E-Commerce

Scope and Limitations

3A Electronic Commerce-Scope, Definition

3B Trade Cycle
3C Electronic markets-Usage, Advantages and Disadvantages,
Future
3D Electronic Data Interchange- Definition, Benefits
3E Internet Commerce, e-Commerce in Perspective
3F EDI Security
 Weightage to Objectives

Marks with
Sr. No Objectives Marks
Option

1 Knowledge 15 15

2 Understanding 20 20

3 Application 30 30

4 Skill 15 15

Total 80 80
 Weightage to Type of Questions
Marks with
Sr. No Type of Question Marks
Option

1 Objective Type 60 60

2 Short Answer 10 10

3 Long Answer 10 10

Total 80 80
 Unit wise Weightage

Mark
Lecture Approx.
Topic/Unit Marks (With
s Pages
option)

E-Commerce 10 10 13 20
 E-Commerce

Introduction:
After the Internet and dot
com revolution, electronic
commerce (e-commerce)
remains a new, emerging
and constantly changing in
the field of information
technology and business
management. With the
advent of the Internet, the
term e-commerce gained
popularity.
 E-Commerce

E-Commerce is more than just

buying and selling products
online. Instead, it encompasses
the entire online processes of
developing, marketing, selling,
delivering, and paying for
products and services purchased
on internet.

Cyber Law and Ethics

 Classification of E-Commerce
Classification of E-Commerce is based on:
1. who orders, the goods and services to be sold
2. who sold those goods and services and the nature of
transactions.

E-Commerce can be classified as

1. Business-to-Business (B2B) Model
2. Business-to-Consumer (B2C) Model
3. Consumer to Business (C2B)Model
4. Consumer-to-Consumer (C2C) Model
The e-Commerce customer may be a home
computer user, a business computer user, a
commercial intermediary.
Business-to-Business (B2B) Model- This model describes
commerce transactions between businesses, such as between a
manufacturer and a wholesaler, or between a wholesaler and a retailer. It
is the largest form of ecommerce. In this form the buyers and sellers are
both business entities and do not involve and individual consumer. It is
commonly known as EDI (Electronic Data Interchange). The two businesses
pass information electronically to each other.
Business-to-Consumer (B2C) Model - In this model,
business and consumers are involved. Business sell to the
public typically through catalogues utilizing shopping cart
software. Customer identifies a need. Searches for the
product or services to satisfy the need. Selects a vendor
and negotiates for price. Receives the product or services
(delivery logistics, inspection and acceptance). Makes
payment. Gets service and warranty claims. Example
websites like Amazon.com, Flipkart etc.
Consumer-to-Business Model - In this model , the customer
requests a specific service from the business. Consumer to Business is a
growing arena where the consumer requests a specific service from the
business. It enables buyers to name their own price, often binding, for a
specific good or services generating demand. Example online trading,
tenders ,freelancing with website like Bazee.com
Consumer-to-Consumer (C2C) Model - It facilitates the
online transaction of goods or services between two peoples.
Consumer-to-consumer (C2C) (or citizen-to-citizen) model
involves the electronically facilitated transactions between
consumers through some third party. Online auction, in which
a consumer posts an item for sale and other consumers bid to
purchase it; The sites are only intermediaries, just there to
match consumers. Example :olx, ebay
 Scope of E-Commerce
E-Commerce uses three 'technologies':
1. Electronic Markets
2. Electronic Data Interchange (EDI)
3. Internet Commerce
 Scope of E-Commerce

Electronic Markets: The principle function is to facilitate the

search for the required product or service. Example Airline booking
systems

Electronic Data Interchange (EDI): EDI provides for the efficient

transaction of recurrent trade exchanges between commercial
organizations. Example :Large retail groups and vehicle assemblers when
trading with their suppliers (supermarket)

Internet Commerce: The Internet can be used for advertising goods and
services and transacting once-off deals. Internet commerce has application
for B2B and B2C transactions. Example purchasing book through
amazon.com.
 TRADE CYCLE
Trade Cycle: A trade cycle is the series of exchanges, between a
customer and supplier that take place when a commercial exchange is
execute.

Phases of Trade Cycle: Trade cycle has to support:

• Finding goods or services appropriate as per need and agreeing terms of
trade
• Placing the order, taking delivery and making payment
• After sales activities

A general trade cycle consists of following phases :

Pre-Sales: Finding a supplier and agreeing the terms. It is a search and
negotiate phase
Execution: Selecting goods and taking delivery. It is Order and Delivery
phase.
Settlement: Invoice (if any) and payment
After-Sales: Following up complaints or providing maintenance. It is a
service and warranty phase.
 E-Market
Definition: An electronic market is an information system (virtual
market) that provides facilities for buyers and sellers to exchange
information about price and product offerings. Electronic market also tend
to be available only to the intermediaries. Electronic market is the virtual
representation of physical market.
Electronic Market bring together product, price and service information
from many suppliers.
Electronic Market can thus act as database or catalogue.
Electronic markets are used for
1. Passenger ticket reservations
2. An airline booking system
3. In various financial and commodity markets. These markets give the
customer (or the customer's intermediary) easy access to comparative
data on price, and other attributes, of the goods or services on offer.
Access to this information is advantageous for the consumer which may
not be beneficial to the supplier.
 E-Market and Trade Cycle
The Electronic market is primarily search phase of trade cycle. Typically
an inter-organisational credit trade cycle. Normally includes facilities for
Execution and Settlement .

Usage of electronic markets

• Application has been limited to specific sectors:
a. Airline Booking Systems
b. Financial and Commodity Markets
• Use is typically via an intermediary (i.e. only for dealers)
• Study of Share and stock market
 E-Market and Trade Cycle
Advantages :
•Customer Advantage: Easy access to comparative price/service
information. These markets give the customer (or the customer's
intermediary).
•Supplier: For supplier it facilitates easy access to market.
•Search cost lowered: It reduces the search cost for buyers and
increases efficiency.
•Assistance to buyers: E-Market is most effective in assisting the buyer.
•Awareness of market: The use of ICT to provide geographically dispersed
traders with the information necessary for the fair operation of the
market.
•Best negotiations: Easy access to information, reduces the search cost of
finding the supplier that meets the purchase requirement.

Disadvantage:
1. It becomes difficult for sellers to maintain high price levels, because
due to the introduction of an electronic market, search cost is reduced
for the buyer.
2. It is disadvantageous for seller, as buyer can make easy price
comparison.
 Electronic Data Interchange

Electronic Data Interchange (EDI):

Definition: The transfer of structured data, by agreed message standards,

from one computer system to another, by electronics means.

This definition has four elements, each of them essential to form EDI
system
1. Structured Data: EDI transactions are composed of code, values and
short pieces of text; each element with strictly defined purpose.
2.Agreed message standards: The EDI transactions has to have a
standards format .The standard is not just agreed between the trading
partners but is a general standard agreed at national or international level.
3. From one computer system to another: The EDI message sent is
between two computer applications There s no requirement for people to
read the message or re-key it into computer system
4. By electronics means: Usually this is by data communication but the
physical transfer of magnetic tape or floppy disc would be within the
definition of EDI
 Electronic Data Interchange
Electronic Data Interchange (EDI): Definition: The transfer of
structured data, by agreed message standards, from one computer system
to another, by electronics means. It has four elements, each of them
essential to form EDI system
1. Structured Data: EDI transactions are composed of code, values and
short pieces of text; each element with strictly defined purpose.
2.Agreed message standards: The EDI transactions have a standards
format. The standard is a general standard agreed at national or
international level.
3. From one computer system to another: The EDI message sent is
between two computer applications There is no requirement for people to
read the message or re-key it into computer system
4. By electronics means: Usually this is by data communication but the
physical transfer of magnetic tape or floppy disc would be within the
definition of EDI.
Thus there are two important things in EDI. First, EDI replaces paper-
based documents with electronic ones. And, second, the data in a document
is transmitted in a standardized format so that both the sender and the
receiver can accurately read the document
 EDI and Trade Cycle

Commercial transactions that are repeated on a regular basis, such as

supermarkets replenishing their shelves, is one category of trade cycle.
EDI is the e-Commerce technology appropriate to these exchanges.EDI is
mapped with settlement and execution phase of trade cycle.
Benefits of EDI:
1. Shortened ordering time: EDI orders are sent straight into the
network. Orders can be in suppliers system within a day.
2. Reduction in cost: The use of EDI can cut cost including the cost of
stationary and postage. EDI has the potential to save staff costs.
3. Elimination of errors: EDI eliminates the source of errors i.e. data
entry errors.
4. Fast response: With EDI, customer can be informed directly, so that
the customer can take fast decision.
 EDI Security

When an organization adopts EDI, security controls becomes important

factor.
Because when transaction takes place between two trading partners,
confidentiality is necessary and important.
EDI security system should include three levels of security:
(1) Network level security: This level of security ensures that users not
registered in the EDI network are not able to gain access to its facilities.

(2) Application level security: In any given EDI application or software,

there might be some data you are not allowed to see, some you can see but
not alter.

(3) Message level security: Here the data should be secured against non-
bonafide messages, duplication, loss or replay of messages, deletion of
messages.
 Internet Commerce

Definition: Internet commerce is sale /transaction done using information

and communication technology (Internet to be specific). Internet
commerce is also mentioned as Business-to-Consumer E-Commerce. In
broad sense Internet Commerce includes:
Full sales and marketing cycle - Analyzing online feedback to ascertain
customer's needs.
Identifying new markets - Through exposure to a global audience through the
WWW.
Developing ongoing customer relationships - Achieving loyalty through
ongoing email interaction.
Assisting potential customers with their purchasing decision - By guiding
them through product choices in an intelligent way.
Providing round-the-clock points of sale - Making it easy for buyers to order
online, irrespective of location.
Supply Chain Management - Supporting those in the supply chain, such as
dealers and distributors, through online interaction.
Ongoing Customer Support - Providing extensive after-sales support to
customers by online methods; thus increasing satisfaction, deepening the customer
relationship and closing the selling loop through repeat and ongoing purchases.
 Internet Commerce

Definition: Internet commerce is sale /transaction done using information

and communication technology (Internet to be specific). Internet
commerce is also mentioned as Business-to-Consumer E-Commerce. In
broad sense Internet Commerce includes:
Full sales and marketing cycle - Analyzing online feedback to ascertain
customer's needs.
Identifying new markets - Through exposure to a global audience through the
WWW.
Developing ongoing customer relationships - Achieving loyalty through
ongoing email interaction.
Assisting potential customers with their purchasing decision - By guiding
them through product choices in an intelligent way.
Providing round-the-clock points of sale - Making it easy for buyers to order
online, irrespective of location.
Supply Chain Management - Supporting those in the supply chain, such as
dealers and distributors, through online interaction.
Ongoing Customer Support - Providing extensive after-sales support to
customers by online methods; thus increasing satisfaction, deepening the customer
relationship and closing the selling loop through repeat and ongoing purchases.
 Internet Commerce
Internet commerce and Trade cycle: Consumer transactions tend to be
once-off (or at least vary each time) and payment is made at the time of
the order. Internet e-Commerce is the technology for these exchanges.
The third generic trade cycle is the non-repeating commercial trade cycle
and Internet e-Commerce or an electronic market is the appropriate e-
technology.
Advantages
1. Home Shopping: Quick and convenient
2. World Wide and 24 hours: Anywhere -any time
3. Home Delivery of the product
Disadvantages
1. Privacy and security: Privacy of personal details and security of
transactions.
2. Delivery of product: Delay in delivery can be inconvenient and can add
other costs.
3. Inspecting goods: You cannot actually see, feel or try goods.
4. Social interaction: Shopping with family and friends will stop.
 E-Commerce Perspective

1. Communications Perspective: E-Commerce is the delivery of information,

products/services, or payments over the telephone lines, computer
networks or any other electronic means.
2. Business Process Perspective:
E-Commerce is the application of technology toward the automation of
business transactions and work flow.
3. Service Perspective:
E-Commerce is a tool that addresses the desire of firms, consumers, and
management to cut service costs while improving the quality of goods and
increasing the speed of service delivery.
4. Online Perspective:
E-Commerce provides the capability of buying and selling products and
information on the internet and other online services.
 E-Commerce Perspective

EDI security standards:

The important aspect of EDI is security and privacy. The first point is to
ensure the interchange of message is reliable. Hence EDI security
standards include: controls designed to protect against errors and
corruption of message.
Where there is concern that transmission is not reliable it can be
protected by digital signature and filters like firewall.
Where the contents of message are sensitive, the privacy of message can
be protected using encryption.