E - COMMERCE

23PCSED03
(For all PG, Semester-IV)
Prepared By
Mrs. S. KOKILA, MCA., M.Phil.,

DEPARTMENT OF COMPUTER SCIENCE

SALEM KONGUNAADU ARTS AND SCIENCE COLLEGE

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 Contents
UNIT – I ............................................................................................................................... 7
1.1 Electronic Commerce .................................................................................................. 7

1.2 Electronic Commerce Frame work .............................................................................. 8

1.3 Anatomy Of E-Commerce Applications .................................................................... 10

1.4 E-Commerce Equipment Consumer applications ...................................................... 14

1.5 Electronic Commerce Organization Applications....................................................... 16

1.6 Components of I-Way ............................................................................................... 19

UNIT-II .............................................................................................................................. 24
2.1 Architecture Framework for Electronic Commerce .................................................... 24

2.2 World Wide Web as the Architecture ........................................................................ 39

2.3 Consumer-Oriented Applications ............................................................................... 43

2.4 Mercantile Process Models ........................................................................................ 50

2.4.1 Mercantile Models from the Consumer's Perspective and Merchant's Perspective 50

UNIT-III ............................................................................................................................. 58
3.1 Electronic Payment Systems ...................................................................................... 58

3.1.1 Types of Electronic Payment Systems ................................................................ 58

3.1.2 Digital Token-Based Electronic Payment Systems ............................................. 59

3.1.3 Smart Card And Credit Card Based Electronic Payment Systems ...................... 62

3.1.4 Risks and Electronic Payment Systems ............................................................... 65

3.1.5 Designing Electronic Payment systems ............................................................... 66

UNIT-IV ............................................................................................................................. 68
4.1 Electronic Data Interchange ....................................................................................... 68

4.2 EDI Applications in Business .................................................................................... 73

4.3 EDI: Legal, Security and Privacy issues EDI and Electronic Commerce .................... 75

4.4 Standardization & EDI .............................................................................................. 77

4.5 EDI Software Implementation ................................................................................... 78

UNIT-V .............................................................................................................................. 82
5.1 Internet and World Wide Web ................................................................................... 82

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5.2 Origins of the Internet ............................................................................................... 82

5.3 New Uses for the Internet .......................................................................................... 83

5.4 Commercial Use of the Internet ................................................................................. 84

5.5 Growth of the Internet ............................................................................................... 85

5.6 Advertising on the Internet ........................................................................................ 86

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 SYLLABUS
UNIT-I
Electronic Commerce – Electronic Commerce Frame work – The Anatomy of
Electronic Commerce Applications - Electronic Equipment Consumer Applications -
Electronic Commerce Organization Applications - Components of I-Way – Network Access
Equipment.
UNIT-II
Architecture Framework for Electronic Commerce- World Wide Web as the
Architecture – Consumer Oriented Applications – Mercantile Process Models – Mercantile
Models from the Consumer's Perspective and Merchant's Perspective.
UNIT-III
Electronic Payment Systems: Types of Electronic Payment Systems – Digital Token
based Electronic Payment Systems–Smart Card and Credit Card Based Electronic Payment
Systems – Risk and Electronic Payment Systems – Designing Electronic Payment Systems.
UNIT:IV
Electronic Data Interchange – EDI Applications in Business – EDI: Legal, Security
and Privacy issues EDI and Electronic Commerce – Standardization and EDI – EDI Software
Implementation.
UNIT-V
Internet and World Wide Web: origin of the Internet – New uses for the Internet –
Commercial use of the Internet–Growth of the Internet – Advertising on the Internet.

Text Books
1.Kalakota and Whinston, "Frontiers of Electronic Commerce", Pearson Education, 2004.
2.Gray P.Scheider, "Fourth Annual Edition Electronic Commerce", Thomson Course
Technology, 2003.

Reference Books
1.Kamalesh K. Baja, Debjani Nag, “E-Commerce–The Cutting Edge of Business”,
TMH Publications, 2005.
2.Agarwala, K.N, Deeksha Agarwala, "Business on the Net: What's and How's of
Ecommerce;" Macmillan, New Delhi.
3.Parag Diwan, Sunil Sharma, "Electronic Commerce: A Manager's Guide to E-Business",
Excel books, 2005.

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 UNIT – I

1.1 Electronic Commerce

E-Commerce or Electronics Commerce is a methodology of modern business which

addresses the need of business organizations, vendors and customers to reduce cost and
improve he quality of goods and services while increasing the speed of delivery. E-commerce
refers to paperless exchange of business information using following ways.

 Electronic Data Exchange (EDI)

 Electronic Mail (e-mail)

 Electronic Bulletin Boards

 Electronic Fund Transfer (EFT)

 Other Network-based technologies

The concept of e-commerce is all about using the internet to do business better and
faster. E-commerce is the process of buying and selling over the Internet, or conducting any
transaction involving the transfer of ownership or rights to use goods or services through a
computer-mediated network without using any paper document.

Electronic commerce or e-commerce refers to a wide range of online business

activities for products and services. It also pertains to “any form of business transaction in
which the parties interact electronically rather than by physical exchanges or direct physical
contact.”

Business transacted through the use of computers, telephones, fax machines, barcode
readers, credit cards, automated teller machines (ATM) or other electronic appliances without
the exchange of paper-based documents. It includes procurement, order entry, transaction
processing, payment authentication, inventory control, and customer support.

E-commerce is subdivided into three categories: business to business or B2B(Cisco),

business to consumer or B2C (Amazon), and consumer to consumer or C2C (eBay) also
called electronic commerce.

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 E-commerce the phrase is used to describe business that is conducted over the Internet
using any of the applications that rely on the Internet, such as e-mail, instant messaging,
shopping carts, Web services, UDDI, FTP, and EDI, among others.

A type of business model, or segment of a larger business model, that enables a firm
or individual to conduct business over an electronic network, typically the internet.

Electronic commerce operates in all four of the major market segments: business to
business, business to consumer, consumer to consumer and consumer to business.
Ecommerce has allowed firms to establish a market presence, or to enhance an existing
market position, by providing a cheaper and more efficient distribution chain for their
products or services.

Examples of E-Commerce

 An individual purchases a book on the Internet.

 A government employee reserves a hotel room over the Internet.

 A business calls a toll free number and orders a computer using the seller's interactive
telephone system.

 An individual withdraws funds from an automatic teller machine (ATM).

 Selling to consumers on a pay-per-download basis, through a Web site, etc

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1.2 Electronic Commerce Frame work

E-Commerce application will be built on the existing technology infrastructure

 A myriad of computers
 Communication networks
 Communication software

Common business services for facilitating the buying and selling process Messaging
& information distribution as a means of sending and retrieving information Multimedia

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content & network publishing, for creating a product & a means to communicate
about it .

The information superhighway- the very foundation-for providing the high way
system along which all e-commerce must travel The two pillars supporting all e-commerce
applications & infrastructure Any successful e-commerce will require the I-way
infrastructure in the same way that regular commerce needs I-way will be a mesh of
interconnected data highways of many forms

 Telephone, wires, cable TV wire

 Radio-based wireless-cellular & satellite
 Movies=video + audio

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  Digital games=music + video + software
 Electronic books=text + data + graphics + music + photographs + video
 In the electronic ‘highway system’ multimedia content is stores in the form of
electronic documents
 These are often digitized
 On the I-way messaging software fulfills the role, in any no. of forms: e-mail, EDI, or
point-to-point file transfers
 Encryption & authentication methods to ensure security
 Electronic payment schemes developed to handle complex transactions
 These logistics issues are difficult in long-established transportation.

1.3 Anatomy Of E-Commerce Applications

E-Commerce applications are:

 Multimedia Content for E-Commerce Applications

 Multimedia Storage Servers & E-Commerce Applications

 Client-Server Architecture in Electronic Commerce

 Internal Processes of Multimedia Servers

 Video Servers & E-Commerce

 Information Delivery/Transport & E-Commerce Applications

 Consumer Access Devices

Multimedia Content for E-Commerce Applications

 Multimedia content can be considered both fuel and traffic for electronic
commerce applications.
 The technical definition of multimedia is the use of digital data in more than one
format, such as the combination of text, audio, video, images, graphics,
numerical data, holograms, and animations in a computer file/document.
 Multimedia is associated with Hardware components in different networks.

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  The Accessing of multimedia content depends on the hardware capabilities of
the customer.

Multimedia Storage Servers & E-Commerce Applications

 E-Commerce requires robust servers to store and distribute large amounts of

digital content to consumers.
 These Multimedia storage servers are large information warehouses capable of
handling various content, ranging from books, newspapers, advertisement catalogs,
movies, games, & X-ray images.
 These servers, deriving their name because they serve information upon
request, must handle large-scale distribution, guarantee security, & complete
reliability

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Client-Server Architecture in Electronic Commerce

 All e-commerce applications follow the client-server model.

 Clients are devices plus software that request information from servers or interact
known as message passing .

 Mainframe computing , which meant for “dump”

 The client server model, allows client to interact with server through request-
reply sequence governed by a paradigm known as message passing.
 The server manages application tasks, storage & security & provides scalability-
ability to add more clients and client devices (like Personal digital assistants to Pc’s.)

Internal Processes of Multimedia Servers

 The internal processes involved in the storage, retrieval & management of

multimedia data objects are integral to e-commerce applications.

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  A multimedia server is a hardware & software combination that converts raw data
into usable information & then dishes out.
 It captures, processes, manages, & delivers text, images, audio & video. It must do to
handle thousands of simultaneous users.
 Include high-end symmetric multiprocessors, clustered architecture, and massive
parallel systems.

Video Servers & E-Commerce

The electronic commerce applications related to digital video will include

 Telecommunicating and video conferencing

 Geographical information systems that require storage & navigation over maps

 Corporate multimedia servers

 Postproduction studios

 Shopping kiosks.

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 Consumer applications will include video-on-demand. The figure which is of video–on
demand consist video servers, is an link between the content providers (media) &
transport providers (cable operators).

Information Delivery/Transport & E-Commerce Applications

 Transport providers are principally telecommunications, cable, & wireless industries.

 Telecommunication companies long-distance telephone lines; local telephone lines
 Cable television companies Cable TV coaxial, fiber optic & satellite lines
 Computer-based on-line servers Internet; commercial on-line service providers
Wireless communications Cellular & radio networks; paging systems

Consumer Access Devices

 Information Consumers Access Devices

 Computers with audio & video Personal/desktop computing capabilities
 Mobile computing
 Telephonic devices Videophone
 Consumer electronics Television + set-top box Game systems
 Personal digital assistants (PDAs) Pen-based computing, voice-driven computing

1.4 E-Commerce Equipment Consumer applications

People needs entertainment on demand including video, games, news on-demand,

electronic retailing via catalogs etc. Currently now we are taking the video on-demand.

Why most companies betting heavily on this?

 93 million homes have television

 Americans spend nearly half their free time watching television

 Every evening, more than one-third of the population is in front of a

television

 Sight, sound, and motion combine to make television a powerful means of marketing

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Consumer Applications and Social Interaction

 Lessons from history indicate that the most successful technologies are those that
make their mark social
 In 1945, in U.S no one had TV. By 1960 about 86percent of households did
 Now contrast with Telephone. Bell invented the telephone in 1876 and by1940, 40%
of U.S. households and by 1980 about 95-98 percent of households connected
 Penetration was slower for Telephone than for TV because of the effort needed to set
up the wiring infrastructure
 The impact of both was good on business, social, consumer behavior and
entertainment habits
 Radio began in 1960, and by 1989, almost 3 decades later, just 319 radio
stations followed the news format .In 1994, their number exceeded 1000
 What do Consumers really want?

 They want quality and cost of service

 If a new system requires more steps to do essentially the same things, consumers
may resist it

 Some people fit that mold, but most of public prefers to lay back and just
watch television and let someone else do the work of figuring out the sequence
of television programming.

What are Consumers willing to spend?

 According to the video on-demand, consumers get the cable bill at basic charge they
will buy

 If it is doubled they will not buy and at the service provider economics will
increased then network operators might look to advertises to fill the gap

Delivering products to Consumers

 Packing and distribution must be considered

 Blockbuster video collects the information and shows the typical consumer

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  Spends $12 a month on home video expenditures

 Go to video store to select video on limited budget and has time to kill

 Only periodically expends a large sum of money

Consumer Research and E-Commerce

Consumer opinion about interactive television is

 46% be willing to pay

 39% want video phone calls
 63% would pay for movies on-demand
 57% would pay for Television shows on-demand
 78% said their worry about it is that they will pay for something that they
previously received free of charge
 64% are think it make it harder for viewers to protect privacy
 41% are tell that it is too confusing to use

1.5 Electronic Commerce Organization Applications

Changing business Environment

 The traditional business environment is changing rapidly

 Many companies are looking outside and within to shape business strategies

 These activities include private electronic connections to customers, suppliers,

distributors, industry groups etc.,

 The I-superhighway will expand this trend so that it allow business to exchange
information.

E-Commerce and the retail Industry

 Conditions are changing in the “new economy” with respect to the retail industry

 Consumers are demanding lower prices, better quality, a large selection of in-
season goods.

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  Retailers are filling their order by slashing back-office costs, reducing profit
margins, reducing cycle times. buying more wisely and making huge investments in
technology

 Retailers are in the immediate line of fire and were first to bear the brunt of cost
cutting

Marketing and E-Commerce

 E-commerce is forcing companies to rethink the existing ways of doing target

marketing and even event marketing.

 Interactive marketing is in electronic markets via interactive multimedia catalogs

 Users find moving images more appealing than still image and listening more
appealing than reading text on a screen

 Consumer information services are a new type of catalog business

Inventory Management and Organizational Applications

 with borders opening up and companies facing stiff global competition

 Adaptation would include moving to computerized, “paperless” operations to reduced

 Once targeted business process is inventory management, solutions for these

processes go by different names

 In manufacturing industry they’re known as just-in-time inventory systems, in the

retail as quick response programs, and in transportation industry as consignment
tracking systems

Just-in-Time (JIT) Manufacturing

 It is viewed as an integrated management system consisting of a number of

different management practices dependent on the characteristics of specific plants

 The first principle is elimination of all waste (time,materials,labour & equipment)

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  The following management practices are focused factory, reduced set-up times,
group technology, total productive maintenance, multifunction employees, uniform
workloads, IT purchasing, total quality control & quality circles

Quick Response Retailing (QR)

 It is a version of JIT purchasing tailored for retailing

 To reduce the risk of being of out of stock, retailers are implementing QR systems

 It provides for a flexible response to product ordering and lowers costly inventory
levels

 QR retailing focuses on market responsiveness while maintaining low levels of stocks

 It creates a closed loop consisting of retailer, vendor, & consumer chain,& as

consumers make purchases the vendor orders new deliveries from the retailer through
its computer network

Supply Chain Management

 QR and JIT address only part of the overall picture

 Supply Chain Management (SCM) is also called “extending”, which means

integrating the internal and external partners on the supply and process chains to get
raw materials to the manufacturer and finished products to the consumer . It includes
following functions

Supplier management: The goal is to reduce the number of suppliers and get them
to Partners

Inventory management: The goal is to shorten the order-ship-bill cycle. When a majority of
partners are electronically linked, information faxed or mailed

Distribution management: The goal is to move documents (accurate data) related to

shipping

Channel management: The goal is to quickly disseminate information about changing

operational conditions ( technical, product, and pricing information) to trading partners

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Payment management: The goal is to Link Company and the suppliers and distributors so
that payments can be sent and received electronically

Financial management: The goal is to enable global companies to manage their money in
various foreign exchange accounts

Sales force productivity: The goal is to improve the communication flow of information
among the sales, customer & production functions .In sum, the supply chain management
process increasingly depends on electronic markets

Work group Collaboration Applications

 A internetwork that enables easy and inexpensive connection of various

organizational segments

 It is to improve communications and information sharing and to gather and

analyze competitive data in real-time

 Videoconferencing, document sharing and multimedia e-mail, are expected to

reduce travel and encourage telecommuting

 Improves the distribution channel for documents and records to suppliers,

collaborators and distributors

1.6 Components of I-Way

I – Way is defined as universal affordable access to high performance network

capable of carrying billions of bits per second in the context of e-commerce.

Components of I-Way

The major components of I-way are

 Consumer access equipments.

 Ramps

 Global Information Distribution Network.

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Consumer Access Equipment

 It is often ignored component of I-way but represent critical category.

 The absence of slow progress in which holding of up other segments of I-way.

 This segment of I-way includes hardware and software vendors who

provide physical devices such as computer software platforms such as
browsers and operating system..

Ramps

 They simplify the leakages to schools and home to the communication backbone.

 This component is often called as last mile because they provide links.

 The providers of access ramps can be differentiated into

Global Information Distribution Networks

 The development of new communication technologies and continued employment

of fiber optic facilities has resulted in higher transmission speeds at significantly
low cost.

 The end result is a seamless web called the I-way of communication network,
computer digital libraries and compute electronics that will put vast amount
of information at users finger tips.

 The two major technologies under pinning high speed global information
distribution networks are

 Long distance networks

 Satellite networks.

Long distance network

 Long distance connectivity is available through cable (coaxial) or (fiber) owned by

long distance interchange carriers (Ixc) .

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  Submarine cables provide an attractive economic advantage for selected rules, where
growth advantage for selected rules, where growth is in demand and communication
capacity is high.

 The Ixc’s also play a significant role in the local access market by teaming with firms
in the wireless and cable tv business.

 Ixc’s are exploring alternative arrangements that would lower the cost of using the
local network. Uniform speed efficiency, levels of technology and cost of telecom
services are necessary for both voice and data services.

 Fiber optics have emerged as technology of choice because it is capable of

providing higher bandwidth than satellite also it is immune to electromagnetic
interference.

 Long distance network infrastructure is now been deployed under seas to carry
international traffic.

Satellite network

 Satellite networks have advantages over terrestrial network and they are
accessible from any point on the globe.

 Satellite networks can provide broadband digital services including voice, data and
video to many points without the cost of wide installation.

 Wide range of services include broadcast radio, video and overseas telephone
links.

 Thus communication satellites are the crucial part of the global communication
and infrastructure.

1.7 NETWORK ACCESS EQUIPMENT

Hub: A hub, at the most basic level, is a “dumb” device that operates at the Physical layer of
the OSI model. A hub forwards all signals it receives to all connected network devices. Think
of a hub as a “drunk” – when he speaks, he speaks to all around him, even if he really only
means to speak with one person.

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Switch: Because the hub is something of a “drunk,” it can be an inefficient (think about the
excess traffic created) and unsecure device. Imagine if you wish to send sensitive credit card
information over the network – do you really want every node to receive your electronic
signal? To alleviate this, the switch was developed. A switch operates at the Data Link layer
of the OSI model. It uses the MAC sub-layer to forward the relevant frames of information
only to the intended recipient. Messages can still be broadcast, but this is only an option and
not the normal condition. Unlike the “drunken” hub, the switch can speak softly to one
person at a time or announce to the crowd.

Bridge: A bridge also operates at the Data Link layer (aka Layer 2) and is used to connect
two (similar or dissimilar) physical network segments together, forming a larger inter-
network. It can forward packets or reject them based on their destination

(MAC) address. Note: The connected network segments must have same network ID.

Router: The router operates at the Network layer of the OSI Model and is used to forward
packets across network segments to reach a certain destination address . Do not be confused
between a router and a bridge – a bridge simply forwards packets or frames based on their
destination address from one connected network segment to another. A router can determine
where a packet should be sent to given its final destination (IP address). Usually, routers
forward packets to other routers, but sometimes routers also forward to other pieces of
network equipment. A router is usually used to connect a home computer to an “always-on”
Internet connection through the home network. To appreciate what a router really does, run
tracert to your favorite website and see how many steps (hops) are involved in getting from
your computer to the web server in question.

Gateway: A gateway is any device that serves to interface with other networks using
dissimilar protocols. For example, a gateway might interface between a home network and
the Internet or between a NetBIOS network and an IPX/SPX network. A gateway operates in
any of the seven OSI layers.

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WAP: A Wireless Access Point is a device that allows wireless devices to access and to
communicate with the network. It acts as a bridge between the wired, traditional network and
other wireless devices. Alternatively, it can act as a bridge between wireless devices and
another, linked WAP. It typically operates in the Network layer of the OSI model as a sort of
router/bridge/switch combination. Note that most WAP devices direct traffic by MAC
address, making them switched.

NIC: A Network Interface Card is a device that allows a node to connect to the network,
typically in the form of a computer “card” (PCI/ISA), but also in the form of an external
(think USB) device. It can either be wired and connect to a traditional, wired network, or
wireless, and connect to a WAP.

NSFNET: NSFNET is the largest single government investment in the NSF funded program.
Almost all the network users throughout the world pass information to members. The
NSFNET backbone sites were interconnected to the new ANS provided (Advanced network
services) by T-3 backbone. Higher development is noticed in the number of local state and
regional networks. The cost reduction was noticed in general in the past. However, it can be
said that the Internet is privatized to certain extent as majority of activities are carried out by
the private sector. Due to some non-profit activities, there is development in expertise,
competition and in commercial services. The National Science Foundation Network
(NSFNET) was a program of coordinated, evolving projects sponsored by the National
Science Foundation(NSF) beginning in 1985 to promote advanced research and education
networking in the United States. NSFNET was also the name given to several nationwide
backbone networks that were constructed to support NSF's networking initiatives from 1985
to 1995. Initially created to link researchers to the nation's NSF-funded supercomputing
centers, through further public funding and private industry partnerships it developed into a
major part of the Internet backbone.

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 UNIT-II
2.1 Architecture Framework for Electronic Commerce

An architecture framework for ecommerce applications consisting of 6 layers:

 Application services with consumer, business, and intra-organization

applications,
 Brokerage and data management for service integration,
 Interface layer providing catalogs and directories,
 Secure messaging for communicating data,
 Middleware services for interaction between systems, and
 Network infrastructure including the World Wide Web as an architecture with
protocols like HTTP, IP, and TCP.
 Communication between layers is enabled by protocols such as FTP, HTTP,
SMTP, and SSL to securely transfer files and messages.

The ecommerce application architecture consists of 6 layers of functionality/ services.

Application services Brokerage and data management Interface layer Secure messaging
Middleware services Network infrastructure

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Application services

This layer comprises of existing and future applications. Three distinct classes of
ecommerce applications are:

 Consumer to business
 Business to consumer
 Intra organization

Brokerage and data management

This layer provides service integration through information brokerages. Information

brokerages represents an intermediary who provides service integration between customers
and information providers. An important aspect of the brokerage function is the support for
data management.

Interface and support services

This layer provides interfaces for ecommerce applications such as interactive catalogs
and functions necessary for information search via directories. Interactive catalogs are
customized interface to customer applications like home shopping. Directories organize
enormous amount of information and transactions generated to facilitate ecommerce.

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Secure messaging

E-messaging is a critical business issue. Messaging is the software that sites between
the network infrastructure and the clients or ecommerce applications. Messaging services
offers solutions for communicating unstructured data, reports as well as structured data such
as purchase orders, shipping notices, etc.

Middleware services

With the growth of networks, client server technology and all other forms of
communicating between or among different platforms, the problems of getting all the pieces
to work together grew. Users demanded interaction between dissimilar systems, networks
that permitted shared resources and applications that could be accessed by multiple software
programs. Middleware is the ultimate mediator between software programs that enables them
to communicate with one another.

Network infrastructure (www as a architecture)

Client browser www server functions Third party services Local or company specific
data Mosaic/ www browser extensions. Information retrieval Data and transaction
management Secure messaging Digital library of document/ data servers Third party
information processing tools/ services Electronic payment servers

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Security Protocol

A communication protocol is a formal description of digital message formats for

exchanging those messages in or between computing systems. The internet protocol(IP) is the
principle communications protocol used for datagram (packets) across an internet using the
internet protocol suite.

open source Interconnection

It is defined as “the capability for applications running on different computers to

exchange information and operate cooperatively using this information. The OSI model
defines a networking framework for implementing protocols in 7 layers: The seven layers
are:

Application layer (layer 7)

This layer supports application and end user processes. Everything at this layer is
application specific.

Presentation layer (layer 6)

This layer provides independence from differences in data representation by

translating from application to network format and vice versa.

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Session layer(layer 5)

This layer establishes, manages and terminates connections between applications. It

deals with sessions and connection coordination.

Transport layer (layer 4)

This layer provides transfer of data between end systems, or hosts and is responsible
for end-to-end error recovery and flow control. It ensures complete data transfer.

Network layer (layer 3)

This layer provides switching and routing technologies, creating logical paths known
as virtual circuits fro transmitting data from node to node.

Data link layer( layer 2)

In this layer, data packets are encoded and decoded into bits. This layer performs the
transmission of data and error control from one node to another node.

Physical layer (layer 1)

This layer conveys the bit stream- electrical impulse, light or radio signal. It provides
the hardware means of sending and receiving data on a carrier, including cables, cards and
physical aspects.

TCP/IP

 TCP/IP is the communication protocol for communication between computers on the

internet.
 TCP - transmission control protocol IP – internet protocol
 TCP takes care of communication between your application software (browser) and
your network software.
 IP takes care of the communication with other computers.

IP ADDRESS
 When a message is sent, an IP address for both the sending and receiving nodes must
be known.

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  The IP address are 32 bits(4 bytes length) in length, decomposition of the IP address
varies according to the assigned class.
Four of these IP address classes include:
 0.0.0.0: This IP address in IPv4 is also known as the default network. It is the
non-routable meta address that designates an invalid, non-applicable, or
unknown network target.
 127.0.0.1: This IP address is known as the loopback address, which a
computer uses to identify itself regardless of whether it has been assigned an
IP address.
 169.254.0.1 to 169.254.254.254: A range of addresses that are automatically
assigned if a computer is unsuccessful in an attempt to receive an address from
the DHCP.
 255.255.255.255: An address dedicated to messages that need to be sent to
every computer on a network or broadcasted across a network.

File transfer protocol (FTP)

FTP is a standard network protocol used to transfer files from one host to another host
over a TCP based network, such as internet. A popular method for uploading and
downloading files is the file transfer protocol (FTP).FTP is common tool used for uploading
web documents to a server.

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HTTP- Hypertext Transfer Protocol

The protocol that underlies the www is called the HTTP. It is a simple
request/response protocol. When a user clicks on a link on a webpage, the connection is
opened, data is transferred and the connection is broken.

Secure HTTP

This supports a variety of security mechanisms to HTTP clients and servers. It

provides encryption techniques for secure conversation between client and server.

Simple Mail Transfer Protocol(SMTP)

This is used in sending and receiving email. This protocol helps the user to save
messages in a server mail box and download them from the server.

Secure sockets layer (SSL)

SSL is standard technology for securing an internet connection by encrypting data

sent between a website and a browser (or between two servers). It prevents hackers from
seeing or stealing any information transferred, including personal or financial data.
r
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Consumer-to-Business Transactions

We call this category marketplace transaction. In a marketplace transaction, customers

learn about products differently through electronic publishing, buy them differently using
electronic cash and secure payment systems, and have them delivered differently. Also, how
customers allocate their loyalty may also be different.

In light of this, the organization itself has to adapt to a world where the traditional concepts of
brand differentiation no longer hold-where "quality" has a new meaning, where "content"
may not be equated to "product," where "distribution" may not automatically mean "physical
transport." In this new environment, brand equity can rapidly evaporate forcing firms to
develop new ways of doing business.

Business-to-Business Transactions

We call this category market-link transaction. Here, businesses, governments, and

other organizations depend on computer-to-computer communication as a fast, an
economical, and a dependable way to conduct business transactions. Small companies are
also beginning to see the benefits of adopting the same methods. Business-to-business
transactions include the use of EDI and electronic mail for purchasing goods and services,
buying information and consulting services, submitting requests for proposals, and receiving
proposals.
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Examine this scenario.

The current accounts payable process occurs through the exchange of paper
documents. Each year the trading partners exchange millions of invoices, checks, purchase
orders, financial reports, and other transactions. Most of the documents are in electronic form
at their point of origin but are printed and key-entered at the point of receipt. The current
manual process of printing, mailing, and rekeying is costly, time-con- suming, and error-
prone. Given this situation and faced with the need to reduce costs, small businesses are
looking toward electronic commerce as a possible savior

Intra organizational Transactions

We call this category market-driven transactions. A company becomes market driven

by dispersing throughout the firm information about its customers and competitors; by
spreading strategic and tactical decision making so that all units can participate; and by
continuously monitoring their customer commitment by making improved customer
satisfaction an ongoing objective. To maintain the relationships that are critical to delivering
superior customer value, management must pay close attention to service, both before and
after sales.

In essence, a market-driven business develops a comprehensive under- standing of its

customers' business and how customers in the immediate and downstream markets perceive
value. Three major components of market- driven transactions are customer orientation
through product and service, customization; cross-functional coordination through enterprise
integration; and advertising, marketing, and customer service.

Information Brokerage and Management

The information brokerage and management layer provides service integration

through the notion of information brokerages, the development of which is necessitated by
the increasing information resource fragmentation. We use the notion of information
brokerage to represent an intermediary who provides service integration between customers
and information providers, given some constraint such as a low price, fast service, or profit
maximization for a client.

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 Information brokers, for example, are rapidly becoming necessary in dealing with the
voluminous amounts of information on the networks. As on-line databases migrate to
consumer information utilities, consumers and information professionals will have to keep up
with the knowledge, and owner- ship, of all these systems. Who's got what? How do you use
it? What do they charge? Most professionals have enough trouble keeping track of files of
interest on one or two database services. With all the complexity associated with large
numbers of on-line databases and service bureaus, it's impossible to expect humans to do the
searching. It will have to be software programs-information brokers or software agents, to use
the more popular term-that act on the searcher's behalf.

Information brokerage does more than just searching. It addresses the issue of adding
value to the information that is retrieved. For instance, in foreign exchange trading,
information is retrieved about the latest currency exchange rates in order to hedge currency
holdings to minimize risk and maximize profit. In other words, the act of retrieving the
information is the input to other transactions.

With multiple transactions being the norm in the real world, service integration
becomes critical. Taking the same foreign exchange example further, service integration
allows one to link the hedging program (offered on a time-sharing basis by a third party) with
the search program (could be another vendor) that finds the currency rates from the cheapest
on-line service to automatically send trades to the bank or financial services company. In
effect, a personalized automated trading system can be created without having to go to any
financial institution. This is just one example of how information brokerages can add value

Another aspect of the brokerage function is the support for data management and
traditional transaction services. Brokerages may provide tools to accomplish more
sophisticated, time-delayed updates or future-compensating transactions. These tools include
software agents, distributed query generator, the distributed transaction generator, and the
declarative resource constraint base-which describes a business's rules and environment
information. At the heart of this layer lies the work-flow scripting environment built on a
software agent model that coordinates work and data flow among support services.

As pointed out earlier, software agents are used to implement information brokerages.
Software agents are mobile programs that have been called "healthy viruses," "digital
butlers," and "intelligent agents." Agents are encapsulations of users' instructions that

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perform all kinds of tasks in electronic marketplaces spread across networks. Information
brokerages dispatch agents capable of information resource gathering, negotiating deals, and
performing transactions.

The agents are intelligent because they have contingency plans of action. They
examine themselves and their environment and if necessary change from their original course
of action to an alter- native plan. For example, suppose you send an agent to an on-line store
with a request to order a bouquet of roses for $25 or less. If the shop offers roses starting at
$30, your agent can either choose a different bouquet or find a different store by consulting
an on-line "Yellow Pages" directory, depending on prior instructions.

Although the notion of software agents sounds very seductive, it will take a while to
solve the problems of inter agent communication, interoperable agents, and other headaches
that come with distributed computing and net- working. To some critics, the prospect of a
single-agent language like Telescript as a world standard is disturbing. They worry that
agents sound a bit too much like computer viruses, which instead of running errands may run
amok. Vendors such as General Magic go to great lengths to explain the precautions it has
taken to make this impossible: the limits placed on the power of agents, the "self-destruct"
mechanism built into their codes. Yet until electronic commerce services are up and running
on a large scale, it is impossible to know how well software agents will work.

Interface and Support Services

The third layer, interface and support services, will provide interfaces for electronic
commerce applications such as interactive catalogs and will sup- port directory services-
functions necessary for information search and access. These two concepts are very different.
Interactive catalogs are the customized interface to consumer applications such as home
shopping. An interactive catalog is an extension of the paper-based catalog and incorporates
additional features such as sophisticated graphics and video to make the advertising more
attractive.

Directories, on the other hand, operate behind the scenes and attempt to organize the
enormous amount of information and transactions generated to facilitate electronic
commerce. Directory services databases make data from any server appear as a local file. A
classic example of a directory is the telephone White Pages, which allows us to locate people
and telephone numbers. In the case of electronic commerce, directories would play an

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important role in information management functions. For instance, take the case of buying an
airline ticket with several stopovers with the caveat that the time between layovers be
minimized. This search would require several queries to various on-line directories to find
empty seats on various airlines and then the avail- ability of seats would be coordinated with
the amount of time spent in the air- port terminals.

The primary difference between the two is that unlike interactive catalogs, which deal
with people, directory support services interact directly with soft- ware applications. For this
reason, they need not have the multimedia glitter and jazz generally associated with
interactive catalogs.

From a computing perspective, we can expect that there will be no one common user
interface that will glaze the surface of all electronic commerce applications, but graphics and
object manipulation will definitely predominate. Tool developers and designers might
incorporate common tools for interface building, but the shape of catalogs or directories will
depend on the users' desires and functional requirements.

Secure Messaging and Structured Document Interchange Services

The importance of the fourth layer, secured messaging, is clear. Everyone in business
knows that electronic messaging is a critical business issue. Consider a familiar business
scenario: You hand over an urgent fax Monday and find out Tuesday that it's still sitting on
your fax operator's desk. What happened? The line was busy and he thought he'd try again
later. Or, the number was wrong, but he forgot to let you know. Or you're in London and you
need to send a spreadsheet that details a marketing plan for a product introduction strategy to
a co-worker in New York. This must be done today, not tomorrow when the courier service
would deliver. There is a solution to these common and frustrating problems. It's called inte-
grated messaging: a group of computer services that through the use of a network send,
receive, and combine messages, faxes, and large data files. Some better-known examples are
electronic mail, enhanced fax, and electronic data interchange.

Broadly defined, messaging is the software that sits between the network
infrastructure and the clients or electronic commerce applications, masking the peculiarities
of the environment. Others define messaging as a frame- work for the total implementation of
portable applications, divorcing you from the architectural primitives of your system. In

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general, messaging products are not applications that solve problems; they are more enablers
of the applications that solve problems.

Messaging services offer solutions for communicating non-formatted (unstructured)

data-letters, memos, reports as well as formatted (structured) data such as purchase orders,
shipping notices, and invoices. Unstructured messaging consists of fax, e-mail, and form-
based systems like Lotus Notes. Structured documents messaging consists of the automated
inter- change of standardized and approved messages between computer applications, via
telecommunications lines. Examples of structured document messaging include EDI.

Messaging is gaining momentum in electronic commerce and seems to have many

advantages. It supports both synchronous (immediate) and asynchronous (delayed) message
delivery and processing. With asynchronous messaging, when a message is sent, work
continues (software doesn't wait for a response). This allows the transfer of messages through
store-and-for- ward methods.

Another advantage of messaging is that it is not associated with any particular

communication protocol. No preprocessing is necessary, although there is an increasing need
for programs to interpret the message. Messaging is well suited for both client-server and
peer-to-peer computing models. In distributed systems, the messages are treated as "objects"
that pass between systems.

Messaging is central to work-group computing that is changing the way businesses

operate. The ability to access the right information at the right time across diverse work
groups is a challenge. Today, with the messaging tools, people can communicate and work
together more effectively-no matter where they are located. When an employee sends an
electronic mail form, the information travels along with the form. So one person can start the
form, mail it to the next person, fill it in/sign it, mail it to the next, and so on. This is known
as message-enabled work-flow solutions.

The main disadvantages of messaging are the new types of applications it enables
which appear to be more complex, especially to traditional programmers and the jungle of
standards it involves. Because of the lack of standards, there is often no interoperability
between different messaging vendors leading to islands of messaging. Also, security, privacy,
and confidentiality through data encryption and authentication techniques are important

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issues that need to be resolved for ensuring the legality of the message-based transactions
themselves.

Middleware Services

Middleware is a relatively new concept that emerged only recently. Like so many
other innovations, it came into being out of necessity. Users in the 1970s, when vendors
delivered homogeneous systems that worked, didn't have a need for middleware. When
conditions changed-along with the hardware and the software the organizations couldn't cope:
The tools were inadequate, the backlog was enormous, and the pressure was overwhelm- ing.
And, the users were dissatisfied. Something was needed to solve all the interface, translation,
transformation, and interpretation problems that were driving application developers crazy.

With the growth of networks, client-server technology, and all other forms of
communicating between/among unlike platforms, the problems of get- ting all the pieces to
work together grew from formidable to horrendous. As the cry for distributed computing
spread, users demanded interaction between dissimilar systems, networks that permitted
shared resources, and applications that could be accessed by multiple software programs. In
simple terms, middleware is the ultimate mediator between diverse software pro- grams that
enables them talk to one another.

Another reason for middleware is the computing shift from application centric to data
centric. That is, remote data controls all of the applications in the network instead of
applications controlling data. To achieve data-centric computing, middleware services focus
on three elements: transparency, transaction security and management, and distributed object
management and services.

Transparency

Transparency implies that users should be unaware that they are accessing multiple
systems. Transparency is essential for dealing with higher-level issues than physical media
and interconnection that the underlying network infrastructure is in charge of. The ideal
picture is one of a "virtual" network: a collection of work-group, departmental, enterprise,
and inter enterprise LANs that appears to the end user or client application to be a seamless
and easily accessed whole.

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 Transparency is accomplished using middleware that facilitates a distributed
computing environment. This gives users and applications transparent access to data,
computation, and other resources across collections of multi- vendor, heterogeneous systems.
The strategic architectures of every major system vendor are now based on some form of
middleware. The key to realizing the theoretical benefit of such an architecture is
transparency. Users need not spend their time trying to understand where something is. Nor
should application developers have to code into their applications the exact locations of
resources over the network. The goal is for the applications to send a request to the
middleware layer, which then satisfies the request any way it can, using remote information.

Transaction Security and Management

Support for transaction processing (TP) is fundamental to success in the electronic

commerce market. Security and management are essential to all layers in the electronic
commerce model. At the transaction security level, two broad general categories of security
services exist: authentication and authorization. Transaction integrity must be a given for
businesses that cannot afford any loss or inconsistency in data. Some commercial sites have
had gigantic centralized TP systems running for years. For electronic commerce, middleware
provides the qualities expected in a standard TP sys- tem: the so-called ACID properties
(atomicity, consistency, isolation, and durability).

Distributed Object Management and Services

Object orientation is proving fundamental to the proliferation of network- based

applications for the following reasons: It is too hard to write a net- work-based application
without either extensive developer retraining or a technology that camouflages the intricacies
of the network. Objects are defined as the combination of data and instructions acting on the
data. Objects are an evolution of the more traditional programming concept of functions and
procedures.

A natural instance of an object in electronic commerce is a document. A document

carries data and often carries instructions about the actions to be performed on the data.
Today, the term object is being used interchangeably with document resulting in a new form
of computing called document-oriented computing. Here, the trend is to move away from
single data-type documents such as text, pictures, or video toward integrated documents
known as com- pound document architectures.

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 The best example of this approach is an active document. If you create a new
document that is an integration of the spreadsheet, word processor, and presentation package,
what you'll see in the next generation of operating systems is that as you scroll through your
document, the tool bar will automatically change from a spreadsheet tool bar, to a word
processing tool bar, to a presentation package tool bar. These applications will also be able to
access and retrieve data from any file in the computing network. The implications are clear.
We're going to see a gradual movement toward active documents that will be
designed out of linked applications.

Evidence of the emergence of document-oriented computing is every- where. The

next generation of operating systems (Apple System 8, Microsoft 95 and IBM Taligent)
enable users to create applications that take little "applets" and put them together to make
"hyper apps," or bundles of complex functionality. The document orientation provides the
ability to build applications from applets. It will provide the necessary ease of development
through capabilities of reuse and customization. In addition, document orientation is expected
to provide scalability as the addition (or modification) of underlying infrastructure should
have no impact on application logic or response time in electronic commerce applications.

In sum, middleware acts as an integrator for the various standard proto- cols already
in use, or soon to be available. These protocols include TCP/IP, Open Software Foundation's
distributed computing environment, and the emerging distributed object computing
frameworks for creating compound documents such as Common Object Request Broker
Architecture (CORBA), Object Linking and Embedding (OLE), and OpenDoc .

2.2 World Wide Web as the Architecture

. To provide a human analogy, think of the network infrastructure as the skeleton and
the Web as the flesh, veins, and skin that shape the human body. Carrying the analogy
further, the functions carried out by the human body would be the electronic commerce
applications. In short, the Web provides the functionality necessary for electronic commerce.

Electronic commerce depends on the unspoken assumption that computers cooperate

efficiently for seamless information sharing.

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 Unfortunately, this assumption of interoperability has not been supported by the
realities of practical computing. Computing is still a world made up of many technical
directions, product implementations, and competing vendors. This diversity, while good for
innovation, causes problems as the e-commerce applications try to impose a certain discipline
on the proliferating computers and net- works. It is ironic that the real effect of computing is
all too often the prevention of data sharing due to incompatibilities-architectures, data
formats, and communications protocols.

The Web community of developers and users is tackling these complex problems. The
Web began in March 1989, when Tim Berners-Lee of the European Laboratory for Particle
Physics (known as CERN, an R&D group of European high-energy physics researchers)
proposed the Web project for research collaboration. Information sharing has been a goal of
CERN, whose members are located in a number of European countries, for many years.

The initial proposal outlined a simple system of using networked hyper- text to
quickly disseminate documents among colleagues. There was no intention of supporting
sound, video, or images in this proposal. By the end of 1990, an implementation of the Web
was placed on a NeXT machine at CERN. The software had the capability to serve
documents to other people on the Internet and came with the capability to edit documents on
the screen using a very primitive line-mode browser (tool for examining Web documents).

The project quickly expanded beyond all imagination as others under- stood the
potential for global information sharing. Hundreds of people throughout the world have
contributed by writing and modifying Web soft- ware and documents. In a way never
envisioned by the original project group, the project reached global proportions by the middle
of 1993 with the introduction of the NCSA Mosaic-a multimedia front-end to all the
information served by the Web.

It shows a block diagram depicting the numerous pieces that constitute a Web
architecture. The architecture is made up of three primary entities: client browser, Web
server, and third-party services. The client browser usually interacts with the WWW server,
which acts as an intermediary in the interaction with third-party services. The client browser
resides on the user's PC or workstation and provides an interface to the various types of
content. For instance, if the user retrieves a graphics file from a Web server, the browser
automatically starts up the browser extension to display the graphics file. Remember that

40
many types of graphics files are available-JPEG, GIF, TIFF, BMP, among others. The
browser has to be smart enough to understand what file it is downloading and what browser
extension it needs to activate to display the file. Browsers are also capable of manipulating
local files.

Web server functions can be categorized into information retrieval, data and transaction
management, and security. The third-party services could be other Web servers that make up
the digital library, information processing tools, and electronic payment systems.

What Does the Web Encompass?

The Web has become an umbrella for a wide range of concepts and technolo- gies that
differ markedly in purpose and scope. These include the global hypertext publishing concept,
the universal reader concept, and the client-server concept.

The global hypertext publishing concept promotes the idea of a seamless information
world in which all on-line information can be accessed and retrieved in a consistent and
simple way. To access information in this seam- less world, we will need the ability to
address many types of data-text files, images, sound files, animation sequences.

41
 The universal readership concept promotes the idea that, unlike the segmented
applications of the past, we can use one application-a universal (or common) user interface-to
read a variety of documents. This concept implies that once information is published it is
accessible from any type of computer, in any country, and that any (authorized) person
merely needs to use one simple program to access it. This is accomplished in the Web by
using a core browser or application that is augmented by supporting applications. The core
browser implements only minimal functionality and attempts to offload more specialized
work onto the supporting applications .

The client-server concept allows the Web to grow easily without any centralized
control. Anyone can publish information, and anyone (as long as he or she is authorized) can
read and download it. Publishing information requires a server program, and reading data
requires a client browser. All the clients and all the servers are connected to one another by
the Internet.

The various standard protocols allow all clients to communicate with all servers. The
client-server architecture of the Web is illustrated. In practice the Web hangs on a number of
essential concepts, including the following:

• The addressing scheme known as uniform resource locator (URL) makes the hypermedia
world possible despite many different protocols.

42
• A network protocol known as hypertext transfer protocol (HTTP) used by the client
browsers and servers offers performance and features not other- wise available.

A mark-up language (HTML), which every Web client is required to understand, is used for
the representation of hypertext documents containing text, list boxes, and graphics
information across the net.

2.3 Consumer-Oriented Applications

The wide range of applications envisioned for the consumer marketplace can be
broadly classified into:

 Entertainment

 Financial Services and Information

 Essential Services

 Education and Training

Personal Finance and Home Banking Management

 Basic Services

 Intermediate Services

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  Advanced services

Home Shopping

 Television-Based Shopping

 Catalog-Based Shopping

Home Entertainment

 Size of the Home Entertainment Market

 Impact of the Home Entertainment on Traditional Industries

Micro transactions of Information

Personal Finance and Home Banking Management:

 The newest technologies are direct deposit of payroll, on-line bill payment and
telephone transfers

 The technology for paying bills, whether by computer or telephone, is

infinitely more sophisticated than anything on the market a few years ago .

 In 1980s were the days of “stone age” technology because of technology

choices for accessing services were limited

 For home banking, greater demands on consumers and expanding need for
information, it’s services are often categorized as basic, intermediate and
advanced

Basic services

 These are related to personal finance

 The evolution of ATM machines from live tellers andnow to home banking

 The ATM network has with banks and their associations being the routers and the
ATM machines being the heterogeneous computers on the network.

44
  This interoperable network of ATMs has created an interface between customer
and bank that changed the competitive dynamics of the industry.

 Increased ATM usage and decrease in teller transactions .The future of home
banking lies with PC’s

Intermediate Services

 The problem with home banking in 1980 is, it is expensive service that requires a PC,
a modem and special software

 As the equipment becomes less expensive and as bank offers broader services,
home banking develop into a comprehensive package that could even include as
insurance ,entertainment

 Consider the computerized on-line bill-payment system

45
  It never forgets to record a payment and keeps track of user account number,
name, amount and the date and we used to instruct with payment instructions.

Advanced Services

 The goal of advanced series is to offer their on-line customers a complete

portfolio of life, home, and auto insurance along with mutual funds, pension plans,
home financing, and other financial products

 The Figure explains the range of services that may well be offered by banks in future

 The services range from on-line shopping to real-time financial information

from anywhere in the world

 In short, home banking allows consumers to avoid long lines and gives flexibility

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Home Shopping:

It is already in wide use and this enable a customer to do online shopping.

Television-Based Shopping:

 It is launched in 1977 by the Home Shopping Network (HSN).

 It provides a variety of goods ranging from collectibles, clothing, small electronics,

house wares, jewelry, and computers

 When HSN started in Florida in 1977, it mainly sold factory overruns and
discontinued items

 It works as, the customer uses her remote control at shop different channels with
touch of button. At this time, cable shopping channels are not truly interactive

Catalog-Based Shopping

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  In this the customer identifies the various catalogs that fit certain parameters
such as safety, price, and quality

 The on-line catalog business consists of brochures , CD-ROM catalogs, and

on-line interactive catalogs

 Currently, we are using the electronic brochures

Home Entertainment:

 It is another application for e-commerce

 Customer can watch movie, play games, on-screen catalogs, such as TV guide

 In Home entertainment area, customer is the control over programming. In Table

tells them, What will be required in terms of Television-based technology for this
telemart to become a reality.

Advanced Services

Size of the home Entertainment Market:

 Entertainment services are play a major role in e-commerce

 This prediction is underscored by the changing trends in consumer behavior

Impact of Home entertainment on traditional industries:

 This will have devastating effects on theater business

 Economic issues might allow theaters to maintain an important role in the movie
industry

 Today average cable bill is approximately $30 a month

Industry Estimates of consumer Expenditures

 Theaters 49.0% $2.3 14.5% $4.5 13.2% $5.0

 Basic cable 35.0% $1.6 34.5% $10.7 36.9% $13.9

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  Premium cable 16.0% $0.8 16.5%$5.1 14.0% $5.3

 Home video __ __ 33.8% $10.5 34.8% $13.2

 Pay per view __ __ 0.7% $0.2 1.1% $0.4

Micro transactions of information:

 One change in traditional business forced by the on-line information

business is the creation of a new transaction category called small-fee
transactions for micro services

 The customer by giving some information away for free and provide information
bundles that cover the transaction overhead.

 The growth of small-money transfers could foster a boom in other

complementary information services

 The complexity is also increased in micro services when an activity named, re-
verification is entered.

 It means checking on the validity of the transaction after it has been approved
Desirable Characteristics of an Electronic marketplace

 Critical mass of Buyers and sellers: To get critical mass, use electronic
mechanisms Opportunity for independent evaluations and for customer dialogue
and discussion:

 Users not only buy and sell products, they compare notes on who has the
best products and whose prices are outrageous

 Negotiation and bargaining: Buyers and sellers need to able to haggle over
conditions of mutual satisfaction, money, terms & conditions, delivery dates &
evaluation criteria

 New products and services: Electronic marketplace is only support full

information about new services

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  Seamless interface: The trading is having pieces work together so that
information can flow seamlessly

 Resource for disgruntled buyers: It provide for resolving disagreements by

returning the product.

2.4 Mercantile Process Models

Mercantile processes define interaction models between consumers and merchants for
online commerce

2.4.1 Mercantile Models from the Consumer's Perspective and Merchant's Perspective

MERCANTILE MODELS FROM THE CONSUMER'S PERSPECTIVE

Pre purchase preparation:

The pre purchase preparation phase include search and discovery for a set of products to
meet customer requirements

 The consumer information search process.

 The Organizational search process.
 Consumer search experiences.
 Information brokers & brokerages.

Purchase consummation:

The purchase consummation phase include mercantile protocols

 Mercantile process using digital cash.

 Mercantile transaction using credit cards.
 Costs of electronic purchasing.
Post purchase interaction: The post purchase interaction phase includes customer service
& Support

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Pre purchase Preparation: The purchase is done by the buyers, so consumers can be
categorized into 3 types

 Impulsive buyers, who purchase products quickly

 Patient buyers, purchase products after making some comparisons
 Analytical buyers, who do substantial research before making decision to
purchase products

Marketing researches have several types of purchasing:

 Specifically planned purchases

 Generally planned purchases
 Reminder purchase
 Entirely unplanned purchases


The consumer information search process: Information search is defined as the degree of
care, perception,& effort directed toward obtaining data or information related to the
decision problem

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The Organizational search process :Organizational search can be viewed as a process
through which an organization adapts to such changes in its external environment as new
suppliers, products, & services.

Consumer Search Experiences: The distinction between carrying out a shopping activity
“to achieve a goal” (utilitarian) as opposed to doing it because “ u love it” (hedonic).

Information Brokers and Brokerages

 To facilitate better consumer and organizational search, intermediaries called
information brokers or brokerages
 Information brokerages are needed for 3 reasons: Comparison shopping, reduced
search costs, and integration

Purchase Consummation

 Buyer contacts vendor to purchase

 Vendor states price
 Buyer and Vendor may or may not engage in negotiation
 If satisfied, buyer ask the payment to the vendor
 Vendor contacts billing service
 Billing service decrypts authorization and check buyers account balance
 Billing service gives to the vendor to deliver product
 Vendor delivers the goods to buyer
 On receiving the goods, the buyer signs and delivers receipt
 At the end of the billing cycle, buyer receives a list of transactions

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Mercantile process using Digital Cash

• Buyer obtains e-cash from issuing bank

• Buyer contacts seller to purchase product
• Seller states price
• Buyer sends e-cash to seller
• Seller contacts his bank or billing service to verify the validity of the cash
• Bank gives okay signal
• Seller delivers the product to buyer
• Seller then tells bank to mark the e-cash as “used" currency

Mercantile Transactions Using Credit Cards

 Two major components compromise credit card transactions in this process:

electronic authorization and settlement
 In retail transaction, a third-party processor (TPP) captures information at the
point of sale, transmits the information to the credit card issuer for authorization,
communicates a response to the merchant and electronically stores the
information for settlement and reporting.
 The benefits of electronic processing include the reduction in credit losses,
lower merchant transaction costs, & faster consumer checkout & merchant-to-bank
settlement

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A step-by-step account of retail transaction follows:
Step1: A customer presents a credit card for payment at a retail location
Step2: The point-of-sale software directs the transaction information to the local network
Step3: System verifies the source of the transaction and routes it.
Step4: In this, transaction count and financial totals are confirmed between the terminal and
the network
Step5: In this, the system gathers all completed batches and processes the data in
preparation for settlement

A merchant client takes one of two forms:

 Merchants are charged a flat fee per transaction for authorization and data
capture services

 The other form of billing allows merchants to pay a” bundled” price for authorization,
data capture, & settlement

Cost of Electronic Purchasing: Cash seems to be preferable to electronic payments,

such as, on-line debit, credit, and electronic check authorization • Consumers appear to
spend more when using cards then when spending cash

Post purchase Interaction: Returns and claims are an important part of the purchasing
process. Other complex customer service challenges arise in customized retailing are:

Inventory issues:

To serve the customer properly, a company should inform a customer right

away and if the item is in stock, a company must able to assign that piece to customer
.Database access and compatibility issues: Customers should get kind of services by easy
issues like calling an 800 number .

Customer service issues: To clear the doubts of customer about product

MERCANTILE MODELS FROM THE MERCHANT'S PERSPECTIVE

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  To better understanding, it is necessary to examine the order management cycle
(OMC).
 The OMC includes eight distinct activities. The actual details of OMC vary from
industry to industry and also for individual products and services
 OMC has generic steps
 Order planning & Order generation.
 Cost estimation & pricing.
 Order receipt & entry.
 Order selection & prioritization.
 Order Scheduling
 Order fulfillment & delivery.
 Order billing & account/payment management.
 Post sales service.

Order planning & order Generation

 Order planning leads to order generation.

 Orders are generated in a no. of ways in the e-commerce environment.
 The sales force broadcasts ads (direct marketing), sends personalized e-mail to
customers (cold calls), or creates a WWW page

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Cost Estimation & pricing

 Pricing is the bridge between customer needs & company capabilities.

 Pricing at the individual order level depends on understanding the value to the
customer that is generated by each order, evaluating the cost of filling each order; &
instituting a system that enables the company to price each order based on its value &
cost

Order Receipt & Entry

 After an acceptable price Quote, the customer enters the order receipt & entry phase
of OMC.
 This was under the purview of departments variously titled customer service, order
entry, the inside sales desk, or customer liaison.

Order Selection & Prioritization

 Customer service representatives are also often responsible for choosing which orders
to accept and which to decline.
 Not, all customers’ orders are created equal; some are better for the business.

Order Scheduling

 In this phase the prioritized orders get slotted into an actual production or
operational sequence.
 This task is difficult because the different functional departments- sales,
marketing, customer service, operations, or production- may have conflicting
goals, compensation systems, & organizational imperative
 Production people seek to minimize equipment changeovers, while marketing &
customer service reps argue for special service for special customers.

Order Fulfillment & Delivery

 In this actual provision of the product or service is made.

 It involves multiple functions and locations.

Order Billing & Account/Payment Management

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  After the order has been fulfilled & delivered, billing is given by finance staff.
 The billing function is designed to serve the needs and interests of the company, not
the customer.

Post sales Service

 This phase plays an increasingly important role in all elements of a company’s

profit equation: customer, price, & cost.
 It can include such elements as physical installation of a product, repair &
maintenance, customer training, equipment upgrading & disposal.

57
 UNIT-III
3.1 Electronic Payment Systems

Electronic payment systems are proliferating in banking, retail, health care, on-line

markets, and even government—in fact, anywhere money needs to change hands.

• Organizations are motivated by the need to deliver products and services more cost

effectively and to provide a higher quality of service to customers.

• The emerging electronic payment technology labeled electronic funds transfer

(EFT).

• EFT is defined as “any transfer of funds initiated through an electronic terminal,

telephonic instrument, or computer or magnetic tape so as to order, instruct, or

authorize a financial institution

3.1.1 Types of Electronic Payment Systems

 EFT can be segmented into three broad categories:

Banking and financial payments

 Large-scale or wholesale payments (e.g., bank-to-bank transfer)

 Small-scale or retail payments (e.g., automated teller machines)
 Home banking (e.g., bill payment)

Retailing payments

 Credit Cards (e.g., VISA or MasterCard)

 Private label credit/debit cards (e.g., J.C. Penney Card)
 Charge Cards (e.g., American Express

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On-line electronic commerce payments

Token-based payment systems

 Electronic cash (e.g., DigiCash)

 Electronic checks (e.g., NetCheque)
 Smart cards or debit cards (e.g., Mondex ElectronicCurrency Card))

Credit card-based payments systems

 Encrypted Credit Cards (e.g., World Wide Web form-based encryption)

 Third-party authorization numbers (e.g., First Virtual)

3.1.2 Digital Token-Based Electronic Payment Systems

Electronic tokens are three types:

Cash or Real-time
 Transactions are settled with exchange of electronic currency.
 Ex: on-line currency exchange is electronic cash (e-cash).
Debit or Prepaid
 Users pay in advance for the privilege of getting information.
 Ex: prepaid payment mechanisms are stored in smart cards and
electronic purses that store electronic money.
Credit or Postpaid
 The server authenticates the customers and verifies with the bank that funds
are adequate before purchase.
 Ex: postpaid mechanisms are credit/debit cards and electronic checks.

Properties of Electronic Cash

There are many ways that exist for implementing an e-cash system , all must
incorporate a few common features. Specifically, e-cash must have the following four
properties:
 Monetary value
 Interoperability
 Retrievability

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  Security

Electronic Cash in Action

 Electronic Cash is based on cryptographic systems called “digital signatures”.

 This method involves a pair of numeric keys: one for locking (encoding) and the
other for unlocking (decoding). (Through public key and private key).

Purchasing E-cash from Currency Servers

The purchase of e-cash from an on-line currency server (or bank) involves two
 Establishment of an account and
 maintaining enough money in the account to bank the purchase.
Some customers might prefer to purchase e-cash with paper currency, either to
maintain anonymity or because they don’t have a bank account.

Using the Digital Currency

 Once the tokens are purchased, the e-cash software on the customer’s PC stores
digital money undersigned by a bank.
 The users can spend the digital money at any shop accepting e-cash, without
having to open an account there or having to transmit credit card numbers.
 As soon as the customer wants to make a payment, the software collects the
necessary amount from the stored tokens.

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Electronic Checks

 It is another form of electronic tokens.

 In the given model shown in fig, buyers must register with third-party account
server before they are able to write electronic checks.
 The account server acts as a billing service.
 The advantages are:
 They work in the same way as traditional checks.

 These are suited for clearing micropayments

 They create float & availability of float is an important for

commerce

 Financial risk is assumed by the accounting server & may result in easier acceptance.

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3.1.3 Smart Card And Credit Card Based Electronic Payment Systems

 Smart cards have been in existence since the early 1980s and hold promise
for secure transactions using existing infrastructure.
 Smart cards are credit and debit cards and other card products enhanced
with microprocessors capable of holding more information than the traditional
magnetic stripe. The smart card technology is widely used in countries such as
France, Germany, Japan, and Singapore to pay for public phone calls,
transportation, and shopper loyalty programs. Smart cards are basically two
types:
 Relationship-Based Smart Credit Cards
 Electronic Purses, which replace money, are also known as debit
cards and electronic money.

Relationship-Based Smart Credit Cards

 It is an enhancement of existing cards services &/ or the addition of new services

that a financial institution delivers to its customers via a chip-based card or other
device .
 These services include access to multiple financial accounts, value-added
marketing programs, or other information card holders may want to store on their
card .
 It includes access to multiple accounts, such as debit, credit, cash access,
bill payment & multiple access options at multiple locations

Electronic Purses

 To replace cash and place a financial instrument are racing to introduce

“electronic purses”, wallet-sized smart cards embedded with programmable
microchips that store sums of money for people to use instead of cash for everything
 The electronic purse works in the following manner:
 After purse is loaded with money at an ATM, it can be used to pay for
candy in a vending machine with a card reader.

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  It verifies card is authentic & it has enough money, the value is deducted
from balance on the card & added to an e-cash & remaining balance is
displayed by the vending machine.

Credit Card-Based Electronic Payment Systems

Payment cards are all types of plastic cards that consumers use to make purchases:

Credit cards: Such as a Visa or a MasterCard, has a preset spending limit based on the
user’s credit limit.

Debit cards : Removes the amount of the charge from the cardholder’s account and
transfers it to the seller’s bank.

Charge cards: Such as one from American Express, carries no preset spending limit.

Advantages:

 Payment cards provide fraud protection.

 They have worldwide acceptance (nearly!).
 They are good for online transactions.

Disadvantages

 Payment card service companies charge merchants per-transaction fees and

monthly processing fees.

Payment Acceptance and Processing

 Open loop (such as VISA) and closed loop (such as American Express)
systems will accept and process payment cards.
 A merchant bank or acquiring bank is a bank that does business with
merchants who want to accept payment cards.
 Software packaged with your electronic commerce software can handle payment
card processing automatically.

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 Electronic cash is a general term that describes the attempts of several
companies to create value storage and exchange system that operates online in much
the same way that government-issued currency operates in the physical world.
 Concerns about electronic payment methods include:
 Privacy ,
 Security
 Independence,
 Portability
 Convenience

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Electronic Cash Issues

 Primary advantage is with purchase of items less than £5

 Credit card transaction fees make small purchases unprofitable
 Facilitates Micropayments – e.g. for items costing less than £1
 Must be anonymous, just like regular currency
 Safeguards must be in place to prevent counterfeiting
 Must be independent and freely transferable regardless of nationality or storage
Mechanism

Electronic Cash Storage

There are Two methods

On-line

 Individual does not have possession personally of electronic cash

 Trusted third party, e.g. e-banking, bank holds customers’ cash accounts

Off-line

 Customer holds cash on smart card or electronic wallet

 Fraud and double spending require tamper-proof encryption

3.1.4 Risks and Electronic Payment Systems

Customer's risks

 Stolen credentials or password

 Dishonest merchant
 Disputes over transaction
 Inappropriate use of transaction details

Merchant’s risk
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  Forged or copied instruments
 Disputed charges
 Insufficient funds in customer’s account
 Unauthorized redistribution of purchased items

Main issue: Secure payment scheme

Electronic payments Issues

 Secure transfer across internet

 High reliability: no single failure point
 Atomic transactions
 Anonymity of buyer
 Economic and computational efficiency: allow micropayments
 Flexibility: across different methods
 Scalability in number of servers and users

3.1.5 Designing Electronic Payment systems

It includes several factors:

Privacy: A user expects to trust in a secure system; just as a telephone is a safe

Security: A secure system verifies the identity of two-party transactions through “user
authentication” & reserves flexibility to restrict information/services through access
control

Intuitive interfaces: The payment interface must be as easy to use as a telephone.

Database integration: With home banking, for ex, a customer wants to play with all his
accounts.

Brokers: A “network banker”-someone to broker goods & services, settle conflicts, &
financial transactions electronically-must be in place

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Pricing: One fundamental issue is how to price payment system services. For e.g., from cash
to bank payments, from paper-based to e-cash. The problem is potential waste of
resources.

Standards: Without standards, the welding of different payment users into different
networks & different systems is impossible.

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 UNIT-IV

4.1 Electronic Data Interchange

 Electronic Data Interchange (EDI) - interposes communication of business

information in standardized electronic form.

 Prior to EDI, business depended on postal and phone systems that restricted
communication to those few hours of the workday that overlap between time
zones

Why EDI

 Reduction in transaction costs

 Foster closer relationships between trading partners

EDI & Electronic Commerce

 Electronic commerce includes EDI & much more

 EDI forges boundary less relationships by improving interchange of information

between trading partners, suppliers, & customers

BENEFITS OF EDI

 Cost & time savings, Speed, Accuracy, Security, System Integration, Just-
In-Time Support.

 Reduced paper-based systems, i.e. record maintenance, space, paper, postage costs

 Improved problem resolution & customer service

 Expanded customer/supplier base or suppliers with no EDI program lose business

EDI layered architecture

 Semantic (or application) layer

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  Standards translation layer
 Packing (or transport) layer
 Physical network infrastructure layer

EDI semantic layer

 Describes the business application

 Procurement example

 Requests for quotes

 Price quotes

 Purchase orders

 Acknowledgments

 Invoices

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  Specific to company & software used

Standards translation:

 Specifies business form structure so that information can be exchanged

 Two competing standards

 American National Standards Institute(ANSI)X12

 EDIFACT developed by UN/ECE, Working Party for the Facilitation of

 International Trade Procedures

EDI transport layer

 How the business form is sent, e.g. post, UPS, fax

 Increasingly, e-mail is the carrier

 Differentiating EDI from e-mail

 Emphasis on automation

 EDI has certain legal status

Physical network infrastructure layer

 Dial-up lines, Internet, value-added network, etc.

EDI in Action

 The fig shows the information flow when paper documents are shuffled
between organizations via the mailroom

 When the buyer sends a purchase order, then relevant data extracted & recorded
on a hard copy.

 This hard copy is forwarded to several steps, at last manually entered into system
by the data entry operators

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  This process is somewhat overhead in labor costs & time delays.

 This hard copy is forwarded to several steps, at last manually entered into system
by the data entry operators

 This process is somewhat overhead in labor costs & time delays.

Information flows with EDI are as follows:

 Buyer sends purchase order to seller computer

 Seller sends purchase order confirmation to buyer

 Seller sends booking request to transport company

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 Transport company sends booking confirmation to seller

 Seller sends advance ship notice to buyer

 Transport company sends status to seller

 Buyer sends Receipt advice to seller

 Seller sends invoice to buyer

 Buyer sends payment to seller

 EDI as a fast, inexpensive & safe method

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4.2 EDI Applications in Business

Four different scenarios in industries that use EDI extensively:

 International or cross-border trade

 Electronic funds transfer

 Health care EDI for insurance claims processing

 Manufacturing & retail procurement

 EDI has always been very closely linked with international trade.

 Trade efficiency, which allows faster, simpler, broader & less costly transactions

Role of EDI in international trade

 EDI facilitates the smooth flow of information

 It reduces paper work

 EDI benefits for international trade are

 Reduced transaction expenditures

 Quicker movement of imported & exported goods

 Improved customer service through “track & trace” programs

 Faster customs clearance & reduced opportunities for corruption, a huge

problem in trade

Interbank Electronic Funds Transfer (EFT)

 EFTS is credit transfers between banks where funds flow directly from the payer’s
bank to the payee’s bank.

 The two biggest funds transfer services in the United States are the Federal
Reserve’s system, Fed wire, & the Clearing House Interbank Payments System
(CHIPS) of the New York clearing house

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Automated Clearinghouse (ACH) Transfers

 ACH transfers are used to process high volumes of relatively small-dollar payments
for settlement in one or two business days

 It provides services: preauthorized debits, such as repetitive bill payments; &

consumer initiated payments.

Health care EDI for insurance EDI

 Providing good & affordable health care is a universal problem

 EDI is becoming a permanent fixture in both insurance & health care

industries as medical provider, patients, & payers

 Electronic claim processing is quick & reduces the administrative costs of health
care.

 Using EDI software, service providers prepare the forms & submit claims
via communication lines to the value-added network service provider

 The company then edits sorts & distributes forms to the payer. If necessary, the
insurance company can electronically route transactions to a third-party for price
evaluation

 Claims submission also receives reports regarding claim status & request for
additional Information

Manufacturing & retail procurement using EDI

 These are heavy users of EDI

 In manufacturing, EDI is used to support just-in-time.

 In retailing, EDI is used to support quick response

Just-In-Time & EDI

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  Companies using JIT & EDI calculates how many parts are needed each day based on
the production schedule & electronically transmit orders.

 Delivery has to be responsive, or it will cost too much in money & time. Getting data
to suppliers quickly.

 A major benefit of JIT & EDI is a streamlined cash flow.

Quick Response & EDI

 For the customer, QR means better service & availability of a wider range of
products.

 For the retailer & supplier, QR may mean survival in a competitive market place.

 Much focus of QR is in reduction of lead times using event-driven EDI.

 In QR, EDI documents include purchase orders, shipping notices, invoices,

inventory position, catalogs, & order status

4.3 EDI: Legal, Security and Privacy issues EDI and Electronic Commerce

Legal Status of EDI Messages

To understand the legal framework, let’s take a look on three modes of

communication types: Instantaneous communication, delayed communication via the U.S.
Postal Service (USPS), & delayed communication via non-USPS couriers;

 Instantaneous: If the parties are face to face or use an instantaneous

communication medium such as the telephone

 Delayed (USPS): The “mailbox rule” provides that an acceptance communicated

via USPS mail is effectively when dispatched

 Delayed (non-USPS): Acceptances transmitted via telegram, mailgram, &

electronic messages, are communicated & operable upon receipt.

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Digital Signatures & EDI

 Digital signatures might be time-stamped or digitally notarized to establish dates &

times.

 If digital signatures are to replace handwritten signatures, they must have the same
legal status as handwritten signatures.

 It provides a means for a third party to verify that notarized object is authentic.

EDI & Electronic Commerce

New types of EDI are traditional EDI & open EDI

Traditional EDI

 It replaces the paper forms with almost strict one-to-one mappings between
parts of a paper form to fields of electronic forms called transaction sets.

 It covers two basic business areas:

 Trade data Interchange (TDI) encompasses transactions such as purchase orders,

invoice & acknowledgements.

 Electronic Funds Transfer (EFT) is the automatic transfer of funds among banks
& other organizations

 It is divided into 2 camps: old EDI & new EDI.

 Old EDI is a term created by those working on the next generation of

EDI standards in order to differentiate between the present & the
future.

Old EDI

 Automating the exchange of information pertinent to business activity

 It is referred as the current EDI-standardization process where it allows every

company to choose its own, unique, proprietary version

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New EDI

 It is refocusing of the standardization process.

 In this, the structure of the interchanges is determined by the programmer who

writes a program.

 It removes long standardization process.

Open EDI

 It is a business procedure that enables e-commerce to occur between organizations

where the interaction is of short duration.

 It is process of doing EDI without the upfront trading partner agreement that is
currently signed by the trading partners

 The goal is to sustain ad hoc business or short-term trading relationships using

simpler legal codes.

 It is a law of contract within the context of e-commerce where transactions

are not repeated over long period of time.

4.4 Standardization & EDI

Standards translation

 Specifies business form structure so that information can be exchanged .

 Two competing standards

 American National Standards Institute (ANSI) X12

 EDIFACT developed by UN/ECE, Working Party for the
Facilitation of International Trade Procedures

Structure of EDI transactions

 Transaction set is equivalent to a business document, such as a purchase order

 Data Segments are logical groups of data elements that together convey

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  information

 Data elements are individual fields, such as purchase order no.

Comparison of EDIFACT & X.12 Standards

 These are comprised of strings of data elements called segments.

 A transaction set is a set of segments ordered as specified by the standard.

 ANSI standards require each element to have a very specific name, such as order date
or invoice date.

 EDIFACT segments, allow for multiuse elements, such as date.

 EDIFACT has fewer data elements & segments & only one beginning segment
(header), but it has more composites. It is an ever-evolving platform

4.5 EDI Software Implementation

EDI software has 4 layers:

 Business application

 Internal format conversion

 EDI Translator

 EDI envelope for document messaging

 These 4 layers package the information & send it over the value-added network to
the target business, which then reverses the process to obtain the original
information

EDI Business Application Layer

 It creates a document, an invoice.

 Sends to EDI translator, reformats the invoice into an EDI standard.

 If there are on the same type of computer, the data move faster

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EDI Envelope for Message Transport

 The X.400 standard was meant to the universal answer to e-mail interconnectivity

 It promises much & to date, delivers little.

 The work on X.400 began in1980

 It is the open standard for mail interchange

 The standard exists in 3 versions: 1984, 1988, & 1992

EDI Software Implementation

 The X.435 inserts a special field in an X.400 envelope to identify an EDI message

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  It includes data encryption; integrity; notification of message delivery & non-delivery;
& non-repudiation of delivery

 It is secure, reliable way to send EDI & accompanying files within the same message.

 Purchase orders, invoices, drawings, e-mail- all could be sent with end-to-end
acknowledgment of message receipt.

Value-Added Networks (VANs)

 A VAN is a communication network that typically exchanges EDI messages

among trading partners.
 It provides services, including holding messages in “electronic mailboxes”,
interfacing with other VANs
 Disadvantage is EDI-enabling VANs is that they are slow & high-priced,
charging by the no. of characters transmitted

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Internet-Based EDI

Several factors make internet useful for EDI:

• Flat-pricing that is not dependent on the amount of information transferred

• Cheap access with low cost of connection- often a flat monthly fee for leased line 0r dialup
access

• Common mail standards & proven networking & interoperable systems

• Security--public-key encryption techniques are being incorporated in various electronic

mail systems

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 UNIT-V
5.1 Internet and World Wide Web

A computer network is any technology that allows people to connect computers to

each other. An internet is a group of computer networks that have been interconnected. In
fact, “internet” is short for “interconnected network.” One particular internet, which uses a
specific set of rules and connects networks all over the world to each other, is called the
Internet. Networks of computers and the Internet that connects them to each other form the
basic technological structure that underlies virtually all electronic commerce.

. Internet known as the World Wide Web, or, more simply, the Web, is a subset of the
computers on the Internet that are connected to one another in a specific way that makes them
and their contents easily accessible to each other. The most important thing about the Web is
that it includes an easy-to-use standard interface. This interface makes it possible for people
who are not computer experts to use the Web to access a variety of Internet resources.

5.2 Origins of the Internet

In the early 1960s, the U.S. Department of Defense became concerned about the
possible effects of nuclear attack on its computing facilities. The Defense Department
realized that the weapons of the future would require powerful computers for coordination
and control. The powerful computers of that time were all large mainframe computers.
Defense Department began examining ways to connect these computers to each other and
also to connect them to weapons installations distributed all over the world. Employing many
of the best communications technology researchers, the Defense Department funded research
at leading universities and institutes.

The goal of this research was to design a worldwide network that could remain
operational, even if parts of the network were destroyed by enemy military action or
sabotage. These researchers determined that the best path to accomplishing their goals was to
create networks that did not require a central computer to control network operations. The
computer networks that existed at that time used leased telephone company lines for their
connections. These telephone company systems established a single connection between
sender and receiver for each telephone call, then that connection carried all data along a
single path. When a company wanted to connect computers it owned at two different

82
locations, the company placed a telephone call to establish the connection, and then
connected one computer to each end of that single connection. The Defense Department was
concerned about the inherent risk of this single-channel method for connecting computers,
and its researchers developed a different method of sending information through multiple
channels.

In this method, files and messages are broken into packets that are labeled
electronically with codes for their origins, sequences, and destinations. You will learn more
about how packet networks operate later in this chapter. In 1969, Defense Department
researchers in the Advanced Research Projects Agency (ARPA) used this direct connection
network model to connect four computers—one each at the University of California at Los
Angeles, SRI International, the University of California at Santa Barbara, and the University
of Utah—into a network called the ARPANET. The ARPANET was the earliest of the
networks that eventually combined to become what we now call the Internet. Throughout the
1970s and 1980s, many researchers in the academic community connected to the ARPANET
and contributed to the technological developments that increased its speed and efficiency. At
the same time, researchers at other universities were creating their own networks using
similar technologies.

5.3 New Uses for the Internet

Although the goals of the Defense Department network were to control weapons
systems and transfer research files, other uses for this vast network began to appear in the
early 1970s. E-mail was born in 1972 when Ray Tomlinson, a researcher who used the
network, wrote a program that could send and receive messages over the network. This new
method of communicating became widely used very quickly. The number of network users in
the military and education research communities continued to grow. Many of these new
participants used the networking technology to transfer files and access computers remotely.
The first e-mail mailing lists also appeared on these military and education research
networks. A mailing list is an e-mail address that forwards any message it receives to any
user who has subscribed to the list. In 1979, a group of students and programmers at Duke
University and the University of North Carolina started Usenet, an abbreviation for User’s
News Network. Usenet allows anyone who connects to the network to read and post articles
on a variety of subjects. Usenet survives on the Internet today, with more than 1000 different
topic areas that are called newsgroups. Other researchers even created game-playing software

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for use on these interconnected networks. Although the people using these networks were
developing many creative applications, use of the networks was limited to those members of
the research and academic communities who could access them. Between 1979 and 1989,
these network applications were improved and tested by an increasing number of users.

The Defense Department’s networking software became more widely used in

academic and research institutions as these organizations recognized the benefits of having a
common communications network. As the number of people in different organizations using
these networks increased, security problems were recognized.. The explosion of personal
computer use during the 1980s also helped more people become comfortable with computers.
During the 1980s, other independent networks were developed by academics worldwide
(such as Bitnet) and researchers in specific countries other than the United States (such as the
United Kingdom’s academic research network, Janet). In the late 1980s, these independent
academic and research networks from all over the world merged into what we now call the
Internet.

5.4 Commercial Use of the Internet

As personal computers became more powerful, affordable, and available during the
1980s, companies increasingly used them to construct their own internal networks. Although
these networks included e-mail software that employees could use to send messages to each
other, businesses wanted their employees to be able to communicate with people outside their
corporate networks. The Defense Department network and most of the academic networks
that had teamed up with it were receiving funding from the National Science Foundation
(NSF).

The NSF prohibited commercial network traffic on its networks, so businesses turned
to commercial e-mail service providers to handle their e-mail needs. Larger firms built their
own networks that used leased telephone lines to connect field offices to corporate
headquarters. In 1989, the NSF permitted two commercial e-mail services, MCI Mail and
CompuServe, to establish limited connections to the Internet for the sole purpose of
exchanging e-mail transmissions with users of the Internet. These connections allowed
commercial enterprises to send e-mail directly to Internet addresses, and allowed members of
the research and education communities on the Internet to send e-mail directly to MCI Mail
and CompuServe addresses.

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 The NSF justified this limited commercial use of the Internet as a service that would
primarily benefit the Internet’s noncommercial users. As the 1990s began, people from all
walks of life—not just scientists or academic researchers—started thinking of these networks
as the global resource that we now know as the Internet. Although this network of networks
had grown from four Defense Department computers in 1969 to more than 300,000
computers on many interconnected networks by 1990, the greatest growth of the Internet was
yet to come.

5.5 Growth of the Internet

In 1991, the NSF further eased its restrictions on commercial Internet activity and
began implementing plans to privatize the Internet. The privatization of the Internet was
substantially completed in 1995, when the NSF turned over the operation of the main Internet
connections to a group of privately owned companies. The new structure of the Internet was
based on four network access points (NAPs) located in San Francisco, New York, Chicago,
and Washington, D.C., each operated by a separate telecommunications company. As the
Internet grew, more companies opened more NAPs in more locations.

These companies, known as network access providers, sell Internet access rights
directly to larger customers and indirectly to smaller firms and individuals through other
companies, called Internet service providers (ISPs). The Internet was a phenomenon that had
truly sneaked up on an unsuspecting world. The researchers who had been so involved in the
creation and growth of the Internet just accepted it as part of their working environment.
However, people outside the research community were largely unaware of the potential
offered by a large interconnected set of computer networks. Figure 2-1 shows the consistent
and dramatic growth in the number of Internet hosts, which are computers directly connected
to the Internet.

In 40 years, the Internet has grown to become one of the most amazing technological
and social accomplishments of the last millennium. Millions of people, from elementary
schoolers to research scientists, now use this complex, interconnected network of computers.
These computers run thousands of different software packages. The computers are located in
almost every country of the world. Every year, billions of dollars change hands over the
Internet in exchange for all kinds of products and services. All of this activity occurs with no
central coordination point or control, which is especially ironic given that the Internet began
as a way for the military to maintain control while under attack.
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 The opening of the Internet to business activity helped to dramatically increase
its growth; however, there was another development that worked hand in hand with the
commercialization of the Internet to spur its growth. That development was the World Wide
Web.

5.6 Advertising on the Internet

E- Advertising or Online advertising or Internet advertising is a marketing strategy

that involves the use of the Internet as a medium to obtain website traffic and target and
deliver marketing messages to the right customers. It is geared toward defining markets
through unique and useful applications.

ONLINE ADVERTISING METHODS

 Display advertising

Display advertising conveys its advertising message visually using text, logos,
animations, videos, photographs, or other graphics. Display advertisers frequently target users
with particular traits to increase the effect of advertisements. Online advertisers often use
cookies, which are unique identifiers of specific computers, to decide which ads to serve to a
particular consumer. Cookies can track whether a user left a page without buying anything, so
the advertiser can later retarget the user with ads from the site the user visited.

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 As advertisers collect data across multiple external websites about a user's online
activity, they can create a detailed picture of the user's interests to deliver even more targeted
advertising. This aggregation of data is called behavioral targeting

Advertisers can also target their audience by using contextual and semantic advertising to
deliver display ads related to the content of the web page where the ads appear. Retargeting,
behavioral targeting, and contextual advertising all are designed to increase an advertiser's
return on investment, over untargeted ads. Advertisers may also deliver ads based on a user's
suspected geography through geo-targeting. A user's IP address communicates some
geographic information (the user's country or region). It helps to narrow the range of possible
locations. For example, with mobile devices, advertisers can sometimes use a phone's GPS
receiver or the location of nearby mobile towers.

Web banner advertising

Web banner ads typically are graphical ads displayed within a web page. Many
banner ads are delivered by a central ad server. Banner ads can use rich media to incorporate
video, audio, animations, buttons, forms, or other interactive elements using Java applets,
HTML5,AdobeFlash,andotherprograms.

Frame ad (traditional banner)

Frame ads were the first form of web banners. The colloquial usage of "banner ads"
often refers to traditional frame ads. Website publishers incorporate frame ads by setting
aside a particular space on the web page. The Interactive Advertising Bureau's Ad Unit
Guidelines proposes standardized pixel dimensions for ad units.

Pop-ups/Pop under

A pop-up ad is displayed in a new web browser window that opens above a website visitor's
initial browser window. A pop-under ad opens a new browser window under a website
visitor's initial browser window.

Floating ad

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 A floating ad or overlay ad is a type of rich media advertisement that appears
superimposed over the requested website's content. Floating ads may disappear or become
less obtrusive after a preset time period.

Expanding ad

An expanding ad is a rich media frame ad that changes dimensions upon a predefined

condition, such as a preset amount of time a visitor spends on a webpage, the user's click on
the ad, or the user's mouse movement over the ad. Expanding ads allow advertisers to fit
more information into a restricted ad space.

Trick banners

A trick banner is a banner ad where the ad copy imitates some screen element users
commonly encounter, such as an operating system message or popular application message,
to induce ad clicks. Trick banners typically do not mention the advertiser in the initial ad, and
thus they are a form of bait-and-switch. Trick banners commonly attract a higher-than-
average click- through rate, but tricked users may resent the advertiser for deceiving them.

News Feed Ads

"News Feed Ads", also called "Sponsored Stories", "Boosted Posts", typically exist on
Social Media Platforms that offer a steady stream of information updates ("news feed") in
regulated formats (i.e. in similar sized small boxes with a uniform style). Those
advertisements are intertwined with non-promoted news that the users are reading through.
Those advertisements can be of any content, such as promoting a website, a fan page, an app,
or a product. This format of online advertisement yields much higher click-through rates than
traditional display ads some examples are: Facebook's "Sponsored Stories", LinkedIn's
"Sponsored Updates", and Twitter's "Promoted Tweets".

Interstitial

An interstitial ad displays before a user can access requested content, sometimes

while the user is waiting for the content to load. Interstitial ads are a form of interruption
marketing

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Text ads

A text ad displays text-based hyperlinks. Text-based ads may display separately from
a web page's primary content, or they can be embedded by hyper linking individual words or
phrases to advertiser's websites. Text ads may also be delivered through email marketing or
text message marketing. Text-based ads often render faster than graphical ads and can be
harder for ad-blocking software to block.

Search Engine Marketing (SEM)

Search engine marketing (SEM) is designed to increase a website's visibility in search

engine results pages (SERPs). Search engines provide sponsored results and organic (non-
sponsored) results based on a web searcher's query. Search engines often employ visual cues
to differentiate sponsored results from organic results. SEM includes all of an advertiser's
actions to make a website's listing more prominent for topical keywords.

Search Engine Optimization (SEO)

Search engine optimization (SEO) attempts to improve a website's organic search

rankings in SERPs by increasing the website content's relevance to search terms. Search
engines regularly update their algorithms to penalize poor quality sites that try to game their
rankings, making optimization a moving target for advertisers.

Sponsored search

Sponsored search (also called sponsored links, search ads, or paid search) allows
advertisers to be included in the sponsored results of a search for selected keywords.

Social Media Marketing

Social media marketing is commercial promotion conducted through social

media websites. Many companies promote their products by posting frequent updates and
providing special offers through their social media profiles.

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4.2.2 ADVERTISING STRATEGIES AND PROMOTIONS

Different companies handle advertising in different ways. In small and medium-sized

companies, it can be done by the sales or marketing departments while large organizations
might set up an advertising department. In both, it’s important to have an advertising strategy
to help them in the creation and communication of the commercials. Advertising refers to any
paid form of non-personal presentation and promotion of ideas, goods or services by an
identified sponsor. An advertising strategy is a plan to reach and persuade a customer to buy
a product or a service.

Developing an advertising strategy

Setting advertising objectives

Advertising objective refers to a specific communication task to be accomplished

within a specific target audience during a specific period. Advertising objectives can be
classified on the basis of primary function - inform, persuade or remind.

Informative advertising

It’s used to inform consumers about a new product or features and to build primary
demand. It’s aimed at informing the market of price changes, correcting false impression,
describing available services or brand, building a brand and company image, communicating
customer value, telling the market about new product and suggesting new uses for a product.
For example, Go TV advert that explains who to use the decoder.

Persuasive advertising

It is an advertising use to build selective demand for a brand by persuading consumers

that it offers the best quality for the money. Persuasive advertising aims at persuading
customers to purchase now and convincing customers to tell others about a brand.

Reminder advertising

Advertising used to maintain customer relationships and keep consumer thinking

about the product or services. The objective is to keep the product in the customer’s mind and
reminding customers where to buy the product. For example, KFC is now open at Junction

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Mall. Reminder advertising is important for mature products as it helps to maintain customer
relationships and keep consumers thinking about the product. Advertisers might want to
maintain customer relationships by assuring existing customers that they made the right
choice in buying the company’s products. It can also be used to move people into immediate
action.

Setting the advertising budget

After determining the objectives, the company next set is the advertising budget for
each product. An advertising budget is an estimate of a company's promotional expenditures
over a certain time period. Before deciding on a specific advertising budget, companies
should make certain determinations to ensure that the budget is in line with their promotional
and marketing goals;

Spend as much as possible:

This strategy, which sets aside just enough money to fund operations, is popular with
startups that see a positive return on investment on their advertising spend. The key is
anticipating when the strategy will start showing diminishing returns and knowing when to
switch strategies.

Allocate a percentage of sales:

This is as simple as allocating a specific percentage based on the previous year's total
gross sales or average sales. It is common for a business to spend 2% to 5% of annual
revenues on advertising. This strategy is simple and safe but is based on past performance
and may not be the most flexible choice for a changing marketplace.

Spend what the competition spends:

This is as simple as adhering to the industry average for advertising costs. Of course,
no market is exactly the same and such a strategy may not be sufficiently flexible.

Budget based on goals and tasks:

This strategy, wherein you determine the objectives and the resources needed to
achieve them, has pros and cons. On the upside, this can be the

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most targeted method of budgeting and the most effective. On the downside, it can be
expensive and risky.

Creating an advertising message:

No matter how big the budget, advertising can succeed only if commercial gains
attention communicates well. There are two essentials in creating advertising messages.

Message strategy

The main aim of an advert is to get target consumers to think about or reach to the
product or company in a certain way. This can only be achieved by making people believe
they will benefit from doing so. Developing an effective message strategy first is identifying
target consumers benefits that can be used as an advertising appeal. Message strategy tends to
be plain, straight forward outlining benefits and positioning points that advertisers what to
stress. The advertisers must, therefore, develop a compelling creative concept that will bring
the message strategy to life in a distinctive and memorable way.Advertising appeal must be;

 Meaningful - pointing out benefits that make a product or service more desirable or
interesting to target consumers.

 Believable - consumers must believe that the product or services will deliver the
promised benefits.

 Distinctive – telling the consumers how the product is different from or better than
competing brands.

Message execution

Message execution involves finding the best style, tone, words and forms that will
capture the attention of the target markets attention and their interests. The impact of an
advertising message does not only depend on how it’s said but also the way it’s said. In
message execution, advertisers must use elements such as style, tone, words and forms
together to persuasively present customer value.

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Selecting advertising media

After creating an advertising message, the advertiser must next decide upon which
media to carry the message. There are factors that are considered when selecting media which
include;

Reach, frequency and media impact

 Reach - a measure of the percentage of people in the target market who are exposed to
advertising campaign during a given period of time.

 Frequency - the number of times the average person in the target audience is exposed
to an advertising message during a given period.

 Media impact - the qualitative value of a message exposure through a given medium
(impression).

Choosing among major media types

The major types of media include; television, radio, newspapers, directs mail, outdoor
and magazines. Each of these media has it owns advantages and limitations. Choose a
medium that will effectively and efficiently present the advertising message to the target
consumers. Key here is to consider the medium’s impact, message effectiveness and cost.

Selecting a specific media vehicle

Media vehicle is a specific media within each general media types such as television
shows and radio programme. Advertisers must critically evaluate each media vehicles that are
offered by different media types. They must look at each media vehicles’ rating- the
percentage of a given population group consuming a media at a particular time. Share-the
percentage of homes using TV or turned to a particular programme. Impression- a sum of all
advertising exposure. And the cost per thousand (CPM) - it the cost which media vehicles
charge per 000’s homes or individuals delivered.

Deciding media timing

Advertisers must decide how to schedule an advert. Most adverts follow a seasonal
pattern. Some do only one seasonal advertising, usually during their sales seasons, for

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instance, St. Paul’s University advertise only during intakes, to attract potential students.
Advertisers can ensure greater efficiency by analyzing media impacts and costs by shifting
into cheaper ones. Advertisers must also choose the pattern of adverts;

 Continuity - scheduling adverts evenly within a given period, for example, Haptic
advert.

 Pulsing - scheduling adverts unevenly over a given time of period.

Evaluating advertising effectiveness and returns on advertising

Advertisers can use two ways in evaluating advertising effectiveness and returns;

Communication effect

Tells whether the adverts and media are communicating well. Individual adverts can
be tested before or after they run. Before an advert is placed, advertisers can show it to
consumers ask how they think about it and measure message recall or attitude changes
resulting from it. After an advert runs, advertisers can measure how the advert affects recall
or products awareness, knowledge and reference.

Sales and profits

Although it’s not easy for advertisers to directly measure the results of an advert in
terms of sales and profits, they can compare past sales and profits with past advertising
expenditures. Another way of measuring returns on sales and promotion is through
experiments.

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 MODEL EXAM QUESTON PAPER I

ALL PG Degree Examinations

E-COMMERCE

Time: 3 Hrs Maximum: 75 Marks

SECTION-A (15 x 1 = 15 Marks)

Answer ALL the questions:

1. Which of the following is not a building block in the infrastructure of e-commerce? a)

Common business services b) Messaging and information distribution

c) Public policy d) Situational standards

2. …... is a mesh of interconnected data highways of many forms.

a) Computer b) I-way C) E-commerce d) Business service

3. …………….. is the use of digital data in more than one format such combination of text,
audio, video, graphics in computer file.

a) Multimedia b) Digitalization

c) Media serving d) Information delivery

4. Which of the following is not an application of e-commerce?

a) Multimedia storage servers b) Consumer access devices

c) Electronic commerce d) Global interference

5. Which of the following is not included in electronic commerce applications related to

digital video?

a) Telecommunicating and video conferencing b) Corporate multimedia servers

c) Video-on-demand d) Postproduction studios

6. Which of the following is not an information delivery method?

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a) Long distance telephones lines b) Cable TV-coaxial

c) Cellular and radio networks d) Wireless communications

7. Expansion of EDI………….

a) Electronic data information b) electronic data interchange

c) Electrical data information d) electronic direct interchange

8. ………….. viewed as an integrated management system consisting of a number of

different management practices dependent on the characteristics of specific plants

a) Just –in- time manufacturing b) quick response retailing

c) Channel management d) supply chain management

9. ……………. the goal is to shorten the order-ship-bill cycle. When a majority of partners
are electronically linked, information faxed or mailed

a) Channel management b) inventory management

c) Sales production d) payment management

10 …………… the goal is to improve the communication flow of information among the
sales, customer & production functions

a) Channel management b) distribution management

c) Sales force productivity d) payment management

11. ____ is not a major type of electronic commerce.

a) Consumer to Business b) Business to Consumer

c)Business to Business d)Consumer to Consumer

12. Which is not one of the three phases of electronic commerce?

a) Reinvention b) Preservation c) Consolidation d) Innovation

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13. Which of the following is/are considered examples of the Consumer to consumer (C2C)
model?

a) Amazon.com b) e-bay c) Rentalic.com d) All of the above

14. Which of the following technology is not used to collect the information about you?

a) Anonymizers b) Spyware c) Gmail d) Cookies

15. Which of the following is not a key element of the business model?

a) Competitive advantage b) Market strategy

c) Universal standards d) Value Proposition

SECTION-B (5 x 5 = 2 5 Marks)

Answer any TWO Questions

16. Explain about the E-commerce.

17. Explain about the mercantile models from the merchant perspective.

18. Explain the types of electronic payment system.

19. Explain about EDI legal, security and privacy issues.

20. Explain about the growth of Internet.

SECTION-C ( 5 x 1 0 =5 0 M a r k s )

Answer all the Questions

21. a)Explain about the E-commerce framework (or)

b) Explain about the components of I-way

22. a) Discuss about the consumer oriented applications (or)

b) Discuss about the world wide web architecture.

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23. a) Discuss about the digital token based electronic payment System (or)

b) Explain about the risks on electronic payment systems

24. a) Explain about the EDI (or)

b) Explain about the EDI software implementation

25. a) Explain about the origin of the Internet (or)

b) Explain about the commercial use of the Internet

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 SHRI SOWDESVARI WOMEN'S COLLEGE (SFCW), SALEM-10

DEPARTMENT OF COMMERCE,

OBJECTIVE I

TITLE: E-COMMERCE

1. Which of the following is not a building block in the infrastructure of e-commerce? a)

Common business services b) Messaging and information distribution

c) Public policy d) Situational standards ANSWER: d

2. …... is a mesh of interconnected data highways of many forms.

a) Computer b) I-way C) E-commerce d) Business service ANSWER: b

3. …………….. is the use of digital data in more than one format such combination of text,
audio, video, graphics in computer file.

a) Multimedia b) Digitalization

c) Media serving d) Information delivery ANSWER:d

4. Which of the following is not an application of e-commerce?

a) Multimedia storage servers b) Consumer access devices

c) Electronic commerce d) Global interference ANSWER:d

5. Which of the following is not included in electronic commerce applications related to

digital video?

a) Telecommunicating and video conferencing b) Corporate multimedia servers

c) Video-on-demand d) Postproduction studios ANSWER:c

6. Which of the following is not an information delivery method?

a) Long distance telephones lines b) Cable TV-coaxial

c) Cellular and radio networks d) Wireless communications ANSWER:d

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7. Expansion of EDI………….

a) Electronic data information b) electronic data interchange

c) Electrical data information d) electronic direct interchange ANSWER:b

8. ………….. viewed as an integrated management system consisting of a number of

different management practices dependent on the characteristics of specific plants

a) Just –in- time manufacturing b) quick response retailing

c) Channel management d) supply chain management ANSWER:a

9. ……………. the goal is to shorten the order-ship-bill cycle. When a majority of partners
are electronically linked, information faxed or mailed

a) Channel management b) inventory management

c) Sales production d) payment management ANSWER:d

10 …………… the goal is to improve the communication flow of information among the
sales, customer & production functions

a) Channel management b) distribution management

c) Sales force productivity d) payment management ANSWER:a

100