Amity School of Business

Amity School of Business

BBA, Semester 1 Computer in Management Ms Bhawana Gupta

Amity School of Business

MODULE-4 E-Commerce

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E-Commerce
Electronic commerce is an emerging model of new selling and merchandising tools in which buyers are able to participate in all phases of a purchase decision, while stepping through those processes electronically rather than in a physical store or by phone (with a physical catalog). The processes in electronic commerce include enabling a customer to access product information, select items to purchase, purchase items securely, and have the purchase settled financially. Electronic Commerce is an concept that describes the selling and buying of products, services and information via computer networks, including the Internet
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E-Business
E-Business refers to online transactions including interactions with business partners, customers and vendors. E-Business interactions are aimed at improving business processes and efficiency

The term E-Business" 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 the enterprise, its clients, and its partners.

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E-Business

The goal of any e-Business project is to create value. Value can be created in different manners: As a result of an increase in margins, i.e. a reduction in production costs or an increase in profits. E-Business makes it possible to achieve this in a number of different ways: Positioning on new markets Increasing the quality of products or services Prospecting new clients Increasing customer loyalty Increasing the efficiency of internal functioning
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E-Business
As a result of increased staff motivation. The transition from a traditional activity to an e-Business activity ideally makes it possible to motivate associates to the extent that: The overall strategy is more visible for the employees and favors a common culture The mode of functioning implies that the players assume responsibilities Teamwork favors improvement of competences As a result of customer satisfaction. As a matter of fact, eBusiness favors: a drop in prices in connection with an increase in productivity improved listening to clients products and services that are suitable for the clients' needs a mode of functioning that is transparent for the user 6

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E-Business
As a result of privileged relationships with the partners. The creation of communication channels with the suppliers permits: - Increased familiarity with each other - Increased responsiveness - Improved anticipation capacities - Sharing of resources that is beneficial for both parties

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E-commerce Advantages
Being able to conduct business 24 x 7 x 365 : E-commerce systems can operate all day every day. Your physical storefront does not need to be open in order for customers and suppliers to be doing business with you electronically. Access the global marketplace: The Internet spans the world, and it is possible to do business with any business or person who is connected to the Internet. Simple local businesses such as specialist record stores are able to market and sell their offerings internationally using e-commerce. This global opportunity is assisted by the fact that, unlike traditional communications methods, users are not charged according to the distance over which they are communicating. Speed : Electronic communications allow messages to traverse the world almost instantaneously. There is no need to wait weeks for a catalogue to arrive by post: that communications delay is not a part of the Internet / ecommerce world.

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E-commerce Advantages
Cost Reduction : E-commerce helps organizations decrease costs in creating, processing, distributing, storing and retrieving information. For example the communication and advertising costs could be lower by sending e-mails and using online advertising channels, than by suing television commercials or the print media. In terms of online ordering and online auction organizations, the costs could be lower than running an actual shop with the associated manpower. Allowing customer self service and 'customer outsourcing: People can interact with businesses at any hour of the day that it is convenient to them, and because these interactions are initiated by customers, the customers also provide a lot of the data for the transaction that may otherwise need to be entered by business staff. This means that some of the work and costs are effectively shifted to customers; this is referred to as 'customer outsourcing'.
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E-commerce Disadvantages
Physical product, supplier & delivery uncertainty: E-commerce purchases are made on trust. This is because, firstly, not having had physical access to the product, a purchase is made on an expectation of what that product is and its condition. Secondly, because supplying businesses can be conducted across the world, it can be uncertain whether or not they are legitimate businesses and are not just going to take your money. It's pretty hard to knock on their door to complain or seek legal recourse! Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever arrive.

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E-commerce Disadvantages
Returning goods: Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods get back to their source? Who pays for the return postage? Will the refund be paid? Will I be left with nothing? How long will it take? Contrast this with the offline experience of returning goods to a shop. Privacy, security, payment, identity, contract : Many issues arise - privacy of information, security of that information and payment details, whether or not payment details (eg credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply.
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Types of E-Commerce
Business to Consumer (B2C): It is the direct trade between companies and end consumers. This is the direct selling via the Internet. For example: selling goods direct to customer and anyone can buy any products from the suppliers website. In this mode is intended to benefit the consumer and can say business to consumer (B2C) Ecommerce works as retail store over internet.

Business to Business (B2B): Business to business Ecommerce existed in marketing from the very beginning. It is the trade that takes place between company. For example: If I give my companys payroll work to another accounting firm, it would be deemed as outsourcing.
Consumers-to-business (C2B)- In todays Ecommerce arena, it is growing trend wherein consumers demand specific products or services from respective businesses. For example: I contact a tour and travel operator via their website for purchasing a holiday package, freelancers

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Types of E-Commerce
Consumer-to-Consumer (C2C)- Usually, this type of Ecommerce works as Consumer to Business to Consumer (C2B2C). It essentially means that a consumer would contact a business in search for a suitable customer. Most of the auction websites (like eBay) and matrimonial websites are working on this methodology. Government-to-Consumer (G2C) The consumer is needed a way by which they could communications with the government in a faster way. The common man of India needed an alternative to reduce the day- to-day hassles of communicating with various government bodies. The most successful effort that has been highly appreciated by a lot of people has been that of the Indian Railways.

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E-Commerce Business Models

Websites are not free; every one costs money to develop and maintain. The cost and potential revenue constitute a Business model.

It is a way of doing business to sustain a business-generate revenue. Free e-mail service has a business model, Free home pages fir into a business model. The business model spells out how a company makes money by showing where it is in the value chain.
There are different models in e-commerce . Each model has it own unique features and offering.
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E-Commerce Business Models

STOREFRONT MODEL This models provides a Web site with product information, a shopping cart, and an online ordering mechanism. Users select the products they want to buy ad place an order thought shopping cart. The product price is usually fixed, but can be negotiable. The storefront model is typical physical goods and services like books, computer or a pizza delivery service. The merchant reaches customers directly and sells without retailers ort intermediaries. CLICK-AND-MORTAR MODEL- A click-and-mortar shop combines a Web Site with a physical store. The additional advantages are that is already has an established brand name, and that it can use its physical store to promote the Web site. Further, users can return unwanted or defective items simply by going to the store rather than mailing it to a Web site operator.
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E-Commerce Business Models

BROKER MODEL Brokers are market makers. As intermediaries , they bring buyers and sellers together and facilitate transactions between them. Those can be Business- to consumer(B2C), Businessto-Business(B2B), or consumer-to-consumer(C2C)markets. A broker makes money by charging a fee for every facilitated transaction or a percentage of the price of the transaction. SUBSCRIPTION-BASED ACCESS MODEL- Many service operators provide subscription based access to their service. A visitors pays a fixed fee per month or year in return for unlimited access to the service. Access beyond a certain limit is subject to a extra. This model is typical for accessing databases with articles, news and online games etc However, possibility of subscription-based models is doubtful. This model is slowly gaining acceptance, because 16 many Internet users are unwilling to pay to view content on the Web.

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E-Commerce Business Models

PREPAID ACCESS MODEL-Service like telephony offer payment by the minute and are handled via a subscription. A viable alternative is prepaid access, where users pay a certain amount for access to the service for a certain time period. It is similar to paying for a prepaid telephone card, which can be renewed for the same charge. In most cases, the card is a smart card that stores the minutes purchased. The available credit on the smart card is reduced during usage of the service. Prepaid schemes give users greater control over how much to spend on the service.

BUILT TO ORDER MERCHANT MODEL - Handles the address part of each packet so that it is delivered to the right destination. Usually , each gateway computer on the network checks this address to identify where to forward the message. This implies that all the packets of a message are delivered to the destination regardless of the route used for delivering the packets. 17

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E-Commerce Applications
Supply chain management Video on demand Remote banking Online marketing and advertisement Home shopping Auctions E-Marketing M-Commerce etc..

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E-commerce Technologies
Internet Intranet Extranet Firewall Cryptography Digital Signature Digital Certificates
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Firewall
A Firewall is a device with a combination of software and hardware , which guards the entrance to a private network and keeps out unauthorized traffic. It also serves the dual purposes of guarding the data and monitoring the traffic that is flowing out from the private network. Firewalls are typically located at the boundary of the networks. Role of firewalls a) Data Integrity Only authorized persons should be able to change or modify the data. b) Authentication Users must genuinely be who they claim to be and not imposters c) Confidentially or Unauthorized Private and sensitive data must be hidden from unwanted users.
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Cryptography
The translation of data into a secret code Encryption is the conversion of data into a form, called a cipher, that cannot be understood by unauthorized people. Decryption is the process of converting encrypted data back into its original form, so it can be understood. Plaintext + key ====== Cipher Text + key ==== Plaintext

2 Types PrivateKey Cryptography (Symmetric Encryption) & Asymmetric Encryption

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PrivateKey Cryptography (Symmetric Encryption) In private-key cryptography, the sender and recipient agree beforehand on a secret private key. The plaintext is somehow combined with the key to create the cipher text. The method of combination is such that, it is hoped, an adversary could not determine the meaning of the message without decrypting the message, for which he needs the keys. The following diagram illustrates the Encryption Process . The following diagram illustrates the Decryption Process .

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Private-key methods are efficient and difficult to break. However, one major drawback that the key must be exchanged between the sender and recipient beforehand, raising the issue of how to protect the secrecy of the key.

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Public-Key Cryptography (Asymmetric Encryption) A encryption system that uses two keys -- a public key known to everyone and a private or secret key known only to the recipient of the message.
An important element to the public key system is that the public and private keys are related in such a way that only the public key can be used to encrypt messages and only the corresponding private key can be used to decrypt them

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E-Commerce : Encryption contd

(Alices private key)

(Alices public key)

Bob

Doug

Alices public key is known to all

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"Hey,Alice, how about lunch at Taco Bell. I hear they have free refills!"
Bob (S)

Encrypt with Alices public key

HNFmsEm6Un BejhhyCGKOK JUxhiygSBCEiC 0QYIh/Hn3xgiK BcyLK1UcYiY lxx2lCFHDC/A

Alice (R)

HNFmsEm6Un BejhhyCGKOK JUxhiygSBCEiC 0QYIh/Hn3xgiK BcyLK1UcYiY lxx2lCFHDC/A

"Hey,Alice, how about lunch at Taco Bell. I hear they have free refills!"
Decrypt with Alices private key
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Digital Signature

A digital signature is an electronic signature that can be used to authenticate the identity of the sender of a message or the signer of a document, and possibly to ensure that the original content of the message or document that has been sent is unchanged. A digital signature can be used with any kind of message, whether it is encrypted or not, simply so that the receiver can be sure of the sender's identity and that the message arrived intact. A digital certificate contains the digital signature of the certificate-issuing authority so that anyone can verify that the certificate is real.

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Digital Signature

Encrypt with Alices private key

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Digital Signature

Append

Alice now passes the message to Bob

Decrypt with Alices public key

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Digital Signature

IT Act 2000 of India defines digital signature to mean authentication of an electronic record by a person in whose name digital certificate is issued by means of an electronic method.
These certificates are essential for establishing whether the public key belongs to the purported owner and if a competent authority has attested the certificate information.

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Digital Certificate

It is a signed package containing a persons name and his/ her public key. The purpose of such certificates is to guarantee that the public key actually belongs to the correct person. These certificates are issued by independent third party that everyone trusts.

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Alice Info: Name Department Certificate Info: Expiration Date Serial Number

Alices Public Key:

Signature of Certificate Authority

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Alice now passes the message to Bob

Digital Signature encrypted with Alice Public Key

Certificate is valid

+
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Decrypted using CA public key

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Message Digest
A message digest is a number which is created algorithmically from a file and represents that file uniquely. If the file changes, the message digest will change. In addition to allowing us to determine if a file has changed, message digests can also help to identify duplicate files.

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E-Commerce : Process
Five Step Process Step 1: Create your website Step 2: Set up an e-commerce store Step 3: Get a merchant account and payment gateway
Step 4: Create a secure payment environment Step 5: Generate traffic
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Electronic Payment System

Electronic payment systems are online payment systems. The goal of their development is to create analogs of checks and cash on the Internet.

Types of Electronic Payment System Electronic Cheques Credit Cards Debit Cards Smart Cards
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An electronic cheques are modeled on paper checks, except that they are initiated electronically. They use digital signature for signing and endorsing and require the use of digital certificates to authenticate the payer, the payers bank and bank account. The are delivered wither by direct transmission using telephone lines or by public networks such as the Internets An electronic check transaction consists of the following steps: Phase I: Purchasing goods 1. The consumer accesses the merchant server, which presents its goods to the consumer. 2. The consumer selects the goods and purchases them by sending an electronic check to the merchant. 3. The merchant may validate the electronic check with his/her bank for payment authorization. 4. Assuming the check is validated, the merchant closes the 38 transaction with the consumer.

Electronic Cheques

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Electronic Cheques
Phase II: Depositing checks 5. The merchant forwards the checks to his/her bank electronically. 6. The merchants bank forwards the electronic checks to the clearing house for being cashed. 7. The clearing house works with the consumers bank, clears the check and transfers money to the merchants bank, which updates the merchants account. 8. At a later time, the consumers bank updates the consumer with the withdrawal information.
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Debit Card
Debits cards are also known as check cards. Debit cards look like credit cards or ATM (automated Teller Machine) cards , but they operate like cash or personal checks. The word debit means subtract and, as the name suggests, your debit card will subtract money from your account each time you use it.

We can use it as an ATM card as well, to withdraw cash from your account and carry out other ATM transactions. However, you can't use a debit card to obtain credit. This can be an advantage since you can only buy what you can afford.
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Credit Card
A credit card allows you to borrow money when making purchases. The money isn't directly debited from your bank account at the time of purchase; instead, you are sent a bill every month for the sum total of your purchases.

You can choose to either pay your bill in full or in part. If you choose the latter, you will have to pay interest on the balance.
The ability to obtain credit is both a blessing and a curse. It allows you to fund big purchases when you are short of money, giving you the option to pay them off over a period of time. However, you must be disciplined and not spend beyond your means.
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Smart Cards
Smart cards are cards that look like credit cards, but store information on a microprocessor chip instead of magnetic strips. A microchip can hold significantly more information than a magnetic strip. Because of this capacity, a single smart card can be used for many different purposes. Unlike magnetic strip cards which can be read by any magnetic reader, and are therefore vulnerable to loss or theft, a smart card can be password-protected to guarantee that it's only used by the owner.

Smart card is a mini-computer without the display screen and keyboard. Smart cards contain a microchip with an integrated circuit capable of processing and storing thousands of bytes of electronic data.
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E-Commerce Security

In case of e-commerce, the biggest risk today is to ensure data security.

The electronic system that supports e-commerce can fail due to fraud, theft of confidential information, disruption of service, or loss of customer confidence.

Designing e-security involves five steps: 1. Adopting a security policy 2. Assessing Web security needs 3. Designing security environment 4. Policing the security perimeter 5. Authorizing & monitoring the security system
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E-Commerce Security issues

The following points outline the security issues related to e-commerce. Access Control : If access control is properly implemented, many other security problems, like lack of privacy, will either be eliminated. Access control ensures only those that legitimately require access to resources are given access and those without valid access cannot have access. This includes both physical access as well as logical access to resources. For example, being able physically to enter a building or having access to network equipment is one example of a threat. Privacy : ensures that only authorized parties can access information in any system. The information should also not be distributed to parties that should not receive it. Issues related to privacy can be considered as a subset of issues related to access control. 44

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E-Commerce Security issues

Authentication : ensures that the origin of an electronic message is correctly identified. This means having the capability to determine who sent the message and from where or which machine. Without proper authentication, it will be impossible to know who actually placed an order and whether the order placed is genuine or not. Non-repudiation : is closely related to authentication and this ensures the sender cannot deny sending a particular message and the receiver cannot deny receiving a message. If this happens infrequently, it may not significantly harm e-commerce, however, on a large scale this can be devastating. For example, if many customers receive goods and then deny placing an order, the shipping handling and associated costs with then order can be significant for the company processing the orders.

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E-Core Values
Ethical Issues Legal Issues Taxation Issues International Issues

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Ethics can be described as Fairness, Justice, Equity, Honesty, Trustworthiness, and equality. Stealing, cheating, lying or backing out of ones words all describe lack of Ethics. Code of Ethics: is a declaration of the principles and beliefs that govern how employees of an organization are expected to behave. E-commerce & Ethics: Threats to Ethics are due to: faster computers and advanced networks, massive distributed databases, ease of access to information, transparency of software, and view that captured information can be used as competitive weapon. Privacy factor: The concern relates to collection of electronic data about consumers by businesses; security of data transmission; and unauthorized access / reading of personal files. 47

Ethical Issues

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Every legitimate business operates in a legal environment. However, many of the legal issues that arise in e-commerce environment are not settled due to lack of specific laws and legal guidelines. When a product is bought over the Internet and found defective, liability becomes an Issue. Who is liable and for what reasons? Each party involved (e-merchant, vendor, shipper and manufacturer) is potentially vulnerable to legal action. Legal issues revolve around: Fraud, Negligence, Misrepresentation, warranty, non-delivery, return, payment, damaged goods, jurisdiction, etc. 48

Legal Issues

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Taxation issues are the most controversial issue facing ecommerce & global taxation authorities. In an e-commerce environment, collection of tax is not easy, due to, location of the merchants business, location of buyer, the type of goods, etc. Each state and country has different sales taxes & jurisdictions. For example, product A may be taxable in Country 1 & not in Country 2 and even the taxation may differ in different states of the same country.
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Taxation Issues

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International Issues

International issues primarily revolve around control of web-site contents & related e-commerce transactions. Major concern on international level are: - What right does any one country have to determine the contents/material available on the Internet. - Can a country regulate any entity in cyberspace & not on the soil of that country. Since no common existing international laws apply to internet & e-commerce, legislation is best left upto individual countries and their ISPs.
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Digital Certificates
Digital certificates are the equivalent of a driver's license, a marriage license, or any other form of identity. The only difference is that a digital certificate is used in conjunction with a public key encryption system. Digital certificates are electronic files that simply work as an online passport. Digital certificates are issued by a third party known as a Certification Authority such as VeriSign. These third party certificate authorities 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. Digital certificates have two basic functions. The first is to certify that the people, the website, and the network resources such as servers and routers are reliable sources, in other words, who or what they claim to be.
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Digital Certificates
The second function is to provide protection for the data exchanged from the visitor and the website from tampering or even theft, such as credit card information.

A digital certificate contains the name of the organization or individual, the business address, digital signature, public key, serial number, and expiration date. When you are online and your web browser attempts to secure a connection, the digital certificate issued for that website is checked by the web browser to be sure that all is well and that you can browse securely. The web browser basically has a built in list of all the main certification authorities and their public keys and uses that information to decrypt the digital signature. This allows the browser to quickly check for problems, and if everything checks out the secure connection is enabled. When the browser finds an expired certificate or mismatched information, a dialog box will pop up with an alert.

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