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Chapter: 1 Introduction to Electronic Commerce. Table of Contents 1.0 :DEFINITION OF COMMERCE.............................................................................. 1.1: VIEWS OF COMMERCE .................................................................................................. 1.1.

1: Buyers Perspectives.......................................................................................... 1.1.2: Sellers Perspective........................................................................................... 1.3: Business Processes............................................................................................... 1.4: ELECTRONIC COMMERCE (E-COMMERCE )........................................................................ 1.4.0: Definition........................................................................................................... 1.5: Impact of e-commerce on organizations.............................................................. 1.6: VALUE CHAIN ANALYSIS............................................................................................. 1.6.1: Typical Company Value Chain.......................................................................... 1.6.2: Re-configuring the Value Chain........................................................................ 1.7: APPROPRIATENESS OF ELECTRONIC TECHNOLOGY IN BUSINESS PROCESSES............................. 1.7.1: Processes well suited for e-commerce.............................................................. 1.7.2: Processes not well-suited for traditional commerce......................................... 1.7.3: Processes well suited for a combination of both............................................... 1.8: ADVANTAGES OF E-COMMERCE...................................................................................... 1.9: DISADVANTAGES OF E-COMMERCE.................................................................................. 1.10 EVOLUTION OF E-COMMERCE........................................................................................ 1.10.2: Intranets and Its Characteristics..................................................................... CHAPTER 2: BUSINESS MODELS FOR E-COMMERCE....................................... 2.0 INTRODUCTION:............................................................................................................ 2.01 BUSINESS-TO-BUSINESS (B2B).................................................................................... 2.02 BUSINESS-TO-CONSUMER (B2C).................................................................................. 2.03 BUSINESS-TO-GOVERNMENT (B2G)............................................................................. 2.1 DEVELOPING A BUSINESS MODEL...................................................................................

1.0 :Definition of Commerce Commerce refers to the negotiated exchange of valuable objects or services between at least two parties and includes all activities that each of the parties undertakes to complete the transaction. In commerce one member of a society creates something of value that another member of a society desires. 1.1: Views of Commerce At least two different perspectives exist: i.The buyers viewpoint ii.The sellers viewpoint Both perspectives illustrate that commerce involves a number of distinct activities, called business processes. 1.1.1: Buyers Perspectives This perspective holds that commerce involves the following activities: i) Identifying a specific need ii) Searching for products or services that will satisfy that need iii) Selecting a vendor iv) Negotiating a purchase transaction including delivery logistics, inspection, testing and acceptance Making payment vi) Performing obtain maintenance if necessary 1.1.2: Sellers Perspective This perspective holds that commerce involves the following activities:Conducting market research to identify customer needs i) Creating a product or service to meet those needs iii) Advertising and promoting the product or service iv) Negotiating a sales transaction including delivery logistics, inspection,testing and acceptance. v) Shipping goods and invoicing the customer vi) Receiving and processing customer payments vii) Providing after sales support and maintenance 1.3: Business Processes These are the activities involved in conducting commerce. They may include: ? Funds transfer ? Ordering ? Invoicing ? Shipping e.t.c. 1.4: Electronic Commerce (e-commerce) 1.4.0: Definition ? E-commerce is the process of buying and selling of goods and/or services where part, if not all, of the commercial transactions occur over an

electronic medium such as the Internet. OR ? This is the sharing of business information, maintaining business relationships and conducting business transactions by means of telecommunications networks. OR ? This is the use of electronic data transmission to implement or enhance any business activity e.g. buyer sending an electronic purchase order to the seller, who sends back an electronic invoice. 1.5: Impact of e-commerce on organizations E-commerce is changing the way traditional business is conducted. How? Technology can help throughout the process including promotion, searching, selecting, negotiating, delivery and support. The value chain is being reconfigured. Specifically e-commerce impacts can be seen in each of the following: ? Structure/Connections ? Work routine ? Communications ? Marketing ? Information Technology Impact on Structure a. Supply Chain Integration b. Direct Sales Elimination of the Middleman c. Decentralization d. Virtual Organizations e. Business Model Impact on Work Routine a. International Business b. 24 Hour / 365 Days c. Faster Turnaround d. Increased Automation iii) Impact on Communication a. International b. Immediate Response c. Indirect iv)Impact on Marketing a. Customer Characteristics ? International ?Direct Sales ?Demographics b. Frequent Updates c. More Public Information d. Search Engines and Directory Impact on IT a. More Mission Critical ? 24 / 7 Support ? Connectivity ? Data Integrity b. More Integration Projects ? Business Chain Integration ? Off-the-Shelf Product Integration

? Database Integration ? Networking and Security

1.6: Value Chain Analysis Value chain examines the activities performed within an organization to establish how they interact, and where improvements could be a source of competitive advantage. An organization is a chain of activities, each providing a value,hence the term value chain. Components of the value chain include: i.Research and development(R & D)- develops products ii.Sales- promotes the products iii.Production- manufactures products iv.Final Inspection- assures quality v.Logistics- delivers the products vi.Technical support- maintains the products 1.6.1: Typical Company Value Chain 1.6.2: Re-configuring the Value Chain a) Vertical Reconfiguration i.Forward Integration- gaining ownership or increased control over distributors or retailers ii.Backward integration- gaining ownership or increased control over suppliers b) Horizontal Reconfiguration-Seeking increased control over competitors 1.7: Appropriateness of electronic technology in business processes It is important to identify which business processes can be streamlined using ecommerce technologies. Some processes make effective use of traditional commerce and cannot be improved upon using technology. Therefore, using technology when it is not necessary or helpful can be a costly mistake. 1.7.1: Processes well suited for e-commerce Business processes that are well suited for e-commerce include commodity items, i.e. a product or service that has become standardized. These may include: Online delivery of software Advertising and promotion of travel services Online tracking of shipments Sale/purchase of new books and CDs

1.7.2: Processes not well-suited for traditional commerce In this category fall products that buyers prefer to touch, smell or otherwise closely examine and these include: Sale/purchase of high fashion clothing Sale/purchase of perishable food products Sale/purchase of expensive jewellery and antiques 1.7.3: Processes well suited for a combination of both Some business processes can be handled well using a combination of electronic and traditional methods and these include: ? Sale/purchase of auto mobiles ? Online banking ? Sale/purchase of investment or insurance products 1.8: Advantages of e-commerce Advantages to the seller i.Increases sales/ decreases cost ii.Makes promotion easier for smaller firm iii.Can be used to reach narrow market segments Advantages to the buyer i.Makes it easier to obtain competitive bids ii.Provides a wider range of choices iii.Provides an easy way to customize the level of detail in the information obtained. Advantages in general i.Increases the speed and accuracy with which businesses can exchange information. ii.Electronic payments (tax refunds, paychecks, e.t.c.) cost less to issue and are more secure iii.Can make products and services available in remote areas iv.Enables people to work from home, providing scheduling flexibility 1.9: Disadvantages of e-commerce i.Some business processes are not suited to e-commerce, even with improvement in technology ii.Many products and services require a critical mass of potential buyers (e.g. online grocers) iii.Cost and returns on e-commerce can be difficult to quantify andestimate. iv.Cultural impediments- people are reluctant to change in order to integrate new technology. The legal environment is uncertain- courts and legislators are trying to catch up. 1.10 Evolution of e-commerce 1.10.1: Internet and Its Characteristics i.Global connectivity ii.Reduced communications costs iii.Lower transaction costs iv.Reduced agency costs

v.Interactivity, flexibility, customization Accelerated knowledge 1.10.2: Intranets and Its Characteristics This is an internal private network that uses Internet technology. It is protected

from

invasion coming from the public Internet through a firewall. An intranet is often installed on an existing network infrastructure.

1.10.3: Extranet

This is a network that allows select users outside an organization to use its intranet through the use of virtual Private Networks (VPNs). These users include: customers, business partners and vendors. 1.11: Deployment of Internet Technologies: Stages of Evolution 1.11.1: Reasons for this choice: In stage 1, the organization gains experience from the situation of networking internally, and naturally evolve from there. After gaining some experience the organization may switch to creating a web site which is more demanding in terms of maintenance and requires a detailed planning. The last stage the organization may start using Electronic Commerce. However e-Commerce needs further maturing of IT. Currently, this is taking the form of biased interest towards web based development environments.

1.12: Exercise: 1. Explain the following terms: a. E-commerce b. Commerce c. Value chain 2. Describe the effects of e-commerce on organizations. 3. Discuss the appropriateness of electronic technology on business process. 4. List down the advantages and disadvantages of e-commerce 5. Define the following terms: a. Internet b. Intranet c. Extranet d. VPN Chapter 2: Business Models for e-commerce 2.0 Introduction: A business model describes an architecture for product, service and information flows, including a description of the various business actors and their roles. In addition, it also describes the potential benefits for the various actors and the source of revenue. The section of a business model that describes how financial value is generated is called a revenue model. Business models are used to generate the following modes of ecommerce: a) Business-to-Business (B2B) b) Business-to-Consumer (B2C) c) Business-to-Government (B2G) 2.01 Business-to-Business (B2B) Refers to business transactions involving two or more businesses. Both businesses must provide a means for exchanging business documents. It is particularly common among large organizations Some of its aspects of B2B include: o Electronic funds transfer o Electronic payment fulfillment o Electronic tracking of transactions 2.02 Business-to-Consumer (B2C) Involves a seller (business) and consumers The business is the information source while the customer is the information seeker. 2.03 Business-to-Government (B2G) Involves government agencies/ departments and a business Could be operated like B2C or B2B 2.1 Developing a Business Model A business model represents the activities of a business including: i). Activity models which describe what a business does ii). Process models which describe how a business accomplishes what it does iii). Data models which represent information structure of a business.

Based on the above activities a business model can be broken down into: Buy side and sell side i.e. the payment direction o With whom is commerce being conducted? Product or service type- refers to the basis of the transaction i.e. category, price, advertising, sales and delivery. 2.20 Developing the e-commerce Business Model E-commerce strategies are best when driven by business strategy. They must be technically feasible & financially viable. Developing the e-commerce Business Model requires one to dissect the buying/selling process into elements & then, think about whether you can apply internet technology. It also requires one to analyze how the other partys needs are changing from a business perspective, and thinking whether you can address them. 2.21 Examples of e-commerce business models a). E-shop (virtual Storefront): This refers to web marketing of a company or a shop with the main goal being to sell goods and services. Other goals include promoting the company and cost reduction of business processes. Revenue is realized from reduced costs, increased sales, affiliates, and advertising whereas the main challenge is to develop strategies to increase demand. Problems: i.Current access speeds and hardware/software configurations make online shopping are frustrating ii.Online shopping is not as immediate as real-world experiences. iii.Security and privacy are major issues. iv.Consumer behavior issues are relatively unknown e.g. marketing, getting repeat customers, using promotions and incentives effectively b). Market aggregators i). E-mall: This is a collection of e-shops, under a common umbrella and may have the following characteristics: 1) A common payment method (one shopping cart) 2) A single entry point to individual e-shops 3) Industry (or horizontal) marketplace. Stores belong to an identified market segment 4) The main challenge for stores is to distinguish themselves ii). Virtual communities: The value of virtual communities comes from members loyalty (customers or partners) and repeat visits. They add their information to a basic environment provided by the virtual community company. The membership fees and advertising are two main sources of revenue. A virtual community can also be an important add-on to other marketing operations. It can be used to build customer loyalty and receive customer feedback. c). Market integrator This is a company that brings buyers and sellers in a specific market sector together. It has the following characteristics: i.The company provide the setting for business ii.The company is a disinterested third party iii.It generates revenue from transaction fees

iv.Some charge sellers a listing fee as well v.It can sell premium services (security, logistics) vi.Problem is achieving and sustaining critical mass d). E-Procurement Refers to electronic tendering & procurement of goods/services Benefits include: i.For buyer: wider choice of suppliers, better quality, improved delivery and reduced cost of procurement ii.For supplier: more tendering opportunities, lower cost of submission, potential collaborative tendering (i.e. for parts of tender) e). The auction model This is a site which provides the virtual space for an ongoing auction. People register with the site to participate. All types of digital and non-digital products are being sold. The site makes money by taking a commission on all sales. The main challenge is the development of trust which is essential to the success of this business model f). Information Services This model involves adding value to data e.g. information searches, customer profiling, investment advice, business opportunity brokerage, business intelligence services). Members may pay on subscription, or per use. Other information services include certification authorities (e.g. eTrust, Verisign) which offer services of authentication, verification 2.22 Types of E-Commerce where the models can be used ? Electronic Data Exchange ? Brochureware ? Help Desk and Support ? Electronic Transactions ? Consumer Purchases ? Advertising ? Application Service Providers (ASPs) a. Electronic Data Exchange This occurs in Business-to-Business E-commerce. It involves the use of messages based on standards such as: ? ANSI X.12 ? UN EDIFACT It uses Industry Based Schemas. The transport Mechanisms applied includes private network/brokers or direct via internet. One of the areas of interest in its application is procurement b. Brochureware This type of E-Commerce involves sites whose main aim is to provide product service information. It includes: i). Electronic Catalogues ii). Indexes and Search Engines iii). Distribution Methods such as CD-ROMs, Dial-Up Networking and Internet Web Sites. iv). Distribution Formats such as HTML and PDF Documents. c. Help Desk and Support It covers the following areas: i.Product or Service Documentation provided via CD-ROMs, Downloadable PDFs and On- Line Web Sites Knowledgebase and FAQs ii.c) Message Boards and News Groups iii.d) Problem Submission

d. Electronic Transactions It includes fields such as:

i.

1. Electronic Funds Transfers (EFT) done by financial institutions via private networks 2. Bill Payments Credit card payments which involve consumers, merchants, processors and financial institutions.

e. Consumer Purchases It includes: i.Direct Delivery Services of Hard and/or Soft Goods ii.Intellectual property which mainly involves downloadable files and subscriptions. f. Advertising Covers areas such as: i.Web Banner Ads ii.SPAM iii.Trial Offers and Coupons iv.Trial Use Intellectual Property g. ASPs-Application service providers Covers businesses such as web hosting services 2.30 THE BENEFITS OF ELECTRONIC COMMERCE 2.31 Benefits to Organizations i.Expands the marketplace to national and international markets ii.Decreases the cost of creating, processing, distributing, storing and retrieving paper-basedinformation iii.Allows reduced inventories and overhead by facilitating pulltype supply chain management iv.The pull-type processing allows for customization of products and services which provides competitive advantage to its implementers v.Reduces the time between the outlay of capital and the receipt of products and services vi.Supports business processes reengineering (BPR) efforts vii.Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs) 2.32 Benefits to consumers i.Enables consumers to shop or do other transactions 24 hours a day, all year round from almost any location ii.Provides consumers with more choices ii.Provides consumers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons iii.Allows quick delivery of products and services (in some cases) especially with digitized products iv.Consumers can receive relevant and detailed information in seconds, rather than in days or weeks v.Makes it possible to participate in virtual auctions vi.Allows consumers to interact with other consumers in electronic ommunities and exchange ideas as well as compare experiences vii.Facilitates competition, which results in substantial discounts

2.33 Benefits to society Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution i.Allows some merchandise to be sold at lower prices, benefiting less affluent people ii.Enables people in Third World countries (e.g. Kenya) and rural areas to enjoy products and iii.services which otherwise are not available to them iv.Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or v.improves quality 2.34 The Limitations of EC The limitations of E-commerce are mainly technical and include: i.Lack of universally accepted standards for quality, security, and reliability ii.The telecommunications bandwidth is insufficient iii.Software development tools are still evolving Difficulties in integrating the Internet and EC software with some existing (especially legacy) applications and databases. iv.Special Web servers in addition to the network servers are needed (added cost). v.Internet accessibility is still expensive and/or inconvenient Exercise 1. 2. What is a business model? Describe the following modes of e-commerce a. B2B b. B2C c. B2G List five examples of E-commerce business models Briefly describe five types of E-commerce where the models can be used. Explain each of the following terms: a. E-Commerce b. E-marketing c. Electronic catalog d. E-market place e. Shopping cart Discuss the benefits and limitations of E-commerce.

3. 4. 5.

6.

Chapter 3: E-Commerce Market mechanisms 3.0 The Digital Revolution and the Economic Impact of EC In the digital revolution, the economy is based on digital technologies such as, digital communication networks, computers, software, and other related information technologies. Digital revolution is also called Internet economy, new economy or web economy Digital networking and communication infrastructure provides a global platform where people and organizations can interact, communicate, collaborate, and search for information. The global platform includes the following characteristics: i.A vast array of digitizable products ii.Consumers and firms conduct financial transactions digitally iii.Microprocessors and networking capabilities embedded in physical goods The term digital economy also refers to the convergence of computing and communication technologies on the Internet and other networks and the resulting flow of information and technology that is stimulating e-commerce and vast organizational changes. This convergence enables all types of information (data, audio, video, etc.) to be stored, processed, and transmitted over networks to many destinations worldwide. Web-based EC systems are accelerating the digital revolution by providing competitive advantage to organizations Another economic impact of EC is the trade-off between the number of customers a company can reach (called reach) and the amount of interactions and information services they can provide to customers (called richness). 3.1 Impacts of EC to Organizations The New World of doing Business based on e-commerce is characterized by the following: Business pressures Organizational responses The role of Information Technology (including electronic commerce) 3.11 Business Pressures Business pressures are related to the business environment. The term business environment refers to the social, economic, legal, technological, and political actions that affect business activities. Business pressures are divided into the following categories: 1. Market The market is global, competitive, and is characterized by a changing workforce and powerful consumers 2. Societal These includes factors such as Social responsibility, Government regulations, budgets/ subsidies and ethics

3. Technology Technology includes innovations, obsolescence, and Electronic Commerce e.t.c. 3.12 Organizational Responses Organizational responses include: 1. Strategic systems Provide organizations with strategic advantages, enabling them to increase their market share, better negotiate with their suppliers, and outsmart competitors 2. Continuous improvement efforts Many companies continuously conduct programs to improve, productivity, quality, and customer service 3. Business process reengineering (BPR) Strong business pressures may require a radical change. Such an effort is referred to as BPR 4. Business alliances Alliances with other companies, even competitors, can be beneficial to a business. This can lead to establishment of virtual corporations. A Virtual Corporation is an electronically supported temporary joint venture for a specific time-limited mission 5. Electronic markets Require the collaboration of the different companies and competitors. 6. Reduction in cycle time and time to market Cycle time reduction refers to shortening the time it takes for a business to complete a productive activity from its beginning to end. It is extremely important for increasing productivity and competitiveness Extranet-based applications accelerate steps in the process of product or service development, testing, and implementation. 7. Empowerment of employees and collaborative work Employees are given the authority to act and make decisions on their own which improves productivity. Empowered sales people and customer service employees make customers happy and help increase customer loyalty. 8. Supply chain improvements E-commerce helps in reducing supply chain delays, inventories and eliminate other inefficiencies 9. Mass customizationproduction of large quantities of customized items Business problem is how to efficiently provide customization. EC is an ideal facilitator of mass customization by enabling electronic ordering to reach the production facility in minutes Note The task facing each organization is how to put together the components that will enable the organization to gain competitive advantage by using EC i.The first step is to put in the right connective networks e.g. LANs, Intranets e.t.c. ii.The vast majority of EC is done on computers connected to Internet, Intranet, or Extranet 3.2 E-Commerce Market Mechanisms 3.21 Electronic Marketplaces Markets facilitate exchange of information, goods, services, and payments. They create economic value

for buyers, sellers, market intermediaries and the society at large. The three main functions of markets are: i.Matching buyers and sellers ii.Facilitating the exchange of information, goods, services, and payments associated with market transactions iii.Providing an institutional infrastructure Market space Components A market space is a marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronically. Components of a market space include, customers, sellers, goods (physical or digital), infrastructure, front-end, back-end, intermediaries or business partners, and support services. Customers Web surfers looking for bargains, customized items, entertainment etc. Sellers Hundreds of thousands of storefronts are on the web advertising and reaching out to millions via web sites Products There are two types of products, physical and digital. Physical products can only be delivered in conventional ways while digital products can be transformed to digital format and delivered over the Internet. Infrastructure which includes the hardware, software, and networks. Front-end business processes These include: Sellers portal, Electronic catalogs, shopping cart, search engine, and payment gateway. Back-end activities These are related to: Order aggregation and fulfillment Inventory management Purchasing from suppliers Payment processing Packaging and delivery 7. Intermediary A third party that operates between sellers and buyers e.g. banks, insurers, credit card companies e.t.c. 8. Other business partners Collaborate on the Internet, mostly along the supply chain 9. Support services such as Certification and trust services and Knowledge providers 3.3 Categories of E-Marketplaces E-market places can be categorized into: 1. Private e-marketplaces which are online markets owned by a single company. 2. Sell-side marketplaces where a company sells either standard or customized products to qualified companies.

3. Buy-side marketplaces in which a company makes purchases from invited suppliers. 4. Public e-marketplaces which includes B2B markets, usually owned and/or managed by an independent third party, that include many sellers and many buyers (exchanges). 3.4 Supply Chains The term Supply chain refers to the flow of materials, information, money, and services from raw material suppliers through factories and warehouses to the end customers. Supply chains include organizations and processes that create and deliver products, information and services to the end customers: It involves activities that take place during the entire product life cycle including movement of information and money and procedures that support the movement of a product or a service as well as the organizations and individuals involved. Illustration: A Simple Supply Chain

3.41 Supply Chain Components There are three main components of a supply chain: 1. Upstream supply chain which includes the activities of suppliers (manufacturers and/or assemblers) and their suppliers 2. Internal supply chain which includes all in-house processes used in transforming the inputs received from the suppliers into the organizations outputs 3. Downstream supply chain which includes all the activities involved in delivering the product to the final customers 3.42 Types of Supply Chains 1. Integrated make-to-stock 2. Continuous replenishment 3. Build-to-ordermodel in which a manufacturer begins assembly of the

customers order almost immediately upon receipt of the order 4. Channel assemblymodel in which product is assembled as it moves through the distribution channel 3.5 Value Chain & Value System Value chain is the series of activities a company performs to achieve its goal(s) at various stages of the production process; each activity adds value to the companys product or service, contributes to profit, and enhances competitive position in the market Value system refers to a set of value chains in an entire industry, including the value chains of tiers of suppliers, distribution channels, and customers. 3.51 Effect of EC in Supply Chain & Value Chain Value chain and the supply chain concepts are interrelated EC increases the value added by: Introducing new business models Automating business processes EC smoothes the supply chain by: Reducing problems in the flows of material, money, and information facilitating the restructuring of business activities and supply chains

3.6 E-Market Success Factors The factors to be considered in the E-market include: 1. Product characteristics including type, price and quality. 2. Industry characteristics 3. Seller characteristics 4. Consumer characteristics under which a consumer may be classified as an impulse, patient or analytical buyer. 3.7 Electronic Catalogs Electronic catalogs are the presentation of product information in an electronic form. They are the backbone of most e-selling sites Evolution of electronic catalogs Merchants or business people advertise and promote the product while customers act as the source of information via feedback. They also carryout price comparisons The electronic catalog consist of Product database, Directory and search capability and Presentation function, Replication of text that appears in paper catalogs The main advantages of electronic catalogs are that they are more dynamic, customized, and integrated. 3.71 Classifications of Electronic Catalogs Electronic catalogs can be categorized based on: Dynamics of information presentation under which a catalog can be static or dynamic Degree of customization under which a catalog can be ready-made or customized Electronic catalogs allow integration of: a). Order taking and fulfillment b). Electronic payment c). Intranet workflow d). Inventory and accounting system e). Suppliers extranet Customized Catalogs are those which are assembled specifically for a company or an individual shopper. Customization systems can: 1. Create branded, value-added capabilities 2. Allows user to compose order 3. May include individualized prices, products, and display formats 4. Automatically identify the characteristics of customers based on the transaction records 3.8 Search Engines A search engine is a computer program that can access a database of Internet resources, search for specific information or keywords, and report the results. It involves the use of intelligent or software agents that can

perform routine tasks that require intelligence 3.81 Search Engines, Intelligent Agents and Shopping Carts E-commerce users use both search engines and intelligent agents Search engines find products or services Software agents conduct other tasks (comparisons) that may require some level of intelligence. Electronic shopping cart is an order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop 3.9 Exercise: 1. Define the term internet economy and state at least two characteristics and benefits associated with it. 2. Discuss the impact of Ecommerce to organizations. 3. List down four components of: a. A market place b. An electronic catalogue c. A supply chain 4. List four categories of e-market places. 5. Briefly explain the following terms: a. Market space b. Business environment c. Business process re-engineering d. Supply chain e. Intelligent agents f. Value chain g. Electronic catalogues h. Search engine. 6. Suppose you are working for a company that is planning to launch a new product in the e-market. What tool would you advice the company to use in order to present the product information to the users?

Chapter 4: Concepts, Characteristics, and Models of B2B Ec 4.0 Introduction to B2B EC Business-to-business e-commerce (B2B EC) refers to transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as eB2B (electronic B2B) or just B2B.It has the following characteristics 1. Parties to the transaction include an online intermediary; that is, an online thirdparty that brokers a transaction between a buyer and a seller, buyers; sellers 2. It has two main types of transactions namely: a. Spot buying which involves the purchase of goods and services as they are needed, usually at prevailing market prices. b. Strategic sourcing which refers to purchases involving long-term contracts that are usually based on private negotiations between sellers and buyers 3. It involves direct, indirect and maintenance, repairs and operations materials. a. Direct materialsmaterials used in the production of a product (e.g., steel in a car or paper in a book) b. Indirect materialsmaterials used to support production (e.g., office supplies or light bulbs) c. MROs (maintenance, repairs, and operations)indirect materials used in activities that support production 4. It has two main directions of trade: a. Vertical marketplacesmarkets that deal with one industry or industry segment (e.g., steel, chemicals). b. Horizontal marketplacesmarkets that concentrate on a service or a product that is used in all types of industries (e.g., office supplies, PCs) 4.2 The Basic B2B Transaction Types Transaction in B2B can either be: 1.Sell side which involves one seller and many buyers 2.Buy side which involves one buyer from many sellers 3.Exchanges which involves many sellers to many buyers

B2B is some form of collaborative commerce since it involves communication and sharing of information, design, and planning among business partners.

4.3 Types of B2B E-Commerce

4.31 Sell-Side B2B Marketplace Architecture

4.32 Buy-Side B2B Market Architecture

4.4 Barriers to C-Commerce C-commerce collaborative commerce is moving ahead fairly slowly because: 1. Technical reasons involving integration, standards, and networks 2. Security and privacy concerns over who has access control of information stored in a partners database 3. Internal resistance to new models and approaches 4. Lack of internal skills to conduct c-commerce 4.5 Infrastructure for B2B B2B requires the following infrastructure for it to function: 1. Server to host database and applications 2. Software for executing sell-side (catalogs) 3. Software for conducting auctions and reverse auctions 4. Software for e-procurement (buy-side) 5. Security hardware and software 6. Software for building a storefront 7. Software for building exchanges 8. Telecommunications networks and protocols 4.6 Extranet and EDI Traditional electronic data interchange systems were implemented using value-added networks. VANs are private, third-party-managed networks that add communications services and security to existing common carriers. EDI that runs on the Internet, that is,

Internet-based EDI is the most widely used today mainly due to its accessibility and affordability to most companies. Extranetssecured networks (by VPN), usually Internet-based, that allow business partners to access portions of each others intranets; extended intranets. 4.7 Integration Integrating computer systems together has always been a tricky non-trivial task, usually fraught with problems and always involving great expense. In fact, it is one of the reasons why most businesses have not been able to implement EDI systems. Although there are vendor provided tools the process of integration is still a challenge to many organizations.

There are some considerations that one ought to make while integrating the EDI system with other existing information systems or with other business partners EDI system. 4.71 Integration with existing information systems issues While integrating our EDI system with existing information system, we need to consider the following issues: 1. Intranet-based work flow 2. Database management systems (DMBS) 3. Application packages 4. ERP 4.72 Integration with business partners Integration with one company is easy. When you are integrating your organizations system with those of sellers or buyers, the considerations may be the same as above but certainly the amount of work to be done is much more. This is because each system might be unique hence demanding a unique solution. Further consideration needs to be made for the buyers owned shopping cart .An important question is whether it will be able to interface with back-end information systems. Some of the problems associated with integration may be solved by use of XML-the eXtensible Markup Languge. 4.8 The Role of XML in B2B Integration Companies interact easily and effectively by connecting to their servers, applications, and databases. For these connections to work there must be standard protocols and datarepresentation schemes. The web is based on the standard communication protocols such as HTTP which are useful only for displaying static visual Web pages. XML (and its variants) is a standard that is used to improve compatibility between the disparate systems of business partners by defining the meaning of data in business documents. It is used to increase: 1. Interactivity 2. Accessibility with speech recognition systems. 4.9 The Role of Software Agents Software Agents may be used to in B2C comparison-shopping And in B2B agents collect information from sellers sites for buyers. 4.10 Agents role in the buy-side marketplace In buy side market place, agents are used to assisting large number of buyers in requesting quotes from multiple potential suppliers in buy-side sellers. 4.11 Exercise: 1. Describe B2B and list four of its characteristics. 2. Use diagrams to explain four types of B2B E-commerce. 3. List four barriers to c-commerce. 4. What consideration would you make while integrating EDI systems with existing information systems? 5. Why do most businesses shy away from implementing EDI systems? 6. Briefly explain the role of XML in integration.

Chapter 5 Web Commerce Infrastructure Commercial Websites .................................................................................................. 1 Components of a Well-Functioning Commercial Website .................................... 1 1. A well organized collection of products and/or services.......................... 1 2. A convenient way for a costumer to select products.................................. 1 3. Convenient order forms.................................................................................. 1 4. Convenient ways of payment ........................................................................ 2 5. Secure communication system....................................................................... 2 6. A way of storing information about customers........................................... 2 7. A way of keeping information about orders................................................ 2 8. Customer support and feedback ................................................................... 2 Technologies Used To Implement Above Features ................................................ 2 Three-Tier (Layer) Architecture for E-Commerce................................................... 3 1. Data Services Layer.......................................................................................... 3 2. Business Services Layer................................................................................... 3 3. Presentation Services Layer............................................................................ 3 Fig. 1: E-commerce three-tier system architecture .............................................. 4 Exercise: ......................................................................................................................... 4 Commercial Websites A commercial website is a website that offers products and /or services for sale. One of the major factors to the success of such a web site is attractiveness. However, even the most attractive web pages will not make a person come back to a website where it takes too long to find the right product or where order forms dont work. Components of a Well-Functioning Commercial Website The most important elements of a good website are: 1. A well organized collection of products and/or services There should be a way for customers to get all the necessary information about products, compare several products, and get advice on related products e.t.c Changes in product information must avoid inconsistencies. Such changes should reflect on every days availability, change in price, product crossreferences e.t.c 2. A convenient way for a costumer to select products This can be implemented using a shopping cart or basket. The customer

should be able to select and delete products while browsing. 3. Convenient order forms An order form should have as few fields as possible and a returning customer should be provided with default information so as to reduce on

the amount of entries he/she needs to make. The form should also catch simple typographical errors. 4. Convenient ways of payment Many options for effecting payment should be provided. There should be a quick way to verify the payment commitment, to check if they are valid, for the owner of the site. 5. Secure communication system This protects transmission of payment information and guarantees privacy of the customer. It also prevents unauthorized access to the site. 6. A way of storing information about customers A well functioning commercial website should avoid re-entry of some information by customers. It should allow customizing of the website to fit someones interest. This is achieved via customer registration or cookies. Benefits of this to the owner ? Enables the owner to customize advertisements based on customer profiles or send emails advertising a new product. ? Ability to monitor customer behavior 7. A way of keeping information about orders A commercial website should allow customers to track their orders and owners to get all kinds of financial and statistical information. 8. Customer support and feedback This aspect cannot be completely mechanized. A human being has to answer e-mails, judge tolerance of customers comments, organize comments by topics e.t.c Customer support and feedback is achieved through online documentation of all products, FAQs, and a way for customers to post their opinion. NB: The above mostly address B2C. For B2B, sites have to be optimized if a company has stable business partners. Technologies Used To Implement Above Features 1). A database implements convenient storage of information about products. Databases may be implemented using database management systems [DBMSs] like Oracle, Ms Access, and MS SQL. This applies for (6), (7) and (8). 2). A convenient interface to the database is provided through the website and implemented through HTML, Java or JavaScript and PHP. We can use ODBC or JDBC to connect remotely to databases 3). Ability to process forms is through various server-site scripts such as Common Gateway Interface -CGI, PERL, Asp or Java Servelets. 2

Comment [k1]: Called Spam since most of them are not sent with the consent or expectation of the customer.

4). Cookies are used to keep track of a user during a session. A cookie is a small text file placed by a web server on the client machine and gets sent back every time the client requests a web page from the server. It is implemented through Java Servelets, Asp e.t.c 5). Encryption and security is implemented via secure sockets layer (SSL). 6). Electronic payment systems and credit card payment methods are used for payment options Three-Tier (Layer) Architecture for E-Commerce E-commerce systems can be implemented using a multi-tier architecture consisting of three tiers or layers. In a typical three-tier architecture (see Fig. 1) for e-commerce systems, the first tier is the data services layer; the second tier is the business services layer, while the third tier is the presentation services layer. 1. Data Services Layer The underlying technology to implement this layer could be a variety of things, including client side cookies, server-side files or a database. This layer is usually best satisfied with a database, running either on the web server itself or easily accessible to the web server, that is in the database server. 2. Business Services Layer This layer consists of business and data components and is composed of a web server running a simple language providing database access. The business components assist in handling business processes/operations while data components provide database access and hide underlying database structure. In this layer, where you code any rules regarding the data you have stored and generally is the bulk of your system. This layer representing the middleware of the integrated system is implemented through a variety of middleware technologies including Common Gateway Interface (CGI) scripts and Java Servelets. Data components hide the underlying data structure from clients 3. Presentation Services Layer This layer is the application or user-agent (such as a browser) rendering the output of your markup or scripting code for your users. Through the very nature of the Internet, this tiers processing is distributed to many computers browsing your site. This layer enables users to see results of your business logic applied to the data you have stored. Provides the user interface to system and converts input data to a format that can be understood at business layer and vice-versa.

Fig. 1: E-commerce three-tier system architecture Exercise: 1. Create a simple Database for recording data about customers, and a web page which should allow the customer to enter his/her details remotely. 2. Describe the term commercial website. 3. Briefly explain five components of a well functioning commercial website. 4. Describe the technology that can be used to implement the above components. 5. Use a diagram to describe the three tier architecture for E-commerce.

Chapter 6: Shopping Cart Fundamentals Chapter 6: Shopping Cart Fundamentals..................................................................... 1 6.0 Introduction ............................................................................................................ 1 6.1 Operation of shopping Cart.................................................................................. 1 6.2 Checkout process ................................................................................................... 1 6.3 Information Architecture of the shopping cart:................................................. 2 6.4 Principles for designing the information architecture of the shopping cart and checkout processes ............................................................................................... 2 6.5 Implementing a Simple Shopping Cart Application ........................................ 4 6.6 Overview of Server-Side Scripting and Active Server Pages (Asp) ............... 4 6.7 Invoking ASP.......................................................................................................... 4 6.8 Differences between Client-side and Server-side Scripts................................. 4 6.9 Example ................................................................................................................... 5 Collections ..................................................................................................................... 6 Example ......................................................................................................................... 6 6.10 Explanation of Example ...................................................................................... 7 6.11 Exercise: ................................................................................................................. 8 6.0 Introduction A shopping cart is an e-commerce ordering system. It is also called a wheelbarrow, shopping bag or a shopping basket. 6.1 Operation of shopping Cart Users initially go to a website and look for the products and/or services they need, thereafter they can click on or tag items of interest for later purchase. This process is called adding up items for purchase to a Shopping cart. The concept (Metaphorically) of a shopping cart helps users understand the actions available to them including: i.Adding additional items to their purchase list ii.Deleting items they selected and iii.Adjusting the quantity of each item to purchase. Metaphors such as wheelbarrow, shopping bag, shopping basket can also be used to refer to this technology. They provide creative ways of giving users a mental mode for shopping online. 6.2 Checkout process When users finish shopping, they proceed to this process to provide their address and payment information. Checkout process may include: i.Specifying a shipping preference ii.Shipping address iii.Method of payment and iv.Any gift-wrapping preferences.

6.3 Information Architecture of the shopping cart: Information architecture refers to the method of structuring and organizing information environments to help people achieve their goals. Information architecture of the shopping cart depends on, clear organization, labeling, navigation and searching systems. 6.4 Principles for designing the information architecture of the shopping cart and checkout processes These principles aim at providing a foundation for rich functionality of ecommerce systems. They include: 6.4.1 Shopping cart process 1. Make the shopping cart easy to find 2. Provide clear ordering options 3. Provide for rich functionality of the shopping cart 4. Make related items available for the shopping cart 5. Provide for the items in the shopping cart to be saved for future purchase 6.4.2 Checkout process 1. Give advance notice of what the checkout process involves 2. Keep order forms simple 3. Ensure secure transactions. 1. Making it easy to find Users should be able to begin ordering process once they have located the items they want. There should be multiple entry points to the cart from the site and for each item in the shopping cart users should see the following information at a glance: i.Description of item. ii.Option to remove or add item iii.Option to add item to shopping list for future purchase iv.Items current availability 2. Provide clear ordering options Provide clear distinction between different ordering options. New ordering options help users process orders quickly, but may often confuse or slow down users. 3. Provide rich functionality These include: i. Options to add items ii. Remove items iii. Find out more information Users should be able to add items during the shopping process or to easily return to shopping in the site after adding an item to the cart. The system should provide appropriate navigational links and options to easily modify quantity of each item or remove items. It should also provide links from each item back to the detailed description for that item. 2

4. Make related items available The e-commerce system should be able to gather user information about past purchases and come up with trends. It should be able to associate items with related items and make this information available to the shopping cart. This can help increase sales 5. Save items for future purchase The system should enable comparison-shopping as well as people purchasing when there is money. Most sites implement this as wish or shopping lists. 6. Provide advanced notice In order to give users an advance notice of what the checkout process involves the system should: ? Let the users know in advance what they can expect in the checkout process e.g. shipping costs ? Provide the users with clues as to where they are in the ordering process e.g. show steps completed and those left ? Also provide users upfront with the information they need to make their decisions to complete the purchase (e.g. costs of shipping options available) 7. Keep order forms simple Order forms should be as simple as possible to help users complete them quickly and without confusion but should have the necessary functionality to meet a users needs. They should indicate required fields as well as optional ones (these can be eliminated). The order process should give the user an opportunity to confirm that all the information is correct before submitting his/her order. While designing the order forms one should have in mind an international audience. 8. Ensure secure transactions To address users concerns about security; ? Have an established brand, provide secure web servers and processes and provide a satisfaction warranty. ? Provide information about security and safety of purchases. ? Enforce trust as a user goes through the checkout process e.g enable user to call with credit card number or mail a personal check instead of filling details in a form ? Also provide order confirmations and e-mail customers to further establish users trust. You could also send an e-mail message at the time the users order is shipped. ? Provide FAQs, email address for questions and phone number for customer representative, to help address problems encountered by users.

6.5 Implementing a Simple Shopping Cart Application A shopping cart is best implemented using databases and database connectivity tools e.g. php, asp e.t.c. A database is a special kind of file that stores data and allows updates and modifications in a uniformed way. SQL is the language used to interact with databases. It allows you to create, delete and update records and connects to databases using middleware such as ODBC, JDBC e.t.c. 6.6 Overview of Server-Side Scripting and Active Server Pages (Asp) ASP refers to pages that are processed on the server, while the results are displayed on the client. ASP code can be written in JavaScript, JSP, or VBScript. The default script language used by ASP is VBScript. This can however be changed by use of a simple tag whose format is: <%@ language=value %> 6.6.1 Advantages of Server-Side Programming/Scripting i) ii) Can tailor output to particular browsers Easier to achieve portability and maintainability 6.62 Disadvantages of Server-Side Programming/Scripting i.Security risk ? Easy to compromise host security ? Easy to allow users to do things that get you into trouble ii.Problems with concurrency ? More people can hit your script at the same time? ? Easy to erase information inadvertently by misunderstanding concurrency limits 6.7 Invoking ASP When using ASP files are named in the format filename. asp. They are started by the markup tag: <%@ language=value %> where value is Jscript, JavaScript or VbScript. Within the code there are several ways to invoke server side scripts i.e. i.Within special script tags annotated with runat=server <script language=Jscript runat=server> Response. write(<h2>Leah Kamunge Njiri</h2>); </script> ii.Within special script tag <% %> <% Response. write(<h2>Leah Kamunge Njiri</h2>); %> 6.8 Differences between Client-side and Server-side Scripts 1. The browser never sees the server-side script-it only sees the output 2. Server-side script operation cannot be overridden by user actions- client-side scripts can be disabled under user control 3. Server-side scripts have full power to manipulate files on host machine 4. Server-side scripts can keep records and remember user preferences- utilized to implement cookies 5. Server-side scripts include new objects e.g. 4

Comment [k1]: Client side scripts may not access some resources in the server.

(a) Request which represents data sent to server from browser e.g. CGI parameters (form values and URL parameters), cookies e.t.c. (b) Response which represents document to be sent to browser 6. There is no document object since we are on the server 7. There is no access to window object for server-side scripts 6.9 Example Write a CGI script that gets values from a form and prints out those values as a web page. Solution: we write an html page to give form structure then an asp file to process the form. form_submit.html <html><body bgcolor="pink"> <h4 align=center>Please tell me about yourself</h4> <form action="form_values.asp" method="post" target="_blank"> <center><table border=20 bgcolor="biege"> <tr><th>Name<td><input type="text" name="names"> <tr><th>Postal Address<td><input type="text" name="postal"> <tr><th>Physical Address<td><input type="text" name="location"> <tr><th>Country<td><select name="country"> <option value="Kenya" selected>Kenya</option> <option value="Uganda">Uganda</option> <option value="Tanzania">Tanzania</option></select> <tr><th>Gender <td><input type="radio" name="gender" value="Male">Male&nbsp; <input type="radio" name="gender" value="Female">Female&nbsp; <input type="radio" name="gender" value="Non of the above">None <tr><th>Email Address <td><input type="text" name="email"> <tr><td><input type="submit" value="Send Details"> <td><input type="reset" value="Clear"> </table></center></form></body></html> form_values.asp <%@ language=JScript%> <html><body><h4 align=center>Here is what you submitted</h4> <center><table bgcolor="pink" border=20 width="100%"> <% name=Request.Form('names'); postal=Request.Form('postal'); location=Request.Form('location'); country=Request.Form('country'); gender=Request.Form('gender'); email=Request.Form('email');

Comment [k2]: Defines the heading style Comment [k3]: For defining table rows. Comment [k4]: Table header: Same as TD but contents in bold and centered.

Comment [k5]: Output space.

Response.write("<tr><th>Name<td>"+name+"</tr>"); Response.write("<tr><th>Postal Address<td>"+postal+"</tr>"); Response.write("<tr><th>Physical Address<td>"+location+"</tr>"); Response.write("<tr><th>Country<td>"+country+"</tr>"); Response.write("<tr><th>Gender<td>"+gender+"</tr>"); Response.write("<tr><th>Email Address<td><a href='mailto:"+email+"'>"+email+"</a></tr>"); %> </table></center></body></html> Collections ? Un-exposed ordered arrays, which can be accessed using indices ? Can also be accessed using enumerators- objects designed to process data in sequence Example form_enum.html <html><body bgcolor="pink"> <h4 align=center>Please tell me about yourself</h4> <form action="form_enum.asp" method="post" target="_blank"> <center><table border=20 bgcolor="biege"> <tr><th>Name<td><input type="text" name="names"> <tr><th>Postal Address<td><input type="text" name="postal"> <tr><th>Physical Address<td><input type="text" name="location"> <tr><th>Country<td><select name="country"> <option value="Kenya" selected>Kenya</option> <option value="Uganda">Uganda</option> <option value="Tanzania">Tanzania</option> </select> <tr><th>Gender<td><input type="radio" name="gender" value="Male">Male&nbsp; <input type="radio" name="gender" value="Female">Female&nbsp; <input type="radio" name="gender" value="Non of the above">None <tr><th>Email Address<td><input type="text" name="email"> <tr><td><input type="submit" value="Send Details"> <td><input type="reset" value="Clear"></table></center></form></body></html> form_enum.asp <%@ language=JScript%> <html><body background="Tapi.jpg"> <h4 align=center>Here is what you submitted</h4> <center><table bgcolor="pink" border=20 width="100%"> <% var en=new Enumerator(Request.Form);//creates an object en for(en.moveFirst();!en.atEnd();en.moveNext()) 6

{//for all members or form fields var field=en.item();//get one field var value=Request.Form(field);//get field's value Response.write('<tr><th>'+field); Response.write('<td>'+value); } %></table></center></body></html> 6.10 Explanation of Example ? en is an enumerator object that enables you to access elements of a collection. ? item() is a method and en.item() accesses the current item or element ? en.moveFirst() sets en.item() as the first item/element. ? en.moveNext() makes en.item() the next item in the sequence ? en.atEnd() is true when we have no more items, is false otherwise. Connecting to a Database <% var con=Server.CreateObject(ADODB.Connection); con.Open(myData); var name=Request.Form(name); var salary=Request.Form(salary); var email=Request.Form(email); var command=insert into Mimi values(+name+ , +email+ , +salary+); con.Execute(command); %> NB: ? We call the above using a form ? Strings must be single quoted ? Numbers must not be quoted Select and Display Records from a Database Table select.asp <%@ language=JScript%> <html><body><h2>Reading from a table</h2> <% var con=Server.CreateObject(ADODB.Connection);//create a connection object con.Open(myData);//create a connection var command=select * from Mimi;//select all records var recordset=con.Execute(command);//retrieve records Response.write(<table border=+1++>); Response. Write(<tr><th>Name<th>E-mail<th>Salary): for(recordset.moveFirst();!recordset.EOF;recordset.moveNext()) { var name=recordset.Fields(0).Value; 7

} var email=recordset.Fields(1).Value; var salary=recordset.Fields(2).Value; Response.write(<tr><td>+name+<td>+email+<td>+salary);

Response.write(</table>); %> </body></html> Note: ? Recordset is an enumerable collection i.e. it has its own enumerator ? recordset.Fields(0).Value is first field of first row 6.11 Exercise: 1. Define the term shopping cart and enlist the actions it makes available to the user? 2. Explain briefly the checkout process. 3. Describe the principles for designing the information architecture of the shopping cart and the checkout processes. 4. Briefly describe the following terms and state where they may be applied in the development of a shopping cart. a. Database b. JavaScript c. Jscript d. SQL e. ASP f. JDBC g. CGI 5. Write a CGI script that gets the values [Name, Country and email] from a form and prints out those values as a web page. NB: This requires that you create a HTML file and an ASP file

Terms: Chapter 7: Payments and Order Fulfillment 7.0 Introduction to Electronic Payments E-commerce and e-payment are inseparable. E- Payment systems and are becoming central to online business as companies look for ways to serve customers faster and at a lower cost. Until recently consumers were extremely reluctant to use their credit card numbers on the Web due to security concerns. However the situation has been improving as more people become aware of how this technology works. The following entities participate actively in an electronic transaction and in e-payment: 1. Customer- Also referred to as the buyer, account holder or cardholder. This entity is interested in initiating an electronic transaction to buy a product or service. Merchant/payee/seller-provides the goods 2. Merchant- Also referred to as the web storefront owner.The merchant is interested in selling products or services using the electronic commerce infrastructure. 3. Processing network-The intermediary service that transfers financial data

between web storefronts and banks. 4. Card/check issuing bank-This is the bank that issued the customers credit card or checking account. 5. Merchants bank- The bank that holds the merchants accounts information. 6. Trusted third party- An entity that verifies the merchants identity to the customer and vice versa. 1

7.1 Key issues to be addressed in E-payment systems. The following key issue of trust must be addressed 1. Privacy- There should be a way of preventing loss of personal information including credit card numbers. 2. Authentication and Authorization-There must be a way to confirm the parties involved and to approve a transaction. 3. Integrity-there should be a way to prevent unauthorized changes to data. 4. Nonrepudiation The e-Payment system should limit parties from rejecting that a legitimate transaction took place. This is achieved by use of signature implemented using encryption. 7.2 Characteristics of successful e-payment methods 1. Independence-should be able to exist independently without any requirement of backing. This property has been violated by several epayment methods which require the parties involved to be holders of a bank account. 2. Interoperability and portability 3. Security-should have security features .it should not be easy to alter and should not allow double spending. 4. Anonymity-not attached to any particular person, i.e, negotiable 5. Divisibility-several denominations 6. Ease of use-storable and retrievable 7.3 Security for E-Payments Security is implemented using the following techniques: a. Public key infrastructure (PKI)a scheme for securing epayments using public key encryption and various technical components. b. Public key encryption-Encryption is the process of changing a digital message to a form that is unintelligible to unauthorized user. Usually it involves changing of from plain text to cipher text. Public key encryptionalso called asymmetric encryption- is implemented by use of a public key that is distributed to anyone who wants it and a private key that is kept secret. To understand how public key cryptosystem works, consider two users, Diana and Paul. Both users have a public/private key pair. When Diana wants to send an encrypted message to Paul, she looks up Pauls public key in a public directory or by other means, uses it to encrypt the message and sends it to Paul. Paul uses his private key to decrypt the message and read it in plain text. Anyone who has access to Pauls public key can send him an encrypted message, but no one, not even the individual who encrypted the message, besides Paul, can decrypt it.

c. Digital signatures process: This is a process that involves the use of public and secret keys to prove the senders authenticity. Digital signatures enhance authentication which is the process by which the receiver of a digital message can be confident of the senders identity. The process may be described using the previous example of Diana and Paul. Paul would like to prove the senders authenticity the process would take the following steps: 1. Diana encrypts the message to Paul using Pauls public key. 2. Diana then encrypts the resulting cipher text with her secret key and sends it to Paul. 3. Paul gets the message and first uses Dianas public key to decrypt the message. A decryption failure would prove that Diana did not send the message. 4. If the decryption is successful Paul is confident that the message is from Diana and may now go ahead and use his secret key to decrypt the message originally encrypted in step 1. d. Digital certificates: This is a message that contains a number of fields, the most important of which are a user Identity and the associated public key. Certificates are issued by trusted third parties called certifying authorities to guarantee the users identity claim. The certificate is used when the message recipient wants to gain access to the senders public key. e. Certificate authorities (CAs)these are trusted third parties who issue digital certificates. An example of a well known certifying authority (CA) on the Internet is Verisign (www.verisign.com). 7.4 Standards for E-Payments i). Secure socket layer (SSL)protocol that utilizes standard certificates for authentication and data encryption to ensure privacy or confidentiality ii). Transport Layer Security (TLS)as of 1996, another name for the Secure Socket Layer protocol iii). Secure Electronic Transaction (SET)a protocol designed to provide secure online credit card transactions for both consumers and merchants; developed jointly by Netscape, Visa, MasterCard, Microsoft and others. 7.5 Modes of electronic payment 1. Electronic Cards a. Payment cardselectronic cards that contain information that can be used for payment purposes b. Credit cardsprovides holder with credit to make purchases up to a limit fixed by the card issuer Security risks with credit cards 3

1. Stolen cards 2. Reneging by the customerauthorizes a payment and later denies it. The solution is to invoke the use of digital signatures. 3. Theft of card details stored on merchants computer-The solution for this is to isolate computer storing information so it cannot be accessed directly from the Web. c. Charge cardsbalance on a charge card is supposed to be paid in full upon receipt of monthly statement d. Debit cardcost of a purchase drawn directly from holders checking account (demand-deposit account) e. Virtual credit cardan e-payment system in which a credit card issuer gives a special transaction number that can be used online in place of regular credit card numbers f. Electronic wallets (e-wallets)a software component in which a user stores credit card numbers and other personal information; when shopping online; the user simply clicks the e-wallet to automatically fill in information needed to make a purchase g. Purchasing cardsspecial-purpose payment cards issued to a companys employees to be used solely for purchasing nonstrategic materials and services up to a preset dollar limit. They are instrument of choice for B2B purchasing. 2. Smart Cards This is an electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card. 3. E-Cash and Innovative Payment Methods E-cash refers to the digital equivalent of paper currency and coins, which enables secure and anonymous purchase of low-priced items. There are several payment methods associated with it. a). Micropaymentssmall payments, usually under $10 b). E-Coin.net-Users purchase some eCoins with a credit card c). Wireless payments-Vodafone m-pay bill system that enables wireless subscribers to use their mobile phones to make micropayments. d). Qpass (qpass.com) - Charges to qpass account, are charged to a specified credit card on a monthly basis. 4. Stored-Value Cards These are cards that hold the cash value downloaded from bank or credit card account. (a) Visa casha stored-value card designed to handle small purchases or micropayments; sponsored by Visa. 4

(b) Mondexa stored-value card designed to handle small purchases or micropayments; sponsored by Mondex, a subsidiary of MasterCard. (c) Internetcash- The primary reason for internet cash is to capture the teenage market. The uses of internet cash are communicating with friends via email and chat rooms, researching information, playing games, downloading music or videos. InternetCash offers prepaid stored-value cards sold in amounts of $10, $20, $50, and $100 and purchases are automatically deducted from the value of the card 5. Person-to-Person Payments These are e-payment schemes (such as paypal.com) that enable the transfer of funds between two individuals. Applications include: repaying money borrowed, paying for an item purchased at online auction, sending money to students at college, sending a gift to a family member, e.t.c. 6. Global B2B Payments (a) Letters of credit (LC)a written agreement by a bank to pay the seller, on account of the buyer, a sum of money upon presentation of certain documents. (b) TradeCard (tradecard.com) Payments innovative e-payment method that uses a payment card. TradeCard allows businesses to effectively and efficiently complete B2B transactions whether large or small, domestic or cross-border, or in multiple currencies 7. E-Checking An E-check is the electronic version or representation of a paper check. It eliminates need for expensive process reengineering and takes advantage of the competency of the banking industry. It is used mainly in B2B. 7.6 Order Fulfillment Order fulfillment refers to all the activities needed to provide customers with ordered goods and services, including related customer services. Other terms related to order fulfillment include: Back-office operationsthese are activities that support fulfillment of sales, such as accounting and logistics. Front-office operationsthese are business processes, such as sales and advertising, which are visible to customers. EC Order Fulfillment Process involves the following activities: 1. Payment clearance 2. In-stock availability 3. Arranging shipments 4. Insurance 5. Production (planning, execution) 5

6. Plant services 7. Purchasing and warehousing 8. Customer contacts 9. Returns (Reverse logisticsmovement of returns from customers to vendors) 10. Demand forecast 11. Accounting, billing 7.6 Order Fulfillment and the Supply Chain Order fulfillment and order taking are integral parts of the supply chain. Order fulfillment problems are created due by lack of coordination and inability or refusal to share information 7.61 Solutions to Order Fulfillment Problems 1. Improvements to order taking process Order taking can be done on EDI, EDI/Internet, or an extranet, and it may be fully automated. 2. Handling Returns This is necessary for maintaining customer trust and loyalty using. Exercise: 1. List down six entities who are actively involved in an electronic transaction. 2. Outline four important issues related to trust that should be addressed in e-payment systems. 3. Briefly explain four characteristics if a successful e-payment methods. 4. Discuss the two types of Encryption standards: Symmetric and Asymmetric encryption. 5. Explain the following standards of electronic payment. a. SSL b. SET c. OTP 6. Outline six modes of electronic payments. 7. Give details of the term order fulfillment.

Chapter 8: Law, Ethics, and Cyber Crime 8.1 Legal Issues vs. Ethical Issues Ethics is the branch of philosophy that deals with what is considered to be right and wrong. Businesspeople engaging in e-commerce need guidelines as to what behaviors are reasonable under any given set of circumstances. What is unethical in one culture may be perfectly acceptable in another. Some of the legal and ethical issues include: 1. Privacy This is the right to be left alone and the right to be free of unreasonable personal intrusions. Loss of this right seams a necessary evil for technology to evolve, in other words, with the advancement of technology; it becomes easier for one to lose private and confidential details to unauthorized parties. Presently, no laws govern the privacy of individuals on the internet. The internet provides easy access to public information. It also enables marketers (supermarkets) to track anything you buy using database technology, that is, data warehouses and data mining technologies. This in turn allows them to profile you and send to you customized offers for goods and services you are most likely to buy. Complication arise when this organization start selling your profile to other marketing organizations against your wish. 2. Intellectual Property Rights Intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. Issues related to IP include: a. Copyright This refers to an exclusive grant from the government that allows the owner to reproduce a work, in whole or in part, and to distribute, perform, or display it to the public in any form or manner, including the Internet.

b. Trademarks A trademark is a symbol used by businesses to identify their goods and services, government registration of the trademark confers exclusive legal right to its use. c. Patent This is a document that grants the holder exclusive rights on an invention for a fixed number of years. 8.2 Cyber Crime This refers to computer generated offences. Examples include: 1. Fraud Fraud refers to intentional deceit or trickery, often with the aim of financial gain. 2. Cyber attack A cyber attack is an electronic attack, either criminal trespass over the Internet (cyber intrusion) or unauthorized access that results in damaged files, pro-grams, or hardware (cyber vandalism). There are certainly individuals who are behind these offenses. These include, Hackers, Crackers, and Other Attackers. 1. Hackers Original hackers created the UNIX operating system and helped build the Internet, Usenet, and World Wide Web; and, used their skills to test the strength and integrity of computer systems Over time, the term hacker came to be applied to rogue programmers who illegally break into computers and networks. 2. Crackers Crackers people who engage in unlawful or damaging hacking short for criminal hackers. 3. Other attackers Script kiddies are ego-driven, unskilled crackers who use information and software (scripts) that they download from the Internet to inflict damage on targeted sites. 8.3 Internet Security Cyber attacks are on the rise due to the following factors: 1. Security and ease of use are antithetical/opposing to one another 2. Security takes a back seat to market pressures 3. Security of an EC site depends on the security of the Internet as a whole 4. Security vulnerabilities are mushrooming 5. Security is compromised by common applications 8.31 Basic Security Issues From the users perspective: compromise The user is concerned about the following issues.

Whether the Web server is owned and operated by a legitimate company.

Whether the Web page and form do not contain some malicious or dangerous code or content. Whether the Web server will not distribute the information the user provides to some other party. From the companys perspective: The company wants assurance to the following issues: Assurance that user will not attempt to break into the Web server or alter the pages and content at the site. Assurance that the user will not try to disrupt the server so that it is not available to others. From both parties perspectives: How do they know that the network connection is free from eavesdropping by a third party listening inon the line? How do they know that the information sent back and forth between the server and the users browser has not been altered? 8.32 Major Internet security issues 1. Authorization -the process that ensures that a person has the right to access certain resources 2. Authentication- the process by which one entity verifies that another entity is who they claim to be by checking credentials of some sort 3. Auditing- the process of collecting information about attempts to access particular resources, use particular privileges, or perform other security actions 4. Confidentiality (privacy) 5. Integrity- As applied to data, the ability to protect data from being altered or destroyed in an unauthorized or accidental manner 6. Nonrepudiation- The ability to limit parties from refuting that a legitimate transaction took place, usually by means of a signature

8.33 General Security Issues at E-Commerce Sites

8.4 Types of Cyber Attacks 1. Technical attack An attack perpetrated using software and systems knowledge or expertise 2. Nontechnical attack An attack in which a perpetrator uses persuasion to trick people into revealing sensitive information or performing actions that compromise the security of a network 3. Common vulnerabilities and exposures (CVEs) Publicly known computer security risks or problems; these are collected, enumerated, and shared by a board of security-related organizations (cve.mitre.org) 4. Denial-of-service (DoS) attack An attack on a Web site in which an attacker uses specialized software to send a flood of data packets to the target computer with the aim of overloading its resources.

5. Distributed denial of service (DDoS) attack A denial-of-service attack in which the attacker gains illegal administrative access to as many computers on the Internet as possible and uses these multiple computers to send a flood of data packets to the target computer 6. Malware A generic term for malicious software 7. Virus A piece of software code that inserts itself into a host, including the operating systems, to propagate; it cannot run independently but requires that its host program be run to activate it 8. Worm

A software program that runs independently, consuming the resources of its host from within in order to maintain itself and propagating a complete working version of itself onto another machine 9. Trojan horse A program that appears to have a useful function but that contains a hidden function that presents a security risk 8.5 Security Technologies Internet and EC security is a thriving business and several companies have come up with technologies to enhance internet security. Examples of security technologies include: Firewall A firewall is a network node consisting of both hardware and software that isolates a private network from a public network. Intrusion detection system (IDS) This is a special category of software that can monitor activity across a network or on a host computer, watch for suspicious activity, and take automated action based on what it sees Security risk management A systematic process for determining the likelihood of various security attacks and for identifying the actions needed to prevent or mitigate those attacks. 8.6 Exercise 1. Briefly describe the following e-commerce and internet issues: a. Privacy. b. Intellectual property rights. 2. Outline two examples of cyber crime and describes at least two groups of individuals who may be behind the offenses. 3. List down five factors which have given rise to cyber attacks. 4. Discuss the basic security issues: a. from the users perspective b. from the companys perspective c. from the both users and companys perspective 5. Outline five major insecurity issues. 6. Describe five types of cyber attacks. 7. Briefly describe the following security technologies: a. Firewall. b. Intrusion detection system. c. Security risk management.

Chapter9: E-Marketing and Advertising 9.0 Introduction: ....................................................................................................... 1 9.1 Characteristics of marketing communications via Internet......................... 1 9.2 Advertising Models for the Web ..................................................................... 1 Types of Adverts ...................................................................................................... 2 9.3 Measuring Effectiveness of an E-commerce Web site ...................................... 2 9.4 Exercise: ................................................................................................................... 3 9.0 Introduction: E-Marketing is the online management process responsible for identifying, anticipating, and satisfying customer requirements profitably. 9.1 Characteristics of marketing communications via Internet (a) Interactivity-Opportunities for customer to pull message (traditionally push has dominated) (b) Intelligence- Low cost market research about markets (c) Individualization- messages can be tailored to individuals (point casting v- broadcasting) - also known as personalization (d) Integration- How Internet allows organizations to contact customer, & how this fits with existing means of communication and how customer can contact organization (e) Industry restructuring-few middlemen (f) Independence of location- how marketing developed for one nation (culture) ,work in another Marketing involves brands. For a brand to be successful people have to be aware of it, it must be of good quality, and should have some loyal customers. 9.2 Advertising Models for the Web The basic questions are: 1. How can content best be delivered to customers? 2. Will advertising techniques used in print and electronic broadcast media work on the web? 3. Will standard methods used to track the success of advertising in these media work on the web? The direction of the advertising message on the web is reversed. In traditional advertising, the message is imposed on the consumer, who is passive; the customer is delivered over to the advertiser in a one-to-many model of

marketing communications. However, on the web, the consumer chooses to view an advertisement on a site and takes actions to uncover the information the advertiser wishes to deliver. Content regains importance as the core of the advertising effort.

Traditional advertising uses brief distilled messages to catch and hold our attention and depends on repetition to deliver the message. Content is minimized and simplified to fit the time constraints of media or the size constraints of the page However, packing the maximum amount of meaning into the minimum amount of content is critical In order to advertise on a site you need to know: i. Why you want to advertise on a site. ii. Who the audience is on the site (demographics and psychographics)? Types of Adverts (a) Banner adverts This involves the placement of an image or banner of varying size on the remote page. The image contains the corporate logo and perhaps a tag line indicating that the user can obtain information or visit an interesting site by clicking on the image (b) Interstitial adverts These are a way of placing full-page messages between the current and destination page. They are pages that pop up between what the viewer is looking at and what they are expecting to get Note With banner ads, viewers quickly learn at some level to recognize banner ads and filter them out Interstitial messages, like TV commercials make viewers a captive of the message. Typical interstitials last ten seconds or less where the viewer is (hopefully) doing nothing but looking at the ad 9.3 Measuring Effectiveness of an E-commerce Web site (a) Site activity analysis-traffic generated by site (b) User profiling-eliciting demographic information using registration forms (c) Auditing-ad statistics audited by independent third parties The following represent some measures of site effectiveness, which can be based upon analysis & auditing: (a) Site awareness = Number of site visitors/total Internet users (b) Site attractiveness = Number of those seeking information/Number of site visitors (c) Promotion effectiveness = Number of those initiating dialogue/ Number

of those seeking information. (d) Purchase effectiveness = Numbers placing order/Numbers initiating dialogue (e) Loyalty effectiveness = Number of repeat customers/Total customers ordering

9.4 Exercise: 1. a. b. c. 2. 3. 4.

Define the terms E-marketing. banner adverts interstitial adverts Differentiate between traditional marketing and e-marketing. What are the advantages of e-marketing over traditional marketing? Outline at least four measures of web site effectiveness.