E-COMMERCE NOTES

Q#1:   What is E-Commerce? Discuss its different types.

General Definition:

The seamless application of information and communication from its point of origin to its endpoint along the entire value chain of business processes conducted electronically and designed to enable the accomplishment of business goals. These processes only may be partial or complete and may encompass business to business as well as business to customer and customer to business transactions. 

According to European Union

Electronic commerce in general concept covering any type of business transactions or information exchange executed using information and communication technology between companies and their customer or between companies and public administration.

Electronic commerce includes electronic trading of goods, services and electronic material.

Important points of e-commerce

1. It covers all types of business transactions
2. E-commerce gets many types of information, which are very useful.

Q#2:   Elements of E-Commerce.

vThe basic elements:                                           

§An e-Shop on a Server

§User (customer) with a web Browser

§An Internet connection

vAdditional issues:

§Visibility

§Ease of Use

§Order Processing

§Online Payments

§Security

§Delivery Systems

§After-Sales

E-Visibility

vGetting the site noticed and the online customers visiting the store.

vWays of advertising a web presence and getting customers in through the door include:

§Site Name

§Conventional Advertising

§Portals

§Malls

§Search Engines

§Links

§Personal Recommendations

e-Visibility – site name

vThe surest way of finding a site is the url.

vIf the url is memorable then the site is made:

§amazon.com

vA sensible simple site name can be guessed by users:

§britishairways.com

e-Visibility – portals

vThe first page a user sees is the portal.

vAn advert on a popular portal is the web equivalent of a TV advert at half time in the cup final or in a break during the Superbowl – it is seen by millions.

vAn advert on a popular web search engine is a similar piece of property.

vAdverts on the portal can be:

§Banners

§Little boxes

§Menu of services

e-Visibility – malls

vAn Internet shopping mall models itself on the American shopping mall, a lot of shops, under one roof with a pleasant shopping atmosphere.

vThe intention is to generate interest and thus trade for all the shops.

vAn Internet mall can provide common services.  Possibilities include:

§Shared advertising.

§Common facilities.

§e-Cash.

§Common customer files.

vThe drawback of joining a mall is that, as for any good retail location, the rents can be high.

e-Visibility – search engines

vA search engine is a standard way to find any Internet site and that includes e‑Shops.

vFinding a specific e-Commerce site may or may not be easy - a successful e-Shop could do with appearing in that top ten list of hits.

vThe search engines index the web by:

§Manual indexing;

§Automatic Indexing (web crawlers).

vCrawlers look at:

§The <TITLE> tag is a prime target.

§The <META> is also checked
… and many other aspects of the site and its use,

vAlso one can ask the search engine to list the site.

vNote, the best of the search engines list only about 15% of internet sites.

e-Visibility – links

vOnline adverts on the web are also links to the site – hypertext links.

vLinks are included on a variety of other sites with a variety of deals being done.

The e-Shop

ve-Shops come in all shapes and sizes.
They range from:

§A few simple web pages for a local craftsman

§Complex sites offering services that include online ordering and payment

vThe full service e-Store needs: an extensive range of facilities; these include:

§Company information

§Customer registration

§Dynamic web pages

§Site indexes and search facilities

§Online order entry and payment systems

§Sophisticated security protection systems

§After sales service and support

§Feedback systems

The e-Shop – online information

vTrust is an issue on the Internet and it is not an issue that is likely to go away.

vTrust can be engendered by:

§Brand name and trading record.

§A site that gives a professional image.

§The inclusion of company information.

§

vAll of this does not prove that a site is genuine but it can reassure potential customers.

The e-Shop – customer registration

ve-Commerce customers have to give their suppliers details about themselves. It is less information than would be required to open a bank account but more than is normally needed to buy some cornflakes.

vProviding this information raises privacy issues:

§Will the information be put to other uses?

§Will the e-Vendor compile a customer profile?

§Is the information secure?

vThe context in which the e-Commerce vendor asks for this information is also important:

§Customer registration prior to using the site

§Customer details only when an order is placed.

Online payments

vOptions for online payment are:

§Credit Cards

§Debit Cards

§Stored Value Cards

§e-Cash

§Delayed Payments

vNote, in a shop there is an exchange of value – online it is pay now and hope that the goods arrive later.

Delivery of goods (e- fulfilment)

vInternet e-Commerce allows users to order what they want, when they want but then they have to wait until the postman arrives.

vDelivery depends on the size, nature, urgency and value.  Options include:

§Post. (You can sell anything online provided it will fit through a letter box.)

§Packet/parcel delivery service.

§Local Delivery. (Perishable goods often require such a service.)

§Collect your Own.

§Electronic Delivery.

§No delivery. (Intangibles such as an e-Ticket.) 

 

After Sales

vAdvantages:

§Online manuals and diagnostics

§Online Support

vProblem areas:

§Return of goods

Q#3:    Discuss the waves of e-commerce.

WAVES OF E-COMMERCE

There are three waves of e-commerce:

(1)   Traditional EDI.

(2)   Electronic commerce.

(3)   New electronic society.

1-TRADITIONAL EDI:

The first wave primarily electronic data interchange (EDI) practices of the 1980 and early 1990 have given way to the second waves. It include the following:

Ø  Place orders.

Ø  Shipment notification.

Ø  Invoicing.

Ø  Examine inventory availability.

Ø  Pre-established business partners.

Place Orders:

The first step in this wave is to place orders according the need.

Shipment Notification:

The companies sees that they have the capacity to full fill the orders of the customers, if they have done then they sent the shipment notification.

Invoicing:

After the shipment notification may be sent the next step is to made the invoicing of particular orders.

Examine The Inventory Availability:

In this wave when the invoicing will be made now the companies or organization check their inventory position weather they can fulfill these orders if not then make or buy these products to made delivery of these orders.

Pre-Established Business Partners:

For EDI the companies pre established their business partners to add on time delivery reduced the inventory cycle and reduce their lead time.

2-ELECTORNIC COMMERCE:

All the steps in first wave may also be included in second wave. The second wave of e-commerce can not protect their information from public, so they designed security controls to protected these information. In addition methods to solve trading partners disputes are also necessary. The second wave of e-commerce brings opportunity for third parties such as independent accounting firms to provide businesses and customers with assurance that business transactions conducted electronically, including internet and web page transactions are safe secure backed by appropriate controls, however it also include:

Ø  Electronic shopping.

Ø  Banking and financial institution.

Ø  Transacting with virtual strangers.

Ø  Increased information sharing.

Electronic Shopping:

E-Commerce provide the facilities of electronically shopping, which may save your time and payment will be made through electronically devices, so there is no chance of error.

Banking and Financial Institution:

In second wave of e-commerce the facility provided to banking and financial institution made their daily transactions electronically like through web pages internet.

Transacting with Virtual Strangers:

In this wave electronic transactions can occur between virtual strangers while in first wave it will occur only for pre-established business partners.                    

Increased Information Sharing:

The second wave provides access information to the company and the body of individuals,

3-NEW ELECTRONIC SOCIETY

The third wave of new society included the elements of second wave and it also included the following elements:

Ø  Cash less transactions.

Ø  High transactions integrity.

Ø  Wide spread use of intelligent agents.

Ø  Continuous testing agents

Q#4:   What are advantages of E-Commerce

BENEFITS OF E-COMMERCE

The benefits of e-commerce fall into two categories:

Þ    Benefits to society

Þ    Benefits to consumers

BENEFITS TO SOCIETY:

Benefits of society include:

1. Expands market place
2. Reduced cost
3. High specialized business
4. Reduced inventories and overhead
5. Expensive customization
6. Reduced time
7. Reengineering projects process

EXPANDS MARKETS:

E-commerce expands the marketplace to national and international markets. Within minimum capital outlay, a company can easily and quickly locate the more customers.

REDUCED COST:

E-commerce reduces the cost of creating, processing, storing and retrieving paper-based information.

HIGH-SPECIALIZED BUSINESS:

E-commerce provides the ability of creating highly specialized businesses. For example, you can purchase dog toys at www.dogtoys.com

REDUCED INVENTORIES AND OVERHEAD:

E-commerce provides a way to reduce inventories and overheads by facilitating the “pull” type supply management.

EXPENSIVE CUSTOMIZATION:

Through pull type process a company can get the expensive customization of products and services which provides competitive advantages. For example, Dell Computer Corporations.

REDUCED TIME:

E-commerce reduces the time between the outlay of capital and receipt of products and services.

REENGINEERING PROJECTS PROCESS:

The process of reengineering projects is also provided by the e-commerce. By changing the process, productivity and knowledge of workers increase up to 100% or more than 100%.

Some other benefits provided by e-commerce to society are as follows:

• Business image
• Improved customer services
• New-found business partners
• Simplified processes
• Increased productivity
• Eliminating paper works
• Reduced transportation cost
• Increased flexibility
• Less traveling for shopping
• Increased living standards
• Opportunities to learn
• Improved quality

BENEFITS TO CONSUMER:

The benefits of E-commerce to consumer include:

• 24 hours availability of products
• More choices for customer
• Less expensive products and services
• Fast delivery
• Virtual actions
• Interact with other customers
• Substantial discounts

24 HOURS AVAILABILITY OF PRODUCTS:

E-commerce enables customers to shop or do other transactions 24 hours a day.

MORE CHOICES FOR CUSTOMERS:

It provides more choices for customers to select products out of large range.

LESS EXPENSIVE PRODUCTS:

E-commerce provides less expensive products and services to all the customers.

FAST DELIVERY:

It allows a company to make a quick delivery of their products, according to the requirements of the customers.

VIRTUAL ACTIONS:

E-commerce makes it possible to participate in virtual actions.

INTERACT WITH OTHER CUSTOMERS:

Customers interact with others through e-commerce in electronic communities and exchanges.

SUBSTANTIAL DISCOUNT:

It facilitates the competitors which may result in substantial discount.

Q#5:   What is Electronic Data Interchange (EDI)? Explain its benefits.

Definition:

According to IDEA (International data exchange association).

“The transfer of structured data by agreed message standards from one computer to another by electronic means”

This definition of EDI has four elements; each of them is essential to an EDI system.

(i)            Structured data.

(ii)          Agreed message standards.

(iii)         From one computer system to another.

(iv)         By electronic means.

STRUCTURED DATA:

In EDI system the data which is transferred to other computer should be in well structured form such as order’s quantity, codes of customers and about products.

AGREED MESSAGE STANDARDS:

The EDI transaction has to follow many standard formats.

FROM ONE COMPUTER SYSTEM TO ANOTHER:

EDI message sent is between two computers’ applications. e.g. the message is directly communicated between customer’s purchasing system and supplier’s order process system.

BY ELECTRONIC MEANS:

EDI is basically data communication but sometimes you have to transfer physical things such as magnetic tape or floppy disks etc.

BENEFITS OF ELECTRONIC DATA INTERCHANGE (EDI)

EDI has number of advantages. These advantages are divided into two groups to gain some competitive advantages.

a)    Direct Benefits

b)    Indirect Benefits

DIRECT BENEFITS:

            The direct advantages of EDI include:

1)    Shortened ordering time

2)    Cost cutting

3)    Elimination of errors

4)    Fast response

5)    Accurate invoicing

6)    EDI payments

Shortened Ordering Time:

Paper orders have to be printed, enveloped and sent out by customer’s post room passes through many processes to reach the supplier’s order processing system. For doing such, you require at least three days. But through EDI, orders are sent through networks, the only delay is the time when the supplier retrieves the message.

Cost Cutting:

The use of EDI can cut costs. These costs include the cost of stationery and postage.

Elimination of Errors:

The use of EDI system eliminates all types of errors which occur due to paper orders.

Fast Response:

If the orders are placed with papers, it would require several days to inform the supplier about the products required. But with the use of EDI customer can inform the supplier timely.

Accurate Invoicing:

In EDI invoices can be sent electronically. So EDI invoices give the advantages of saving the time and avoiding the errors.

EDI payment:

Payments can also be made through EDI. The EDI payment system can also reduce the errors which occur when invoices are matched manually.

INDIRECT BENEFITS:

Indirect advantage of the use of EDI can be:

i.              Reduced stock holding

ii.            Cash flow

iii.           Business opportunities

iv.           Customer lock in

Reduced Stock Holding:

The ability to order regularly and quickly reduces the amount of goods that need to be kept in the store. When you reduce the stock holding, it will cut the cost of storeroom and warehousing.

Business Opportunities:

When the company has the ability to fulfill the orders quickly, it will lead to increase in the number of customers. The companies get the advantage to compete in new business.

Customer Lock In:

The establishment of EDI system should be considerable advantage for both supplier and customer. Switching to a new supplier requires that the electronic trading system and trading relationship be redeveloped.

CONCLUSION:

To gain above-mentioned advantages, EDI has to be seen as an investment. The costs of EDI system (Hardware, Software and Network) and time required to established agreements.

Q#6:   Define supply chain management and explain its framework and 

            Components/ elements.

SUPPLY CHAIN

A supply chain is a collection of independent steps that when followed, accomplish a certain objective such as meeting customer requirements.

SUPPLY CHAIN MANAGEMENT

“Supply Chain Management is a generic term that encompasses the coordination of order generation, order taking, and order fulfillment of products, services and information.”

In simple words:

“Supply Chain Management is the center of major business revolution to get products to market faster and at lower cost.”

IMPORTANT POINTS OF DEFINITION:

Þ    Order taking

Þ    Order fulfillment

Þ    Distribution of products

Þ    Provide services

Þ    Provide certain new information

Þ    Provide products at lower costs

FRAMEWORK OF SUPPLY CHAIN MANAGEMENT:

The framework of supply chain management is as follows:

1. Beyond manufacturing facility

            a) Material Suppliers

            b) Channel Supply Partners

                        i) Wholesalers

                        ii) Distributors

                        iii) Retailers

            c) Customers

2. Beyond Complex Nature

i)             Presentation

ii)            Sales techniques

iii)           Services

iv)           Forecasting demand of customers

v)            Data analyze

vi)           Sourcing

vii)         Margin

viii)        Distribution

1- BEYOND MANUFACTURING FACILITY:

Material Suppliers:

            For the order fulfillment, supply chain management provides a facility of material suppliers which provide cheaper raw material to the company.

Supply Channel Partners:

            Supply chain management plays the following role to find the right channel for distribution of products.

Ø  Wholesalers

Ø  Retailers

Ø  Distributors

Customers:

            With supply chain management, the can easily meet the requirements of customers.

2-BEYOND COMPLEX NATURE:

            The complex nature of supply chain management is considered equal parts in all the following field:

Presentation:

            Gives presentations about products to customers.

Sales Techniques:

            It gives the sales techniques to sales department.

Service:

            The supply chain management facilitates the service organization.

Forecasting Demand of Customers:

            To forecast the customer demand is important aspect of the company.

Sourcing:

            Supply chain management provides of many types of sources.

Margin:

            The profit margin increases due to supply chain management.

Distributors:

            Supply chain management distributes the products among the customers.

ELEMENTS OF SUPPLY CHAIN MANGEMENT

There are three elements of supply chain management.

Ø  Planning System

Ø  Execution System

Ø  Performance Measurement System

PLANNING SYSTEM:

            Planning system focuses on having the right products at the right place and at the right time. This system facilitates order taking and information gathering from the customer, and from order receiving to final consumptions.

Þ    The requirements of this system include:

Ø  Understanding demand such as:

Ø  What the customers want

Ø  When they want it

Ø  Where they want it

Ø  Successfully managing all parts of supply chain

EXECUTION SYSTEM:

Execution system facilitates the physical movement of goods and services. Through a supply chain management system we can focus on operational efficiency which may include finding new ways to streamline and automate day to day business operations to reduce costs and improve productivity.

This focus on some application based systems such as:

Ø  Order fulfillment

Ø  Inventory control

Ø  Manufacturing process

Ø  Distribution management

PERFORMANCE MANAGEMENT SYSTEM:

This system is necessary in order to make more informed decisions and respond to changing market conditions. In this system, accounting and financial management systems are very important. These applications use e-commerce tools such as “data warehousing” which allows effective information for auditing and analysis.

Q#7:   What is Porter’s value chain and supply chain? Discuss in details:

SUPPLY CHAIN

The web of trade relationships is referred to as the supply chain to the value chain (as each stage adds value to the product before passing it on.)

Value chain is different from trade sector. The products sold in shops and purchased for use in organizations are the result of a complex web of relationships among manufacturers, components suppliers, wholesalers, and retailers. Each trade exchange in supply chain is a transaction that adds cost.

So E-commerce is the application of information and communications technology to the value chain to enable the accomplishment of business goods.

The business goods is that to reduce costs improve service or enter into new market.

DEFINITION

“The production of goods and services is the results of the efforts of many organizations. A complex web of contracts and co-operation known as supply chain or the value system.”

                                                PORTER’S VALUE CHAIN

In 1985 porter introduced his model of the generic value chain in his book “Competitive Advantages” Creating and sustaining superior performance.

Porter’s model was essentially concerned with the internal activities of the company.

These activities are divided into three groups:

(i)            Primary activities.

(ii)          Support activities.

(iii)         Value chain activities.

1-PRIMARY ACTIVITIES:

          The primary activities are classified as:

(a)  Inbound logistics.

(b)  Operations.

(c)  Outbound logistics.

(d)  Marketing and sales.

(e)  Services.

Inbound logistics:

This activity related to the goods which a company needs to store and their operations.

Operations:

The production process make the goods as the customers wants.

Outbound:

When the company makes the products, this activity distributes these products among the customers.

Marketing and sales:

In this activity the company must know the requirements of the customers then made these products and sells that products the customers.

Services:

When the sales activity is done now the service facility is provided to customers at their requirements.

2- SUPPORT ACTIVITIES:

Porter divided these activities as:

(a)   Procurement:

(b)   Technology development:

(c)   Human resource management

(d)   Firm infrastructure:

Procurement:

The function of this activity is that to find the supplier which provide materials required in operations of the organizations.

It is also the responsibility of this activity to maintain a good quality at acceptable price and with reliable delivery.

Technology development:

This activity provides the advance technology to the organization which they needs to update their production processes, train their staff.

Human Resource Management:

These activities are responsible for recruitment, training and personal management of the people, in the organization.

Firm Infrastructure:

It includes the overall management of company.

3-OTHER VALUE CHAIN ACTIVITIES:

            The possible applications of these activities are as:

(a)   Electronic Media.

(b)   Online searches.

(c)   Online advertising.

(d)   Online assistance.

Electronic Media:

      The organization used electronic media to advertise their vacancies.

(b) Online Searches:

            Procurement used online searches to identify the sources of supply.

(c) Online Advertising:

            Marketing using online advertising.

(d) Online Assistance:

            Servicing providing online assistance.

Q#8:   Write a note on e-payment.          OR

The crucial issue in e-commerce revolves around how the customers will pay businesses online for various products and services. Discuss in details.

The crucial issue in e-commerce revolves around how the customers will pay businesses online for various products and services. Discuss in details.

ELECTRONIC PAYMENT:

Electronic payment is an integral part of electronic commerce.

Broadly speaking electronic payment is defined as:

“Electronic payment is a financial exchange that takes place online between buyers and sellers.”

Explanation:

The contents of this exchange are usually in same form of digital financial instrument. These instruments include:

Ø  Encrypted credit card numbers

Ø  Electronic checks

Ø  Digital cash

FACTORS OF E-PAYMENT:

There are three factors of electronic payment which are interested among the financial institutions, these are as follows:

Ø  Decreasing technology costs

Ø  Reduced operational and processing costs

Ø  Increasing online commerce

DECREASING TECHNOLOGY COSTS:

Many financial institutions desire to reduce their technology cost. Electronic payment facility fulfills their desire.

Example: Banks decrease their technology cost by adopting the e-payment such as credit cards, travelers checks, e-checks, etc.

REDUCED OPERATIONAL AND PROCESSING COST:

In banks, cash and checks are very expensive to process but through e-payment banks are seeking to reduce their operational and processing costs. Before e-payment facility daily transactions were very expensive but when the banks adopt e-payment it may reduce their expenses.

Example: when in UBL the accounts are maintained at daily paper transactions such as credits, checks, debits, it will bear $1.00 million expenses in a year. In later when banks adopted e-payment technology, it reduced its cost to $500,000.

INCREASING ONLINE COMMERCE:

The crucial issue in e-commerce revolves around how the consumers will pay businesses online for various products and services. Currently, consumers can view endless variety of products and services offered by vendors on the internet, but a constant and secure capability doesn’t exist. The online payment may resolve the problems of the consumers.

In early nineteenth century, banks faced problems in offline commerce. The online commerce resolved all these problems of banks.

The goal of online commerce is to develop a small set of payment methods that are widely used by customers and widely accepted by the banks or other financial institutions.

CONSUMERS’ ISSUES ASSOCIATED WITH E-PAYMENTS:

The consumers’ issues associated with e-payments include:

Ø  Consumer protection from fraud arising in record keeping.

Ø  Transactions privacy and safety.

Ø  Competitive pricing of payment service to ensure equal access to all consumers.

Ø  Right to choice of institutions and payment methods.

Q#       When only write a short note E-Payment.

E-PAYMENT:

Goods and services bought using web have to be paid for and given transaction online, cash will not do.

The ways of paying for e-commerce transactions can be classified as:

Ø  Credit Cards

Ø  Debit Cards

Ø  Stored Value Cards

Ø  E-Cash

Ø  Delayed Payments

Ø  Smart Cards

Ø  E-Checks

While online payments give reasonable assurance to the vendor that payment is being made there is no equivalent assurance to the consumer that the goods or services will be delivered or rendered and will be in acceptable quality.

1-CREDIT CARDS:

The most common way of paying for an e-commerce transaction is pay with credit cards. The customers type the card number, expiry date and billing address on the order form and the vendor can verify the details and be confident of payment.

Companies allow credit cards for Customer Not Present (CNP) transactions. CNP transactions initially used for telephone ordering and the same facility had been adopted for e-commerce payments.

Concern for security of online credit card payment include:

Ø  Fraudulent use of credit card

Ø  Interception of credit cards details

Ø  Remote storage of credit cards

2-DEBIT CARDS/CASH CARDS:

Debit cards/cash cards can be used for e-commerce transactions in such a way as a credit card. However, debit cards offer less security than more commonly used credit cards. Debit cards are also not appropriate for very small transactions and do not afford anonymity.

3-STORED VALUE CARDS:

One of the most common forms of electronic payment is a stored value card. The most widespread use of this technology is the telephone card that is available for use in public call boxes.

Stored value cards could be used for e-commerce; it would suitable for small payments.

4-E-CASH:

The online equivalent of a stored value card is e-cash or network money. The system operates by the user transferring money from a credit card on bank account into e-cash account. The e-cash can than be used to make payments for e-commerce transactions.

The advantages of e-cash are:

Ø  Operation of this system is very cheap.

Ø  There is security risk.

Ø  Transferability of cash.

Disadvantages of e-cash are:

Ø  No system can be accepted.

Ø  There are not clear terms and conditions of e-cash.

5-DELAYED PAYMENTS:

The final option is to pay off-line. A number of sites seeking to reassure customers who are uncertain about the security of online payments will accept credit cards details by the telephone or fax or checks through the posts. This process is time consuming. It causes extra work for the e-vendor and delay for the customer.

6-SMART CARDS:

A smart card is small plastic card the works similar to a credit card but it contains micro-processor and a storage unit. Smart card technology is also used ot make payments. It has two types:

Ø  Memory smart cards

Ø  Intelligent smart cards

Following are the facilities provided by these cards:

Ø  Pay for the item purchased over the phone.

Ø  Download money from bank accounts to smart cards

Ø  Transfer checks to bank account balances

Ø  Transfer balances between accounts

7-ELECTRONIC CHECKS:

Another mechanism for internet payments is the electronic checks. With electronic checks, the payer interacts its financial institution to pay a specific amount to another party, the payee. Financial EDI systems have been performing this function for many years. E-checks provide internet web sites to perform the following functions:

Ø  Present the bills to the payers

Ø  Allow the payers to initiate payment of the invoice

Ø  Provide remittance information

Ø  Allow payments to be made to new business with which the payers have never before transacted.

Q#9:     Business models of e-marketing or e-commerce

BUSINESS MODELS OF E-MARKETING

To establish the business models of e-marketing to consumers, first we define the important perspectives that compose the e-business models.

          These perspectives of business models are as follow:

Ø  Direct marketing versus indirect

Ø  Full cyber marketing versus partial cyber marketing.

Ø  Electronic distribution versus electronic broker.

Ø  Electronic store versus electronic shopping mall.

Ø  Generalized e-malls versus specialized e-malls.

Ø  Proactive Versus Reactive strategic posture toward cyber marketing

Ø  Global versus regional marketing.

Ø  Sales versus customers services.

DIRECT MARKETING VERSUS INDIRECT MARKETING

Direct Marketing

Direct marketing means that manufacturers advertise and distribute their own products to customers electronically. Example; Dell computers

Indirect Marketing

Indirect marketing means that manufacturers distribute their products to customers through a third party.

FULL CYBER MARKETINT VERSUS PARTIAL CYBER MARKETING

Full Cyber Marketing

Full cyber marketing means that companies sell their product and services through internet only.

Partial Cyber Marketing

Partial cyber marketing means that companies sell their products and services not only through Internet but also through physical stores.

ELECTRONIC DISTRIBUTOR VERSUS ELECTRONIC BROKER:

Electronic Distributor

E-distributors mean that the dealings of items are handled by a single store. Like Toy Amazon, Wal Mart online belongs to category of electronic distributors.

Electronic Broker

E-broker introduces suppliers who deal with items that customers are looking for. e.g. yahoo is playing the role of electronic broker.

ELECTRONIC STORE VERSUS ELECTRONIC SHOPPING MALL:

Electronic Store

Electronic store is referred to as an electronic distributor whose dealing items are handled by a single store. However, e-store in the mall is independent distributor.

Electronic Shopping Mall

Electronic shopping mall is an electronic distributor or broker whose dealing items are handled by more than a single e-store. e.g. online departmental store.

GENERALIZED E-MALLS VERSUS SPECIALIZED E-MALLS:

Generalized E-Malls:

The generalized e-malls deal with various categories of item, so supply of items is very wide. e.g. Online Departmental Store

Specialized E-Malls:

It focuses on special types of items. The cyber book stores like Amazon belong to specialized field. Example: Dell Computers

PROACTIVE VERSUS REACTIVE STRATEGIC POSTURE TOWARD CYBERMARKETING:

Proactive Strategic Posture Toward Cyber Marketing:

It means a company’s main distribution channel is internet and the internet activities such as inventory and operations management are focused on the capitalized the benefit of the cyber marketing.

Reactive Strategic Posture Toward Cyber Marketing:

Reactive strategic posture toward cyber marketing means that the traditional physical distribution channels continues to the main ones even though the company has opened an online distribution channel. So the Internet management style and activities are left unchanged.

GLOBAL VERSUS REGIONAL MARKETING:

Global Marketing:

The worldwide sale of products and services through internet is called global marketing. Example: Yahoo.com provides a global marketing.

Regional Marketing:

The sale of products and services within the countries or division base is known as regional marketing. Example: Insurance Companies, Banking Institutions.

SALES VERSUS CUSTOMER SERVICES:

Sales:

The companies open some websites for the sale of goods or services. The purpose of these companies it earn profit only.

Customer Service:

The websites of some countries are used mainly for customer services. Example: all computer hardware and software companies provide customer service.

CONCLUSION:

Using the eight business models of e-commerce, readers can analyze the current business models of a company and establish an appropriate business model for future.

Q#10: Explain online banking system.

INTRODUCTION:

There was a time when the bank customers wanted to know their bank balances or to make urgent payments but problems might occur in this regard. These problems may be solved through online banking system.

SERVICES OFFERED BY ONLINE BANKS:

Online banking allows the customers to check their balances or pay a bill at any time of the day or night. Following services are offered by online banks:

1. Online banks and statement given up to the minute information. The statement can be used to check that any specific debit or credit has gone through.
2. Credit transfers so that bills can be paid online. It also includes the facility to setup a transaction now for the bill to be paid later date.
3. Maintenance of standing orders and direct debits.

The major service that is not provided is cash in and cash out for this service. The account holder leave their home and visit an Automate Teller Machine (ATM) or a bank branch.

ELEMENTS/ISSUES OF ONLINE BANKING:

For online banking there are some issues which are as under:

a)    Security Issues

b)    Management Issues

c)    Managing financial supply chain.

d)    Pricing issues

e)    Marketing issues

f)     Back office support issue.

(A) SECURITY ISSUE:

Security is obviously an issue. Because there are large number of customers involve on this system so security problems are find commonly. There problems can be solved to give passwords to each customers. When they want to login they give their password.

(B) MANAGEMENT ISSUES:

Banks must deliver high quality products at the customer convenience with high tech, high touch personal and affordable service.

In order to achieve this management has to balance five key values such as simplicity, customized service, convenience, quality and pricing.

(C) MANAGING SUPPLY CHAIN:

Some of the products such as

i)             Insurance

ii)            Entertainment

iii)           Travel

iv)           Investment

v)            Management

May not even originate from the bank but from third party provider. The bank acts customers with access to value added service provider anywhere in the world.

Online technology allows software companies like Microsoft to become gateway. The challenge to bank is real.

(D) PRICING ISSUES:

Price affects online banking at three levels.

• Initial software pricing
• Financial product pricing
• Usage pricing

i) Initial Software Pricing:

In order to gain market shares and achieve a critical mass of customers banks will bundle their respective personal finance products with new PCs.

ii) Financial Product Pricing:

The pricing of financial products has to balance three major costs

• Developmental costs
• Marketing costs
• Support costs

iii) Usage Pricing:

This type of pricing is based on bank’s volume of transactions. Banks need to balance a number of objectives when establishing pricing strategies.

(E) MARKETING ISSUES

The benefits of online banking are often not made clear to potential user. Marketing issues are depending upon two ways.

i)             Customer Attracting

ii)            Keeping customer

i) Customer Attracting

The online banking provides certain facilities to attract the customer.

i)             Check account balances

ii)            Paying bills, etc.

ii) Keeping Customer:

Keeping customers require the followings:

Þ    Bank must switch costs of moving from one software to another to keeping customer form moving.

Þ    Banks must provide integrate services.

Þ    Banks can realize the positive costs implications for long term value added to customer loyalty.

(F) BACK OFFICE SUPPORT:

Back office support operations technology is often a crucial and misunderstood element of online banking.

Q#11: The web is changing and reshaping industries whose core business is

             information transfer between the firms and the customers. Explain with

             examples. (1^st annual 2003 & 2004)

WEB AND ELECTRONIC COMMERCE

Companies use the web to communicate with customers and suppliers by publishing content on their web server for wide spread distribution. Motivated by the potential for business to business as well as business to consumer commerce, many firms are taking steps toward selling their products on the web.

The web is also changing and reshaping industries whose core business is information transfer between the firms and the consumers.

Examples of such business functions are as follows:

2. Advertising
3. Marketing
4. Sales
5. Customer Services

Industries that engage in information sharing with customers include:

Þ    Banking and Financial Services

Þ    Retailing

Þ    Electronic Publishing and Entertainment

In these industries the web is used for four major tasks.

• Attracting new customers with marketing and advertising
• Serving existing customers with customer service and support
• Developing new markets and distribution channels
• Developing new information based products

1. MARKETING AND ADVERTISING:

The marketing department of the organization or industry uses the web for brand name management, disseminating product catalogues, sales information and product announcements.

The web provides friendly interface that will open new channels for interacting with and selling direct to the customers. Companies get revenues directly from web sales.

Advertisers can use web to introduce high quality content to attract customers’ attention. They need to create new offerings to exploit the internet’s unique properties such as access to all of a wide range of users, ability to provide unlimited information for lower cost, detailed interactions with customers, the ability to create distinct market segments and the ability to personalize services for individual users.

2. CUSTOMER SERVICE AND SUPPORT:

The web can perform a variety of customer oriented tasks including:

Ø  A new distribution channel for software, software patches and support information.

Ø  Customer interaction and query capability.

Ø  New avenues for customer relationships.

Ø  Access to government information.

A New Distribution Channel for Software, Software Patches And Support Information:

Electronic distribution of software is not a new concept. Example: a few years ago, IBM began experimenting with software distribution with satellite.

More recently, satellite based online interactive made a part with Microsoft to distribute the software maker’s products through internet. However, technological restrictions still affect delivery. Where bandwidth allows, software can be delivered directly to the users’ desktop.

Customer Interaction And Query Capability:

The web has made possible to provide customer interaction and query capability.

Example: By using the web, the customer of Federal Express and United Parcel service can check the location and status of specific overnight packages. Customer can log on to Federal Express web page and track the status of their own package.

New Avenues For Customer Relationships.

Customer relationship are very important in high contact industries like banking. The web is helping banks to form direct relationship with their customers.

Example: UBL banks provide a facility of ATM to its customer to check their balances and transactions currently.

Access To Government Information:

The web also changes the way in which the government agencies interact with and provide information to the public.

Example: Securities and Exchange Commission (SEC) publishes the filing of public companies, information provided by the companies to make decisions about their investment.

3. DEVELOPING NEW MARKETS AND DISTRIBUTION CHANNELS:

The web will enable the firms to build on the assets that they already posses like brand name recognition, customer relationships and information in order to develop new markets and distribution channels.

Example: Stock Exchange provide certain information to their customers about market rates, shares and about distribution channels on their web pages.

4. DEVELOPING NEW INFORMATION BASED PRODUCTS:

The web will enable the firms to provide the new information about their products to customers. In this way firms capture the markets to introduce new product online with the help of web.

Example: At yahoo.com, companies give information about their products.

Q#12: Discuss scope of e-commerce in Pakistan

SCOPE OF E-COMMERCE

Electronic commerce is the term which is very popularized in every field of organizations.

The scope of e-commerce exists in three areas:

1. Electronic Markets
2. Electronic Data Interchange
3. Internet Commerce

ELECTRONIC MARKETS:

An electronic market is the use of information and communication technology to present a range offering available in the market segments.

Electronic markets include the followings:

i)             Introduce New Markets

ii)            Introduce New Products

iii)           Introduce New Business

Introduce New Markets:

Through e-commerce, in less developed countries like Pakistan, companies and different organizations introduce new markets which allow customer to purchase products according to their demand.

Introduce New Products:

When e-commerce introduces new markets, it also introduces new products in these markets to capture the customers according to their satisfied products.

Introduce New Business:

In Pakistan, e-commerce plays very important role in introducing a new business. It also provides many types of facilities to their customers such as online banking, online airline booking, etc.

ELECTRONIC DATA INTERCHANGE:

EDI provides a standardized system for doing trade transactions so that can communicate directly from one computer to another easily.

EDI consists of followings:

Ø  International Trade

Ø  Used by Big Organizations

International Trade:

Electronic commerce facilitates the international trade at large scale. It gives the companies global information about products and services so that companies may compete in international markets.

Used by Big Organizations:

EDI is used by big organizations that make a large number of regular transactions through one branch of its business to another branch.

INTERNET COMMERCE:

Information and communication technology can also be used to advertise and sale a wide range of goods and services. This type of e-commerce is used commercially on Internet.

Example: Internet can be used for the purchase of books that are then delivered by post or booking the tickets that can be picked up by the clients when they arrive at the events.

Q#13 Discuss in detail the E-commerce security Issues.

Ecommerce Security Issues

Customer Security: Basic Principles

Most ecommerce merchants leave the mechanics to their hosting company or IT staff, but it helps to understand the basic principles. Any system has to meet four requirements:

·         privacy: information must be kept from unauthorized parties.

·         integrity: message must not be altered or tampered with.

·         authentication: sender and recipient must prove their identities to each other.

·         non-repudiation: proof is needed that the message was indeed received.

Privacy is handled by encryption. In PKI (public key infrastructure) a message is encrypted by a public key, and decrypted by a private key. The public key is widely distributed, but only the recipient has the private key. For authentication (proving the identity of the sender, since only the sender has the particular key) the encrypted message is encrypted again, but this time with a private key. Such procedures form the basis of RSA (used by banks and governments) and PGP (Pretty Good Privacy, used to encrypt emails).

Unfortunately, PKI is not an efficient way of sending large amounts of information, and is often used only as a first step — to allow two parties to agree upon a key for symmetric secret key encryption. Here sender and recipient use keys that are generated for the particular message by a third body: a key distribution center. The keys are not identical, but each is shared with the key distribution center, which allows the message to be read. Then the symmetric keys are encrypted in the RSA manner, and rules set under various protocols. Naturally, the private keys have to be kept secret, and most security lapses indeed arise here.

Digital Signatures and Certificates

Digital signatures meet the need for authentication and integrity. To vastly simplify matters (as throughout this page), a plain text message is run through a hash function and so given a value: the message digest. This digest, the hash function and the plain text encrypted with the recipient's public key is sent to the recipient. The recipient decodes the message with their private key, and runs the message through the supplied hash function to that the message digest value remains unchanged (message has not been tampered with). Very often, the message is also timestamped by a third party agency, which provides non-repudiation.

What about authentication? How does a customer know that the website receiving sensitive information is not set up by some other party posing as the e-merchant? They check the digital certificate. This is a digital document issued by the CA (certification authority: Verisign, Thawte, etc.) that uniquely identifies the merchant. Digital certificates are sold for emails, e-merchants and web-servers.

:Secure Socket Layers

Information sent over the Internet commonly uses the set of rules called TCP/IP (Transmission Control Protocol / Internet Protocol). The information is broken into packets, numbered sequentially, and an error control attached. Individual packets are sent by different routes. TCP/IP reassembles them in order and resubmits any packet showing errors. SSL uses PKI and digital certificates to ensure privacy and authentication. The procedure is something like this: the client sends a message to the server, which replies with a digital certificate. Using PKI, server and client negotiate to create session keys, which are symmetrical secret keys specially created for that particular transmission. Once the session keys are agreed, communication continues with these session keys and the digital certificates.

:PCI, SET, Firewalls and Kerberos

Credit card details can be safely sent with SSL, but once stored on the server they are vulnerable to outsiders hacking into the server and accompanying network. A PCI (peripheral component interconnect: hardware) card is often added for protection, therefore, or another approach altogether is adopted: SET (Secure Electronic Transaction). Developed by Visa and Mastercard, SET uses PKI for privacy, and digital certificates to authenticate the three parties: merchant, customer and bank. More importantly, sensitive information is not seen by the merchant, and is not kept on the merchant's server.

Firewalls (software or hardware) protect a server, a network and an individual PC from attack by viruses and hackers. Equally important is protection from malice or carelessness within the system, and many companies use the Kerberos protocol, which uses symmetric secret key cryptography to restrict access to authorized employees.

Transactions

Sensitive information has to be protected through at least three transactions:

·         credit card details supplied by the customer, either to the merchant or payment gateway. Handled by the server's SSL and the merchant/server's digital certificates.

·         credit card details passed to the bank for processing. Handled by the complex security measures of the payment gateway.

·         order and customer details supplied to the merchant, either directly or from the payment gateway/credit card processing company. Handled by SSL, server security, digital certificates (and payment gateway sometimes).

Practical Consequences

1. The merchant is always responsible for security of the Internet-connected PC where customer details are handled. Virus protection and a firewall are the minimum requirement. To be absolutely safe, store sensitive information and customer details on zip-disks, a physically separate PC or with a commercial file storage service. Always keep multiple back-ups of essential information, and ensure they are stored safely off-site.

2. Where customers order by email, information should be encrypted with PGP or similar software. Or payment should be made by specially encrypted checks and ordering software.

3. Where credit cards are taken online and processed later, it's the merchant's responsibility to check the security of the hosting company's webserver. Use a reputable company and demand detailed replies to your queries.

4. Where credit cards are taken online and processed in real time, four situations arise:

1.    You use a service bureau. Sensitive information is handled entirely by the service bureau, which is responsible for its security. Other customer and order details are your responsibility as in 3. above.

2.    You possess an ecommerce merchant account but use the digital certificate supplied by the hosting company. A cheap option acceptable for smallish transactions with SMEs. Check out the hosting company, and the terms and conditions applying to the digital certificate.

3.    You possess an ecommerce merchant account and obtain your own digital certificate (costing some hundreds of dollars). Check out the hosting company, and enter into a dialogue with the certification authority: they will certainly probe your credentials.

4.    You possess a merchant account, and run the business from your own server. You need trained IT staff to maintain all aspects of security — firewalls, Kerberos, SSL, and a digital certificate for the server (costing thousands or tens of thousands of dollars).

Security is a vexing, costly and complicated business, but a single lapse can be expensive in lost funds, records and reputation. Don't wait for disaster to strike, but stay proactive, employing a security expert where necessary.

Business process outsourcing (BPO)

is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in the marketplace. BPO is often divided into two categories: back office outsourcing, which includes internal business functions such as billing or purchasing, and front office outsourcing, which includes customer-related services such as marketing or tech support.

BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO that is contracted to a company's neighboring country is sometimes called nearshore outsourcing, and BPO that is contracted within the company's own country is sometimes called onshore outsourcing.^[1]

The most common examples of BPO are call centers, human resources, accounting and payroll outsourcing.

Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. BPO is a part of the outsourcing industry. It is dependent on information technology, hence it is also referred to as information technology enabled services or ITES. Knowledge process outsourcing and legal process outsourcing are some of the subsets of business process outsourcing.

E-commerce security issues

E-commerce systems are based upon Internet use, which provides open and easy communications on a global basis. However, because the Internet is unregulated, unmanaged and uncontrolled, it poses a wide range of risks and threats to the systems operating on it.

The use of the Internet means that your internal IT and e-commerce systems are potentially accessible by anyone, irrespective of their location.

Risks

Some of the more common threats that hackers pose to e-commerce systems include:

·         carrying out denial-of-service (DoS) attacks that stop access to authorised users of a website, so that the site is forced to offer a reduced level of service or, in some cases, ceases operation completely

·         gaining access to sensitive data such as price lists, catalogues and valuable intellectual property, and altering, destroying or copying it

·         altering your website, thereby damaging your image or directing your customers to another site

·         gaining access to financial information about your business or your customers, with a view to perpetrating fraud

·         using viruses to corrupt your business data

Impact upon the business

Impact upon the business

All of these risks can have a significant impact upon a business running an e-commerce service. The potential business implications of a security incident include the following:

·         Direct financial loss as a consequence of fraud or litigation.

·         Subsequent loss as a result of unwelcome publicity.

·         Criminal charges if you are found to be in breach of the Data Protection or Computer Misuse Acts, or other regulation on e-commerce.

·         Loss of market share if customer confidence is affected by a DoS attack.

·         The image presented by your business, together with the brands under which you trade, are valuable assets. It is important to recognize that the use of e-commerce creates new ways for both image and brands to be attacked.

Q#14: Future Application Development

Q#15: Customer Care

Q#16: E-Commerce Business & Technology Strategies.

Q#17: Discuss Outsourcing in an organization regarding e-commerce.

Q#18: What is Encryption? Discuss the security advantages of Encryption /

            Decryption in e-commerce