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Unit - I - E-Commerce
Unit I
Unit II
Unit III
Unit IV
E-commerce means buying and selling of goods and services over the internet. This include both business to business and business to consumer (B2C) transactions. E-Commerce deals with the exchange of money for soft or hard goods and services.
E-Commerce is a general concept covering any form of business transaction or information exchange executed using information and communication technologies. E-Commerce take place between companies, between companies and their customers or between companies an public administration. Electronic commerce includes electronic trading of goods, services and electronic material.
Definition : E-commerce is like so much in the areas of business and information system the subject of numerous definitions. Some authors see e-commerce as largely or entirely an internet phenomenon.
Seddon (1997) has suggested that the world has just entered a third new phase in the evolution of IT capabilities : the internet era. The suggestion divides the evolution of information technology into 20 year period
1955 – 1974 	The electronic Data processing era
1975 – 1994	    The management information system era
1995 – 2014?	The Internet era
Features of E-Commerce
1) It include electronic trading of goods and services
2) It can be applied to trade cycle
3) It is fasted growing web page application
4) It completes the business transaction in few minutes
5) It offers services to customer for 24 hr
6) It increases the efficiency of the trade
7) It provides diverse types of product
8) It offers services for all days
9) It extends the scope of business
10) It provides better customer services
11) It uses EDI technique for regular business transaction
12) It offers qualitative products at reasonable price
13) It provides facility of online transaction
14) Use of electronic cash, cheques & smart cash cards are notable features.
Function of E-Commerce
The four functions of E-Commerce are :
• Communication : The aim of communication function is to deliver information and/or documents to facilities business transitions. For ex – e-mail.
• Process Management : The process management function covers the automation & improvements of business processes.
• Service Management : Service Management function is the application of technology to improve the quality of service.
• Transaction capabilities : Transaction capabilities provides the ability to buy/sell on the internet or some other on-line service. Ex- Rediff.com
Benefits of E-Commerce
1) Reduced costs to buyers from increased competition in procurement, as more suppliers are able to compete in an electronically open marketplace.
2) Reduced costs to suppliers by electronically accessing on-line database of bid opportunities by online abilities to submit bids, and by on-line review of awards.
3) Reduced errors, time and overhead costs in information processing by eliminating requirement for reentering data.
4) Reduced inventories, as the demand for goods and services are electronically linked through just in time inventory and integrated manufacturing techniques.
5) Reduced time to complete business transations, specifically reduced time from delivery to payment.
6) Better quality of goods as standardized specifications and increased competition; also better variety expanded markets and the ability to produce customized goods.
7) Increased access to a client base. Identifying and locating new clients and new markets.
8) Cost-effective document and fund transfer.
9) Faster time to market as business processes are linked, eliminating time delay between steps within the process.
Impact of E-Commerce of Business
E-Commerce is impacting in a broader way on most of the business organizations. It is to decide how our organization is equipped to use e-commerce technology. This is the most important and difficult part of defining our strategy, because of the multifaceted nature of e-commerce and the various alternative it presents. The variables is this issue involved are :
• Need of change
• Risk avoidance
• State of the current operation
• Competition and financial stability
These will change the geography of our e-commerce landscape. The factors and components that affect our strategy development is shown in the figure.
Traditional Commerce Vs E-Commerce
E-commerce involves combination of :
• Information technology
• Telecommunications technology
• Business processes

Advantages of E-Commerce
1) Companies are interested in electronic commerce because it can help in the increase of profit.
2) Electronic commerce can increase sales, decrease recurring costs and eventually end up in higher profits.
3) Unlike making advertisement in billboards, sending product catalogues to different customers through post, advertising can be easily done on the web at a lesser cost.
4) E-Commerce not only increases sales opportunities, but it also increases buying opportunities.
5) E-Commerce provides buyers with a wider range of choices than traditional commerce as it can consider many different product and services form a wider variety of sellers through the web.
6) E-commerce can be extended for the welfare of the society. Particularly, e-governance transaction in the form of electronic bill payment to the government, tax refunds to the public.
Disadvantages of E-Commerce
1) E-Commerce possesses disadvantages as well. Some businesses will never do business electronically,
2) Items that need to be inspected through touch and smell are not possible to sell through e-commerce websites.
3) High cost items such as custom-designed jewellary and antiques is not possible to inspect adequately form a different geographical location, regardless of the virtual reality technologies that might be in use.
4) One major disadvantages of e-commerce today is the rapidly developing pace of the underlying technologies.
5) Perishable grocery products, such as fruit and vegetables are harder to sale electronically, as customer want to examine and select specific items that are still fresh and appealing.
Electronic Commerce and the Trade Cycle
E-commerce can be applied to all, or to different phases, of the trade cycle. The trade cycle varies depending on :
• The nature of the organization involved.
• The frequency of trade between the partners to the exchange
• The nature of the goods or services being exchanged
The trade cycle has to support :
• Finding goods or services appropriate to the requirement and agreeing the terms of trade.
• Placing the order, taking delivery and making payment
• After-sales activities such as warrantee, service etc.
There are numerous version of the trade cycles depending on the factors outlined above and for may transaction, further complicated by the complexities of international trade.
• Regular, repeat transactions between commercial trading partners
• Irregular transaction between commercial trading partners where execution and settlement are separated
• Irregular transaction in once-off trading relationships where execution and settlement are typically combined.
Electronic Markets
An electronic market is an inter-organizational information system that provides facilities for buyers and sellers to exchange information about price and product offerings. The electronic market is primarily about the search phase of the trade cycle. The electronic market is most effective in assisting the buyer in a commodity market where product are essentially identical across all sellers.
“The effect of an electronic market in a commodity market is a more efficient distribution of information which causes decreasing profit possibilities for sellers.”
Usage of E-Market
E-Market gives easy and fast access to data for product and services to the customers. The main use of E-Market is spreading and publishing information for the use of customers. E-Market is also referred as search phase of the trade cycle.
The best example of E-Market is airline tickets booking or enquiry. The other E-market system is stock market.
Airline booking system and stock market system. Both systems helps users to search information, marking enquiry or to check the current status.
E-Market helps to serve or to solve customer’s queries or problem. Models of E-Market are to different types that are :
1. Virtual superstores
2. Electronic Storefronts to existing services
3. Bid/ask marketplaces
4. Virtual order centers
5. Intranet-based centers
6. Intranet-based electronic business communities
7. Virtual trading marketplaces.
1. No need of Middlemen : e-market is direct online between producer and customer. Hence there is no need of middle man in the distribution system which leads to saving in cost of commission.
2. Trading at low cost : Trading on internet require less charges. There for operation cost of trading is very low as compared to traditional commerce
3. Expansion of market : Worldwide buyer and sellers joint hands in market.
4. Increase in Profit : Managing marketing activities through internet is profitable. It allows selling the products in many countries.
5. Searching Cost : It saves searching cost by providing all information at a time. It also decrease overall cost of the product.
1. Insufficient database : database with regard to producer, customer is not sufficient. There fore information from all types of customers and suppliers is still not available on internet.
2. Lack of availability of consumer goods : Consumer’s goods for daily needs are not completely available on E-Market. Daily needs such as vegetables, fruits, breads, milk are not available on E-market.
3. Mindset of customers : Majority of the customers do not know how to use internet. They are not fully aware about the benefits of E-commerce. Therefore they like the traditional approach of buying and selling. Today we can easily notice that majority of the people would like to visit market place for purchasing the goods, this trend shows that the majority of the customers would like to continue with the traditional market and not E-market.
4. Skill person : To handle this system.
Future of E-Market
The evolution to more open and interoperable electronic market place will depends upon the mass use of internet as E-market uses internet, co-operation between e-market availability of electronic business rules. On the basis of these E-market can have following future :
1. The use of Internet will make users aware for E-market and its use which leads to the mass use of E-market.
2. Instead of visiting travel agent, customer can visit online ticket booking of railway or airline website. It provides information of flights schedules or seat availability and can be book ticket
3. Customer can search online shops for the required product and services which help to get these product and services in low price without any middlemen.
4. Within a vertical industry. For Ex. a consumer would be able to manage all financial holdings across the various financial institutions that are maintaining them.
5. Across co-operating industries, but focused on a uniquely identified process.
6. The E-market providers can make their services “Open” to the available E-Market.
Electronic Data Interchange (EDI)
EDI is based on a set of standardized messages for the transfer of structured data between computer applications. It can have many applications, e.g. sending test results from the pathology laboratory to the hospital or dispatching exam results from the exam boards to schools, but it is principally used for trade exchanges : orders, invoices, payments and the many other transactions that can be used in national and international trade exchanges.
EDI is used for regular repeat transaction, see Figure. It takes quite a lot of work to set up systems to send and retrieve EDI message and in general, It is not applicable to one-off exchanges.
EDI means the electronic exchange of business documents in a computerized standard format which is universally accepted between two trading partners. In simple word EDI refers to paperless trading.
Thus EDI means exchange of documents in standardized electronic format between two or more business organizations automatically by using electronic media such as computer application of one business organization with computer application to another business organization.
Future of EDI
1) Use of electronic devices such as computer for transaction.
2) Trading partners have agreed upon the standard format of the business documents
3) Use of standard format for all the business documents to be exchanged for completing business transaction.
4) Both business organization should use standard format documents
5) EDI follow the ANSI standards which are universally accepted
6) It follows the principles of co-operation
7) It facilitated “Paper less trading”
8) It uses value added network.
9) It expands the existing process of business organization
10) This system is universally accepted
Benefits of EDI
EDI beneficial for both sender or receiver
1. Improvement in overall quality : By better record keeping, fewer errors in data, reduction in processing time, less reliance on human interpretation of data, minimized unproductive time.
2. Inventory Reduction : It permits faster and more accurate filling of orders, helps reduce inventory assists in JIT inventory management.
3. Provides better information for management decision marking. It provides accurate information and audit trails for transitions enabling business to identify areas offering the greatest potential for efficiency improvement or cost reduction.
4. Minimization of data Entry errors : The notable feature of EDI is easy transfer of the entire data as per requirement. EDI maintains accuracy in transfer to database as there is no need to type or retype the data again and again.
5. Improved and fast communication : EDI is better method of communication within few minutes with suppliers.
6. Better Customer Service : EDI provides better service to both sender and receiver, better service is one which given at right time to the right person with right price.
7. Paper less Transactions : In paper based system every transaction is supported by paper source document.
8. Efficient Management : Better planning, organizing, communicating, co-ordinating and controlling EDI transactions over internet is a notable feature.
Limitations of EDI
1) High Costs : Application are costly to develop and operate. It is difficult for new users.
2) Limited accessibility : It does not allow consumers to communicate or transact with vendors in an easy way.
3) Rigid Requirement : Needs highly structured protocols, preciously established arrangement, unique proprietary bilateral information exchanges.
4) EDI application automate any certain portion of the transaction.
5) Application are narrow in scope
EDI Trade Cycle
The EDI trade cycle involves trading partners who wants to exchange data from the organization. There may be two companies with a common customer or two banks whose customers wants to deal with one another or between two divisions of the same company.
Every trade comprises two main activities i.e. buying and selling. Thus two or more main partners involved are manufacturer or buyer and supplier.
1) Trading partners will have the flow of data between them through exchanges. The simplest the most common form of exchange is where one partner wants to send a single message
2) The recipient of data should be authorized recipient of such electronic data interchange. After confirming authorization the sender transfer or exchange data.
3) The exchange divide messages on which most EDI standards concentrate.
4) After receiving the data the receiver transfer it to its own computer system for further processing to obtain output.
Internet Commerce
E-Commerce can be and is used for once-off transaction. This area of trade is typified by the consumer purchasing over the internet but there are other networks :
• Television sales channels are in use in the US;
• The French Minitel is a mature example of an interactive public access network;
• And this type of e-commerce is also used by organization to make once-off or infrequent purchases of items such as computer and office supplies.
The Internet can be used for all or part of the Trade cycle :
• The first stage of the trade cycle is search and the facilities of the internet can be used to locate sites offering, or advertising, appropriate goods or services;
• An increasing number of sites offer facilities to execute and settle the transaction, or in normal parlance to make a purchase – delivery may be electronic or by a home delivery service depending on the nature of the goods or service being offered. The use of the internet for on-line purchasing may or may not follow a search – publishing a web site address is an increasingly common feature on conventional advertising.
• The final use of internet e-commerce is for after-sales service. Many IT providers now offer on-line support and on-line services such a banking are arguably, a special case of the use of after-sales transactions.
Internet Security
Secure Transactions
On the basic of early experience, Internet was finding a way to safely buy and sell goods or transfer funds over it. As messages go through so many computer between a buyer and seller, or transaction was secure. Details of credit card numbers and other sensitive information could easily be captured. The goal was to enable e-commerce by providing a safe, convenient and immediate payment system on the internet for transaction between consumers, merchants and their banks as well as between individual by processing them is real time. The secure payment system works as follows :
• If we visit the merchant’s website and select items to be purchased and enter shipping instructions. The merchant’s server then returns to us a summary of the item, price and transaction ID
• We have to click on the pay button which launches the cyber cash wallet. Choose a credit card option and click OK to forward the order and encrypted payment information to the merchant.
• The merchant receives the packet, strips off the order and forwards the encrypted payment information digitally signed and encrypted with our private key to the cyber cash server.
• The cyber cash server receiver the packet, takes the transaction behind into firewall and off the internet unwraps data within a hardware-based cryptobox.
• The merchant’s bank forwards t authorization request the issuing bank via the card association or directly to the respective site. The approval or denial code is sent bank to cyber cash.
• Cyber cash returns the approval or denial code to the merchant who passes it on to us.
Security Procedure
Firewall :- The main function of any wall is to offer protection. Firewall is a reliable accepted security measure. Firewall is a software that regulates who can access the internet. It is a software/Hardware combination that separates an internal local area network from the external internal. It is similar to the laxman rekha of Ramayana, in which no one can cross, except the authorized person.
Encryption :- It is the scrambling of digital messages in such a way that only the sender and receiver can read the message. Encryption is the process that hides meaning by changing messages into unintelligible message. Customer names, addresses and credit card numbers are processed by complex mathematical encryption algorithms to ensure that only the authorized server to which they are connected can decode the information .
Password :- A password is a secret word or string of characters that is used for authentication, to prove identity or gain access to a resource. The password must be kept secret. The use of passwords is known to be ancient. Sentries would challenge those wishing to enter an area of approaching it to supply a password or watchword. Sentries would only allow a person or group to pass if they knew the password. It modern time user name and password are commonly used by people during a log in process that controls access to process that controls access to protected computer operating systems.
Access control List : An access control list (ACL) is a list of permissions attached to an object. An ACL specifieds which users – or system processes—are granted access to objects, as well as what operations are allowed to be performed on given objects.
Digital Certificate : Digital certificates are the equivalent of a driver’s license, a marriage license, or any other from of identity. The only difference is that a digital certified is used in conjunction with a public key encryption system. Digital certificates are electronic files that simply work as a online passport digital certificate are issued by a third party known as a certification authority such as verisign or thawte. These third party certificate authorizes have the responsibility to confirm the identity of the certificate holder as well as provide assurance to the website visitors that the website is one that is trustworthy and capable of serving them in a trustworthy manner
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