Bba 401 Book

E-Commerce
INSPIRED BY LIFE
Manipal
Sikkim Manipal University

Directorate of Distance Education
Subject Code: BBA 401 Book ID: B1712
Edition: Fall 2011
Edition: Fall 2011

Print:
Printed at Manipal Technologies Ltd
Published on behalf of Sikkim Manipal University, Gangtok, Sikkim by
Vikas Publishing House Pvt Ltd
Authors: Pushpa Singh & Narendra Singh
Copyright Authors, 2012
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Sikkim Manipal University

Directorate of Distance Education
Department of Management Studies
Board of Studies
Dean Pankaj Khanna
SMU DDE Director
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Chairman
HOD Management Studies Shankar Jagannathan
SMU DDE Former Group Treasurer
Wipro Technologies Limited
Additional Registrar
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Chief Financial Officer
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Student Evaluation Examinations Branch
SMU DDE Sadhna Dash
Senior HR Consultant
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Adjunct Faculty and Advisor
SMU DDE
Prof. K. V. Varambally
Director
Manipal Institute of Management, Manipal
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Authors Profile
Pushpa Singh is an M.Tech. (C.S.E) from G.B. Technical University, Lucknow and an
M.C.A. from G.L.A.I.T.M. (Mathura). She is presently working with Accurate Institute of
Management & Technology, Greater Noida, as an Assistant Professor in the IT Department.
Previously she has been associated with IEC College of Engineering and Technology,
Greater Noida, as a Sr. Lecturer in the MCA department and has worked in BIT (Bhagwant
Institute of Technology), Muzzfarnagar, as a lecturer in the IT department. She has various
international and national journals to her name. She has co-authored books on Modeling
and Simulation, E-business Applications and Computer Application in Management for
various publishing houses.
Narendra Singh is an M.Tech. (C.S.) from Rajasthan Vidhyapeeth University, and an MBA
from Baran Institute of Management, Mahamaya Technical University. He has taught subjects
like Computer Application in Management/Computer Fundamental, Management Information
System, E-Commerce and Computer Network & Internet Technology. He has worked as
Sr. Lecturer with SRIRAM Institute of Management & Technology, Greater Noida and with
United College of Engineering & Research, Greater Noida, as Lecturer. He has co-authored
books on Modeling and Simulation, E-business Applications and Computer Application in
Management for various publishing houses. He has presented research papers on titles
like Green IT: A solution of emerging IT problem, Regular User Priority Scheme for
Performance Improvement in 4G Network, Weightage Factor Based Scheme for
Performance Improvement in Ad Hoc Networks etc.
Peer Reviewers Profile
Dr Jai Raj Nair holds a Bachelors degree in Architecture from Bengal Engineering College
(University of Calcutta), PGDBM from IIM, Calcutta and Ph.D from Symbiosis International
University, Pune. He has also successfully completed a Cisco-certified course titled Building
the Internet Corporation. Dr Nair worked for 8.5 years in the corporate world in the domain
of Engineering Consultancy, Software Development, and Business Development in reputed
organizations like Development Consultants Ltd. (Delhi & Calcutta), Data-Core (India) Ltd.
(Calcutta) and Kirloskar Computer Services Ltd.(Bangalore) before moving over to the
academic world.
Dr Nair has been associated with reputed Institutions like SIT, Tumkur, M P Birla Institute
of Management, Bangalore and Symbiosis Institute of Business Management, Bangalore
as faculty, handling Systems and Marketing Courses. Besides, he has been a visiting
faculty at several B-Schools over the past eleven years. He was also successfully delivered
MDP programs at top IT/ITES companies.
Dr Nair is a voracious reader and an avid writer. He has presented papers at National
and Regional Conferences. Three of his papers were selected for International Conferences
conducted by universities in Thailand, Italy, and Greece. He has also published research
papers, articles et al in management journals of repute. Furthermore, Dr Nair has also
written a chapter in a textbook on Retail Management. His research interests include
software engineering, e-retailing, supply chain management and retro-logistics, business
process reengineering, technology-enabled retailing, to name a few.
In House Content Review Team
Dr G.P. Sudhakar Ramya S Gowda

HOD, Department of Management Studies Assistant Professor
SMU DDE Department of Management Studies
SMU DDE
BBA 401
E-Commerce
Contents
Unit 1
E-Commerce Framework 119
Unit 2
Network Infrastructure for E-Commerce - I 2136
Unit 3
Network Infrastructure for E-Commerce - II 3758
Unit 4
E-Commerce: Requirements and Architecture 5975
Unit 5
E-commerce Infrastructure 7798
Unit 6
Business Models 99112
Unit 7
Security in Electronic Business 113132
Unit 8
Encryption 133147
Unit 9
E-Payment Systems 149170
E-Commerce Contents
Sikkim Manipal University Page No. (vi)
Unit 10
Enabling Technology of World Wide Web 171192
Unit 11
E-Marketing 193211
Unit 12
Policy and Implementation 213230
Unit 13
Mobile Commerce 231250
Unit 14
EDI, E-CRM and E-SCM 251266
BBA 401
E-Commerce
Course Description
Electronic commerce, commonly known as e-commerce or e-business, consists

of buying and selling of products or services over electronic systems, such as
the Internet and other computer networks. Over the years, the amount of trade
conducted electronically has grown extraordinarily due to widespread Internet
usage. The use of e-commerce has spurred lateral innovations in electronic
funds transfer, supply chain management, Internet marketing, online transaction
processing, electronic data interchange (EDI), inventory management systems,
and automated data collection systems. E-commerce has also led to the
development of electronic marketplaces where suppliers and potential customers
are brought together to conduct mutually beneficial trade.
Though, a large percentage of e-commerce is conducted entirely
electronically for virtual items, such as access to premium content on a website,
most electronic commerce involves the transportation of physical items in some
way. Almost all big retailers have electronic commerce presence on the World
Wide Web. Online retailers are sometimes known as e-tailers and online retail
is sometimes known as e-tail. E-commerce is generally considered to be the
sales aspect of e-business. It also consists of the exchange of data to facilitate
the financing and payment aspects of the business transactions.
Researching and understanding the guidelines required to properly
implement an e-commerce plan is a crucial part to becoming successful with
online store building. The focus of this course is to ensure that such objectives
are met. Students develop the skills necessary to identify a product or service
that can help one in doing this business. A studied effort has been made to
integrate theory with practice in this learning material.
Course Objectives
E-commerce is the use of the Internet and the Web to conduct business
transactions. It involves digitally enabled commercial transactions between
organizations and individuals. The terms e-commerce and e-business are used
interchangeably. E-business is the digital enablement of transactions and
processes within a firm and therefore does not include any exchange in value.
E-business turns into e-commerce when an exchange of value occurs across
firm boundaries. Therefore, e-commerce and e-business intersect at the business
firm boundary at the point where internal business systems link up with suppliers.
The course E-Commerce of BBA 4th Semester helps students to gain the
required knowledge of E-Commerce.
After studying this subject, you should be able to:
Explain the working of e-commerce
Explain the working of the TCP/IP reference model
Explain e-commerce infrastructure
Identify the evolution of Internet business models
Discuss the various security concerns of intranet and extranet

Explain the process of cryptography
Explain the working of various Internet services
Discuss the legal and ethical policy issues relating to e-marketing
Explain the architecture of WAP
Analyse the applications of EDI, E-CRM and E-SCM
The Self Learning Material (SLM) for this subject is divided into 14 units. A brief
description of all the 14 units is given below:
Unit 1 E-Commerce Framework: Introduces the e-commerce framework
and infrastructure.
Unit 2 Network Infrastructure for E-Commerce - I: Explains the network
infrastructure required for setting up an e-commerce activity such as LAN, WAN
and the Internet. The unit also explains the architecture of TCP/IP reference
model.
Unit 3 Network Infrastructure for E-Commerce - II: Explains the working of
Common Gateway Interface and the various types of network access equipment.
E-Commerce Course Objectives
Sikkim Manipal University Page No. (x)
Unit 4 E-Commerce Requirements and Architecture: Explains the

requirements of setting up an e-commerce and also the e-commerce framework
architecture.
Unit 5 E-Commerce Infrastructure: Analyses the design and development
of a website and the technology infrastructure required.
Unit 6 Business Models: Discusses the evolution of Internet Business Models
and explains the Six Components Business Model.
Unit 7 Security in Electronic Business: Analyses the security concerns of
intranet and extranet. The unit also discusses the various protection methods
employed by organizations.
Unit 8 Encryption: Introduces the concept of encryption and explains the
different types of encryption methods.
Unit 9 E-Payment Systems: Explains the working of different types of epayment
systems and also analyses the security standard for electronic payment
systems.
Unit 10 Enabling Technology of World Wide Web: Explains the working of
various Internet services such as WWW, e-mail, FTP, Telnet and Web chat.
Unit 11 E-Marketing: Discusses the types of e-marketing, its advantages
and disadvantages.
Unit 12 Policy and Implementation: Analyses the various legal and ethical
policy issues related to E-marketing.
Unit 13 Mobile Commerce: Introduces the concept of m-commerce and
explains the basic WAP architecture.
Unit 14 EDI, E-CRM and E-SCM: Analyses the importance of EDI, E-CRM
and E-SCM in m-commerce.
Unit 1 E-Commerce Framework

Structure
1.1 Introduction
Objectives
1.2 Definition of E-Commerce
1.3 Origin of E-Commerce
1.4 History of the Internet
1.5 E-Commerce Opportunities for Businesses
1.6 Working of E-Commerce
1.7 E-Commerce vs the Traditional Business Mechanism
1.8 Advantages of E-Commerce
1.9 Disadvantages of E-Commerce
1.10 Main Goals of E-Commerce
1.11 Summary
1.12 Glossary
1.13 Terminal Questions
1.14 Answers
References
1.1 Introduction
Today, if you suddenly wish to own a copy of your favourite novel, you need not
plan a trip to the nearest book store and be disappointed if a copy is not available.
Nor do you have to make repeated trips to check whether the store has been
able to obtain one for you. All you need to do is, switch on your computer, log on
to the Web and visit one of the numerous online bookstores such as
Amazon.com, SimplyBooks.in, uRead.com, eBay India and Flipkart.com. You
can select the books you want and have them delivered at your doorstep without
moving out of your house. That is how easy electronic business or e-commerce
has made shopping for you today. It is not just books that can be bought in this
manner. Everything is bought, sold, hired, exchanged or traded online today
from books, toys, garments and electronic appliances to cakes, flowers and
gifts.
E-Commerce Unit 1
Sikkim Manipal University Page No. 2
Amazon.com, Inc. is a multinational electronic commerce company headquartered
in Seattle, Washington, United States. It is the world's largest online retailer. Amazon
has separate websites for the following countries: United States, Canada, United
Kingdom, Germany, France, Italy, Spain, Japan, and China. It may also launch
websites in Netherlands, Sweden, and India. It also provides international shipping
to certain countries for some of its products.
The term e-commerce refers to the amalgamation of tools built on

information and communication technologies (by and large known as business
software), in the organization, to enhance their performance. This builds value
for the company, its customers and its affiliates. E-commerce spans much further
than e-commerce or purchase and sale across the Web and delves into the
procedures and background of a business venture.
E-commerce is a powerful business setting that is formed when one
connects critical business systems directly with consumers, workforce, traders,
and business associates using intranet, extranet, e-commerce technologies,
two-way applications and the Web. It is more than a smart Web presence or a
slick, flash-driven shopping cart. This is a critical surfacing of business across
the world, with a number of technologies getting into the enterprise computing
ecosystem. E-commerce provides a powerful mechanism for companies to
enhance productivity and bring down costs. Nevertheless, in order to utilize
these substantial benefits, organizations must make sure that their e-commerce
is implemented appropriately and matches with their market segment. Ecommerce
applications can be divided into three categories: (i) Internal business
systems (ii) Enterprise communication and collaboration (iii) Electronic
commerce.
Today, e-commerce is a byword in the Indian society and it has become
an essential part of our daily life.
E-Commerce Unit 1
Objectives
After studying this unit, you should be able to:
Identify the origin and history of e-commerce
Categorize the e-commerce opportunities for businesses
Demonstrate the working of e-commerce
Differentiate between e-commerce and the traditional system of business
Classify the advantages and disadvantages of e-commerce
Summarize the goals and requirements of e-commerce
1.2 Definition of E-Commerce
E-commerce is an advanced technology related to commerce and the electronic
media, the computer in particular. It is first important to understand the term
business, which refers to the exchange of goods, items or commodities and
services or applications for money.
A popular definition of business is as follows:
Business is the exchange or the buying and selling of entities (goods or
commodities) on a very large scale involving transportation from one place to
another.
In e-commerce, there is a need for computers and Internet applications
to manage and organize products and services. This concept of using the Internet
to connect with customers, business partners and distributors for business
purposesas in the case of e-mailis known as e-commerce or electronic
business.
The terms e-commerce and e-business are often used interchangeably.
E-commerce deals with the buying and selling of information, products
and services through the computer network.
E-commerce is defined as a business activity which uses an electronic
medium. It also refers to the buying or selling of goods and services without
visiting a store.
E-commerce involves activities, such as the delivery of information,
products, services and payment through the electronic medium.
E-Commerce Unit 1
Buying and Selling

Information Products Services
through
Computer Network
E-Commerce
1.3 Origin of E-Commerce

E-commerce refers to conducting business online with the help of electronic
devices like personal computers, phone lines, fax machines, pagers and so on.
In the 1950s, computers were used by organizations to process and store records
of internal transactions. However, information between businesses continued
to be exchanged on paper, like purchase orders, invoices, cheques, remittance
devices and other standard forms, which were used to document transactions.
IBM was the first company which used the term e-commerce
internationally. In 1972, IBM used the term as e-commerce and the first
successful transaction was executed between the US and the European Union
in 1993, with the invention of personal computers.
By the 1960s, businesses that engaged in large volumes of transactions
had begun exchanging transaction information on punched cards or magnetic
tapes. Data communications technology eventually allowed trading partners to
transfer data over telephone lines, instead of shipping punched cards or magnetic
tapes to each other in advance.
Although these information transfer agreements between trading partners
increased efficiency and reduced errors, they were still not an ideal solution.
E-Commerce Unit 1
Only large trading partners could afford to participate in the benefits of these
paper-free exchanges, because the translation programmes that one trading
partner wrote generally would not work for other trading partners.
Several freight and shipping companies, in 1968, joined hands to form
the Transportation Data Coordinating Committee (TDCC), which was charged
with exploring paths to minimize the load that shippers and carriers faced. The
shipper could electronically transmit the computer file to any freight company
that had adopted the TDCC format. Therefore, they were saved from the printing
and handling of forms, and also from entering the data twice and having to
worry about error-correction procedures.
During the 1970s, the introduction of Electronic Data Interchange (EDI)
between banks over a secured private network changed the financial market.
In 1973, the ANSI (American National Standards Institute) committee developed
a uniform EDI standard. This committee and its subcommittees included experts
from the information technology background from over 800 organizations. During
the late 1970s and early 1980s, e-commerce became widespread within
companies in the form of electronic messaging technologies, i.e., EDI and email.
Combining a range of processes, such as EDI, electronic mail (e-mail),
WWW and Internet applications, e-commerce provides ways to exchange
information between individuals, companies and customers and most important
of them all, between computers. The core media of e-commerce remains the
Internet and the WWW.
E-commerce is the paperless exchange of information in a business with
the use of EDI, electronic bulletin board, e-mail and other technologies. Ecommerce
helps to automate processes and transactions that are manually
done on paper. It assists companies to change the way they operate and become
completely e-environment friendly.
Electronic commerce has become very popular in the past few years.
Table 1.1 Total E-Commerce Transaction in India
Year Total e-commerce transaction
1998-1999 ` 131 crore
1999-2000 ` 450 crore
2000-2002 ` 1400 crore
2006 (Expected) ` 2300 crore
E-Commerce Unit 1
Self-Assessment Questions
1. State whether the following statements are true or false.
(a) The term e-commerce was coined by IBM.
(b) The first e-commerce transaction was executed between the US
and the European Union in 1993.
(c) A uniform EDI standard was developed in 1973 by IBM.
2. Fill in the blanks with appropriate words.
(a) E-commerce stands for _______________ commerce.

(b) An e-commerce setting connects critical business systems directly
with consumers, workforce, traders and business associates using
______, extranet, e-commerce technologies, two-way applications
and the _________.
1.4 History of the Internet
1969 : The US Department of Defense started the first network among

major research centres in the US.
1971 : Major connections or nodes were established. E-mail was
introduced.
1973 : Defense Department started developing various forms of file
transfer.
1984 : Domain Name Service (DNS) was introduced.
1986 : The US National Service Foundation created Internet-based
telephone lines.
1987 : The number of hosts (computers on the Internet) reached 10,000.
1988 : The number of hosts on the Internet crossed over 60,000.
1989 : Over 100,000 hosts on the Internet were registered.
1991 : The World Wide Web (WWW) was created by CERN in
Switzerland.
(Conseil European pour la Recherch Nuclearire)
1992 : One million hosts were found on the Internet.
E-Commerce Unit 1
1995 : There were a total of 6.6 million hosts or computers on the Internet.
July 1997 : 1.3 million domain names were registered.
Dec. 1997 : 22 million servers, 40 million users on the WWW.
2000 : 110 million users and 72 million domain names.
2003 : 802.2 million users and 233 hosts.
Table 1.2 Growth of the Internet in India
Years Internet Subscribers Internet Users
1997 25 45,000
1998 250 2,00,000
1999 359 100000
2000 650 2000000
2001 1130 6668000
2002 1763 10684000
2003 3661 29000000
2004 4403 31723000
2005 6674 52875000
Internet usage in India
10000
20000
30000
40000
50000
60000
1999 2000 2001 2002 2003 2004 2005
Subscribers
Users
E-Commerce Unit 1
Table 1.3 Growth in the Number of Hosts over the years
Year Number of hosts advertised in the DNS (in ` crore)
1993 1313000
1994 2217000
1995 4852000
1996 9472000
1997 16146000
1998 29670000
1999 43230000
2000 72398092
2001 109574429
2002 147344723
2003 171638297
2004 233101481
1.5 E-Commerce Opportunities for Businesses

Many businesses need e-commerce software services to help take advantage
of e-commerce areas.
1. Tourism and Travel Sector: This sector has updated its system with ecommerce
services. Consumers can make online reservations of hotels,
motels, air tickets, railway tickets, etc.
2. Banking Sector: Most banks have changed their working style by making
their services available online through their respective websites.
3. Health Care Sector: This sector is large and uses a major part of
government expenses. So, most health care companies communicate or
exchange their services with each other.
4. Stock Sector: In the stock exchange sector, e-commerce services provide
demat account facilities for customers who can do an overall analysis of
the status of the stock areas and do their respective transactions.
5. Financial Sector: In India, the financial sector has adopted e-commerce
services and the users make maximum use of the same.
E-Commerce Unit 1
Activity 1
Make a list of businesses (other than those mentioned in the unit) that
depend on e-commerce services to thrive in the market.
1.6 Working of E-Commerce

To understand the operation of e-commerce, consider a customer who wants to
make an online purchase. He is moved to the online transaction server where
all the information is encrypted. Once he has placed his order, the information
moves through a private gateway to a processing network, where the issuing
and acquiring bank complete or deny the transaction. This process takes only
few seconds.
Figure 1.1 An Online Transaction
E-Commerce Unit 1
1.7 E-Commerce vs the Traditional Business Mechanism

S.
No.
Basis E-Commerce Traditional
1
Reduction of
data error
2
Reduction of
cost
3
Reduction of
paper work
4
Reduction of
process
cycle time
The buyer and the seller create
purchase orders on their
systems, print them or e-mail
them to the receiver. The
receiver then re-enters the
same information on the
computer. This creates the
error.
As time is money, time is
directly linked to saving money.
There is repetition of the same
work at every level. So it
involves a lot of time and if
there is an error, it may lead to
wastage of money.
It requires re-entry of data at
every level and also lot of time.

So precious time is wasted in
re-entering and pr int ing
reports.
In the traditional system, when
the buyer orders in a paper
format, the data is re-entered
into the sellers computer and
only then processing takes
place. This is time consuming
and requires full commitment.
It does not involve data
at mul t ipoints. Wi th
e-commerce, data goes
directly from one computer
t o a n o t h e r wi th o u t
involving a human being.
Initial cost of e-commerce
is very high as compared
to the paper process.
However, over a period of
time, it is very effective.
E-commerce data in the
electronic form is easy to
shareacrossthe
organization.
E-commerce reduces the
processing cycle time of
complete cycles as the
data is entered into the
system. It is a simulating
process.
3. Fill in the blanks with the appropriate word.
(a) E-commerce is defined as a business activity that uses ____ medium.
(b) Domain Name service was introduced in______.
(c) In e-commerce there is reduction of data error as it does not involve
data at_____.
E-Commerce Unit 1

(a) In 1973, the ANSI (American National Standards Institute) committee
developed a uniform EDI standard.
(b) TDCC stands for Transportation Design and Coordination Council.
1.8 Advantages of E-Commerce
1. All-time processing: Customers can use the marketplace at all times

with the use of e-commerce services.
2. Better service: Customers are fully satisfied and receive better service.
3. No mediators: Customers can directly contact the suppliers and remove
all mediators.
4. Data on consumer performance: Using the e-commerce services, one
can understand consumer behaviour, for example, websites, products,
schemes and modes of payment which are preferred by the customer.
5. Time saving: Customers can save time because they can purchase
anything through the merchant websites.
Other Advantages
E-commerce reduces the cost of the product.
It reduces paperwork as the entire work is done electronically.
The product is directly supplied to the customer because all orders and
enquiries are processed online. This eliminates the need for wholesellers
and retailers and brings down the cost.
Improved customer relationship is achieved by fast dissipation of
information.
E-commerce minimizes the time taken from order to delivery.
Provides better, faster and effective linkage with clients.
Enhances the organizations product and also does a market analysis, as
the organization gets feedback from the customer.
E-commerce helps to create knowledge markets. Small groups within big
firms can be funded with seed money to develop new ideas.
E-commerce helps people work together.
E-commerce is a 24 7 operation and has a global reach.
E-Commerce Unit 1
1.9 Disadvantages of E-Commerce

Fast technological advancements have made transactions from all over the
world possible in no time. This has transformed the traditional marketplace into
an on-line electronic marketplace or e-marketplaces. But e-commerce is not
just about benefits. There are also disadavantages associated with e-commerce.
Some of the most prominent ones are:
1. Lack of customer awareness: People who have no knowledge about
electronic communication like the Internet, and computers find it difficult
to transact electronically.
2. Not for small business: Small businessmen do not want to take any
extra burden because they have no knowledge of e-commerce functions.
3. Does not support all types of businesses: Some types of businesses
are not fit for e-commerce services.
4. Legal formalities: Before implementing e-commerce services in the

business, it is necessary to complete certain legal formalities like
authorization and authentication.
Other Disadvantages
High risk for Internet startup organization
Security problems
Customer relation problems
Data integrity problems
Customer satisfaction problems
Activity 2
E-commerce is not favoured by most small businesses. Make a note of
some ways by which e-commerce can be made popular among them.

(a) Legal formalities such as authorization and ____________________
need to completed before e-commerce services can be implemented.
(b) Data ___________ problems could be an issue with e-commerce.
E-Commerce Unit 1

(a) E-commerce reduces paperwork as the entire work is done
electronically.
(b) E-commerce increases the need for wholesellers and retailers.
1.10 Main Goals of E-Commerce
It is widely acknowledged today that new technologies, in particular, access to

the Internet, tend to modify communication between the different players in the
professional world, notably:
Relationships of businesses and organizatins with their clients
Enterprise-employee relationships, that is, internal functioning
Enterprise-partner relationships
enterprise-suppliers relationship
The term e-commerce therefore refers to the integration, within the
company, of tools based on information and communication technologies
(generally referred to as business software) to improve their functioning in
order to create value for not just the business, organization or enterprise but
also its clients and partners.
E-Commerce no longer only applies to virtual companies (called click and
mortar) all of whose activities are based on the Net, but also to traditional
companies (called brick and mortar).
In fact, the term e-commerce which is frequently mixed up with the term
e-business, only covers one aspect of e-commerce, i.e. the use of an electronic
support for the commercial relationship between a company and individuals.

All e-commerce projects are aimed at creating value. This value can be
created in different ways:
By increasing margins, i.e. by reducing production costs or increasing
profits. E-commerce makes it possible to achieve this in a number of
different ways:
Focussing on new markets
Positioning on new markets
Increasing the quality of products or services
Prospecting new clients
E-Commerce Unit 1
Increasing customer loyalty

Increasing the efficiency of internal functioning
By increasing staff motivation. The transition from a traditional activity
to an e-commerce activity ideally makes it possible to motivate associates
to the extent that:
By making the overall strategy more visible to the employees and
favouring a common culture
By encouraging the players to shoulder more responsibilities
By favouring teamwork and improving competencies
By improving customer satisfaction. E-commerce favours customer
satisfaction in the following ways:
Reduced prices with increase in productivity
Improved handling of clients
Satisfaction of clients needs in terms of products and services
Transparent mode of functioning
As a result of privileged relationships with the partners. The creation
of communication channels with the suppliers permits:
More familiarity
Faster and better responsiveness
Improved anticipation capacities
Sharing of resources beneficial for both parties
An e-commerce project can therefore only work as soon as it adds value
to the company, but also to its staff, its clients and partners.
E-commerce can be carried out in a simple manner by following a simple
step-by-step processes, which are shown in Figure 1.2.
E-Commerce Unit 1
Figure 1.2 The Process of E-Business
Figure 1.2 The Process of E-Commerce
E-commerce primarily ensures that costs are reduced, product cycle time
is reduced, customer response is speeded up and service quality is improved.
Therefore, it will not be wrong to say that the main goals of e-commerce (Figure
1.3) are:
To identify and fulfil the rapidly changing needs of consumers,
merchants, organizations, etc.
To constantly improve the quality of goods and services with the
feedback from all stakeholders
To increase the turnover by widening the market and the speed of
services
To bring down costs through speed and accuracy of information
All these goals can be achieved only if the website is user-friendly with a
simple design. Visitors should be able to navigate through it properly. In addition,
the business needs to be promoted well establishing a good connect with the
customers.
It is important to understand what the companys e-commerce expectations
are before plunging into implementing e-commerce solutions. Once the
expectations are known, the company can begin to plan its e-commerce strategy.
A company may benefit by conducting an e-commerce strategy project to plan
its e-commerce future. E-commerce is a way to facilitate improvements in a
E-Commerce Unit 1
companys internal and external processes, in addition to allowing a company

to expand market penetration and geographical markets. Therefore, the
processes that will be integrated into the e-commerce infrastructure must be
both known and ready for integration. To implement e-commerce without
understanding the companys business goals or processes will result in failure
of business.
Goals of E-Commerce
Identify the rapidly changing need of Consumers, suppliers
and organizations
Fulfill the rapidly changing need of Consumers, suppliers and
organizations
Constantly improve the quality of goods and services
Incorporate feedback from all stakeholders
Increase the turnover by widening the market
Increase the speed of services
Bring down the costs through speed and accuracy of
information
Figure 1.3 Goals of E-Commerce
(a) E-commerce aims to increased the quality, quantity and

___________ of services.
(b) A company can plan its e-commerce strategy only if the e-commerce
____________ are known.
(a) E-commerce limits a companys market expansion.
(b) E-commerce can help increase margins through improve in customer
loyalty and prospecting new clients.
E-Commerce Unit 1
1.11 Summary
Let us recapitulate the important concepts discussed in this unit:
E-commerce deals with the selling and buying of products and services
using the computer network.
IBM introduced the term e-commerce in 1972 and the first transaction
was conducted between the US and the European Union in 1993.
E-commerce enables exchange of information between two or more parties
through the use of a range of processes such as EDI, e-mail, WWW and
the Internet.
Tourism and travel sector, banking sector, health care sector and financial
sector derive many benefits through e-commerce.
E-commerce differs from traditional business practices in terms of
reduction of error, reduction of cost, reduction of paperwork and reduction
of process cycle time.
Some of the advantages of e-commerce are that the customers can make
transactions at any time of the day or night, better service, absence of
mediators and time saving.
E-commerce also suffers from disadvantages. This is because it is not
suitable for all businesses, especially small businesses and also it is
necessary to fulfil many legal formalities at the time of implementation.
1.12 Glossary
Business: The exchange of goods or services for money
E-commerce: Business activity that uses an electronic medium
ANSI: American National Standards Institute, that developed a uniform
EDI standard
Client: A person who uses the services or advice of a professional person
or organization
Time-saving: A device or service that reduces the amount of time it takes
to do something
E-Commerce Unit 1

1. Define E-commerce.
2. Trace the evolution of e-commerce.
3. List some businesses that rely upon e-commerce services.
4. Summarize the working of e-commerce.
5. How does e-commerce differ from the traditional business mechanism?
6. Highlight the advantages of E-commerce.
1.14 Answers
Answers to Self-Assessment Questions
1. (a) True; (b) True; (c) False
2. (a) Electronic; (b) Intranet; Web
3. (a) an electronic; (b)1984; (c) multipoints
4. (a) True; (b) False
5. (a) Authentication; (b) integrity
7. (a) Speed; (b) Expectation
8. (a) False; (b) True
Answers to Terminal Questions

1. Refer to Section 1.2
E-Commerce Unit 1
References
1. Turban, Efraim, Jae Kuy Lee and Michael Chung. Electronic Commerce:
A Managerial Perspective. Prentice-Hall, 1999.
2. Whitley, David. E-Commerce: Strategy, Technologies and Applications.
Tata McGraw-Hill, 1998.
Unit 2 Network Infrastructure for

E-Commerce - I
Structure
2.1 Introduction
Objectives
2.2 Local Area Network (LAN)
2.3 Ethernet: IEEE 802.3: Local Area Network (LAN) Protocols
2.4 Wide Area Network (WAN)
2.5 The Internet
2.6 TCP/IP Reference Model

2.7 Domain Names
2.8 Hyper Text Markup Language (HTML)
2.9 Simple Exercises in HTML
2.10 Summary
2.11 Glossary
2.13 Answers
References
2.1 Introduction
In the previous unit, you learnt about the definition and origin of e-commerce,
the history of the Internet, and the difference between e-commerce and traditional
business, among other topics. In this unit, you will be learning about the network
infrastructure for e-commerce, including topics such as Local Area Network
(LAN), Ethernet, Wide Area Network (WAN), the Internet, TCP/IP Reference
Model, Domain Names, and Hyper Text Markup Language (HTML).
You may know by now that that all the services of e-commerce work on
the Internet which is known as the network of networks. Computer network is
a collection of more than two computers, which are connected together to share
information and computer peripherals. The key word in the definition is sharing,
the main function of computer networking. The ability to share information
efficiently is what gives computer networking its power and appeal. Through
the efforts of all major factors involvedthe sharing of time, talent, and
resourcethe primary goal of computer networking is to reduce resources.
E-Commerce Unit 2
Objectives
Give examples of the importance of Local Area Network (LAN)
Generalize the workings of Ethernet (IEEE 802.3)
Demonstrate the working of Wide Area Network (WAN)
Summarize the importance of the Internet
Evaluate the TCP/IP Reference Model
Discuss the functioning of domain names
Summarize the highlights of Hyper Text Markup Language (HTML)
2.2 Local Area Network (LAN)
A LAN (refer to Figure 2.1) covers only a limited geographically area ranging
from 0 to 2 Km, such as organizations, home, buildings. In a local area network,
nodes are connected in a network and operating systems are installed on them.
In this type of networking, generally, Cat 5 cable (8 wires) is used, meaning the
connection is done through wire. However, there is another option of connecting
LAN, which is WLAN, where connection is possible without wires. LAN stores
the system and application software that can be shared by the computers to
other computers and peripherals. Most LANs connect nodes and computers.
They have their own CPU for executing programs. The importance of LAN in an
organization is very high because users can easily communicate to each other
through LAN and they can share resources such as printers, memories, database
and other peripherals of network.
Network
E-Commerce Unit 2
Figure 2.1 Local Area
Metropolitan Area Network (MAN): Metropolitan Area Network or MAN (refer

to Figure 2.2) occupies a larger area compared to LAN, such as a town or a
university/organization premises (which is spread between 05 km to 20 km). It
incorporates a number of LANs to form a network. This bulky network comprises
of an optical fibre setup. MAN connects the computer system, other resources
and some times local area network to a range from 5 to 50 km, meaning it can
effectively cover a town. It uses high speed data transfer mediums like fibre
optic, coaxial cable, etc.
Multi-tenant
Customers
Core
Network
Basestation
Basestation
Repeater
SME
Customer
Residential
Customer
SOHO
Customer
Figure 2.2 Metropolitan Area

Network
(a) With ______ it is possible for the connections to take place without
wires.
(b) Metropolitan Area Network connects the computer system, other
resources and some times local area network to a range from 5 to
______ km.
E-Commerce Unit 2
2.3 Ethernet: IEEE 802.3: Local Area Network (LAN) Protocols

IEEE 802.3 is covered by a small area (Local Area Network). It refers to the
family of Ethernet Protocols. There are two methods of process in Ethernet
standard: first is half-duplex and second is a full-duplex mode. In the half duplex
mode, data are transmitted using the popular Carrier-Sense Multiple Access/
Collision Detection (CSMA/CD) protocol on a shared medium. The main
disadvantages of the half-duplex are effectiveness and space limitation, in which
the link distance is limited by the minimum MAC frame size. This restriction
reduces the effectiveness drastically for high-rate transmission. Therefore, the
carrier extension technique is used to make sure that the minimum frame size
of 512 bytes in Gigabit Ethernet gets a reasonable link distance.
Four data rates are currently defined for operation over optical fiber and
twisted-pair cables. These are:
(i) 10 Mbps - 10Base-T Ethernet (IEEE 802.3)

(ii) 100 Mbps - Fast Ethernet (IEEE 802.3u)
(iii) 1000 Mbps - Gigabit Ethernet (IEEE 802.3z)
(iv) 10-Gigabit - 10 Gbps Ethernet (IEEE 802.3ae)
(a) IEEE 802.3 is covered by small area (Local Area Network).
(b) The main disadvantages of the half-duplex are effectiveness and
space limitation.
2.4 Wide Area Network (WAN)

A WAN (refer to Figure 2.3) crosses almost whole geographic areas, such as
nations. WANs often connect n number of smaller networks. Communication
medium of this networks are telephone line, satellite links, microwave, etc. In
other words, a Wide Area Network (WAN) is a bulky communication of network
that consists of a group of LANs and other different networks (refer to Table
2.1). WAN generally crosses a big geographical area, and can be used to connect
cities, states, or even countries.
E-Commerce Unit 2
Figure 2.3 Wide Area Network

Table 2.1 Wide Area Network
Parameter LAN MAN WAN
Area covered Covers small area
i.e. within the
building
Covers large area.
But smaller than
WAN
Covers large
geographical area
Error rates Lowest Moderate Highest
Transmission
speed
High speed Moderate speed Low speed
Equipment cost
Uses inexpensive
equipment
Uses moderately
expensive
equipment
Uses most expensive
equipment
(a) With MAN, the error rates are highest.
(b) LAN has low transmission speed.
2.5 The Internet

The Internet is the network of networks or a means of connecting a computer or
network to any other computer or network in the world, through specific network
components and servers. When two computers are connected over the Internet,
they can exchange all types of information, such as video, computer programs,
text, graphics and voice.
E-Commerce Unit 2
It is not possible for one to make an Internet. Still, organizations around

the world over collaborate in its functioning and development. The high-speed,
fibre-optic cables (called backbones) through which the bulk of the Internet
data travels are owned by telephone companies in their respective countries.
The Internet grew out of the Advanced Research Projects Agencys Wide Area
Network (then called ARPANET) recognized by the US Department Of Defense
in 1960s for collaboration in military research among business and government
laboratories. Later universities and other US institutions connected to it. This
resulted in ARPANET growing beyond everyones expectations and acquiring
the name Internet. The development of hypertext based technology (called
World Wide web, WWW, or just the Web) provided means of displaying text,
graphics, and animations, and easy search and navigation tools that has triggered
the Internets explosive worldwide growth.
Activity 1
What is the biggest contribution of the Internet to human society? Write a
500 word essay on the topic.
(a) When two computers are connected over the ________, they can
exchange all types of information.
(b) The high-speed, fibre-optic cables (called backbones) through which
the bulk of the Internet data travels are owned by __________
companies.
2.6 TCP/IP Reference Model

The builder of the TCP/IP protocol group created their own architectural model
to help describe its components and functions. This model goes by different
names, including the TCP/IP model, the DARPA model (after the agency that
was largely responsible for developing TCP/IP) and the DOD model (after the
United States Department of Defense, the D in DARPA).
In spite of the model you use to represent the function of a networkand
regardless of what you call that modelthe functions that the model represents
E-Commerce Unit 2
are pretty much the same. This means that the TCP/IP and the OSI models are
relatively same in nature even if they do not carve up the network functionality
pie in precisely the same way. There is a fairly natural correspondence between
the TCP/IP and OSI layers; it just isnt always a one-to-one relationship. Since
the OSI model is used so widely, it is common to explain the TCP/IP architecture
both in terms of the TCP/IP layers and the corresponding OSI layers.
Client Gateway/(Internet) Host
Application layer
Presentation layer
Session layer
Transport layer
Network layer
Data link layer
Physical layer
Application layer
Presentation layer
Session layer
Transport layer
Network layer
Data link layer
Physical layer
2.4 TCP/IP Layer Communications

Characteristics of Gateways
Figure
Gateway routers are used to connect dissimilar LANs and perform all the
functions of bridges and routers. It operates as all seven layers of the
OSI Reference Model.
Gateways provide full protocol conversion from one proprietary LAN
technology to another.
Gateway uses higher layers of the OSI model, perhaps through layer 7,
the application layer.
1. Application
2. Transport
3. Internet
Represents data to the user plus encoding
and dialog control.
Support communication between diverse
devices across diverse networks (using
TCP/IP).
Determines the best path through the
Network ( using gateway).
Controls the hardware devices and media
4. Network Layer that make up the network .
Figure
2.5 TCP/IP Reference Model for Communication
E-Commerce Unit 2
The TCP/IP model (refer to Figure 2.5) has four layers that match six of
the seven layers in the OSI Reference Model. The TCP/IP model does not
address the physical layer, which is where network component and hardware
devices reside. The next three layersnetwork interface, the Internet and (hosttohost) transportcorrespond to layers 2, 3 and 4 of the OSI model. The TCP/
IP application layer conceptually blurs the top three OSI layers. It is important
to note that some people consider certain aspects of the OSI session layer to
be possibly part of the TCP/IP host-to-host transport layer.
(a) The builder of the TCP/IP protocol group created their own
architectural model to help describe its components and functions.
(b) The TCP/IP model has two layers that match six of the seven layers
in the OSI Reference Model.
2.7 Domain Names

As numeric strings are hard to remember, which make up the IP address, all
servers on the Internet also have human-readable names, called domain names.
For instance, it is easier for us to remember www.sriram.ac.in than
134.45.56.178. An organization might block all access to certain domain names
or allow access only to specific domain names. A domain name always contains
two or more components separated by dots; for example microsoft.com,
tcs.co.in, etc. The last portion of the domain name is the top label domain name
and describes the type of organization. The major types of top label domain
names are:
com : represents commercial entities
org : represents miscellaneous organizations that do not fit any other
category, such as non-profit group.
edu : represents educational institutions
net : represents organizations directly involved in Internet operations
gov : represents the United States Federal Government Entities
mil : represents the military of the United States
E-Commerce Unit 2
Country Codes: This is a two-letter abbreviation for a particular country; for

example in represents India, uk represents the United Kingdom, and fr
represents France.

(a) A domain name always contains_______ or more components.
(b) _______ represents educational intuitions.
2.8 Hyper Text Markup Language (HTML)

HTML is a method where ordinary text can be converted into hypertext. It is a
set of special codes included to control the layout and appearance of the text.
Technically, HTML is not a programming language. It combines instruction within
data to tell a display program called browser, how to render the data that the
document contains.
The following is the structure of HTML:
<html>
<head>aboutauthors</head>
<title>FirstPage</title>
<body>
<h1>HellothismyHomepage!
</body>
</html>
< HTML>:This tag defines the top most elements, identifying it as an HTML
document.
<Head>:This tag contains information about your HTML file.
<Title>:This tag is nested within the head tag. It identifies your page to the
rest of the world. Output of tag is displayed on your browsers title bar but does
not appear as part of the page.
<body>:This is a body part of your HTML web page. Within this tag all the
various tag is used. Every tag has prespecified attributes and there possible
values.
E-Commerce Unit 2
Levels of Heading: Six different levels up to <h1>,<h2>,<h3>,<h4>,

<h5>,<h6>
Adding a comments:<! - - and ends with >
Creating List: There are two types of list : ordered list and unordered list.
Ordered List:
<ol>
<li>MSWindows
<li>MSExcel
<li>MSWord
</ol>
Unordered List:
<ul>
<li>MSWindows
<li>MSExcel
<li>MSWord
</ol>
Creating Definition Lists:
A glossary consists of three tag elements:
<dl>:Define the List
<dt>:Define term
<dd>:Define the definition
Inserting Images:
To insert images in your page use <img> tag as follows:
<img src=flower.gif height=100" width=100" border=1">
Linking the HTML page:
To link one HTML to another use anchor tag as follows:
<a href = first.html > Click me </a>
Setting font size:
We can set font of text by using font tag as follows:
<font face=Arial size=4" color=red>
Marquee tag:
This tag offers some movement from up, down, left, right of given text:
<marquee direction=up bgColor=red behavior=scroll> MY Moving Text
is displayed here </marquee>
E-Commerce Unit 2
Table tag:
Page layout on the web has to be set by using tables because HTML has no
method to set margin or columns.
Example:
<tableborder=1"cellspacing=6"cellpadding=6"
width=80%>
<tr><th>Rollno</th>
<th>Name</th>
</tr>
<tr><td>34</td>
<td>Pooja</td>
</tr>
<tr><td>35</td>
<td>Priya</td>
</tr>
</table>
Form tag:
Form tag is an important element for doing online business. Forms are necessary
for gathering user information, conducting surveys, or even providing interactive
services. Forms are supported by both client and server for successful
implementation. A number of features are available for building forms, including
text boxes, check boxes, radio buttons, submit buttons and text area. A user
can enter text, selects items from a list, check boxes, and then submit the
information to the server. A program on the server then interprets the data acts
on it appropriately, either by returning information in hypertext form, downloading
a file, or electronically notifying the company of your order.
Item Name:
Item ID:
Number of Quantity:
(Submit)
E-Commerce Unit 2
The corresponding coding of above HTML form is given below:

<form method=post action=/cgi-bin/purchase.asp>
Item Name: <input type=text name= item_name value= CD
> <br>
Item Code: <input type=text name=code value=
CD_Mos_2" > <br>
Number of Quantity: <input type=text name= Qty value=4" > <br>
<input type=submit value=submit>

Generating forms in HTML is only half the task. The harder part is to
decode the input data submitted from the form. All the programs use data
submitted from the form. All the programs that use data submitted from an
HTML form must conform to the specification called Common Gateway Interface
(CGI).
The important aspect of web server development is application gateway,
more specifically, CGI, which is a specification for communicating data between
an information server, in this case, Web server, and another application. CGI is
used wherever the web server needs to send or receive data from another
application, such as a database. A CGI script is a program that negotiates the
movement of data between the Web server and an outside application.
Use of CGI is to pass data, filled in by a user in an HTML form, from the
web server to a database. Data also can be returned to the users browser via
CGI. CGI scripts may be written in high level language such as C and Perl,
because they can run so many platforms.
(a) HTML is a method where ordinary text can be converted into
hypertext.
(b) The important aspect of web server development is application
gateway, more specifically, CGI.
E-Commerce Unit 2
2.9 Simple Exercises in HTML

Basic exercises
1. Create a webpage that prints a name Vijay to the screen.
Solution:
<html>
<body>
<!printnametothescreen>
Vijay
</body>
</html>
On Screen: Vijay
2. Create a webpage and set its title to It is good to be home to the screen, and
set the title of the page to the current date.
Solution:
<html>
<head>
<!setthetitleofthepagetothecurrentdate>
<title>October15,2011</title>
</head>
<body>
<!printamessage>
Itisgoodtobehome.
</body>
</html>
On screen: It is good to be home.
HTML Text exercise
3. Prints the name Vijay in Tahoma font.
Solution:
<html>
<body>
<fontface=Tahoma>Vijay</font>
E-Commerce Unit 2
</body>
</html>
On screen: Vijay
Would the World Wide Web function without HTML? Research the Internet
and give reasons to support your answer.
2.10 Summary
Computer network is a collection of more than two computers, which are
connected together to share information and computer peripherals.
A LAN covers only a limited geographically area ranging from 0 to 2 Km,
such as organizations, home, buildings.
MAN occupies a larger area compared to LAN, such as a town or a
university/organization premises (which is spread between 05 km to 20
km) is termed as Metropolitan Area Network or MAN.
IEEE 802.3 is covered by small area (Local Area Network). It refers to the
family of Ethernet Protocols. We have two methods of process in Ethernet
standard: first is half-duplex and second is a full-duplex mode.
A Wide Area Network (WAN) crosses almost whole geographic areas,
such as nations. Communication medium of this networks are telephone
line, satellite links, microwaves, etc.
The Internet is the network of networks and a means of connecting a
computer or network to any other computer or network in world through
specific network components and servers.
The builder of the TCP/IP protocol group created their own architectural
model to help describe its components and functions. This model goes
by different names, including the TCP/IP model, the DARPA model (after
the agency that was largely responsible for developing TCP/IP) and the
DOD model (after the United States Department of Defense, the D in
DARPA).
HTML is a method where ordinary text can be converted into hypertext. It
is a set of special codes included to control the layout and appearance of

the text. Technically, HTML is not a programming language.
E-Commerce Unit 2
2.11 Glossary
Computer network: Collection of more than two computers, which are
connected together to share information and computer peripherals
LAN: Supplies networking capability to a group of computers in close
proximity to each other such as in an office building, a school, or a home
MAN: Metropolitan Area Network; covers a wider area than LAN
WAN: Network that crosses almost whole geographic area, such as nation
and all over world; WANs often connect n number of smaller networks
The Internet: Network of networks and a means of connecting a computer
or network to any other computer or network in the world through specific
network components and servers
HTML: Method where ordinary text can be converted into hypertext; it is
a set of special codes included to control the layout and appearance of
the text
Protocol: A set of rules that control the way data is sent between
computers
Architecture: The design and structure of a computer system

1. Discuss the importance of LAN.
2. What is Ethernet (IEEE 802.3)?
3. Explain the term Wide Area Network. How is it different from LAN?
4. What is the Internet?
5. Discuss the main features of the TCP/IP Reference Model.
6. What are domain names? Explain.
7. Why is Hyper Text Markup Language (HTML) important? Discuss.
E-Commerce Unit 2
2.13 Answers
1. (a) WLAN; (b) 50
2. (a) True; (b) True
3. (a) False; (b) False
4. (a) Internet; (b) Telephone
6. (a) Two; (b) Edu

References
1. Turban, Efraim, Jae Kuy Lee and Michael Chung. 1999. Electronic
Commerce: A Managerial Perspective. Prentice Hall.
2. Whitley, David. 1998. E-commerce: Strategy, Technologies and
Applications. Tata McGraw-Hill.
Unit 3 Network Infrastructure for

E-Commerce - II
Structure
3.1 Introduction
Objectives
3.2 Common Gateway Interface
3.3 Multimedia Objects
3.4 Network Access Equipment
3.5 Network Cables
3.6 Broadband Telecommunication
3.7 Summary
3.8 Glossary
3.10 Answers
References
3.1 Introduction
In the previous unit, you learnt about the network infrastructure for e-commerce,
including topics such as Local Area Network (LAN), Ethernet, Wide Area Network
(WAN), the Internet, TCP/IP Reference Model, Domain Names, and Hyper Text
Markup Language (HTML).
In this unit, you will learn about Common Gateway Interface (CGI), which
is a process used to share the data between the web server and the web browser.
CGI is a set of standards where a program can send data back to the web
server where it can be processed. Also discussed at length is broadband
telecommunication, which makes use of a digital or analogue signal to relay
voice and data. In most applications, the term is associated with systems offering
fast transmission of data, either using latest digital technology or an analogue
system with a wider bandwidth. There are numerous types of broadband
telecommunications in use today.

You will also be taught various other topics, including, but not limited to,
multimedia objects, network access equipment, and network cables.
E-Commerce Unit 3
Objectives
Evaluate the importance of common gateway interface
Define and give examples of multimedia objects
Demonstrate the working of network access equipment
Summarize the functioning of network cables
Discuss the importance of broadband telecommunication
3.2 Common Gateway Interface
As you traverse the vast frontier of the WWW, you could come across documents
that make you wonder, How did they do this? These documents could consist
of, among other things, forms that put for advice or registration information,
image maps that allow you to click on different parts of the image, counters that
present the number of users that accessed the document, and utilities that
allow you to search databases for specific information. In most cases, youll find
that these properties were done using the Common Gateway Interface,
commonly known as CGI.
One of the Internets worst-kept secrets is that CGI is astoundingly simple.
That is, its trivial in design, and anyone with an iota of programming experience
can write rudimentary scripts that work. Its only when your requirements are
more demanding that you have to master the more complex workings of the
Web.
CGI is the part of the Web server that can communicate with other different
programs running on the server. With CGI, the Web server can call up a program,
while passing user-specific data to the program (such as what host the user is
connecting from, or input the user has supplied using HTML form syntax). The
program then processes that data and the server passes the programs response
back to the Web browser.
CGI is not an enchantment; its just programming with some particular
types of input and a few strict rules on program output. Everything in between is
just programming. Of course, there are special techniques that are particular to
CGI. But underlying it all is the simple model as shown in Figure 3.1
E-Commerce Unit 3
Web
Browser
Information
HTTP
Server
3. Gateway
Script of
Program
1. Form/Query 2. CGI
4. HTML 4. HTML
Figure 3.1 CGI Model
Common uses of CGI include:

Guest books
Email forms
Mailing list maintenance
Blogs
(a) CGI is a set of standards where a program can send data back to
the web server where it can be processed.
(b) One of the Internets worst-kept secrets is that CGI is astoundingly
complex.
3.3 Multimedia Objects
Multimedia objects are files that hold images, audio recordings, video
clips and scanned documents, etc., which relate to some fact within our
genealogical data. A multimedia object can be linked with several entities
(animals, person, family, source ) and vice versa.
In other words multimedia is media and content that uses a combination
of different content forms. The term can be used as a noun (a medium
E-Commerce Unit 3
with multiple content forms) or as an adjective describing a medium as

having multiple content forms. The term is used in contrast to media which
only use traditional forms of printed or hand-produced material. Multimedia
includes a combination of text, audio, still images, animation, video, and
interactivity content forms.
Multimedia is usually recorded and played, displayed or accessed by
information content processing devices, such as computerized and
electronic devices, but can also be part of a live performance. Multimedia
(as an adjective) also describes electronic media devices used to store
and experience multimedia content. Multimedia is distinguished from mixed
media in fine art; by including audio, for example, it has a broader scope.
The term rich media is synonymous for interactive multimedia.
Hypermedia can be considered one particular multimedia application.
Multimedia presentations may be viewed by person on stage, projected,
transmitted, or played locally with a media player. A broadcast may be a
live or recorded multimedia presentation. Broadcasts and recordings can
be either analogue or digital electronic media technology. Digital online
multimedia may be downloaded or streamed. Streaming multimedia may

be live or on-demand.
Multimedia games and simulations may be used in a physical environment
with special effects, with multiple users in an online network, or locally
with an offline computer, game system, or simulator.
The various formats of technological or digital multimedia may be intended
to enhance the users experience, for example to make it easier and faster
to convey information. Or in entertainment or art, to transcend everyday
experience. Enhanced levels of interactivity are made possible by
combining multiple forms of media content. Online multimedia is
increasingly becoming object-oriented and data-driven, enabling
applications with collaborative end-user innovation and personalization
on multiple forms of content over time. Examples of these range from
multiple forms of content on Web sites like photo galleries with both images
(pictures) and title (text) user-updated, to simulations whose co-efficient,
events, illustrations, animations or videos are modifiable, allowing the
multimedia experience to be altered without reprogramming. In addition
to seeing and hearing, Haptic technology enables virtual objects to be
felt. Emerging technology involving illusions of taste and smell may also
enhance the multimedia experience.
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(a) Multimedia is media and content that uses a combination of different
______forms.
(b) Online multimedia is increasingly becoming _________ and
_________.
3.4 Network Access Equipment
Hubs: All networks (except those using coaxial cable) require a central location
to bring media segments together. These central locations are called Hubs.
Hubs are special repeaters that overcome the electromechanical limitations of
a media signal path.
There are three types of Hubs:
1. Passive Hub: A passive hub simply combines the signals of network
segments. There is no signal regeneration.
2. Active Hub: Active hub is that which regenerates of amplifies the
signals.
3. Intelligent Hub: Intelligent hub regenerates the signal and performs
some network management and intelligent path selection.
Switches: It supports transmitting receiving and controlling traffic with other
computers on the network. MAC (Media Access Control) address is hard-coded

on the card by manufacture. This MAC address is globally unique.
Comparison of Hub and Switch
Hub is broadcasting device while switch is point-to-point communication
device.
Hub operates at physical layer while switch operates at data link layer.
Switch can be used as a repeater but hub cannot be used as repeater.
Switch uses switching table to find out the correct destination while hub
simply broadcasts the incoming packet.
Repeaters: Repeaters (refer to Figure 3.2) are devices that operate at the
physical layer of the OSI model. The basic purpose of a repeater is to extend
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the distance of LAN. Their primary purpose is simply to regenerate a signal

received from input and correct the signal to its original state for output.
Workgroup Repeaters
(Fiber to AUI ST)
(LE4204A-R3)
Pure Networking
10/100 Ethernet
Switch (LB8516A)
Standard Ethernet Cable
(LCN100)
Duplex Fiber Optic Cable (EFN062),
upto 1.2 miles (1.9 km)
PC
Figure 3.2 Repeater
Network Interface Card (NIC): The primary function of NIC is to allow the
computer to communicate on the network. It supports transmitting, receiving
and controlling traffic with other computer on the network. NIC operates at
physical layer of OSI model. MAC address is hard coded onto the card by
manufacturer. This MAC address is globally unique and is of 48 bits. The MAC
address provides a way to distinguish one NIC from other NIC. These MAC
addresses are also called physical address.
Bridge: A bridge (refer to Figure 3.3) is a device that is attached to two or more
LANs to create an extended LAN. The LANs to be interconnected may be similar
or dissimilar. As each type of LAN has different MAC frame structure, the bridge
takes care of these differences by reformatting the frames.
Manufacturing Database Server
Bridge
Corporate LAN Segment Manufacturing Segment
Figure 3.3 Bridge
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Router: A router (refer to Figure 3.4) operates at the third network layer of ISOOSI
model. It connects more than two different types of network. Router
determines the short path between source and destination for data transmission.
Windows
Small Business
Server
Client computers
Internet
Router device
with an assigned
IP address
Switch
or hub
Figure 3.4 Router
Table 3.1 shows the similarities and differences between a router and a
bridge.
Table 3.1 Similarities and Differences between a Router and a Bridge
Router Bridge
1 Router operates network layer of
OSI model.
Bridge operates the data link layer
of OSI model.
2 Routers are relatively expensive. Bridges are relatively inexpensive.
3 Routers are difficult to set up and
configure.
Bridges are relatively easy to
configure.
4 Routers can accommodate multiple
paths.
Bridges can accommodate single
path.
5 Routers can join two different
networks.
Bridges extend the existing
networks.
6 Routers can be both hardware and
software device.
Bridges can be both hardware and
software device.
Activity 1
How much better are todays web servers compared to what was available
ten years back? Refer the Internet and give a detailed answer.
E-Commerce Unit 3
(a) Switch is broadcasting device while hub is point-to-point
communication device.
(b) Routers are very cheap.
3.5 Network Cables

Network cables are the medium through which information generally travels
from one node/network device to another. There are many types of cables which
are used for computer network. In some cases, a network will utilize only one
type of cable, while other networks will use a variety of cable types. The type of
cable chosen for a network is related to the networks topology, protocol, and
size. Understanding the characteristics of different types of cable and how they
relate to other aspects of a network is necessary for the development of a
successful network.
There are following types of cables used in networks and other related
topics.
Fibre optic cable
Cable installation guides
Wireless LANs
Unshielded Twisted Pair (UTP) cable
Shielded Twisted Pair (STP) cable
Coaxial cable
Fibre optic cable
Fibre optic cabling (refer to Figure 3.5) consists of a centre glass core surrounded
by several layers of protective materials. It transmits light rather than electronic
signals eliminating the problem of electrical interference. This makes it ideal for
certain environments that contain a large amount of electrical interference. It is
also the standard for connecting networks between buildings, due to its immunity
to the effects of moisture and lighting.
Fibre optic cable has the capability to transmit signals over much longer
distances than coaxial and twisted pairs. It also has the capability to carry
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information at superior speeds. This capacity broadens communication

possibilities to include services such as video conferencing and interactive
services. The cost of fibre optic cabling is comparable to copper cabling; however,
it is more difficult to install and modify.
The centre core of fibre cables is made from glass or plastic fibres. A
plastic coating then cushions the fibre centre, and kevlar fibres help to strengthen
the cables and prevent breakage. The outer insulating jacket is made of teflon
or PVC.
Figure 3.5 Fibre Optic Cable
There are two common types of fibre cables single mode and multimode.
Multimode cable has a larger diameter; however, both cables provide high
bandwidth at high speeds. Single mode can provide more distance, but it is
more expensive.
Specification Cable Type
10BaseT Unshielded Twisted Pair
10Base2 Thin Coaxial
10Base5 Thick Coaxial
100BaseFX Fibre Optic
100BaseBX Single mode Fibre
100BaseSX Multimode Fibre
1000BaseFX Fibre Optic
1000BaseBX Single mode Fibre
1000BaseSX Multimode Fibre
Installing cablesome guidelines

When running cable, it is best to follow a few simple rules:
If it is necessary to run cable across the floor, cover the cable with cable
protectors.
Label both ends of each cable.
Use cable ties (not tape) to keep cables in the same location together.
Always use more cable than you need. Leave plenty of slack.
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Test every part of a network as you install it. Even if it is brand new, it may
have problems that will be difficult to isolate later.
Stay at least 3 feet away from fluorescent light boxes and other sources
of electrical interference.
Wireless LANs
Figure 3.6 Wireless LANs
Wireless LANs use high frequency radio signals, infrared light beams, or
lasers to communicate between the workstations, servers, or hubs. Each
workstation and file server on a wireless network has some sort of transceiver/
antenna to send and receive the data. Information is relayed between
transceivers as if they were physically connected. For longer distances, wireless
communications can also take place through microwave transmission, cellular
telephone technology or by satellite.
Wireless networks are great for allowing laptop, desktop, portable devices,
or remote computers to connect to the LAN. Wireless networks are also beneficial
in older buildings where it may be difficult or impossible to install cables.

The two most common types of infrared communications used in schools
are line-of-sight and scattered broadcast. Line-of-sight communication means
that there must be an unblocked direct line between the workstation and the
transceiver. If a person walks within the line-of-sight while there is a transmission,
the information would need to be sent again. This kind of obstruction can slow
down the wireless network. Scattered infrared communication is a broadcast of
infrared transmissions sent out in multiple directions that bounces off walls and
ceilings until it eventually hits the receiver. Networking communications with
laser are virtually the same as line-of-sight infrared networks.
Advantages of wireless networks:
Cost: Setting up a wireless network can be much more cost effective than
buying and installing cables.
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Expandability: Adding new computers to a wireless network is as easy as

turning the computer on (as long as you do not exceed the maximum
number of devices).
Mobility: With a laptop computer or mobile device, access can be available
throughout a school, at the mall, on an airplane, etc. More and more
businesses are also offering free Wi-Fi access (Hot spots).
Fast setup: If your computer has a wireless adapter, locating a wireless
network can be as simple as clicking Connect to a Networkin some
cases, you will connect automatically to networks within range.
Disadvantages of wireless networks:
Inconsistent connections: How many times have you said to yourself,
Wait a minute, I just lost my connection? Because of the interference
caused by electrical devices and/or items blocking the path of transmission,
wireless connections are not nearly as stable as those through a dedicated
cable.
Speed: The transmission speed of wireless networks is improving;
however, faster options (such as gigabit Ethernet) are available via cables.
If you are only using wireless for Internet access, the actual Internet
connection for your home or school is generally slower than the wireless
network devices, so that connection is the bottleneck. If you are also
moving large amounts of data around a private network, a cabled
connection will enable that work to proceed much faster.
Security: Protect sensitive data with backups, isolated private networks,
strong encryption and passwords, and check network access traffic to
and from the wireless network.
Interference: Because wireless networks deploy radio signals and similar
techniques for transmission, they are vulnerable to intrusion from lights

and electronic devices.
Unshielded Twisted Pair
Twisted pair cabling comes in two varieties: shielded and unshielded. Unshielded
twisted pair (UTP) is the most popular and is generally the best option for school
networks.
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Figure 3.7 Unshielded Twisted Pair
The quality of UTP (refer to Figure 3.7) may range from telephone-grade
wire to extremely high-speed cable. This cable has four pairs of wires inside the
jacket. Each pair is twisted with a different number of twists per inch that helps
to eliminate interference from adjoining pairs and other electrical devices. The
Electronic Industry Association/Telecommunication Industry Association
(EIA/TIA) has set standards of UTP and rated six categories of wire, which are
as follows.
Category Speed Use
1 1 Mbps Voice Only (Telephone Wire)
2 4 Mbps Local Talk & Telephone (Rarely used)
3 16 Mbps 10BaseT Ethernet
4 20 Mbps Token Ring (Rarely used)
100 Mbps (2 pair) 100BaseT 5 Ethernet
1000 Mbps (4 pair) Gigabit Ethernet
6 1,000 Mbps Gigabit Ethernet
7 10,000 Mbps Gigabit Ethernet
Unshielded Twisted Pair connector

The standard connector for unshielded twisted pair cabling is known as RJ-45
connector (refer to Figure 3.8). This is a plastic connector that looks like a large
telephone-style connector. A slot allows the RJ-45 to be inserted only one way.
RJ stands for Registered Jack, implying that the connector follows a standard
borrowed from the telephone industry. This standard assigns which wire goes
with each pin inside the connector.
Figure 3.8 RJ-45 Connector
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Shielded Twisted Pair (STP) cable

UTP cable is the least expensive cable; it may be disposed to radio and electrical
frequency interference (it should not be too close to electric motors, fluorescent
lights, etc.). If you must place cable in environments with lots of potential
interference, or if you must place cable in extremely sensitive environments
that may be susceptible to the electrical current in the UTP, shielded twisted
pair may be the solution. Shielded cables can also facilitate to extend the
maximum distance of the cables.
Shielded twisted pair cable is available in three different configurations:

1. Each pair of wires is individually shielded with foil.
2. There is a foil or braid shield inside the jacket covering all wires.
3. There is a shield around each individual pair, as well as around the
entire group of wires.
Coaxial cable
Coaxial cable (refer to Figure 3.9) has a single copper conductor at its centre. A
plastic layer provides insulation between the centre conductor and a braided
metal shield. The metal shield facilitates to block any outside interference from
fluorescent lights, motors, as well as other computers.
Figure 3.9 Coaxial Cable
Coaxial cabling is not easy to install, but it comes with the advantage of
being highly resistant to signal interference. Also, it can support greater cable
lengths between network devices than twisted pair cable. The two types of
coaxial cabling are thick coaxial and thin coaxial.
Thin coaxial cable is known as thinnet. 10Base2 refers to the specifications
for thin coaxial cable moving Ethernet signals. The 2 refers to the approximate
maximum segment length being 200 metres. The maximum division length is
actually 185 metres. Thin coaxial cable has been popular in school networks,
particularly linear bus networks.
Thick coaxial cable is known as thicknet. 10Base5 refers to the
specifications for thick coaxial cable carrying Ethernet signals. The 5 refers to
the maximum division length being 500 metres. Thick coaxial cable has an
extra protective plastic cover that helps keep moisture away from the centre
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conductor. This creates thick coaxial a great choice when running longer lengths
in a linear bus network. One disadvantage of thick coaxial is that it is not easily
bendable and quite difficult to install.
Coaxial cable connectors
A most common type of connector used with coaxial cables is the Bayone-NeillConcelman (BNC) connector (refer to Figure 3.10). There are different types of
adapters for BNC connectors, including a T-connector, barrel connector, and
terminator. Connectors are the most vulnerable points in any network. To help
avoid problems, always use the BNC connectors that screw onto the cable.
Figure 3.10 BNC Connector
(a) Coaxial cabling is extremely easy to install.
(b) One of the rarest forms of connectors is the Bayone-Neill-Concelman
(BNC) connector.

(a) Fibre optic cabling consists of a centre _____ core surrounded by
several layers of protective materials.
(b) The standard connector for unshielded twisted pair cabling is known
as _______connector.
3.6 Broadband Telecommunication
In general, broadband refers to telecommunication where a wide band of

frequencies is available to transmit information. There is wide range of
frequencies available, and information can be multiplexed and sent on many
different frequencies or channels within the band simultaneously. This way, more
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information can be transmitted in a shorter duration of time than what is

achievable with older methods of transmission.
One of the configurations that have been around for a number of years is
the integrated services digital network, or ISDN. This network design can be
used to relay voice and data over copper telephone lines. This may not be the
fastest option in fashion today; however, it does make it possible to access the
Internet without the requirement of a high-speed connection or a lot of resources.
Another common example is the asynchronous transfer mode, referred
to in the telecommunications world as ATM. This option is much quicker than
ISDN and has proven to be extremely handy for companies relying heavily on
the Internet and electronic communications.
Asynchronous Transfer Mode, (ATM), is a network technology based on
transferring data in cells or packets of a fixed size. The cell used with ATM is
smaller compared to units used with older technologies. This size of the cell
allows for an advantageATM equipment can transmit video, audio, and
computer data over the same network, and guarantee that no single type of
data clutters the line.
Some people opine that ATM is the definitive answer for the Internet
bandwidth problem; others and not so confident. ATM creates a fixed or route
between two points whenever data transfer begins. This differs from TCP/IP,
where messages are divided into packets and each packet can take a different
route from source to destination. This difference makes it easier to track and bill
data usage across an ATM network, but it renders it less adaptable to sudden
increases in network traffic.
Integrated Service Digital Network
Integrated Service Digital Network, (ISDN), is the original high-speed Internet
service. It sparked the high-speed Internet development between service
providers during the 1990s and, of course, revolutionized Internet use. Much
like its predecessor, the dial-up Internet service, ISDN utilizes a phone line. In
fact, it set the standard for telephone data service.

ISDN Internet service was the improvement upon dial-up, and it also paved
the way for DSL and cable-modem Internet service thereafter. It can be
considered the step of Internet evolution that lies between dial-up and DSL/
Cable. Modernizing Internet use and bringing high-speed access inside the
home, ISDN became the standard by which rival broadband Internet service
providers competed. Although ISDN Internet service still exists, like the dial-up
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connection it is being replaced by faster and cheaper services that the broadband
companies are providing. Regardless, broadband high-speed Internet service
is still compared with ISDN today, since they both represent the benchmark of
their times.
ISDN Internet service is basically a telephone-based network system that
operates by a circuit switch, or dedicated line, and is capable of transmitting
data and phone conversations digitally over normal telephone wires. This makes
it both faster and of higher quality than dial-up Internet service. During the 1990s
this revolutionized the way people did business. No longer would you have to
miss a call in order to access your Internet, or shut down the Internet to make a
telephone call. As such, ISDN Internet service made video teleconferencing not
only possible, but very popular as well.
There are two different types, or lines, of ISDN Internet service.
The first is a basic rate ISDN line. Called a Basic Rate Interface
(BRI), this line has two data, or bearer, channels that operate at 64
kbit/sec. Two or more ISDN-BRI lines can be combined as well,
yielding speeds of 256 kbit/sec. It is common to combine these lines
for video conferencing use or for transmitting data at higher speeds.
The second type of ISDN line is called a primary rate line, or Primary
Rate Interface (PRI). This line had 23 bearer channels and has a
total speed of 1,544 kbit/sec. It is used mostly for telephone
communication rather than data transmission, particularly within
companies that have large, private telephone exchange systems
operating inside their business.
The advantages of having ISDN Internet service definitely lies in the data
lines themselves. Not only do you have constant data speed via these lines,
each bearer channel runs at 64 kbit/sec with the ability to be combined to reach
greater speeds. ISDN Internet serviced also facilitates multiple data transmission,
so telephone calls and data downloading are no longer mutually exclusive. The
disadvantages, however, is that the digital clarity of ISDN voice communication
and its speedy data transmission come at an extra cost. ISDN is billed like a
phone line, but with an extra cost for service. Although its operational distance
from the ISDN central office is greater than that for DSL, its terminal adaptor
(similar to a modem) costs more than DSL or cable modems. While this
equipment and service continue to remain exorbitant, it is leaving the way open
for other Internet services to share the marketplace.
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Frame Relay
Frame Relay is a digital connection-oriented data service that sends packets of
data, called frames, over the network. This frame of data is transmitted through
the network and checked for errors. Frame Relay is designed for cost-efficient
data transmission for intermittent traffic between local area networks (LAN-toLAN) and between end-points in a wide area network (WAN). It is a data network
service bundled with leased line access for transmitting data between remote
networks. Frame Relay is a digital packet network service that provides all the
features and benefits of a dedicated network service without the expense of
multiple dedicated circuits. This data is carried in the form of packets and given
an ID on a per packet basis. It is then sent across the network in a very efficient
way. In a Frame Relay network, circuits are connected to a packet switch within
the network that ensures that packets are routed to the correct location. Frame
Relay is a digital dedicated service that is leased from a carrier. It is a switched
service.
Application-level security
Web applications can be protected from SQL Injection Attacks where
the attacker enters SQL commands into Web form input fields or URL
query strings to try to manipulate the SQL statement being sent to and
from the database. To avoid SQL injection attacks, the following methods
should be used:
o Use of queries or stored procedures to access a database as opposed
to using string concatenation
o Limitation the amount of characters in Web form input fields and
URL query strings to a proper amount
o Validate text input and URL query strings for improper characters
(e.g. apostrophe, dash)
o Do not display errors to the user that contain information about the
database or actual source code
ASP.Net Web applications must be secured from Cross Site Scripting
(XSS) attacks. To accomplish this, developers must ascertain that the
ASP.Net validateRequest Page directive is set to True (the default setting)
so that users of the application are prevented from entering HTML or
JavaScript code into Web forms.
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Data transmission security

When confidential or important data is passed between the user and the Web
server, the HTTPS (SSL over HTTP) protocol will be used. SSL provides server
authentication, data encryption (over the wire), and data transmission integrity.
The SSL certificate used on the Web server will need to be trusted by the Web
browsers listed on the CDEs Minimum Web Browser Requirement Web page.
Database security
Web applications should use minimum privileges to access database
objects (i.e. tables, views, stored procedures). For instance, if the Web
application needs read-only access to a specific database table, the
database permissions should be set accordingly than giving the Web
application admin or owner rights to the entire database.
Individual database fields storing confidential or sensitive data (for
example, passwords, social security number) must be stored using
encryption techniques.
Password requirements
Passwords whether created by application developers, administrators, or users
must meet or be required through validation to meet all of the following
parametres. Passwords must:
Be at least eight characters in length.
Contain characters from three of the following four categories:
o Uppercase letters (A though Z)
o Lowercase letters (a through z)
o Numbers (0 through 9)
o Special characters (!, @, #, $, ^, &, *, -, =, _, +, ?)
Not be the same as the logon or user name.
Activity 2
Select any two major broadband service providers in India and present
their pros and cons.
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(a) _________ refers to telecommunication where a wide band of
frequencies is available to transmit information.
(b) __________ is a digital connection-oriented data service that sends
packets of data, called frames, over the network.
(c) Passwords must be at least _____ characters in length.
3.7 Summary

Common Gateway Interface (CGI) is a process used to share the data
between the web server and the web browser. CGI is a set of standards
where a program can send data back to the web server where it can be
processed.
CGI is the part of the Web server that can communicate with other different
programs running on the server. With CGI, the Web server can call up a
program, while passing user-specific data to the program (such as what
host the user is connecting from, or input the user has supplied using
HTML form syntax).
The primary function of NIC is to allow the computer to communicate on
the network. It supports transmitting, receiving and controlling traffic with
other computer on the network. NIC operates at physical layer of OSI
model.
Network cables are the medium through which information generally travels
from one node/network device to another. There are many types of cables
which are used for computer network. In some cases, a network will utilize
only one type of cable, while other networks will use a variety of cable
types.
Fibre optic cabling consists of a centre glass core surrounded by several
layers of protective materials. It transmits light rather than electronic signals
eliminating the problem of electrical interference. This makes it ideal for
certain environments that contain a large amount of electrical interference.
It is also the standard for connecting networks between buildings, due to
its immunity to the effects of moisture and lighting.
E-Commerce Unit 3
Wireless LANs use high frequency radio signals, infrared light beams, or
lasers to communicate between the workstations, servers, or hubs. Each
workstation and file server on a wireless network has some sort of
transceiver/antenna to send and receive the data. Information is relayed
between transceivers as if they were physically connected.
In general, broadband refers to telecommunication where a wide band of
frequencies is available to transmit information. There is wide range of
frequencies available, and information can be multiplexed and sent on
many different frequencies or channels within the band simultaneously.
This way, more information can be transmitted in a shorter duration of
time than what is achievable with older methods of transmission.
Integrated Service Digital Network (ISDN), is the original high-speed
Internet service. It sparked the high-speed Internet development between
service providers during the 1990s and, of course, revolutionized Internet
use.
3.8 Glossary
Common Gateway Interface (CGI): Process used to share the data

between the web server and the web browser
Hubs: Central locations in networks that bring media segments together
Repeaters: devices that operate at the physical layer of the OSI model,
whose basic purpose is to extend the distance of LAN
Bridge: Device that is attached to two or more LANs to create an extended
LAN
Router: Operates at the third network layer of ISO-OSI model and
connects more than two different types of network
Network cables: Medium through which information generally travels
from one node/network device to another
Fibre optic cable: Cable that consists of a centre glass core surrounded
by several layers of protective materials, and which transmits light rather
than electronic signals
Wireless LANs: LANs that use high frequency radio signals, infrared
light beams, or lasers to communicate between the workstations, servers,
or hubs
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Line-of-sight communication: Communication through unblocked direct

line between the workstation and the transceiver

1. What is CGI?
2. Discuss the main features of CGI.
3. What are multimedia objects? Explain their use.
4. Write a note on any five network access equipment.
5. Discuss the use of network cables.
6. Describe the various types of broadband telecommunication available.
3.10 Answers
2. (a) Content; (b) Object-oriented, Data-driven
5. (a) Glass; (b) RJ-45
6. (a) Broadband; (b) Frame Relay; (c) Eight


E-Commerce Unit 3
References
1. Laudon, Kenneth C. and Carol Guercio Traver. 2004. E-Commerce:
Business, Technology, Society. N.J: Prentice Hall.
2. Turban, Efraim, Jae Kuy Lee and Michael Chung. 1999. Electronic
Commerce: A Managerial Perspective. Prentice Hall.
3. Whitley, David. 1998. E-commerce: Strategy, Technologies and
Applications. Tata McGraw-Hill.
Unit 4 E-Commerce: Requirements

and Architecture
Structure
4.1 Introduction
Objectives
4.2 Requirements of E-Commerce
4.3 Functions of E-Commerce
4.4 E-Commerce Framework Architecture
4.5 I-way or Information Highway
4.6 Summary
4.7 Glossary
4.9 Answers
References
4.1 Introduction
In the previous units, you have learned about the origin and evolution of
e-commerce. You now know that e-commerce which began in the early 1970s,
grew rapidly alongside the advances in telecommunication and information
technology. Thus, today we find that there is hardly any form of business that
has not adopted e-commerce. Having made this statement, let us now look into
the various requirements that one should possess to venture into e-commerce.
This unit gives you the details of the essential components that are required
for setting up an e-commerce. The unit also highlights the various components
of the Information Highway or the I-Way that routes information and services
between the business and its clients.
Objectives
Describe the various requirements of e-commerce
State the various prerequisites of e-commerce
Describe the various functions of e-commerce

Recall and describe the architecture of e-commerce framework
E-Commerce Unit 4
Assess the role of I-Way in e-commerce transactions

Identify the various components that make up the I-Way infrastructure
4.2 Requirements of E-Commerce

The following are the requirements of e-commerce:
Improved customer service
Origin of new business opportunities
Enhanced speed and accuracy of a product
Product cost saving
Improved customer services: These days, consumers want better
service. Therefore, e-commerce services offer a means of communication
between the consumer and the company. The consumer can even make
online complaints to a company. Most websites provide a different e-mail
id where complaints can be mailed. Customer-oriented organizations take
complaints very seriously. Not only are the grievances given a good
hearing. Action is taken almost immediately. It is possible for satisfied as
well as dissatisfied customers to express their opinions and also make
suggestions. The bonding between the company and the customer
strengthens.
Origin of new business opportunity: Bigger network between
consumers and companies can lead to new business opportunities.
For example, a business may find infinite possibilities to develop and
increase its consumer base. A company offering gardening-related
products may also think of venturing into delivery of bouquets, cakes and
gifts on request, for a price. Companies offering toys for toddlers could
also come up with a forum where parents can interact with paediatricians
or child psychologists to clarify doubts.
Enhanced speed and accuracy of a product: The usage of e-commerce
services reduces human errors and other problems like a duplication of
proceedings. This perfection in speed and accuracy, plus easy access to
documents and information affect the increase in production. A customer
care executive may often forget to enter necessary details of a transaction.
She may have to call up and bother the customer repeatedly to get some
information. In case of online interaction, the customer will fill in his own
E-Commerce Unit 4
details. Reconfirmation may not be necessary at all. Wastage of time and

money can be checked.
Product cost saving: Despite the fact that you can reduce the cost of a
product by the use of e-commerce services, it also reduces the errors
and the cost of sending the information to partners.
4.2.1 Prerequisites of E-Commerce Procedure
More and more people are getting into e-commerce. This is natural because
there are hardly any barriers to entry. Online businesses can be run from home.
You do not really need degrees and certificates to get started. However, you do
need to give the venture some serious thought. A lot of work would be required,
at least initially.
In order to conduct e-commerce, the main things you will require include
the following:
1. A commercial website like www.futurebazaar.com
2. A product or service you want to sell through the respective websites
3. Shopping carts or purchase order forms
4. Current credit card account that will be accepted on e-payment
5. An online payment gateway, if you plan to process credit cards in real
time, over the Internet
6. A secure socket layer (SSL) to secure the gateway
1. State whether the statements are true or false.
(a) E-commerce services offer a means of communication between the
consumer and the company.
(b) The usage of e-commerce services can reduce errors.
(a) Besides reducing the number of human errors, e-commerce can
also lead to _______.
(b) While beginning an e-commerce activity a_____is required to secure
the gateway.
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4.3 Functions of E-Commerce

E-commerce applications enable various business functions and transactions
to be done electronically. Some of the functions are discussed as follows:
E-Advertising: Advertising of information is currently the largest
commercial activity on the Web. For example:
(i) A companys website contains its profile and all the information on
its products and services.
(ii) It displays banners that can be clicked.
(iii) E-commerce portals like www.yahoo.com.
(iv) Newsgroups also provide publicity.
E-Catalogues: Web pages that offer information on products or services
that a company offers are available on an e-catalogue. An e-catalogue

provides information on:
(i) Packaging
(ii) Product attributes and characteristics
(iii) Availability
(iv) Payment modes
(v) Cost, etc.
E-Publishing: This sector was among the first few to spend on this novel
technology especially on the Internet. E-publishing has led to several
successful e-commerce endeavours, such as an independent publication
through the Internet and electronic newspapers.
Online publications offer services, such as:
(i) Online reading/browsing
(ii) Online search
(iii) Customized information services
E-Banking: This facility offers remote banking electronically. Electronic
banking is also referred to as online banking, cyber banking, home banking
or virtual banking. It enables Web users to make online purchases and
pay for the same using an online-banking facility. It is cost-effective, simple
and available 24 hours. Customers have access to several services, such
as:
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(i) Bill payment

(ii) Electronic cheque writing
(iii) Record keeping
(iv) Tracking of bank account, credit cards
4.3.1 Shopping Services
Shopping services are of many types. A few of them are discussed as follows:
1. Services provided by independent businesses who send their
representatives to the stores to do comparison shopping for specific
products. A shopping service is hired on contract to compare competitive
prices or prices for the same item in competitive stores, depending on the
request, and the needs of the client.
2. Shopping services that are offered to cable television subscribers where
consumers can buy products (usually at a discount) that are displayed on
a special shopping services channel.
3. Shopping services are offered to subscribers of personal information
services for home computer use. For example, a company provides online
information to subscribers. Among the many services offered by this
company is one called products guides, from which consumers can shop
and select purchases right from their own computer terminals.

4.3.2 Information Services
Information service is also known as information systems. For several
organizations, information systems or information services are accountable for
IT and Management Information Systems. Different types of decisions are
supported by information systems at various levels of the organizational
hierarchy. Key information systems include information management software
and structural databases. They include the following:
Enterprise Collaboration System (ECS)
Transaction Process System (TPS)
Decision Support System (DSS)
Executive Support System (ESS)
Management Information System (MIS)
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Activity 1
Search on the Net for a model e-catalogue and prepare a list of the
information it carries. Suggest some other information you think it should
carry to be more effective.
(a) E-advertising is currently the largest commercial activity on the Web.
(b) Online banking is also referred to as cyber banking.
4. Fill in the blanks with the appropriate words.
(a) Web pages that offer information on products or services that a
company offers are available on an ________.
(b) Key information systems include information management software
and________.
4.4 E-Commerce Framework Architecture

E-commerce applications are built on the existing infrastructure for online
communication, network and connection software which frames the nascent
information superhighway.
E-Commerce Applications
E-commerce can be applied in:
1. Supply chain management
2. Online banking
3. Procurement and purchasing
4. Online marketing and advertisement
5. Home shopping
Figure 4.1 shows several e-commerce applications, including interorganizational
and customer-oriented examples. Without each of the building blocks in the
infrastructure, none of these uses will be possible.
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Technical Standard for
E-Documents, Multimedia and
Network Protocols
Public Policy Legal and
Privacy Issues
(Cyber Law, IT Act 2000)
Common business services infrastructure/security/
authentication/electronic payment
The messaging and information distribution
infrastructure (EDI, e-mail)
Multimedia content and network publishing
infrastructure
The information superhighway infrastructure
(Telecommunication, cable TV, wireless network,
the internet)
Figure 4.1 E-Commerce Applications
4.4.1 ClientServer Architecture in E-Commerce

The clientserver model is followed by the applications of e-commerce. The
model lets the client work together with the server with the help of a request
reply sequence governed by message passing. The server handles application
tasks, storage and security and gives scalability to increase clients.
Application Logic
Presentation Logic
Application Logic
Multimedia Content
Client Server
Result
Processed Result
Figure 4.2 ClientServer Architecture
4.4.2 Building Blocks of E-Commerce

Enterprise applications, insights, functions and IT infrastructure form the building
blocks of e-commerce.
Enterprise application software refers to software that facilitates the
performance of business functions such as scheduling (of production/
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manufacturing processes, etc.), accounting, management of customer

databases/information, management of bank account/dealings, etc. It is common
to see such software hosted on servers. It is capable of serving multiple
enterprises concurrently, over a computer network. This gives enterprise software
an edge over the commonly used single-user applications which can only perform
on a users PC. These single-user applications can only serve one user at a
time. Enterprise software provides solutions to problems that concern the
enterprise as a whole and not individual departments. Only large enterprises
can afford to build such enterprise software. This software becomes the pillar of
the IT systems on which the entire enterprise functions and communicates.
Among other things, there are enterprise applications for various functions such
as:
Finance
HRM
Customer relationship management or CRM
Supply chain management or SCM
Product life cycle or PLC management
Enterprise commerce management
Enterprise resource planning or ERP
All these processes, such as SCM, CRM and ERP need to be integrated
properly for e-commerce to be successful. The IT infrastructure required for the
same may include the following:
Application servers
Web services
Wireless technology
Database software
XML
Storage systems
Server platform
Business intelligence would also be required for Web analysis, for
managing knowledge and content and for mining data, if required, depending
on the nature of e-commerce.
For todays growing e-commercees, it is very important to consider the
issues of security of information and the reliability and scalability of the systems
as well. This is taken care of by integration.
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The two indispensable pillars that support all e-commerce applications

and infrastructure are as follows:
(i) Public policy to govern universal access to privacy and information
pricing.
(ii) User interface and transport in the interest of compatibilities across
the entire network to dictate the nature of information publishing.
Information should be accessible by any device, which the consumer
chooses, and should be supported by any type of operating system.
(a) Enterprise application software can serve only one or two enterprises
simultaneously.
(b) All enterprises, irrespective of their size or volume of business can
support enterprise software.
(a) The clientserver model lets the client work with the server with the
help of a requestreply sequence by______.
(b) _____provides solutions to problems that concern the enterprise as
a whole and not individual departments.
4.5 I-way or Information Highway

Any e-commerce application will need the I-Way infrastructure in the same
manner as any normal business would require the interstate highway network
to carry goods from one place to the other.
I-Way is a network of interconnected data highways of several types:
Cable TV wires
Telephone wires
Cellular and satellite
Radio-based wireless
I-Way is an interactive two-way high-capacity method of transporting
information and services. I-Way is applicable in large volume e-commerce
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applications as it provides traffic-free telecommunication service. I-Way helps

organizations, firms and companies in upgrading their network infrastructure.
It also helps companies and organizations in recognizing the following:
1. Their infrastructure
2. Ways to change their business
3. Transaction strategies (marketing, advertising, etc.)
4. Ways to sell their products and services
5. Ways to change their relationship with the customer
4.5.1 Market Forces behind I-Way
The market forces behind I-way are divided into two categories:
1. Requirement of market participants
2. Strategic alliances and I-way infrastructure
1. Requirement of market participants
According to market-participant demands, I-Way is influenced by the user and
the organization. The I-way superhighway is based on the behaviour of the
consumer and the producer because they have multiple roles.
The following list plays an important role in the I-Way structure. The multiple
roles of the users that help in structuring the market are:
Numbers of users who use online services
Consumers who pay for information and products
Persons who provide services
Others include third-party brokers and intermediaries
Until recently, the marketplace was divided into the communication,
entertainment and information sectors. The boundaries between communication,
entertainment and information are not absolute. For example, video is a part of
information, entertainment and communication (via videoconferencing).
Television sets and PCs are now able to interact or exchange any sort of data.
2. Strategic Alliances and I-Way Infrastructure
The success of I-Way is based on market strategies. These strategies are built
according to needs that are based on market structure, i.e., communication,
entertainment and information.
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The resources required for building these three segments (communication,

entertainment and information) of I-Way are driving companies to make
maximum use of existing facilities. This is done through alliances to control
costs and create test markets.
Two aspects of these alliances are as follows:
(i) They cut across the industry line, a diversity suggesting that a number
of companies will perform different roles within alliances, for example,
telephone or cable companies deliver information whereas computer
hardware and software firms provide access hardware and
applications to use the data information.
(ii) Many alliances are international, signalling that I-Way will be global
from the start.
4.5.2 Components of I-Way
There are three major components that make up the I-Way infrastructure:
(i) Network Access Equipment or Component
(ii) Local Access Equipment or Component
(iii) Global Information Distribution
(i) Network access equipment or component
To access any network, specific equipment is required at the customers end
and this enables the consumer to access the network. It consists of hardware,
such as routers, switches and access devices, such as computers and set-top
boxes. Software platforms are browsers and operating systems.
(ii) Local access component
Local access component is the link between businesses, homes, schools and
organizations to the main communication point also referred to as the last mile.
Last mile connection represents a tremendous investment that cannot be easily
replaced or overlooked in any network strategy.
It provides the following types of connections:
(a) Telephone-based last mile
(b) Cable-based last mile
(c) Electrical-based last mile
(d) Wireless-based last mile
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(iii) Global access component

Nowadays, e-commerce activities are not limited to any country; and with the
world becoming a global village, a proper network infrastructure is required to
connect people and businesses across the world. These types of networks
include:
(a) Long distance networks (via coaxial cable or fibre optic cable)
(b) Satellite
I-Way Component
Network
Access
Component
Local
Access
Component
Global
Access
Component
Hubs
Routers
Set-top boxes
Telephone-based
Cable-based
Wireless-based
Computer-based
Long distance network
Satellite
Figure 4.3 Online Information Service
4.5.3 Public Policy Issues Shaping the I-Way

Governments are expected to play a crucial role in defining I-Way. However,
there are some major issues as follows:
(i) Cost
Who will pay for constructing the I-Way? Some favour the interstate-highway
model with government construction, ownership and maintenance. Others
support the current, regulated, telephone-system model.
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(ii) Subsidies
Subsidies include tax breaks, government, business or other forms of
encouragement. These raise an open question. What will these tax subsidies
actually subsidize?
Who will pay to extend the networks to non-profit institutions such as
schools, hospitals and the police and fire departments?
(iii) Regulation
Some enterprises argue that if a highway is built with private funds, there should
be no government regulation. The only regulation that should exist should be to
provide public access, privacy and reasonable tools.
Yet, there are still many issues that remain undecided:
What are the rules?

Who writes them?
Who enforces them?
(iv) Universal Access
Some economists argue that the market should decide who gets access to the
I-Way. Others insist that the highway operations must provide universal access,
however, at a reasonable cost.
If the I-Way is built and run by private interests without significant
government investment, these institutions may not be able to afford connecting
to the network.
Issues that may arise are:
How are firms encouraged to provide universal access?
How universal is universal? Is it just nationwide or international access?
Internet-Component of I-Way Network Infrastructure
The Internet is a well-known component of I-Way network infrastructure.
Its general infrastructure targets not only one e-commerce application,
such as video-on-demand or home shopping, but a wide range of
computer-based services, such as e-mail, EDI, information retrieval
and videoconferencing, online banking, game, music, movie and
chatting.
The Internet is a unique combination of postal services, telephone
systems, research libraries, super markets and talk show centres that
enable people to share and purchase information.
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The concept of the Internet is based on networking. The basic principle is

to share information between or among computers.
The Internet is the network of various small networks.
The Internet includes standalone computers, local area networks or LANs,
metropolitan area networks or MANs and wide area networks or WANs.
The Internet can be differentiated by the language spoken. It is divided
into two parts:
(a) Academic Internet
(b) Business Internet
(a) Academic Internet
The characteristics of academic Internet are:
(i) All the host computers speak the same language (TCP/IP).
(ii) It consists of various government networks, regional networks, campus
networks and some international networks.
(iii) It includes (a) NSFNET-US group of research IP network. (b) EBONEEuropean
group of IP network.
(b) Business Internet
(i) The computer can speak a variety of languages other than TCP/IP. These
include:
(a) ISO/OSI x.25- based packet switching networks
(b) SNA-based BITNET
(c) Other languages for networks run by commercials
(ii) The business Internet consists of online services, value-added networks
and other e-mail only services.
The academic and business networks can talk to each other through
language (protocols) transitions called gateways, stationed at the network border.
More recently, business Internet providers have begun to adopt TCP/IP
as the standard protocol on their own networks, thus allowing smooth linkage
with the academic Internet.
I-Way includes both the academic and business Internet categories and
extends the boundaries further to encapsulate non-IP based networks such as
telecom carriers network, cable TV, mobile and cellular networks.
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Internet
Academic Business
Figure 4.4 Part of the Internet
Activity 2
Research on the Internet and write about the role of the Government of
India in enabling academic Internet.
(a) I-way is a non-interactive one-way method of transporting information
and services.
(b) I-way is based on the behaviour of the consumer and the producer
because they have multiple roles.
(a) _____is a network of interconnected data highways of several types.
(b) The three major components of I-Way are the network access
equipment, local access equipment and_____.
4.6 Summary

Improved customer service, new business opportunities, enhanced speed
and accuracy of product and product cost saving are the requirements of
e-commerce.
E-advertising, e-publishing, e-banking and e-catalogues are some of the
important functions of e-commerce. Besides these, e-commerce also
enables shopping services and information services.
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An existing infrastructure for online communication, network and

connection software forms the foundation upon which an e-commerce
set-up can be built.
Information Highway or I-Way enables the two-way communication
between business and client in business transactions.
4.7 Glossary
E-advertising: Advertising information on the Web
E-banking: Enables users to make online purchases and make payments
using an online banking facility
Enterprise application software: Refers to software that facilitates the
performance of business functions such as scheduling, accounting,
management of customer databases and so on
I-Way: A network of interconnected data highways of various types
Network access equipment: Specific equipment required at the
customers end that enables access to a network
Software: The Program, etc. used to operate a computer
Browsing/Browse: To look for information on computer, especially on
the Internet
1. List the various prerequisites of e-commerce

2. Explain the various functions of e-commerce. Also, add a note on the
types of shopping service and information services.
3. Formulate a model of the architecture of e-commerce framework. What
are the building blocks of e-commerce?
4. Identify the role of I-Way in e-commerce transactions.
5. Prepare the list of the various market forces that operate in the I-Way.
6. What are the various components of I-Way.
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4.9 Answers
2. (a) innovative business; (b) socket layer
3. (a) True; (b) True;
4. (a) e-catalogue; (b) structural databases
6. (a) message passing; (b) Enterprise software
8. (a) I-Way; (b) global information distribution
1. Refer to Section 4.2.1

References
Unit 5 E-Commerce Infrastructure

Structure
5.1 Introduction
Objectives
5.2 Need for an Intelligent Website
5.3 Technology Infrastructure Required
5.4 Basic Web Languages for Web Designing
5.5 Corporate Strategic Infrastructure Required
5.6 Miscellaneous Website Design Tips
5.7 Summary
5.8 Glossary
5.10 Answers
References
5.1 Introduction
In the previous unit, you read about the requirements of e-commerce and the
significance and components of I-Way. The fact remains that for any e-commerce
to be successfull, the website should be very user-friendly and attractive.
Therefore, web design is very important for company status and e-marketing
because a website works as a representative of its respective company. An
attractive website motivates the consumer to explore it further. One should keep
the following points in mind when assessing a website:
A website should be easily accessible to a consumer and its structure

should not be difficult. It should be customer-oriented.
It should be up to date on companys policies, schemes and offers
about new products.
The content of a website should be made attractive with the use of
text, pictures, animation, sound, video, etc.
It should be designed in a manner that it can be downloaded quickly

because a consumer will not wait if a website is slow.
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The website should provide detailed and complete information

regarding its products and services; else, the consumer will not
understand the products value.
Ideally, a good website explains how and what its organization offers
by pointing out how it differs from its competitors, and how it can
make a difference to the customers life.
Since a vast amount of information is displayed on a website, the
website should be coherent. The customer should be able to easily
navigate the website.
A good website should have subsections.
A linking structure is mandatory. It describes the way in which the
alternative sections of the site are linked. This linking structure enables
users to easily move back and forth between the sites subsections.
Navigation tools should be present. These refer to the site tools that
facilitate the users movement throughout the site.
To attract and retain users, some sites provide a number of features.
Some such features are as follows:
(i) The user returns and enters the requisite information through the login
registration. The site recognizes the returning user and configures itself
as per the users preset preferences.
(ii) In order to identify the visitors, most sites try to track and collect data on
the returning users behaviour by saving, identifying and tracking
information on the users local disk storage in temporary files called
cookies.
(iii) Many sites provide free e-mail accounts to send and receive e-mails from
the site using a unique e-mail ID.
(iv) Users can select screen layouts and content sources based on their
interests.
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Website
Context
The sites layout and design
Commerce
The sites capability to enable
commercial transactions
Connection
Degree to which one site is
linked
Content
Text, picture, sound and video

that the site contains
Community
How the site enables user-touser
communication
Figure 5.1 Basics of a Commercial Website
Objectives
Summarize what constitutes a good website design
Formulate a procedure for creating an intelligent website
Calculate the manpower required for e-commerce
Identify and list the basic Web languages that can be used for Web
designing
Recommend the corporate strategic infrastructure required for ecommerce
5.2 Need for an Intelligent Website
One cannot build an intelligent website that optimally has all sources of
information for an online company, overnight. Actually, it is a long process that
requires significant investment in technology, and an accumulation of knowledge
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that can come only with experimentation and trial and error. Website intelligence
leverages four types of information.
(i) Demographics: This explains such basic elements of the customers as:
Who they are
What their income is
Their marital status
(ii) Expressed Preferences: This explains what topics customers have
expressed an interest in; for example, types of music, choice of books,
and the stocks they track. The preferences are generally stored through
form-based questionnaires provided when the customer registers for a
site or a service.
(iii) Past Transactions: These are records of past transactions that the
consumers have had with a company. They are recorded when a customer
actually makes a purchase.
(iv) Observed Behaviour: This type of information is derived by observing the
manner in which the customer navigates when using the website. It also
tracks the sites he visited previous to and after visiting the said site.
Consider the following steps that e-commerce companies typically follow
in leveraging their information.
Step 1: Basic Web traffic analysis
Before starting any Web activity, one first needs to analyse the Web traffic. This
type of data provides a record of the entry and exit points into a website, pages
that were visited, links that were followed, the duration for which a person viewed
a particular page, the precise day and time of visit, the browser type, visitors IP
address and other information.
Step 2: Customer interaction analysis
This step is used to collect more information about the customers interactions
with the website. The registered users are people who have had to register for
site usage, generally by filling out a survey form. As you know, in any site (even
a free site) the user has to fill a registration form in which there are various
types of questions related to profession, education, age, gender, leisure activities,
merchandise purchasing, etc. Through this registration process, the site is able
to get information related to both the demographics and preference. This type
of data is used to help inform personalization engines to serve the contents
according to the visitors interests.
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Step 3: Real-time personalization

Personalization is the ultimate realization of the one-to-one marketing dream.
Customers are recognized when they come in; they can tailor the way they
interact with the merchant; and receive promotions and marketing pogrammes
that perfectly fit their personal requirements and preferences.
The following are four ways of personalization:
(a) Greetings: This is a more general way of personalization. The customer
is greeted by name and welcomed back whenever he or she visits the
site.
(b) Customization: It allows a customer to tailor the service he or she receives
from an e-commerce site. For example, any Hotmail user can customize
his use of the popular search engine by creating a My Hotmail environment
which is more adapted to his needs.
(c) Narrowcasting: This relates to the delivery of time-sensitive information,
personalized to each customer. These types of personalized messages
can be sent through e-mails, phone calls or pagers which enable the
customer to receive information without having to connect to the site.
(d) Recommendation: Recommendation technology has evolved dramatically
in the past few years. Earlier, it was based only on the preferences that a
customer would have explicitly expressed during registration. Now, it can
be done in real time and predicted automatically by the personalization
engine using different types of information such as observed real-time
behaviour, purchase histories and expressed preferences.
Step 4: Getting to fine-grained segmentation
Fine-grained segmentation is used to enhance the sites marketing power by
using an e-commerce intelligence system performing customer segmentation.
You can start with products that are at hands reach through coarse segmentation,
and then continue to fine-grained segmentation. This step also uses artificial
intelligence to conduct knowledge discovery. That is, it can look for patterns in
large data sets and identify common elements.
Step 5: Going through the streams of clicks
The click-stream data contains details on customer behaviour that are richer
than what can be achieved in traditional channels. Click-stream information is
the recording of every page request from every visitor by the website owners.
This information is stored into massive log files.
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Step 6: Enrich content with external data

Once a customer performs a number of purchases, the website is able to further
enhance the customers profile. Demographic data from third party providers
may be added to the profile to provide a richer view of the customer base.
Analysing the enriched data might show, for instance, that a customer who
buys history books falls into a demographic segment which is also inclined to
buy classical music.
Step 7: Reaching optimal intelligence
A company can reach optimal intelligence once it is able to combine historical
transaction records, observed behaviour via click-stream data and preferences
expressed in online surveys.
5.2.1 Website: Goals, Objectives and Manpower Required
Before creating a web page, it is important to decide the goals, objectives, and
overall purpose of the e-commerce website. Without these, the website may
not have the focus it needs to be successful. To help determine the goals and
objectives, you have to ask and answer questions such as the following:
Will the website collect information about current and potential customers?
Will the website allow the customers to make online orders for products
and services?
Will the website advertise products and services?
Will the website provide links to the related web pages?
Will the website provide general information or industry-related
information?
Will the website recruit employees?
Will the website act as a virtual salesperson that will perform online
transactions?
How many web pages are planned for design?
Should the site be structured such that it helps in gathering data for the
purpose of marketing?
Is there a requirement for development of special tools to help users
when they visit the site?

Based on the answers to the aforementioned questions, you will either
require a one-stop shop or separate contractors that will look into each part of
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the site. The simplicity or complexity of the act of designing a website largely
depends on your imagination and/or budget constraints.
5.2.2 Design vs Development
Often, the terms Web designing and Web development are used
interchangeably. This, however, is not an accurate usage. Designing a website
and developing one are two very different activities. Designing a website has
two components, the front end and the back end. While these have been
used interchangeably, usually design means the front-end whereas development
means the back-end.
Front-end design
When a customer visits a site, what he sees is the front end. These are the
pages that display the graphics, images, and text on your site. Those that
design a website focus on this end. They select appropriate images and fonts
and even decide text and image arrangement. Appreciation of aesthetics is a
Web designers strength. He need not be tech savvy. Nonetheless, apart from
understanding what will be visually appealing on screen, designers need to
know the technical limitations while designing for the Web. An experienced
Web designer should also be able to collaborate with a Web developer.
Back-end development
Web developers help you build your website. They work on the back end, the
side not visible to the surfer, to make a site work. Although not seen by visitors,
this site is required to enhance the visitors experience.
Back-end functions are all about making provisions so that visitors can
view different pages and even enter data, execute sales transactions, and allow
images to alter or move. It is important for the Web developer to be adept at
various/languages such as Javascript.
Thus, it is important to ensure that the resumes of potential employees
reflect the following skills:
HTML (is used to create text and the layout framework of the page)
Web imaging (it creates and compresses images)
Javascript (it writes programs which run as part of web pages)
ASP (customizes web pages for users)
Java/C++ (writes programs that are embedded in a web page)
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This is a typical E-commerce website. Look at the various applications and services
offered at this webpage. Designing an E-commerce website is becoming difficult
due to various services offered as the same website, which involves going through
intricate designing methods.
5.2.3 Advantages of a Website

What is novel about the Internet is that it not only is a mine of information, but is
also available at the click of a button. The Internet is undoubtedly a huge source
of knowledge. All that a person requires is a website and a resource-generous
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Web hosting company. Most people feel that designing a website is an expensive
project. This, however, is not true. All that you need to do is to find the right Web
host. The benefits of a website will certainly override the costs.
Whether for personal use, or to aid a business venture, the advantages
of a website are tremendous. Many who have their own websites use them to
further a hobby or an interest since a personal website too can be an excellent
avenue for the exchange of knowledge with others. On the other hand, firms
use websites such that their goods and services are marketed and promoted.
For them, the attractive advantage is that they are able to cut costs involving
postage, couriers and advertising, etc. For them, cutting back on such expenses
as postage, couriers and advertising, etc., becomes the attractive advantage.
The following are the key benefits of having a website.
Increased awareness of products and services
The Internet allows a business to expand its markets tremendously. Businesses
no longer need to limit their focus only to the local scene. Through the use of the
Internet, businesses can effortlessly explore international and regional markets.
This introduces dynamic changes in participating businesses. This is because,
their nature and marketing activities alter and many find encouragement to enter
new markets by diversifying their products and services. Trading hours too find
extension since numerous items can be viewed on a website round the clock.
Freedom
The Internet provides great freedom to its users. Therefore, not only do those
that are otherwise introverts, frequent the Net, but even the smallest of
businesses are tempted to join. In fact, such is its growth rate that users are
alarmingly increasing at a rate of approximately 50,000 per day. Since information
can be freely posted on the website, and hence the Net, businesses profit in a
huge way. Not only has the Net become a huge customer marketplace, but
businesses have found a medium that enables them to compete with the largest
of organizations, on an even field.
Cost advantage
Web businesses are keenly aware of their profit potential simply by being on
the Internet. The advantages are very obvious. They can advertise their products
and services and yet avoid the costs and delays caused by such activities as
printing, publishing and distribution. Since the Internet offers a global
marketplace, greater value is added to the costs outlaid for promotion and
marketing. Thus, compared to the offline market, the benefits are many more.
Websites incorporate e-commerce facilities that transform 2D screen visuals
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into user-reactive models. For instance, consumers can place online orders for
products and services. This greatly reduces their administration costs. Some of
the ways to reduce costs arefollow-ups through e-mails thereby reducing
costs incurred by making phone calls, electronically generated and distributed
newsletters that reduce printing and distribution costs, and most importantly,
extended trading hours.
It is now felt that if any business does not exist on the Internet, then it is
not only losing out on the benefits of a dynamic industry, but is also increasing
its chances of being forgotten.
Activity 1
Imagine and make a list of how many activities/tasks can be carried out on
an E-commerce website.
(a) A good website should have subsections.
(b) The user returns and enters the requisite information through the
login registration.
(a) Website intelligence leverages________types of information.
(b) The first step in leveraging information by e-commerce companies
is_______.
5.3 Technology Infrastructure Required

A great deal of planning and preparation goes into the development of a
successful website. Acquiring the vital tools of the Internet is a significant part
of that preparation.
HTML Editor
An HTML editor is a software program used to edit and create HTML documents.
This is a tedious process which is why most Internet marketers prefer using an
HTML editor. There are some that prefer writing their own HTML code.
Nonetheless, HTML editor is an advantageous tool to use, as there are editors
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that tend to add unnecessary codes which may not support the latest technology.
As a potential Web developer, whether you write your own HTML or use an
editor, learning HTML is very essential. Its knowledge not only provides
independence, but it also enables one to add special effects a feature that not
many HTML editors support.
Text Editor
A text editor is a software program used to edit text which does not involve any
special formatting. Those who write their own HTML code, need an adequate
text editor. Although using a text editor can be a time-consuming activity, its use
ensures that the code is clean, free from errors and that the file size is not very
large. Moreover, a text editor is also useful in writing articles and in editing
scripts. Those who have a Windows operating system use the Note Pad as
their preferred text editor.
FTP
File Transfer Protocol, or FTP, is a system that is used to upload files to a Web
server and download files from a Web server. It provides you a way to control files
on the server. This makes it an important tool. An FTP program enables operators
upload scripts, set file permissions, create folders and transfer files to and from a
server. To use FTP, a software program that supports it has to be downloaded
and installed in the computer; the most popularly used being WS FTP Pro.
Graphics Editor
A graphics editor is a software program used to edit as well as to design graphics.
Most Internet entrepreneurs find graphic designing intimidating. However,
since hiring a professional graphics designer can be expensive, most
entrepreneurs learn some basic design techniques. The program that Internet
marketers use the most is Paint Shop Pro. It is a powerful program and alone
can design graphics professionally.
Zip/Unzip Software
A Zip file is an archive of one or more files compressed into one file for easy
distribution. These are used to compress and transport file archives over the
Internet. Since downloading one Zip file is more convenient than downloading
several different files ZIP file is the popular method for distributing files
electronically. Moreover, the files in the Zip archive are compressed. Therefore,
download time gets minimized.
You can effortlessly extract or unzip a Zip file using a Zip/Unzip software
program. WinZip is the most popular Zip program because it makes the use of
file archives easy and uncomplicated. WINZIP has certain easy features that
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allow files to be conveniently viewed, extracted, added, deleted and tested.

These features include point-and-click and drop-and-drag.
E-mail
Most Internet service providers also feature and provide e-mail accounts to their
clients. Nonetheless, these accounts are inadequate to conduct business over
the Internet. This is more true for those businesses that receive large numbers of
e-mails every day. The disadvantage of an e-mail is that it contains the ISPs
name and is also very limited when it comes to features and options. Outlook and
Eudora are the most popular e-mail clients. Outlook and Eudora enable you to
download e-mails from a server. In addition, it offers such features as sorting and
filtering. You can easily organize e-mail messages. The most important feature is
that your e-mail address remains your own domain and not anothers. Therefore,
a webmaster toolbox always has a significant role in your success.
Activity 2
Which E-mail do you use? What are its advantages over the other E-mail
services? What changes do you suggest in the E-mail that you use to
make it better.
(a) An HTML editor is a software program used to edit and create HTML
documents.
(b) FTP is a system that is used to upload and download files to and
from a Web server.
(a) ______ is a software program used to edit text.
(b) ______ is a software program used to create HTML documents.
5.4 Basic Web Languages for Web Designing
HTML
HTML is a method which converts ordinary text into hypertext. Technically
speaking, HTML is not a programming language, but a set of special codes that
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controls a texts layout and appearance. The instructions are within a data. This
data informs the browser, which is a display program, how to render the data
that is contained in the document.
The Hello World program which is a common computer program employed for
comparing programming languages, scripting languages, and markup languages
is made of 8 lines of the HTML code. However, the line breaks and the
<!DOCTYPE> tag, or the document type declaration, are optional:
<!DOCTYPEhtml>
<html>
<head>
<title>HelloHTML</title>
</head>
<body>
<p>HelloWorld!!</p>
</body>
</html
JavaScript
Originally called LiveScript, JavaScript was developed by Netscape. An
agreement with Sun Microsystems changed the original name. The intention
was to benefit from the growing popularity of Java Programming language.
JavaScript is a language that can be executed on the web browser. Java script
programs do not require any software and can run on Internet Explorer or
Netscape Navigator. It is a client side scripting language, and is basically used
to validate and edit an image, text colours and other things. JavaScript is casesensitive.
Example:
<html>
<head><title></title></head>
<body>
<scriptlanguage=JavaScripttype=text/javascript>
<!document.write(Myfirstjavascriptprogramme);
>
</script>
</body>
</html>
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A minimal example of a web page containing JavaScript (using HTML 4.01

syntax) would be:
<!DOCTYPEHTMLPUBLIC//W3C//DTDHTML4.01//EN
http://www.w3.org/TR/html4/strict.dtd>
<html>
<head><title>simplepage</title></head>
<body>
<script type=text/javascript>
document.write(HelloWorld!);
</script>
<noscript>
<p>YourbrowsereitherdoesnotsupportJavaScript,
oryouhaveJavaScriptturnedoff.</p>
</noscript>
</body>
</html>
VBScript
Developed by Microsoft, VBScript is a subset of the Visual Basic for Application
language used in Microsoft Office suite. Just like the JavaScript, VBScript is
also a client-based language. Again, like Java, VBScript is also run on Internet
Explorer and Mozilla Firefox. The most pertinent difference between them is
that while VB can be compiled, a VBScript cannot be compiled. VBScript is the
default ASP scripting language.
Perl Script
Perl is a powerful text processing language. Prior to the development of Active
Server Page (ASP), it was extensively used in Common Gateway Interface
(CGI) scripting. Perl Script is a subset of Perl and retains most of its functionality.
Microsoft does not ship Perl Script with ASP, but it can be downloaded from the
Internet.
Active Server Page
Active Server Page (ASP) allows users to be treated as unique entities. This, in
spite of the fact that all the users may be running the same program on the
same machine, i.e.,your Web server. Needless to say, running a complex
program for multiple users on one computer requires many resources.
Fortunately, Microsoft makes sure that those resources are at the userss
disposal. ASP provides:
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A means by which individualized data can be saved for each other

Access to the various file systems
Access to the various databases
A way by which Control Object Model (COM) can be launched and
controlled
In other words, ASP can be used to create multi-user application. This
implies that one can obtain application scalability by leveraging ASP.
XML
XML is not just another mark-up language, it is a Meta language. In programming
parlance, meta means description. In other words, it is used to provide
descriptive information about a document. It is very different from HTML. The
main difference is that while HTML is a fixed language, XML is not. HTML has
a set, pre-decided structure that has to be followed to make pages workable.
XML, on the other hand, is flexible enough to allow users to create their own
tags. It can even be extended by creating other mark-up languages with it. XML
can be used to write mark-up languages for many kinds of applications. They
can be used for ATM machines, databases, etc. It is not only a powerful tool for
creating other languages but it also works much like its parent language, SGML.
At the same time, the advantage that XML has over SGML is that SGML is
extremely complicated while XML is relatively easy to learn and use.
5. Match the following:
(a) HTML (i) The default ASP scripting language
(b) VBScript (ii) A set of special codes that controls a texts
layout and appearance
(c) ASP (iii) Used in Common Gateway Interface
(d) Perl Script (iv) Allows users to be treated as unique entities
(a) HTML is a method that converts ordinary text into hypertext.
(b) HTML is a programming language.
(c) JavaScript is not case sensitive.
(d) JavaScript programs do not require any software.
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5.5 Corporate Strategic Infrastructure Required

Initially, when companies were beginning to establish themselves on the Web,
their websites was in their infancy. They were more like static brochures, were
not updated frequently with new or additional information and did not possess
the ability to help the companys customer or vendor transact business. As Web
technology transformed fairly rapidly, only a few businesses were able to catch
up with these changes in terms of website development and management.
Internal Development vs Outsourcing: There are a fair number of companies
that tend to avoid the problems of e-commerce site development by outsourcing
the project. However, this is not advisable. An e-commerce website can be
successful only if it integrates and supports those activities which the business
is engaging in. Nonetheless there are, companies that are large and technically
self-sufficient enough to launch their own e-commerce projects without requiring
external help. The key to the success of any project is that a balance is struck
between the support from inside and outside for each project.
Internal Team: To begin with, a company needs to decide the parts of its ecommerce
project that require to be outsourced. This is achieved by creating
an internal team that assumes responsibility for the entire project. Such a team
should include professionals who have sufficient knowledge about the Internet
and the Web. They also need to be creative and interested in taking their
company beyond its existing boundaries. Including a technical professional is
not sufficient. The person should be knowledgeable about the companys
business. In order to create a successful e-commerce project, it is very essential
that the appointed people have sound business knowledge, creativity, and are
well respected by the companys line managers.
The internal team takes full responsibility for the e-commerce project.
This means that from deciding the objectives of the site to their final
implementation and operation, the team is ultimately responsible for the initiative.
This team also has the responsibility of deciding the sections of the project that
need to be outsourced.
Early Outsourcing: Many companies choose to outsource the initial designing
and development of their e-commerce projects. This is usually done for an
early launch of the project. The outsourced team develops the site, and trains
professionals from the concerned company before handing them charge of the
site. This mechanism is known as early outsourcing.
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Late Outsourcing: This type of outsourcing works in the reverse pattern. The
initial site design and development is done by the professionals of the concerned
company. They even implement the system and operate it so that it becomes a
stable and integral part of the company. After the company gains the competitive
edge that the system was meant to provide, its maintenance is outsourced. In
this way, professionals can channelize their energies to further develop new
technologies. This mechanism is known as late outsourcing.
Partial Outsourcing: In this type of outsourcing, only specific functions of a
project are outsourced. A company that specializes in designing, developing,
implementing and operating a website is hired for this purpose. The electronic
payment system is a case in point. Most vendors willingly provide complete
customer payment processing. These vendors provide a site that takesover
when customers are ready to pay, and returns the customers to the original site
after processing the payment transaction. Handling the e-mail and response
function of numerous small websites is another example of partial outsourcing.
Many companies also like to send an automatic order confirmation via e-mail
as soon as the order or credit card payment is accepted.

(a) The internal development team should comprise_____.
(b) In ______only specific functions of a project are outsourced.
(a) The internal development team decides the sections of the project
that need to be outsourced.
(b) When the maintenance is outsourced after the company gains
competitive edge in the market, it is called late outsourcing.
5.6 Miscellaneous Website Design Tips
Keep it Simple
The type of website one chooses to create depends on the market one wishes
to target. Unless the market that you are trying to reach consists of teenager or
such groups that appreciate a dressy website, it is recommended to keep the
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website simple. This rule is particularly applicable if yours is a professional

company.
Navigation
Also ensures that the navigation is simple. This can be done by making available
a menu, textual or graphical, on each page. If the site is large, care should be
taken that visitors always know the section they are visiting. The site should
also be such that simple easy ways are available that help locate links which
will redirect visitors to the main page or any other section.
Font Size
It is advisable not to fix the font size as there are surfers who face problems
reading text that is in a small font size. They like to set their own font size. If the
font size is fixed, it discourages many such people from visiting the site.
Load Time
Not all surfers have a DSL cable modem connection. There are many who
browse with 14.4K modems. The need for speed is the key factor on the Internet.
Whether users are on high-speed connection or dial-up modem, speed is of
great value. Recent studies have shown that if your page does not load in the
first 8 seconds, the user is likely to move away from the page. People are
switching to high speed internet connections, more so in the case of mobile
users who are on the move. The web page should load rapidly. The size should
be about 50kb including images, content and other media elements.
Screen Resolution
There are three major screen resolutions: 640 480, 800 600 and 1024
768. Since mobile devices have different width, you have to provide for pages
working well on smart phones and iPad as well. You should use device emulators
to test the site on as many devices as possible. Also, since today, most users
have a screen resolution higher than 1024 760 pixels. The smart phone screen
also has to be taken into consideration, and the use of emulator will be most
helpful. It is erroneous to assume that all monitors are set for the same resolution.
The difference in dimension and proportion can cause unexpected issues
when zooming in mobile browsers. The close up view of the product is essential
on an e-commerce site, for e.g. Apple doubled the pixel density of its display in
iPhone 4, essentially to circumvent the zoom-in issues.
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In Windows XP/Vista/Windows 7
Right click on your desktop
Click on properties
Click on the settings tab
You can change your monitors resolution by sliding the bar for Screen Area.
On a MAC
Apple Menu > Control Panels > Monitors > Choose Setting
Frames
Why is it that frames do not work? This is because they increase the load time.
Loading two pages simultaneously is a problem for people with a slow connection.
Moreover, frames also take up space, more so if there are more than two frames.
If the screens resolution is 640x480, it can have a bad effect. Of course, you
can add a scroll but again screen resolution will pose a problem. Creating the
perfect layout can be difficult especially if it has to be created using frames that
work at all resolutions.
Animation
Animation should be kept at a minimum unless the site is meant either for
children or for teenagers. It takes away from the main focus of the site which
ideally should be its content.
Links
Links should be created that direct the visitor out of the site. This allows flexibility
to the visitor who can then browse new links while staying on your site.
Banner Exchange
Banners should never be on the front page because the visitor might get
dissuaded before he has even explored the site. Banners should be located in
the inner pages of the site. Even then these should be limited to the bottom of
the page.
Top of Page
When pages are long, links to the top of the page should be provided at the
bottom. Giving text links at the bottom is another alternative. This way, the
visitor will not have to scroll to the top for the menu.
Table Tricks
Playing around with tables can yield good results. You can place tables inside of
each other, and can differentiate by using different colours for each.
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Website Image
Also ensure that your website projects the image you want it to. This image can
be projected with a simple manipulation of colours, layout and design. Fonts
too can be experimented with. A judicious use of all such elements can go a
long way to create the desired look.

(a) The type of website one chooses to create depends on the______.
(b) Navigation can be made simple by making available a _______ on
each page.
(a) It is not advisable to fix the font size.
(b) Banners should be on the front page of the website.
5.7 Summary
Let us recapitulate some of the important concepts discussed in this unit:
A good website explains how and what its organization offers by pointing
out how it differs from its competitors and how it can make a difference to
the customers life.
Building an intelligent website for a company is a tedious task as it requires
significant investment in technology and vast knowledge of the various
associated processes.
Web designers should be knowledgeable about the demographics,
expressed preferences of customers, the nature of past transactions and
the observed behaviour of customers.
Based on the requirements of the company, its website can be designed
by a single Web designer or by separate contractors to look into different
segments of the site.

There are two components in designing a websitethe front-end design
and back-end development. Front-end design refers to the pages that
display the graphics, images and text on the website; while back-end
functions refer to the provisions that enable a visitor to browse through
the different pages.
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A successful website provides increased product awareness, more

freedom to the users and cost advantage to the company.
Some of the Internet tools required for developing a website are HTML
Editor, JavaScript, Text Editor, FTP, Graphics Editor, and so on.
5.8 Glossary
Web developers: Professionals who build websites

Web designers: Professionals who can help design your website
HTML editor: A software program that can be used to edit and create
HTML documents.
Text editor: A software program used to edit text which does not involve
any special formatting
FTP: A system that is used to upload files to a web server and download
files from a web server
Graphic editor: A software program used to edit as well as to design
graphics
Website: A place connected to the Internet, where a company or an
organization, or an individual person, puts information
E-Mail or Email: A method of exchanging digital messages from an author
to one or more recipients
1. Describe the various steps in the construction of a website.

2. Write about the goals, objectives and manpower required for constructing
a web page.
3. Prepare the list of the advantages of a website.
4. Write about the important Internet tools that are required for preparing a
website.
5. Summarize the features of some of the basic Web languages required
for Web designing.
6. What are some of the corporate strategic infrastructures required during
website development?
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5.10 Answers

2. (a) Four; (b) analysis of Web traffic
4. (a) Text editor; (b) HTML editor
5. (a) (ii); (b) (i); (c) (iv); (d) (iii)
6. (a) True; (b) False; (c) False; (d) True
7. (a) professionals; (b) partial outsourcing
9. (a) market one wishes to target; (b) textual or graphical menu

References
Unit 6 Business Models

Structure
6.1 Introduction
Objectives
6.2 Evolution of Internet Business Models
6.3 Business Models in Practice
6.4 Business Model: The Six Components
6.5 Summary
6.6 Glossary
6.8 Answers
References
6.1 Introduction
In the previous units, you have learned that e-commerce is a business transaction
that is performed using an electronic medium. This unit discusses the types of
transactions in an e-commerce. A transaction in an electronic market describes
the number of interactions between parties, for example, ordering, making
payment, supporting delivery and of course marketing.

One must therefore have a marketing strategy for transacting commerce
through which a corporation maintains itself and generates revenue. Business
models are created for the purpose of trying to answer the following questions:
(i) How can you get competitive advantage?
(ii) Which product-market strategy should be followed?
(iii) What should be the marketing mix?
Business models are defined as, A set of shared common characteristics,
behaviour and methods of doing business that enables a firm to generate profits
through increasing revenues and reducing cost.
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Raw material produce r
Manufacturer
Distributor
Retailer
Consumer
Business-toBusiness-toBusiness
Business
Thus, in this unit, you will learn about the evolution of the Internet business
models and the business models that are currently in vogue. The latter is of
three types, namely business-to-business (B2B), business-to-consumer (B2C)
and consumer-to-consumer (C2C). It will also familiarize you with the six
components of a business model. This will help you to differentiate between a
business model and a revenue model. This unit will also elaborate on the role of
business models. To get value from a new product, a firm needs a proper
business model. You will learn how business models differ from business strategy,
and about entrepreneurial advantage.
Objectives
Discuss the evolution of Internet-based business models
Evaluate the business models in practice
Identify the components of business models
Summarize the functioning of business models vis--vis revenue models
State the role of a business model
Differentiate between business model and business strategy
Classify the advantages of entrepreneurship
6.2 Evolution of Internet Business Models

In the past few years, e-commerce has pervaded every aspect of daily life. In a
very short time since its evolution, both people and institutions have used Internet
technologies to increase production, increase convenience and enhance
communications worldwide. The Internet has become integral to daily activities
from banking to shopping and entertainment. For example, just a few years
ago, many people went into a bank and interacted with other people to conduct
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regular banking. Today, people have embraced the automated teller machine
(ATM) that has made banking easy. Today, millions of people rely on the Internet
banking services for their banking needs.
The fast expansion and general acceptance of online business has people
wondering as to why this e-commerce did not happen earlier. The answer is
quite simple; the technology and infrastructure needed were not there to support
e-commerce. Consider, the example of computersmany business enterprises
used large mainframe computers with private data formats. These were not
easy to share with home or office users. The ubiquitous personal computers
(PCs) were not generally available. Thus, only a few computers outside the
business circle could get that information. Even when PCs became popular,
both in offices and at homes, the ability to process business was restricted.
This was because the infrastructure needed was not available.
At the same time, to set up an online or e-commerce earlier, it required
the individual company to develop the whole technology infrastructure. It was
required to develop its own business and marketing planning. However, these
days this is not the case. Now the only problem of an e-commerce is how to
integrate its business, because now many companies have resolved the complex
work of (i) developing individual Internet-based products and (ii) services that
take care of the problems of customer and supply interactions. Nevertheless,
the real challenge is the ability to combine these technologies and services
based on solid business and marketing plans, working on a real-time basis.
Today, the growth of e-commerce is at a fast pace as both organizations
and consumers have access to the Internet, either from their homes or offices.
Thus, there is excitement and the potential for success has also grown. At the
same time, the tremendous growth of the Internet has led to challenges of
increased integration of e-commerce of all capability and capacity.
The growth of e-commerce can be studied at two phases. Companies in
the first phase set up e-commerce, when e-commerce technology was new to
the market.
The trend of companies that set up e-commerce in the first phase are as
follows:
Business organizations rushed to get an e-commerce website up.
Little or no regard was given to check how scalable or reliable the site
needed to be.
It was a matter of beating competition.
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Another drawback of these first-to-market consumer sites was that there
was no or little integration with the production side of the business. The production
part of the business tried to establish its own online-based relationship with
suppliers. Thus, the lack of integration proved to be a major obstacle for many
business organizations. This was due to:
Growth of customer base
Request for real-time order status
Return of products
Today, in the second phase of establishing an e-commerce, owning a
website is not considered to be a way to distinguish a business. The expectations
of customers and suppliers have increased manifold. Organizations are forced
to start planning about integrating the back-end and real-time transaction
processing. Business organizations should maintain a complete customer
supplier relationship with the help of Internet-based technologies and join those
systems to the interpersonal aspects of the business transaction when needed.
Many businesses have realized the prospects of e-commerce and are addressing
the whole business cycle and controlling the Internet technologies.
It can be concluded that these days, online business has the power to
change the business scene. Previously, the business model of a company was
considered to be the basic determination of its value. Nowadays, the value of a
company is based on its strategy, business model and its ability to sell.
Technology has started a new competition. Businesses using Internet
technologies and integrating their systems and processes more efficiently now
break the barriers and make it to the Fortune 500 stalwart. These start-ups are
able to vastly reduce the obstacle to entry while significantly increasing their
own market reach. This has been possible due to the following:
(i) Capitalizing on a continuous business proposal
(ii) Rightly applying technology.
In e-commerce, the motto is first to market equals first to success.
Nevertheless, a sound foundation has to be made. Using Internet technologies
is important to be successful in this business.
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(a) Today, both people and institutions use Internet technologies to
increase production and enhance communications worldwide.
(b) Companies in the first phase set up e-commerce when e-commerce
technology was in its infancy.
(a) One of the drawbacks of the first-to-market consumer sites was that
there was no integration with the _________of the business.
(b) Today, the value of a company is based on its strategy, business

model and_______.
6.3 Business Models in Practice

There are three fundamental types of business models in practice. These are:
1. Business-to-Business (B2B)
2. Business-to-Consumer (B2C)
3. Consumer-to-Consumer (C2C)
Table 6.1 Summary of E-Commerce Model
Model Description Example of Website
Business-toConsumer
Goods or services sold
directly to consumers
pets.com, edirects.com,
amazon.com, autobytel.com
Business-toBusiness
between business and
other businesses
verticalnet.com,
metalsite.com,
shop2gether.com
Business-toGovernment
Goods or services sold to
government agencies
igov.com
Consumer-toConsumer
between consumers
ebay.com, inforocket.com
Consumer-toBusiness
Consumers fix the cost of
their goods or services for
other consumer
priceline.com
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1. Business-to-Business Model
The business-to-business (B2B) model needs two or more business
organizations that do business with each other. It entails commercial activity
among companies through the Internet as a medium. At present, there are

many types of e-commercees. The B2B e-commerce is of the following types:
(a) Supplier oriented
In this type of B2B e-commerce, a supplier establishes the electronic market
where a number of customers or buyers transact with suppliers. Generally, it is
done by a supplier which has monopoly over products that it supplies.
(b) Buyer oriented
In this type of B2B electronic commerce, big business organizations with high
volume purchase capacity creates an e-commerce marketplace for purchases
and gains by starting a site of their own. The online e-commerce marketplace is
used by buyers for placing requests for quotations and carrying out the entire
purchase process.
(c) Intermediary oriented
In this type of B2B e-commerce, a third party establishes the e-commerce
marketplace and attracts both buyers and sellers to interact with each other.
Application of B2B model
Some of the applications of B2B model are, inventory management, channel
management, distribution management, order fulfilment and delivery payment
and payment management.
2. Business-to-Consumer Model
The business to consumer model clearly concentrates on individual buyers and
is thus known as Business-to-Consumer (B2C) model. The B2C model offers
consumers the capabilities to browse, select and merchandise online from a
wider variety of sellers and at better prices. The B2C e-commerce interaction is
most appropriate for the following types of transactions:
(i) Easily transformable goods, i.e., products that are easily transformable
into digital format, such as videos, software packages, music books, and
so on
(ii) Highly rated branded items or items with return security
(iii) Items sold in packets that are not possible to open in physical stores
(iv) Items that follow standard specification
E-Commerce Unit 6
The following steps summarizes the working of B2C:

(i) The customer identifies his/her need.
(ii) Then, the customer looks for the product or service that suit his/her needs.
(iii) The customer selects a vendor and negotiates a price.
(iv) The customer then receives the product or service.
(v) The customer makes the payment for the received product service.
(vi) The customer gets the services and warranty claims that are associated
with the product.
3. Consumer-to-Consumer Model
In a consumer-to-consumer (C2C) model, consumers sell directly to other

consumers via online classified advertisements and auctions or by selling
personal services or expertise online. The C2C model involves the growing
popularity of peer-to-peer (P2P) software that facilities the exchange of data
directly between individuals over the Internet.
Table 6.2 Summary of Business Models
Model Description Example
B2B
One business sells products or services
to other businesses
metalsite.com
B2C
Business sells products or services
directly to consumers
amazon.com
C2C
Consumer sells directly to other
consumers
ebay.com
Activity 1
Research on the Net and prepare a table showing the evolution of business
models and the contributions of important personalities towards the same.

(a) There are four basic types of business models.
(b) In consumer to business models, consumers fix the cost of their
goods or services for other consumers.
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(a) A_______needs two or more business organizations that do business
with each other.
(b) In intermediary-oriented B2B e-commerce, a______establishes the
e-commerce marketplace and attracts both sellers and buyers to
interact with each other.
6.4 Business Model: The Six Components
According to Henry Chesbrough and Richard S. Rosenbloom there are six

components of a business model, namely :
(i) Value proposition
(ii) Market segment
(iii) Value chain structure
(iv) Revenue generation and margins
(v) Position in the value network
(vi) Competitive strategy.

(i) Value proposition: It has three components as follows:
(a) It is an explanation of any problem faced by a customer.
(b) It is about the resolution of that problem
(c) It is the value of this resolution from the customers point of view.
(ii) Market segment: Since diverse market segments have different
requirements, it boils down to which group to target. At times, the full
benefit of a new product development is realized only when a new market
segment is focused.
(iii) Value chain structure: The concept of value chain structure demonstrates
the company's place and the value addition tasks done by it in the value
chain. It also shows in what ways the company captures part of the value,
which it has helped to add in the chain.
(iv) Creation of revenue and profits: It means how income is created in the
business, such as rental, sales, subscription, and so on. It also includes
revenue made from the target profit margins and the cost structure.
(v) Place in the value network: It identifies competitors and sellers whose
products, services or relationships create more demand for your product.
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It also looks for other effects in the business network that might be used
to give more value to the customer.
(vi) Competitive strategy: It refers to the ways in which a business
organization tries to expand a permanent competitive benefit and utilize it
to advance the competitive situation of the company in the market.
6.4.1 Business Model vs Revenue Model
The term business model is a broad term that explains things, such as the
place of a business organization in the value chain, the choice of the customers,
products and the cost of doing business. The business model plans the course
through which the company would in fact make profit. It states clearly the price
it would charge the customers.
The old model corporations have been discredited as overmanaged,
overcontrolled and overstructured but underlet. Thus, todays top managers
should focus on their real managerial skills that would bring success to the firm
in the future. Today, a brand latest business model has come up. Here many of
the important tasks of the company are delegated to the different individual
parts, but synergy results from the vigour of the employees and unrestricted
flow of information.
6.4.2 Role of a Business Model
To profit from an innovation in a product or a service, a new firm or a start-up
needs an appropriate business model so that it is able to exploit its innovation
and be the market leader. Business models are needed to bring in new
technology that will yield an economic value. As the old and familiar business
models cannot be used for all new firms, new business models are planned.
The importance of the business model cannot be denied, because in many
cases the profitability of the innovation rests more on the business model itself
than on the product or service provided by the innovation. In their paper, The
Role of the Business Model in Capturing Value from Innovation, Henry
Chesbrough and Richard S. Rosenbloom provide a crucial structure explaining
the basics of a business model. As there is a complex inter-play of markets,
products and the environment in which a business organization runs, it is very
difficult to understand the organizations responsibility in its totality. While
business experts are acquainted in their area, technical experts understand
theirs. Figure 6.1 makes it clear how the business model serves to connect
these two domains.
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Economic
Outputs
Technical
Inputs
Business
Model
Figure 6.1 Role of a Business Model
Many business subjects including finance, economics, entrepreneurship,

marketing operations and strategy are used to finalize a business model. The
business model itself is an essential determinant of the profits to be generated
from an innovation. A below average innovation with a great business model
could be more profitable than a good innovation with a below average business
model.
6.4.3 Business Model vs Business Strategy
You have read earlier in this unit about the six components of business models
by Chesbrough and Rosenbloom. They further strike a comparison between
the concept of the business model to that of strategy, identifying the following
three differences:
(i) Creating value vs capturing value: The focus of the business model is
on the creation of value. Though the business model only addresses how
that value would be captured by the organization, strategy focusses on
building a sustainable competitive advantage.
(ii) Business value vs shareholder value: The business model helps in
the conversion of innovation to yield economic value for the businesses,
but it does not focus on delivering business value to the shareholders.
For instance, though the business model does not consider the financing
methods, nonetheless, it impacts shareholder value.
(iii) Assumed knowledge levels: Business model assumes a limited

environmental knowledge, even though strategy is dependent on a more
intricate examination that needs more conviction about the environment.
6.4.4 Advantages of Entrepreneurship
According to Chesbrough and Rosenbloom, a good business model like Xerox
has a tendency to establish thrust, but the company remains constrained to its
thriving model. At the same time, the coming up of new technologies forces
business organizations to evolve new business models. This gives new
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companies or start-ups a freehand to make a choice or even develop a new

business model themselves. Otherwise, in adddtion to the risk taken up in the
technology and economic areas, an unproven business model increases the
risk further. Business ventures, generally, are more prepared to acknowledge
this risk.
On the other hand, many venture capitalists fancy themselves as investors
in business models. Thus, when it becomes obvious that the previous model is
not working, the venture capitalists often try and push for a change in the business
model.
Activity 2
A below-average innovation with a great business model could be more
profitable than a good innovation with a below average business model.
Justify this statement citing an example.

(a) According to Rosenbloom and Chesborough, a business model has
five components.
(b) A business model enables to bring the technical experts and business
experts to the same platform.
(a) The___________plans the course through which a company would
make profit.
(b) Business strategy focuses in delivering _____________to the
shareholders.
6.5 Summary

In a very short period since its evolution, the Internet has become integral
to the daily activities of people.
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Today, three basic types of business models are usedbusiness-tobusiness,

business-to-consumer and consumer-to-consumer models.
According to Henry Chesbrough and Rosenbloom, a business model has

six components.
A business model plans the course through which a company would make
profit and also states the price of the product/service it would charge the
customers.
To really profit from an innovative product or service, a firm needs an
appropriate business model so that it is able to exploit its innovation and
be the market leader.
6.6 Glossary
E-commerce: A business interaction that is performed by using the

electronic medium
Business model: A set of shared common characteristics, behaviour
and methods of doing business that enables a firm to generate profits
through increasing revenues and reducing cost
Consumer-to-consumer: Consumers sell directly to other consumers
via online classified advertisements and auctions or by selling personal
services or expertise online
Buyer oriented business: The online e-commerce marketplace is used
by buyers for placing requests for quotations and carrying out the entire
purchase process
Intermediary-oriented: A type of B2B e-commerce, is which a third party
establishes the e-commerce marketplace and attracts both buyers and
sellers to interact with each other
Internet banking: A system allowing individuals to perform banking
activities at home, via the Internet
Digital format: Use of discrete integral numbers in a given base to
represent all the quantities that occur in a problem or calculation
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1. Describe the evolution of Internet-based business models.
2. Discuss the main features of the three fundamental types of business
models.
3. Describe the six components of business models.
4. Summarize the role of a business model.
5. Differentiate between a business model and business strategy. State the
differences in tabular form.
6. Prepare a list of the advantages of entrepreneurship.
6.8 Answers
2. (a) production side; (b) its ability to sell

4. (a) B2B model; (b) third party
6. (a) business model; (b) value

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References
Unit 7 Security in Electronic Business

Structure
7.1 Introduction
Objectives
7.2 Intranet and Extranet Security: Threats and Protection
7.3 Protection Methods
7.4 Data and Message Security
7.5 Firewalls
7.6 Summary
7.7 Glossary
7.9 Answers
References
7.1 Introduction
In the earlier units, you learnt that a considerable volume of business today is
conducted over public networks. There is exchange of large volumes of
confidential data such as credit card details, financial records and other important
information. So, security and confidentiality should be ensured before businesses
can conduct financial transactions over the Internet.
At a time when e-commerce is growing at a fast pace, the lack of data
security on the Internet has become a complex issue. Hence, e-security has
become a major concern. In this unit, you will learn about security threats, client
server security, messagedata security, network security and Web security.
Objectives
Asses the security concerns of intranet and extranet
Differentiate between various security problems in a clientserver
environment
Compare the two broad categories of clientserver security threats
Evaluate the various protection methods adopted by organizations
State how data and message security is ensured over the Net
Summarize the components, types and limitations of firewalls
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7.2 Intranet and Extranet Security: Threats and Protection

Over the last four years, the use of intranets and extranets by organizations has
increased tremendously. The reasons for this are many:
Intranet and extranet are more economical than leased line networks
or WANs.
They enable more cost-effective and productive means of working.
They can help organizations distribute information more economically
and faster.
They are effective tools for developing self-service applications,
reducing administrative costs and improving collaboration with
employees within the organization and with business partners.
With this increased use of intranet and extranet transactions comes its
associated security threats. A security threat is a circumstance, condition, or an
event that causes a loss of or harm to data or network resources. This loss/
harm can be in the form of destruction, disclosure and modification of data;
denial of services; fraud and waste. These can be caused by unauthorized
access, tampering and eavesdropping.
It is therefore important that organizations and businesses must secure
themselves against such threats. In order to do this, they must put in place
strong network security solutions which can transparently and automatically
control the access of corporate intranets and extranets. The solutions must be
in the form of identification and authentication of users, encryption of all traffic
from the application to the user, and access control to all information.
Prospective customers
Rest of the World
Community of Interest
Industry Associations
Business Partners
Customers
Suppliers
Employees
Trusted ID & Authentication

Community
Intranet
Trusted Services
Trusted Transactions
Extranet
Internet
Figure 7.1 The Expanding Network

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7.2.1 Security Concerns of Intranet and Extranet

With the increased use of intranets and extranets, the need for security of
networks and computer systems has also gone up. TCP/IP protocol is an open
technology as it is a connectionless protocol. Here, data is broken up into
packets which then travel freely over the network to reach their final destination
by the best possible route. Unless proper precautions are taken, these data
packets can easily be intercepted and/or altered.
Unfortunately, this can often happen without either the sender or the
receiver being aware of the security breach. Since dedicated links between the
parties in a communication usually are not established in advance, it is easy for
one party to impersonate another party.
Hacker
Mobile Worker
Customer
Supplier
Web Site
Hacker
Branch Office
Firewall
Corporate
Intranet
PO3/Mail
Server
HR/
Finance
Manufacturing
Hacker
Engineering
Svr
Contractors
Employees
Figure 7.2 Expanding Networks Increase Possible Points of Attack
Figure 7.2 is a diagrammatic representation of the security threats to a network

from both within and outside an organization.
Security risks encountered on intranets and extranets
There are many ways of breaching an intranet or extranet network. A breach
may occur in the following ways:
An unauthorized person, who does not belong to an organization, gains
wrongful access to the companys computer system.
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An employee or a supplier who is authorized to use the system for a
particular purpose actually uses it for any other purpose(s). To take an

example, an HR person may break into a marketing database to access
sales figures.
Confidential information may be intercepted when in transit; for
example, an intruder can attach a network sniffing device to the
network. While sniffers are generally used for network diagnostics,
they can also be used to intercept data coming over the wire.
Users may share documents over the intranet or extranet between
offices in different geographical locations.
Sensitive data which is sent over the wire can be exposed by
telecommuters accessing the corporate intranet from their home
computers.
E-mails can also be intercepted in transit.
7.2.2 ClientServer Network Security
Client-server security ensures that only authorized users can access the
information. Such mechanisms include password protection, encrypted smart
cards, biometrics and firewalls. Following are the security problems in a client
server environment:
1. Physical Security: This is a common problem which is caused by an
unauthorized user, say a hacker, who gains physical access to computers
by guessing the passwords of the various users.
2. Software Security: A software security breach occurs when programs/
software are compromised and made to execute operations which they
should not legally be doing.
Example: The rlogin hole in the IBM RS-6000 workstation, which enables
a cracker to create a root shell or super user access mode, can be used
to delete an entire file system or a password file or create a new account.
3. Inconsistent Usage: A security lapse of this nature is caused by the
assembling of a combination of hardware and software by a system
administrator. Due to the increasing complexity of software, such type of
assembling is a growing problem and compromises the security of any
system.
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7.2.3 ClientServer Security Threats

Clientserver security threats are largely divided into two categories:
Threats to client
Threats to server
1. Threats to clients
Client threats mostly arise from malicious data or code, malicious code being
viruses, worms and Trojan horses.
Virus: A virus is a code segment that replicates by attaching copies of

itself to existing executable (EXE) files. The new copy of the virus is
executed whenever a user executes the host program. Every virus
does a different thing; one virus may display some particular text string
on the monitor while another may delete all files on a hard disk on a
particular date.
Worm: A worm is also a self-replicating program but it differs from a
virus in that it does not require any host program. Clients must regularly
scan for malicious data and executable program fragments that are
transferred from the server to the client. Examples of worms include
VBS/Loveletter and Happy99.
Trojan Horse: This is a program that performs a desired task as well
as other unexpected functions. An example would be an editing
program for a multi-user system that could be modified to randomly
delete another users file(s). Examples of a trojan horse would include
BackOrifice, VBS/Freelink and Backdoor G.
2. Threats to servers
Threats to servers include:
Unauthorized eavesdropping
Denial of services
Modification of incoming data packets
(a) Eavesdropping
Hackers can use electronic eavesdropping to trap user names and unencrypted
passwords sent over a network. Encryption can prevent eavesdropping on data
travelling over unsecured networks.
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(b) Denial of services

A denial of service attack is a type of security threat wherein legitimate users
are prevented from using a particular service to the deliberate actions of
attackers. Examples of such a threat are:
Preventing legitimate traffic on a network by flooding it
Preventing access to a service by disrupting a server by sending more
requests than the server can handle
Preventing a particular individual from accessing a service
Disrupting service to a specific system or person
Services can be denied by service overloading or message overloading
Service overloading: You can easily overload a web server by writing
a small looping program to send requests continually for a particular
file; for example, to display a home page.
Message overloading: This happens when someone sends a very
large file to a message box every few minutes. The message box
rapidly grows in size, soon occupying all the space on the disk. The
repeated receiving process on the recipients machine can cause
the disk to crash.
(c) Packet modification
This is an integrity threat that involves modifying or destroying a message packet.
IP Spoofing: Internet Protocol is the elementary protocol which sends data
over the internet and other computer networks. The header of each packet that
is to be transmitted contains the source and destination addresses called IP
addresses. An IP address would look like this: 192.30.233.0
The creation of an IP packet with a copied IP source is called IP address
spoofing. In such a case, the intention is to disguise the senders identity or to
impersonate another computing system. It is one among the many common
forms of online disguises. How it works is that an attacker spoofs the IP address
of a senders machine and then sends a malicious message. Since this appears
to have come from a trusted machine, an attacker thereby gains unauthorized
access to a computer or a network.
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Table 7.1 Average Losses from Various Types of Attacks
Type of Attack Average Loss

Unauthorized Insider Access 1,363,915
Theft of Proprietary Info 1,307146
Financial Fraud 656,927
Telecom Fraud 595,766
Sabotage of data or networks 164,817
Spoofing 128,000
System penetration by outside 110,944
Telecom Eavesdropping 96,833
Denial of Service 77,417
Virus 65,997
Active Wiretapping 49,000
Inside Abuse of Net Access 38,744
Laptop Theft 35,348
Average Loss 215,753
Source: Computer Security Institute (USA)/FBI 1998 Survey of Computer Security
A survey conducted by the Computer Security Institute in 1998 in the US

classified the different types of attacks and put a value to them. Based on the
survey it was deduced that unauthorized access by insiders was resulting in the
most serious financial losses.
Activity 1
Prepare a chart showing the various stages of development of the security
solutions and the causes that led to the development of each type.

(a) Intranets and extranets are more economical than WANs.
(b) It is impossible to intercept data over the network using TCP/IP.
(c) A Trojan horse will perform only the desired task.
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(a) Client server security ensures that only________users can access
the information.
(b) A _______is a code segment that replicates by attaching copies of
itself to existing executable files.
(c) A _____ does not require a host program to replicate itself.
7.3 Protection Methods
In order to reduce the different types of security threats, various protection

methods can be used. These include:
(a) Trust-based security
(b) Security through obscurity
(c) Password schemes
(d) Biometric system
(a) Trust-based security: Trust-based security trusts everyone, and
therefore, does nothing extra to protect the network or restrict access to
any data on that network. All users working in a network can share
information. This approach assumes that no user will break into the system
illegally or delete any files or indulge in unauthorized access of data. In
the past, this approach was successful, but not any more.
(b) Security through obscurity: Any network can be secure as long as
nobody outside its management group is allowed to find out anything
about its operational details. This can be done by hiding account passwords
in binary files or scripts so that nobody will ever find them.
But its usefulness is minimal in the UNIX world where users are free to
move around the file system and have a good understanding of
programming techniques. They can easily guess the bits of knowledge
considered confidential. These bypass the whole basis of Security Though
Obsecurity and make this method of security quite ineffective.
(c) Password schemes: Yet another form of security is password schemes.
However, it can also break down when some common words or names
are used as passwords.
The simplest method used by most hackers is dictionary comparison.
This is done by comparing a list of encryption user passwords against a
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dictionary of common encryption words. This scheme often works because

users tend to chose relatively simple or familiar words as passwords.
As a solution, you can use mixed-case passwords containing at least one
non-alphanumeric character and changing passwords every sixtyninety
days.
You can also include one-time passwords or smart card randomized
tokens. This scheme provides a high level of security.
(d) Biometric system: The biometric system involves some identification
aspects which are related to the human body, such as comparing
(fingerprints), palm prints and voice recognition. The biometric system
uses one-to-one and one-to-many relationships. However, these systems
are expensive to implement.
Activity 2
Find out the types of protection methods adopted by your organization/
institution. How effective are they?
3. State whether the following statements true or false.
(a) In a trust-based security, all users working in a network can share
information.
(b) Biometric systems are cheap.
(a) The simplest method adopted by password hackers is..
(b) Biometric systems involve some identification aspects related to the.
7.4 Data and Message Security
Data security
Data security generally suffers from packet sniffing. A sniffing attack begins
when a computer is compromised to share some data or program. A cracker
starts by installing a packet sniffer into the network. The sniffer program attacks
the network traffic, telnet or FTP session that a legitimate user initiates to gain
access to another system. The session contains the login ID, password and
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user number of the person logging into other machines. This is the information
a sniffer needs to log in to a machine.
Message security
Threats to message security fall into three categories:
Confidentiality
Integrity
Authentication
(a) Message confidentiality
Message confidentiality means when a message passes between the client

and the server on a public network, third parties cannot view and intercept this
data. Confidentiality is important for user-sensitive data such as credit card
number. This requirement will be amplified when other kinds of data, such as
employee records, government files and social security number, begin traversing
the Net.
(b) Message integrity
The contents of transaction must be unmodified during transit. It must be clear
that no one has added, deleted or modified any part of the message. Error
detection codes or checksum, sequence number and encryption techniques
are methods to enhance information integrity. Sequence numbers prevent
recording, losing or replaying of messages by an attacker. Encryption techniques,
such as digital signature, can detect any modification of a message.
(c) Message sender authentication
In an e-commerce environment, it is important that clients authenticate
themselves to servers, that servers authenticate themselves to clients and that
both authenticate themselves to each other. Authentication in e-commerce
basically requires the user to prove his or her identity for each requested service.
Third-party authentication services must exist within a distribution network
environment where a sender cannot be trusted to identify itself correctly to a
receiver. A digital certificate is used for this (authentication) purpose.
7.5 Firewalls
One of the most common security measures in use today is the firewall. A
firewall is meant to act as a defence mechanism. It prevents unauthorized people
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that do not belong to an organization from gaining access to data that is

considered sensitive.
A firewall is simply a barrier between two networks usually a trusted
internal network and an external network which is untrusted. The system
administrator defines a set of policies. Based on these policies, the firewall
decides whether to let incoming and outgoing packets go through or whether to
block them. Figure 7.3 shows how a firewall works.
Internet
40,000
networks;
number of
hackers?
Enterprise
LAN
or
WAN
Firewall
bypass should
not be allowed
Figure 7.3 Schematic Diagram of a Firewall
Importance of a firewall
A firewall can monitor incoming and outgoing security alerts and record
and track down an intrusion attempt depending on the severity.
Some firewalls, but not all, can delete viruses, worms, Trojan horses or
data collectors.
A firewall can also be used to prevent employees from accessing selected
sites on WWW.
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7.5.1 Components of a Firewall

Following are the hardware and software components of a firewall:
1. Hardware: Firewall hardware usually consists of a separate computer
dedicated to running the firewall software functions.
2. Software: Firewall software can consist of some or all of these
applications:
Packet Filters
Proxy Servers
SOCKS Servers
Network address translation (NAT) services
Logging and monitoring software
Virtual private network (VPN) services
7.5.2 Types of Firewalls
All firewalls can be divided broadly into two categories static and dynamic.
Let us try and understand the features of these two categories of firewalls.
(a) Static firewall
These firewalls are generally pre-configured and they allow or deny access
from outside by default. In a Default Allow policy, all inbound traffic is unrestricted;
only specified users are denied access to the network of enterprises. In the
Default Deny policy, only those specific users who display their authentication
are permitted to access a network.
(b) Dynamic firewall
A dynamic firewall uses allowance and denial of services policy with regard to
the network on the basis of time. Some service on the network may be allowed
and others denied for a specific time period. The configuration of such a firewall
is slightly more complex.
Different types of firewalls are used depending upon the requirements of
organizations. Some of these are:
IP Packet Filtering Firewall
Application-Level Firewalls
1. IP packet filtering firewall
This firewall uses a router or any other suitably configured device to filter incoming
and outgoing data packets. It does so by examining the information contained
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in the TCP/IP packet header. The filters can be configured to accept or discard
a packet on the basis of the following information given in the packet header:
Source address
Destination address
Application or protocol
Source port number
Destination port number
This router stores a table containing rules specified for security purposes.
While examining a packet header, the firewall compares the information in it
with the rules stored in the access control table (these rules are the parameters
for blocking a packet or allowing it to pass through the router). If the information
in the packet header does not match with any of the specified rules, the firewall
applies the default rule.
Now, what is a default rule? The default rule generally follows the allow
all or deny all model. For strict security; the firewall default rule should be the
deny all model which most packet filters actually follow. (See Figure 4.8.)
Sample Screening Rules:
Protocols (TCP, UDP)
Source IP address (Domain.edu)
Target TCP port 80 (WWW only)
IP Packet screening router
Public Internet
Figure 7.4 IP Packet Filter Firewall
Disadvantages
Packet filters cannot support user authentication and blocking based on
contents at the application level.
For complex protocols that specify return data ports dynamically, the
filtering protocol becomes difficult and complex.
The creation of packet-filtering rules can become tedious when used for
filtering all the permutations and combinations of packet attributes.
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It is susceptible to IP spoofing; hackers can change IP addresses in packet

headers to those that are acceptable and thereby get access to a corporate
network.
A more sophisticated and secure type of firewall is an application-level
gateway, such as a proxy application gateway.
2. Application-level firewalls
An application-level firewall intercepts incoming and outgoing packets; runs
proxies that copy and forward information across the firewall, and functions as
a proxy server. As a result, a direct connection between a client or a server that
is trusted and an untrusted host is prevented.
A proxy server application gateway is a special server that typically runs

on a firewall machine. Instead of directly talking to external WWW servers,
each request from the client is routed to a proxy on the firewall that is defined by
the users. This is how it works: (i) the proxy server waits for a request from
inside the firewall, (ii) it then forwards the request to the remote server outside
the firewall and (iii) reads the response and then returns it to the client.
Application-level proxies are designed for individual applications. If, for
example, an application-level firewall runs, WWW and SMTP (e-mail) traffic will
pass through the firewall, while all other services such as Telnet and FTP would
be blocked.
Proxy server
on the
firewall
machine that
connects to
external
Internet
Web HTTP
Server
FTP
Server
Gopher
Server
Telnet
Server
USENET
News Server
Client
inside the
firewall
Secure subnet inside

the firewall security
perimeter
Public Internet
Figure 7.5 Application-Level Firewall

E-Commerce Unit 7
7.5.3 Factors to Consider in a Firewall

When selecting a firewall, the following factors should be considered:
Ease of use
Level and quality of protection
Whether it is free
Its level of intelligence
Its technique/strategy for coping with Internet connection sharing
Ease of use
The firewall must be easy to install, run and use. Take the example of Windows
SP2firewall; it is quite good, but not user friendly.
How good is the protection?
Does the firewall block outgoing security threats, as it does with incoming ones?
Is it free? If not, why should I purchase as opposed to a free solution?
It is important to check out if the firewall software is free. If it is being offered
free, chances are it will be a basic, cut-down version of the complete package.
Most vendors allow a thirty day trial for the complete package, after which which
they offer the cut-down version free of cost (if you wish to purchase). However,
given the nature and extent of cyber threats prevalent today, it may be worth the
cost to buy the complete version.
How intelligent is it?

Some firewall software may be more intelligent than others. An intelligent firewall
will recognize a genuine Windows application when it tries to access the Internet,
while another (which is not intelligent) will need to be prompted on whether
access should be denied or not.
How does it cope with Internet connection sharing?
Those that use Internet Connection Sharing (ICS) through Windows XP, a firewall
that blocks the user from identifying an IP address or from making use of an
internet connection can be a botheration. However, it is definitely not advisable
to frequent the net without the assistance of a firewall. You will probably have to
do a trial and error before you find the firewall best suited to your needs.
7.5.4 Firewall Policy
A firewall generally implements one of two basic design policies:
Permissive Approach
Restrictive Approach
E-Commerce Unit 7
(a) Permissive Approach

In this approach, all services are by default allowed to pass the site. Only
those which have been specifically identified by the network services
access policy as disallowed, are blocked. It is a desirable policy because
it allows for more ways to get around the firewall. Certain services, such
as FTP, Archie and RPC, are difficult to filter. In such cases, a firewall of
this nature is suitable.
(b) Restrictive Approach
A restrictive firewall denies all services by default, and allows only those
services that have been identified as allowed, to pass. This policy follows
the classic access model used in all areas of information security. The
second policy is stronger and safer, but it is more restrictive for users.
7.5.5 Limitations of Firewalls
Firewalls also have limitations:
A firewall is unable to offer protection from those threats that do not pass
through it.
It does not protect a network system against threats that emanate from
within the network that is, from internal users.
A firewall monitors the traffic in a network, permitting only authenticated
and legitimate traffic flow. It does not concern itself with integrity issues
related to applications and data.
A firewall is concerned with the controlled flow of data traffic and not with
confidentiality of data. However, application proxies at the firewall machine
can provide encryption and decryption of all the data passing through as
it becomes a single access point to the application.

A firewall cannot protect very well against viruses. In general, a firewall
cannot provide protection against a data-driven attack an attack in which
something is mailed or copied to an internal host, from where it is then
executed.
(a) A sniffer program attacks the network traffic, telnet or FTP session
that a legitimate user initiates to gain access to another system.
E-Commerce Unit 7
(b) Authentication is e-commerce requires the user to provide his or her

identity.
(a) Data security generally suffers from________.
(b) ________prevent recording, losing or replaying of messages by an
attacker.
Factors to Consider in a Firewall
When selecting a firewall, the following factors should be considered:
Ease of use
Level and quality of protection
Whether it is free
Its level of intelligence
Its technique/strategy for coping with Internet connection sharing
Ease of use
The firewall must be easy to install, run and use. Take the example of Windows
SP2firewall; it is quite good, but not user-friendly.
How good is the protection?
Does the firewall block outgoing security threats, as it does with incoming ones?
Is it free? If not, why should I purchase as opposed to a free solution?
It is important to check out if the firewall software is free. If it is being offered
free, chances are it will be a basic, cut-down version of the complete package.
Most vendors allow a thirty-day trial for the complete package, after which which
they offer the cut-down version free of cost (if you wish to purchase). However,
given the nature and extent of cyber threats prevalent today, it may be worth the
cost to buy the complete version.
How intelligent is it?
Some firewall software may be more intelligent than others. An intelligent firewall
will recognize a genuine Windows application when it tries to access the Internet,
while another (which is not intelligent) will need to be prompted on whether
access should be denied or not.
How does it cope with Internet connection sharing?
Those that use Internet Connection Sharing (ICS) through Windows XP, a firewall
that blocks the user from identifying an IP address or from making use of an
internet connection can be a botheration. However, it is definitely not advisable
E-Commerce Unit 7
to frequent the Net without the assistance of a firewall. You will probably have to
do a trial and error before you find the firewall best suited to your needs.

(a) A firewall prevents unauthorized people from gaining access to
sensitive data.
(b) All firewalls can delete worms and viruses.
(c) The firewall must be easy to install, run and use.
(a) Firewall ______consists of a separate computer dedicated to running
the firewall software functions.
(b) A firewall cannot offer protection against those threats that______.
(c) A firewall cannot protect well against_______.
7.6 Summary

Security threats refer to circumstances or occasions that result in the
destruction, disclosure or modification of data thereby causing economic
harm to network resources.
The client-server security threats can be divided into two broad
categoriesthreats to client and threats to server.
Threats to clients arise from virus, worm and Trojan horse.
To take care of this, a security threat solution is essential which can
transparently and automatically control access to corporate intranets or
extranets.
Some of the popular methods adopted by organizations to reduce security
threats include trust-based security, security through obscurity, password
schemes and biometric system.
Firewalls are important to control and monitor traffic between the outside
world and a local network. A firewall places a device, a computer or a
router between the Internet and the network.
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7.7 Glossary
Security threat: A circumstance, condition, or an event that causes
economic loss to data or network resources in the form of destruction,
disclosure, and modification of data, denial of services, fraud and waste
Clientserver security: Ensures that only authorized users access the

information and includes such mechanisms as password protection,
encrypted smart cards, biometrics and firewalls
Biometric system: Involves some identical aspects that are related to
the human body, such as fingerprints, palm prints and voice recognition
Virus: A code segment that replicates by attaching copies of itself to
existing executable files
Trojan horse: A program that performs a desired task and also includes
unexpected functions
Worm: A self-replicating program that is self-continued and does not
require any host program.
Firewall: A barrier between two networks and includes an internal network
often called the trusted network and an external network called untrusted
network

1. Explain the security concerns of intranet and extranet.
2. Discuss the different security problems in a clientserver environment.
3. Describe the two broad categories of clientserver security threats.
4. Evaluate the various protection methods adopted by organizations.
5. Explain how data and message security are ensured over the Net.
6. Summarize the components, types and limitations of firewalls.
E-Commerce Unit 7
7.9 Answers
1. (a) True; (b) False; (c) False
2. (a) authorized; (b) virus; (c) worm
4. (a) dictionary comparison; (b) human body
6. (a) packet sniffing; (b) Sequence numbers
7. (a) True; (b) False; (c) True
8. (a) hardware; (b) do not pass through it; (c) viruses

2. Refer to Sections 7.2.1 and 7.2.2
References
1. Laudon, Kenneth C. and Carol Guercio Traver. E-Commerce: Business,

Technology, Society. N.J: Prentice Hall, 2004.
Unit 8 Encryption
Structure
8.1 Introduction
Objectives
8.2 Cryptography
8.3 Encryption
8.4 Digital Signature
8.5 Virtual Private Network
8.6 Summary
8.7 Glossary
8.9 Answers
References
8.1 Introduction
In the previous unit you learnt about security in electronic unit. In this unit, you
will learn about encryption. Encryption is an important cryptography technology
used to transform information using an algorithm to make it unreadable to anyone
except those possessing special knowledge (usually referred to as a key).
Cryptography is the science of writing in a secret code is called cryptography.
Since long, encryption is being used by militaries and governments to facilitate
secret communication as there are several instances of data in transit being
intercepted in recent years. Encryption is also used to protect data in transit,
i.e., data being transferred via networks (such as the Internet and e-commerce),
mobile telephones, wireless microphones, wireless intercom systems, Bluetooth
devices and bank automatic teller machines. Encrypting data in transit also
helps to secure it as it is often difficult to physically secure all access to networks.
Objectives
Define cryptography and describe the purposes of cryptography
Summarize the role of encryption in message security
Discuss the various methods of encryption
Identify the various features of digital signature
Discuss the role of virtual private network (VPN) in encryption
E-Commerce Unit 8
8.2 Cryptography
Cryptography is derived from the Greek words kryptos (hidden, secret) and
grph (I write). It is the practice and study of hiding information. Cryptography
is today considered a branch of both mathematics and computer science, and
is used extensively in information theory, computer security and engineering.
Cryptography is used in applications which require security of data, such as in
the case of ATM cards, computer passwords and electronic commerce.
8.2.1 Purpose of Cryptography
The science of writing in a secret code is called cryto. It is supposed to have
been first used as far back as 1900 BC by an Egyptian scribe. Cryptography is
believed to have appeared soon after writing was invented and used in diplomatic
exchanges and battle plans. With the development of computer communication,
the need for security of communication media also rose. Quite understandably,
then, cryptography began to be used to provide this security while communicating
over any untrusted medium, particularly the Internet.
These security requirements include:
Authentication: That is, giving proof of ones identity.
Privacy/confidentiality: Making sure that no one other than the intended
reader reads the message.
Integrity: Providing assurance to the receiver that the message received
by him is no different from the original one.
Non-repudiation: A mechanism which will prove that the message was
actually sent by the sender and no one else.
Thus, it is seen that cryptography serves a dual purpose: data is protected
from being stolen or altered and users are authenticated. This is done in three
ways: (a) Secret key (or symmetric) cryptography, (b) Public-key (or asymmetric)
cryptography and (c) hash functions. The unencrypted data is referred to as
plaintext. It is encrypted into ciphertext, and then decrypted into usable plaintext.
8.2.2 Encryption as the Basis for Data and Messaging Security
Encryption is a cryptography technology to scramble (encrypt) the data with a
key so that no one can make sense of it while it is being transmitted. When the
data reaches its destination, the information is unscrambled (decrypted) using
the same or a different key.
E-Commerce Unit 8
The terms used commonly in a cryptography system are as follows:

Intruder: An intruder is any person who does not have the authorization
to access the network or the information.
Plaintext: It is an intelligible message that needs to be converted into
an unreadable message or encrypted message.
Ciphertext: A message in an encrypted form.

Example:
(Encrypted Form) (Decrypted Form)
Plain Text Algorithm Cipher Text Algorithm Plain Text
Goods Next two letters Iqqfu Previous two letters Goods
Sales Previous one letter rzkdr Next one letter Sales
Encryption is a method by which plaintext can be converted into ciphertext.

Decryption is a method by which a ciphertext can be converted into plaintext.
Algorithm: A cryptography algorithm is a mathematical function.
Key: It is a string of digits.
(a) The science of writing in a secret code is called_____________.
(b) _____ is a cryptography technology to scramble (encrypt) the data
with a key so that no one can make sense of it while it is being
transmitted.
(c) _______ is an intelligible message that needs to be converted into
an unreadable message or encrypted message.
8.3 Encryption
8.3.1 Methods of Encryption
There are three types of cryptography or methods of encryption:

Secret key or private key or symmetric key cryptography
Public key or asymmetric key cryptography
Hash function
E-Commerce Unit 8
1. Secret key or symmetic key cryptography

In this scheme, both the sender and the recipient possess the same key to
encrypt and decrypt the data. Figure 8.1 shows how secret or private key
cryptography works.
Original
Message
Encrypted
Message
Encrypted
Message
Original
Message
Secret Key Encrypt
Secret Key Decrypt
Internet
8.1 Schematic Diagram of Secret Key Cryptography
Data Encryption Standard

Data Encryption Standard (DES) is an example of secret key cryptography. It
was developed by IBM. DES is block cipher-based scheme which encrypts a
64-bit data block using a 56-bit key. The block is transformed in such a way that
it involves sixteen iterations. This done by using the security key.
To take an example, suppose, A encrypts a message with a secret key
and e-mails it to B, who on receiving it, checks the header to identify the sender.
B then has to take the duplicate of the secret key to decrypt the message.
Drawbacks of secret key cryptography
Both parties must agree upon a shared secret key.
If there are n correspondents, you have to keep track of n different
secret keys. If the same key is used by more than one correspondent,
the common key holders can read each others mail.
Symmetric encryption schemes are also subject to authenticity
problems. Since both the sender and the recipient have the same
secret key, the identity of originator or recipient cannot be proved.
Both can encrypt or decrypt the message.
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2. Triple Encryption
As discussed, the DES is a block cipher and employs shared secret encryption.
But, nowadays DES is considered unsafe for various applications primarily due
to the 56-bit key size which is too small. Triple DES is considered as an improved
version to overcome many of the shortcomings of DES. The triple encryption
technology is based on DES and is sometimes referred as Triple DES or 3DES.
The event follows an Encrypt-Decrypt-Encrypt (EDE) sequence. Decrypt
sequence is just the same encrypting operation with the keys reversed. It is
based on the DES algorithm and can easily modify the existing software to use
Triple DES. It has a longer key length that helps in eliminating many of the
shortcut attacks used to reduce the amount of time it takes to break DES. Thus,
Figure
Triple DES is considered as an exceptional and dependable option to fulfill the

security requirements of highly sensitive information.
Triple DES mode of operation takes three 64-bit keys for an overall key
length of 192 bits. In Private Key Encryption, the user can just type in the complete
192-bit (24 character) key rather than entering each of the three keys individually.
The procedure for encryption is exactly the same as regular DES, but it is repeated
three times. The data is encrypted with the first key, decrypted with the second
key and finally encrypted again with the third key (Refer to Figure 8.2).
Figure 8.2 Triple DES Mode
3. Public key cryptography

This scheme operates on a double key, called pair key, one of which is used to
encrypt the message and the other is used to decrypt it. This can be viewed as
two parts; one part of the key pair, the private key, is known only by the designated
owner. The other part, the public key, is published widely but is still associated
with the owner of the private key. Figure 8.3 shows how public key encryption
works.
E-Commerce Unit 8
Encrypted
Message
Original
Message
Original
Message
Encrypted
Message
Internet
(Cipher Text)
(Cipher Text)
Public Key Encrypt
Private Key Decrypt
Figure 8.3 Schematic Diagram of Public Key Cryptography
Encryption and Decryption

Data encrypted with a public key can only be decrypted with a private key.
Data encrypted with a private key can only be decrypted with a public key.
Advantages of public key cryptography
Message confidentiality can be proved: The sender uses the recipients
public key to encrypt a message, so that only the private key holder can
decrypt the message, and no one else.
Authenticity of the message originator can be proved: The receiver
uses his private key to encrypt a message, to which only the sender has
access.
Easy to distribute public key: The public key of the pair can be easily
distributed.
Hash function
Hash function is a formula that converts a message of a given length into a
string of digits called a message digest. A mathematical transformation is used
by the hash function to encrypt information such that it is irreversible. The
encrypted ciphertext message cannot be decrypted back to plaintext.
(a) The sender generates a message.

(b) A Message Digest of the message is created using the hash function.
(c) The sender attaches the digital signature to the end of the message.
(d) The sender encrypts both message and signature with the receivers public
key.
(e) Using a private key, the entire message is encrypted by the receiver.
(f) The receiver calculates the message digest using the hash function.
The receiver uses the same hash function that the sender uses, and which
has been agreed upon in advance. The main advantage of using the hash
function for encryption is that even if an unauthorized person accesses Xs
public key, he will not be able to get to the hash function-generated key; thus
making the digital signature authentic and secure.
Activity 1
Search on the Internet for public key cryptography and find out the
disadvantages of using it.
2. State whether the following statements are true or false:

(a) In secret key cryptography, only the sender possesses the same
key to encrypt and decrypt the data.
(b) Data Encryption Standard (DES) is an example of public key
cryptography.
(c) Triple DES mode of operation takes three 64-bit keys for an overall
key length of 192 bits.
(d) Data encrypted with a public key can only be decrypted with a private
key.
E-Commerce Unit 8
8.4 Digital Signature

Digital signatures are used for authenticating e-commerce business transactions.
The authentications refer to legal, financial and other document-related issues.
Digital signatures are just like handwritten signatures which determine
authentications.
A digital signature consists of two parts:
(i) Signature in the document: signer authentication
(ii) Document authentication
(i) Signer authentication: A signature should indicate who signed a
document, message or record and should be difficult for another person
to produce without authorization.
(ii) Document authentication: A signature should identify what is signed so
that:
Sender can not remove the content of messages after signing it.
The receiver cannot make any changes in the message.
8.4.1 Validity of Digital Signatures
Generally, a key expires after a certain period that could range from six months
to a year. A signed document with an expired key is not acceptable. The contract
is registered with a digital time stamping service at the time it is signed; the
signature can be authenticated even after expiry of the key. If every party on the
contract keeps a copy of the timestamp, all of them can prove that the contract
was signed using valid keys. Actually, the timestamp can prove the validity of
the contract even if one signatorys key gets compromised at any instant after
the contract is signed.
A digital time stamping (DTS) service issues timestamps which associate
a date and time with a digital document in a cryptographically strong way. The
digital timestamp can be used at a later date to prove that an electronic document
existed at the time stated on its timestamp.
Because keys are intended to be public and are widely distributed, anyone
can easily create a private/public key pair and distribute the public key, claiming
it belonged to someone else. One solution to this problem is a public-key
certificate. A public-key certificate is a data structure, digitally signed by a
Certifying Authority (CA).
E-Commerce Unit 8
Certificates authority
Certificates authority is an organization or institution that issues digital certificate
to companies and organizations that are accessible via the Internet. These
certificates are issued for a certain period of time and are used as an assurance
of the security of a website. It is also known as trusted third party. CAs form
characteristics of many public key infrastructure (PKI) schemes. There are many
commercial CAs that charge for their services. There are also several providers
issuing digital certificates to the public without any cost. Generally, institutions
and governments have their own CAs.
Certificates authority issues digital certificates that consist of the
identification details of the owner and his public key. The corresponding private
key is in a similar manner not made available publicly, but kept as a secret by
the end-user, who generates a key pair. The certificate also acts as evidence by
the CA such that the public key contained in the certificate is related to the
person, organization, server or other entities noted in the certificate. If the user
believes in the Certificate Authority (CA) and is able to validate the CAs signature,
then he can also validate the requirement of a certain public key that belongs to
whoever is identified in the certificate.
Digital certificate
A digital certificate serves as an electronic identity card that establishes the
users credentials when business deals are transacted across the Web. A digital
certificate is defined as a method to electronically verify for authenticity. The
digital certificate is just like an identity card, such as a drivers license. Digital
certificate is issued by a number of certificate authorities; it is used to prove that
a website, or a visitor to a website, is the entity or person they claim to be; An
electronic credential issued by a certification authority to establish the identity

of an organization when doing business on the Internet.
Contents of digital certificate
A digital certificate contains the following details:
Certificate Holders Name, organization and address.
The name of certificate authority who has issued this certificate.
Public key of the holders for cryptographic use.
Time limit, these certificates are issued for durations of six months to a
year.
Digital certificate identification number.
E-Commerce Unit 8
A digital certificate contains a public key that is used for encrypting messages
and digital signatures. It also has the digital signature of the certificate authority.
By this signature a recipient can verify that the certificate is genuine. Sometimedigital
certificates conform to a standard, X.509. It can be kept in registries so
that authenticating users can look up other users public keys.
8.4.2 Non-Repudiation and Message Integrity
Digital identity is based on message integrity, non-repudiation and confidentiality.
Integrity ensures that a message or transaction has not been tampered with.
Non-repudiation ensures that the contents of the message sent are intact and
provides evidence for the existence of a message or transaction. The user and
the recipient cannot dispute the contents, once sent. The contents are protected
as confidential which means that only authorized individuals or groups can access
the contents of a message or transaction. In certain cases, these features are
not necessary and hence are considered as luxury. However, there are scenarios
where these features are most critical. For managing digital identity strategy,
clarity of these features is very important.
Integrity
Integrity is the basic requirement of a highly dependable identity infrastructure.
Identity systems serve the purpose of exchanging credentials as well as
messages and transactions pertaining to attributes, provisioning of information
and other data. Integrity builds a trust that the contents have not been tampered,
which is important in this environment. To understand this better, let us take an
example of a document that represents identity credentials. It is important to
validate the authenticity of the credentials to be sure of their originality.
Non-repudiation
Non-repudiation is the activity of presenting of tamper-proof evidence proving
that a message was sent or received. Critical identity-related acts should be
protected even though the messages or transactions can be disputed. For
understanding this better, let us take the instance of two people, Nadia and Joe,
who are exchanging messages. In one case, Nadia denies sending a message
to Joe that he claims to have received. The ability to counter Nadias denial is
called Non-repudiation of Origin (NRO). In the second scenario, Nadia claims
to have sent Joe a message that he denies having received. Provision of evidence
to counter Bobs claim is called Non-Repudiation of Receipt (NRR).
E-Commerce Unit 8
Activity 2
Search on the Internet for the term digital signature and find out how it
ensures non-repudiation of data.

(a) ______ are used to authenticate e-commerce business transactions.
(b) A ______ service issues timestamps which associate a date and
time with a digital document in a cryptographically strong way.
(c) A _____ is defined as a method to electronically verify for authenticity.
8.5 Virtual Private Network

A virbtual private network (VPN) establishes virtual connection between client
and server. It is a network that uses a public communication infrastructure,
such as the Internet, to provide remote offices (other place) or individual users
with secure access to their organizations network. A virtual private network can
be compared with a system of owned or leased lines that can only be used by
one organization. The goal of a VPN is to provide the organization with the
same capabilities, but at a much lower cost.
A VPN works on the shared public infrastructure while maintaining privacy
through security procedures and tunneling protocols such as the Layer Two
Tunneling Protocol (L2TP). In effect, the protocols, by encrypting data at the
sending end and decrypting it at the receiving end, send the data through a
tunnel that cannot be entered by data that is not properly encrypted. An
additional level of security involves encrypting not only the data, but also the
originating and receiving network addresses.
One popular technology to accomplish these goals is VPN . A VPN is a
private network that uses a public network (usually the Internet) to connect
remote sites or users together. The VPN uses virtual connections routed through
the Internet from the businesss private network to the remote site or employee.
By using a VPN, businesses ensure security anyone intercepting the encrypted
data cant read it.
E-Commerce Unit 8
VPN was not the first technology to make remote connections. Leased
lines, such as ISDN (integrated services digital network, 128 Kbps), are private
network connections that a telecommunications company could lease to its

customers. Leased lines provided a company with a way to expand its private
network beyond its immediate geographic area. These connections form a single
wide-area network (WAN) for the organization. Though leased lines are reliable
and secure, the leases are expensive, with costs rising as the distance between
offices and work places increases.
4. State whether the following statements are true or false:
(a) A virtual private network (VPN) is a network that uses a private
communication infrastructure.
(b) The goal of a VPN is to provide the organization with the same
capabilities, but at a much lower cost.
8.6 Summary

The science of writing in a secret code is called cartography. It is supposed
to have been first used as far back as 1900 BC by an Egyptian scribe.
Encryption is a cryptography technology to scramble (encrypt) the data
with a key so that no one can make sense of it while it is being transmitted.
Encryption is a method by which plaintext can be converted into a
ciphertext.
Decryption is a method by which a ciphertext can be converted into a
plaintext.
In secret key cryptography, both the sender and the recipient possess the
same key to encrypt and decrypt the data.
Data Encryption Standard (DES) is a block cipher based scheme which
encrypts a 64 bit data block using a 56 bit key. The block is transformed
in such a way that it involves 16 iterations.
Public key cryptography operates on a double key, called pair key, one of
which is used to encrypt the message and the other is used to decrypt it.
E-Commerce Unit 8
Digital signatures are used for authenticating e-commerce business

transactions. The authentications refer to legal, financial and other
document-related issues.
Hash function is a formula that converts a message of a given length into
a string of digits called a message digest.
Certificates authority is an organization or institution that issues digital
certificate to companies and organizations that are accessible via the
Internet.
Digital identity is based on message integrity, non-repudiation and
confidentiality.
A virtual private network (VPN) establishes virtual connection between

client and server. It is a network that uses a public communication
infrastructure, such as the Internet, to provide remote offices (other place)
or individual users with secure access to their organizations network.
A VPN works on the shared public infrastructure while maintaining privacy
through security procedures and tunneling protocols such as the Layer
Two Tunneling Protocol (L2TP).
8.7 Glossary
Cryptography: The science of writing in a secret code

Encryption: A cryptography technology to scramble (encrypt) the data
with a key so that no one can make sense of it while it is being transmitted
Intruder: Any person who does not have the authorization to access the
network or the information
Plaintext: An unreadable message that needs to be converted into an
intelligible message or encrypted message.
Ciphertext: A message in an encrypted form.
Hash function: is a formula that converts a message of a given length
into a string of digits called a message digest.
Non-repudiation: is the activity of presenting of tamper-proof evidence
proving that a message was sent or received
E-Commerce Unit 8

1. Discuss the meaning and purpose of cryptography.
2. Compare the features of secret key cryptography and those of public key
cryptography.
3. Explain how hash function operates.
4. Describe how digital signatures are validated.
5. Explain the method of ensuring non-Repudiation and message integrity
of message.
6. What is virtual private network (VPN)? Discuss how it works.
8.9 Answers
1. (a) Cryptography; (b) Encryption; (c) Plaintext
2. (a) False; (b) False; (c) True; (d) True
3. (a) Digital signatures; (b) Digital time stamping; (c) Digital certificate


E-Commerce Unit 8
References
Unit 9 E-Payment Systems

Structure
9.1 Introduction
Objectives
9.2 B2B Electronic Payments
9.3 Third-Party Payment Processing
9.4 Electronic Payment GatewaySecurity Standard for
Electronic Payment System
9.5 Summary
9.6 Glossary
9.8 Answers
References
9.1 Introduction
The previous unit discussed encryption and its significance in providing
messaging security. Security is an issue that is extremely important when it
comes to making online payments. An Electronic Payment System (EPS) is an
online business process used for fund transfer through an electronic medium,
like personal computers, mobile phones, servers and hand-held devices.
Therefore, electronic payment system can be defined as: The transfer of
electronic money between financial institutions over a secure private network.
Making payments on the Internet is essentially the electronic version of
any traditional payment system. However, in the electronic payment system,
everything is digital and it is designed to be handled electronically; no change
and/or old currency problems are faced. EPS is a faster payment system which
provides its service to customers at low cost.
EPS is not bound by regional boundaries and therefore funds can be
transferred anywhere. It is a secure method of fund transfer and provides faster
services as compared to a conventional payment system. It provides services
not only to big organizations, banks and business transactions, but also to users
and consumers for online shopping and marketing at very low cost. There are
various ways by which a customer can make payments, such as by using credit
cards, digital cash, debit cards, and so on.
The issues involved in EPS are:
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1. The selection of the mode of EPS by consumers; for example, e-cash,

e-cheque, credit cards and debit cards.
2. The management of financial risk associated with various payment
instrumentsprivacy, frauds and error as well as other risksin the online
market.
3. Getting to know the procedures and institutional arrangements that
constitute the basics of the process of electronic payment linking
consumers and organizations.
In this unit, you will learn about B2B electronic payments, third party
payment processing and electronic payment gateway.
Objectives
Demonstrate the working of business-to-business electronic payments
Evaluate the various categories of EPS
Identify and arrange the steps in third-party processing
Discuss the concept of payment gateways
9.2 B2B Electronic Payments

Electronic Payment Systems are becoming central to e-commerce as companies
look for ways to serve customers faster and at a lower cost. EPS is being used
nowadays in banking, retail, health care, online markets, and even in government
transactions. Looking back it can be said that research in electronic payment
(e-payment) systems can be traced back to the 1940s. However, it was only in
the late 1970s that the first applications and credit cards materialized. In the
beginning, this upcoming electronic payment system was known as electronic
funds transfer (EFT). It was defined as: Any transfer of funds initiated through
a telephone instrument, electronic terminal, or magnetic tape or computer, so
as to authorize, order, or instruct a financial institution to credit or debit an
account.
Computer system and satellite communication are employed to transfer,
to supply financial assets or money in EFT. Thus, EFT stands in contrast to
conventional money and payment modes that rely on physical delivery of cheque
or cash.
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Types of Electronic Payment Systems (EPS)
There are three main categories of EPS.

1. Banking and Financial Payments
Large-scale or whole payment (e.g., bank-to-bank transaction)
Small-scale or retail payment (e.g., ATM)
Home banking (e.g., bill payment)
2. Retail Payments
Credit cards (VISA or Master cards)
Private label credit/debit cards (e.g., JC Penny cards)
Charges cards (e.g., American Express)
3. Online e-commerce Payments
This category is again divided into two types:
(i) Electronic token-based payment system
Electronic cash (e.g., DigiCash)
Electronic cheques (e.g., NetCheque)
Smart cards or debit cards (e.g., Mondex e-currency cards)
(ii) Credit card-based payment systems
Encrypted credit cards (www form-based encryption)
Third-party authorization number (e.g., First Virtual)
9.2.1 Electronic Token-based Payment System
Earlier, token as a form of monetary instrument was available. Now, electronic
token (e-token) in the form of electronic cash/cheque has been developed. It is
recognized as equivalent to cash and is backed by banks.
Types of electronic tokens: There are three types of e-tokens.
(a) Type 1- In this type of electronic business deal, the cash transaction is
completed with the exchange of electronic currency. Electronic cash
(e-cash) is an example of online currency exchange.
(b) Type 2 Debit or prepaid: In this type of transaction, users have to pay in
advance for any product or services. Smart card and electronic purses
are examples of prepaid payment system. Delhi Metro has introduced
smart card for its travellers.
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(c) Type 3Credit or Postpaid: In this type of transaction, a central server

verifies the customer and checks with the bank whether funds are sufficient
before any interchanges are made. Credit card/debit card and electronic
cheque are examples of postpaid mechanism.
1. Electronic Cash
Electronic cash (e-cash) is a form of electronic payment system based on
encryption. This means it is a secure payment system. Before a product is
bought or services availed cash has to be obtained from a currency server. The
safety of e-cash is ensured by digital signature.
How to purchase e-cash

The buying of e-cash from an online currency server (or bank) involves two
steps:
(a) Establishing an account
(b) Keeping an adequate amount of money in the bank to back the purchases
Currently, in most e-cash trials, all customers must have an account with
a central online bank. Transactions must be available to access and pay for
foreign services or national services. To maintain this type of access, it has to
be backed by many banks. Also, e-cash should be accessible in many currencies
in different banks. A service provider of one country must be able to accept
tokens of various currencies from the other countries. The following points will
make you understand the working of e-cash.
The user of e-cash can only operates this account with a bank if that
bank has the facility to offer e-cash.
The customer applies for the amount and denomination of e-cash that
he/she needs. This amount is debited from the customers account.
To digitally sign the note for the given amount, the bank uses its private
key and sends the note back to the customer. In practice, the currency
server issues a Bank Note with a serial number and the amount
remitted to the customer.
The bank uses a pair of keys for unlocking and locking funds.
For encoding a message into a cipher text, a locking key is used.
While the key that encodes is kept private, the key that decodes is
made public.
The bank gives to all its customersboth sellers and buyersits public
key. This helps the customers to decode any message or currency
encoded with the banks private key.
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When the user has the e-cash made available to him, he signs the ecash
by using his key (and can also provide it to anyone if he wants)
The original number is masked or the note is blinded when the ecash
software prepares a note.
A database of spent notes is maintained by the central bank.
7. Credit
Merchant a/c
6. Return
e-Cash
3. Send
e-Cash
Currency
Server
Consumers
Bank
Merchants
Bank
Consumer
Merchant
1. Request
to obtain
2. Transfer
Money
4. Send e -Cash
5. Delivery Goods
Figure 9.1 Working of e-Cash
In e-cash, transaction takes place in three steps as follows:

Step - 1: Getting electronic cash
(a) The consumer requests his/her bank to transfer money to the currency
server to get e-cash.
(b) The consumer bank transfers money from the consumers account to the
currency server.
(c) The e-mint sends e-cash to the consumer. The consumer receives his/
her cash.
Step - 2: Purchasing with electronic cash
(a) The consumers select the goods and transfer the e-cash to the merchant.
(b) The product is made available to the customers by the merchant.
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Step - 3: Redeeming cash by the merchant

(a) The merchant may send the e-cash to its bank and the bank in turn
redeems the money from the currency server.
(b) The currency server transfers money to the merchants bank for crediting
the merchants account.
Currency Server
The currency server is a special term used in EPS. The customer and the
merchant can exchange the different currencies depending upon the machine
used. Currency server can be a type of ATM machine, POS (Point of Sale)
terminal and card reader.
Properties of e-cash
The following are the four properties of e-cash:
(a) Monetary value: Although one bank creates e-cash but other banks accept
it.
(b) Interoperability: E-cash is negotiable as payment for paper currency, goods
and services.
(c) Retrieval and storage: The other quality of e-cash is that it is storable and
retrievable.
(d) Security: E-cash is not easy to copy.
Advantages of e-cash
E-cash is best suited for small transactions.
Authentication is not an issue. Who pays is not important as long as the
merchant gets his payment.
E-cash can be issued in very small denominations that can be used to
pay for small transactions.
The low cost of e-transactions makes it feasible for merchants to charge
small amounts without losing profit.
2. Electronic Cheques
Electronic cheque (e-cheque) is a form of e-token. E-cheque is planned to accept
individuals or a group who prefers to pay on credit or through some method, but
not through cash. An electronic cheque has all the same features as a paper
cheque. It functions as a message to the senders bank to transfer funds, the
message is given to the receiver, who in turn, endorses the cheque and presents
it to the bank to obtain funds.
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Working of e-cheques
Figure 9.2 shows the working of e-cheques.
7. Forward
Cheque
6. Forward
Cheque
5. Forward
to bank
3. Validate
Cheques
1. Accesses Server and Presents Goods
Consumers Bank Merchants Bank
Consumer
Browser
Clearing House
Merchant
System
4. Closes Transaction
2. Selects goods and pays e-Cheque
8. Account
Update
Figure 9.2 Working of E-Cheques
Step - 1: Purchasing goods

(a) The consumer accesses the merchant server and the merchant server
presents its goods to the consumer.
(b) The consumer selects the goods and purchases them by sending an
electronic cheque to the merchant.
(c) The merchant may validate the electronic cheque with its bank for payment
authorization.
(d) Assuming the cheque is validated, the merchant closes the transaction
with the consumer.

Step - 2: Depositing cheques at the merchants bank
(a) The merchant electronically forwards the cheque to the bank.
(b) The merchant bank forwards the e-cheque to the clearing house for
cashing.
(c) The clearing house with the consumer bank, clears the cheque and
transfers the money to the merchants bank, which updates the merchant
account.
(d) The consumers bank updates the consumer with the withdrawal
information.
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Advantages of Electronic Cheques

(a) It is similar to traditional cheques.
(b) E-cheques are much faster than e-cash, as they use conventional
encryption unlike public and private keys used in e-cash.
(c) The risk is taken care of by the accounting server, which will guarantee
that the cheque would be honoured.
The following two systems provide electronic cheques for online payment:
(a) Financial Services Technology Corporation (FSTC)
(b) Cyber Cash
FSTC system
The Financial Services Technology Corporation (FSTC) is a consortium of banks
and clearing houses that has designed the electronic cheque. The model is
very similar to the traditional paper cheque. The electronic cheque system uses
digital signature for signing and endorsing. FSTC offers users the choice of
payment instruments that allow them to designate an electronic cheque as a
certified cheque or an electronic charge card slip for greater flexibility.
Electronic cheques can be delivered either by direct transmission over a
network, or by e-mail. In both cases, the existing banking channels can clear
payments over the network. The whole system is integrated with the existing
banking infrastructure and the Internet. FSTC plans for electronic cheques
including transfer and transactions involving the National Automated Clearing
House Association for transferring funds between banks. Businesses can also
use the FSTC scheme to pay for invoices received from other businessmen.
Advantages of FSTC
FSTC system has a variety of payment options using a single interface
that gathers all transactions into a single account log.
It is not necessary to deal with a number of financial institutions to make
these different types of payments. The consumer has to deal only with his
bank.
Cyber cash electronic cheque
Cyber cash is an extension of a wallet for credit cards. Unlike the cyber cash
credit card system, cyber cash will not serve as an intermediate party for
processing cheques. Instead, these functions will be handled directly by banks.
The cyber cash electronic cheque system does not provide multiple payment
options.
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3. Smart Cards
Smart cards, containing microprocessors, are able to hold more information
than cards based on the traditional magnetic strips. They help the cardholder to
perform operations, especially of financial nature. Most of these methods are
known as stored value cards or electronic purse system. Units of prepayment
or currency value are electronically stored on an IC (integrated circuit) chip
embedded in these cards.
There are two types of smart cards, (a) relationship-based smart credit
card and (b) electronic purses.
(a) Relationship-based smart credit card
As you must be aware, smart credit card is based on some kind of relationship
between a cardholder and an organization, such as between Delhi Metro and
its commuters or between the users of toll bridges or highways, and the company
that has built them. Financial institutions also give enhancement on existing
card services or provide new services to their customers through the smart
card. Relationship-based smart credit card offers consumers the following
options:
On a smart credit card a customer can access many accounts, such as
credit, debit, investments or stored value for e-cash.
There are multifarious uses of smart credit card, such as payment of bills,
access to cash, or funds transfer for selected accounts, etc.
Smart credit cards provide access to ATMs, a screen phone, a PC, or
interactive TVs anywhere and at all times.
(b) Electronic purse and debit cards
E-purse is a wallet-size smart card with programmable microchips that store
monetary value in the form of money. The electronic purse works in the following
manner:
After the purse is loaded with money at an ATM or through the use of an
inexpensive special telephone, it can be used to pay for candy, for instance, in
a vending machine equipped with a card reader. The vending machine is
authentic and there is enough money available for a chocolate bar. The value of
the purchase is deducted from the balance on the card and added to an e-cash
box in the vending machine or ATM machine. When the balance in the electronic
purse is empty, then the purse can be recharged with more money.
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9.2.2 Credit Card-based Payment Systems

So far, we have seen the problems associated with e-cash and electronic
cheques. The credit card payment system on the Internet provides one possible
time-tested alternative. When a customer buys a product or avails a service,
the details of the credit card is given to the seller of goods or to the service
providers involved. The credit card provider makes the payment.
The credit card transaction simply requires that the consumer has a
legitimate credit card number and expiration date while placing an order. This
information has been provided through standard Internet options like e-mail/
SMS. Credit cards use personal information number (PIN). The pin is a secret
code that the consumer must enter while using the credit card online. As such,
it prevents the misuse of the card in case it is stolen. We can divide the credit
card system into three basic categories:
(a) Payment made by simply furnishing the details of the credit card
(b) Payment made by providing the encrypted details of the credit card
(c) Payment made on the basis of verification by a third party
(a) Payment using plain credit card details
In plain credit card payments, unencrypted information is exchanged through
the Internet or telephone lines. However, this system provides a low-level security
as any snooper can read a credit card number, and programs can be created to
scan the Internet traffic for credit card numbers and send the numbers.
Authentication is also a serious issue with the plain credit card system. Since in
this system, it is the responsibility of the seller or service provider to make sure
that the person using the credit card is its legitimate owner. Without the help of
encryption, it cannot provide authentication, and, therefore, this system is not in
use.
(b) Payment using encrypted credit card details
In this type of credit card system, the credit card data is encrypted and fed into
a browser or any other e-commerce devices and safely sent through the network
from the buyers to the sellers. This provides safety, privacy and security as
encrypted information is transferred over the public network.
(c) Payment using third party verification
This credit card system uses a third party for security. An organization that
gathers and allows payments from one client to another is known as third party.
After a lapse of sometime, the transaction of one credit card for the whole
accrued amount is completed.
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Working of encrypted credit card system

A consumer presents his credit card information along with his
authentication signature (or PIN number) to a merchant server.

The customers identity as the proprietor of the credit card account is
authenticated by the merchant server.
Then the information about the credit card charge and signature to its
bank or online credit card processors is represented by the merchant
server.
The information to the customers bank for authorization approval is further
represented by the bank or processing party.
Finally, the credit card data, charge authentication, and authorization to
the merchant is returned by the customers bank.
Consumer Merchants Server
Consumers
Bank
On-Line Credit
Card Processors
Send encrypted credit card
number
Send
Information
Verify
Authorize
OK
Authentication
of fund
Monthly
purchase
statement
Figure 9.3 Working of an Encrypted Credit Card
Activity 1
Research on the Net and prepare a list of early credit cards that were in the
market. Also, make a note of the conditions that were to be fulfilled for
availing credit card services at that time.
Authorize
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(a) EPS is bound by regional boundaries.
(b) E-cash is an example of online currency exchange.
(c) Cyber cash electronic cheque system does not provide multiple
payment options.
(a) The transfer of electronic money between financial institutions over
a secure private network is called________.
(b) The safety of e-cash is scrutinized by _______.
(c) _______is a consortium of banks and clearing houses that has
designed the electronic cheque.
(d) The two types of smart cards are______ and_______.
9.3 Third-Party Payment Processing
Third-Party Processors: Credit Cards

In a third-party credit card payment system, consumers have to be registered
on the Internet with a third party to verify electronic microtransactions. It is different
from e-tokens in the following ways:
It depends on existing financial instruments.
At least one additional party has to be involved online.
Sometimes, it has more than one party to ensure extra security.
First Virtual (http://www.fv.com/) and Open Payment Market (http://
www.openmarket.com) are companies, which provide third-party payment
services. These companies have links with credit cards, banks, processing
agents, and the Internet. Payment can be made by credit card or by debiting a
demand deposit account via the automated clearinghouse. These companies
are also called online third-party processors (OTPPs). Consider the following
points to understand the working of OTPPs:
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(i) The customer has to fill a registration form to get an OTPP account number.
This gives the OTPP a profile of the customer, backed by a financial
instrumentthe credit card.
(ii) If a customer wants to purchase anything online, the customer requests
the item from the merchant by giving him the OTPP account number.
(iii) Either the customer types in the information about his/her account or he/
she can also as a routine authorize the merchant via browser settings to
access his/her OTPP account and bill him.
(iv) The merchant contacts the OTPP payment server with the customers
account number.
(v) The OTPP payment server authenticates the customers account number
for the vendor and checks for adequate cash.
(vi) The OTPP payment server sends an automatic WWW from the electronic
message or a simple e-mail to the buyer. The buyer responds to the form
or e-mail in one of the three ways: a) Yes, I agree to pay b) No, I dont
want to pay c) Fraud, I never asked for this.
(vii) If the customer sends a Yes to the OTPP payment server, the merchant
is given information and the customer is permitted to download the item
or material.
(viii) Until it gets authentication of purchase close, the OTPP does not debit
the buyers account. It is done so that the buyer cannot deny the payment.
To use this system, both the parties customers and merchants must be
registered with the OTPP. All the information that is transferred over the public
network must be in encrypted form. This system uses a two-key serverone is

the merchant server and the other is the payment server. Users first create an
account with the payment server. The customer uses this browser and makes a
purchase from a merchant server by clicking on a payment URL, which is
attached to the product on a www page. Payment URLs send the encoded
information to the payment server. The payment server verifies the customer by
asking for his account number. Once the customer is authenticated, the payment
is automatically processed. All transactions are recorded in the customers online
statement.
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Merchant
Consumer
Client
Browser
Mercha
Server
nts
Payment
Server
Online third-party
processor with links
to multiple payment
systems
Figure 9.4 Third-Party Payment Processing
Certificates Authority
The Certificates Authority (CA) issues a digital certificate to companies and
organizations that are accessible via the Internet. They are issued for a certain
period of time and are used as a guarantee of the security of a website. It is also
referred to as a reliable third party.
CAs are features of numerous public key infrastructure (PKI) plans. There
are several profitable CAs that take payments for their services. There are also
quite a few providers providing free digital certificates to the public. Usually,
governments and institutions have their own CAs.
CAs issue digital certificates that consist of the characteristics of the owner
and the public key. The corresponding private key is not made accessible publicly,
but kept covert by the end-user who made the key pair. The CA also confirms
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the certificate that the public key enclosed in the certificate is connected to the
person, organization, server or other body noted in the certificate. If the user
has faith on the CA and can confirm the CAs signature, then he can also confirm
that a certain public key does in fact belong to whoever is acknowledged in the
certificate.
Digital Certificate
A digital certificate is called an electronic identity card and is used for establishing
the users credentials when conducting transactions over the Web. The digital
certificate is defined as a method of verifying authenticity electronically. The
digital certificate is equivalent to real identification, such as a drivers license.
Different certifying authorities provide it. Digital certificates are used to confirm
that a website, or a visitor to a website, is the entity or person they declare to be.
They are like an electronic testimonial issued by a certification authority to
ascertain the identity of an organization when doing business dealings on the
Internet.
Contents of digital certificate
A digital certificate includes:
Holders name, organization, address
Name of the certificate authority
Public key of the holders for cryptographic use
Time limit (these certificates are issued for a period of six month to a
year)
Digital certificate identification number
Digital certificate contains a public key employed for encrypting
communication and digital signatures. It also contains the digital signature of
the certificate-issuing authority so that a receiver can confirm that the certificate
is authentic. Some digital certificates conform to a standard, X.509. Digital
certificates can be held in reserve in registries so that verifiers can look up other
users public keys.
Activity 2
Find out the online third-party processor in India and highlight its role.
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(a) Companies that provide third party payment services are called online
third-party processors.
(b) Digital certificate contains a public key employed for encrypting
communication and digital signatures.
(a) __________is an example of companies that provide third-party
services.
(b) ______issues a digital certificate to companies and organizations
that are accessible via the Internet.
9.4 Electronic Payment GatewaySecurity Standard for

Electronic Payment System
A secured payment transaction system is of critical importance to e-commerce.
Without standard security, you cannot assume the success of e-commerce,

hence, there are two common standards used for a secure electronic payment
system:
1. Secure Socket Layer (SSL)
2. Secure Electronic Transaction (SET)
1. Secure Socket Layer (SSL)
Secure socket layer (SSL), is a protocol that enables data security layers between
high-level application protocols and TCP/IP. It provides:
Data encryption
Server authentication
Message integrity
Optional client authentication
SSL is layered between application protocols such as HTTP, SMTP,
TELNET, FTP and GOPHER, above the Internet connection protocol,
TCP/IP.
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E-Commerce Application
Server HTTP
TCP-based application protocol
as HTTP, SMTP, NNTP
SSL
Internet Protocol (IP)
SSL gives a security Handshake protocol to start the TCP/IP connection.

The consequence of this handshake is that the client and the server agree on
the level of security they would use and completes any verification necessities
required for the connection. After that, it is only used to decrypt and encrypt the
message stream.
Client Browser
1. Client sends connect request
2. Server sends form to client
3. User fills in the form and submits
4. Server sends form data with SSL
Web Server
SSL makes available encryption that begins a secure channel to thwart

third parties on the network from being able to interfere with and read messages
that are communicated between the client and the server. It also helps
confirmation that uses a digital signature to verify the authenticity of the server.
To offer security, the Netscape Navigator supports a new URL access method,
https, for linking to HTTP servers using SSL (that means http is a protocol that
is simply SSL underneath HTTP).
We should use https:// for HTTP URLs with SSL, whereas you continue
to use http;// for HTTP URLs without SSL, as (HTTP + SSL)= https, and HTTP
are different protocols and typically reside on different ports (443 and 80,
respectively). However, the similar server system can run boththe server and
the insecure HTTP server simultaneously. This shows that HTTP can offer some
information to all users using no security and https can provide only secure
information. As for instance, merchant catalogue can be insecure but the ordering
payment forms could be secure.
The advantage of SSL over secure HTTP is that SSL is not limited to
HTTP, but can also be used for making secure FTP and TELNET among other
Internet services. Moreover, as SSL encrypts everything, the display of complex
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pages can be slow, and, therefore, those sites that are protected often use
minimal graphics to minimize the performance impact.
2. Secure Electronic Transaction
MasterCard and Visa developed the secure electronic transaction (SET) standard
for the safe use of debit, credit, and corporate purchasing cards over the Internet.
Microsoft, GEE, IBM, RSA and VeriSign are the co-developers. The SET protocol
is a set of written standards that explain how banks, merchants, consumers
and Cybercash associations should execute the transactions of these cards
across the Internet and WWW. SET architecture includes a number of entities
such as:
Cardholder
Merchant
Acquirer
Issuer and payment gateway
Number of certificate authority
SET protocol provides the following services:
(i) Protection of the cardholders account details from both fraudulent
merchants and eavesdroppers
(ii) Non-repudiation for both the merchant and the cardholder on the
agreement of transaction
(iii) Assurance to the merchant that the payment will be sure
Suppose a consumer has a browser, such as Microsofts Internet Explorer that
is SET-enabled; and on the other hand, banks, merchants, etc. have a SETenabled
server. The following are the steps involved in the transaction:
1. The consumer would open his MasterCard or Visa bank account on his
SET-enabled browser.
2. The consumer has a digital certificate and private signing key. This
certificate is used for signing the credit card for online purchases or other
transactions.
3. The bank should have certificates from the third-party merchants. These
certificates comprise the public key of the merchant and the public key of
the bank.
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4. Over a web page, the customer places an order.

5. The merchants certificate is received by the browser of the customer and
the latter confirms it from the certificate of the merchant, the validity/
invalidity of the merchant.
6. The order information is sent by the browser after encryption with the
merchants public key, and the payment information is encrypted with the
banks public key.
7. The merchant validates the customer by examining the customers
certificate on the digital signature. This is done by referring the certificate
to the bank or third party.
8. With the banks public key, the merchant gives the order message to the
bank as well as the merchants certificate, and the customers information.
9. The bank authenticates the merchant and the message with the help of
the digital signature on the certificate along with the message and verifies
the payment part of the message.
10. The bank digitally signs and sends authorization to the merchant, who
can then fill the order.
(a) Secure socket layer provides data encryption.
(b) Set protocol ensures protection of the cardholders account details
from eavesdroppers.
(a) ___________is a protocol for giving data security layers between
high-level application protocols and TCP/IP.
(b) ________was developed by MasterCard and Visa for the safe use
of debit, credit and corporate purchasing cards over the Internet.
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9.5 Summary
An electronic payment system is an online business process that enables
fund transfer through an electronic medium such as personal computers
and mobile phones.
Nowadays, EPS is being used in banking, retail, health care, online markets
and in government transactions.
The three main categories of EPS are banking and financial payments,
retail payments and online business payments.
The tokens of yester years have been replaced by electronic tokens such
as e-cash and e-cheque. E-tokens are of three typescash or real-time,
debit or prepaid and credit or post-paid.

The electronic cheque is designed by the Financial Services Technology
Corporation (FSTC), which is a consortium of banks and clearing houses.
The third-party credit payment systems depend of existing financial
instruments and at least one additional party has to be involved online.
The two common standards used for a secure electronic payment system
are the secure socket layer (SSL) and secured electronic transaction
(SET).
9.6 Glossary
Electronic payment system: An online business process used for fund

transfer through an electronic medium
Electronic cash: A form of electronic payment system based on encryption
E-purse: A wallet-size smart card with programmable microchips that
store monetary value in the form of money
Credit card transaction: Requires that the customer has a legitimate
credit card number and expiration date while placing the order
Third party: An organization that gathers and allows payments from one
client to another
Digital certificate: A method of verifying authenticity electronically
Secure socket layer: A protocol for giving data security layers between
high-level application protocols and TCP/IP
E-Commerce Unit 9

1. Explain the concept of business-to-business electronic payments.
2. What is electronic cash? Explain the working of e-cash.
3. What are smart cards? Explain the different types of smart cards.
4. Diffrerentiate bwtween the different types of credit card-based payment
systems.
5. Identify and arrange the steps in third-party processing.
6. Describe the concept of payment gateways.
9.8 Answers
1. (a) False; (b) True; (c) True

2. (a) electronic payment system; (b) digital signature; (c) The Financial
Services Technology Corporation (FSTC); (d) relationship-based smart
credit card, electronic purses
4. (a) First Virtual (http://www.fv.com/); (b) Certificates Authority
6. (a) SSL; (b) Secure Electronic Transmission (SET)

E-Commerce Unit 9
References
1. Laudon, Kenneth. C. Traver and Carol Guercio. 2002. E-Commerce:
Business, Technology, Society. MA: Addison Wesley Publishing Company.
2. Tan, Margaret. 2004. E-Payment: The Digital Exchange. Singapore:
Singapore University Press.
Unit 10 Enabling Technology of

World Wide Web
Structure
10.1 Introduction
Objectives
10.2 Internet Services
10.3 Internet Software
10.4 Summary
10.5 Glossary
10.7 Answers
References
10.1 Introduction
The previous unit discussed e-payment systems, which is just another online
facility that makes payments convenient for online buyers. All these facilities
make the Web even more popular. In fact, it is impossible to think of life without
the Web. So, what is the Web? This unit will give you the answer.
The World Wide Web (www), popularly referred to as the Web, is a
network of millions of servers, hosts and users, and is one of the most popular
services on the Internet. It is based on online web pages, which can be defined
as a collection of texts, images, videos and sound. Web pages stored on the
World Wide Web are accessed through an interactive software called Web
browser. Mozilla Firefox, Internet Explorer and Google Chrome are some popular
Web browsers. These web pages are written in HTML or Hyper Text Markup
Language (HTML). HTML is a script-based language that is used extensively
for publishing information on the Web. Hypertext is similar to normal text, the
difference being that it is linked to some other text, page or information content.
Entire documents on the World Wide Web are accessed through a standard or
protocol. Hypertext Transfer Markup Language (HTTP) is a commonly known
transfer protocol used for transferring hypertext documents from a host to a
client computer. You can say that the World Wide Web is a distributed hypermedia
systema system where information resides on multiple websites or servers.
Therefore, while browsing the Internet, you can see the links from one document
to another and from one site to another.
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Almost all the protocols available on the Internet are accessible on the
Web. These protocols include e-mail, File Transfer Protocol (FTP), Gopher,
Telnet, and so on. The World Wide Web has its own protocolHTTP. The
World Wide Web provides several Internet-based client/server applications, such
as www, e-mail, File Transfer Protocol (FTP), Chat, UseNet, Telnet and
Newsgroups. Some popular services are explained in the following sections.
Objectives
List the services that are available on the Internet
Summarize the importance of the software that helps you to connect to
the Internet
Describe the concept of a search engine
Identify and list the popular and commonly used search engines
10.2 Internet Services

You are all familiar with the Internet (or Net) and must be regular users of the
following services withoutprobablyknowing its technical aspects. This section
will explain the following services that are available on the Net:
World Wide Web
E-mail
File Transfer Protocol
Telnet
Web Chat
Online Service
Instant Messaging
10.2.1 World Wide Web
According to Wikipedia, the World Wide Web is a system of interlinked hypertext
documents accessed via the Internet. You can use a Web browser to view
texts, images, videos and multimedia on web pages and navigate between them
using hyperlinks.
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You can view a Web page by following these steps:

Step 1: First type the URL of the page you wish to view, into a Web browser
or follow a hyperlink. In order to reach the desired page, the Web
browser sends out a series of communication messages. Once the
requested information has been located, it is displayed on the screen.
Step 2: The Web browser requires an IP address to establish contact with
the Web server and send data packets to it. This IP address is
obtained by converting the server name keyed in as part of the URL
using the global, distributed Internet databasethe domain name
system, or DNS.
Step 3: To retrieve the information requested for, the browser sends an HTTP
request to the Web server at the IP address derived from the server
name provided in the URL. Normally, first a request is sent for the
HTML text on the requested page, which is immediately parsed by
the browser. Once this is done, fresh requests are made for the
images or other files that may be part of the particular page. The
popularity of a website is measured by the number of page views or
hits or file requests made.
Step 4: After the requested files are received from the Web server, the
browser creates a Web page according to the specifications provided
by its HTML, Cascading Style Sheet (CSS) or any other Web
language. After the text has been formatted, other features such as
images and music are added on to create the web page you see on
your screen.
A majority of web pages are linked to other Web resources through
hyperlinks. These resources may be other pages containing related information,
downloads, definitions and documents. The Web of information, thus, is this
entire collection of data/information interconnected via hyperlinks.
(Source: Adapted from Wikipedia)
10.2.2 Electronic Mail

Electronic mailor e-mailhas been around from even before the Internet.
Wikipedia explains that e-mail is any method of digitally creating, transmitting
or storing human communication that is primarily textual. A host of electronic
mail systems have been designed in the past, but there were problems with
respect to compatibility and interoperability. However, with the proliferation of
the Internet since the 1980s, major efforts have been madeand successfully
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at standardization. Today, a single standard based on the Simple Mail Transfer

Protocol (SMTP) is used. SMTP was first published as Internet Standard 10
(RFC 821) in 1982.
MIT (Massachusetts Institute of Technology) was one of the first to let

many users to simultaneously log into the IBM 7094 from remote dial-up
terminals. They could also store files online. Users now had the capability to
share information in new ways. E-mail was first started in 1965 to enable users
of a time-sharing mainframe computer to communicate with each other. However,
e-mail soon became network e-mail. By 1966, messages could be exchanged
between different computers.
The development of e-mail was influenced to a great extent by the
ARPANET computer network. The creation of ARPANET in 1969 made a very
significant contribution to the development of e-mail and one report indicates
experimental inter-system e-mail transfers. In 1971, Ray Tomlinson started the
use of the @ sign which separates the user name from their machine name.
Let us now understand how an e-mail system works. The model on which
a modern e-mail system works is the store-and-forward model. E-mails are
rarely transmitted directly from one user to another. E-mail computer server
systems accept, store and forward mail on behalf of users who connect up from
their personal computers or any other network-enabled device.
Originally, e-mails could only send or receive text messages composed in
the ASCII character set. With the advances in technology, now transmission of
any media is possibleincluding attachments consisting of audio and video
clips.
10.2.3 File Transfer Protocol

File Transfer Protocol (FTP) is a generic term for a cluster of programs used to
transfer files or data from one computer to another. It is a network protocol that
allows an FTP client to connect to an FTP server and manipulate files on that
server. Therefore, this protocol can be used to exchange and manipulate files
across computers.
FTP sites are normally used for uploading and downloading files to a
central server computer before they are distributed. Usually, heavy files are
transmitted in this manner because there may be restrictions on the size of files
that can be transmitted as attachments of e-mails.
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Special FTP software is required to connect to an FTP site and download

and upload files. Both commercial and free FTP software programs are available.
The following information is required to connect to an FTP site:
1. Server address or hostname: The network address of the computer
you want to connect to; for example, FTP.MYFTPSITE.COM.
2. Username and password: These are the credentials you use to access
the specific files on the computer you wish to connect to.
10.2.4 Telnet
Telnet (Telecommunication network) is a network protocol used on the Internet
or in local area network (LAN) connections. It was developed in 1969 and is one
of the first Internet standards. With Telnet, a user can get access to a commandline
interface on a remote machine.
Telnet is a software which implements the client part of the protocol. Telnet
clients are available for almost all platforms. However, because of security issues
with Telnet, its usage has gone down considerably.
Example: Take the case of a person who works in the Mumbai office of a firm.
He is in Delhi on official work and wants to log into his computer in the Delhi
office. He can do this using the Telnet protocol, as shown in Figure 10.1.
Client Side Server Side
TCP/IP TCP/IP
Request to
Server
Request received
from client
Figure 10.1 Remote Login through Telnet
The Telnet client computer must run a Telnet client application and the
Telnet server must run a Telnet server application. The users computer, which
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initiates the connection, is referred to as the host computer or telnet client, and
the machine being connected to, which accepts the connections, is referred to
as the remote login computer or Telnet server.
10.2.5 Web Chat
Web chat allows users to communicate with one another in real time through
Web interfaces. A Web browser is the only requirement to be able to chat on
the Web.
The history of Web chatting is closely linked to the evolution of Web
technology. Earlier, chat sites consisted of simple interfaces that were dynamically
generated HTML pages. The pages could feature a choice of fonts, colours,
images and links to give it a lively and vibrant look. But HTML pages came with
their disadvantages as well, the main one being their interactivity. Every HTML
message required a form to be submitted and a page to be loaded. As a result,
there was a waiting period before each message could be sent. There were
other problems too. There were delays in receiving messages and page flicker
because of frequent page reloads. As a result, the use of HTML chat sites
reduced.
These problems with HTML led to the development of other technologies
for Web chatting. Java applet technology was introduced in 1995. Java was
suitable as an interface for chatting because of its advanced network and
graphical capabilities. But Java too had its own problemslong initial page loading
time. However, despite this problem, this technology has worked well and scaled
well.
Newer technologies have been in use since 2005. These include Ajax
and Flash, and are used for the new chat systems such as Buzzen Chat. These
technologies are trendy and their strength is in their graphical and usability
features. Although these technologies are not error-free either, their strengths
are likely to see them being used extensively.
10.2.6 Online Services

The first commercial online services became available in 1979. Anyone who
had a modem and communicating software could chat and e-mail; or access
news, financial and stock market information, various forums, bulletin boards
and other general information. These services used text-based interfaces and
menus. The problem with these services was that subscribers could exchange
e-mails only with those who subscribed to the same service.
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These commercial services used either pre-existing packet-switched (X.25)

data communications networks or the services own networks. Users were
required to dial into local access points and then connect to remote computer
centres where information and services were located. Subscribers were charged
by the minute for their usage and there were separate day-time and evening/
weekend rates. Here, it was similar to telephone services of that time.
As technology advanced and computers began to support colour and
graphics, online services also gradually developed to offer framed or partially
graphical information displays. In the early 1990s, graphics-based online services
such as Playnet Prodigy, MSN and Quantum Link were developed. These online
services were in use before the Web browser, was developed, but were less
popular.
Beginning in 1992, the Internet was open to commercial entities. Earlier
only government, academic and corporate research settings had access to the
Internet. The first online service to offer Internet access was DELPHI, which
had earlier developed TCP/IP access.
The invention of the World Wide Web in 1993 brought about a sea change
so far as online services were concerned. The Internet very quickly developed
into a powerful resource for information and communication for consumers and
businesses. Here was a means of communication (e-mail and free, independent
websites) that practically cost nothing! This development turned the earlier
business model that had supported the rise of the early online service industry,
on its head.
CompuServe, BIX, AOL, DELPHI and Prodigy gradually added access to
Internet e-mail, Usenet newsgroups, FTP and to other websites. Simultaneously

they moved from usage-based billing to monthly subscriptions. On the other
hand, companies that had been paying service providers (such as AOL) to host
their information and early online stores now began to design and develop their
own websites. This seriously affected the economics of the online industry. Those
who could switch over to Internet-basedand later Web-based online services
survived.
A new class of online service providers emerged to provide access to the
Internet and offer a slew of Internet-based services. As the popularity of the
Internet increased, service providers changed their technologies and commercial
terms in order to increase their customer base. Internet connectivity, which was
earlier through telephone and modem, later offered high-speed and broadband
access through cable and phone companies. Today, wireless access is also
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available to subscribers. The charges for these services have also changed.
Many ISPs now offer flat-fee, unlimited access plans.
Prodigys (a leading ISP in the US) Chief Technical Officer had said in
1999, Eleven years ago, the Internet was just an intangible dream that Prodigy
brought to life. Now it is a force to be reckoned with.
Online service interfaces
The first online service utilized a simple text-based interface. The content that
the user could access was predominantly text and users entered their queries
and choices through a command prompt. So, any computer with a modem and
terminal communications program could access these online services. Gradually,
graphics user interfaces (GUI) began to be developed. The early GUI-based
interfaces offered only limited graphics on their sitesmainly simple icons and
buttons and text. But with improvement in modem speed, more complicated
graphics could be offered by the service providers. Today, images, music, text
just about anything one could wantis available and offered on the Net.
Common resources provided by online services
Resources and online services available include:
Airline reservations
Online games
Message boards
E-mail
Chat services
File download services
Online dictionary and encyclopaedia
Current news and weather
Online games
10.2.7 Instant Messaging

Instant messaging (IM), as explained by Wikipedia is, A form of real-time
communication between two or more people based on typed text. The text is
conveyed via devices connected over a network such as the Internet.
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The important features of IM are as follows:

IM is different from e-mailing. Chatting and messaging happen in real
time before the users eyes. Some systems even allow sending offline
messages to people not currently logged on.
It allows effective and efficient communication, providing instant
acknowledgment or reply. IM provides other additional feature, such
as use of webcams (to see the other participants) and free Internet
telephony.
IM allows a user to save a conversation for later reference.
In early instant messaging programs, each character appeared on the
screen as they were typed. The UNIX talk command shown in the screenshot
above was popular in the 1980s and early 1990s.
In the late 1980s and early 1990s, the Quantum Link (Q-Link) online service
for Commodore 64 computers offered user-to-user messages between currently
connected customers and they called it On-Line Messages (or OLM for short).
America Online (earlier Quantum Link) has a similar product to offer, called
AOL Instant Messenger (AIM). Q-Links OLM was an early GUIless developed
than the Unix, Windows and Macintosh based GUI messaging programs. Also,
OLMs were Plus Services, that is they charged an extra per-minute fee over
and above the monthly access cost.
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The mid 1990s saw the launch of new GUI-based messaging clients led
by PowWow (then ICQ). In 1997 came AOL Instant Messenger. A few years
later ICQ (then owned by AOL) was awarded two patents by the US Patent
Office for instant messaging services. During the same period, Yahoo Excite,
Ubique and MSN began to develop their own messaging applications which
used their own client and proprietary protocol. This posed a problem for the
usersif they wanted to use multiple networks they would have to run more
than one client applications.
Jabber, an open source application which was based on an open standards
protocol, was launched in 2000. This technology enabled Jabber servers to act
as gateways to other instant messaging protocols. The need for running multiple
clients was thus reduced. Multi-protocol clients can use any of the popular IM
protocols by using additional local libraries for each protocol.

Many instant messaging services now offer value-added features like
videoconferencing, Voice over Internet Protocol (VoIP) and Web conferencing
services, which integrate videoconferencing and instant messaging capabilities.
Some newer instant messaging companies offer desktop sharing, IP radio and
IPTV to the voice and video features.
The well-known Instant Messaging icons and symbols are shown here;
identify each one of them. Which one do you use?
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Activity 1
Prepare a chart showing how Internet services have changed the way people
communicate the world over.
1. State whether the following are true or false.
(a) You can use a Web browser to view texts, images, video and
multimedia on web pages.
(b) FTP is a generic term for a cluster of programs used to transfer files
or data from one computer to another.
(a) A majority of web pages are linked to other Web resources
through_______.
(b) _______ allows users to communicate with one another in real time
through Web interface.
(c) The first online service to offer Internet access was ______.
(d) ______ allows a user to save a conversation for later reference.
10.3 Internet Software

There are three types of Internet software which help to connect to the Internet.
1. Protocol: Transmission Control Protocol/Internet Protocol (TCP/IP) is the
basic communication protocol which enables users to communicate over
the Internet. It is the group of communication protocols used to connect
hosts on the Internet.
2. Dialer software: This software is given by an Internet Service Provider
(ISP). It identifies a users name and telephone number through a modem.
After successful identification, the modem connects the computer to the
Internet.
3. Web browser: A Web browser accesses content on the Web and then
displays it on a computer screen. Examples of Web browsers are Internet
Explorer, Mozilla Firefox and Google Chrome, which allow users to view
content on the Web.
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10.3.1 Internet-Related Terminology

In this section the most commonly used terms with respect to the Internet are
discussed:
(i) Web Page
A web page is combination of an electronic document or content which is
written in a Web language such as Hyper Text Markup Language (HTML).
Web pages are linked to each other through hyperlinks.
(ii) Website
A website is a collection of web pages which are linked to each other. To
open any website, you have to enter the Universal Resource Locator
(URL) address in the Web browser address bar.
Example: http://www.smudde.edu.in
(iii) Home Page
The home page is the first page of a website; it is the page you see the
moment you open a website. The following screenshot is the home page
of the directorate of distance education, Sikkim Manipal University.
(iv) Universal Resource Locator (URL)
Universal Resource Locator is the Web address of any resource on the
World Wide Web. It identifies the Internet application protocol, host name,
path and file name.
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(v) Uniform Resource Locators (URLs)

http://www.smude.edu.in/Pages/Welcome.aspx
URLs, or Uniform Resource Locators, are methods by which documents
or data are addressed in the World Wide Web. The URL contains the
following information:
The Internet name of the site containing the resource (document or
data).
The type of service the resource is served by (HTTP, Gopher, WAIS).
The Internet port number of the service. If this is omitted the browser
assumes a commonly accepted default value.
The location of the resource in the directory structure of the server.
Structure of a URL
The following is an outline of the most common form of a URL:
http://www.address.edu:1234/path/subdir/file.ext
|||||
|service||||
|____host______|||
|||
|port||
|fileand|
|_resourcedetails_|
Service
The above figure gives a general outline of URL structure. This outline is
followed by most, but not all, URLs. The first part is the service specifier,
(here HTTP service) which specifies the access method. Specifically this
is the part before the colon. Some examples of services are: http:,
gopher:,wais:andftp:.
Address and Port Number
The second part is usually the Internet address of the server, indicated by
the double forward slash (//). This address can also contain the (optional)
port number the service listens at. The full name is then specified by a
string like //www.address.edu:1234/, where :1234refers to the port
number 1234. If you want to use the default port number you can leave
out both the colon and the number, i.e. //www.address.edu/.
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Resource Location
The forward slash after the host and port specifications indicates the end
of the address and the beginning of the specification for the file/resource
to be accessed. This field varies depending on the service being accessed.
(vi) Hypertext
Hypertext is a form of text on a computer that leads a user to related
information on demand. Web pages can be linked together using hypertext.
Unlike traditional text which is static, hypertext makes possible a dynamic
organization of information through hyperlinks. One can design hypertext
to perform various tasks. It can link different file formats, such as text,
audio, video, image, animation, and so on. When a user clicks on it or
hovers over it, a bubble with a word definition may appear.
(vii) HyperText Markup Language
HyperText Markup Language (HTML) is the Web programming language
used to create Web documents for WWW. HTML allows you to bring
together text, images, audio and video so that they can be viewed on the
Web.
HTML is a method where ordinary text can be converted into hypertext. It
is a set of special codes included to control the layout and appearance of
the text. Technically, HTML is not a programming language. It combines
instructions with data.
HTML is the character-based method for describing and expressing
content, which can be in the form of image, text, sound or video clips.
How can you start your own HTML codes?
1. Open any editor, say Notepad.
2. Write the HTML codes.
3. Save your file with .htm or html extension (like abc.htm or
abc.html).
4. Open this file in any browser (Internet Explorer or Google Chrome).
Document tags
All HTML files should include the following tags:
HTML Tag
Head Tag
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Title Tag
Body Tag
Example of HTML coding structure
<HTML>
<HEAD>
<TITLE>.</TITLE>
</HEAD>
<BODY>
.
.
.
.
</BODY>
</HTML>
(viii) Hyper Text Transfer Protocol
Hyper Text Transfer Protocol (HTTP) is the standard protocol used for
transferring web pages across the Internet. It also supports requesting
and responding. This means a client can make a request to a server for
any website, and the server will respond to the client using HTTP.
(ix) Internet Service Provider
An Internet Service Provider (ISP) is a firm that provides Internet access
to a consumer for a fee. Incidentally, MTNL was the first Internet service
provider in India.
(x) Web Server
The Internet Web server is a computer that is connected to the Internet
all the time (24 x 7). You can access a particular website through an
Internet Web server from anywhere. In other words, a web server is a
high-configuration computer that gives responses to users requests. It
also hosts multimedia content such as web pages, etc. Figure 10.2 shows
you graphically how this server works.
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Fig 6.2 File Transfer from Web Server to Browser

Web
Server
PC
Web Browser
User Request for file
Server Response to client

browser
Welcome to
my website
Browser reads
the text sent by
server and web
page is
displayed on
clients screen
Figure 10.2 File Transfer from Web Server to Browser
(xi) Download and Upload

Downloading is a service by means of which you can transfer any content
from a Web server to a host computer.
Uploading is the reverse in order to transfer any content file from a host
computer to a Web server, you would upload the content.
(xii) IP Address
An IP address is a 32-bit number which is the unique address assigned
on the Internet. A typical IP address looks like this: 192.168.0.34. A firewall
is a software that can control traffic to and from any IP address.
(xiii) Domain Name
The string of numbers that make up an IP address can be difficult to
remember. Therefore, all servers on the Net also have names assigned
to themcalled domain name. An organization can block all access to
certain domain names or allow access only to specific domain names.
(xiv) Web Browser
A Web browser is software which provides a graphical user interface (GUI)
so that the user can navigate the Internet easily by clicking on menus,
icons or buttons, instead of using keyboard commands which are difficult
and too many to learn and remember. The two most popular Web browsers
are Mozilla Firefox and Google Chrome.
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Internet Explorer
Figure 10.3 Home Page of Microsoft Internet Explorer
Features of a Web browser

(a) A browser can handle a request for an HTML file.
(b) It maintains a history of the website visited.
(c) A browser supports multimedia data.
(d) A browser allows a user to save any collection of pages.
10.3.2 Search Engines
A Web search engine is used to search for information on the World Wide Web.
The information may include images, web pages or any type of file. Some search
engines are capable of mining data available in databases, open directories
and newsbooks. The difference between a search engine and a Web directory
is that the former is operated by algorithms or a combination of algorithmic and
human inputs, the latter is maintained by human editors.
Some popular search engines are as follows:

www.google.com
www.yahoo.com
www.rediff.com
www.msn.com
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www.ask.com
www.khojo.com
Figure 10.4 Home Page of the Google Search Engine
10.3.3 Tools for Internet Access

If you want to use the Internet, you will need the following in order to access it:
ISP
External
Modem
Internet
PC
Figure 10.5 Connecting to the Internet
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An Internet connection through a legal ISP

A modem
A computer
A sound card, graphics card, CD-Rom, speakers, etc.
Activity 2
Prepare a list of popular Web browsers.
(a) TCP/IP is the basic protocol that enables users to communicate over
the Internet.
(b) A website is a collection of web pages linked to each other.
(c) Uploading enables you to transfer any content from a Web server to
a host computer.
(a) ______accesses content on the Web and then displays it on the
computer screen.
(b) _______is a form of text on a computer that leads a user to related
information on demand.
(c) _________ is a firm that provides Internet access to a consumer for
a fee.
(d) _____is a software that can control traffic to and from any IP address.
10.4 Summary
The availability of various technologies has resulted in the growth of the

World Wide Web. Some of these services include the e-mail, Telnet, Web
chat and other online services.
Modern e-mail systems are based on a store and forward model. Originally,
e-mails could only send text messages composed in the ASCII character
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set; today, almost any media format can be sent, including attachments
consisting of audio and video clips.
File transfer protocol (FTP) is a network protocol used to transfer data
from one computer to another through a network, such as the Internet.
Telnet is another technology with which a user can get access to a
command line interface on a remote machine.
Web chat allows users to communicate in real time using easily accessible
Web interfaces. All that is required to chat is a Web browser and it gives
the user instant access.
In early 1992, the Internet was opened to commercial activities. A new
class of online service providers emerged later on to provide access to
the Internet and offer a slew of Internet-based services.
The three types of Internet software that enables a user to connect to the
Internet are protocol, dialer software and Web browser.
10.5 Glossary
World Wide Web: It is a system of interlinked hypertext documents
accessed via the Internet.
File Transfer Protocol (FTP): It is a network protocol used to transfer
data from one computer to another through a network such as the Internet.
Telnet: It is a network protocol used on the Internet or in LAN connections.
Instant Messaging (IM): It is a form of real time communication between
multiple users based on typed text which is conveyed through devices
connected over a network such as the Internet.
Hypertext: It is a form of text on a computer that leads a user to related
information on demand.
URL: It is the web address of any resource on the WWW. It identifies the
Internet application protocol, host name, path and file name.
Hyper Text Markup Language (HTML): It is a web programming
language. HTML allows users to bring texts, images, audio and video so
that they can be viewed on the Web.
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1. Explain the features of various services available on the Internet.
2. What is electronic mail? Trace its evolution.

3. What is Instant Messaging? Explain its features.
4. Write a note on the different types of Internet software.
5. What are search engines? Cite some popular search engines.
6. Identify and list the various tools required to access the Internet.
10.7 Answers

2. (a) Hyperlinks; (b) Web chat; (c) DELPHI; (d) InstantMessaging
3. (a) True; (b) True; (c) False
4. (a) Web browser; (b) Hypertext; (c) Internet Service Provider; (d) Firewall

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References
1. Schneider, Gary P., and Jessica Evans. New Perspectives on the Internet.
Course Technology, 2002.
2. Schlein, Alan M., Peter Weber, and J. J. Newby. Find It Online: The
Complete Guide to Online Research. Facts on Demand Press, 2002.
Unit 11 E-Marketing
Structure
11.1 Introduction
Objectives
11.2 Challenges of Traditional Marketing
11.3 Retailing in E-Commerce Space
11.4 Internet Marketing
11.5 Advertisement and Display on the Internet
11.6 E-Commerce for Service Industry
11.7 Summary
11.8 Glossary

11.10 Answers
References
11.1 Introduction
The previous unit discussed the technologies available on the Internet, including
e-mail, instant messaging, search engines and Internet-related software.
The world is changing every minute, every second. Change has taken
over the field of marketing too. New methods of marketing, that is, online
marketing and e-marketing have evolved. The successful harnessing of Internet
marketing has given rise to benefits such as online purchase and sale of goods
along with the generation of leads. This unit will discuss the benefits that the
Internet offers over traditional marketing. It will also talk about the advantages
that retail businesses can achieve through e-commerce and by advertising on
the Internet.
Objectives
List the challenges faced in traditional marketing
Identify and summarize the advantages of Internet marketing
Classify the types of Internet marketing
Describe the importance of e-commerce in the service industry
Discuss the effectiveness of adverstiments and displays on the Web
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11.2 Challenges of Traditional Marketing

Traditional marketing operates on the basis of the four Ps, that is, the correct
marketing mix of product, price, promotion and placement. Before launching
any product, its production and management, price, promotion, placement or
distribution, its retailing and the procedure by which it is delivered to the enduser
all need to be planned, decided and taken care of. The target customers
need to be segmented and studied so that a detailed marketing plan can be
drawn up. Then, an advertising plan is decided upon.
The challenges faced by traditional marketing are as follows:
1. Expensive Product: When a company decides the cost of a product,
it includes all expenses like product information brochure, shipping
charges, mailing and service of human resources, among others.
As a result, the cost of product is high.
2. Lack of Consumer Interaction: It is not possible for the company
to interact with the consumer because between the two, operate the
wholesaler and retailer.
3. Lack of Coordination: Sometimes, companies face some problems
in marketing activities because marketing executives, brochure
printers and advertising agencies, etc, lack coordination and all of

them cannot perform at the same time because all work has to be
passed by management, channel wise. Therefore, delays are
inevitable.
With customers being exposed to more and more brands with each passing
day, brand recall is reducing. It is difficult for consumers to make a brand choice
as all brands are as good as their competitors. This leads to a need for an allround
marketing strategy which covers all the existing modes and also aims at
constant brand recall. This is where the reach of the Web plays a significant
role.
Activity 1
Prepare a chart showing the challenges faced by traditional marketing
methods and the ways in which e-marketing can rectify such problems.
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(a) Traditional marketing operates on the basis of the four Ps.
(b) In traditional marketing, a detailed marketing plan is drawn after
segmenting and studying the target customers.
(a) It is not possible for the company to interact with the customers
because between the two operate the______and_______.
(b) With customers being exposed to more and more brands with each
passing day, _______is reducing.
11.3 Retailing in E-Commerce Space
Doing business in cyber space is advantageous to retailers in many ways. It

reduces labour costs and helps avoid expenditure on paperwork and
merchandising. It is a known fact that online transaction costs are lower. Some
of the other merits are as follows:
Better Customer Service and Satisfaction
Customer relationship management on the Net is more efficient and gathering
of information is a lot more easier. The collected information can be used for
customer service. It is easy to gain background information related to the location,
recent buys, account history and status of payment.
It is possible for customers to track their own orders, search for the nearest
outlet or find answers to their queries. Customer information and data related to
purchasing are used to guide marketing and purchasing and to improve the
quality of services.
Personalization of Services
Services are personalized and marketing is optimized. Several different
communication channels including live chat, e-mail, telephone and online FAQs
are combined to assist customer relationship management. Customers have

the option to select the method in which they want to do business with you. You
will be aware of the background of your customer, the time at which he placed
the order, the nature of his complaint, irrespective of when he/she made it.
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Reduction in Customer Service Cost

As customers are able to search for the products they want, on their own, they
are able to get exactly what they are looking for. They even check their order
status on their own. The emphasis on self-service helps reduce the expenditure
on customer service. Websites have customized display of product range with
the prices and relevant information for the selected product categories. The
content is usually available in multiple languages for the convenience of
customers.
Benefits of an Online Catalogue
Online catalogues are regularly updated with new models, products, pricing
descriptions or offers. Printing and mailing costs can be avoided and you can
indulge in short-term price promotions. Online catalogues allow interested
customers to look at the products within their specific price range. Link to
inventory allows customers to confirm the availability of products and the time
of delivery. Special customers can be offered discounts or rewards on the basis
of their online purchase history or current interest through special promotions,
free delivery offer (over a certain sales limit), coupons and frequent-shopper
points.
(a) Online transactions are always high on cost.
(b) In e-commerce, it is possible for consumers to keep track of their
orders.
(a) ________and_________related to purchasing are used to guide
marketing and purchasing and to improve the quality of services.
(b) ________enable you to avoid printing and mailing costs.
11.4 Internet Marketing

The term Internet marketing is interchangeably used for Web marketing,
e-marketing, Internet advertising or online marketing. The wide availability of
the World Wide Web allows businessmen across the world access to millions
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of potential customers. All that is required is a few clicks of the mouse. Thanks
to the Net, your products and services can be viewed or read about by many
people in different parts of the world, at the same time.
Services of professional Web marketers are available these days who

ensure that potential customers not only visit your site, but also become regular
customers.
Once you subscribe to such services, they help to market your product
through various facilities such as the Mall Linking Service. This enables the
clients site to get linked to the Internet connection of numerous other online
shopping mall service providers. They log on to the sites provided and managed
by these marketing specialists. They promote the website according to the nature
and function of search engine movements. Marketing techniques such as
Advanced Press release services, Click Exposure techniques and Advanced
Search Engine facilities are used. Click exposure techniques function through
direct targeted keyword advertising. Online marketing services target a chosen
category for advertising using effective pop-under. This is qualitative, targeted
and scaleable website traffic which can help your business to grow very fast.
In the world of advertising, Internet marketing is one of the popular sources
for promoting business, business products and services because of its ability to
reach the target audience. An online shopping website is of course an advantage
as the facility will then be open all year round and for twenty-four hours a day.
Professional Internet marketers will ensure that your business or firm appears
right on the top of important search engines and directories. A part of the role of
a professional Internet marketer is to make the website design user-friendly,
optimize the search engine, optimize the structure of the website, optimize
keyword, etc.
Electronic customer relationship management systems and management
of digital customer data are also components of Internet marketing. It intermingles
the technical and creative features of the Internet, that is, design, advertising,
development and sales. Internet marketing involves much more than mere
promotion or development of a website or a banner advertisement being placed
on a website. Internet marketing that is effective is achievable through a
comprehensive strategy. This strategy combines a firms sales targets and
business model with the function and look of its website. This way, it can focus
on its target market through correct selection of the kind of design advertising
and media.
The Internet does not suffer from any geographical constraints. It is a
useful marketing tool and allows you to advertise your products and services
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online. It does not require you to be physically present with the customer for the
sale to take place.
Before the Internet became popular, a businessman would have had to
travel abroad in search of overseas clients and to finalize transactions. As a
result, only affluent businessmen or big companies could afford foreign travels.
Now, even small-scale businessmen can attract foreign customers and interact
with prospective clients without having to travel anywhere.
Unlike the traditional forms of marketing including print and audio/video
media, the Internet offers an economical and cost-effective method of marketing.
You can get business without bothering to participate in trade fairs or shows.
The Internet enables prospective buyers to go through the product
catalogue/gallery at any hour of the day or night, at their convenience.
For a company with diverse products, advertising on radio and television
can be very constraining. The limitation is in terms of the time. In such situations,
the Internet offers freedom to display a wide range of products and give detailed
descriptions and information related to rates, size, colours, etc.
Increased sales and profits enable the website owner to recover the cost
incurred on the maintenance of the website.
It often happens that certain markets are not tapped by a seller because
he is not aware of it or is located far away from it. This drawback is taken care
of by Internet marketing. As a result, new markets have been discovered.
11.4.1 Types of Internet Marketing
There are many types of Internet marketing. Some of these are discussed as
follows:
1. Pay per click
2. Search Engine Optimization (SEO)
3. Internet auctions
4. Affiliate marketing
5. Banner advertising
6. Directory listings
7. Ethical e-mail marketing
8. Viral marketing
Let us learn a little about each of these types.
Pay Per Click: In this type of marketing, a certain amount is paid to the
search engine by the website, to ensure that the site is featured separately
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whenever keywords related to that particular sector or industry are typed

in.
Search Engine Optimization (SEO): This implies the making of a website
more search engine-friendly. As a result, whenever a user types a search
or a specific keyword, the resultant site containing the keyword or search
item will show in the top search results. To attract potential customers,
this kind of Internet marketing is perfectly suitable.
Internet Auctions: Online auctions are similar to the auctions that most
of us have seen or are familiar with. Items are put up to be sold at a

minimum price quoted by the seller. Those interested in buying start quoting
the price they are willing to pay for them. The person who quotes the
highest price is known as the highest bidder, and he gets the item. A
buyer can be from any part of the world in the case of online auctions.
Affiliate Marketing: When a firm engages other websites or firms to
market their products, it is termed as affiliate marketing. These hired firms
or websites are referred to as affiliates. It is the responsibility of the affiliates
to market the products of the firm that hired them. These affiliates may
carry or display the companys logos or banners on websites hosted by
them. Visitors who click on these banners are automatically redirected to
the sponsor companys site. For this work, the affiliate receives a
commission.
Banner Advertising: This kind of advertising involves the displaying of
banners of the advertisers on the website. Displaying the banner on the
website for a particular period of time involves a certain amount of money
to be paid by the advertiser.
Banners are designed to be visually attractive in order to get the
customers attention. The website on which the banner has been displayed
decides the kind of response it gets. However, it cannot be guaranteed
that the banner will be viewed by the prospective customers.
Directory Listings: When websites are placed in particular categories in
a directory, this service is termed as directory listings. This service can be
chargeable or provided free of cost. Yellow Pages and Yahoo are examples
of directories where such listings can be done. Therefore, Internet
marketing is a new age marketing which allows sellers with good prospects.
Internet marketing is cheaper than traditional marketing and allows even
small-scale businesses to thrive and flowish.
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Ethical E-mail Marketing: Several Web applications allow website owners

to maintain the databases of subscribers and also provide the facility of
sending personalized newsletters within no time. Usually, marketing
strategies are impersonal. E-mail marketing provides a chance to address
the recipient personally. If e-mail marketing is handled tactfully, it can be
utilized to appeal the target audiences emotions and obtain an optimistic
reaction from them. Information, about new products and launches,
seminars, up-to-date information on service workshops, etc., can be
conveyed to the subscribers with the help of e-mails
Online News Articles: Online news articles complement SEO and online
public relations. News helps spread consumer awareness and converts
the reader into a prospective buyer. This will result in an increase in the
brand value of e-commerce. Professional agencies help their clients/
website owners to prepare news articles and upload on relevant sites and
online news media.
Viral Marketing: Viral marketing is an idea that spreads and while it is
spreading, it helps to market your business. It is a phenomena that
encourage people to pass on a marketing message. Some marketing
campaigns can be huge and they use social media to achieve their cause.
They may be in the form of video clips games, images, text message. For
example, the Tamil song Why this Kolavari Di is from the sound track of
an upcoming film. It became viral on the net due to its Tanglish lyrics!
When you visit a shop, for instance, to purchase a bed, the salesman will
try to sell you matching sheets, cushions, pillows, mattresses, etc. Similarly,
on the Net, when people send e-mails, they unwittingly end up infecting
the recipient of their mail with the ads appearing at the bottom of the
message. This is called viral marketing.
11.4.2 Internet Consumer and Market ResearchNeeds of
Website Consumers
While designing a website, a company may have many objectives in mind. An
effective website would attract consumers and describe the objectives of the
company such as:
1. Creating a healthy relationship with consumers
2. Attracting consumers to the website
3. Designing an interesting website to encourage consumers to explore
4. Motivating consumers to stay on the website
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5. Advising consumers to get more information by clicking on the website

links
Needs of Website Consumers
When a companys website is designed, then it should:
1. Provide full knowledge of the products or services offered
2. Facilitate easy purchase of the products or services offered
3. Declare full information of product or service warranties, guarantees
4. Offer a complete company profile
5. Offer information related to the person responsible
There are professional agencies who help website owners examine Web
audiences by behaviour, size and demographic profile. Their custom research
and analyses can not only help a website owner measure the audience, but
also evaluate the site, track the traffic on competition's sites, evaluate the
strategies of competitors and accordingly update and develop high-quality/
effective content.
Research on consumers generally involves the following:
Identification of the audience
Segmentation of visitors to the website
Study of the level of Internet usage by visitors, whether it is light, medium
or heavy
Integration of data pertaining to consumer profiles, sales and attitudes
Comparison of online and offline performances
Study of the channels that are used frequently
Exploration of the ways in which offline and online channels can be
used together to gain an edge and increase sales
Use of custom surveys
Evaluation of customer satisfaction levels
Identification of the most effective ways in which customers can be
attracted
11.4.3 Advantages and Disadvantages of Internet Marketing
Internet marketing has its positive as well as negative aspects. Both the merits
as well as the demerits have to be understood well before a proper Internet
marketing strategy can be created.
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Advantages
The online store is open at all times, day and night. Customers from all
parts of the globe can shop at any time of the day or night.
It is the most economical way of spreading your message. Sending emails
to subscribers is a lot cheaper than posting letters to them.
Subscribers can be updated promptly through e-mails. Website visitors
can access current and updated information every time they visit the
website. Customers can be informed about promotional schemes and
sales as soon as they access their e-mails.
Online magazines/newspapers or law firms are information-sensitive
businesses. They can obtain products straight without relying on the courier
service. Products can be delivered directly to the customers without using
a courier service.
Disadvantages
Online marketing does not come without a price. The cost of offering the
product or providing the service should take into account the expenditure
on software, hardware, time, effort, website design and maintenance and
online distribution costs.
Only about 50 per cent of households indulge in online shopping. This
means that you are able to reach out only three out of six households.
The Internet is still regarded as a source of information gathering by most

customers. Of the total number of browsers who visit websites, the vast
majority motivated to purchase will probably buy in person because people
are more comfortable with live interaction during sales transactions.
Customers do not show interest in purchasing from small businesses
that have only one location.
It is very important to keep updating your site since outdated information
can result in losses.
The traditional form of old-fashioned customer service is still popular and
preferred. The majority of marketers online do not have very strong
customer service or inquiry response programmes. As a result, many
online visitors may rate a website as having poor customer service even
before actually coming in contact with the product/service provider.
Poor navigation facility also makes it difficult for visitors to search for
what they want. This happens more often on websites that are designed
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from the marketing point of view and not from the customer service point
of view.
The security of various sites is doubted by the visitors. Many visitors do
not want to risk transacting online using credit cards for fear of having
their personal/credit card information stolen.
Those visiting your site have probably been to other similar sites as well.
A purchase can be guaranteed only if they find exactly what they want.
Visitors expect some free content or special offers or bonuses.
Activity 2
Search the Web and prepare a chart showing real examples of the various
types of Internet marketing.
(a) Mall linking service enables the clients site to get linked to the Internet
connection of many other online shopping mall service providers.
(b) In pay per click, a certain amount is paid to the search engine by
the website.
(c) Online marketing comes at free cost.
(a) ________ and _____enable the website owner to recover the cost
incurred on the maintenance of the website.
(b) When a firm engages other websites or firms to market their products,
it is called______.
(c) ______occurs when a customer is convinced to buy another product
along with the product he wished to purchase.
11.5 Advertisement and Display on the Internet

Advertising plays a very important role in the overall marketing strategy. It involves
bringing a product or service to the attention of potential and current consumers.
It involves the process of developing and placing ads, direct mails, billboards,
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television, radio, Internet, etc. Advertising is usually the largest expense of a

marketing plan. Therefore, advertising on the Web goes much beyond simply
putting up banners. You have to sell your ad space, ads, put them up and also
employ good advertising display and tracking software. The Internet has become
the accepted medium of advertising and more businesses are turning towards
the Web instead of the traditional newspaper, radio and TV advertising which
are becoming unaffordable, especially for small entrepreneurs.
According to the Interactive Advertising Bureau (IAB), and
PricewaterhouseCoopers (PwC) that released the IAB Internet Advertising
Revenue Report, advertising revenues from Jan to June 2007 were nearly $10
billion. This is a 27 per cent increase than the previous year, at the same time.
The advertisers were from consumer advertising sector targeting the increasingly
growing online traffic and popularity of several online companies.
It is generally known that apart from e-mail being the most used online
method, Search is the second. The advertising formats using Search, with
Google still leads with nearly 64 per cent of the market share mostly in the US,
followed by Yahoo. Search ads in Google accounts for 41 per cent of the money
spent. It is common knowledge that one of the best ways to get traffic on a web
site is through the search engines. This can be accomplished by using blogs
effectively. All that is required is indexing of blogs and posting of keywords.
Good banner ads can ensure maximum hits to your website. Banner ads
are the most popular and commonly used technique of advertising on the Internet.
Look at the banner ad in this very popular website.
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When the Web first began to get commercialized in the late 1990s,
innumerable new websites were created and a lot of money in the form of venture
capital was invested in them. The websites were either e-commerce websites
or content sites. While the former offer things for sale and earn their income by
selling services and products, the latter create content or collect and offer
pictures, videos, words and other content for interested readers to view.
Content websites earn their income mainly through advertising, like TV
stations, radio stations and newspapers. Advertising on the Web is on the rise
across the globe. Marketers cannot ignore the strength, effectiveness and power
of response rates that range from 315 per cent.

Many types of business benefit from the features offerred by e-advertising.
These include consumer businesses, industrial businesses, non-profit
organizations, service firms, universities associations and trade groups.
Advertising on the Web is a powerful tool for acquiring new customers.
Advertising on the Net is developing into a broader mix of factors that an
organization employs for enhancing sales even if the business is executed totally
offline or fully or partially online. Advertising on the Net is becoming a significant
part of almost every organizations marketing mix. When you advertise on the
Web, it takes aspects of standard marketing and adds tools like search engine
optimization (SEO), advertising, meta tags, and promotion to attracts customers
to your website.
E-Advertisement
Another type of direct marketing is e-advertising. This type of marketing makes
use of e-mail as a mode of communicating fund-raising or commercial messages
to the customers. It must be noted that every e-mail that an existing or a potential
customer receives can be regarded as e-advertising.
The Web lowers the cost of publishing and enables even small
organizations to become e-publishers.
In e-advertising, the advertising broker accepts advertisements and then
places them with suitable websites. The broker gets a payment from the
advertiser which he shares with the website publisher. This process can be
automated with the advertisers providing a description of the type of websites
they would like to advertise on; and this information then being matched with
appropriate sites by using meta data related to the geographic region and
appropriate keywords.
Auctioning of the websites helps to determine the price of the
advertisement. The price is determined by the most popular keywords. This
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leads to the meta data (about the web pages) and the advertisements becoming
commodities and proxies for the ads and web page content. This process is
used by the search engine, Google.
So, nowadays when people discuss e-advertising, they generally refer to
it as online advertising. This is advertising in the online environment, that is,
using websites, e-mail ads, etc. Although the forms may be different, the basic
principles remain more or less similar to that of traditional advertising; for instance,
organizations make use of paid space to promote businesses.
E-advertising is considered as persuasive, non-personal information
related to a product or service that appears in an e-mail or on a web site.
Businesses have realized that by advertising online, they will be able to reach
their target market faster and in a more efficient manner. Online marketers and
advertisers have highly benefitted from e-advertising because of cost-effective,
innovative and better targeted opportunities.
Advertisement and Marketing
E-advertising and marketing go hand-in-hand. The world of e-advertising is
known for its technical expertise and brilliance on the Internet. The marketing
industry uses the might of this electronic medium to bring about the publicity of
goods and services. The colour, brilliance and attractiveness of this medium
serves the purpose of the marketing industry in total and to the maximum.
All advertising industries work toward the same goal, that is, boosting
clients sale. Manufacturers, retailers, service providers and non-profit
organizations approach e-advertising agencies to develop attractive webpages
which will help in the publicity of the goods and services being offered.
When it comes to e-advertising and marketing, it is interesting to note
that e-advertising helps to bring about marketing. This is because e-advertising
is a cost-efficient way by which you can carry the message of your product to
potential customers. The knowledge of the product can reach customers all
over the world.
The other major advantage of e-advertising and marketing is that unlike
any other form of marketing, the Internet provides advertisers the scope to
keep a track of the number of customers who have visited their site and more
so enrolled and carried out a booking for their goods and services. E-advertising
and marketing help in the promotion and expansion of online shopping. Eadvertising
and marketing help in acquainting customers with the utility and
durability of products.
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The benefits of e-advertising that lead to productive marketing are

manifold. These are in the form of greater availability of information related to
the value of a product. The very nature of the Internet, as a powerful medium in
the promotion of goods and services is that there is a neat enlistment of all the
benefits of the product on offer. The buyer gets to know more about the product
before he can decide on it. Products also enjoy the privilege of moving out of
the closet from the domestic, to the national and further to the international
market.
The advantages of e-advertising and marketing are that browsers and
online shoppers are offered a wider and greater choice. By going online,
customers remain informed about all the latest fashions and market trends.
They can browse through galleries of new varieties of products. They can use
the Zoom option to take a closer view of the products on sale without having to
go round in circles in retails shops.
It is important to note that in the world of e-advertising and marketing,

sound marketing strategies go hand in hand. E-advertising and marketing has
had a strong impact on several industries. The advertising industry has gravitated
towards spending its resources on online facilities. For example, in the music
industry, there has been a boom owing to the medium of the Internet. Listeners
download music files from the Internet.
Look at the E-advertisements displayed in this website.
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(a) Advertising involves bringing a product or service to the attention of
potential and current customers.
(b) Advertising is usually the largest expense of a marketing plan.
(c) E-advertising is a type of indirect marketing.
(a) Content websites mainly earn their income through_______.
(b) _______of the websites helps to determine the price of the
advertisement.
11.6 E-Commerce for Service Industry

It is not just products that sell well on the Internet, services also benefit from
doing electronic business. The hospitality industry, for instance, has been
following the trend of online application in recent years. In fact, all travel-related
business deals on the Net are referred to as e-travelling.
It is the smaller travel agencies that benefit more from doing business
online than the bigger and well-established ones. E-commerce gives the smaller
firms a competitive advantage over their larger counterparts.
Other than hoteliers, travel-related service providers in the travel industry
have been quick to take advantage of direct online distribution. All the significant
airlines and car-rental firms have adopted the Internet as their main medium of
distribution. Most major airlines earn a good part of their revenue from their
website dealings. More and more airlines sell directly to online customers and
compete with online intermediaries to gain a strong presence on the Internet.
Direct Internet consumer sales allows the airlines to cut down on the commission
that they would have had to pay to the travel agencies.
Similarly, hoteliers have also realized that online distribution helps cut
costs, attract rich customers and reduce dependency on traditional channels
that are the more expensive. They have realized that by focussing only on
traditional distribution channels, they will only be facing lower occupancy rates
and heavy expenditure on distribution and operation costs.
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(a) The smaller travel agencies benefit more from e-commerce than
the bigger well-established companies.
(b) Most major airlines earn a good part of their revenue from their
website dealings.
(a) All travel-related business deals on the Net are referred to as..
(b) ______gives the smaller firms a competitive advantage over their
larger counterparts.
11.7 Summary
E-marketing has become popular by providing solutions to the challenges
and issues that are generally faced in traditional marketing. These
challenges include high cost of offerings and lack of interaction with
consumers.
With more and more brands coming into the market with each passing
day, the need for an all-round marketing strategy has led to the adoption
of the Web for marketing purposes.
Online marketing results in reduced cost, greater potential and high returns.
For Internet marketing to succeed it is important for a firm to emphasize
on market, which is its target, with the help of correct selection of media,
design and type of advertising, directory listings, online news articles and
viral marketing.
11.8 Glossary
4 Ps of marketing: The right marketing mix of product, price, promotion

and placement
Internet marketing: Also called Web marketing, online marketing or
e-marketing, it involves marketing of products on the Internet so that the
business is promoted to a larger audience, spread across the globe.
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Search engine optimization: Referred to as SEO, it is an activity that

helps make websites more search-engine friendly.
Affiliate marketing: A type of marketing wherein a firm hires other firms
or websites for marketing products

1. Identify and list the various challenges faced by traditional marketing.
2. Summarize the various advantages of e-commerce to retailers.
3. Explain the features of the different types of Internet marketing.
4. Describe the process of designing an effective website.

5. Compare the various advantages and disadvantages of Internet marketing.
6. Evaluate the role of advertisement in the Internet marketing strategy.
11.10 Answers

2. (a) wholesaler, retailer; (b) brand recall
4. (a) Increased sales, profits; (b) affiliate marketing; (c) Viral marketing
5. (a) true; (b) True; (c) False
6. (a) advertising; (b) Auctioning
8. (a) e-travelling; (b) E-commerce

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References
Unit 12 Policy and Implementation

Structure
12.1 Introduction
Objectives
12.2 Legal and Ethical Policy Issues: Protection of Privacy
and Intellectual Property
12.3 Strategy Planning for E-Commerce
12.4 Summary
12.5 Glossary
12.6 Termianl Questions
12.7 Answers
References
12.1 Introduction
In the previous unit, you learnt that today many business firms and individuals
benefit from the commercial development of the Internet. The unit discussed
the merits of Internet marketing and how it overcomes various challenges faced
by the traditional marketing system. However, this development of Internetbased
marketing also exacts a price from individuals, organizations and societies.
The benefits must be carefully considered to seek and make ethical and socially
responsible decisions in this environment.
E-commerce is so new that the legal, ethical and other public policy issues
necessary for setting up an e-commerce are still evolving.
Such issues are important for the success of e-commerce. The major
social, ethical and political issues surrounding e-commerce are categorized as:
Privacy
Consumer protection
Taxation
Intellectual property
Free speech
Other legal issues and ethics
Every organizations mission states the purpose of the organizations
existence, determines the purpose of the website and provides the framework
for a companys e-commerce strategy. Regardless of its involvement level, a
company has to develop strategies to meet its goals. Making it easier for website
E-Commerce Unit 12
editors to find information by using a specialized strategy or engine, is one

possible strategy. Utilizing a Web-based call centre to enhance customer service
could be another strategy.
Objectives
Identify the major legal and ethical issues related to e-commerce
Discuss the intellectual property issues in e-commerce
Summarize the measures for protecting buyers and sellers on the Internet
Recall the difficulties faced in protecting privacy
Compare the measures taken by individuals and companies to protect
privacy
Evaluate the strategic planning process for e-commerce
Explain the process of formulating e-commerce strategies
Give examples of the steps and issues involved in e-commerce
implementation
12.2 Legal and Ethical Policy Issues: Protection of

Privacy and Intellectual Property
Many legal and ethical issues arise while conducting e-commerce. This section
will familiarize you with some of the legal and ethical issues related to ecommerce.
12.2.1 The Information Technology Act, 2000

The Act is arranged in 13 Chapters comprising of 93 Sections along with Four
Schedules.
The Preamble to the Act states that it aims at providing legal recognition
for transactions carried out by means of electronic data interchange and other
means of electronic communication, commonly referred to as electronic
commerce, which involve the use of alternatives to paper-based methods of
communication and storage of information and aims at facilitating electronic
filing of documents with the Government agencies.
As per preamble to the Act, the purpose of Act is (a) to provide legal
recognition for transactions carried out by means of electronic data interchange
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and other means of electronic communication, commonly referred to as

electronic commerce, which involve the use of alternatives to paper-based
methods of communication and storage of information and (b) to facilitate
electronic filing of documents with the Government agencies. - - The Act came
into effect on 17.10.2000.
The Information Technology Act enables:
Legal recognition to Electronic Transaction / Record
Facilitate Electronic Communication by means of reliable electronic record
Acceptance of contract expressed by electronic means
Facilitate Electronic Commerce and Electronic Data interchange
Electronic Governance
Facilitate electronic filing of documents
Retention of documents in electronic form
Where the law requires the signature, digital signature satisfy the
requirement
Uniformity of rules, regulations and standards regarding the authentication
and integrity of electronic records or documents
Publication of official gazette in the electronic form
Interception of any message transmitted in the electronic or encrypted
form
Prevent Computer Crime, forged electronic records, international alteration
of electronic records fraud, forgery or falsification in Electronic Commerce
and electronic transaction.
Advantages of Cyber Laws
This Act aims to provide the legal infrastructure for e-commerce in India. And
the cyber laws have a major impact for e-businesses and the new economy in
India. The IT Act 2000 attempts to change outdated laws and provides ways to
deal with cyber crimes. It is important to have such laws so that people can
perform transactions over the internet through credit cards without fear of criminal
mishaps. The Act offers the much-needed legal framework so that information
is not denied legal effect, validity or enforceability, solely on the ground that it is
in the form of electronic records.
Keeping in view the growth in transactions and communications carried
out through electronic records, the Act empowers government departments to
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accept filing, creating and retention of official documents in the digital format.
The Act has also proposed a legal framework for the authentication and origin
of electronic records / communications through digital signature.
From the perspective of e-commerce in India, the IT Act 2000 and its
provisions contain many positive aspects. Firstly, the implications of these
provisions for the e-businesses would be that email would now be a valid and
legal form of communication in our country that can be duly produced and
approved in a court of law.
Companies shall now be able to carry out electronic commerce using the
legal infrastructure provided by the Act.
Digital signatures have been given legal validity and sanction in the Act.
The Act throws open the doors for the entry of corporate companies in
the business of being Certifying Authorities for issuing Digital Signatures
Certificates.
The Act now allows Government to issue notification on the web thus
heralding e-governance.
The Act enables the companies to file any form, application or any other
document with any office, authority, body or agency owned or controlled by the
appropriate Government in electronic form by means of such electronic form as
may be prescribed by the appropriate Government.
The IT Act also addresses the important issues of security, which are so
critical to the success of electronic transactions. The Act has given a legal
definition to the concept of secure digital signatures that would be required to
have been passed through a system of a security procedure, as stipulated by
the Government at a later date.
Under the IT Act, 2000, it shall now be possible for corporates to have a
statutory remedy in case if anyone breaks into their computer systems or network
and causes damages or copies data. The remedy provided by the Act is in the
form of monetary damages, not exceeding `1 crore.
Source: Adapted from: http://www.lexvidhi.com/article-details/importantprovisionsof-the-information-technology-act-2000-144.html; http://www.aicteindia.
org/downloads/itact2000.pdf
12.2.2 Legal Issues
Some legal issues in e-commerce that need to be understood are:

(a) Privacy: Problems relating to privacy are fast becoming the most important
issues for consumers.
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(b) Intellectual property: Trademarks, copyrights and patents are the most
common intellectual property issues affecting cyberspace.
(c) Free speech: The Internet provides the maximum opportunity for free
speech.
(d) Taxation: It is illegal to impose any new sales tax on Internet business.
(e) Consumer protection: Different types of fraud exist in electronic trade.
(f) Other legal issues: Several legal issues are related to e-commerce such
as validity of contests, jurisdiction over trades, encryption policies and
Internet gambling.
Protecting privacy
Privacy is the right to be left alone and the right to be free of unreasonable
personal intrusions. Privacy is a girder supporting freedom. The right to privacy
is recognized today in virtually all the US states and by the Federal Government,
either by statute or common law.
In the 20th century, privacy-related thoughts and legislation focussed on
restraining the government and using personal information. With the widespread
use of the Internet and e-commerce, the issue of privacy became more critical.
A special organization called the Electronic Privacy Information Centre exists
for focussing on the protection of privacy.
Although online businesses gather and use anonymous demographic
information, in many cases, the profiles derived from tracking consumers
activities on the Web are linked with personally identifiable information.
The ways in which someone can collect private information about you
through the Internet are by:
Reading your newsgroups postings
Finding you in the Internet directory
Reading your e-mail
Making your browser record information about you
Website self-registration and the use of cookies are the two information
gathering tools.
Websites can gather customer information through filled-out registration
questionnaires. Information may be collected with an aim to plan the business
or can be sold to a third party and used in a wrong or improper way.
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Cookies help websites maintain user states. A cookie is a piece of
information that allows a website to record a visitors comings and goings. This
click stream data is used to create profiles that can include hundreds of distinct
data fields for each consumer.
One way to protect privacy is to form privacy policies or develop codes
which can help organizations to keep legal hassles or problems at bay.
In addition to the common laws and the constitution, there are both federal
laws and state laws that protect individuals against government intrusions and
in some cases define privacy rights, vis--vis private organizations such as
financial, education and media institutions.
Protecting intellectual property
Trademarks, copyrights and patents are the most common intellectual property
issues affecting cyberspace. Intellectual property refers to the intangible property
that corporations and individuals have created and which is protected under the
laws of patent, copyright and trade secret.
Copyright is a statutory grant that provides the creators of intellectual
property with ownership.
A trademark, as defined under the Trademarks Act, 1999, is a mark capable
of being represented graphically and which is capable of distinguishing the goods
or services of one person from those of others and may include the shape of
the goods, their packaging and combination of colours.
A patent is a document that grants the holder exclusive rights on an
invention for twenty years.
Legal protection
The Digital Millennium Copyright Act of 1998 is the first major effort to adjust
the copyright laws to the Internet age. This legislation was the result of a
confrontation between the major copyright holders in the United States.
The penalty for wilfully violating the DMCA includes restitution to the injured
parties of any losses due to infringement.
Criminal remedies are available to federal prosecutors, including fines
upto $ 500,000 or five years imprisonment for a first offence, and upto
$ 1 million in fine and ten years of prison for repeat offenders.
DMCA implements a World Intellectual Property Organization Treaty of
1996 which declares it illegal to make, distribute or use devices that circumvent
technology-based protection of copyrighted material and attaches stiff fines
and prison sentences for violations.
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Patents are very different from copyrights. Patents protect the ideas
themselves and not merely the expression of ideas. There are four types of
inventions for which patents are granted under patent lawmachines, manmade
products, compositions of matters and processing methods.
In order to be granted a patent, the applicant must show that the invention
is original, novel, non-obvious and not evident in prior arts and practices.
Domain issues
Two controversies concerning that deals names are as follows:
(i) Whether top-level domain names, for example, .com; .org and .gov should
be added.
(ii) Whether companies can use trademarks of other companies as domain
names.
12.2.3 Ethical Issues
Ethics is a branch of philosophy that deals with what is considered to be right
and wrong. Ethics is the heart of social and political debates about the Internet.
In many instances, an individual facing an ethical decision is not actually
considering whether or not to break the law.
Actions may be considered unethical on the basis of the firm, the country
and the particular circumstances related to the scenarios.
The spread of e-commerce has created many new ethical situations. Ethics
is different in different countries. In a continent like Asia, more emphasis is
placed on the benefits to the society than on the rights of individuals.
Codes of ethics are developed by various companies and organizations.
These are sets of principles meant to serve as guides for the members.
Mason et. al (1995) have categorized ethical issues into issues related to
privacy, accuracy, property and accessibility.
(i) Privacy deals with collection, storage and dissemination of
information.
(ii) Accuracy deals with accuracy, authority and fidelity of the information
gathered and processed.
(iii) Property deals with ownership and value of information and
intellectual property.
(iv) Accessibility deals with the right to information and payment of fees
to access it.
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Legal and ethical issues are important for the success of e-commerce.
The organizations that are active in this area are:
The Organization for Economic Cooperation and Development
CommerceNet
Activity 1
Find out the names of at least two organizations in India that look into the
legal and ethical issues in e-commerce activities.
(a) A patent is a document that grants the holder exclusive rights on an

invention for twenty years.
(b) CommerceNet is an organization that takes care of legal and ethical
problems in e-commerce activities.
(a) _________is the right to be left alone and the right to be free of
unreasonable personal intrusions.
(b) A______is a piece of information that allows a website to record a
users visit to a website.
(c) _______is a branch of philosophy that deals with what is considered
to be right and wrong.
12.3 Strategy Planning for E-Commerce
One approach to conducting e-commerce planning and implementation is to

use the generic methodology. It has four main stages as follows:
(i) Industry and competitive analysis
(ii) Strategy formulation
(iii) Implementation
(iv) Assessment
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These stages are interrelated in a cyclic movement.

Industry and
Competitive Analysis
Strategy Formulation
Implementation
Performance Assessment,
Strategy Reassessment
Figure 12.1 The Strategic Planning Cycle
12.3.1 Industry and Competitive Analysis

Industy and competitive analysis entails the monitoring, evaluation and
dissemination of information from the external and internal environments with
respect to launching an e-commerce project. A popular way to conduct such an
analysis is to start with environmental scanning using a SWOT analysis. A SWOT
analysis describes specific strengths, weaknesses, opportunities and threats.
The corporate strengths and weaknesses can be represented in a four-cell
matrix called the SWOT matrix.
The elements are as follows:
In the opportunities (O) block, the external, current and future opportunities
available for the company are examined.
In the threats (T) block, the external threats facing the company now and
expected to in the future are analysed.
In the strengths (S) block, the specific areas of current and future strengths
for the company are described.
In the weaknesses (W) block, the specific areas of current and future
weaknesses for the company are stated.
The study can find an opportunity to sell e-commerce software developed
for the internal purposes to others or to add new products.
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The trial may come from competitors or from spreading some corporate
resources too thin.
Internal
Factors
External
Factors
Strengths (S) Weaknesses (W)
Opportunities (O)
Threats (T)
SO Strategies WO Strategies
Generate strategies here
to use strengths to
take advantage of
opportunities
ST Strategies ST Strategies
Generate strategies
here to take advantage
of opportunities by
overcoming weaknesses
Generate strategies here
to use strengths to
avoid threats
Generate strategies
here to minimize
weaknesses and
avoid threats
Figure 12.2 The SWOT Diagram
The strength can be the companys programmers, whereas weaknesses

may be the lack of experience in database integration.
After the SWOT analysis is completed, strategy formulation starts.
12.3.2 Strategy Formulation
Strategy formulation involves the development of long range and strategic plans
for effectively managing environmental opportunities and threats keeping in
mind the strengths and weaknesses of the company.
Strategic formulation is relevant both for e-commerce in general and
individual e-commerce projects. A company will formulate the objectives of each
e-commerce project based on its e-commerce mission.
A business should think about what it intends to accomplish by establishing
a website. The reasons why businesses establish websites are marketing,
customer support and sales. E-commerce not only redefines the existing market
E-Commerce Unit 12
for products and services, but also provides an opportunity for totally new services
and products. Examples are contract services, network supply and support
services and directory services, market makers and many types of online
information services. E-commerce implementation may not be followed by sales
unless companies plan and re-engineer their organizations appropriately.
Strategy formulation can also include several other topics. Therefore, one
can use a methodology such as that of the critical success factors.
Critical Success Factors for E-Commerce
The critical success factors for e-commerce are the business technologies and
human factors without which the desired level of organizational goals cannot be
achieved. Often, it helps to start considering business environments and the
advantages of e-commerce before analysing the risks involved, if any, in the ecommerce
project.
The major success factors of e-commerce can be summarized as support
received from the top management; technological infrastructure; specific services
or products traded; project team reflecting various functional areas; acceptance
of customer; user-friendly Web interface; degree of trust between buyers and
sellers; integration with the corporate legacy systems; security and control of
the e-commerce system; competition and market situation; cost of the ecommerce
project; pilot project and corporate knowledge.
Value Analysis Approach
Value analysis approach is used to assess the desirability of e-commerce to
employ a formal value-chain analysis (Porter, 1985).
A value chain refers to a series of activities performed by a company to
attain its goals at various stages of the production process. The goals may
range from acquisition of resources to product delivery. Companies that pursue
the creation of additional value using their e-commerce channels should consider
the competitive market and current rivalry to best leverage its e-commerce
assets.
One way for an e-commerce vendor to achieve an advantageous position
is to differentiate itself by providing superior service at every point of contact
with the customers.
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Customer
Acquisition
Relationship
Marketing
Customer
Retention
Customer
Extension
Customer
Selection
How can you acquire

this customer in the
most efficient and
effective way?
What criteria
determines who will
be your most profitable
customers?
How can you
increase the loyalty
and the profitability
of this customer?
How can you keep
this customer for
as long as possible?
Figure 12.3 Gartner Group and Relationship Marketing Model
Return on Investment and Risk Analysis

The rate of return on investment (ROI) for an e-commerce project is the ratio of
the cost of resources required to the benefits generated by the e-commerce
project. The cost of resources for an e-commerce project is easy to quantify.
However, the returns are difficult to measure.
To address this issue in IT, Parker (1996) classified generic IT values and
risks into:
(a) Values financial, strategic and stakeholder
(b) Risks competitive strategy, organizational strategy and uncertainty
Strategic values include competitive advantage in the market and benefits or
advantages resulting from the streamlining of the back-end or front-end business
operations and procedures.
Stakeholder values reflect organizational redesign, information technology
architecture, empowerment and organizational learning which are unique to
each company.
Competitive strategy risks are external and result from joint-venture alliances
or changes of a demographic nature.
Organizational strategy risks are uncertainty factors internal to the company
as opposed to external competitive risks.
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All those values and risks need to be examined and appropriate priorities
need to be set to help formulate a desirable e-commerce strategy.
12.3.3 E-Commerce Scenarios
An e-commerce project can be implemented once the strategic planning and
the cost-benefit analysis are completed.
Hutchinson (1997) described four e-commerce scenarios that can be used
to accomplish the task.
(i) Open, global commerce scenarios where removal of intermediaries
is a powerful force that flattens the value chain.
(ii) The members-only subnet scenario is applicable to business-tobusiness

(B2B) e-commerce.
(iii) The electronic middlemen scenario shows that supplies in both the
consumer market as well as the business market can make their
services and products available through third-party attribution
channels.
(iv) The consumer marketing channels scenario where advertising,
consumer telephony and traditional broadcast come together and
unite to form an e-commerce medium on the Net, which is consumeroriented.
12.3.4 E-Commerce: Strategy and Implementation
To understand the strategic planning framework, you have to first understand
that business strategies can be competitive and/or co-operative.
A competitive strategy assumes fighting against all competitors in order
to survive and win.
A co-operative strategy plans to work together with specific competitors
to earn an advantage against or gain an edge over the other competitors.
Competitive strategy
A competitive strategy can be either offensive or defensive. An offensive strategy
takes place in an established competitors market situation whereas a defensive
strategy usually takes place in the organizations own market position.
Co-operative strategies
A typical co-operative strategy involves a strategic alliance through value-chain
alliance or a joint-venture partnership. A strategic alliance is a partnership of
multiple corporations formed to achieve competitive advantages that are mutually
beneficial.
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The major types of strategic alliances used in e-commerce are as follows:

Joint venture
Value-chain partnership
E-commerce strategies in small businesses
12.3.5 Electronic Commerce Strategy in Action
Walid Mougayar suggests ten steps on strategy actions and acting on perfecting
the outcomes of each one.
(i) Educate and train wherever required and necessary
(ii) Review the existing supply-chain and models
(iii) Understand the expectations of your clients/end-users and partners from
the Web
(iv) Re-evaluate the nature of your products and services
(v) Assign a new role to your human resource department
(vi) Extend your existing systems to the outside
(vii) Keep track of competition, market shares and new competitors

(viii) Develop a marketing strategy that is Web-centric
(ix) Ensure active participation in not just creating but also developing virtual
marketplaces
(x) Install e-commerce management style
12.3.6 Implementation: Plans and Execution
Implementation involves the creation of a Web team that represents various
functional areas as well as the planning for detailed technology tasks. Web
hosting, security and control are important parts of an implementation plan.
Creation of Web team and assigning of Functional Skills to Subprojects
The roles and responsibilities of the team leader, user management, Web master
and technical staff should be defined. The details are to be developed by the
different functional areas such as marketing, customer relations, puchase,
accounting, finance, human resources, security and other operations.
The project team can be managed by assigning functional expertise to
such projects.
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Evaluation of Outsourcing
E-commerce requires access to the Web, building of the site and connection of
the website to the existing corporate information system for its implementation.
A decision has to be taken whether to purchase a commercial e-commerce
software package or use a Web hosting company. Another option is to hire a
Web designing house that specializes in e-commerce designs.
Web Content Design
A Web team has to design Web content features such as e-mall, shopping cart
software, online catalogues, dynamic databases, animation and security.
Security and Control in e-Commerce
The Web team has to develop effective security and privacy guidelines and
these should address the following:
The Internet features that require monitoring
The policies accessed and used
The revelation of information via the Net
Activity 2
One of the critical success factors of e-commerce is maintaining a degree
of trust between the buyers and sellers. What according to you are some
ways to promote a healthy relation between the two?
(a) Industry and competitive analysis entails the monitoring, evaluation
and dissemination of information.
(b) Organizational strategy risks are external and result from joint venture
alliances.
(a) A_____describes the specific strengths, weaknesses, opportunities
and threats of a business.
(b) A company will formulate the objectives of each e-commerce project
based on its_______.
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(c) The critical success factors for e-commerce are the ______
and_______.
(d) A_______refers to a series of activities performed by a company to
attain its goals at various stages of the production process.
(e) __________involves the creation of a Web team that represents
various functional areas as well as the planning for detailed
technology tasks.
12.4 Summary

E-commerce is so new that the legal, ethical and other public-policy issues
that are necessary for setting up e-commerce are still evolving.
These legal issues are segregated into privacy, taxation, consumer
protection, intellectual property, free speech and other legal issues.
Ethics is at the heart of social and political debates about the Internet.
Strategic planning describes what an e-commerce project should do with
respect to the companys objectives. Strategy formulation, on the other
hand, involves analysis of cost and benefit and ROI.
Creating a Web team and assigning functional expertise to subprojects
are some steps included in implementation apart from Web hosting and
security.
12.5 Glossary
Copyright: A statutory grant that provides the creators of intellectual
property with ownership
Trademark: A mark capable of being represented graphically and of
distinguishing the goods or services of one person
Patent: A document that grants the holder exclusive rights on an invention
for twenty years
Ethics: A branch of philosophy that deals with what is considered to be
right and what is wrong
E-Commerce Unit 12
Cookies: A computer file with information in it that is sent to the central

server each time a particular person uses a network or the Internet
Domain: A set of websites on the Internet which end with the same group
of letters, for example .com, .org
Pilot project: An activity planned as a test or trial
12.6 Termianl Questions

1. Discuss the major legal and ethical issues related to e-commerce.
2. Demonstrate the working of the strategic planning process for ecommerce.
3. Summarize the process of formulating e-commerce strategies.
4. Describe the various factors that are critical for e-commerce.
5. Why is value chain analysis conducted by firms?
6. Recall the steps and issues involved in e-commerce implementation.
12.7 Answers

2. (a) Privacy; (b) cookie; (c) Ethics
4. (a) SWOT analysis; (b) e-commerce mission; (c) business technologies,
human factors; (d) value chain; (e) Implementation

E-Commerce Unit 12

References
Unit 13 Mobile Commerce

Structure
13.1 Introduction
Objectives
13.2 Overview of M-Commerce - Wireless Application Protocol (WAP)
13.3 Generations of Mobile Wireless Technology
13.4 Components of Mobile Commerce
13.5 Networking Standards for Mobiles
13.6 Summary
13.7 Glossary

13.9 Answers
References
13.1 Introduction
In the previous unit, you learnt about the legal, ethical and other public policy
issues necessary for setting up an e-commerce. These issues included Privacy,
Consumer protection, Taxation, Intellectual property, Free speech, and other
legal issues and ethics. Every organizations mission states the purpose of the
organizations existence, determines the purpose of the website and provides
the framework for a companys e-commerce strategy.
Also, the units preceding Unit 12 shed light on the various features,
requirements and applications of e-commerce. The units also helped you analyse
the pros and cons of conducting an e-commerce, by comparing it with traditional
business systems. This unit introduces a related conceptM-commerce. A
relatively new conceptin 1997 two mobile-phone enabled Coca Cola vending
machines were installed in Helsinki, FinlandM-commerce is now popular the
world over. From making payments over the phone to booking tickets for a
movie, there is no dearth of M-commerce-related services today.
This unit will also delve into the evolution and development of various
generations of mobile wireless technology, besides giving you a comparative
account of each.
E-Commerce Unit 13
Objectives
Identify the role of wireless application protocol (WAP) in mobile Internet
Access
Classify the basic components of the WAP model
Describe the architecture of the WAP model and evaluate the significance
of each layer of the model
Assess the evolution of the various generations of mobile wireless
technology
Identify the two components of mobile commerce
Recommend the various networking standards for mobiles
Contrast the various advantages and disadvantages of M-commerce
13.2 Overview of M-Commerce Wireless Application
Protocol (WAP)
Since the development of mobile wireless technology in the early 1970s, the
mobile wireless industry has come up with many new technologies that have
revolutionized the way communication occurs the world over. The recent past
has seen the mobel wireless technologies have seen four or five generations
starting from 0G4G. With the introduction of the cellular concept in the 1G
brought about the mobile wireless communication. Since then the 2G enabled
the replacement of analogy technology with digital communication; while in 3G
emphasis is given to data communication, besides the voice communication.
Thus, a converged network for both voice and data communication is
emerging. Moreover, research is in full swing to introduce many killer applications
for the 4G.
The term mobile commerce or M-commerce has no particular definition.
Several analysts and vendors have defined M-commerce in varied ways. Put
simply, when a mobile device is used for electronic commerce, it is referred to
as mobile commerce or M-commerce.
The following are some popular definitions of M-commerce.
(i) M-commerce is the use of a mobile device to communicate, inform,
transact, and entertain using text and data via a connection to the
public and private network. Lehman Brothers
E-Commerce Unit 13
(ii) Business-to-consumer transaction conducted from a mobile device.

J.P. Morgan
(iii) Mobile commerce refers to any transaction with monetary value that
is conducted via a mobile telecommunication network.
Duelacher
Any electronic transaction or information interaction which is conducted
using a mobile device and mobile networks (wireless or switched public
networks), that leads to the transfer of real or perceived value in exchange for
information, service or goods.
mobileinfo.com
The sale of mobile phone ring tones, games, audio and video content,
including full-length music tracks are the primary usages of M-commerce.
M-commerce also caters to information transfer, such as cricket scores via the
short messaging service. The modes of payment used in M-commerce are:
Deducting a mobile users their calling credit, either directly or via the
reverse-charged SMS
Premium-rate calling numbers
M-commerce is sometimes confused as an extension of e-commerce. Mcommerce
is regarded as a business opportunity with functions and
characteristics that are unique and are not just an extension of an organizations
Internet-based e-commerce channel. There are many resemblances between
M-commerce and e-commerce. The similarities range from the ability to buy a
product or service virtually versus a real environment. Table 13.1 shows the
dissimilarities between M-commerce and e-commerce.
Table 13.1 M-commerce vs E-commerce

Technology E-Commerce M-Commerce
Device Personal computers Smart phones, Pagers, PDAs
Operating System Windows, Linux, Unix
Symbian (EPOC), Palm OS, Pocket PC
Presentation Standard HTML
HTML. WML, i-mode
Browser
Microsoft Internet
Explorer, Mozilla
Firefox
IOS and Android
Apple: Phone 4-Mobile Safari
Nokia N900-Micro B (Mozilla based)
HTC Hd2 - Opera Mobile
Bearer Network TCP/IP and Fixed
wire line Internet
GSM, GSM/GPRS, TDMA, CDMA
E-Commerce Unit 13
13.2.1 Wireless Application Protocol (WAP)

The WAP forum has developed an open global specification called the wireless
application protocol (WAP). WAP allows the mobile user with a WAP device to
access and communicate information and services easily and immediately.
A set of communication protocols specified by WAP standardizes the
manner in which radio transceivers, mobile phones and other wireless devices
can be used to access the Internet, including e-mail, Internet Relay Chat (IRC)
and the World Wide Web (www). The traditional desktop Internet is very similar
to the WAP model.
Phone.com describes WAP as:
WAP bridges the gap between the mobile world and the Internet as well as the
corporate intranets and offers the ability to deliver an unlimited range of mobile
value-added services to the subscribersindependent of their network, bearer
and terminal. Mobile subscribers can access the same wealth of information
from a pocket-sized device as they can from the desktop.
Mobile devices must have the following features:
1. Less memory
2. Less powerful central processing units
3. Smaller display
4. Limited input facilities
5. Restricted power consumption
A wireless data network must have the following features:
1. More latency
2. Less bandwidth
3. Less predictable availability

4. Less connection stability
WAP is an attempt to design a protocol keeping in mind the above factors
relating to mobile devices and wireless data networks.
WAP is a set of protocols that specifies a complete framework for mobile
Internet access. The WAP forum is an industry association founded in 1997 by
Nokia, Motorola, Ericsson and Phone.com. The purpose of WAP is to expand
the usages of wireless data by providing a platform for developing new valueadded
services. WAP brings superior services and content to digital mobile
phones and other mobile terminals from the Internet.
E-Commerce Unit 13
13.2.2 The Basic WAP Model

WAP has three main components that are necessary for the protocol to function
properly.
WAP Components
1. WAP Gateway
2. WAP Server
3. Client Device
1. WAP Gateway
The WAP gateway provides communication between wireless networks and
the Internet. It acts as an interface between telecommunication protocols within
the mobile operators network and Internet protocols.
The main benefits of a WAP gateway include:
(i) The WAP gateway translates the protocols between the Internet and
the wireless network.
(ii) WAP content is encoded into a compact binary form by the WAP
gateway over air transmission due to efficiency reasons.
2. WAP Server
The second important component is the WAP server. It stores the WAP content.
The WAP server can be on a local network or anywhere on the Internet. WAP
servers contain Wireless Markup Language (WML), WML Script and Wireless
Bitmaps which are all WAP content formats.
3. Client Device
The client device can be a mobile phone, a pager, a Personal Digital Assistant
(PDA) or any other WAP enabled device.
13.2.3 Architecture Overview
The World Wide Web Model
The Web or the WWW model is used on the Internet to provide the client with
the ability to receive content in a defined data format from Web servers. The
standard protocols, like the Transmission Control Protocol and the Internet
Protocol (TCP/IP) and Hypertext Transfer Protocol (HTTP) handles the
communication. Figure 13.1 shows that to reach the content on the server a
Uniform Resource Locator (URL) is used by the clients.
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The client uses a Web browser to display the contents provided by the
server in a standard format called the Hyper Text Markup Language (HTML)
and the script language (Java Script, Visual Basic (VB) Script, etc.,) to enhance
the content functionality.
HTTP Response (HTML)
HTTP Request (URL)
Client Web Server
Figure 13.1 World Wide Web Model
The WAP Model

WAP is designed to use existing technology and standards. A browser in a
WAP device communicates with the WAP gateway connected to the Internet.
The WAP gateway translates requests from the www protocol to stack the WAP
protocol and vice versa.
When the browser sends a request to the server, WAP gateway decodes
it to plain text and sends the request to the WAP server as the desired content,
as show in Figure 13.2. By this method, a content provider only needs to add a
few content types to the WAP server to enable the WAP services to be developed,
as the user of the WAP device is always connected to same gateway. The
Wireless Markup Language (WML) script is the standard content format used
by WAP applications. When a server replies, the desired content is sent to the
gateway. The content is encoded by the WAP gateway into binary form of WML
and sent to the WAP device. This binary encoding is used to reduce network
traffic. The textual content is not only compressed, but also all unnecessary
spaces and line breaks are removed in this way.
HTTP Response (WML)
Internet
HTTP Request (URL)
Client Web Server
WAP
Device with
Browser
WAP Device
WAP
Gateway WAB Server
WSP Encoded Request
(URL)
WSP Encoded Response
(WML)
CGI
Scripts
Etc.
Content
Figure 13.2 The WAP Model

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The WAP client communicates with the WAP server by using the WAP
gateway. The WAP gateway translates the client requests to www requests
before submitting the request to the WAP server.
The WAP Protocol Stack

Wireless Application Environment or Application Layer (WAE)
Session Layer or Wireless session Protocol (WSP)
Transaction Layer or Wireless Transaction Layer (WTP)
Security Layer or Wireless Transport Layer Security (WTLS)
Transport Layer or wireless Datagram Protocol (WDP)
Wireless Bearers:
GSM CDMA SMS GPRS CDPD
Figure 13.3 The WAP Protocol Stack
Figure 13.3 depicts the wireless application protocol in a series of layers.

The Open Systems Interconnection (OSI) model defines a layered framework
for generically describing and designing protocols. Similarly, WAP has six layers.
Each layer is responsible for managing some part of WAP. The WAP architecture
layers are analysed as follows:
1. Application Layer or Wireless Application Environment (WAE)
In the WAP protocol stack the WAE is the uppermost layer. WAE is divided in
two logical layers:
(i) The first layer is for user agents
(ii) The second layer is for service and formats
The first layer is for user agents, that is browsers, phone books and
message editors. In the second layer, there are different elements such as
WML, WML Script, image formats, card and calendar format, and so on.
WAE provides an important service, that is the URL service. The URL
identifies resources on a server that can be reached by well-known protocols.
WAE also supports Uniform Resource Identifier (URI), which is used to locate
resources that are accessed without using well-known protocols, such as wireless
telephony functions.
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2. Session Layer or Wireless Session Protocol (WSP)

Two interfaces for the WAE are provided by the wireless session layer.
(i) A connection-oriented service that functions on top of the transaction layer
protocol.
A session is provided by the connection-oriented service between the
WAP gateway and the client. It takes care of communication interruptions,
like change of bearer and capability negotiation.
(ii) A service that is connectionless operates above a non-secure or secure
datagram service. The WAE uses a thin layer when a reliable transaction
of data is not required.
In short, a session layer provides the following services:
(i)) It creates and releases a connection between the client and the server.
(ii) Exchanging data between the client and the server using a coding scheme
that is much more compact than the traditional HTML text.
(iii) Suspending and releasing sessions between the client and the server.
3. Transaction Layer or Wireless Transaction Protocol
A lightweight transaction-oriented protocol is provided by WTP which is
appropriate for mobile phones and which also runs on top of a datagram service.
A dependable way of communication is provided with an ability to avoid
duplication and retransmit lost messages. WTP manages three types of
transactions:
(i) Unreliable one-way request: A message is sent and no
acknowledgement is expected from the receiving device. Such applications
use the Wireless Datagram Protocol (WDP).
(ii) Reliable one-way requests: A message is sent and the recipient sends
an acknowledgement.
(iii) Reliable two-way request-reply transactions: A message is sent and
the recipient replies with exactly one result message. The sender then
finally acknowledges the result message. If the recipient knows that the
message processing time exceeds the initiators timer interval, the recipient
may send a hold on message to prevent the initiator from resending the
original message.
4. Security Layer or Wireless Transport Layer Security (WTLS)
A transport layer security between the WAP gateway and the WAP client is
provided by the security layer. Your data is protected by WTLS including privacy,
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denial-of-service protection, authentication and data integrity. Data integrity

ensures that it is unmodified and uncorrupted. WAP privacy services guarantee
that all transactions between the WAP device and the gateways are encrypted.
Authentication and protection against denial-of-service attacks are also parts of
WTLS.
5. Transport Layer or Wireless Datagram Protocol (WDP)
WDP provides an interface that is consistent to the stacks upper layer and the
datagram layer forms the base of the WAP protocol stack. The WDP layer is
not required if WAP is applied over a bearer supporting User Datagram Protocol
(UDP). WDP also allows correction of data error. On GSM SMS and other
bearers, provided by WDP provides the datagram functionality. If needed WDP
can extend with the functionality for re-assembling and segmenting datagrams
that are large for the underlying bearer.
6. Wireless Bearer Network
The wireless bearer networks are at WAPs lowest level. To function on various
bearer services the WAP protocols are designed for them, such as packetswitched
networks, short message services and circuit switched connections.
Each network has its own advantage and disadvantage in terms of performances,
delays and errors.
Activity 1
Prepare a list of some examples of M-commerce.

(a) The sale of ring tones over the mobile phone is an example of Mcommerce.
(b) The traditional desktop Internet is very similar to the WAP model.
(a) _______enables mobile subscribers to access the same wealth of
information from a pocket-sized device as they can from the desktop.
(b) ________acts as an interface between wireless networks and the
Internet.
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(c) In the WAP model, _______is used to reduce network traffic.

(d) The______layer is not required if the WAP is applied over a bearer
supporting User Datagram Protocol.
13.3 Generations of Mobile Wireless Technology
First Generation (1G)

The first generation (1G) of mobile phones can be traced to the early
1980s.
The first generation of wireless technology used the analog technology.
It used FDMA technology for modulation.
Advanced Mobile Phone Service (AMPS) was used in the US and Australia.
Nordic Mobile Telephone (NMT) was used in Switzerland, the Netherlands,
Europe and Russia.
Problems with First Generation
The problems in the first generation are as follows:
1. The problem with AMPS is that in the 800 MHz band, radio waves are 40
cm long and travel in straight lines.
2. Signals are absorbed by trees and plants and high buildings.
3. It has creates a high level of echo and signal distortion.
4. It has a low calling capacity.
5. It allows minimum privacy.
6. It provides poor data communication capability.
Second Generation (2G)
Second generation or 2G technologies use digitized technology.
It uses a combination of TDMA (Time Division Multiple Access) and
FDMA (Frequency Division Multiple Access) technologies.
Four 2G systems are in use and are:
D-AMPS Digital Advanced Mobile Phone Service
GSM Global System for Mobile
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CDMA Code Division Multiple Access

PDC Personal Digital Cellular
Among these, GSM and CDMA are the popular systems.
In 2G technology, voice is digitized over a circuit in 1G and 2G networks
and data is transacted over a circuit. This technology is called circuit switched
data (CSD). Using modems, a data connection is established between the device
and the network.
2.5 Generation (2.5G)
In the 2.5 technology, voice is digitized over a circuit. However, data in
2.5 G is packetized.
2.5G uses the same encoding techniques as 2G.
General Packet Radio Service (GPRS) networks is an example of
2.5G.
Third Generation (3G)
3G technology uses spread spectrum techniques for media access
and encoding.
In a 3G network, both data and voice use packets.
The International Telecommunication Union (ITU), as a part of its
International Mobile Telecommunication 2000 (IMT-2000) programme,
defined the technical framework of 3G.
The two 3G models of CDMA are wideband CDMA (WCDMA) and
CDMA 2000.
(a) 1G used FDMA technology for modulation.
(b) In a 2G network, both data and voice use packets.
(a) 2G uses a combination of_______and ______technologies.
(b) ______uses the same encoding techniques as 2G.
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13.4 Components of Mobile Commerce

There are two main components of mobile commerce. These are:
1. Wireless communication component
2. Access device for mobile computing
1. Wireless Communication Component
Wireless communication component is a medium through which signals cannot
be guided through a solid medium. In a wireless system, air is the medium
through which electromagnet solid energy can flow easily in several directions
via antennas.
The wireless (unguided media) methods include radio-based, satellitebased
and light-based wireless systems.
Radio-Based Wireless System: Radio-based systems include radio
waves, satellites and paging systems. These use radio frequency
signals that range between 100 KHz 20 KHz.
Radio waves include the following types:
(i) Short wave
(ii) Ultra high frequency
Radio frequency (RF) is of three types:
(i) One-way RF signals that cover upto 10 miles; for example, digital pagers.
(ii) Two-way Transceivers are used by RF for sending and receiving data
upto six miles.
(iii) Local: It functions in the medical, scientific and industrial (ISM) bands.
Radio-based services can be grouped into two main categories:
(a) Land based: Cellular communication packet data between network and
specialized mobile radio (SMR).
(b) Satellite based: Paging systems and very small aperture satellite (VSAT).
Land-based radio systems use low power transmitters and receivers to
send and receive data, while satellite-based systems use high frequency.
Satellite-Based Wireless System: Satellite microwave systems
transmit signals between directional parabolic antennas. A
communication satellite is a microwave relay station placed 36,000
km above the equator. It is a satellite placed in a geosynchronous
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orbit. It appears to be stationary relative to the earth and always stays

over the same point with respect to the earth.
Satellite frequency range lies between 46 GHz and 11-14 GHz .
Satellite microwave installation for orbiting satellite is technical and
difficult.
Satellite network is useful in any situation where data needs to be
dispersed.
Light-Based Communication System: Light-based communication
system use light to send pulses that emit in a light emitting diode
(LED) to a photo sensor that decodes the signals.
A light-based communication system has two categories:
(i) Low-speed devices (range 115 kbps to 250 kbps)
(ii) High-speed devices (range 1.2 mbps)
The installation cost of a light-based system is less and the process is
hassle free. It is also capable of sending data multiple times. It is still
not as fast as many cable connections, but it is fine for updating files,
downloading the days schedule or transmitting other forms of data.
The goal is compatibility between personal digital assistants, notebooks
and desktop computers as well as peripherals such as printers, fax
machines and even telephones.
2. Mobile Information Access Devices
There is a wide variety of information access devices. These are:
(i) Portable computer
(ii) Hybrid computers
(iii) Personal digital assistants
(i) Portable computers
Portable computer can be of any of the following three categories.
Portable Computers
Laptops Notebooks Hand-helds
Figure 13.4 Types of Portable Computers
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(a) Laptops
Laptops are useful for running applications that demand very powerful hardware,
such as Computer Aided Design (CAD) and video presentations.
(b) Notebooks
Notebooks serve the traditional user who wants to do a large amount of word
processing and manipulate sizable spreadsheets. The subnotebook allows a
close approximation of the desktop computing experience and is a mainstream
of mobile computing. Subnotebook designs include applications in ROM and
Windows software.
(c) Hand-held system
Hand-held system is a powerful system when several of its capabilities are
combined with more intuitive functions, such as phone lists and messaging.
(ii) Hybrid Pen Computer
A hybrid pen computer provides a pen-based system instead of a keyboard. It
is provided with two options:
(a) Without keyboard
(b) With keyboard
In case a keyboard is provided, it is of the standard size and there is a
mouse which is used as a pen. The user gets a tablet-size writing pad when the
display is closed.
(iii) Personal Digital Assistants (PDAs)
Personal digital assistants are similar to PCs but smaller in size can fit inside a
coat pocket. The PDA is optimized in size and weight, which means it has limited
functionality. The PDA market is divided into three functional segments:
(a) Digital assistants: In this segment, the hand-held device captures data
and digitizes it. It combines personal information management with
wireless voice, data and fax communication. They rely on a pen-based

user interface in place of a keyboard and makes heavy use of handwriting
recognition. Digital assistants include a wide array of information
management tools and notepad and sketchpad.
(b) Personal communication: In this segment, the mobile telephone has
an LCD screen integrated into it. Personal communicators are suitable
for users who want two-way communication and an all-in-one device. But
when an LCD screen is attached to the mobile phone then it is difficult
because a user cannot read the screen and talk on the phone at the
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same time. It is expected that in some time, the personal communicator

and the digital assistants will come together and will be obtainable in
various forms.
(c) Palmtops: In this segment, there is a large storage segment (probably
on CD-ROM) for the user who wants to carry a lot of data and is also able
to retrieve it easily. Palmtops give support to tasks that are personal, like
simple note taking, diary maintenance, expense tracking and many types
of calculations. Communications terminal allows accessibility to e-mails
and palmtops provide collective functionality of a personal organizer.
(a) The unguided media methods include radio-based, satellite-based
and light-based wireless systems.
(b) Land-based radio systems use high power transmitters and receivers
to send and receive data.
(a) Satellite microwave systems transmit signals between___antennas.
(b) Sub-notebook designs include applications in ____and___software.
13.5 Networking Standards for Mobiles

There are three basic types of mobile networking standards:
1. Time Division Multiple Access (TDMA)
2. Frequency Division Multiple Access (FDMA)
3. Code Division Multiple Access (CDMA)
1. Time Division Multiple Access (TDMA)
In TDMA, the radio channel is divided in a way that users are able to transfer
information in different time slots, to enable multiple users to share the channel.
TDMA is the first digital system standardized in North America. In TDMA, multiple
users, data services or sources are allotted different time-slices to access the
same channel. The available time slice is divided among multiple modulatedECommerce Unit 13
signal sources. Therefore, each transmitter uses the channel after the time
interval of (577 8) microseconds or 4.615 ms (GSM).
2. Frequency Division Multiple Access (FDMA)
Frequency multiplexing requires a separation of the frequency bands used for
transmission by different channels. The available frequency range is divided
into bands which are used by multiple sources or channels at the same time.
FDMA is an access method which assigns different slices to different users for
accessing the same carrier. FDMA suffers from inter-modulation.
3. Code Division Multiple Access (CDMA)
In CDMA neither the frequency domain nor the time domain are divided, rather
the same frequency is shared at the same time by all users. A code or sequence
is assigned to every user and the bit rate of the information transferred by the
user is bigger than the bit rate of the sequence.
As long the correct code is with the receiving device, it can select its
conversion out from others. Any further user that is added, the complete interface
enhances and it gets difficult to take out a users sequence that is unique to him
from other users. For CDMA, maximizing the battery life of mobiles and the
precise power control is significant in increasing the systems capacity. Mobiles
that transfer extreme power boost interference to other mobile phones.
13.5.1 Future Trends in Mobile Commerce
Most trends and advances are seen in Asia, Europe and North America. But
nowadays, almost all countries benefit from using M-commerce. Many
businesses use M-commerce as a competent process of meeting the demand
of their customers. That is the reason why mobile phones and PDAs have
become so popular.
M-commerce has been adopted by banks and many financial institutions
to access account information, for example, stock quotes, financial advices
and balance inquiries from anywhere and make transactions, like paying money
and buying stocks through the mobile phone. This method is termed as
m-banking or mobile banking.
Mobile phones are also becoming popular for providing news from
anywhere in the world. The demand for mobile services has led to the growth of
sports, entertainment, reservation and shopping service on the mobile phone.
M-commerce is being used by organizations to increase the scale of everything
and widening the rangefrom advertising, marketing and services. Security
plays an important role in mobile commerce. Mobile companies, today, invest a
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significant part of their revenue for the protection of their customers and
information related to them from intruders and online hackers.
13.5.2 Advantages of M-Commerce
The advantages of M-commerce are:

1. The mobile phone can be personalized as per the mobile owners
preference and also have full control over data.
2. Cost savings, innovative business opportunities and customer satisfaction
can be ensured.
3. Improved, quicker and efficient linkage with clients can be provided by
M-commerce.
4. The buyer and the seller can be brought closer through M-commerce
thus facilitating higher profits and better customer relationship.
5. With the help of the light-weighted device, M-commerce can be used
anywhere and anytime.
13.5.3 Disadvantages of M-Commerce
The disadvantages of M-commerce are:
1. Since mobile phones come with small screens; it limits the intricacies of
the applications.
2. Mobile phones contain graphics or processing power that are limited in
comparison to a PC.
3. Some overheads are added due to security problems.
4. Different networks have different approaches towards M-commerce.
Activity 2
Research the Net and gain info on 5G and wwww.

(a) There are two basic types of mobile networking standards.
(b) In CDMA, the same frequency is shared at the same time by all
users.
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(a) TDMA stands for______.
(b) FDMA suffers from______.
(c) Using M-commerce facility for making bank balance enquiries is
called_______.
13.6 Summary
When a mobile device is used for electronic commerce, it is called mobile
commerce or M-commerce.
WAP allows a mobile user with a WAP device to access and communicate
information and services.
WAP has three componentsWAP gateway, WAP server and client
device.
The WAP protocol stack has six layers, with each layer having distinct
roles.
The past two decades saw the evolution of several generations of wireless
mobile technology, from 0G 3G. While 4G is still in the evolution phase,
5G is in the pipeline.
The various components of mobile commerce can be grouped into two
categoriesthe wireless communication component and the access
devices for mobile computing.
Some of the popular information access devices are the portable computer,
hybrid computers and personal digital assistants (PDAs).
The three basic mobile networking standards are the Time Division Multiple
Access (TDMA), Frequency Division Multiple Access (FDMA) and Code
Division Multiple Access (CDMA).
13.7 Glossary
Mobile commerce: Using a mobile device such as a mobile phone or
PDA to conduct e-commerce
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Wireless Application application protocol (WAP): A set of protocols

that specifies the complete framework for mobile Internet access
3G technology: Uses spread spectrum techniques for media access and
encoding
WAP gateway: Provides communication between wireless networks and
the Internet
Satellite-based wireless system: Satellite microwave systems transmit
signals between directional parabolic antennas.
1. Demonstrate the role of wireless application protocol (WAP) in mobile

Internet access.
2. Describe the architecture of the WAP model. Add a note on the significance
of each layer of the model
3. Trace the evolution of the various generations of mobile wireless
technology. What are the advantages of one generation over its preceding
generation?
4. Compare the two components of mobile commerce.
5. List the various networking standards for mobiles. Explain their features.
6. Identify and list the various advantages and disadvantages of Mcommerce.
13.9 Answers

2. (a) WAP; (b) WAP gateway; (c) Binary encoding; (d) WDP

4. (a) TDMA, FDMA; (b) 2.5G
6. (a) Directional parabolic; (b) ROM, Windows
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8. (a) Time Division Multiple Access; (b) Inter-modulation
(c) Mobile banking

6. Refer to Sections 13.5.2 and 13.5.3
References

Unit 14 EDI, E-CRM and E-SCM

Structure
14.1 Introduction
Objectives
14.2 Electronic Data Interchange (EDI)
14.3 E-CRM
14.4 E-SCM
14.5 Summary
14.6 Glossary
14.8 Answers
References
14.1 Introduction
In Unit 13, you learnt that mobile commerce or m-commerce is the use of a
mobile device to conduct business transactions. The unit discussed in detail the
architecture of WAP (wireless application protocol) and the components of mobile
commerce. The unit also discussed that there are three mobile networking
standardsTDMA, FDMA and CDMA. Some of the advantages of m-commerce

are cost savings, innovative business opportunities and customer satisfaction.
In this unit, you will learn about EDI, E-CRM and E-SCM. EDI or electronic
data interchange involves the transfer of data between a sender and a receiver
through electronic means. Earlier, business communication relied heavily on
the postal department and courier services to transfer information related to
business between the buyer and the seller. Today, EDI has transformed the
way business is conducted.
Customer relationship management (CRM) involves techniques used by
organizations to build client relationships. As a strategy, it operates at the
corporate level, and its focus is to create and maintain customer relationships.
Many CRM software packages are commercially available; however, they differ
in their attitude toward CRM. As a method, CRM provides detailed information
regarding a customers buying preferences and needs. The company then uses
this information to enhance its products by adding new features, to set prices
for new products and decide promotion strategies, and to negotiate terms. The
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present age is that of electronic media. Companies conduct their business

through any electronic medium; hence, CRM is also called as e-CRM.
Supply chain management (SCM) is the delivery of a product at the right
time, place and price. Not only is supply chain management a leading costsaving
technique and means of revenue enhancement, it is also a competent
strategy of business transformation. What is exclusive to SCM is that it combines
the organizations internal system with those of its partners, customers and
suppliers. As a strategy, it finds versatility through such technologies as the
Internet, the electronic data interchange, transportation and so on.
Objectives
Recall the architecture of EDI
Identify and list the benefits of using EDI
Evaluate the importance of E-CRM in todays business world
Compute the various E-CRM solutions
Compare the various phases of E-CRM
State the uses of E-CRM
Describe the basic components of E-SCM
14.2 Electronic Data Interchange (EDI)

Earlier, companies used paper for conducting business. They used to enter
data into a business application, print the form containing the data, and mail
this form to a trading partner. The exchange of information between companies
relied heavily on the postal system. The trading partner, after receiving the form,
used to re-key the data into another business application. Inherent in this process
are poor response times and excessive paperwork and the potential for errors
as information is transcribed. The use of the postal system can add days to the
exchange process. The advent of business computers has enabled companies
to process data electronically, that is, exchanging information via electronic
means.
Electronic data interchange (EDI) is defined as the computer-to-computer
transfer of information in a structured and predetermined format.
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14.2.1 EDI Architecture and Application in Business

EDI software has four layers, namely business application, internal format
conversion, EDI translator and EDI envelope for document messaging. At the
senders side, these four layers make a package of the information and then
this package is sent over the value-added network to the target side where the
four layers follow the reverse process to obtain the original information.
Figure 14.1 EDI Transmission of Information
The first layer (business application) in the EDI process creates a

document, i.e., an invoice, in a software application. This software application
uses the internal format conversion to convert the document into the form an
EDI translator can understand, and sends the document to an EDI translator.
An EDI translator automatically reformats the invoice into the EDI standard
agreed by both the business entities. Then this business information is passed
on to the EDI envelope for document messaging, where business information
is wrapped in the electronic envelope of the EDI package and it is mailed to the
trading partner over VANs (value-added networks). The receiving trading partner
receives this EDI package and the process is reversed to obtain the original
invoice in the format the receiving trading partner can understand, and it is sent
to the application to process the invoice.
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To understand the process of EDI, consider the example of an organization

that has to send purchase orders to different manufacturers. To accomplish
this, the steps below are followed.
1. Preparation of electronic documents: The first step is to collect and
organize the data using the organizations internal application systems.
Rather than printing out purchase orders, the system builds an electronic
file of purchase orders.
2. Outbound translation: The next step is to translate this electronic file
into a standard format. The resulting data file will contain a series of
structured transactions related to the purchase orders. Note that the EDI
translation software will produce a separate file for each manufacturer.

3. Communication: The organizations computer automatically connects
to the value-added network, and transmits all files that have been prepared.
The VAN will process each file, routing it to the appropriate electronic
mailbox for each manufacturer. In case of manufacturers not subscribed
to the organizations VAN, the files are automatically routed to the
appropriate network service.
4. Inbound translation: The manufacturers retrieve the files from their
electronic mail boxes as per their convenience, and reverse the process
that the organization went through, translating the file from the standard
purchase order format to the specific format required by the manufacturers
application software.
5. Processing electronic documents: Each manufacturer processes the
purchase orders received in their internal application systems.
14.2.2 Benefits of EDI
EDI offers a number of benefits, some of which are as follows:
Speed: Information between computers moves more rapidly, and with
little or no human intervention. Sending an electronic message across
the country takes minutes or less.
Accuracy: The alternate means of document transfer suffer from the
major drawback of requiring re-entry into the recipients application system,
with the possibility of keying errors. But information that passes directly
between computers without having to be re-entered eliminates the chances
of transcription errors. There is almost no chance that the receiving
computer will invert digits, or add an extra digit.
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Economy: The cost of sending an electronic document is not more than

the regular first class postage. In addition, cost is also reduced due to the
elimination of re-keying of data, human handling, routing and delivery.
The net result is a substantial reduction in the cost of transaction.

(a) EDI is the exchange of data between computers in a structured and
predetermined format.
(b) EDI software has three layers.
(a) _________ is the first layer in the EDI architecture.
(b) _________ automatically reformats the invoice into the agreed EDI
standard by both the business entities.
14.3 E-CRM
The concept of E-CRM is derived from e-commerce. Like e-commerce, E-CRM

also uses net environment i.e., intranet, extranet and the Internet. It encompasses
everything that involves the management of relationships with clients and makes
use of information technology.
A CRM system has the following functions:
Encourages the philosophy of customer orientation
Recognizes aspects that are significant to customers
Develops end-to-end processes should be developed to serve clients
Provides successful customer support
Tracks sales related aspects
Handles customer complaints
Takes up customer-based measures
The Internet has become integral to business life. It provides companies
with opportunities that strengthen relationships with customers, allow mass
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communication and minimize customer-service costs. What is known as e-CRM

has its foundations in the Internet and Sales Force Automation (SFA), which is
the use of electronic methods to gather and analyse information regarding
customers. In fact, the definition of e-CRM states that: Activities that handle
customer relationships with the use of the Internet, electronic mediums and
web browsers. Obtaining and retaining customers time and attention is proving
to be a major challenge for companies. This is due to the fact that the medium
through which companies make an effort to identify with their customers are
themselves increasing everyday.
Moreover, information technology has reached a level of sophistication
where it can differentiate between messages from customers and personalized
services and messages. The following tools are used in e-CRM:
Creation of personalized web pages that recognize and reflect
customers preferences
Customized products or services
In other words, a business environment has almost all companies
connected via the Internet. E-CRM is more than just a tool that offers a
competitive advantage; it is mandatory for a companys survival.
14.3.1 E-CRM Solutions
E-CRM solutions have multifold benefitsdecreased costs, increased revenues
and improved customer service are only a few. E-CRM objectives can be attained
with the help of Web-based CRM specification development, Internet business
strategies, Web system designs, e-publishing and projects management
interactive interface design.
The strategy for e-CRM can be visualized in the following three steps:
Step-1: Customer Information Environment

First step is collecting information about the customer and creating a customer
information environment. It also consists of metrics programs that monitor
customer behaviour.
Step-2: Customer Value Orientation
This step focusses on operational effectiveness. Customers want value for
their money. They believe in a perceived value, and this is represented in
Figure 14.2.
E-Commerce Unit 14
Core Products and

benefits
+
Customized Service
benefits
Price
+
Costs others than
price
Perceived Quality
(Obtained)
Perceived Sacrifice
(Given)
Perceived
Value
Figure 14.2 Customer Value Orientation
Step-3: Customer Loyalty

This step focusses on the integration of the internal processes of an organization
with the customer in creating a community.
Most companies focus on attracting and retaining customers. on pulling
customer and holding them. In order to meet this requirement, companies require
e-commerce solutions and e-CRM that is customer directed. By using e-CRM,
both the parties benefit. Customers benefit since they can access information
on demand, have to spend less for services and get better discounts, whereas
organizations gain from increased profits and higher cost savings.
14.3.2 Phases of E-CRM
The following are the three phases of e-CRM:
1. Acquisition
2. Enhancement
3. Retention
Each phase has a different impact on customer relationship.
1. Acquisition: Acquire new customers by promoting the product or providing
new services or providing better quality with respect to convenience and
innovation.
E-Commerce Unit 14
2. Enhancement: Enhance the relationship by encouraging excellence in

cross-selling and upselling. This will deepen the relationship.
3. Retention: Each companys aim is to retain profitable customers and not
just acquire new customers. Today, almost all leading companies focus
on the retention of existing customers. Retention focusses on service
adaptability, i.e., it delivers not what the market wants, but what the
customer wants. Customer retention has replaced cost-competitiveness
and cost-effectiveness as the biggest concern for companies.
14.3.3 Implementing and Integrating CRM Solutions
Several CRM software packages that are available now help organizations
expand their CRM related activities. Organizations have the liberty to choose
any of these packages or build and design their own solutions. The following
important points need to be considered to implement CRM in an effective way:
Adoption of customer-focussed managers for better satisfaction
Creating an organization that follows a customer-focussed culture
Developing an end-to-end process for serving customers
Tracking every aspect of selling to existing as well as prospective
customers
Encouraging the habit of asking questions when helping customers with
problems
Moreover, when introduced into a companys other information systems,
CRM solutions prove to be more effective. One example is the Transaction
Processing System (TPS) which processes real-time data. This data is further
used by the sales and finance departments to quickly and accurately calculate
the financial position. This information, when transferred back to CRM, can
prevent customers from ordering an item that is unavailable.
14.3.4 Privacy Issues and CRM
CRM activities cannot be effectively and efficiently employed without certain
practices that ensure safety and privacy, because CRM systems have diverse
types of data stored in its systems. More data means that companies can provide
better service to its customers. A known example of data-related problem is the
phenomenon called cookies, which can glean information by tracking credit
card transactions. Management often tracks personal data in order to increase
revenue and profitsthe idea being that some customers tend to be more
profitable than others. CRM is so designed that it focuses on profitable customers.
E-Commerce Unit 14
The less profitable ones are deleted from the list. A websites design and quality
plays a critical role in determining the extent to which customers trust a company
and willingly conduct transactions and provide personal information. Just like
the Internet, e-commerce and e-CRM solutions are increasingly being used in
the corporate sector. Consequently, much time is being devoted to making the
system more sophisticated and safe for customers.
It is clear that customer relations are based on three things: service, trust
and loyalty. Customers have to believe that a company or business is working
with their best interest in mind. Actually, this trust creates an emotional bond
between the business and its customers. Without trust, there can be no
relationship.
14.3.5 Use of E-CRM
CRM covers the entire gamut of customer-related interactions and business. A
commendable CRM program is one that not only acquires customers and
provides them service, but also retains them. This can be done by practising
the following:
Providing round-the-clock technical assistance and customer service
Offering methods to manage and schedule follow-up sales calls
Recognizing customers value and developing suitable service strategies
for all customers
Storing information regarding customer preferences in order to target
customers selectively
Tracking all communication pertaining to a customer
Providing a system to rectify service insufficiencies
Providing a system to schedule and manage repair and maintenance and
on-going support
Identifying potential problems before they occur
Providing a method to handle complaints and issues
14.3.6 Failure of E-CRM
Designing, creating and implementing IT projects is not an easy task. It is
considerably risk prone since it involves a lot of money and a high chance of
failure. Nonetheless, the fact that the failure rate of CRM has dropped from 80
per cent to 40 per cent is indicative of a positive trend. The following are the
major issues that are related to CRM failure:
E-Commerce Unit 14
1. Intangible benefits are not easy to measure or value.

2. It is difficult to identify specific business problems and rectify them.
3. Absence of sponsorship from the active senior management.
4. User acceptance is not upto the mark.
5. Failure to automate a badly defined process.
14.3.7E-CRM vs CRM
Table 14.1 E-CRM vs CRM
E-CRM CRM
1. It provides information in response
to specific customer inquiries.
2. Promotion and discounts are
offered to individual customers.
3. Pricing of products is negotiated
with each customer.
4. New product features are created in
response to customer demands .
1. It has the uniform message of Push
and Sell for all customers.
2. Promotion and discounts are the
same for all customers.
3. The sellers set the pricing of products
for all customers.
4. CRM is determined by the seller,
based on research and development.
Activity 1
Research the Net and find the names of at least six CRM software packages.
(a) The first step in E-CRM involves collecting information about the
customer and creating a customer information environment.
(b) There are four phases in E-CRM.
(a) E-CRM has its foundations in the Internet and.
(b) The third phase of CRM is.
14.4 E-SCM
The Internet has enabled customers to search for specific products, that too at
prices they are willing to pay. Customers are the focus of modern supply chains.
E-Commerce Unit 14
It is important for manufacturers to know what their customers want, how to

package it, and where to ship it. Customers should be ready to change directions
rapidly especially if they are looking for a change. Similarly, manufacturing
processes and businesses should be scalable and agile. Manufacturers may
be out of business very soon if they do not implement established techniques to
succeed today.
A way of communicating and doing business with customers and suppliers
is through the Internet supply chain. Cracked and erratic supply chains have
become less tolerable mainly because customers are not ready to accept the
related costs and extended lead times. It is crucial to remember that the customer
is just a mouse click away from your competitors.
Supply chains enable companies to optimize business processes inside
and outside the company. They can deliver new products and services to
customers where they demand them and when they demand them.
14.4.1 Why E-SCM?
Supply chains have often been seen as rigid sequences of activities that
contribute to the manufacture, production and delivery of products. It involves
inflexible manufacturing plans, hypothetical shipping schedules and questionable
inventory forecasts.
The Internet has changed this conventional process into something which
is nearer to science. Organizations benefit from an Internet-enabled supply
chain in the following ways:
Minimize administrative overheads
Abstain costly disasters
Reduce the labour cost
Earn bigger profit margins on completed goods
Harvest on revenue-producing gains and cost cutting
Remove outdated business processes
Accelerate responsiveness and production to customers
Decrease needless inventory (thereby maximizing working capital)
Customer service can be improved and inventories can be reduced if a
companys supply chain is integrated effectively.
E-Commerce Unit 14
It is important to make sure that a companys internal systems work well

before they are extended over the Internet. This allows the automated supply
chain to generate optimum value.
14.4.2 Basic Components of E-SCM
The following are the five basic components of e-SCM:
i) Plan: The most strategic part of SCM is planning. All that is required is a
strategy to maintain those resources that cater to customer's demand for
a product or service. To monitor the supply chain, metrics need to be
planned and developed. This will help in cutting cost, increasing the
efficiency and delivering better quality to its customers.
ii) Source: A source once selected leads to supplier selection for the delivery
of goods and services that are required to make a product. Price should
be set by companies. Delivery and payment procedures with suppliers
should be made by companies along with matrices to improve and monitor
the relationships. The inventory of goods and services that you obtain
from suppliers is managed by it, together with getting shipments, validating
them, moving them to the manufacturing units and authorizing the
payments of suppliers.
iii) Make: This stage relates to the manufacturing of activities that are essential
for production, testing, packaging and delivery preparation. The most vital
metrics of supply chain are to measure levels of quality, produce output
and worker productivity.
iv) Deliver: This part of SCM is also called logistics. It manages the orders
receipts from customers, chooses delivery services to send goods to
customers, establishes an invoicing system to get payments and sets up
a group of warehouses.
v) Return: The difficult part of the supply chain is return. A network should
be created that will receive faulty and surplus products back from
customers and help customers who have trouble with the products that
are delivered.
14.4.3 E-SCM: How it Fulfils Customer Needs
All aspects of a business are covered by SCM. It starts from the raw materials
and finishes at the end-user. When you enter a shop to purchase a certain item,
try to imagine the sequence of steps that has brought it to the point where you
see it. You will find a price tag on the material, with all the details of its date of
E-Commerce Unit 14
manufacturing, date of expiry, lot number, etc. The shop has carefully placed it
on the shelf after procuring it from a distributor and noting all these details for
billing and tracking future complaints. The shop always maintains an inventory
of this and hundreds of other products that are available in the store, as well as
a minimum stock level and a re-order level.
When you complete your purchase, the point of sale updates this
information at various places. The stock level will decrease and revenue will
increase. If stock levels reach a certain level then the distributor has to replenish
the stock before it becomes zero and the distributor also has to be paid his due
amount. This chain is again pushed backwards to the lowest level of the supplier
who has to supply the material in time. By this process, there is constant flow of
money and material in order to satisfy the needs of the customer.
Actually, a supply chain manages the flow between different stages to
maximize productivity and minimize overstocking. The SCM system is a collection
of many applicationsdemand, inventory and transportation planning.
14.4.4 Advantages of E-SCM
The advantages of e-SCM can be divided into two categories:
Real time advantage
Strategic advantage
Real Time Advantages
The real time advantages of e-SCM are as follows:
Global trading capabilities
Knowledge can be exchanged globally
Provides enterprise-to-enterprise connectivity

Provides e-marketplace-to-e-marketplace connectivity
Provides a specific marketplace
Strategic Advantages
The strategic advantages of e-SCM are:
It supports the exchange of information through trading communities such
as employees, customers, suppliers, distributors and manufacturers.
It acts as an interface with any third-party software.
It is platform independent.
E-Commerce Unit 14
It is a fully integrated system.

It allows for rapid deployment and scalability.
Activity 2
Visit a local store and prepare a chart showing the various activities of its
supply chain. Find out the tools that are used to identify items and their
location along the supply chain.

(a) Traditional supply chains involve inflexible manufacturing plans.
(b) E-SCM maximizes administrative overheads.
(a) _________ are the focus of modern supply chains.
(b) E-SCM is platform _________.
14.5 Summary

Electronic data interchange (EDI) is defined as the computer-to-computer
EDI software has four layers, namely business application, internal format
conversion, EDI translator, and EDI envelope for document messaging.
E-CRM involves the effective management of customer relationships by
using information technology.
Some of the benefits of e-CRM solutions are decreased costs, increased
revenues and improved customer service.
By using e-CRM, both customers and companies benefit; while customers
benefit from accessing up-to-date information, less cost and better
services, the companies benefit from high profit and cost savings.
Traditional supply chains involved inflexible manufacturing plans,
hypothetical shipping schedules and inventory forecasts that were not
very dependable.
E-Commerce Unit 14
E-SCM comprises five basic componentsplan, source, make, deliver

and return. It manages the flow between different stages to maximize
productivity and minimize overstocking.
E-SCM has both real-time and strategic advantages.
14.6 Glossary
Electronic data interchange (EDI): Defined as the computer-to-computer
EDI translator: Automatically reformats an invoice into the EDI standard
agreed by both the business entities
Customer relationship management: Involves those techniques that
are used by companies to build their relationships with clients.
Transaction Processing System (TPS): A type of information system
that collects, stores, modifies and retrieves the data transactions of an
enterprise.
End-To-End System: A term used in many business arenas referring to
the beginning and end points of a method or service
Supply Chain Management (SCM): A systematic integration of suppliers,
Original Equipment Manufacturer (OEM), distributors and customers in
order to produce and distribute the right quantities, to the right locations,
at the right time, and at the cheaper cost, while satisfying the entire supply
chain partners
1. Explain the architecture of EDI. Add a note on the benefits of using EDI.
2. Discuss the importance of E-CRM in todays business world.
3. Explain the various E-CRM solutions.
4. Discuss the various phases of E-CRM. How do you implement and
integrate CRM solutions in an effective way?
5. What are the basic components of E-SCM?
6. Identify and list the various advantages of E-SCM.
E-Commerce Unit 14
14.8 Answers
2. (a) Business application; (b) An EDI translator
4. (a) Sales Force Automation; (b) retention
6. (a) Customers; (b) independent

4. Refer to Sections 1.4.3.2, 14.3.3 and 14.3.4
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E-Commerce

Sikkim Manipal University

Edition: Fall 2011

Sikkim Manipal University

invented, electronic, digital or mechanical, including photocopying, scanning, recording or by any

Dr G.P. Sudhakar Ramya S Gowda

Electronic commerce, commonly known as e-commerce or e-business, consists

Discuss the various security concerns of intranet and extranet

Unit 4 E-Commerce Requirements and Architecture: Explains the

Unit 1 E-Commerce Framework

The term e-commerce refers to the amalgamation of tools built on

Buying and Selling

1.3 Origin of E-Commerce

(a) E-commerce stands for _______________ commerce.

1.4 History of the Internet

1969 : The US Department of Defense started the first network among

1.5 E-Commerce Opportunities for Businesses

1.6 Working of E-Commerce

1.7 E-Commerce vs the Traditional Business Mechanism

every level and also lot of time.

4. State whether the following statements are true or false.

1.8 Advantages of E-Commerce

1. All-time processing: Customers can use the marketplace at all times

1.9 Disadvantages of E-Commerce

4. Legal formalities: Before implementing e-commerce services in the

5. Fill in the blanks with appropriate words.

6. State whether the following statements are true or false.

1.10 Main Goals of E-Commerce

It is widely acknowledged today that new technologies, in particular, access to

support for the commercial relationship between a company and individuals.

Increasing customer loyalty

Figure 1.2 The Process of E-Commerce

companys internal and external processes, in addition to allowing a company

(a) E-commerce aims to increased the quality, quantity and

1.13 Terminal Questions

Answers to Terminal Questions

Unit 2 Network Infrastructure for

2.6 TCP/IP Reference Model

Figure 2.1 Local Area

Metropolitan Area Network (MAN): Metropolitan Area Network or MAN (refer

Figure 2.2 Metropolitan Area

2.3 Ethernet: IEEE 802.3: Local Area Network (LAN) Protocols

(i) 10 Mbps - 10Base-T Ethernet (IEEE 802.3)

2.4 Wide Area Network (WAN)

Figure 2.3 Wide Area Network

2.5 The Internet

It is not possible for one to make an Internet. Still, organizations around

2.6 TCP/IP Reference Model

2.4 TCP/IP Layer Communications

2.7 Domain Names

Country Codes: This is a two-letter abbreviation for a particular country; for

6. Fill in the blanks with appropriate words.

2.8 Hyper Text Markup Language (HTML)

Levels of Heading: Six different levels up to <h1>,<h2>,<h3>,<h4>,

The corresponding coding of above HTML form is given below:

<input type=submit value=submit>

2.9 Simple Exercises in HTML

is a set of special codes included to control the layout and appearance of

2.12 Terminal Questions

Answers to Terminal Questions

1. Refer to Section 2.2

Unit 3 Network Infrastructure for

telecommunications in use today.

Figure 3.1 CGI Model