communication.
Advantages of VAN
Using a Value Added Network (VAN) in EDI offers two major advantages:
1. Time Independence: Users can send and receive messages at their convenience, eliminating
the need for simultaneous connections.
2. Protocol Independence: VANs re-envelop interchanges with the recipient's transmission
protocol, ensuring compatibility between sender and receiver.
Internet-Based EDI
Internet-based EDI utilizes email, extranets, and web-based hosting services to replace traditional
VANs. It allows trading partners to exchange information through web forms corresponding to EDI
fields. Despite potential, further efforts are required for widespread adoption.
Benefits of EDI include:

Shortened Ordering Time:
Automated order generation in a predefined format reduces ordering time significantly.
Cost Cutting:
EDI transactions are cost-effective, eliminating paper and staff-related expenses. The primary cost is
the EDI software.
Elimination of Errors:
Automatic message generation minimizes human-induced typing errors.
Fast Response:
Electronic processing of EDI messages enables quick order fulfillment, especially for suppliers of raw
materials.
Accurate Invoicing:
Invoices generated in EDI standard format are more accurate compared to paper invoices.
EDI Payment:
Standard EDI documents facilitate the electronic provision of financial information for payment
purposes.
Enterprise Resource Planning (ERP)

ERP integrates all company departments into a unified computer system. It links individual
departmental software, enabling cross-functional access to information. SAP is an example. While
complex, ERP faces challenges in integrating with e-commerce applications.
Electronic Banking
Electronic banking, or online banking, encompasses various financial activities conducted remotely
from home, business, or while traveling, eliminating the need for a physical bank visit.
Advantages of e-banking
• Get current account balances at any time
• Obtain credit card statements
• Pay utility bills
• Download account information
• Transfer money between accounts
• Send e-mail to your bank
• Manage your own schedule
• Handle your finances from any location
• Apply for loans online
For banks, e-banking represents an inexpensive alternative to branch banking and a chance to enlist
remote customers.
Lesson 37
PERSONAL FINANCE ONLINE
Personal finance involves managing individual financial matters through customized approaches. This
includes tasks such as tax calculations and budgeting, often facilitated by software like Quicken, MS
Money, and Money 2003. Online data importation automates transaction registers, allowing for
efficient tax calculations and budget preparation based on downloaded account details.
Value Chain
Michael Porter introduced the concept of value chains in 1985 to help businesses organize and
optimize their activities in electronic commerce (EC). A value chain breaks down a business into
strategic units focused on specific products, distribution channels, and customer types, streamlining
processes from design to support.
Primary and Support activities

Porter identified that there are some primary activities as well as certain supporting activities in a
strategic business unit. Following is the example of value chain for a strategic business unit
1. Identify Customers: Activities focused on finding new customers and improving service to
existing ones through surveys and market research.
2. Design: Involves taking a product from the concept stage to manufacturing, including concept
research, engineering, drawings preparation, and test marketing.
3. Purchase Materials and Supplies: Activities related to material procurement, vendor
selection/qualification, negotiating supply contracts, and monitoring quality and timely
delivery.
4. Manufacture Product or Create Service: Involves transforming materials and labor into
finished products, such as fabricating, assembling, and packaging.
5. Market and Sell: Activities providing buyers with a way to purchase and incentivizing them
to do so, including advertising, promotions, managing salespersons, monitoring distribution
channels, and pricing.
6. Deliver: Activities related to storage, distribution, and shipment of the final product, including
warehousing, selecting shippers, material handling, and timely delivery to customers.
7. Provide After Sales Service and Support: Activities aiming to promote a continuing
relationship with customers, including installing, testing, repairing, maintaining a product, and
fulfilling warranties.
8. Note on Flow: Left-to-right flow does not strictly imply a time sequence; for instance,
marketing activities can occur before purchasing materials.
9. Importance of Each Primary Activity: Depends on the product/service and customer type;
manufacturing may be critical for some businesses/products, while marketing may be more
important for others.
10. Support Activities: Provide infrastructure for primary activities.
 Finance and Administration: Involves accounting, paying bills, borrowing funds, and
complying with government regulations.
 Human Resources: Coordinates management of employees, including recruiting, hiring,
compensation, and benefits.
 Technology Development: Includes activities to improve the product/service and enhance
processes in every primary activity, such as field tests, maintenance of procedures, and
process improvement studies.
Industry value chains

Porter suggests examining a strategic business unit within its industry through the concept of a "value
system" or industry value chain. Each business unit has its value chain, and understanding industry
activities helps identify opportunities for cost reduction and product improvement. In the logging
industry example, involving loggers, sawmills, lumberyards, furniture factories, and retailers, EC can
reduce costs, improve quality, reach new customers or suppliers, and create innovative selling
methods. For instance, a software developer using EC could directly send updates to customers,
cutting out the need for a retailer, reducing product prices, and increasing sales revenue.
SWOT (strengths, weaknesses, opportunities and threats) analysis

SWOT analysis assesses a business unit's internal strengths and weaknesses, as well as external
opportunities and threats. Strengths involve evaluating what the business does well and its cultural
support. Weaknesses consider areas of poor performance, financial liabilities, and skilled manpower.
Opportunities explore industry trends, new markets, and technologies, while threats assess competitor
strengths, changes in the business environment, and potential disruptive factors. SWOT analysis
provides a holistic view of a business's capabilities and challenges.
Example of Dell
In the 1990s, Dell used SWOT analysis to develop a successful strategy. Recognizing strengths in
direct selling and cost-effective design, it addressed the weakness of lacking ties with local dealers.
Faced with threats from competitors with stronger brands, Dell seized the opportunity of
knowledgeable customers and utilized the internet for marketing. By offering customized computers,
Dell reduced the impact of brand threats, showcasing adaptability within the industry value chain.
Lesson 38
SUPPLY CHAIN
The supply chain comprises upstream (supplier-related), internal (manufacturing and packaging), and
downstream (distribution and sale) activities. Using a milk processing unit as an example, upstream
involves milk supply and raw materials for packaging, internal includes processing, packaging, and
labeling, and downstream covers distribution to stores for customer purchase. The supply chain is a
comprehensive process connecting suppliers to end-users through various stages.
Supply chain management

Supply chain management involves actively engaging and negotiating with suppliers to enhance
products and processes. Modern firms are expanding beyond their organizational boundaries, forming
network organizations within the supply chain. The goal is to add value to the end customer and
establish long-term relationships with a select number of capable suppliers.
Internet technologies and supply chain

The use of internet technology in supply chain management offers numerous advantages. It enables
swift communication between suppliers and provides real-time updates on changes in customer
demand and product design. The rapid exchange of product specifications reduces transaction
processing time and lowers associated costs. Additionally, the use of internet technology minimizes
the chances of errors in transaction data entry. While there may be a cost associated with
implementing these technologies, the overall benefits in terms of efficiency and error reduction
outweigh the expenses. Supply chain management software further enhances the ability to manage
internal and external processes, allowing for better prediction of production needs for specific
products.
Examples of technology use in supply chain

Two notable examples illustrate the effective use of technology in supply chain management. Firstly, a
leading global aircraft manufacturer faced production disruptions in 1997, prompting an investment in
information systems throughout its supply chain. Collaborating with suppliers through technologies
like EDI and the internet, the company improved communication, providing timely engineering
specifications and drawings. This resulted in a 50% reduction in assembly process time, enabling
faster aircraft production and enhancing customer service with a spare parts web platform.
Secondly, a prominent computer brand leveraged customer information to minimize inventory
holdings. By sharing sales forecasts, product changes, and warranty claims with top suppliers through
a secure website, the company optimized production planning. These examples highlight the
collaborative use of technology in supply chains to reduce inventory, enhance product quality, lower
production costs, and increase process efficiency.
Supply chain and ultimate consumer orientation

In 1995, an American tire manufacturer shifted focus to prioritize tire dealers over ultimate consumers.
By creating an extranet, dealers gained direct access to tire information, saving costs and improving
service. This initiative increased dealer loyalty, reducing the likelihood of recommending competing
brands to end consumers.
Competitive Strategy
Competitive strategy is vital for organizational success, focusing on gaining a market edge over
competitors through effective planning and distinctive advantages. Three basic strategies for
competitive advantage are as under
- Cost Leadership: Sell at a lower price to attract more customers.
- Differentiation: Offer unique qualities that make your product more attractive, even at a
slightly higher price.
- Focus: Concentrate efforts on a specific market segment, area, or product type for higher
profitability.
Role of e-commerce in Competitive Strategy
By applying EC following major benefits can be derived:
Reduced Administration/Transaction Cost:

EC lowers infrastructure and overhead costs by facilitating direct electronic transactions, supporting
cost leadership.
Improved Logistics Supply Chain:

EC enables quick responses and just-in-time delivery, reducing inventory and production costs for cost
leadership and differentiation.
Customization:
By analyzing customer data, EC allows personalized services, aligning with differentiation and focus
strategies.
Differentiate in Terms of Quality of Service:

In online businesses, EC reduces delivery time and costs, allowing direct downloads and supporting
cost leadership and differentiation.
Lesson 39
PORTER’S MODEL OF COMPETITIVE RIVALRY
Porter’s Five Forces Analysis:
1. Threat of New Entrants:

- Barriers to entry include capital, knowledge, and skill.
- IT/EC investment can act as a barrier for new entrants.
- Advancements in technology can create opportunities for new entrants, especially in online
services like banking.
2. Threat of Substitution:
- New products providing the same function pose a threat.
- E-commerce can facilitate the rise of substitutes, as seen in the shift from physical music shops to
online distribution channels.
3. Bargaining Power of Buyers:

- Number of competitors and product supply influence buyer bargaining power.
- E-commerce enables lower production costs, better inventory control, and direct sales, reducing
overall production costs and allowing for competitive pricing.
4. Bargaining Power of Suppliers:

- Availability of raw materials and the number of suppliers impact bargaining power.
- E-commerce capabilities can affect the quality of service and supplier bargaining power.
5. Competition Between Existing Players:

- Fierce competition among businesses of similar size and strategy.
- E-commerce can provide a competitive edge by reducing administration/transaction costs,
improving supply chain efficiency, and enhancing product quality and customer service.
Strategic Planning Cycle:
1. Industry and Competitive Analysis:

- SWOT analysis helps identify critical success factors for EC projects.
- Analysis of online competitors is easily accessible on the web.
2. Strategy Formulation:
- Develop a competitive business strategy based on internal and external environment analysis.
- Consider cost leadership, product differentiation, or focus strategies.
- Identify IT applications to implement/enforce the chosen strategy.
3. Implementation:
- Build a plan for executing the strategy, involving key individuals from various departments.
- Consider whether to build in-house infrastructure or outsource tasks.
- Pilot projects may precede full-scale implementation.
4. Strategy Assessment:
- Monitor and assess the results of the implementation plan.
- Corrective measures and expansion plans are considered.
- Assess the viability of the strategy in a changing environment.
- Gather feedback through surveys and input from diverse groups.
Lesson 40
BARRIERS TO INTERNATIONAL E-COMMERCE
1. Lack of Trust:
- Establishing trust is challenging due to online anonymity.
- Credibility is crucial for success; established brands have an advantage.
- Attention to visitor needs and easy-to-find information contribute to building trust.
- Companies need to address customer concerns, such as refund claims.
2. Language:
- Local language versions of websites are essential for international business.
- Translation software can help convert content into different languages.
- Prioritizing translation for key pages like the homepage, marketing, and product information is
common.
- Different approaches, like browser language detection or explicit language links, are used.
3. Culture:
- Cultural considerations impact business decisions.
- Careful selection of names, icons, and images is crucial.
- Cultural sensitivity extends to symbols, colors, and content choices in web design.
- Some regions have a less welcoming cultural environment for e-commerce.
4. Infrastructure Issues:
- Government control and regulations in some regions limit internet infrastructure growth.
- Low bandwidth in many third-world countries hinders data communication.
- High costs for internet connection in Europe discourage extensive web surfing.
- International transactions involve complex customs monitoring, requiring coordination.
Electronic Transactions Ordinance, 2002 (ETO):
1. Definition of Terms:
 Certificate: Confirms authenticity or integrity of electronic documents or signatures.
 Cryptography Services: Transformation of document contents to prevent unauthorized
decoding.
 Accredited Certification Service Provider: Provider authorized to issue certificates for
cryptography services.
 Certification Practice Statement: Provider's statement on certificate issuance practices.
 Originator and Addressee: Parties involved in electronic communication.
 Information System: Electronic system for creating, processing, and storing information.
 Electronic Signature: Letters, numbers, symbols, etc., in electronic form for authentication.
 Authenticity and Integrity: Identification of the person or system and the document's
unchanged state.
2. Appropriate Authority:
- Defined authority in relation to federal and provincial legislatures, government functions, and
court matters.
3. Sections of the ETO:

- Section 3: Ensures legal recognition of electronic documents, records, and transactions.
- Section 4: Deems the requirement for a written document satisfied if in electronic form.
Lesson 41
ELECTRONIC TRANSACTIONS ORDINANCE, 2002 (ETO) (CONTINUED….)
The term "Appropriate authority" in Pakistan encompasses legislative assemblies, federal and
provincial governments, the Supreme Court, High Courts, and statutory bodies related to
governmental functions. Statutory bodies are established under specific laws, such as the Lahore
Development Authority under the Lahore Development Act, 1975. The Constitution of Pakistan is the
supreme law, containing federal and concurrent legislative lists. The Federal list is exclusive to the
federal legislature, while the Concurrent list allows both federal and provincial legislatures to make
laws.
Section 6 of the Electronic Transactions Ordinance (ETO) outlines conditions for validly retaining
electronic documents. It states that retention in electronic form is acceptable if the document remains
accessible, accurately represents its original form, and includes information for identification of origin,
destination, and date/time of generation. Essentially, electronic documents must be accessible, reliable,
and identifiable for valid retention.
Section 7 of the Electronic Transactions Ordinance (ETO) in Pakistan recognizes electronic

signatures, satisfying signature requirements under any law. Advanced electronic signatures are
presumed valid, with the burden of proof on the disputing party. While the distinction between
electronic and advanced electronic signatures is not clear, it appears that advanced electronic
signatures involve certification by an accredited service provider.
In traditional legal practices, documents are written on stamped papers per the Stamp Act, 1899. The
Qanoon-e-Shahadat Order, 1984, requires documents to be witnessed, and copies can be notarized by
a notary public.
Sections 10 and 11 of the ETO
Section 10 of the Electronic Transactions Ordinance (ETO) exempts stamp duty for two years
from the ordinance's commencement or until provincial governments establish electronic means for
stamp duty payment and recovery, whichever is later.
Section 11 of the ETO waives attestation/notarization requirements for electronic documents for two
years from the ordinance's commencement or until the appropriate authority implements measures for
attestation and notarization, whichever is later.
Section 13 of the ETO determines the sender of an electronic communication as follows:

1. An electronic communication is deemed to be from the originator if sent by the originator, an
authorized person acting on behalf of the originator, or an automated system programmed by
the originator.
2. The addressee should consider an electronic communication as from the originator, and can act
on this assumption if there is no reason to suspect its authenticity or if circumstances do not
indicate otherwise.
Lesson 42
Section 14
Section 14 of the ETO allows an originator to attach a condition to an electronic communication,
stating that it is deemed unsent until the acknowledgment is received. If the originator has not
specified a particular form or method for acknowledgment, the addressee can provide it through any
communication or conduct sufficient to indicate receipt to the originator.
Section 15
Section 15 of the Electronic Transactions Ordinance (ETO) establishes guidelines for the place and
time of dispatch and receipt of electronic communications:
1. Dispatch occurs when an electronic communication enters an information system beyond the
originator's control, unless otherwise agreed.
2. The time of receipt depends on whether the addressee has designated an information system:
- If designated, receipt is when the communication enters the specified system or when retrieved
by the addressee from a different system.
- If not designated, receipt is when the communication enters any information system of the
addressee.
3. The place of dispatch is the originator's usual residence or place of business, and the place of
receipt is the addressee's usual residence or place of business, unless otherwise agreed.
4. For determining the place of dispatch and receipt, considerations are made for multiple places
of business, the absence of a place of business (referring to usual place of residence), and the
definition of "usual place of residence" for a corporate body.
This section is vital for calculating the limitation period for legal actions and determining territorial
jurisdiction in legal matters.
Section 16
Section 16 of the Electronic Transactions Ordinance (ETO) establishes that no individual has a legal
entitlement to insist that an appropriate authority accepts, creates, issues, retains, or engages in
monetary transactions in electronic form. However, when an appropriate authority, according to a law
or procedure, is involved in processes such as document filing, issuance of permits, or payment
transactions, it can independently decide to operate in electronic form. The authority has the discretion
to specify the manner, format, electronic signatures, and other attributes for such electronic documents
or transactions. This provision serves as the legal foundation for e-government practices.
Section 17:
This section emphasizes that the Electronic Transactions Ordinance (ETO) does not prevent
certification service providers from engaging in the business of providing certification services
without accreditation. However, it imposes a restriction on falsely claiming accreditation without
holding a valid certificate issued by the Certification Council.
Section 18-21: Certification Council Establishment and Functions:

Section 18: The Federal Government is mandated to establish the Certification Council, named the
Electronic Certification Accreditation Council, within sixty days of the ordinance's promulgation. The
Council is a body corporate with perpetual succession and a common seal, comprising five members,
with the majority from the private sector and one designated as the chairman.
Section 19: This section outlines the qualifications of the five members of the Certification Council,
ensuring representation from various backgrounds such as telecommunications engineering,
information technology, administration, and law.
Section 20: Describes the funding sources for the Certification Council, including government grants,
fees for accreditation certificates, and repository-related fees.
Section 21: Enumerates the functions of the Certification Council, which include granting and
renewing accreditation certificates, monitoring compliance of accredited providers, managing a
repository, conducting research, accrediting foreign providers, promoting standards, providing advice,
and making recommendations to appropriate authorities.
Section 23: Information Repository:

Section 23: This section mandates the Certification Council to establish and manage a repository for
accreditation certificates and certificates issued by accredited providers. The repository must be open
to public inspection, and the Council must ensure the security of the information contained within it.
Notices of suspension or revocation of accreditation or certificates are required to be posted in the
repository within the prescribed time.
Lesson 43
Section 24: Accreditation of Certification Service Providers

This section empowers the Certification Council to grant accreditation to certification service
providers based on specified criteria and procedures outlined in regulations. The terms and conditions,
including duration, renewal, suspension, or revocation of accreditation, are also covered. Accreditation
fees are prescribed, and a transparent procedure with a right to a hearing is ensured.
Section 25: Certification Practice Statement (CPS)

Certification service providers must prepare a Certification Practice Statement (CPS), a policy
document filed with the application for accreditation. The CPS includes details on notifying affected
parties, subscriber identification, certificate suspension or revocation policies, accuracy of
information, and depositing certificates in the repository. The CPS requires approval by the
Certification Council, and any subsequent changes also need approval.
Section 31 - Exemptions for Certain Documents

This section outlines specific exemptions from the Electronic Transactions Ordinance (ETO). The
ETO provisions do not apply to:
1. Negotiable Instruments: Defined as per Section 13 of the Negotiable Instruments Act, 1881.
2. Power-of-Attorney: Governed by the Powers of Attorney Act, 1881 (VII of 1882).
3. Trusts: As defined in the Trust Act 1882 (II of 1882), excluding constructive, implied, and
resulting trusts.
4. Wills or Testamentary Dispositions: Covered under any law currently in force.
5. Contracts for Sale or Conveyance of Immovable Property: Along with any interest in such
property.
The Federal Government, after consulting with the provinces, holds the authority, through an official
Gazette notification, to declare whether the entire ETO or specific parts shall apply to the instruments
mentioned in clauses (a) to (e) of sub-Section (1).
Sections 32-33: Jurisdiction and Application of the Ordinance

These sections establish the jurisdiction of Pakistani courts in matters related to persons, information
systems, or events within Pakistan, even if the subject matter occurs outside the country. The
provisions of the Electronic Transactions Ordinance (ETO) apply regardless of anything to the
contrary in other laws, emphasizing its overriding effect.
Sections 34-37: Offences

These sections outline various offences under the ETO. Offences include providing false information
to a certification service provider, improper use of electronic signatures, issuing false certificates,
unauthorized access to information systems, and attempts to alter or hinder access to information.
Penalties include imprisonment, fines, and compensation for damages. The sections aim to deter
fraudulent or unauthorized activities related to electronic transactions.
Lesson 44
GLOBAL LEGAL ISSUES OF E-COMMERCE
The Electronic Transactions Ordinance (ETO) designates session courts in Pakistan for handling
offenses. The legal system is divided into civil and criminal law, with civil courts addressing private
rights and magistrate courts dealing with criminal matters. The court hierarchy allows for appeals to
district, session, high courts, and the Supreme Court.
Despite global trends recognizing electronic documents and signatures, the ETO in Pakistan has
shortcomings. Ambiguities exist in distinguishing electronic and advanced electronic signatures.
Sections on offenses lack clarity, and international aspects of e-commerce are overlooked. The roles of
accredited and non-accredited certification service providers are undefined. Notably, rules and
regulations mandated by the ETO are yet to be established, raising concerns despite the passage of
time since its enforcement.
Let us now examine some major global legal issues of e-commerce. They are listed as follows:
 Territorial jurisdiction
 Online contracts
 Copyright in cyberspace
 Domain name and trademark conflicts
 Online defamation
 Online privacy
 Issues of taxation on internet
 Cyber crimes
Territorial Jurisdiction
Territorial jurisdiction in legal disputes is traditionally based on geographical boundaries, with courts
in a specific area having competence over cases arising there. However, in cyberspace, where the
internet transcends geographical boundaries, determining jurisdiction becomes complex. Different
countries may be involved, each with its own laws related to internet transactions. This complexity
arises when considering scenarios like an Australian e-commerce firm with a website hosted in
Canada, facing a dispute with a Pakistani customer. In cyberspace, the plaintiff can choose the forum
or country to file the case, a practice known as forum shopping. Courts often consider factors such as
interactivity, commercial nature, and the effects of information exchange to determine territorial
jurisdiction in cyberspace.
Online contracts
Online contracts mirror traditional contracts, requiring three elements: offer, acceptance, and
consideration. Clicking 'I accept' on a web page signifies agreement to terms, forming a legally
binding contract (click wrap agreement). Contracts in cyberspace can be oral, through conduct, or
correspondence. Offers and acceptances occur through various online means such as email, EDI, web
forms, or downloads.
In the online environment, imposter acceptances can pose issues, mitigated by using digital signatures
for identity verification. For significant contracts, parties are encouraged to mandate digital signatures
to confirm authority. Negligence in protecting passwords, leading to imposter acceptance, may render
a company liable for breach of contract, compelling fulfillment or compensation.
Copyright in cyberspace
Cyber copyright concerns arise due to the internet's nature. It grants exclusive rights to creators for
various works, excluding ideas. Web pages, though likely protected, face challenges with copies made
during HTTP requests or caching by ISPs. 'Fair use' in copyright law allows exceptions for specific
purposes. If an author provides a hyperlink to their work, it may imply permission to download or
copy, potentially avoiding copyright issues.
Generally, the protection under ‘fair use’ may be sought on the following basis:
'Fair use' protection is determined by factors like educational or non-profit use, the nature of the work,
the extent of copying, and impact on market value. Proper citation is essential to avoid plagiarism
accusations. The 'Napster case' illustrates legal consequences for facilitating copyright infringement,
leading to the platform's shutdown and a significant settlement.
In 1996, the World Intellectual Property Organization proposed international copyright treaties, urging
signatory countries to adopt or amend laws for protecting copyrighted works in the digital era.
Lesson 45
GLOBAL LEGAL ISSUES OF E-COMMERCE
Patent infringement
A patent grants exclusive rights to make, use, and sell a unique and useful invention. While patenting
software can be expensive and time-consuming, copyright registration is a more practical option for
software programs. However, e-commerce companies find value in 'business process patents' that
protect specific procedures for conducting business activities. Examples include a unique 1-click
purchasing method and a 'name your own price' system. Some experts argue that these patents may
lead to unfair monopolies, and courts are yet to resolve complex issues related to business process
patents.
Trade mark and domain name conflicts

A trademark is a symbol linking a business to its goods or services, a trade name is the brand a
business is recognized by, and a domain name is a unique global identifier for a website. Conflicts
arise in cybersquatting, concurrent use, parasites using variant domain names, and domain variations.
Trademarks/names can be multiple and localized. The experts have identified four areas of conflict as
follows:
 Cyber squatting
Cyber-squatting is the intentional registration of domain names containing trademarks/trade names to
later blackmail or demand ransom from companies. It is considered an offense in most countries. For
example, if 'Glory Enterprise' finds that someone unrelated, like Mr. 'A', has registered a domain with
the word 'glory,' they may have to request a transfer. If Mr. 'A' then demands ransom, it is deemed as
cyber-squatting.
 Concurrent use
Concurrent use occurs when two organizations legitimately claim the same domain name, but the
uniqueness of domain names creates a conflict. For instance, if a company selling electronic goods and
another selling French fries both want the domain name 'frys,' only one can be assigned the desired
domain due to its uniqueness.
 Parasites
Parasite domain names, like 'macrosoft.com' imitating 'Microsoft,' exploit famous names for business
advantage. The issue of xyz.com vs. xyz.org arises from assigning second-level domain names to
multiple top-level domains, leading to potential confusion. The Uniform Dispute Resolution Policy
(UDRP), managed by the International Corporation for Assigned Names and Numbers (ICANN),
allows trademark holders to reclaim domains through arbitration. The World Intellectual Property
Organization (WIPO) in Switzerland is a nominated arbitration service provider under UDRP.
 Online Defamation
Online defamation involves false statements damaging a person's or company's reputation. It's
challenging to distinguish justifiable criticism from defamation, especially online where anonymity is
common. Commercial websites and designers should avoid negative statements about others and
carefully review online statements about competitors to prevent defamation. Liability of internet
service providers (ISPs) is linked to their control over content. ISPs with editing control may be held
liable, while those without control can escape liability for online defamation.
Online Privacy
Online privacy concerns evolve with the internet's growth. Websites can collect visitor data, posing a
threat to informational privacy. Countries vary in privacy expectations, with some having privacy laws
like Canada's PIPEDA and the EU directive on personal data protection. The U.S. lacks firm privacy
regulations, allowing companies to set their policies, typically opting for opt-out or opt-in approaches.
Opt-out assumes consent unless denied, while opt-in requires explicit consent. Guiding principles for
privacy legislation include using data for customer service, restricting sharing without consent,
informing customers about data use, and allowing data deletion requests.
Internet Taxation
Internet taxation for e-businesses involves compliance with various taxes such as income tax,
transaction taxes (sales tax and custom duties), and property tax. E-businesses, due to their
international reach, may need to adhere to multiple tax laws from different countries. Income tax is
levied on net income, while sales tax is imposed on goods sold. Understanding 'nexus,' the connection
between a business and a government, is crucial for determining tax obligations in different countries.
E-businesses may need to file separate tax returns and pay taxes in each country where they establish
sufficient business activities. To avoid double taxation, U.S. tax law provides credits/refunds for taxes
paid to foreign countries on foreign earnings. Online sellers must be aware of customer locations and
sales tax laws in various jurisdictions to determine tax applicability.
Cyber Crimes
The advent of internet technology has led to emerging crimes, known as cyber crimes, including
online fraud, hate speech, cyber-stalking, online terrorism, and computer-based attacks. Countries
worldwide are adapting or creating laws to address cyber crimes. The challenge lies in determining
territorial jurisdiction, especially when a crime committed by a resident in one country affects another
where the act may not be considered a crime.

E-Commerce (IT430) - Notes

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

E-Commerce (IT430) - Notes

Uploaded by

Copyright:

Available Formats

E-Commerce (IT430) Short Notes

E-CASH PAYMENT SYSTEM

Anonymity in E-Cash System:

Making the Payment:

Proving the Payment:

E-Cash & the Web:

Secure Electronic Transaction (SET)

Dual Signature in SET

SSL vs. SET

Online catalogues vs. Paper catalogues:

Brick-and-Mortar vs. Click-and-Mortar businesses:

Web Catalogue Revenue Model

Digital Content Revenue Model

Advertising-Supported Revenue Model

Advertising-Subscription Mixed Revenue Model

Fee-for-Transaction Revenue Model

Fee-for-Service Revenue Model

Choosing a Domain Name

E-Business Public Relations

Let us briefly examine these stages:

Familiarity: Customers engage in multiple transactions, understanding the company's policies

Life Cycle Segmentation

B2B Marketing on the Web

8. Emotional vs. Rational Branding:

Types of Data Mining

Online Analytical Processing (OLAP)

Value Added Network (VAN)

Benefits of EDI include:

Enterprise Resource Planning (ERP)

Primary and Support activities

Industry value chains

SWOT (strengths, weaknesses, opportunities and threats) analysis

Supply chain management

Internet technologies and supply chain

Examples of technology use in supply chain

Supply chain and ultimate consumer orientation

Role of e-commerce in Competitive Strategy

By applying EC following major benefits can be derived:

Reduced Administration/Transaction Cost:

Improved Logistics Supply Chain:

Differentiate in Terms of Quality of Service:

Porter’s Five Forces Analysis:

1. Threat of New Entrants:

3. Bargaining Power of Buyers:

4. Bargaining Power of Suppliers:

5. Competition Between Existing Players:

Strategic Planning Cycle:

1. Industry and Competitive Analysis:

Electronic Transactions Ordinance, 2002 (ETO):

3. Sections of the ETO:

Section 7 of the Electronic Transactions Ordinance (ETO) in Pakistan recognizes electronic

Sections 10 and 11 of the ETO

Section 13 of the ETO determines the sender of an electronic communication as follows:

ELECTRONIC TRANSACTIONS ORDINANCE, 2002 (ETO) (CONTINUED….)

Section 18-21: Certification Council Establishment and Functions:

Section 23: Information Repository:

ELECTRONIC TRANSACTIONS ORDINANCE, 2002 (ETO) (CONTINUED….)

Section 24: Accreditation of Certification Service Providers

Section 25: Certification Practice Statement (CPS)

Section 31 - Exemptions for Certain Documents

Sections 32-33: Jurisdiction and Application of the Ordinance

Sections 34-37: Offences

Trade mark and domain name conflicts

You might also like