E – Commerce

Business have been looking for ways to increase their profits and
market share . The search for more efficient ways of doing business
has been driving another revolution in the conduct of business .This
revolution is known as electronic commerce which is any
purchasing or selling through an electronic communications
medium. Business planners in institutions and organizations now
see technology not only as a supportive cofactor, but as a key
strategic tool. They see electronic commerce as a “wave of future”.
Information technology has revolutionized and digitalized
economic activity , and made it a truly global phenomenon .One of
the most visible icons of the IT Revolution is the internet – the
world wise web. Which is a gigantic anarchic network of computers
world wide , which is essentially used for communicating ,
interaction , interactive long distance computing and exchange of
information giving rise to a host of applications from military and
government to business , education and entertainment.
E-commerce exists because of internet. It has been born on the net
and is growing with the net . It involves carrying business on and
through the net .
E-commerce is a product of the digital economy. It is a source of a
paradigm shift , in redefining technology, individual and global
societies , as well as national and global economies.
Electronic commerce is a symbolic integration of
communications , data management , and security capabilities to
allow business applications within different organizations to
automatically exchange information related to the sale if goods
and services . Communication services support the transfer of
information from the originator to the recipient. Data
management services define the exchange format of the
information.Security mechanisms authenticate the source of
information, guarantee the integrity of the information received ,
prevent disclosure of information to inappropriate users , and
document that the information was received by the intended
Prior to the development of e-commerce, the process of marketing
and selling goods was a mass-marketing and sales-force driven
process . Customers were viewed as passive targets of advertising
“campaigns” .Selling was conducted in well-insulated “channels”
.Consumers were trapped by geographical and social boundaries,
unable to search widely for the best price and quality .
E-commerce has challenged much of this traditional business
thinking.
E-Commerce Defined :

“The use of internet and the WEB to transact

business . More formally , digitally enabled
commercial transactions between and among
organizations and individuals.”
“Electronic commerce is commerce via any
electronic media , such as TV,fax, and online
networks.Internet-based commerce makes use of
any Internet facility and service. Web-based
commerce focuses on the opportunity of the
World Wide Web apparatus , in particular , its
ubiquity and its ease of use .”
Benefits/Features of E-Commerce :
Electronic commerce increases the speed,accuracy, and efficiency
of business and personal transactions. The benefits of E-commerce
include the following :
•Ubiquity : E-commerce is ubiquitous, meaning that it is available
just about everywhere , at all times.It liberates the market from
being restricted to a physical space and makes it possible to shop
from your desktop, at home, at work , or even from your car using
mobile commerce .From customer point of view , ubiquity reduces
transaction costs – the costs of participating in a market.To transact
it is no longer necessary to spend time and money traveling to
market.At a broader level, the ubiquity of e-commerce lowers the
cognitive energy required to transact in a marketplace . Cognitive
energy refers to the mental effort required to complete a task.
•Global Reach : E-commerce technology permits commercial
transactions to cross cultural and national boundaries far more
conveniently and cost effectively than is true in traditional
commerce.As a result, the potential market size for e-commerce
merchants is roughly equal to the size of the world’s online
population.The total number of users or customers an e-commerce
business can obtain is a measure of its reach.
•Universal Standards : The technical standards for conducting e-
commerce , are universal standards – they are shared by all nations
around the world. The universal technical standards of e-commerce
greatly lower the market entry costs - the cost merchants must pay
just to bring their goods to market. At the same time , for consumers
, universal standards , reduce search cost – the effort required to find
a suitable products.
•Richness : Information richness refers to the complexity and
content of a message.
•Interactivity : E-commerce technologies are interactive , meaning
they allow for two-way communication between merchant and
consumer .It allows an online merchant to engage a consumer in
ways similar to a face-to face experience , but on a much more
massive , global scale.
•Information Density : the internet and the Web vastly increase
information density –the total amount and quality of information
available to all market participants , consumers, and merchants
alike.E-commerce technologies reduce information collection,
storage , processing , and communication costs .At the sale time,
these technologies increase greatly, the accuracy and timeliness
of information-making information more useful and important
than ever.As a result information becomes more plentiful,cheaper
and of higher quality.
•Personalization/Customization : E-commerce technologies permit
personalization – merchants can target their marketing messages to
specific individuals by adjusting the message to a person’s
name,interests , and past purchases.The technology also permits
customization –changing the delivered product or service based on a
users preference or prior behavior.Given the interactive nature of e-
commerce technology, a great deal of information about the
consumer can be gathered in the marketplace at the moment of
purchase.With the increase in information density , a great deal of
information about the consumer’s past purchases and behavior can
be stored and used by online merchants.The result is increase in the
level of personalization and customization.
Types of E-Commerce :
There are different types of e-commerce and many different ways to
characterize these types .
The five major types of e-commerce are :
1. B2C
2. B2B
3. C2C
4. P2P
5. M-Commerce
B2C : (Business-to-Consumer)
The most commonly discussed type of e-commerce is Business-to-
Consumer (B2C) e-commerce, in which online business attempt to
reach individual consumers is done .It has grown exponentially since
1995, and is the type of e-commerce that most consumers are likely
to encounter . Within the B2C category there are many different
types of business models: portals , online retailers , content providers
, transaction brokers , market creators , service providers , and
community providers.
B2B : (Business-to-Business)
In this type of e-commerce , one business focuses on selling to
other business .It is the largest form of e-commerce.The ultimate
size of B2B e-commerce could be huge . At first, B2B e-commerce
primarily involved inter-business exchanges , but a number of other
B2B business models have developed, including e-distribution ,
B2B service providers , matchmakers , and info-mediaries that are
widening the use of e-commerce.
C2C : Consumer-to-Consumer
C2C e-commerce provides a way for consumers to sell to each
other , with the help of an online market maker such as the auction
site .In C2C e-commerce , the consumer prepares the product for
market , places the product for auction or sale, and relies on the
market maker to provide catalog , search engine ,and transaction
clearing capabilities so that products can be easily displayed ,
discovered , and paid for.
P2P : (Peer-to-Peer)
Peer-to-Peer technology enables Internet users to share files and
computer resources directly without having to go through a
central Web server. In peer-to-peer’s purest form, no
intermediary is required . Entrepreneurs and venture capitalists
have attempted to adapt various aspects of peer-to-peer (P2P) e-
commerce.
E.g. Napster.com established to aid internet users in finding and
sharing music files (mp3 files). It is partially peer-to-peer
because it relies on a central database to show which users are
sharing music files.
M-commerce :
Mobile commerce or m-commerce , refers to the use of wireless
digital devices to enable transactions on the Web . These devices
utilize wireless networks to connect cell phones and handheld
devices to the Web. Once connected , mobile consumers can
conduct many types of transactions , including stock trades,
banking, travel reservations , and more.

***B2G : Business to Government

E-Commerce Business Models :
A business model is a set of planned activities (sometimes
referred to as business process) designed to result in a profit in a
marketplace. The business model is at the center of the business
plan.
A business plan is a document that describes a firm’s business
model .
An e-commerce business model aims to use and leverage the
unique qualities of the internet and the World Wide Web.
There are Eight Key Ingredients of a Business Model :
1. Value proposition : It defines how a company’s product or
service fulfils the needs of the customers.To develop and/or
analyze a proposition, the following questions need to be
answered :
- Why will customers choose to business with your firm
instead of another company ?
- What will your firm provide that other firms do not and
cannot ?
From the consumer point of view , successful e-commerce
value propositions include : personalization and
customization of product offerings, reduction of product
search costs, reduction of price discovery costs, and
facilitation of transactions by managing product delivery.
2. Revenue model :
The firms revenue model describes how the firm will earn revenue ,
generate profits,and produce a superior return on invested
capital.The function of business organizations is both to generate
profits and to produce returns on invested capital that exceed
alternative investments.
* The advertising model :
A website that offers its users content, services , and/or products
also provides a forum for advertisements and receives fees from
advertisers. Those websites that are able to attract the greatest
viewer ship and are able to retain user attention are able to charge
higher advertising rates.
* Subscription Revenue Model :
In the subscription revenue model , a Web site that offers its users
content or services charges a subscription fee for access to some or
all of its offerings .
* Transaction fee revenue model :
In this model a company receives a fee for enabling or executing a
transaction. (e.g. Online auction websites taking some commission
from buyer as well as the seller).
* Sales Revenue Model :
In the sales revenue model , a companies derive revenue by selling
goods, information , or services to customers .
E.g. amazon.com
* Affiliate Revenue model :
In the affiliate revenue model , sites that steer business to an
“affiliate” receive a referral fee or percentage of the revenue from
any resulting sales.
3.Market Opportunity :
The term market opportunity refers to the company’s intended
marketplace and the overall potential financial opportunities
available to the firm in that marketplace . The market
opportunity is usually divided into smaller market niches. The
realistic market opportunity is defined by the revenue potential
in each of the market niches .
4. Competitive Environment :
The firms competitive environment refers to the other companies
operating in the same marketplace selling similar products . The
competitive environment for a company is influenced by several
factors : how many competitors are active, how large their
operations are , what the market share of each competitor is ,
how profitable these firms are , and how they price their
products.
5.Competitive Advantage :
Firms achieve a competitive advantage when they can produce a
superior product a superior product and/or bring the product to
market at lower than most, or all, of their competitors . Firms also
compete on scope .Some firms can develop global markets while
other firms can only develop a national or regional market .Firms
that can provide superior products at lowest cost on global basis
are truly advantaged.
6. Market strategy :
Market strategy is the plan the company put together that details
exactly how the company intend to enter the market and attract
new customers.
7.Organizational Development :
Describes how the company will organize the work that needs to be
accomplished.
8. Management Team :
Employees of the company responsible for making the business
model work.
 Categorizing
E-Commerce
Business Models
Major B2C business models :
There are a number of different models being used in the B2C e-
commerce arena . The major models include the following :
•Portal :-Offers powerful search tools plus an integrated package of
content services ;typically utilizes a combined
subscription/advertising revenue/transaction fee model ;may be
general or specialized.
•E-tailer :- Online version of traditional retailer; includes virtual
merchants (online retail stores) , clicks and mortar e-tailers (online
distribution channel for a company that also has a physical
store);catalog merchants (online version of direct mail catalog);
online malls (online version of mall);manufacturers selling directly
over the Web.
•Content Provider :- Information and entertainment companies that
provide digital content over the Web; typically utilizes an
advertising , subscription ,or affiliate referral fee revenue model.
•Transaction broker :- Process online sales transactions; typically
utilizes a transaction fee revenue model.
•Market creator :- Uses Internet technology to create markets that
bring buyers and sellers together ; typically utilizes a transaction fee
revenue model.
•Service provider :- Offers services online.
•Community provider :- Provides an online community of like-
minded individuals for networking and information sharing ;
revenue is generated by referral fees , advertising , and subscription.
Major B2B business models :
The major business models used to date in B2B arena include :
•Hub, also known as marketplace/exchange – electronic market
place where suppliers and commercial purchasers can conduct
transactions ; may be general (a horizontal marketplace ) or
specialized (a vertical marketplace) .
•E-distributor :- Supplies products directly to individual businesses.
•B2B service provider :- Sells business services to other firms.
•Matchmaker :- Link business together , changes transaction on
usage fees.
•Infomediary :- Gathers information and sells it to business .
Major C2C business models :
A variety of business models can be found in the customer-to-
customer e-commerce , peer-to-peer e-commerce, and m-
commerce areas :
•C2C business models connect consumers with other consumers
.The most successful has been the market creator business model
used by eBay.com .
•P2P business models enable consumers to share files and services
via Web without common servers. A challenge has been finding a
revenue model that works.
•M-commerce business models take traditional e-commerce
models and leverage emerging wireless technologies to permit
mobile access to the Web.
•E-commerce enablers business models focus on providing the
infrastructure necessary for e-commerce companies to exist, grow,
and prosper.
Key business concepts and strategies applicable to e-commerce :
•Industry structure : The nature of players in an industry and their
relative bargaining power – by changing the basis of competition
among rivals , the barriers to entry , the threat of new substitute
products , the strength of suppliers , and the bargaining power of
buyers.
•Industry value chains : The set of activities performed in an
industry by suppliers , manufacturers , transporters , distributors and
retailers that transforms raw inputs into final products and services –
by reducing the cost of information and other transaction costs.
•Firm value chains : The set of activities performed within an
individual firm to create final products from raw inputs – by
increasing operational efficiency .
•Business strategy : A set of plans for achieving superior long-term
returns on the capital invested in a firm – by offering unique ways
to differentiate products , obtain cost advantages , compete globally
, or compete in a narrow market or product segment.
 Technology Infrastructure for
E-Commerce
The Internet and World Wide Web E-
Commerce Infrastructure
The Internet : Technology Background
The Internet is an interconnected network of thousands of
networks and millions of computers (sometimes called as host
computers or just hosts) linking business , educational institutions
, government agencies , and individuals together .The internet
provides services such as e-mail, news-groups, shopping, research
, instant messaging , music videos and news . No one organization
controls the Internet or how it functions , nor it is owned by
anybody , yet it has provided the infrastructure for a
transformation in commerce, scientific research, and culture .The
word internet is derived from the word internetwork or the
connecting together of two or more computer networks.The
World Wide Web is one of the internet’s most popular services,
providing access to over one billion Web pages , which are
documents created in a programming language called HTML and
which can contain text , graphics , audio, video, and other objects,
as well as “hyperlinks” that permit a user to jump from one page
to another.
The Internet : Key Technology Concepts;
Based in the definition , the internet means a network that uses the
IP (Internet Protocol) addressing scheme, supports the
Transmission Control Protocol (TCP), and ,makes services
available to users much like a telephone system makes voice and
data services available to the public.
Behind this formal definition are three extremely important
concepts that are the basis for understanding the Internet : packet
switching , the TCP/IP communications protocol , and
client/server computing .Although the Internet has evolved and
changed dramatically, these three concepts are at the core of how
the Internet functions today and are the foundation for Internet.
Packet Switching : It is a method of slicing digital messages into parcels called
“packets” sending the packets along different communication paths as they
become available , and then reassembling the packets once they arrive at their
destination .Prior to the development of packet switching , early computer
networks used leased , dedicated telephone circuits to communicate with terminals
and other computers.
In packet-switched networks , messages are first broken down into
packets.Appended to each packet are digital codes that indicate a source
address(the origination point) and the destination address, as well as sequencing
information and error-control information for the packet.Rather than being sent
directly to the destination , in a packet network , the packets travel from computer
to computer until they reach their destination. The computers are called Routers .
Routers are special purpose computers that interconnect thousands of different
computer networks that make up the internet and route packets along to their
ultimate destination as they travel.To ensure that packets take the best available
path towards their destination, the routers use computer programs called routing
algorithms.
Packet switching makes full use of almost all available communication lines and
capacity.If some lines are disabled or too busy , the packets can be sent on any
available line that eventually leads to the destination point.
TCP/IP :
TCP refers to the Transmission Control Protocol . IP refers to the
Internet Protocol. A protocol is a set of rules for formatting ,
ordering , compressing , and error checking messages.It may also
specify the speed of transmission and means by which devices on
the network will indicate they have stopped sending and/or
receiving messages. Protocols can be implemented in either
hardware or software .TCP/IP is implemented in Web software
called server software .It is the agreed upon protocol for
transmitting data packets over the Web.TCP establishes connections
among sending and receiving Web computers , handles the
assembly of packets at the point of transmission , and their
reassembly at the receiving end.
IP addresses :TCP handles the packetizing and routing of Internet
messages . IP provides the Internet’s addressing scheme .Every
computer connected to the Internet must be assigned an address –
otherwise it cannot send or receive TCP packets .When a user
sign’s onto the Internet using a dial-up telephone modem, the
computer is assigned a temporary address by the Internet service
provider.
Internet addresses known as IP addresses , are 32-bit numbers that
appear as a series of four separate numbers marked off by periods
such as 201.61.186.227. Each of the four numbers can range from
0-255. This “dotted quad” addressing scheme contains up to 4
billion addresses of the computer ( 2 to the 32nd power).The
leftmost number typically indicates the network address of the
computer , while remaining numbers help to identify the specific
computer within the group that is sending (or receiving) messages.
Domain Names and URLs : Most people cannot remember 32-bit
numbers .IP addresses can be represented by a natural language
convention called domain names.The domain name system (DNS)
allows expressions to stand for numeric IP addresses.
Uniform Resource Locators (URLs ) are addresses used by Web
browsers to identify the location of content on the web, also use
domain names as a part of the URL.A typical URL contains the
protocol to be used when accessing the address, followed by its
location. The protocol used is HTTP (Hypertext Transfer
Protocol).A URL can have more than one paths.
Client/Server computing :
It is a model of computing in which very powerful personal
computers called Clients are connected together in a network
together with one or more server computers.These clients are
sufficiently powerful to accomplish complex tasks such as
displaying rich graphics , storing large files, and processing
graphics and sound files , all on a local desktop or hand held
device. Servers are networked computers dedicated to common
functions that their client machines on the network need. Such as
storing files , software applications, utility programs such as Web
connections , and printers.
Other Internet Protocols :
SMTP :Simple mail transfer protocol
For Sending
POP : Post Office Protocol Email
IMAP : Internet message access protocol

FTP : File Transfer Protocol for transferring files

SSL : Secure Socket Layers for Security
E-Commerce Security
Environment
It is difficult to estimate the actual amount of e-commerce crime
for a variety of reasons . In many instances , e-commerce crimes
are not reported because companies ear of losing the trust of
legitimate customers. And even when crimes are reported , it may
be hard to quantify the losses incurred .The most serious losses
involved theft of proprietary information and financial
fraud.Online credit card fraud is perhaps the most high profile
form of e-commerce crime. In some cases , the criminals aim to
just deface , vandalize and/or disrupt a Web site, rather than steal
goods or services . The cost of such an attack includes not only the
time and effort to make repairs to the site but also damage done to
the site’s reputation and image as well as revenues lost as a result
of the attack. Estimates of the overall cost of the various forms of
cyber vandalism range into billions.
What is Good E-Commerce Security ?
What is a secure commercial transaction ?
Anytime a user goes into a market place , he/she takes risks,
including the loss of privacy (information about what you
purchased).The prime risk as a customer is that you do not get what
you paid for.As a merchant in the market , you don’t get paid for
what you sell,.Thieves take merchandise and then either walk off
without paying anything , or pay you with a fraudulent instrument ,
stolen credit card , or forged currency.
Burglary, breaking and entering , embezzlement , trespass ,
malicious destruction, vandalism – all crimes in traditional
commercial environment – are also present in e-
commerce.However , reducing risks in e-commerce is a complex
process that involves new technologies, organizational policies and
procedures, and new laws and industry standards that empower law
enforcement officials to investigate and prosecute offenders.
Security Threats in the E-Commerce Environment :
From the technology perspective , there are three key points of
vulnerability when dealing with e-commerce : the client, the server
and the communication pipeline.
•Malicious Code
It includes a variety of threats such as viruses , worms , Trojan
horses , and “bad applets” . A virus is a computer program that has
the ability to replicate or make copies of itself , and spread to other
files. In addition to the ability to replicate , most computer viruses
deliver a “payload”(destroying files,reformatting the computers
hard drive or causing programs to rum improperly.
A Trojan horse does something other than expected . The Trojan
horse is not itself a virus because it does not replicate , but is often a
way for viruses or other malicious code to be introduced into a
computer system.
Bad applets also referred to as malicious mobile code , are expected
to become an increasing problem as java and Active X controls
become more commonplace.
Malicious code is a threat to the system’s integrity and continued
operation, often changing how a system functions or altering
documents created on the system . In many cases the user is
unaware of the attack until it affects the system and the data on the
system.
•Hacking and Cyber vandalism :
A hacker is an individual who intends to gain unauthorized access
to a computer system . Within the hacking community , the term
cracker is typically used to denote a hacker with criminal intent
although in the public press , the terms hacker and cracker are
used interchangeably. Hackers and crackers get unauthorized
access by finding weaknesses in the security procedures of Web
sites and computer system , often taking advantages of various
features of internet that make it an open system that is easy to use.
Cyber vandalism is intentionally disrupting,defacing , or even
destroying the site.
Group of hackers called as “tiger teams” are used by corporate
security departments to test their own security measures.By hiring
hackers to break into the system from outside , the company can
identify weaknesses in the computer systems.
•Credit Card Frauds
The fear that the credit card information will be stolen frequently
prevents the users from making online purchases . In e-commerce
the greatest threat to the consumer is that the merchant’s server with
which the customer is transacting will “lose” the credit information
to permit it to be diverted for a criminal purpose.Credit card files
are the major targets of Web site hackers.
Dimensions of E-Commerce security :
There are six dimensions to e-commerce security :
1. Integrity
2. No repudiation
3. Authenticity
4. Confidentiality
5. Privacy
6. Availabilty
Integrity refers to the ability to ensure that information being
displayed on a Web site , or transmitted or received over the
internet , has not been altered in any way by an unauthorized
party.e.g. an unauthorized person intercepts and changes the
contents of an online communication , such as by redirecting a
blank wire transfer into a different account , the integrity of the
message has been compromised because the communication no
longer represents what the original sender intended .

Non repudiation refers to the ability to ensure that e-commerce

participants do not deny (I.e. repudiate) their online actions.
Authenticity refers to the ability to identify the identity of a
person or entity with whom you are dealing on the internet. How
does the customer know that the Web site operator is who it
claims to be ? How can the merchant be assured that the
customer is really who he/she say he/she is ? Someone who
claims to be someone they are not is “spoofing” or
misinterpreting themselves.
Confidentiality refers to the ability to ensure that messages and
data are available only to those who are to view them .
Confidentiality is something confused with privacy , which refers
to the ability to control the use of information a customer
provides about himself or herself to an e-commerce merchant.
Availability refers to the ability to ensure that an e-commerce site
continues to function as intended .
E-Commerce security is designed to protect these six
dimensions.When any one of them is compromised , it is a security
issue.
Electronic Data
Interchange
EDI is defined as inter organization exchange of documents in
standardized electronic form directly between computer
applications. Examples of typical business documents include
purchase orders, invoices, and material releases. In basic terms, EDI
can be thought of as the replacement of paper-based purchase order
with electronic equivalents. Documents originate in the sender’s
computer, which prints them on forms-these are then typically send
via mail or fax. When receivers get the paper document, they are
forced reenter the information in to their computers. This is a slow,
inefficient and error-prone method of moving commerce related
data from one computer to another. With EDI, the business
documents are moved electronically from sender’s computer
application to receiver’s application. Besides application-to-
application communication, ideally one wants data in standard
format so that users do not have each other’s internal data formats.
 EDI’s goal is to enable easy and inexpensive
communication of structured information through out corporate
community. EDI can facilitate integration among dispersed
originations. Another of EDI’s goal is to reduce the amount data
capture and transcription; this results in decreased incidence of
errors, reduced time spent on exception handling, and fewer data
caused delays in the business process. Benefits can be secured in
inventory management, transport and distribution, administration,
cash management. In addition, faster handling of transactions
results in increased cash flow.
The key aspects of EDI are as follows-
 
      The utilization of electronic transmission medium
(normally a VAN) rather than physical storage media such as paper,
magnetic tapes, and discs.
      Use of structured, formatted messages based upon agreed
standards (such that messages can be translated, interpreted, and
checked for compliance with an explicit set of rules).
      Relatively fast delivery of documents from sender to
receiver (generally implying receipt with hours to minutes).
      Direct communication between applications (rather than
just between systems)
VAN : Value Added Network
•EDI can fit business transaction continuum. Pre-purchasing
activities can be supported by electronic version white/yellow
pages; supplier directories; and on price list, offers, or period
contracts. Purchasing and logistic can be made more efficient by
providing EDI links for messages that have known formats and
contents, supplemented by e-mail links between partners, to handle
exceptions. The post purchasing tasks can be addressed through so-
called EDI, whereby check writing and dispatch processes are
replaced by instructions delivered electronically to the
corporation’s bankers. The challenge confronting corporate
planners is to deliver each of these capabilities to their
organizations cost-effectively.
EDI’s benefits –
 
Business secures many benefits when utilizing EDI. However,
investment will be necessary in order to lower costs, and planning
and control is needed insure that the savings are actually realized.
 
      Monitory savings are obtained by automating existing
business procedure. Cost savings arises in relation to the
preparation, postage and handling of mainstream transactions or in
secondary but expensive areas such as the preparation and dispatch
of applications for approval by a regulatory authority or other
reporting functions.
      EDI also eliminates other paper handling tasks. On the
sender’s side, envelopes no longer have to be stuffed documents and
mailed to the recipients. On the receiver’s side, documents no longer
have to remove from envelopes, photocopied, filled and reentered in
to a computer.
 In addition to the pre-transaction cost savings, benefits can arise
from reduced exceptions handling. Generally a significant amount of
staff’s time is traceable to errors in original data capture to the
detection, investigation, adjustment, and rework of erroneous
transactions. With EDI, data need to be captured once only; by
imposing appropriate integrity controls at original data entry, staff
time and costs can be ameliorated.
      Among the major benefits is the elimination of re-keying
the data. With EDI, business documents transit automatically from
the sender’s business applications to the receiver’s application. The
receiver needs not to reenter the information from a paper form;
keypunching errors are avoided and accuracy of the data increases.
Fewer staff hours are devoted to paper shuffling, data entry, and
fixing keypunching errors, and more efforts can be channeled to
more productive work.
     With EDI organization exchange business documents more
quickly, resulting in a shorter business cycle. Manufacturers can
get the correct supplies and materials more quickly, allowing them
to reduce their baseline stock and thus their inventory cost.
Companies that utilize Just-in-Time Manufacturing in order to
reduce inventory levels find EDI an important , if not
indispensable, tool. As shelf items are sold, these retailers
automatically send purchase orders to their venders via EDI in
order to quickly replenish these items.
     Furthermore, EDI can positively impact customer service
factors such as the incidence of errors and timeliness of deliveries.
Hence even simple automation by EDI can contribute to a company’s
competitive advantage either by enhancing its cost -effectiveness or
by improving its Client-service posture.
     Other advantages accrue to organizations that utilize EDI as
an opportunity to rationalize (rethink) operations , via business
process reengineering. Mature EDI using organizations are now
beginning to seek the intrinsic gains that realization can offer. For
example, business partners who are confident in one another’s data
processing apparatus can do away with invoices and pay on the basis
of a receipt of goods matched against a purchase order . In many
sectors, EDI is likely to contribute to reallocation of functions
between business partners.
Migration from non-EDI to EDI operations is generally driven by
the demands of dominant organizations. E.g. Subcontractors to
major industrial establishments using EDI are at times forced to
adopt the technology in order to continue doing business.
Companies can send Edi transactions across the internet in two
ways .The first way via the File Transfer Protocol(FTP) and the
second is via e-mail.
Most Internet EDI implementations use e-mail because it is
relatively more secure and requires more administration.With e-
mail, the trading partners do not have to be concerned about login
Ids, passwords , directory names , or file names.
FTP requires the user to administer a login ID and password for
each trading partner .The trading partners must also agree on
directory names and file names before they can exchange EDI via
The overhead associated with FTP becomes significant when large
number of trading partners are involved.The login and password
are sent across the Internet with no encryption and could be
intercepted by hackers; the hacker would then be able to login to
the trading partner’s computer and access the same files and
directories . With Internet e-mail , the sender and receiver do not
log in to each other’s computers.
Security of Data During Transmission :
Business with computers containing confidential data connected
to the Internet do not want the public to have unauthorized access
to specific parts of their files; at the same time they might want
the public to have access to specific parts of their information
base.Business that offer services that require payment by methods
including credit card transactions need to be cautious .If these
transactions are not secured, hackers can access the users account
information.
 Risk
management
Risk : “The possibility of loss or injury .”
E-commerce risk involves understanding potential problems that
might occur in the business and affect on success.
Risk management is an activity undertaken to lessen the impact on
potentially adverse events on business .Risk management is an
investment .There are costs associated with it.The investment in
risk management depends upon the nature of the business .
Risk Assessment :
The first step is to inventory the information and knowledge
assets of E-commerce site and company . What information is at
risk ? Is it customer information, proprietary designs, business
activities, secret processes , or other internal information , such as
price schedules , executive compensation , or payroll ?
For each type of information try to estimate the losses for the
firm.
Based on the quantified list of risks, one can start to develop a
security policy I.e a set of statements prioritizing the information
risks, identifying acceptable risk targets, and identifying the
mechanisms for achieving these targets.
Technology Solutions
Protecting internet
communications
Because e-commerce transactions must flow over the
public internet, and therefore involved thousands of
routers and servers through which the transaction packets
flow , security experts believe the greatest security threats
occur at the level of internet communications. This is very
different from a private network where a dedicated
communication line is established between the two parties.
A number of tools are available to protect security of
internet communications, the most basic of which is
message encryption.
 
ENCRYPTION
Encryption is the process of transforming plain text data in to
cipher text that can not read by anyone outsider of the sender
and the receiver. The purpose of encryption is (a)to secured
stored information and (b) to secure information transmission .
Encryptions can provide four of the six key dimensions of
E-commerce security .
•Message integrity – provides assurance that the message has
not been altered
•Nonrepudication – prevents the user from denying he or she
sent the message.
•Authentication – provides verification of the identity of the
person (or machine) sending the message.
Confidentiality – gives assurance that the message was not read
by others. This transformation of plain text to cipher text is
accomplished by using a key or cipher. A key (or cipher) is
any method of transforming plain text to cipher text.
Encryption can be practiced since the earliest form of
writing and commercial transaction. Ancient Egyptian and
Phoenician commercial records were encrypted using
substitution and transposition ciphers. In a substitution
cipher, every occurrence of given letter is replaced
systematically by another letter. For instance, if we used the
cipher ”letter plus two”- meaning replace every letter in a
word with a new letter two places forward – then the word
“hello” in plain text would transformed into the following
cipher text :”jgnnq”. In a transposition cipher , the ordering
of the letters of each word is changed in some systematic
way.
Symmetric Key Encryption: In order to decipher this
message , the receiver would have to know the secret cipher
that was used to encrypt the plain text. This is called
symmetric key encryption or secret key encryption. In
symmetric key encryption , both the sender and the receiver
use the same key to encrypt and decrypt the message. How do
the sender and the receiver have the same key? They have to
send tit over some communication media or exchange the key
in person .The possibilities for substitution and transposition
ciphers are endless, but they all suffer from common flaws.
First, in the digital age, computers are so powerful and fast as
these ancient means of encryption can be broken quickly.
Second, symmetric key encryptions require that both parties
share the same key. In order to share the same key, they
should send the over a presumable insecure medium where it
could be stolen and used to decipher messages. If the secret
key lost or stolen, entire encryption system fails.
Third, in commercial use where we are not all parts of the same
team or army, you would need a separate key for each of the
parties with whom you transacted, that is, one key for the bank,
another for a department store, and another for the government.
In large population of users, this could result in as many as n (n
- 1) keys. In population of millions of Internet users, thousands
of millions of keys would be needed to accommodate all e-
commerce customers (established at about 35 million
purchasers in the United States). Potentially, (35 millions )2
different keys could be needed. Clearly this situation would be
too unwieldy to work in practice.
Modern encryption system are digital. The ciphers or keys
used to transform plain text in to cipher text are digital strings.
Computers store text or other data as binary strings composed
of 0s and 1s . For instance, the binary representations of the
capital letters “A” in ASCII computer code is accomplished
with eight binary digits (bits):01000001. One in which digital
strings can be transformed into cipher text is by multiplying
each letter by another binary number, say, an eight- bit key
number 01010101. If we multiplied every digit character in our
text messages by this eight-bit key, sent the encrypted message
to a friend along with the secret eight-bit key, the friend could
decode the message easily.
The strength of modern security protection is measured in terms
of the length of the binary key used to encrypt the data. In the
above example, the eight-bit key is easily deciphered because
there are only 28 or 256 possibilities. If the intruder knows you
are using eight-bit key, then he or she could decode the message
in a few seconds using a modern desktop PC just using the brute
force method of checking each of the 256 possible keys. For this
reason, modern digital encryption systems use keys with
56,128,256, or 512 binary digits. With encryption of 512 digits,
there are 2512possiblities to check out. It is estimated that all the
computers in the world would need to work for ten years before
stumbling upon the answer.
The most widely used systematic key encryption on the internet
today is the Data Encryption Standard (DES) developed by the
National Security Agency (NSA) and IBM in the 1950s. DES
uses 56-bit encryption key. To cope with much faster computers,
Triple DES – essentially encrypting the message three times
each with a separate key, has improved it recently. There are
many other symmetric key systems, DES requires a different set
of keys for each set of transactions.
PUBLIC KEY CRYPTOGRAPHY
Two mathematically related digital keys are used: a public key
and private key. The private is kept secret by the owner, and
public is widely disseminated. Both keys can be used to encrypt
and decrypt the message. However, once the keys are used to
encrypt a message, that same key can not be used to unencrypt
the message.
 
To check the confidentiality of the message and ensured it has
not been altered in transit, a hash function is used first to create a
digest of the message. A hash function is an algorithm that
produces a fixed length number called a hash or message digest .
A hash function can be simple, and count the number of digital
“1s”in a message, or it can more complex, and produce a128-bit
number that reflects the number of 0s and 1s, the number of 00s,
11s, and so on.
One more step is required to ensure the authenticity of the
message, and to ensure the nonrepudiation , the sender the
encrypts the entire block of cipher text one more time using the
sender’s private key. This produces a digital signature (also
called an e-signature) or “signed” cipher text that can be sent
over the internet.
Digital envelop - a that uses symmetric encryption for large
documents, but public key encryption to encrypt and the
symmetric key.
Digital certificates and Public key Infrastructure (PKY)
 There are still some deficiencies in the message security regime
described above. How do we know that people and institutions
are who they claim to be? Anyone can make up a private and
public key combination and claim to be the defense department
or Santa Clause. Before you place an order with an online
merchant such as Amazon. Com, you want to be sure it really
be Amazon.com you have on the screen and not a spoofer
masquerading as Amazon. In the physical world, if someone
asks who are you and you show a social security number, they
may well ask to see a picture ID or a second form of certifiable
or acceptable identification. If they really doubt who you are ,
they may ask for references to other authorities and actually
interview these other authorities. Similarly in the digital world,
we need a way to know who people and institutions really are.
Digital certificates, and the supporting public key
infrastructure, are an attempt to solve this problem of digital
identity. A digital certificate is a document issued by a trusted
certification authority (CA) that contains the name of the
subject or company, the subject public key, a digital
certificate serial number, an expiration date, an issuance date,
the digital signature of the certification authority (the name of
the CA encrypted using the CA’s private key), and other
identifying information.
 
Public key infrastructure (PKI)
Certification authorities and digital certificate procedures that are
accepted by all parties.
 Pretty good privacy (PGP)
A widely used e-mail public key encryption software program
 S_HTTP (Security Hypertext Transfer Protocol)
A secure message-oriented communications protocol designed for
use in conjunction with HTTP. Cannot be secure non-HTTP
messages.
  Virtual Private Networks (VPN)
VPN allow remote users to securely access internal networks via
the internet, using the point-to-point Tunneling Protocol (PPTP)
Point-to-point Tunneling Protocol (PPTP)
 
PPTP an encoding mechanism that allows one local network to
connect to another using the internet as the conduit.
PROTECTING
NETWORKS
Once you have protected communications as well as possible , the
next set of tools to consider are those that can protect your
networks , and severs and clients on those networks.
 Firewalls:Firewalls and proxy servers are intended to build a wall
around your network, and the attached servers and clients, just like
physical-world firewall protect you from fires for a limited period
of time. Firewalls and proxy servers share some similar functions,
but they are quite different. Firewalls are software applications
that act as filters between a company private network and the
internet. They prevent remote client machines from attaching to
your internal network. Firewalls monitor and validate all incoming
and outing communications. Every message that is to sent or
received from the network is processed by the firewall software,
which determines if the message meets security guidelines
established by the business. If it does, it is permitted to be
distributed , and if it doesn’t , the message is blocked.
There are two major methods firewall used to validate traffic
:packet filters and application gateways. Packet filters examine
data packets to determine whether they are destined for a
prohibited port , or originate from a prohibited IP address (as
specified by the security administrator). The specifically looks at
the source and destination information , as well as the port and the
packet type , when determining whether the information may be
transmitted. One down side of the packet filtering method is that it
is susceptible to spoofing , since authentication is not one of its
roles.
Application gateways are a type of firewall that filters
communications based on the application being requested, rather
than the source or destination of the message. Such firewalls also
process requests at the application level, farther away from the
client computers than the packet filters. By providing a central
filtering point , application gateways provides greater security
than packet filters, but can compromise system performance.
Proxy servers (proxies) : are software severs (usually located on
dedicated machine) that handle all communications originating
from or being sent to the internet, acting as a spokesperson or
bodyguard for the organization. Proxies act primarily to limits
access of internal clients to external internet severs act as firewall
as well . Proxy servers are sometimes called dual home systems
because they have to network interfaces. To internal machines, a
proxy server is known as the gateways, while to external
machines it is known as a mail server or numeric address.
When a user on an internal network requests web pages, the
request is routed first to the proxy sever . The proxy server
validates the user and the nature of the request , and then sends
the request on to the internet. Pages sent by the external internet
server passed to the proxy server. If acceptable, the pages pass
on to the internal network web server and then to the client
desktop. By prohibiting users from communicating directly with
the internet, companies can restrict access to certain types of
sites, such as pornographic , auction, or stock trading sites.
Proxy servers also improve Web performance by storing
frequently requested Web pages locally , reducing upload times,
and hiding the internal network’s address , thus making it more
difficult for hackers to monitor.
Risk assessment –an assessment of risks and points of vulnerability
 Security policy- a set of statements prioritizing the information
risks, identifying acceptable risk targets, and identifying the
mechanism for achieving these targets.
 Implementation plan – the action steps you will take to achieve
the security plan goals.
 Security organization –educates and trains users, keeps
management aware of security threats and breakdowns, and
maintains the tools chosen to implement security.
 Access controls – determine who can gain legitimate access to a
network.
Authentication procedure include the use of digital signatures,
certificates of authority , and public key infrastructure.
Biometrics the study of measurable biological or physical
characteristics. 
Authorization policies determining differing levels of access to
information asset for differing levels of users. 
Authorization management system establishes where and when
a user is permitted to access a certain parts of a web site.
Security audit involves the routine review of access logs
(identifying the outsiders are using the sites as well as how
insiders are accessing the site’s assets) 
Tiger team a group whose sole job activity is attempting to break
in to a site.
PAYMENT
SYSTEM
TYPES OF PAYMENT SYSTEM
 
There are five main types of payment systems:
1. Cash
2. Checking transfer
3. Credit cards
4. Stored value and
5. Accumulating balance.
 
Cash 
Cash, which is legal tender, defined by a national authority to
represent value, is the most common form of payment in terms of
number of transactions.
The key feature of cash is that it is instantly convertible
into other forms of value without the intermediation of any other
institution. For instance, free airline miles are not cash because
they are not instantly convertible into other forms of value- they
require intermediation of by a third party (the airline) in order to
be exchanged for value (an airline ticket) . Private organizations
sometimes create a form of private cash called scrip that can be
instantly redeemed by participating organizations for goods or
cash. Example includes Green Stamps and other forms of
consumer loyalty currency.
Checking Transfer
 
Checking Transfers which are transferred directly via a signed
draft or check from a consumer’s checking account to a merchant
or other individual, are the second most common form of
payments in terms of number of transactions and the most
common in terms of total amount spent.
Checks can be used for both small and large transactions,
although typically they are not used for micro payments. Checks
have some float (it can take up to ten days for out-of-state checks
to clear) and the unspent balances can earn interest. Checks are
not anonymous and required third party institutions to work.
Checks also introduces security risks for merchants. They can be
forged more easily than cash; hence authentication is required.
For merchants, checks also present some additional risk
compared to cash because they can be cancelled before they clear
the account or they may bounce if there is not enough money in
the account.
Money orders, cashier checks , and travelers checks are ensured
checks that address some of the limitations of personal checks
described above. Ensured checks reduced the security risk of a
personal check by requiring an up-front payment to a trusted third
party – A bank or money transferred company such as American
express, Wells Fargo , or Western Union. These trusted third
parties then issue a guaranteed payment draft called money order
that is as good as cash, although less anonymous. Merchants are
guaranteed the funds in an any transaction with an ensured check.
Trusted third parties make money by charging consumers a fee
and receiving interest on the money consumers deposited with
them . Ensured checks provide merchants with lower risk, but they
add cost for the consumer. In return, consumers have a payment
instrument that is accepted almost everywhere and in some cases
is insured against loss.
Credit card

A credit card represents an account that extends credit to

consumer, permits consumers to purchase items while deferring
payment, and allows consumers to make payment to multiple
vendors at one time. Credit card association such as Visa and
MasterCard are nonprofit associations that set standards for the
issuing banks – such as Citibank- that actually issue the credit
cards and process transactions. Other third parties (called
processing centers or clearinghouses) Usually handle
verification of accounts and balances. Credit card issuing banks
act as financial intermediaries, minimizing the risk to the
transacting parties.
Credit card offers consumers a line of credit and the ability to make
small and large purchase instantly. They are widely accepted as
form of payment , reduce the risk of theft associated with cash , and
increase consumer convenience. Credit card also offer consumers
considerable float. With a credit card, for instance, a consumer
typically need not pay for goods purchased until receiving a credit
card bill thirty days later. Merchant’s benefits from increased
consumers spending resulting from credit card use, but they pay a
hefty transaction fee of 3% to 5% of the purchase price of the
issuing banks. In addition, federal regulation places the risks of the
transactions (such as credit card fraud, repudiation of the
transaction, or nonpayment) largely on the merchant and credit card
issuing bank.
Credit cards have less finality than other payment systems
because consumers can refuse or repudiate purchase under
certain circumstances, and they limit risk for consumers while
raising it for merchants bankers.
Stored Value
Accounts created by depositing funds in to an account and from
which funds are paid out or withdrawn as needed are stored-value
payment systems . Stored value payment systems are similar in
respects to checking transfers – which also stored funds – but do not
involve writing a check. Example include debit card, gift
certificates , prepaid cards and smart cards . Debit cards look like
credit cards, but rather than providing access to a line of credit ,
they instead immediately debit a checking or other demand deposit
account. For many consumers, the use of debit card eliminates the
need to write a paper check. Be cause debit cards are dependent on
funds being available in consumers bank account, however, large
purchases are still generally paid for by credit card.
Accumulating balance
Accounts that accumulate expenditure to which consumers make
periodic payments are Accumulating balance payment systems.
Traditional examples include utility, phone, and credit card bills s,
all of which accumulate balances, usually over a specified period
(typically a month) , and are paid in full at the end of the period.
New forms of payment include:
Digital cash :Systems that generate a private form of currency that
can be spent at e-commerce sites.
Online stored value systems :Systems that rely on prepayments ,
debit cards, or checking accounts to create value in an account that
can be used for e-commerce shopping.
Digital accumulating balance systems : Systems that accumulate
small charges and bill the consumer periodically. These systems
are especially suited for processing micropayments
for digital content.
Digital credit account :System that extend the online functionality
of existing credit card payment systems.
Digital checking :Systems that create digital checks for e-
commerce remittances and extend the functionality of existing
bank checking systems.
HOW AN ONLINE CREDIT CARD
TRANSACTION WORKS
Online credit card transactions are processed much the same way
that in-store purchases are , with the major differences being that
online merchants never see the actual being used , no card
impression is taken , and no signature is available. Online credit
card transactions most closely resemble MOTO transactions (mail
order, telephone order) transactions. These type of purchases are
also called CNP (Card Not Present) transactions and are the main
reason that charges can be disputed later by consumers. Since the
merchants never sees the credit card, nor receives a hand sign
agreement to pay from the customer, when disputes arise, the
merchant faces the risk that the transaction may be disallowed and
reversed, even though he has already shipped the goods or the user
has downloaded a digital product.
There are five parties involved in an online credit card purchase:
consumer, merchant, clearinghouse, merchant bank (sometimes
called the “acquiring bank”), and the consumers card issuing bank.
In order to accept the payment by credit card, online merchants
must have a merchants account established with a bank or
financial institution. A merchant account is simply a bank
account that allows companies to process credit card payments and
receive funds from those transactions.
CREDIT CARD E-COMMERCE ENABLERS
Companies that have a merchant account still need to buy or build
a means of handling the online transaction; securing the merchant
account is only step one in a two part process. Today, Internet
payment service providers can provide both a merchant account
and the software tools needed to process credit card purchases
online.
DIGITAL WALLETS
A digital wallet – let’s call it your “analog wallet” – resides in
your pant pocket or in your purse. Analog wallets are pretty
universal; just about every transaction–based culture has some
form of portable value storage and identifying device. A wallet
typically contains your Ids , cash, phone cards, credit/debit cards,
old receipts and records, photos of those close to you, and other
miscellaneous items. A digital wallet seeks to emulate the
functionality of an analog wallet. The most important function of
a digital wallet are to (a) authenticate the consumer through the
use of digital certificates or other encryption methods, (b) store
and transfer value, and (c) secure the payment process from the
consumer to the merchant.
DIGITAL CASH

Digital cash (some times called e-cash) was one of the first
forms of alternative payment systems developed for e-
commerce. The name digital cash is in fact something of a
misnomer. Recall our original definition of cash : legal tender
(called currency) created by national authorities that is instantly
convertible to other forms of value (goods and services) without
the intermediation of any third parties.

Most of the early examples of digital cash have failed , many of

the ideas have survived today as the part of P2P(peer-to-peer)
payment system.
Online stored Value Systems
Online stored value payment systems permit consumers to make
instant, online payments to merchants and other individuals based
on value stored in an online account. Some stored value systems
require the user to download a digital wallet.
Smart Cards as Stored Value Systems

Smart cards are another kind of stored value system base on

credit-card-sized plastic cards that have embedded chips that
store personal information. Where as credit cards store a single
charge account number in the magnetic strip on the back, smart
cards can hold 100 times more data , including multiple credit
card numbers and information regarding health insurance ,
transportation , personal identification , bank accounts, and
loyalty programs, such as frequent flyer accounts. This capacity
makes them an attractive alternative to carrying a dozen or so
credit or ID cards in a physical wallet. Smart cards also require a
password , unlike credit cards, adding another layer of security.
There are actually two types of smart cards – contact and contact
less – depending on the technology embedded. In order for
contact cards to be red, they must be physically placed into a card
reader, while contact less cards have an antenna built in that
enables transmission of data without direct contact. A stored-
value smart card, such as retail gift card purchased in a certain
dollar value, is an example of a contact card because it must be
swiped through a smart card reader in order for payment to be
processed.
Digital Accumulating Balance Payment Systems :
Digital accumulating balance payment systems allow users to
make micro payments and purchases on the Web , accumulating
debit balance for which they are billed at the end of the month .
Like a utility or phone bill , consumers are expected to pay the
entire balance at the end of the month using checking or credit
card account .Digital accumulating balance systems are ideal for
purchasing intellectual property on the web such as music tracks ,
books , or any articles .
Digital Checking Payment Systems :
It seeks to extend the existing the functionality of checking
accounts for use as online shopping payment tools. It can be
thought of as an extension to the existing checking and banking
infrastructure. Some of the simpler systems are used to
electronically pay individuals and to settle accounts at online
auction sites . More sophisticated systems are used by the
Treasury Department to transfer billions of dollars electronically .
Digital Checking Payment Systems have many advantages :

1. They do not require consumers to reveal account information to

other individuals when settling an auction.
2. They do not require consumers to continually send sensitive
financial information over the WEB.
3. They are less expensive than credit cards for merchants. And
4. They are much faster than paper-based traditional checking.
Digital Payment Systems and the Wireless Web :
Wireless device usage has exploded and is expected to continue
as new products and services are introduced .From cellular
phones to pagers and personal digital assistants (PDAs), wireless
devices have spurred the creation of new Web sites to support
them. One area in which there is substantial interest is in
financial services, including stock trading and money transfer .
B2B Payment System :
B2B payment systems pose special challenges and are much
more complex than B2C payments , in large part because of the
complexity involved in business purchasing. Sometimes a dozen
of more documents may be needed to consummate the
transaction, including purchase order , invoice , bill of landing or
shipping , insurance papers , financial documents , regulatory
documents , credit verifications , service documents (if any) ,
authentication , letters of credit (foreign transactions), and
payment methods or instruments . In addition , B2B payment
systems must link to existing ERP (Enterprise Resource
Planning) systems that integrate inventory , production ,
shipping , and other corporate data , and into EDI (Electronic
Data Interchange) systems which are systems that replace paper-
based purchase orders with electronic equivalents .
The B2B payment market is actually much larger than the B2C
market because of the larger size of transactions among businesses
and the frequency of transactions
Electronic billing presentment and payment (EBPP) systems :
These are new forms of online payment systems for monthly bills .
EBPP services allow customers o view bills electronically and pay
them through electronic funds transfers from bank or credit card
accounts. More and more companies are choosing to issue
statements and bills electronically , rather than mailing out paper
versions.
Online Market
Research
Market research involves gathering information that will help a
firm identify potential products and customers .There are two
general types of market research .

Primary research involves gathering first-hand information using

techniques such as surveys , personal interviews and focus
groups.This type of research is typically used to gain feedback on
brands, products , or new marketing campaigns where no previous
study has been done.
Secondary research relies on existing , published information as the
basis for analyzing the market .
Both primary and secondary research can be completed online
more efficiently , less expensively , and more accurately than
offline.In addition to two different approaches to market research ,
there are two types of data to be studied . Quantitative data is data
that can be expressed as a number , such as percentage .
Quantitative data can be analyzed using statistical programs that
identify relationship between certain variables , or factors that
affect how someone responds. Qualitative data is data that cannot
be easily quantified , such as opinions , survey questions that yield
qualitative responses are analyzed by grouping responses into
similar sub segments based on the answer given . One type of
analysis is content analysis , which tries to identify the major
categories of responses given.
Primary Research : Surveys and questionnaires are the most
popular and frequently used market research tools.Using a survey
instrument , which is a list of questions , researchers can approach
groups of people to ask their views on virtually any imaginable
topic.
Online surveys can be typically be administered more quickly and
less expensively than traditional mail or telephone
surveys.Companies can hire an outside market research firm to
conduct the survey or create and administer their own .
Online surveys also make it possible to track respondents and
follow up with those who haven’t yet completed survey, which
help to improve response rates , the percentage of people who
complete a survey. A low response rate can damage the validity ,
or believability , of a survey’s results.
Feedback forms, which ask users to provide input regarding a site’s
operations in a set format , are another type of inline survey.
Requesting regular input from site visitors may provide more
qualitative data , which is more difficult to analyze , but the
resulting information can assist in improving and enhancing site
performance.
Personal interviews are another primary research tool . The
interview is generally guided by a set of questions very similar to
survey instrument. Although it is more difficult to incorporate
personal interviews within Web sites , it is possible to conduct
research online via live chat or e-mail , with trained researcher
interacting with the study participants .Personal interviews offer an
opportunity to gather more in-depth information on a topic.In some
cases , personal interviews are used as second phase of a research
project , following initial information gathering by survey.
Secondary Research : It involves gathering information using WEB
sites as the information source.
The Key to being efficient and effective as a researcher is
identifying the WEB sites most likely to provide answers to the
questions posed in the research .By establishing and agreeing on
the key question to be answered through market research , as well
as why that information will be useful , researchers can zero in on
their information needs. Understanding how the information will
impact other decisions also helps to further refine information
collection.
Some popular secondary research tools ( Web Sites)
1. Factiva.com
2. Businesswire.com
3. Hoovers.com
4. Localeyes.com
5. Thomasregister.com
6. Corporateinformation.com
7. sec.gov
8. Aol.com (America Online)
Online Marketing
Technologies that support Online Marketing :
•Web transaction logs : Records that document user activity at the
Web site .
•Transaction logs : Coupled with data from the registration
forms and shopping cart database , these represent a treasure trove
of marketing information for both individual sites and the online
industry as a whole.
•Cookies : A small text file that Web sites place on
visitors /client computers every time they visit , and during the
visit , as specific pages visited . Cookies provide Web marketers
with a very quick means of identifying the customer and
understanding his or her prior behavior at the site.
•Web bugs : Tiny graphic files hidden in marketing e-mail
messages and on Web sites . Web bugs are used to automatically
transmit information about the user and the page being viewed to a
monitoring server.
•Databases , data warehouses, data mining , and “profiling “
:Technologies that allow marketers to identify exactly who the
online customer is and what they want , and then to present the
customer with exactly what they want, when they want it, for the
right price.
•Advertising networks : best known for their ability to present users
with banner advertisements based on a database of user behavioral
data . Specialized ad servers are used to store and send users the
appropriate banner ad.
CRM systems : A repository of customer information that records
all of the contacts that a customer has with a firm and generates a
customer profile available to everyone in the firm who has a need
to “know the customer”.
IT enabled marketing and branding strategies :
•Online marketing techniques to online customers include
permission marketing , affiliate marketing , viral marketing , and
brand leveraging.
•Online techniques for strengthening customer relationships include
one-to-one marketing ; customization , transactive content ; and
customer service (CRMs,FAQs,live chat , intelligent agents , and
automated response system).
•Online pricing strategies include offering products and services for
free ,versioning , bundling , and dynamic pricing.
•Strategies to handle the possibility of channel conflict.
Direct E-mail marketing :
E-mail marketing messages sent directly to interested users (direct
e-mail marketing) has proven to be one of the most effective forms
of marketing communications. The key to effective direct e-mail
marketing is “interested users”. Direct e-mail marketing is not
spam . SPAM involves sending unsolicited e-mail to a mass
audience of Internet users who have expressed no interest in the
product . Instead , direct e-mail marketing messages are sent to an
“opt in” audience of Internet users who have expressed at one time
or another an interest in receiving messages from the advertiser. By
sending e-mail to an opt-in audience , advertisers are targeting
interested customers. Because of the comparatively high response
rates and low cost, direct e-mail marketing is the fastest growing
form of online marketing.
The primary cost of e-mail marketing is for the purchase of the list
of names to which the e-mail will be sent .
Due to the cost savings possible with e-mail , the short time to
market , and high response rates , companies are expected to
increasingly use e-mail to communicate directly with customers.
Online Catalogs :
Online Catalogs are the equivalent of paper-based catalog. The
basic function of a catalog is to display the merchant’s wares. The
electronic version typically contains a color image of each available
product , a description of the item , as well as size , color, material
composition , and pricing information . While simple catalogs are ,
technically , hard coded HTML pages and graphics displaying
softwares , most sites with more than 15-20 products generate
catalog pages from a product and price database that be easily
changed . Simply by clicking on an order button at the site ,
customers can make a purchase instantly.
Public Relations :
Another marketing communications tool used to increase
awareness of a site , and potentially boost traffic , is public
relations. Public Relations (PR) involves communicating with
target audiences, pr publics , using methods other than advertising .
Some of these methods include publicity (media coverage), special
events , such as a grand opening celebration or press conference ;
and publications , such as newsletters and customer bulletins.
Public Relations firms can also support a Web site by creating
promotional strategies , developing relationships with reporters and
producers of interest to the client company , proposing articles and
TV program subjects , and generally keeping the press aware of
any good news regarding an online company. Some firms
specialize in dot-coms or have an online media specialty .The
major advantage of public relations is the low cost relative to other
media exposure.
Online Marketing Metrics :
1. Impression
2. Clickthrough Rate (CTR)
3. Hits
4. Page Views
5. Stickness (Duration)
6. Unique visitors
7. Loyalty
8. Reach

Continued …
9. Recency
10. Acquisition rate
11. Conversion rate
12. Attrition rate
13. Abandonment rate
14. Retention rate
1. Impressions are the number of times an ad is served .
2. Clickthrough rate (CTR) measures the percentage of people
exposed to an online advertisement who actually click on the
advertisment.
3. Hits are the number of http requests received by a firm’s
server .Hits can be misleading as a measure of site activity
because a “hit” does not equal a page : a single page may
account for several hits if the page contains multiple images or
graphics.A single site visitor can generate hundreds of hits .
4. Page views are the number of pages requested by visitors. A
single page that has three frames will generate three page views.
5. Stickiness (Duration) is the average length of time visitors
remain at a site .The longer amount of time a visitor spends at a
site , the greater the probability of purchase.
6. Unique visitors counts the number of distinct, unique visitors to
a site , regardless of how many pages they view.
7. Loyalty measures the percentage of users who return in a year.
This can be good indicator of the trust shoppers place in site.
8. Reach is typically a percentage of the total number of
consumers in market who visit a site.
9. Recency like loyalty, measures the power of site to produce
repeat visits and is generally measured as the average number
of days elapsed between shopper or customer visits.
10.Acquisition rate measures of the percentage of visitors who
register or visit product pages (indicating interest in the
product)
11.Conversion rate measures the percentage of visitors who
actually purchase something.
12. Attrition rate measures the percentage of customers who
purchase once , but never return within a year.
13.Abandonment rate measures the percentage of shoppers who
begin a shopping cart form but then fail to complete the form
and leave the site.
14.Retention rate indicates the percentage of existing customers
who continue to buy on a regular basis.
Online Advertisement : It is the most common and familiar
marketing communications tool .The advantages of online
marketing are the ability to target ads to narrow segments and to
track performance of advertisements in almost real time. Online
advertisements also provide greater opportunities for interactivity
– two – way communication between advertiser and the potential
customer .
Different forms of online advertisements include :
•Banner and rich media ads
•Paid search engine illusion and placement
•Sponsorships , and
•Affiliate relationships
•Direct E-mail marketing
IT Enabled Services in
Banking
Banks are institutions , which help in mobilizing the savings of
a country . The two basic functions of bank are accepting
deposits and providing advances to track and manage money ,
there by playing an important role in increasing money
supply of any country.Although majority public sector banks
in India still function manually but these too have suffered a
lot of limitations in their working because of human
calculation errors , difficulty in managing bulky files ,
inability to provide services to their customers during
holidays, difficulty in physical accessibility during emergency
situation faced by their customers and inconvenience to their
customers due to queuing up at bank branches . With the
introduction of online banking concept lot of these
disadvantages have been done away with.
Concept of Online Banking :
India has a big banking network . Many of the banks have
their branches fully computerized .This automation is the
first step for IT enabled banking services .
Online system allows customers to plug into host of banking
services from personal computer by connecting with the
bank’s computers over telephone wires .
Online banking offers services like allowing customers to
check the balances in their accounts , transfer funds among
accounts , order electronic bill payments, allow customers to
apply for loans , download information about their own
accounts into their computers , trade stocks or mutual funds
, and look at images of their cheque and deposit slips.
Minimum Requirements for any bank to go Online :
a) About The Bank – The bank should offer information about
itself and details about all the services it offers , including
interest rates and various service charges . This information
needs to be updated regularly.
b) Details of Branches – There should be a searchable list of
physical branches and ATM’s with their full address ,
telephone numbers and e-mail addresses.
c) Procedural Guidelines –There should be detailed guidelines
on how to start accounts , apply for loan or credit card etc.
d) Tracking Facilities –An account holder or credit card
holder should be able to create an account at site , should be
able to see his balance , see whether
e) Transfer of Money : It should accept standing
introduction charges like transferring a stipulated sum
every month to another account . It should allow
customers to transfer money to some other account
operated by someone else.
f) Mail Linkages : There should be facilities at the site to
interact with the bank , to clarify doubts etc . Moat of the
banks give a mailto link on the page that is opened by
their email clients .
Approaches to Online Banking :

There are two approaches to online banking

1. PC banking or Client based Banking

2. Internet Banking
PC Banking or Client Based Banking :
PC works through special software and a dial-up service that
uses a modem to connect its association’s business office to an
electronic bank site , from which one can access financial
information.
The “Client-Based” system in which customers use their own
software , generally use personal financial managers –
specialized computer programs that help customers carry out a
variety of personal finance activities .
These programs typically allow customers to do much of their
work offline , and then dial in to complete their bank
transactions.These client-based systems have the advantage of
allowing customers to integrate all their banking information
with other personal data using a single program.
Internet Banking : IN this the customers use a PC , modem
and Internet Service Provider to get onto the World Wide
Web , locate their bank’s website and get their account
details .Internet Banking has a massive potential as a
marketing tool because of its low costs compared to investing
in branches.
Internet Banking allows customers to simply dial in and use
the bank’s software or software provided by Internet Service
Provider . Many customers find it easier to use , especially
for the customers who want electronic banking services but
not interested in doing a lot of other personal finance
calculations.
New Services Offered through Online Banking
1. Treasury management services : It let’s the customers
manage their money , including reviewing and reconciling
their business accounts .(to check whether cheque has been
cleared )
2. Payment Information : It includes online bill payment and
fund transfers .Some banks also offer extra security
features.
3. Receipt Information : This service enables the customer to
view transactions and information regarding funds coming
into their accounts online .
4. Miscellaneous financial transactions – It offers financial
planning and brokerage services , permits purchase of
foreign currency , typically via foreign wire ; and handle a
variety of e-commerce tasks , such as processing payments
online when members use credit cards .
5 .Electronic bill paying method : There are a number of
special online bill paying facilities like billjunction.com ,
paymybills.com.sbionline.com etc.
6. Debit Cards : Debit cards are another facility offered by
online banking .Every time the cardholder makes the payment
the funds get automatically deducted from their personal
bank account . Debit cards can be used as ATM cards.
Factors Affecting Application of Online Banking

1. Security
2. Cost
3. Size
4. Employee Attitude
5. State of Dilemma
Improvement in Service Quality through Online Banking :
1. High Interest Rates
2. Round The Clock Service
3. Time Saving
4. Wide Usage
5. Portable
6. Cost Effective
7. Liquidity
8. Wide Applicability
9. Convenient
IT enabled services for
Governance
E-governance is an opportunity to re-think the business process
following a logic that places the user at the center of every task
performed.

E-governance facilitates economic efficiency, transparency as a

means of preventing corruption and the importance of
information in the analysis, articulation and acceptance of
policy choices .
E-governance involves transformation from being passive
information and service provider to active citizen
involvement .
It includes the following dimensions:
1. Single source of information for user/customer
2. Equality and easy of access
3. Optimizing resource of multiple organizations with the aid
of inter-organizational Information System
4. Intergovernmental participation
5. Public relation
6. Involving various stakeholders
7. Simulating debates
8. Exchanging views and information
9. Increasing participation by employees, customers in decision
making
10. Public information feedback

E-governance from the government point of view is smoothen

interface between government and citizens for
Simple,Moral,Accountable,Responsive and Transparent
(SMART) governance .
E-governance is “people,process and policies associated with
managing technology.”
Why E-governance :
The major objective of any business organization is to provide
better services and at the same time monitor the whole
process.It facilitated the managers or role players to
perform the task easily. It enables :
1. More responsive and accessible to changing needs of the
customers
2. Provide high quality monitoring with lesser people
3. Economic growth can be achieved by means of wealth
creation
4. Bring efficiency by quality delivery services
5. Better transparency and integrity in dealing with customer
and government.
6. Greater synergy in decision making
7.Enable to create electronic/digital forums
8.Increased productivity and enhance the overall
competitiveness
9.Reduction in duplication of information
10. Monitoring of business transaction at lower cost
11.Market expansion and contribute to the macro-economy of
the state and country.
E-governance in organization :
In order to adopt change in the system one has to face challenges
of different types. An organization may have to deal with the
following issues and develop strategies for the same .
1. Mindset of people
2. Power of Knowledge
3. Structure
4. Legal framework
5. Labour and union
6. Knowledge Management
7. Language
8.Process Reengineering
9.Infrastructure
10.Connectivity
Issues for Implementation :
Following are the issues to be considered before an
organization goes for implementing e-governance :
1. Technology issues
2. Change related issues
3. Funding issues
4. Language
5. Content
Technology issues : The organization has to decide about the
technology infrastructure required to be a part of E-
governance .This is as well an essential factor to provide
efficient services .The technology issues can be categorized
into :
1. Hardware issues
2. Software issues
Change Related Issues : These can be grouped under
1. Organizational issues
2. Political issues
3. Employee related issues
4. Language issues
Funding issues :Cost is a critical factor to be considered
irrespective of private or public sector organizations .Since
huge investment is required to introduce computers at
different working levels both in government and business
organizations one can think of leasing this activity to reduce
cost involves in buying the computers.

Language issues : In India adoption of vernacular language

poses a major challenge in the electronic environment .This
will facilitate access to resources available in local languages
.
Content : Content is the focus on E-Governance . The
challenge is to develop web content into an integrated online
experience that enhances the value of printed and online
products .Content convergence is an important issue as it has a
major relationship with
•Compute industry
•Information industry
•Communication networking