LESSON 1

INTRODUCTION TO E-COMMERCE

DEFINITION OF COMMERCE
The exchange of goods and services for money

Consists of:

Buyers - these are people with money who want to

purchase a good or service.
Sellers - these are the people who offer goods and services
to buyers.
Producers - these are the people who create the products
and services that sellers offer to buyers.

ELEMENTS OF COMMERCE
You need a Product or service to sell
You need a Place from which to sell the products

You need to figure out a way to get people to come to your place.
You need a way to accept orders.
You also need a way to accept money.
You need a way to deliver the product or service, often known as

fulfillment.
Sometimes customers do not like what they buy, so you need a way to
accept returns.
You need a customer service and technical support department to
assist customers with products.

HISTORY OF THE INTERNET

Started as a US government project in 1969.
The purpose was to create a net that can function even if

one center is destroyed in a military attack.

- Hub and spokes can be useless if the hub is destroyed.
- Network can continue to be functional even if some
nodes are destroyed, as long as information can pass
through other nodes.
Effective in 1971 with computers on both coasts of the US.

IN THE 1980S
Personal computers or terminals were connected to a

server.
The server was a mainframe, or connected to a mainframe
computer.
The mainframe was connected to another mainframe of
the company in another location via dedicated lines.
Only large companies could afford the expense and
investment in equipment.

TODAY
Connections across countries and continents made through

dedicated fast lines.

A company may have one local network (LAN), which is
connected to the Internet through a Regional network.
Well established in all over the world.

COMPUTER CLASSIFICATIONS
Mainframes:

- term for very large computers

- used to handle large amount of data or
complex processes
- main advantage is reliability
Midrange:
- medium sized, less expensive and smaller
- usually a server
Micro-computer:
- work stations with computing capabilities
- single-users systems linked to form a network
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WHAT IS A NETWORK
Series of points or nodes interconnected by communication
paths
Node is a connection point for transmitting data
Network can interconnect with other networks to form global
networks

BENEFITS OF A NETWORK
Facilitates resource sharing
Provides reliability
Cost effective
Provide a powerful medium across geographical divide

GEOGRAPHICAL DISTANCE
Local area
network (LAN):

small area, share a single server

Metropolitan area a wider network, can bridge several

LANs
network (MAN):
Wide area
network (WAN):
Internet:
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a broader area covered, can include

several MANs
a network of networks that covers
the entire globe

INTERNET ADDRESSING SYSTEM

Internet uses TCP (Transmission Control Protocol )/IP,

therefore every computer on the Internet has an IP address

IP address is numerical, separated by dots
Works with DNS (Domain Name System):
- com: for commercial purposes
- net: for Internet Service Providers
- org: for non-profit, non-commercial groups
- gov: reserved for government
- edu : education
- int: reserved for international organizations
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ASSIMILATION OF TECHNOLOGY
Technology first adopted to increase efficiency doing the

same tasks faster e.g. word processing instead of typing

Technology next adopted to increase effectiveness doing

tasks not only faster but better e.g. spreadsheets

transformed finance and accounting (as well as science and
other fields)

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HISTORY OF ELECTRONIC COMMERCE

According to the editor-in-chief of International Journal of

Electronic Commerce, Vladimir Zwass, Electronic commerce is

sharing business information, maintaining business
relationships and conducting business transactions by means
of telecommunications networks.
Electronic commerce has existed for over 40 years, originating
from the electronic transmission of messages during the Berlin
airlift in 1948.
From this, electronic data interchange (EDI) was the next
stage of e-commerce development. In the 1960s a cooperative
effort between industry groups produced a first attempt at
common electronic data formats.

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HISTORY OF ELECTRONIC COMMERCE

The

formats, however, were only for purchasing,

transportation and finance data, and were used primarily for
intra-industry transactions.
It was not until the late 1970s that work began for national
Electronic Data Interchange (EDI) standards, which developed
well into the early 1990s.
EDI is the electronic transfer of a standardized business
transaction between a sender and receiver computer, over
some kind of private network or value added network (VAN).

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HISTORY OF ELECTRONIC COMMERCE

Both sides would have to have the same application software

and the data would be exchanged in an extremely exact

format.
Thus electronic commerce can be broadly defined as the
exchange of merchandise (whether tangible or intangible) on
a large scale between different countries using an electronic
medium
The implications of this are that e-commerce incorporates a
whole socio-economic, telecommunications technology and
commercial infrastructure at the macro-environmental level.

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E-COMMERCE MECHANISMS
Transformation of economic activity into digital media

- Exchange information, content, agreements, and services

among parties that are connected to through the
Internet.
Enables new ways of creating, delivering and capturing
value to customers.
- Availability
- Convenience

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WORLD WIDE WEB (WWW)

World Wide Web (Web):
- A collection of documents that reside on computers, and that can be
accessed by other computers on the Internet.

Multimedia documents:
- Text
- Images
- Sounds
- Drawings
- Video

Hypertext:
- Links to other documents
- Can begin execution of a program
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WEB BROWSERS
Computer programs that can:

- Display Web documents

- Follow links
- Execute other programs
- Enhance applications such as real-time audio or video
Netscape and Internet Explorer
The Microsoft legal trouble due to the Explorer.

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WEB SERVERS
Computers that run server software.
A server waits for request to arrive from a user.

- The request is typically for a document.

The server sends (serves) the document to the requesting
computer.
Sometimes the server allows a user to fill in information on
a document, and the then transfers the information to
another program or a server.

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WWW AND INTERNET

The World Wide Web (WWW) is not the Internet

Access to the Internet doesnt mean you have e-commerce

WWW works in HTTP (The Hypertext Transfer Protocol)
Web pages works in HTML (Hypertext Markup Language)
Web browser provide access to information on the WWW

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WHAT IS E-COMMERCE
Distributing, buying, selling and marketing products

and services over electronic systems

E-business for commercial transactions
Involves supply chain management, e-marketing,
online marketing
Uses electronic technology such as:
- Internet
- Extranet/Intranet
- Protocols

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TERMS AND DEFINITIONS

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Internet:

A collection of computers that speak a common language

protocol

Intranet:

Private version of the Internet

Main purpose to share company information and computing
resources among employees

Extranet:

Private network that users outside the company can access

Requires security and privacy
Collaborate with other companies

E-COMMERCE AS THE NETWORKED

ECONOMY

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Create value largely through gathering, synthesizing and

distribution of information
Formulate strategies that make management of the enterprise
and technology convergent
Compete in real time rather than in cycle time
Operate in a world characterized by low barriers to entry, nearzero variable costs of operation and shifting competition
Organize resources around the demand side rather than supply
side
Manage better relationships with customers through technology

E-COMMERCE TODAY
The Internet is the perfect vehicle for e-commerce because of

its open standards and structure.

No other methodology or technology has proven to work as
well as the Internet for distributing information and bringing
people together.
Its cheap and relatively easy to use it as a medium for
connecting customers, suppliers, and employees of a firm.
No other mechanism has been created that allow
organizations to reach out to anyone and everyone like the
Internet.

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E-COMMERCE TODAY
The Internet allows big businesses to act like small ones

and small businesses to act big.

The challenge to businesses is to make transactions not
just cheaper and easier for themselves but also easier and
more convenient for customers and suppliers.
Its more than just posting a nice looking Web site with
lots of cute animations and expecting customers and
suppliers to figure it out
Web-based solutions must be easier to use and more
convenient than traditional methods if a company hopes
to attract and keep customers.
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WHAT IS A WEB-BASED BUSINESS

Business that uses the WWW to fulfill its business

process
Four basic business processes:
- information dissemination
- data capture
- promotions and marketing
- transacting with stakeholders
Business objectives interact with web based
applications

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