E - COMMERCE

ContentIntroduction

Concept

Learning Outcomes

What is E-commerce?

History

Types of E-Commerce

Advantage and Disadvantage of Ecommerce

Benefits Of Ecommerce

E-Commerce Infrastructure Center for E-Commerce Infrastructure Development

Business Models and e-Commerce Business Models for Internet based e-commerce: An Anatomy Introduction

The emerging market structure

Business Models for Internet based e-commerce

Value streams in Internet based business

Revenue Streams in Internet based Business

Logistic streams for Internet based Business

Towards an appropriate business model

Conclusions

E-Commerce Strategy Successful E-Commerce Strategies

Business To Business Ecommerce Strategies for Growth

Developing a Winning Ecommerce Strategy

Supply Chain Management and e-Commerce Impact of E-Commerce on Supply Chain Management

The Role of Supply-Chain Management in E-commerce

E-Commerce will transform Supply Change Management

Marketing Strategies and e-Commerce Marketing Strategy and E-Commerce Introduction

Strategic analysis - Understanding the Environment

Identifying the Strategic Options/SWOT analysis

The Strategy Hierarchy

Retailing in E-commerce

Conclusion

E-Commerce Security and Controls Security Implications

Information Security

Security Policies and Procedures

Protecting the E-Commerce Environment

Data protection and E-commerce

Electronic Payment Systems Electronic Payment Systems Hacker Definition

Requirements for Payment System

Payment Methods

Electronic Payment Schemes

Mobile Commerce and Pervasive Computing Mobile Commerce

Evolution of Mobile Commerce Applications

Pervasive Computing

Some Personal and Business Uses of Pervasive Computing

Relation of Pervasive Commerce with E-Commerce

Relation of Pervasive Commerce with M-Commerce

The four major types of Wireless Telecommunications Networks

Legal and Ethical Issues in e-Commerce Ethical & Morel Implications

Legal Implications

Legal Issues Involved in E-Commerce

Conclusion

Social and Other Issues in e-Commerce Social Issues

Economic Issues

Privacy Issues

Conclusion

Introduction to e-Commerce

Introduction

Electronic commerce (e-commerce) is a growing aspect of the business community. This formally

is the use of digital transactions between and among businesses and individuals. More commonly

e-commerce is the use of the Internet to conduct business. Initially emerging from the Electronic

Data Interchange (EDI) e-commerce has gone through several major steps to get to its current

point. Through these steps there has been an emergence of several subsets of e-commerce and

new technologies. As a result of these changes and the growth of electronic commerce benefits

and detriments have been brought to society that can be generalized to all the subsets of e-

commerce. Looking at economic, privacy and social aspects of society we can see there are

issues facing electronic commerce development. It is also possible to see there are some

industries that e-commerce has had a greater impact on, such as the culture and information

industry. Overall, electronic commerce can be a benefit to society especially if businesses adapt

to their customers worries such as privacy concerns. As these problems begin to be solved and

technology improves e-commerce will provide individuals with more choice and add further depth

to the economy.

Concepts

Anonymous remailer, B2B exchange, browser, checkout page, common gateway interface,

cookie, day trading, denial of service attack, design pattern, disintermediation, distributed objects,

dynamic pages, dynamic pricing, e-auction, e-learning, email server, e-mall, e-procurement, e-

shop, e-tailing, file transfer protocol, framework, horizontal portal, hyperlink, hypertext mailer,

Hypertext Markup Language, information brokerage, Java, online trading, portal, posting,

procurement, query, rapid application development, search engine, Secure Sockets Layers,

Server Side Includes, Servlet, shopping cart, spam, spider, stateless server, supply chain, third

party marketplace, thread, trust brokerage, vertical portal, virtual community. web page, web

server, website, webmaster.

Learning Outcomes

Having studied this unit you should be able to:

detail what is meant by the term ‘e-commerce’;

examine some typical distributed applications;

detail some of the problems that are encountered when developing distributed applications;

describe briefly some of the technologies that are used to support distributed applications;

show how some of the technologies detailed in the unit are used in concert to realise a

typical commercial system;

describe some of the business models used in the internet.

What is E-commerce?

E-Commerce is the ability of a company to have a dynamic presence on the Internet which

allowed the company to conduct its business electronically, in essence having an electronic shop.

Products can be advertised, sold and paid for all electronically without the need for it to be

processed by a human being.

Due to the vastness of the internet advertising and the website can be exposed to hundreds of

people around the world for almost nil cost and with information being able to be changed almost

instantly the site can always be kept up to date with all the latest products to match with

consumers demands.

The biggest advantage of E-Commerce is the ability to provide secure shopping transactions via

the internet and coupled with almost instant verification and validation of credit card transactions.

This has caused E-Commerce sites to explode as they cost much much less than a store front in

a town and has the ability to serve many more customers.

In the broad meaning electronic commerce (E-Commerce) is a means of conducting business

using one of many electronic methods, usually involving telephones, computers (or both).

E-Commerce is not about the technology itself, it is about doing business using the technology.

Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying

and selling of products or services over electronic systems such as the Internet and other

computer networks. The amount of trade conducted electronically has grown extraordinarily with

wide-spread Internet usage. A wide variety of commerce is conducted in this way, spurring and

drawing on innovations in electronic funds transfer, supply chain management, Internet marketing,

online transaction processing, electronic data interchange (EDI), inventory management systems,

and automated data collection systems. Modern electronic commerce typically uses the World

Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider

range of technologies such as e-mail as well.

A large percentage of electronic commerce is conducted entirely electronically for virtual items

such as access to premium content on a website, but most electronic commerce involves the

transportation of physical items in some way. Online retailers are sometimes known as e-tailers

and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce

presence on the World Wide Web.

Electronic commerce that is conducted between businesses is referred to as business-to-business

or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific,

pre-qualified participants (private electronic market). Electronic commerce that is conducted

between businesses and consumers, on the other hand, is referred to as business-to-consumer or

B2C. This is the type of electronic commerce conducted by companies such as Amazon.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists

of the exchange of data to facilitate the financing and payment aspects of the business

transactions.

History

There have been several key steps in the history of e-commerce. The first step came from the

development of the Electronic Data Interchange (EDI). EDI is a set of standards developed in the

1960’s to exchange business information and do electronic transactions. At first there was several

different EDI formats that business could use, so companies still might not be able to interact with

each other. However, in 1984 the ASC X12 standard became stable and reliable in transferring

large amounts of transactions. The next major step occurred in 1992 when the Mosaic web-

browser was made available, it was the first ‘point and click’ browser. The Mosaic browser was

quickly adapted into a downloadable browser, Netscape, which allowed easier access to

electronic commerce. The development of DSL was another key moment in the development to

of e-commerce. DSL allowed quicker access and a persistent connection to the Internet.

Christmas of 1998 was another major step in the development of e-commerce. AOL had sales of

1.2 billion over the 10 week holiday season from online sales. The development of Red Hat Linux

was also another major step in electronic commerce growth. Linux gave users another choice in a

platform other then Windows that was reliable and open-source. Microsoft faced with this

competition needed to invest more in many things including electronic commerce.

Napster was an online application used to share music files for free. This application was yet

another major step in e-commerce. Many consumers used the site and were dictating what they

wanted from the industry. A major merger, in early 2000, between AOL and Time Warner was

another major push for electronic commerce. The merger, worth $350 million, brought together a

major online company with a traditional company. In February 2000 hackers attacked some major

players of e-commerce, including Yahoo, e-bay and Amazon. In light of these attacks the need for

improved security came to the forefront in the development of electronic commerce.

It is predicted that that revenues, up until 2006, will grow 40% to 50% yearly. Expectations of

higher prices as well as larger profits for e-commerce business are also present. Also, we will see

a larger presence by experienced traditional companies, such as Wal-Mart, on the Internet. It is

believed companies in general will take this mixed strategy of having stores online and offline in

order to be successful. It can be seen that there will be a large growth in Business-to-Consumer

(B2C) e-commerce, which is online businesses selling to individuals. However, even though B2C

electronic commerce may be the most recognizable there are different varieties.

Today the largest electronic commerce is Business-to-Business (B2B). Businesses involved in

B2B sell their goods to other businesses. In 2001, this form of e-commerce had around $700

billion in transactions. Other varieties growing today include Consumer-to-Consumer (C2C)

where consumers sell to each other, for example through auction sites. Peer-to-Peer (P2P) is

another form of e-commerce that allows users to share resources and files directly

Types of E-Commerce

E-commerce is the use of Internet and the web to transact business but when we focus on digitally

enabled commercial transactions between and among organizations and individuals involving

information systems under the control of the firm it takes the form of e-business. Nowadays, 'e' is

gaining momentum and most of the things if not everything is getting digitally enabled. Thus, it

becomes very important to clearly draw the line between different types of commerce or business

integrated with the 'e' factor.

There are mainly five types of e-commerce models:

1. Business to Consumer (B2C) - As the name suggests, it is the model involving businesses

and consumers. This is the most common e-commerce segment. In this model, online businesses

sell to individual consumers. When B2C started, it had a small share in the market but after 1995

its growth was exponential. The basic concept behind this type is that the online retailers and

marketers can sell their products to the online consumer by using crystal clear data which is made

available via various online marketing tools. E.g. An online pharmacy giving free medical

consultation and selling medicines to patients is following B2C model.

2. Business to Business (B2B) - It is the largest form of e-commerce involving business of

trillions of dollars. In this form, the buyers and sellers are both business entities and do not involve

an individual consumer. It is like the manufacturer supplying goods to the retailer or wholesaler.

E.g. Dell sells computers and other related accessories online but it is does not manufacture all

those products. So, in order to sell those products, it first purchases them from different

businesses i.e. the manufacturers of those products.

3. Consumer to Consumer (C2C) - It facilitates the online transaction of goods or services

between two people. Though there is no visible intermediary involved but the parties cannot carry

out the transactions without the platform which is provided by the online market maker such as

eBay.

4. Peer to Peer (P2P) - Though it is an e-commerce model but it is more than that. It is a

technology in itself which helps people to directly share computer files and computer resources

without having to go through a central web server. To use this, both sides need to install the

required software so that they can communicate on the common platform. This type of e-

commerce has quite low revenue generation as from the beginning it has been inclined to the free

usage due to which it sometimes got entangled in cyber laws.

5. M -Commerce - It refers to the use of mobile devices for conducting the transactions. The

mobile device holders can contact each other and can conduct the business. Even the web design

and development companies optimize the websites to be viewed correctly on mobile devices.

There are other types of e-commerce business models too like Business to Employee (B2E),

Government to Business (G2B) and Government to Citizen (G2C) but in essence they are similar

to the above mentioned types. Moreover, it is not necessary that these models are dedicatedly

followed in all the online business types. It may be the case that a business is using all the models

or only one of them or some of them as per its needs.

Advantage and Disadvantage of Ecommerce

E commerce provides many new ways for businesses and consumers to communicate and

conduct business. There are a number of advantages and disadvantages of conducting business

in this manner.

E-commerce advantages

An E-Commerce website offers many advantages to most types of businesses of all types and

sizes. The main advantages are:

Access to A Global MarketThe internet allows companies to have access to a global market rather than just the potential

customers in the surrounding area of there physical location. Due to the fact that the website is

open 24-hours a day (more below) time differences between countries are no longer a problem,

you wouldn't have to get up early in America to order something in England anymore.

Cutting Out the MiddlemanBusinesses can sell direct to the consumer rather than having to sell to a supplier and then them

sell it on, this means the company can usually offer the product at a discount compared to there

retailers because only one company has to make profit rather than two or more.

A Level Playing FieldA small business can compete and show itself as a professional company as much as large ones

as budgets for setting up a professional site are relatively cheap to the amount of return you can

get on them.

Open 24 Hours a DayWith fully automated payment and order processing systems your site need never be closed even

if your office/warehouse is. Orders can be dispatched during opening hours while orders can be

taken 24 hours a day, this has great advantages for people who might be at work or busy during

normal working hours of some shops.

Greater Customer SatisfactionAn E-Commerce website can be a powerful tool for building customer loyalty if it is effective

enough, a well designed website puts the customer in charge of the relationship, they can buy,

browse, ask for help or track the progress of order they have placed where they want and when

they want.

Reduced Marketing Costs

Word of mouth can be incredibly powerful on the Web through e-mail recommendations and

search engine rankings. You can achieve a great deal through growth by treating customers well,

keeping them informed about your activities and benchmarking yourself against competitors. Also

with the internet advertisement being relatively cheap you can reach many more people at a

cheaper cost than using convential advertising methods.

Better Customer InformationYou can quickly and easy analyze your customers by location and area as well as the products

they buy as you will have to request a customers name and address from them when processing

a transaction. As well as you being more informed about your customers, your customers are also

more informed as generally on E-Commerce sites there is more information on a product including

reviews etc to help customers choose the right product for them. This works in the best interest for

the site as it cuts down on the amount of returned goods.

SecurityMost E-Commerce suits offered by companies come with built in security in the software and with

the purchase of a dent SSL certificate and some good server configurations you can safely know

that all the details of your customers will be safe and secure. You can get approved certificates to

show that your site is secure and meets up the certain standards; this lets your customers know

that they are safe to shop at your site and the data will not end up in the wrong hands.

Also sensitive information such as credit card numbers are usually automatically processed so do

not require any staff at the company to see them, making purchasing online even more secure.

Some advantages that can be achieved from e-commerce include:

Being able to conduct business 24 x 7 x 365. E-commerce systems can operate all day

every day. Your physical storefront does not need to be open in order for customers and

suppliers to be doing business with you electronically.

Access the global marketplace. The Internet spans the world, and it is possible to do

business with any business or person who is connected to the Internet. Simple local

businesses such as specialist record stores are able to market and sell their offerings

internationally using e-commerce. This global opportunity is assisted by the fact that, unlike

traditional communications methods, users are not charged according to the distance over

which they are communicating.

Speed. Electronic communications allow messages to traverse the world almost

instantaneously. There is no need to wait weeks for a catalogue to arrive by post: that

communications delay is not a part of the Internet / e-commerce world.

Marketspace. The market in which web-based businesses operate is the global market. It

may not be evident to them, but many businesses are already facing international

competition from web-enabled businesses.

Opportunity to reduce costs. The Internet makes it very easy to 'shop around' for products

and services that may be cheaper or more effective than we might otherwise settle for. It is

sometimes possible to, through some online research, identify original manufacturers for

some goods - thereby bypassing wholesalers and achieving a cheaper price.

Computer platform-independent. 'Many, if not most, computers have the ability to

communicate via the Internet independent of operating systems and hardware. Customers

are not limited by existing hardware systems' (Gascoyne & Ozcubukcu, 1997:87).

Efficient applications development environment - 'In many respects, applications can be

more efficiently developed and distributed because the can be built without regard to the

customer's or the business partner's technology platform. Application updates do not have

to be manually installed on computers. Rather, Internet-related technologies provide this

capability inherently through automatic deployment of software updates' (Gascoyne &

Ozcubukcu, 1997:87).

Allowing customer self service and 'customer outsourcing'. People can interact with

businesses at any hour of the day that it is convenient to them, and because these

interactions are initiated by customers, the customers also provide a lot of the data for the

transaction that may otherwise need to be entered by business staff. This means that some

of the work and costs are effectively shifted to customers; this is referred to as 'customer

outsourcing'.

Stepping beyond borders to a global view. Using aspects of e-commerce technology can

mean your business can source and use products and services provided by other

businesses in other countries. This seems obvious enough to say, but people do not

always consider the implications of e-commerce. For example, in many ways it can be

easier and cheaper to host and operate some e-commerce activities outside Australia.

Further, because many e-commerce transactions involve credit cards, many businesses in

Australia need to make arrangements for accepting online payments. However a number of

major Australian banks have tended to be unhelpful laggards on this front, charging a lot of

money and making it difficult to establish these arrangements - particularly for smaller

businesses and/or businesses that don't fit into a traditional-economy understanding of

business. In some cases, therefore, it can be easier and cheaper to set up arrangements

which bypass this aspect of the Australian banking system. Admittedly, this can create

some grey areas for legal and taxation purposes, but these can be dealt with. And yes

these circumstances do have implications for Australia's national competitiveness and the

competitiveness of our industries and businesses.

As a further thought, many businesses find it easier to buy and sell in U.S. dollars: it is effectively

the major currency of the Internet. In this context, global online customers can find the concept of

peculiar and unfamiliar currencies disconcerting. Some businesses find they can achieve higher

prices online and in US dollars than they would achieve selling locally or nationally. Given that

banks often charge fees for converting currencies, this is another reason to investigate all of your

(national and international) options for accepting and making online payments.

In brief, it is useful to take a global view with regard the potential and organization of your e-

commerce activities, especially if you are targeting global customers.

A new marketing channel. The Internet provides an important new channel to sell to

consumers. Peterson et al. (1999) suggest that, as a marketing channel, the Internet has

the following characteristics:

the ability to inexpensively store vast amounts of information at different virtual locations

the availability of powerful and inexpensive means of searching, organizing, and

disseminating such information

interactivity and the ability to provide information on demand

the ability to provide perceptual experiences that are far superior to a printed catalogue,

although not as rich as personal inspection

the capability to serve as a transaction medium

the ability to serve as a physical distribution medium for certain goods (e.g., software)

relatively low entry and establishment costs for sellers

no other existing marketing channel possesses all of these characteristics.

E-commerce disadvantages and constraints:

Some disadvantages and constraints of e-commerce include the following.

Time for delivery of physical products. It is possible to visit a local music store and walk out

with a compact disc or a bookstore and leave with a book. E-commerce is often used to

buy goods that are not available locally from businesses all over the world, meaning that

physical goods need to be delivered, which takes time and costs money. In some cases

there are ways around this, for example, with electronic files of the music or books being

accessed across the Internet, but then these are not physical goods.

Physical product, supplier & delivery uncertainty. When you walk out of a shop with an

item, it's yours. You have it; you know what it is, where it is and how it looks. In some

respects e-commerce purchases are made on trust. This is because, firstly, not having had

physical access to the product, a purchase is made on an expectation of what that product

is and its condition. Secondly, because supplying businesses can be conducted across the

world, it can be uncertain whether or not they are legitimate businesses and are not just

going to take your money. It's pretty hard to knock on their door to complain or seek legal

recourse! Thirdly, even if the item is sent, it is easy to start wondering whether or not it will

ever arrive.

Perishable goods. Forget about ordering a single gelato ice cream from a shop in Rome!

Though specialized or refrigerated transport can be used, goods bought and sold via the

Internet tend to be durable and non-perishable: they need to survive the trip from the

supplier to the purchasing business or consumer. This shifts the bias for perishable and/or

non-durable goods back towards traditional supply chain arrangements, or towards

relatively more local e-commerce-based purchases, sales and distribution. In contrast,

durable goods can be traded from almost anyone to almost anyone else, sparking

competition for lower prices. In some cases this leads to disintermediation in which

intermediary people and businesses are bypassed by consumers and by other businesses

that are seeking to purchase more directly from manufacturers.

Limited and selected sensory information. The Internet is an effective conduit for visual and

auditory information: seeing pictures, hearing sounds and reading text. However it does not

allow full scope for our senses: we can see pictures of the flowers, but not smell their

fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further,

when we pick up and inspect something, we choose what we look at and how we look at it.

This is not the case on the Internet. If we were looking at buying a car on the Internet, we

would see the pictures the seller had chosen for us to see but not the things we might look

for if we were able to see it in person. And, taking into account our other senses, we can't

test the car to hear the sound of the engine as it changes gears or sense the smell and feel

of the leather seats. There are many ways in which the Internet does not convey the

richness of experiences of the world. This lack of sensory information means that people

are often much more comfortable buying via the Internet generic goods - things that they

have seen or experienced before and about which there is little ambiguity, rather than

unique or complex things.

Returning goods. Returning goods online can be an area of difficulty. The uncertainties

surrounding the initial payment and delivery of goods can be exacerbated in this process.

Will the goods get back to their source? Who pays for the return postage? Will the refund

be paid? Will I be left with nothing? How long will it take? Contrast this with the offline

experience of returning goods to a shop.

Privacy, security, payment, identity, contract. Many issues arise - privacy of information,

security of that information and payment details, whether or not payment details (eg. credit

card details) will be misused, identity theft, contract, and, whether we have one or not, what

laws and legal jurisdiction apply.

Defined services & the unexpected. E-commerce is an effective means for managing the

transaction of known and established services, that is, things that are everyday. It is not

suitable for dealing with the new or unexpected. For example, a transport company used to

dealing with simple packages being asked if it can transport a hippopotamus, or a customer

asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such

requests need human intervention to investigate and resolve.

Personal service. Although some human interaction can be facilitated via the web, e-

commerce can not provide the richness of interaction provided by personal service. For

most businesses, e-commerce methods provide the equivalent of an information-rich

counter attendant rather than a salesperson. This also means that feedback about how

people react to product and service offerings also tends to be more granular or perhaps lost

using e-commerce approaches. If your only feedback is that people are (or are not) buying

your products or services online, this is inadequate for evaluating how to change or

improve your e-commerce strategies and/or product and service offerings. Successful

business use of e-commerce typically involves strategies for gaining and applying customer

feedback. This helps businesses to understand, anticipate and meet changing online

customer needs and preferences, which is critical because of the comparatively rapid rate

of ongoing Internet-based change.

Size and number of transactions. E-commerce is most often conducted using credit card

facilities for payments, and as a result very small and very large transactions tend not to be

conducted online. The size of transactions is also impacted by the economics of

transporting physical goods. For example, any benefits or conveniences of buying a box of

pens online from a US-based business tend to be eclipsed by the cost of having to pay for

them to be delivered to you in Australia. The delivery costs also mean that buying individual

items from a range of different overseas businesses is significantly more expensive than

buying all of the goods from one overseas business because the goods can be packaged

and shipped together.

Some business processes are difficult to be implemented through electronic commerce.

Return-on-investment is difficult to apply to electronic commerce.

Businesses face cultural and legal obstacles to conducting electronic commerce.

Benefits Of Ecommerce

E Commerce is one of the most important facets of the Internet to have emerged in the recent

times. Ecommerce or electronic commerce involves carrying out business over the Internet with

the assistance of computers, which are linked to each other forming a network. To be specific

ecommerce would be buying and selling of goods and services and transfer of funds through

digital communications.

The benefits of Ecommerce:

Ecommerce allows people to carry out businesses without the barriers of time or distance.

One can log on to the Internet at any point of time, be it day or night and purchase or sell

anything one desires at a single click of the mouse.

The direct cost-of-sale for an order taken from a web site is lower than through traditional

means (retail, paper based), as there is no human interaction during the on-line electronic

purchase order process. Also, electronic selling virtually eliminates processing errors, as

well as being faster and more convenient for the visitor.

Ecommerce is ideal for niche products. Customers for such products are usually few. But in

the vast market place i.e. the Internet, even niche products could generate viable volumes.

Another important benefit of Ecommerce is that it is the cheapest means of doing business.

The day-to-day pressures of the marketplace have played their part in reducing the

opportunities for companies to invest in improving their competitive position. A mature

market, increased competitions have all reduced the amount of money available to invest. If

the selling price cannot be increased and the manufactured cost cannot be decreased then

the difference can be in the way the business is carried out. Ecommerce has provided the

solution by decimating the costs, which are incurred.

From the buyer’s perspective also ecommerce offers a lot of tangible advantages.

1. Reduction in buyer’s sorting out time.

2. Better buyer decisions

3. Less time is spent in resolving invoice and order discrepancies.

4. Increased opportunities for buying alternative products.

The strategic benefit of making a business ‘ecommerce enabled’, is that it helps reduce the

delivery time, labor cost and the cost incurred in the following areas:

1. Document preparation

2. Error detection and correction

3. Reconciliation

4. Mail preparation

5. Telephone calling

6. Data entry

7. Overtime

8. Supervision expenses

Operational benefits of e commerce include reducing both the time and personnel required

to complete business processes, and reducing strain on other resources. It’s because of all

these advantages that one can harness the power of ecommerce and convert a business to

e-business by using powerful turnkey ecommerce solutions made available by e-business

solution providers.

E-Commerce Infrastructure

Clients and partners, using computers, telephones, etc., can connect to the Internet through dial-

up lines to the public switched telephone network (PSTN). Through the PSTN Internet Service

Providers (ISPs) can be reached. The ISPs can also be reached through dedicated lines that

generally offer higher bit-rates, such as digital subscriber lines (DSLs), as well as T1, T4 and other

links. Connections can also be established from LANs, routers, hubs and PBX and other switches

on the Customer Premises, i.e. the premises of the clients, partners, etc. In addition to the plain

old telephone system (POTS) other operators offer connections to the Internet. These include

cable television operators, electric power companies, etc. 

Most are integrated with other networks, including packet switched public data networks

(PSPDNs) that use routers and similar switching/directing devices. 

On the other side of these networks you will find the host computers of the product/service

provider or seller. These people may have co-located or outsourced storage facilities. The latter

are data warehouses containing information on products, services, clients, partners, suppliers,

billing, payments, etc.

Security is of a major concern. This includes concerns about the following, among many other

security problems:

Credit card numbers, expiration dates, and owner information getting in the wrong hands.

Orders being accepted from the wrong clients. 

Payments being made to the wrong sources or goods and services being delivered to the

wrong people.

Viruses being allowed to pass through the system. 

To prevent some of these security problems firewalls are installed at critical interfaces. The

firewalls are supposed to filter the traffic, inhibit transmission of unwanted information (including

viruses), and prevent malicious or criminal actions by outside persons. However, a firewall cannot

by itself prevent misuse of credit card numbers or identity fraud. 

Encryption is a way of improving security. You as a user can encrypt your messages in an end-to-

end fashion and having your correspondent at the other end convert the message back into the

original clear-text. Encryption can also be used on individual links in the transmission chain. 

There has always been a competition between users and "authorities." Users want secure

encryption end-to-end, and government (law enforcement) agencies want to be able to read your

messages and in particular illegal ones. These agencies may be part of your own government or

foreign governments. We all agree that the traffic of drug dealers, terrorists and similar persons

should be controlled. Some countries make all encryption illegal, and others, like the U.S.

Government, put restrictions on the complexity of the encryption permitted.

Severe problems in the conflict between users and government arise when the users are

conducting businesses in the multimillion dollar range with governments. Examples of such users

are manufacturers of telecommunications networks, airplanes, as well as construction companies,

etc. You hear all of them talking about cases where their messages with their local agents

regarding terms and prices end up in clear-text on the desks of their (government) customers

even before their agents receive the messages. This may mean that the capabilities of

government security agencies (like the U.S. National Security Agency) have been used to

intercept and decrypt messages. Since national security agencies lost most of their "jobs" after the

end of the cold war, some countries are considering using the security capabilities of these

agencies to promote civil business.

Center for E-Commerce Infrastructure Development

Founded in January 2002, the Center for E-Commerce Infrastructure Development (CECID) is a

research and development center in the University of Hong Kong committed to promoting e-

commerce infrastructure development and standardization. A member of OASIS, W3C,

RosettaNet, and the ebXML Asia Committee, CECID actively takes part in the development and

implementation of international standards, such as Universal Business Language, Web Services,

and RosettaNet. Through participation in these international and regional standards bodies,

CECID follows closely the latest developments in e-commerce technology standards and

promotes Hong Kong's e-commerce technology to technical communities overseas.

CECID's operation is primarily financed by R&D grants from the Innovation and Technology

Commission of the Hong Kong Government for its two flagship research projects, namely Project

Phoenix and Project Pyxis. In its completed Project Phoenix, CECID has produced several

software packages that implement major ebXML specifications. These software packages include

Hermes Message Service Handler, eb-Mail, and ebXMLRR Registry/Repository and are currently

released under open source licenses on the freebXML.org website that CECID established in

2002. Commenced in 2004, Project Pyxis targets to develop enabling technology for e-business

interoperability between trading partners and within large enterprises using various

complementary and competing Web Services standards.

From the Internet to the WWW-:

Internet: the vast collection of interconnected networks that all use the TCP/IP protocols. Internet

is a network of computers connected to each other which are not part of the Internet as they don’t

use a TCP/IP protocol.

Intranet: a private network inside a company or organization that may use the same kinds of

software applications that you could find on the Internet, but it is only for internal use. An intranet

may be on the Internet (though gateways) or may simply be a network.

World Wide Web (WWW):

System of Internet servers that support documents formatted in a markup language called HTML

(Hypertext Markup Language). This language supports linking a document to other documents, as

well as linking to graphics, audio, and video files.

The WWW is an information-sharing model that is built on top of the Internet. The WWW

uses the HTTP protocol to transmit data.

E-commerce services, which use HTTP to allow applications to communicate in order to

exchange business logic, use the Web to share information.

The WWW is just one of the ways that information can be disseminated over the Internet.

The Internet, not the Web, is also used for e-mail, which relies on SMTP and FTP.

Packets, Routing and Addressing:

Four key rules have contributed to the success of the Internet:

Independent networks should not require any internal changes to be connected to the

network.

Packets that do not arrive at their destinations must be retransmitted from their source

network.

Router computers act as receive-and-forward devices; they do not retain information about

the packets that they handle.

No global control exists over the network.

The Internet uses packet switching:

Files are broken down into packets that are labeled with their origin, sequence, and

destination addresses.

This fact has very important consequences for both the performance and the security of e-

commerce systems.

The programs on routers use ‘routing algorithms’ that call upon their ‘routing tables’ to

determine the best path to send each packet.

When packets leave a network to travel on the Internet, they are translated into a standard

format by the router.

These routers and the telecommunication lines connecting them are referred to as ‘the Internet backbone’.

Between seller and customer there are several other actors who have a role to play.

Internet Protocols: Common language’.

rules governing data exchange between: two communicating entities,

layers in a station, from station to station, or network to network

3 key elements to consider:

Syntax includes data format, signal levels.

Semantics includes control information, e.g. coordination and error handling

Timing includes speed matching, sequencing

TCP/IP: protocol of internet

Transmission Control Protocol / Internet Protocol

simple and effective

most types of network

but does not include many security features

TCP:•Controls disassembly of a message or a file into packets before transmission over Internet

•Controls reassembly of packets into their original formats when they reach their destinations.

IP:

Specifies addressing details for each packet

Hypertext Transfer Protocol:

Hypertext Transfer Protocol (HTTP) is the set of rules for delivering Web pages over the

Internet.

HTTP uses the client/server model - The client opens an HTTP session and sends a

request to a server. The server returns an HTTP response message which contains data.

After this, they forget about each other – this has very significant implications for Web (and

ecommerce) application development.

IP addressing:32-bit number to identify the computers connected to the internet (232 ˜

4billion)

Base 2 (binary) number system: Used by computers to perform internal calculations

Sub-netting: Use of reserved private IP addresses within LANs and WANs to provide

additional address space

Private IP addresses: Series of IP numbers not permitted on packets that travel on the

Internet

Network Address Translation (NAT) device: Used in sub-netting to convert private IP

addresses into normal IP addresses.

Email: Electronic mail (e-mail): Must also be formatted according to common set of rules.

E-mail server: Computer devoted to handling e-mail

E-mail client software: Used to read and send email; Example: Microsoft Outlook,

Netscape Messenger

Mail Protocols: Simple Mail Transfer Protocol (SMTP)- Specifies format of a mail

message; Post Office Protocol (POP): POP message can tell the e-mail server to send mail

to user’s computer and delete it from e-mail server, or send mail to user’s computer and not

delete it, or simply ask whether new mail has arrived.

Markup Languages and the Web:

Text markup language: Specifies set of tags that are inserted into text

Standard Generalized Markup Language (SGML): Older and complex text markup

language, A meta language.

World Wide Web Consortium (W3C): Not-for-profit group that maintains standards for the

Web

Hypertext Markup Language (HTML): markup language used to create documents on the Web

today

HTML tags: Interpreted by Web browser and used by it to format the display of the text

HTML Links: Linear hyperlink structure, Hierarchical hyperlink structure.

Scripting languages and style sheets: Most common scripting languages: JavaScript, JScript, Perl, and VBScript

Cascading Style Sheets (CSS): Sets of instructions that give Web developers more control

over the format of displayed pages, Style sheet: Usually stored in a separate file,

Referenced using the HTML style tag

Extensible Markup Language (XML) : Uses paired start and stop tags

Includes data management capabilities that HTML cannot provide

Differences between XML and HTML: XML is not a markup language with defined tags,

XML tags do not specify how text appears on a Web page.

Intranets and Extranets:Intranet:

An intranet is an interconnected network (or internet – small “i”) that does not extend

beyond the organization that created it

Intranets are an extremely popular and low-cost way to distribute corporate information

An intranet uses Web browsers and Internet-based protocols (including TCP/IP, FTP,

Telnet, HTML, and HTTP) and often includes a firewall.

Extranet Extranets are intranets that have been extended to include specific entities outside the

boundaries of the organization (business partners, suppliers, etc.)

An extranet can be a public network, a secure (private) network, or a virtual private network

(VPN).

Intranets and Extranets: A public network is any computer or telecommunications network that is available to the

public.

A private network is a private, leased-line connection between two companies that

physically connects their intranets to one another

A VPN extranet is a network that uses public networks and their protocols to send sensitive

data to partners, customers, suppliers, and employees using a system called ‘IP tunneling’

or ‘encapsulation’.

Connectivity: Large firms that provide Internet access to other businesses are called Internet Access

Providers (IAPs) or Internet Service Providers (ISPs).

The most common connection options that ISPs offer to the Internet are telephone,

broadband, leased-line, and wireless.

Bandwidth is the amount of data that can travel through a communication line per unit of

time

Bandwidth can differ for data traveling to or from the ISP.

The Semantic Web:“The Semantic Web provides a common framework that allows data to be shared and reused

across application, enterprise, and community boundaries. It is a collaborative effort led by W3C

with participation from a large number of researchers and industrial partners. It is based on the

Resource Description Framework (RDF), which integrates a variety of applications using XML for

syntax and URIs for naming.” [W3C 2004]

"The Semantic Web is an extension of the current web in which information is given well-defined

meaning, better enabling computers and people to work in cooperation."

The Resource Description Framework (RDF) integrates a variety of applications from library

catalogues and world-wide directories to syndication and aggregation of news, software, and

content to personal collections of music, photos, and events using XML as an interchange syntax.

The RDF specifications provide a lightweight ontology system to support the exchange of

knowledge on the Web.

Semantic Web: Project by Tim Berners-Lee , If successful - Would result in words on Web

pages being tagged (using XML) with their meanings

Resource description framework (RDF): Set of standards for XML syntax

Ontology: Set of a standard that defines relationships among RDF standards and specific

XML tags.

Summary: Packet-switched networks

TCP/IP: Protocol suite used to create and transport information packets across the Internet

IP addressing and domain names

POP, SMTP, and IMAP: Protocols that help manage e-mail

Markup Languages and the Web: Hypertext Markup Language (HTML); Extensible Markup

Language (XML)

The Web and the Semantic Web.

Business Models and e-Commerce

Business Models for Internet based E-Commerce: An Anatomy Introduction

The growth of Internet based businesses; popularly known as dot coms is anything but meteoric. It

has dwarfed the historical growth patterns of other sectors of the industry.

Over years, several organizations doing business through the Internet have come out with their

own set of unique propositions to succeed in the business. For instance Amazon.com

demonstrated how it is possible to "dis-intermediate" the supply chain and create new value out of

it. Companies such as Hotmail, and Netscape made business sense out of providing free products

and services. On the other hand companies such as AOL and Yahoo identified new revenue

streams for their businesses. It is increasingly becoming clearer that the propositions that these

organizations employed in their business could collectively form the building blocks of a business

model for an Internet based business. Several variations of these early initiatives as well as some

new ones being innovated by recent Internet ventures have underscored the need for some theory

building in this area.

A good theory is a statement of relations among concepts with in a set of assumptions and

constraints. The purpose of theory is two fold: to organize (parsimoniously) and to communicate

(clearly). Wallace outlined a systematic approach to theory building, which broadly consists of

observation, induction and deduction. Theory building in a new area often begins with individual

observations that are highly specific and essentially unique items of information. By careful

measurement, sample summarization and parameter estimation, it is possible to synthesize

empirical generalizations. The next stage in theory building involves concept formation,

proposition formation and proposition arrangement. Using sampling the hypothesis that

occasioned the construction of the proposition could be tested. Eventually, the results of

hypothesis testing enables confirmation, modification or rejection of the theory. In this paper we

focus on observation and induction aspects of theory building.

Another key aspect of theory building is the use of alternative classification schemes often

employing typologies and taxonomies. Typological classification has a twofold function:

codification and prediction. A typology creates order out of the potential chaos of discrete and

heterogeneous observations. But in so codifying the phenomena, it also permits the observer to

seek and predict relationship between phenomena that do not seem to be connected in any

obvious way. This is because a good typology is not a collection of undifferentiated entities but is

composed of a cluster of traits, which in reality hang together. Indeed systematic classification and

the explication of rationale for classification are tantamount to the codification of the existing state

of knowledge in a discipline.

The Internet infrastructure layer addresses the issue of backbone infrastructure required for

conducting business via the net. Expectedly, it is largely made up of telecommunication

companies and other hardware manufacturers such as computer and networking equipment. The

Internet applications layer provides support systems for the Internet economy through a variety of

software applications that enable organizations to commercially exploit the backbone

infrastructure. Over years, several applications addressing a range of issues from web page

design to providing security and trust in conducting various business transactions over the net

have been developed. The Internet intermediary layer includes a host of companies that

participate in the market making process in several ways. Finally, the Internet commerce layer

covers companies that conduct business in an over all ambience provided by the other three

layers. the four layers. The Internet infrastructure layer and the applications layer play a crucial

role in moderating and trend setting the growth of Internet economy.

The focus on the last two layers stems from several reasons:

(a) The growth of the intermediary and the commerce layer is significantly higher than that of the

other two layers. Barua and Whinston reported a 127% growth in the commerce layer during the

first quarter of 1999 over the corresponding period in 1998. Furthermore, one in three of 3400

companies that they studied did not even exist before 1996. They also reported that 2000 new

secure sites are added to the web every month indicating the creation of new companies and

migration of existing brick and mortar businesses.

(b) The extensive customer interaction in these two layers has offered more scope for creating

unconventional business models and hence offers more scope for identifying certain typologies

Moreover there has been no attempt to provide a consistent definition for a business model in the

Internet context. On the other hand, consultants and practitioners have often resorted to using the

term business model to describe a unique aspect of a particular Internet business venture. This

has resulted in considerable confusion. Before we elaborate on the theme, we clarify the scope of

the term "Internet based Ecommerce".

Our definition of this term does not include organizations that have merely set up some web sites

displaying information on the products that they sell in the physical world. On the other hand, only

those organizations that conduct commercial transactions with their business partners and buyers

over the net (either exclusively or in addition to their brick and mortar operations) are considered.

Henceforth, our reference to the term "Internet Economy" is limited by the scope as we have

identified here.

Our purpose extends beyond providing a formal definition and an anatomy to the business model.

We use the proposed framework to relate to the market structure in the Internet economy. We

begin with a broad classification of emerging market structures in Internet based business. We

provide a definition for a business model and elaborate on the idea by identifying its various facets

in the context of Internet. Finally, we identify certain dimensions that could potentially influence

organizations in their choice of an appropriate business model out of the building blocks that we

have identified.

The Emerging Market StructureThe Internet economy has divided the overall market space into three broad structures: Portals,

Market Makers, and Product/Service providers. A portal (POR) engages primarily in building a

community of consumers of information about products and services. Increasingly, portals emerge

as the focal points for influencing the channel traffic into web sites managed by Product/Service

providers and other intermediaries. They primarily play the role of funneling customer attention or

"eyeballs" into these web sites in a targeted fashion. Companies such as AOL and Yahoo largely

cater to the Business to Customer (B2C) segment. However, it is not uncommon to find portals in

the Business to Business (B2B) segment also. Ariba.com and MarketSite.net (promoted by

Commerce One) are portals serving B2B segment.

Market Maker9 (MMK) is another emerging structure in the Internet market space. A market

maker plays a similar role of a portal in building a community of customers and/or a community of

suppliers of products and services. However, it differs from portals in several ways. Firstly, market

makers invariably participate in a variety of ways to facilitate the business transaction that takes

place between the buyer and the supplier. Consequently, often a market maker is expected to

have a high degree of domain knowledge. For instance, a portal such as Yahoo can funnel the

traffic of prospective computer and software buyers into web sites that provide services related to

selling these. However, a market maker such as Beyond.com require a higher domain knowledge

related to buying and selling of computer and software products to add value to the business.

Lastly, unlike a portal, a market maker endeavors to provide value to suppliers and customers

through a system of implicit or explicit guarantee of security and trust in the business transaction.

Auction sites such as e-bay are the early market makers in the B2C segment. On the other hand a

large number of market makers are evolving in the B2B segment. Some examples include

Chemdex (Chemicals), HoustonStreet.com (Electricity), FastParts (Electronic components),

BizBuyer.com (small business products) and Arbinet (Telecommunication minutes and

bandwidth).

B2B segment has several characteristics that promote a bigger role for market makers. These

include huge financial transactions, greater scope for reducing product search costs and

transaction costs. Since B2B e-commerce application is poised for a spectacular growth, the role

of market makers will be increasingly felt. There will be wide scope for catering to either a vertical

or a horizontal market hub. The predominant forms the market makers take in B2B segment

include organizing auctions and reverse auctions, setting up exchanges and product and service

catalogue aggregation.

The third market structure will comprise the product/service providers (PSP) dealing directly with

their customers when it ultimately comes to the business transaction. The suppliers will conduct

their business with their partners directly over the net. This will call for extensive customization of

their information system and business processes to accommodate customer requirements on line.

Notable examples in this category of market structure include companies such as Amazon.com

and Landsend.com in the B2C segment and companies such as Cisco and Dell Computers in the

B2Bsegment.

The emerging market structure indicates a few characteristics of the Internet based ecommerce

business applications. Firstly, each of these addresses a key constituent of the business that is

carried out over the net. Secondly, the three market structures exist in both B2B and B2C

segment. Thus they cover the whole gamut of the Internet economy. Furthermore, there is a high

level of overlap and inter-dependency among the players in the three market structures. For

instance players in the PSP market will succeed in marketing their products and services only

when they catch the attention of prospective customers outside their web site. In order to do this

they may often need the support of a POR. As we know, the revenue stream of a POR or a MMK

depends to a large extent on its relationship with PSP. Finally, since the fundamental purpose of

the three market structures are very different, one would expect different approaches to the value

that they offer to their business partners and customers and the manner in which they organize

their revenue stream.

Portals lay more emphasis on building a community of customers and channeling the customer

eyeball traffic. On the other hand, market makers are more interested in building a community of

both suppliers and buyers. Organizations in the PSP market structure will however, focus more on

building a community of buyers. The other two dimensions are of less importance to this group. It

will therefore be interesting to understand how existing organizations in these segments have

carved out business models. We turn our attention to this aspect by developing a notion of a

business model.

Business Models for Internet based e-commerceUnderstandably, for the sector of the industry that is hardly a decade old, a formal definition of a

business model is non-existent. There have been scanty attempts in the past to formally define

and classify business models in the Internet context. In our understanding these attempts are

neither complete nor robust. However, we present a brief over view of these for the sake of

completeness.

Schlachter identified five possible revenue streams for a web site. These included subscriptions,

shopping mall operations, advertising, computer services and ancillary business. The emphasis

was to show how revenue models existing in the brick and mortar scenario would be exploited in a

web based business. Fedwa identified seven revenue generating business models. In addition to

the revenue streams identified by Schlachter, Fedwa added timed usage and sponsorship and

public support as possible revenue sreams. Based on a qualitative analysis of the Internet based

models pertaining to grocery and delivery of customer packages Parkinson stressed the role of

business affinities such as logistic providers in creating the value proposition.

These models were too narrow in their scope and do not cover the gamut of alternatives

employed by today's Internet-based businesses. Perhaps a better description of the business

model was provided by Timmers. Timmers identified eleven business models that currently exist

and classified them on the basis of degree of innovation and functional integration required. These

business models describe a particular unique aspect of doing business over the net and ignore

other aspects. A good theory should ensure that the factors considered as part of the explanation

of the phenomena of interest should possess comprehensiveness and parsimony. Previous

attempts to define business models for Internet based business do not satisfy these requirements.

For instance, the example of Amazon.com for building a virtual community does not bring out

another unique feature, viz., disintermediation of supply chain.

We argue that a business model is a unique blend of three streams that are critical to the

business. These include the value stream for the business partners and the buyers, the revenue

stream and the logistical stream. Value stream identifies the value proposition for the buyers,

sellers and the market makers and portals in an Internet context. The revenue stream is a plan for

assuring revenue generation for the business and the logistical stream addresses various issues

related to the design of the supply chain for the business. The long-term viability of a business

largely stems from the robustness of the value stream. Furthermore, the value stream in turn

influences the revenue stream and choices with respect to the logistical stream.

Value Streams in Internet Based BusinessOften, buyers perceive value arising out of reduced product search cost and transaction costs.

Further the inherent benefits of the richness and reach of the Internet provides an improvised

shopping experience and convenience. It is not uncommon for the buyers to have benefits that

spill over to other domains. For example, a market maker offering air line tickets may provide, in

addition, hotel and car rental services for the buyer when he purchases a ticket to her holiday

destination. Furthermore the buyer will also have access to the views of a community of people

who visited the same place previously at the same time of the year. The value these online

communities provide to buyers is hard to replicate in the physical world.

Suppliers often perceive value arising out of reduction in customer search costs, cost of product

promotion, business transaction costs and lead time for business transactions. These benefits are

likely to be substantial in the B2B segment. For instance, Siebel and House reported that car

dealers spend on an average about $ 25 to close business with a buyer referred by autobytel.com

as opposed to several hundreds of dollars in the brick and mortar operation. There is virtually zero

customer search costs in such referrals.

The introduction of a market maker or a portal is likely to increase the value for both the buyers

and the customers in addition to its own. This sets in a virtuous cycle for all the three players. As

more suppliers join in the market making process, the buyers begin to see more choices for them.

As more buyers join, the suppliers will begin to experience the beneficial effects of a wide

customer base and lower customer search costs. The buyers themselves will benefit from the

growing community of buyers. Finally, both the buyers and the suppliers begin to rely on the

market maker/portal. This ensures a robust revenue stream for the market maker/portal.

The above example shows that there is potential for identifying alternative value

streams based on the market structure in which the Internet based business is set up. We identify

four possible value streams in an Internet based business:

Virtual Communities (V1): Virtual communities offer a multitude of values to the buyers, sellers

and the market makers and portals. Communities have a distinctive focus that brings together

people with common interests. Ethnicgrocer.com is a business venture that caters to the grocery

requirements of Asians and Hispanics. However, the community building effort extends beyond

just providing groceries. Hagel observed that it is extremely difficult to replicate the value

proposition of virtual communities because much of the value of these communities is member

generated. Moreover, communities induce a high switching cost for the members of the

community and thereby provide first mover advantage for the organizations that host these

communities.

Dramatic reduction in transaction costs (V2): An electronic market place is an inter-

organizational information system that allows a buyer or a seller, an independent third party or a

multi-firm consortium to exchange information about prices and product offerings. Moreover the

costs of product and price comparisons become negligible. A major impact is that they typically

reduce search costs for both the buyers and the sellers. Bakos argued that as search costs come

down, the prices come down both in a commodity and in a differentiated market. Furthermore, as

more and more participate in this process, the benefits increase due to what is known as network

externalities in economics18. This reduction in costs could form a value proposition in terms of

increased margin or lowering of product prices. The recent experiences of dot coms in the B2C

segment have adequately demonstrated this phenomenon. However, the benefits of this value

proposition are inversely proportional to the number players conducting business online. As more

and more competitors switch to electronic markets, this will cease to differentiate between them.

Gainful exploitation of information asymmetry (V3): The effects of asymmetric information on

market equilibrium have been studied in a multitude of economic situations and models proposed

to address these issues. The models can be differentiated as search models and bargaining

models. These models provide the basis for a role for intermediaries who seek to bring the price -

quality combinations close to informationally efficient combinations. Coupled with the effect of

network externalities, the ubiquitous nature of Internet business operations have opened up new

value streams that can exploit information asymmetry existing in several business transactions.

In situations that involve numerous buyers of products and services spread over large

geographical area and sellers who have perishable products and services it is possible to exploit

the benefits of information economy into a value proposition. In travel, hotel and tourism industry

there are a variety of product offerings and high levels of uncertainty of patronage. Since the

services are perishable in nature, it is possible to buy out these left over services at a competitive

price and re-sell it at a higher value. The sellers do not have perfect information on demand.

Similarly, the buyers do not have perfect information on the supply. Therefore an intermediary can

create value arising out of this information asymmetry. Priceline.com is an illustrative example for

such a value stream in a B2C segment. Even in the case of non-perishable items, it is possible to

exploit the information asymmetry by the setting up online bids and reverse auctions.

In the B2B segment, information asymmetry often exists when there are several potential

suppliers for an industrial bid. By enabling an online real time bidding and negotiation process it is

possible to obtain substantial reductions in the final bid value. An intermediary who enables this

process usually creates a value proposition and a revenue stream that is linked to the value of the

reduction obtained for the buyer. Free Markets Online Inc., a Pittsburgh based intermediary is an

example of this category.

Free Markets assists industrial buyers in posting requests for proposal (RFPs) and holding

Internet based reverse auctions for their products. By automating the flow of information, a large

number of suppliers can be effectively included in the RFP process, resulting in more competition

and lower costs for the buyer.

Value added market making process (V4): Our previous discussions on value streams in the

Internet context are sometimes augmented by some additional value propositions. These could be

the main value generating streams in some cases. Security and Trust, for instance, are major

concerns in Internet based e-commerce. Hence, it is possible to invent a value proposition with

this theme. When the market maker vouchsafes the transactions that take place under its domain

it is a significant value to buyers and sellers. The seafood industry often brings small buyers and

sellers together who don't know each other. By providing its trusted third party credit rating

information, Seafax imparts to buyers and sellers the confidence to trade with unknown trading

partners, thereby improving the market liquidity. A similar role in the B2C segment is played by

ebay. Providing financial instruments and establishing credible guarantee for the transactions are

potential application domains. In a similar fashion addressing privacy and delivery reliability

concerns will also have the potential for identifying new value streams.

The quantum of transactions and the financial value are quite high in B2B segment.

Moreover, the process of selling often involves a few third party service providers such as

logistics. Such applications offer more scope for creating these value streams in B2B segment.

The potential value propositions offered could include a combination of several of the following:

Credit verification

Buying guides

Risk management

Procurement management

Quality Assurance

Order fulfillment

Credit verification

Security & Trust

Financial Instruments (Cyber Cash)

Escrow

The value streams identified above are not mutually exclusive. For instance, organizations

creating a value stream on the basis of online communities will also be able to exploit the benefits

of reduced transaction costs or some additional value through providing enhanced security.

However, we argue that organizations often build their model on the basis of one dominant value

stream. The value derived from others is incidental and supplementary to the main value stream.

Revenue Streams in Internet based Business

Value stream addresses the long-term sustainability of the business proposition and often sets the

context for identifying revenue streams for an organization. The revenue steam is nothing but the

realization of the value proposition in a short-term, usually on a yearly basis. In addition to the

traditional modes of revenue generation, the Internet economy has allowed organizations to

exploit new revenue streams that are hard to replicate in a brick and mortar operation. We discuss

here six such revenue streams.

Increased margins over brick & mortar operation (R1): Internet based businesses will

invariably have increased margins on account of several factors. As we have already pointed out,

the prominent among them include reduction in transaction costs and customer search costs.

Furthermore, cost reduction could also be achieved through dis-intermediation of the supply chain.

The classic example of amazon.com offering as much as 50% discount on New York Times best

sellers and 30% discount on other titles is a result of dis-intermediation of the supply chain. The

increase in margins on account of these could be further compounded by an increase in sales

turnover.

The cost reduction attained in this fashion is likely to be partly off set by the additional costs

incurred in hosting banner ads on other sites in order to funnel customer attention into one's own

web site. However, it appears that the net effect of these is an increase in margins.

Revenue from online seller communities (R2): By providing free membership market makers

build a community of buyers and get access to a host of information of their interest. It builds

certain features that help buyers perceive value in associating with the market maker. For

instance, compare.com provides a potential buyer of entertainment electronics such as

camcorders with all information on price, products and allows for a variety of comparisons. Over a

period of time, the market maker could induce high switching costs for the buyers.

Similarly by promising an untapped source of buying community, they build a community of

suppliers. The suppliers experience a reduction in customer search costs by entering into such

markets. Once the community of suppliers and buyers are in place, the market maker can build a

revenue stream out of charging the suppliers a one time membership fee and a variable

transaction fee linked to the quantum of business performed through the market maker. There are

several examples of these in both the B2C and B2B.

Advertising (R3): The ubiquitous nature of the Internet operations and the ability of certain

organizations to build a community of buyers have allowed these organizations to look towards

advertising as the main source of revenues. Portals (including the search engines) and large

community sites such as Yahoo, AOL, MSN and Hotmail play a crucial role in funneling the

customer eyeballs into the target web sites. It is natural for these web sites to host banner ads and

generate huge revenue to support their operations.

Variable pricing strategies (R4): Organizations that are in the business of selling electronically

delivered products have unique characteristics of the information economy to exploit. High initial

cost and nearly zero marginal cost often characterize information production and dissemination.

Hence a pricing scheme based on marginal costs is not applicable for this class of products.

However it is possible to use a range of alternatives involving variable pricing and bundle and

option pricing.

Different consumers have different valuations for one particular piece of information indicating a

different willingness to pay. Varian argued that if the willingness to pay is correlated to some

observable characteristics of the consumers such as demographic profile, then it could be linked

to the pricing strategy. Student and University versions of software are examples of this category.

Another strategy could be bundling of goods to sell to a market with heterogeneous willingness to

pay.

Revenue streams linked to exploiting information asymmetry (R5): As we have already

pointed out, an intermediary exploiting the information asymmetry between the buyer and the

supplier generates a revenue stream often linked to the quantum of savings accruing to the buyer.

Several variations of the auction formats are being used.

Free offerings (R6): The notion of providing free products and services is not a recent

phenomenon. During world war, Gillette was reported to have supplied US marines with shaving

razors with replaceable blades. Every user of such a razor could potentially expand the market for

blades later. The fundamental philosophy behind free services has been one of giving away

today's revenues in return for assured future revenues. The case of Adobe Systems in giving

away Acrobat readers free exploits a similar idea. As more and more users read documents with

Acrobat readers, they feel the urge to create documents using Acrobat. They will eventually end

up buying the full version of Acrobat. In both the above cases, the organizations gave away free

only part of their product/services.

However, organizations such as Hotmail and Netscape identified several other revenue streams

arising out of totally giving away free products/services. In an Internet context, the following

exciting possibilities open up once an organization adopts this aspect:

Free offerings dramatically catalyses the process of building a community of consumers.

When Hotmail provided free e-mail service, it built a huge online community of consumers

waiting to be channeled into a multitude of web sites of products and services.

Such a large community attracts the attention of potential sellers of products and

services. The community of sellers will be willing to pay for advertising.

If the organization decides to build a community of suppliers, the suppliers will be willing

to pay a membership fee and a variable transaction fee.

Sometimes, the free option results in global spread of customers and results in free

customer feedback and product improvement initiatives. The success of Netscape browser

and the Linux operating system is attributed to this phenomenon.

We believe that although the notion of free offerings as a revenue stream sounds paradoxical it is

by far radical. Moreover, it has numerous spin-offs leading to other revenue streams as we have

demonstrated. We would expect this to occupy a central role in providing a formidable revenue

stream as it has the first mover advantage.

Logistic Streams for Internet Based BusinessThe Internet economy allows an organization to position itself at an appropriate level of the supply

chain depending on the nature of its business. Three distinctive logistical streams exist in the

Internet economy and all the three streams have evolved out of the need for creating the

maximum value for the customers. Dis-intermediation is the process by which the logistical stream

is shortened leading to better responsiveness and lower costs. On the other hand, Internet based

business also calls for new forms of intermediation. Infomediaries and meta-mediaries seek to add

value to the logistical stream by addressing certain problems arising out of information overload

and transaction cost inefficiencies.

Dis-intermediation (L1): Due to the nature of certain products and services offered, Internet has

made it possible to shrink the supply chain by a process of dis-intermediation. Consequently,

transaction costs have reduced and responsiveness to customer requirements has improved

considerably. These improvements often lead to price reduction and or increased margin and

sales turnover. The success of Amazon.com over Barnes & Nobles and that of Encarta over

Encyclopedia Britannica have adequately demonstrated the benefits of this logistical stream. In

the B2B segment, the success of Dell Computers and that of Cisco are largely attributed to this

phenomenon. The success of companies selling information data bases consisting of a large

number of journals in electronic form in bringing down the cost of maintaining libraries is also

related to this phenomenon.

Infomediation (L2): In the market for information the number of sources and suppliers of

information as well as the amount of information is much higher than a single information seeker

can handle. This is primarily due to a spectacular growth of Internet sites. Individual information

seekers can not contact every possible source of information, nor can they estimate the accuracy

and true value of the information offered. This has necessitated a crucial role for an intermediary

to address information requirements of the users. This often involves storage and dissemination of

meta-information, for example, references to information concerning a particular topic. Examples

of information intermediaries offering this meta-information as a service in Internet based business

are primarily portals comprising of search engines and electronic product catalogue aggregators.

Hagel and Rayport argued that infomediaries in the future would act as custodians, agents and

brokers of customer information and market it to businesses on customers' behalf while protecting

their privacy at the same time.

Meta-mediation (L3): Metamediation is a process that goes beyond aggregating vendors and

products and includes additional services required for facilitating transactions. Certain markets (in

the B2B segment) are characterized by fragmented supply chain leading to high vendor search

costs, high information search costs, high product comparison costs, large market size and huge

work flow costs. Under these conditions, meta-mediation will add value to the buyers, sellers and

the intermediary.

It may be noted that our classification of the emerging market structure closely follows that of the

above logistical streams. The Portals utilize the infomediation stream and the market makers

utilize the meta-mediation stream. Some players in PSP will be able to exploit the dis-

intermediation stream for their business model.

Towards an Appropriate Business ModelThe alternatives that we have presented under each stream merely indicate the possible options

available to an organization. However, the process of arriving at an appropriate business model

involves picking up the right mix of alternatives. A few aspects that are peculiar to its business

often guide an organization. In particular the following factors have a bearing on the choice of the

business model:

Assumed role in the market structure:Organizations will be able to narrow down their choices by an understanding of the role that they

play in the Internet economy. For instance, the logistical stream sharply divides the three market

structures. Similarly, while a market maker will be able to utilize all the four value streams,

streams such as reducing transaction costs and exploiting information asymmetry are not of much

use to a portal.

The information presented in the table is a useful beginning to the process of arriving at an

appropriate business model. However, it is abstract and can at best offer some broad guidelines.

Within each market structure there are significant variations in the nature of the activities that

organizations perform. For instance, the PSP segment includes organizations such as

Amazon.com, which sells books and music and furniture manufacturers such as Ethen Allen. Can

Ethen Allen replicate the disintermediation model of Amazon and hope to achieve the same

degree of success? Perhaps the answer is no. There are significant aspects that ultimately

influence an organization towards its choice of an appropriate business model. This leads us to

other factors.

Physical attributes of the goods traded:Goods traded over the net could be either informational goods (soft goods, that could be

transported electronically) or physical goods (hard goods that need physical transportation by a

logistics provider). This differentiation influences the choice of an appropriate revenue stream. For

instance, variable pricing strategies, free offerings, and a combination of a one time fee and a

variable transaction based fee are potential options for organizations trading soft goods.

Organizations trading hard goods will often have to resort to unique options that provides

increased margins and/or premium over the brick and mortar operations. In the case of other

organizations engaged in providing a variety of services for Internet based businesses it is

possible to employ a combination of the proposed revenue streams.

The choices with respect to logistical streams are obvious for an organization trading soft goods.

Such organizations will eventually gravitate towards dis-intermediation. However, in the case of

hard goods there are other factors that govern an appropriate choice of the logistical stream.

Personal involvement required in buying - selling process:The choice of the logistical stream for hard goods is significantly affected by this factor. Goods

traded over the net broadly fall into two categories: experience goods and economy goods.

Experience goods require greater personal involvement in the buying process. This could be in

the form of making an assessment of the suitability of the buy by physically handling and

examining the good to be purchased. Attributes such as color, texture and the experience of using

it on a test basis are crucial determinants of the buying decision. Dis-intermediation of the supply

chain is a risky strategy for such goods. On the other hand, the use of infomediaries and

metamediaries will greatly enhance the value by facilitating the process. Moreover they can also

play a significant role in reducing search costs and transaction cost inefficiencies.

A case in point is the role played by Autobytel.com, a portal that assists potential buyers of

automobiles. A potential buyer uses Autobytel in three ways. Initially, the buyer understands the

options available for her and the comparative aspects of one manufacturer/model over the other.

This drastically reduces the product search costs for the buyer. In the second stage, the nearest

dealer who is an affiliate of Autobytel contacts the buyer. The dealer helps the buyer in

discovering her experience of using a vehicle. Once the buyer makes up her mind, she returns to

Autobytel for price and loan negotiations. The customer search costs are drastically reduced for

the dealer and the buyer gets better price as a result of this process.

On the other hand, economy goods are ideal candidates for dis-intermediation. The driving force

in this case is to reduce the costs by eliminating portions of the value chain that do not seem to

add any value. Many goods traded in the B2B segment will fall in this category.

ConclusionsThe unprecedented growth in Internet based business in a short period of time has underscored

the need for understanding the mechanisms and theorizing the business models adopted by

successful organizations. We have begun this process by providing a framework to understand

how business models are designed for organizations comprising the Internet economy. The

process has one been of making certain empirical generalizations. However, it allows for theory

building in several ways. For instance, it is possible to develop several propositions and constructs

using this framework for further empirical testing. These could relate to the market structure, the

three streams or the specifics of the business as applicable to this framework.

Specifically, we envisage more efforts in empirically verifying our framework and the variables

constituting the business model. We propose that a deeper understanding of the relationship

between the market structure and the choice of the business model be investigated by specific

case studies. Furthermore, it will be a useful addition to the theory if we could establish the

variables that drive organizations to specific choices in the three streams over the other.

Ecommerce Strategies

Ecommerce Strategies provides performance-based online marketing services and technologies

for leading multi-channel marketers. Clients benefit from Ecommerce Strategies custom approach

to online marketing and lead generation programs. Ecommerce Strategies proprietary tracking

and reporting technology platform, advanced market expertise, and active account management

enable clients to acquire and reacquire online customers.

Most importantly, advertisers and publishers alike work intimately with Ecommerce Strategies to

obtain the best results for all those involved. Past history proves the most effective customer

acquisition campaigns are achieved by companies who can bridge the gap between advertisers

and publishers with a common goal, and Ecommerce Strategies is the unchallenged leader in

accomplishing this.

No one leverages the power of digital marketing services and technologies to drive measurable

results for our clients like Ecommerce Strategies.

Ecommerce strategies are plan intended to increase the ecommerce trade mechanism and

implement this strategy to all sectors of the business. Since internet is the fastest growing

mechanism of the world more companies are using e-commerce for trade and selling purposes.

The ecommerce mechanism has developed it self as a powerful business. There are several

online businesses that are making use of ecommerce to increase their income and earn profits.

However several e-commerce strategies should be deployed to ensure this mechanism is used

properly and bring the desire result to the business:

The foremost ecommerce strategy is to implement a proper secure ecommerce website.

The best way to achieve this is to protect the websites with security protocols and digital

certificates. More clients are attracted to ecommerce sites which provide the best security and

transaction mechanism. Getting ecommerce web site certified from the leading online security

agencies is also a good way to promote ecommerce and provide the mechanism more

authenticity and credibility.

To ensure that the ecommerce operational specifications are carried out promptly tables

and data bases are developed using strong programming skills which list down all the data

entry in a queue. Maintaining the record of all the transactions which are carried out using the

ecommerce mechanism help the system to keep track of all the details in a more convenient

and timely manner.

The ecommerce site design also play a great role in its effectiveness. The user interface of

such sites are specially design to be user friendly and easily operational by the clients so that

they can make the online purchase more easily and in a manner which is very open and clear

to the clients.

Ecommerce strategies are built to address customers' issues. All the factors that could

enhance the point of view of online clients are incorporated in ecommerce's web designs. The

major contribution to ecommerce is achieved by the involvement of the online clients therefore

their comfort and ease is kept in mind while building and promoting ecommerce.

The basic strategy of ecommerce is to categorize it to a specific trade. It is not feasible to

use the same mechanism for different trade mechanism as it may impose complexity issues.

Therefore for a particular trade a separate ecommerce forum is created and deployed.

To bring in more customers it is very necessary that the websites through which the

ecommerce is being operated is eye-catching and attracts the clients. A strategy deployed to

expand ecommerce includes providing additional features to the customers online such as

free consultancy information on various products etc.

Another strategy is to introduce eye-catching shopping carts as the feature of the

ecommerce internet trade mechanism. Shopping carts are particularly designed software that

is used in ecommerce to improve a customer online shopping practice. This software keeps

the track of customer's orders and upholds tables and queues keeping the documentation of

the orders.

Successful E-Commerce Strategies

By harnessing the power of the worldwide web, small businesses are now able to reach beyond

local markets to sell their products to customers around the world.

But just like your local market, the world of e-commerce is highly competitive. To be successful

you’re going to need to stay one step ahead of the competition. Here are some strategies that will

help you gain – and maintain – a competitive advantage over your very real competitors in the

virtual world of e-commerce.

Develop a Highly Quality Virtual Catalog:

To truly succeed in e-commerce, you’ll need to invest in the development of a first-rate virtual

catalog. Similar to a mail catalog, a virtual catalog displays photos and information about your

products, and provides a method for customers to place orders. But instead of sending the catalog

to the customer, the customer comes to the catalog by visiting your company’s website.

Virtual catalogs have a number of distinct advantages over traditional mailed ones. The nature of

a website makes it easier to display your product in a variety of options and to include additional

product information that there may not be room for in a mail catalog. Also, unlike a mail catalog,

virtual catalogs can be easily changed to add or remove products and to update product

availability information.

Having a poorly constructed virtual catalog can sometimes be worse than having no catalog at all.

Since creating quality internet catalogs requires a certain amount of expertise, you should

probably outsource this task to a dependable web designer.

Advertise on Search Engines:

Your website and virtual catalog will only be as effective as the amount of traffic (potential

customers) that visits the site. To increase traffic, you’ll need to explore the possibility of

advertising on search engines, e.g. Google and Yahoo.

Most search engines sell space for ads that will appear alongside or around the list of websites

that appear when an internet surfer types in a set of search words. Under the right conditions,

these ads can be a great way to direct people who may already have an interest in your product to

your website.

Negotiate Links with Other Websites:

Another way to increase traffic is to negotiate links to your site with other high traffic websites. For

either a fee or a reciprocal linking agreement, other companies may be willing to include an ad for

your business on their website. While it’s highly unlikely that you’ll convince the competition to

participate in this kind of arrangement, it is very possible to negotiate links with companies that

sell complementary or non-competing products.

Another benefit of links: One of the variables most search engines use to rank websites is the

number of links that exist to your site from other sites. The more links there are to your website,

the more likely it is that your site will appear ahead of the competition in keyword search.

Business To Business Ecommerce Strategies for Growth

Business to business ecommerce is the area of business where the gains and profits are much

more rewarding due to the fact that you work directly with a company in order to service that

business. The advantage of providing great business service while virtually going across the globe

has become more reputed because of business to business ecommerce. Listed below are 5

strategies to accelerate business to business ecommerce growth.

The first step or strategy you must implement into your business is to have a web platform

or property to project and brand your business image from. In other words, utilize a web

site and a blog to attain that promotional platform.

The second thing you must do in order to foster business to business ecommerce growth,

is to make sure your business content flows within the guidelines and rules of the search

engines. This will assist you in receiving a good search engine ranking for your business.

The third step, which is really a priority, is to determine what type of service or services that

you want to provide for other businesses. Do your research and gather information about

business to business services that you can provide. If you have knowledge in search

engine optimization, you can provide that service for companies. If you have a decent

technical background, you can offer the service of providing technical support for a

company’s website.

The fourth step, which is really an alternative for the third step, is to see if you can come up

with a special product or tool that will be of great use to a business or company. You can

have companies purchase this business to business ecommerce software or tool from you

in order to optimize their business process.

The fifth and final step is to aggressively market your business to business ecommerce

service. Your goal in this step is to make your company as visible as you can to its target

client base. You must make use of the search engines, rss feeds, pod casts, and articles in

order to really get your business out there.

Developing a Winning Ecommerce Strategy

One bright spot on the economic horizons around the world seems to be continued consumer

spending and ecommerce is clearly a part of this, with sales estimated to be in excess of $9.9

Billion in the next three months according to ACNielsen. But, there is a dark cloud hovering over

this sunny ecommerce landscape called poor web site design. Let’s explore some of the reasons

why consumers are not reaching for their credit cards after perusing an ecommerce web site.

There is a huge knowledge gap about how the web is really driving online and offline commerce.

A recent e-Commerce Pulse survey of more than 33,000 surfers conducted by Nielsen/Net ratings

and Harris Interactive indicates ecommerce sites are driving more purchases offline (phone,

catalogue, retail store sales) than online. Many consumers are using the web to effortlessly

compare features and pricing – then, calling the company or visiting their local retail store to make

a purchase. Clearly many companies need to factor this information in when analyzing their online

and offline marketing expenditures and related ROI.

According to a recent Zona Research and Keynote Systems Report released earlier this summer

over $25 Billion (USD) was lost in ecommerce due to users abandoning the web site prior to a

purchase being made or during the process. The users just gave up because the load times (the

amount of time it takes a page to be displayed in a browser) were painfully slow. Today’s online

shoppers aren’t a real patient group, they want information presented in 12-18 seconds, or they

are off to another site that works

Unfortunately many firms have allocated a disproportionate amount of resources for advertising

and not enough on good web site design and back end infrastructure. It’s critical to make the

market aware of a site, but if the potential customers are not presented with the right navigation

and menus (read information architecture) they will not buy. Case in point, according to recent

Dataquest surveys (and others) between 20-40% of most users don’t purchase because they can’t

figure out how to easily move around the web site.

Many firms fail to properly integrate their ecommerce components with the overall site design. The

in-house developers or outside design firm concentrate on the sexy parts of the web site design

process (the graphics, branding, look and feel) and only focus on the ecommerce process after

the primary web site design is completed – making ecommerce an afterthought.

A large number of ecommerce web sites don’t even list a phone number, arbitrarily forcing people

to contact the company electronically – this is a real problem, as many people don’t want to use e-

mail or forms as their primary means of communicating, they want the immediacy of the

telephone.

It’s very surprising, but approx 30% of ecommerce sites don’t have a search capability that

actually works – in many cases it just returns gobblygook. This is a real irritant for many online

shoppers who want to find goods and services quickly and efficiently – the need for speed should

be the ecommerce merchants marketing mantra and a good search capability gives users a way

to quickly find products.

One of the most important parts of any web site is the home or index page, as it aggregates the

design elements and information architecture. So many index page are cluttered and poorly

designed, loaded with poor graphics, bad menu structures, oddball words or my absolute least

favorite, 30-60 second Flash animation sequences which force the user to sit and stare at a blank

screen while the animation loads.

Privacy statements are about as exciting as filing taxes (unless you know your getting a refund) –

they are out of necessity filled with legal terminology that needs to be addressed succinctly and in

a way that makes a consumer feel comfortable about doing business with an ecommerce web

site. Unfortunately, many ecommerce web site privacy statements look like an afterthought, or, are

so “attorney driven” (three pages – who has time to read this?) people are turned off by them. It’s

very important that a privacy statement be a compromise doc brokered between legal and

marketing.

Supply Chain Management and e-CommerceSupply chain management (SCM) is the management of a network of interconnected businesses

involved in the ultimate provision of product and service packages required by end customers

(Harland, 1996). Supply Chain Management spans all movement and storage of raw materials,

work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (supply

chain).

Impact of E-Commerce on Supply Chain Management

A production supply chain refers to the flow of physical goods and associated information from the

source to the consumer. Key supply chain activities include:

Production planning

Purchasing

Materials management

Distribution

Customer service

Sales forecasting

These processes are critical to the success of any operation whether they’re manufacturers,

wholesalers, or service providers.

Electronic commerce and the Internet are fundamentally changing the nature of supply chains,

and redefining how consumers learn about, select, purchase, and use products and services. The

result has been the emergence of new business-to business supply chains that are consumer-

focused rather than product-focused. They also provide customized products and services.

E-commerce impacts supply chain management in a variety of keyways. These include:

Cost efficiency: E-commerce allows transportation companies of all sizes to exchange

cargo documents electronically over the Internet. E-commerce enables shippers, freight

forwarders and trucking firms to streamline document handling without the monetary and

time investment required by the traditional document delivery systems.

By using e-commerce, companies can reduce costs, improve data accuracy,

streamline business processes, accelerate business cycles, and enhance customer

service. Ocean carriers and their trading partners can exchange bill of lading instructions,

freight invoices, container status messages, motor carrier shipment instructions, and other

documents with increased accuracy and efficiency by eliminating the need to re-key or

reformat documents. The only tools needed to take advantage of this solution are a

personal computer and an Internet browser.

Changes in the distribution system: E-commerce will give businesses more flexibility in

managing the increasingly complex movement of products and information between

businesses, their suppliers and customers. E-commerce will close the link between

customers and distribution centers. Customers can manage the increasingly complex

movement of products and information through the supply chain.

Customer orientation: E-commerce is a vital link in the support of logistics and

transportation services for both internal and external customers. E-commerce will help

companies deliver better services to their customers, accelerate the growth of the e-

commerce initiatives that are critical to their business, and lower their operating costs.

Using the Internet for e-commerce will allow customers to access rate information, place

delivery orders, track shipments and pay freight bills.

E-commerce makes it easier for customers to do business with companies: Anything that

simplifies the process of arranging transportation services will help build companies' business and

enhance shareholder value. By making more information available about the commercial side of

companies, businesses will make their web site a place where customers will not only get detailed

information about the services the company offers, but also where they can actually conduct

business with the company.

Ultimately, web sites can provide a universal, self-service system for customers. Shippers can

order any service and access the information they need to conduct business with transportation

companies exclusively online. E-commerce functions are taking companies a substantial step

forward by providing customers with a faster and easier way to do business with them.

Shipment tracking: E-commerce will allow users to establish an account and obtain

real-time information about cargo shipments. They may also create and submit bills of

lading, place a cargo order, analyze charges, submit a freight claim, and carry out many

other functions. In addition, e-commerce allows customers to track shipments down to

the individual product and perform other supply chain management and decision

support functions. The application uses encryption technology to secure business

transactions.

Shipping notice: E-commerce can help automate the receiving process by

electronically transmitting a packing list ahead of the shipment. It also allows companies

to record the relevant details of each pallet, parcel, and item being shipped.

Freight auditing: This will ensure that each freight bill is efficiently reviewed for

accuracy. The result is a greatly reduced risk of overpayment, and the elimination of

countless hours of paperwork, or the need for a third-party auditing firm. By intercepting

duplicate billings and incorrect charges, a significant percent of shipping costs will be

recovered. In addition, carrier comparison and assignment allows for instant access to a

database containing the latest rates, discounts, and allowances for most major carriers,

thus eliminating the need for unwieldy charts and tables.

Shipping Documentation and Labeling: There will be less need for manual

intervention because standard bills of lading, shipping labels, and carrier manifests will

be automatically produced; this includes even the specialized export documentation

required for overseas shipments. Paperwork is significantly reduced and the shipping

department will therefore be more efficient.

Online Shipping Inquiry: This gives instant shipping information access to anyone in

the company, from any location. Parcel shipments can be tracked and proof of delivery

quickly confirmed. A customer's transportation costs and performance can be analyzed,

thus helping the customer negotiate rates and improve service.

The Role of Supply-Chain Management in E-commerceE-commerce does not just mean trading and shopping on the Internet. It means business

efficiency at all operation levels. Executives know it is critical to effective business operations, but

until now quantifiable performance measures have been as scarce as the number of corporate

executives of China who heard of the phrase "supply chain management" (SCM). Supply Chain

Management means coordinating, scheduling and controlling procurement, production, inventories

and deliveries of products and services to customers. The SCM is the backbone of Ecommerce, a

very critical component of E-commerce. Supply Chain Efficiency means having the right product at

the right place at the right time, can save money/reduce costs, and can enhance cash utilization.

A significant number of companies in the United States have implemented their Internet platform

for Supply Chain Efficiency in the past 2 to 3 years, and the large of them will follow in the next

few years. We will briefly review how the SCM can bring the benefits to the western corporations

and Chinese corporations. Some case studies and B2B standard proposal will be presented to

illustrate the benefits and bottleneck of E-commerce implementation in China.

Competition in the 21st century will be across supply chains, not individual companies. A supply

chain is a network of facilities and distribution options for the entire network of companies to work

together to design, produce, deliver, and service products. Since its inception about 10 years ago,

the field of supply chain management has become tremendously important to companies in an

increasingly competitive global marketplace.

People are a kind of forgetting what efficiency and tools mean for the past industrialization

process. Tools or automation have played a significant role in production quality and efficiency.

Modern transportation tools have advanced delivery efficiency in a tremendous way. Money as a

financial instrument is an obvious tool to facilitate product exchange efficiency. How does Internet

help to transform and shape today’s companies in this information era? The answer is “e-

business”. E-business infrastructure is an information tool for optimizing the entire business

management and operation processes. In his article, “Executive Overview: Managing Real World

B2B Integration”, Peter Linkin, a senior manager of product marketing of Vitria Corporation stated

what is required in order to gain full benefit from e-business as follows:

Integrated, automatic system-to-system interaction with all trading partners

The ability to integrate those interactions seamlessly with your in-house applications and

processes to provide true end-to-end visibility and control

Accommodation of the individual nuances of each partner's mode of interaction

A high-quality and reliable means of exchanging messages over the Internet, which

provides business-level guarantees of delivery and integrity

Intelligent management of those interactions, allowing control and ability to change them

dynamically

The ability to adapt to change, by quickly and easily locating new services or partners,

learning their specific capabilities, and forming a rapid "electronic bond" with them.

In a simple phrase, an integrated supply chain management (SCM) system is the backbone to

achieve the above e-business objectives. Although the phrase “SCM” conjures up different

meanings to different people but one fact is clear: businesses have been striving to achieve

efficiency in their "sourcing," "making" and "delivering" for nearly 20 years, according to Bill

Hakanson from the Supply-Chain Council organization. He also gave a couple of definitions of

SCM as follows when he gave a brief description of Supply-Chain Operations Reference-model

proposed by the organization: “Supply Chain means all inter-linked resources and activities

needed to create and deliver products and services to customers. In the truest sense, the supply-

chain spans from the point where natural resources are removed from the earth to the point where

they are replaced in the earth: "from dirt to dirt." Supply Chain Management means coordinating,

scheduling and controlling procurement, production, inventories and deliveries of products and

services to customers. Supply Chain Management includes all the steps you do everyday in your

administration, operations, logistics, and information processing from your customers to

suppliers.”

Supply Chain Efficiency can improve customer service - having the right product at the right place

at the right time. Supply Chain Efficiency can save money/reduce costs.

E-Commerce will transform Supply Change Management

In the early 1980s, IBM faced a critical problem. The company had installed its mainframe

computers at customers’ facilities all over the world, and it needed to manage its inventory of

computer parts in a way that would let engineers fix malfunctioning machines as rapidly as

possible. That was a mind-boggling logistical exercise. It involved hundreds of thousands of

parts stocked in thousands of locations worldwide.

Even as IBM executives wrestled with the issue, Morris Cohen, a Wharton professor of

operations and information management, stepped up to help. As the principal scientist working

on the problem, he and a group of colleagues from Wharton helped IBM develop Optimizer, a

decision-support system that let the computer giant map out a global parts supply chain.

Result: IBM was able to cut inventory investment by $250 million, while reducing annual

operating costs by 10% and increasing the level of customer service.

IBM was hardly an isolated case. During the past two decades or more, Cohen has continued to

study how companies use supply chains to support after-sales service operations in industries

ranging from computers to automobiles. In the process, he says, he has learned fundamental

lessons about the way such supply chains should be set up and managed. Among them: It would

be a mistake for a company to set up a parts supply chain in the same way that it does its

production supply chain. "These logistics problems are very different than planning production,"

Cohen explains.

"They are like high-stakes gambling problems, or like portfolio management problems. You have

to solve them by understanding the risk tradeoffs involved."

What exactly does that mean for companies? According to Cohen, one implication is that parts

supply chains must be designed in a way that takes into account the criticality of a company’s

products, and the cost to the consumer if the product fails. Consider, for example, a component

in a computer system used by air traffic controllers. If the air-traffic control system were to go on

the blink, the results could be devastating. Ideally, the system should be repaired in minutes, if

not seconds. Similarly, a stalled machine in a semiconductor fabrication plant could bring the

entire manufacturing process to a standstill. Cohen explains that components for such critical

products or services must be served by supply chains that differ dramatically from parts supply

chains for non-critical products. Example: if a home hair dryer doesn’t work, the worst result for

the user would probably be a bad hair day.

Another key issue, according to Cohen, is determining the locations in the supply chain where a

company should stock the parts. Should parts be stocked in a centralized fashion—say, a single

warehouse or a small number of central warehouses? Or should the company have a far-flung

network with multiple stocking points? The answer, Cohen notes, depends on the criticality factor.

In the case of computer systems for air traffic controllers, it makes sense to have critical

components stocked over a wide network, so that plenty of points in the supply chain can back up

one another when the parts are urgently needed. In contrast, a busted hair dryer could probably

wait an extra day for parts to be shipped from a distant central warehouse or disposed of

altogether by providing the customer with a replacement product

Cohen, who has overseen research by several Ph.D. students over the years on such issues,

developed many of these principles while studying parts availability in the automobile industry.

Between 1985 and 1987, Cohen and his colleagues worked with General Motors to study the

company’s parts supply chain network—at a time when the company was setting up Saturn as

an independent firm. Cohen says that many of the recommendations that he and his colleagues

made showed up as part of Saturn’s service-support system.

Today Saturn has the highest off-the-shelf availability rate for parts of any car maker, according

to Parts Monitor, a trade publication. In a paper published this year in the Sloan Management

Review, Cohen and three colleagues—two of whom worked for GM and Saturn—point out that

Saturn’s performance was based on two key factors: Matching the company’s supply chain

strategy to the criticality of its customers’ needs, and involving dealers (or "retailers") in its supply

chain strategy.

Where is parts supply-chain management headed in the future? Cohen believes that with the

coming of e-commerce, the field is moving towards a revolution. The main reason is that

"technology has reached a point where large-scale optimization has become possible in real

time," Cohen says. As a result of the Internet, it has now become possible for companies to

create vast networks connecting their operations with those of their suppliers and customers. In

the past, the hurdles to setting up such networks were so enormous that companies developed

their own proprietary supply chains at enormous costs in time and money. As web-based

technology takes off, however, the process of setting up such supply chains will become both

faster and less expensive.

Cohen believes that it is now possible for him to commercialize some of his research. With a

view to doing that he last year launched MCA Solutions, an application service provider that

offers supply chain services to clients. According to William C. Ross, the company’s director of

software engineering, the company’s products give users a global bird’s eye view of optimal

inventory.

In a recent article written for the Financial Times Mastering Management series, Cohen and

Vipul Agrawal, chief operating officer of MCA Solutions and a former professor at the Stern

business school in New York City, explain how e-commerce will transform supply-chain

management. Cohen and Agrawal believe that as companies’ access to sources of supply

increases as a result of web-based exchanges, "the dream of always providing the right product

to the right customer at the right time and place and at the right price will very likely become a

reality."

A good example of a company that is using the Internet to manage its supply chain is Dell

Computer. According to Cohen and Agrawal, the company’s web site allows customers to

specify the configurations of their computers. This means that Dell can procure and assemble

components at lower cost and with shorter lead times. Dell’s supplier network can provide

components to the company’s assembly plant in Austin within hours of an order being placed.

Dell’s sales over the Internet now amount to more than $30 million a day.

Over time, more companies will migrate to such web-based supply chain management systems.

This may not happen as rapidly as some people hope, considering the setbacks this year to the

Internet economy, but the supply chain revolution is on its way—and there’s no turning back.

Marketing Strategies and E-Commerce

A marketing strategy serves as the foundation of a marketing plan. A marketing plan contains a

list of specific actions required to successfully implement a specific marketing strategy. An

example of marketing strategy is as follows: "Use a low cost product to attract consumers. Once

our organization, via our low cost product, has established a relationship with consumers, our

organization will sell additional, higher-margin products and services that enhance the consumer's

interaction with the low-cost product or service."

A strategy is different than a tactic. While it is possible to write a tactical marketing plan without a

sound, well-considered strategy, it is not recommended. Without a sound marketing strategy, a

marketing plan has no foundation. Marketing strategies serve as the fundamental underpinning of

marketing plans designed to reach marketing objectives. It is important that these objectives have

measurable results.

A good marketing strategy should integrate an organization's marketing goals, policies, and action

sequences (tactics) into a cohesive whole. The objective of a marketing strategy is to provide a

foundation from which a tactical plan is developed. This allows the organization to carry out its

mission effectively and efficiently.

A marketing strategy is a process that can allow an organization to concentrate its limited

resources on the greatest opportunities to increase sales and achieve a sustainable competitive

advantage. A marketing strategy should be centered around the key concept that customer

satisfaction is the main goal.

Marketing Strategy and E-Commerce Introduction

With the rapidly advancing technologies that are occurring in modern business, organizations are

required to be ready, and able to adapt within their ever-changing environment. It is true across

all diverse industries that in order to stay competitive, organizations must be able to utilize the

various tools that technology has to offer. Technological factors have been of growing

importance, particularly in recent years. A major factor involved in these technology issues is the

use of the Internet as a major issue to modern organizations. The Internet has been rapidly

growing since its inception and is now commonly used in all sectors of societies, in all corners of

the globe. The Internet has quickly become one of the most valuable assets in modern

technology, and as such, is developing as an integral part of modern commerce. As with past

technologies, the Internet will have future technological advances develop from its own growth.

The task the organizations of in the new century? Realized future opportunities and threats, and

base a strategy accordingly. Is it cliché to say that 'the Internet changes everything': the

challenge now is to say what, how and how quickly?

The Internet has lead to the birth and evolution of electronic commerce or E-commerce. E-

commerce has now become a key component of many organizations in the daily running of their

business. Simply defined, electronic commerce is a system of online shopping and information

retrieval accessed through networks of personal computers. E-commerce challenges traditional

organisational practices, and opens ups a vast array of issues that the organizations must

address. By focusing on the varying levels of an organisation, it soon become apparent the

effects that E-commerce can have. An understanding of the implication E-commerce has on

such organisational divisions can help businesses gain understanding hence plan for it's

inevitable continuing evolution. In terms of marketing, the modern organisation must be critically

aware of the development of E-commerce, and the implications that it entails. Marketers develop

their own recipe of promotional tactics to fit the product lines or industries in which they compete.

Now electronic communications tools are and will continue to be an important ingredient in the

promotional mix.

In assessing the implications of E-commerce in terms of marketing, it is important to understand

its impact in respect to marketing strategy formulation. As the Internet, and in turn E-commerce

has developed, and continues to evolve and grow, it is vital that any organisation, in any

particular industry, must base it's strategic planning around such a rapidly growing medium. The

growth of the Internet is an environmental influence that must be embraced and understood so to

successfully plan for future marketing implementation. In order to successful realise the impact

that E-commerce has in terms of marketing, it is important to break the area of interest into some

key areas. As most of the issues that arise in terms of E-commerce represent organizations

entering the environment, it seems natural to base discussion around this. Therefore, the bulk of

the literature review relates existing organizations entering into the E-commerce market

environment.

In successfully identifying the relationship between E-commerce and strategy, the issues are

categorized as follows:

1. Strategic analysis · Understanding the environment 2. Identifying the strategic options/SWOT

analysis · Strategic Advantages/Disadvantages · Advertising · Electronic cost

cutting/publishing/Process 3. Corporate level, Business level, d Marketing level 4. Retailing in E-

commerce · Implementation Issues · Financial · Performance monitoring 5. Conclusion · Based

on current knowledge state.

To gain a clearer understanding of the implication of E-Commerce in the formulation of

marketing strategy, it is imperative to gain a clear understanding of the environment and its

relevant effects. This helps in understanding the rationale in a developing marketing strategy,

particularly the influences of E-Commerce on its make-up. The next crucial element is to gain an

understanding of E-commerce itself, as well as the current and possible future developments. In

understanding E-commerce's impact on strategic foundations, an organization’s strategies can

be more clearly focused. Once the organization and E-commerce's respective environments are

clear it is then possible to understand E-commerce's implications in regards to fundamental

marketing strategies. By focusing on tools such as the competitive strategy framework we can

gain a better understanding of strategy formulation. By now it is easy to link E-commerce ideals

directly into the strategic planning sequence, and hence understand its impact to the marketer.

By reviewing these traditional marketing theories and practices, it's possible to see where, if at

all E-commerce fit into current frameworks. This will provide relevant conclusions that can be

made based on the strategic implications of E-commerce, and it's attributes in the marketing

process. In doing so, this adds a vital dimension to the marketer in an ever-growing technology

based society, of which must be clearly understood.

Strategic analysis - Understanding the Environment

In order to gain an understanding of E-commerce's impact to the modern organization it is

imperative that the environmental issues are analyzed and understood. The understanding of the

environment in which an organization is involved is a fundamental element of its strategic plan.

In order to be successful in any industry the organization must have a sound understanding of

influences that effect its product or service offer. When conducting an environmental analysis in

regards to the Internet, it may seem that many of its attributes are present in traditional

consumer markets. However, E-commerce provides organizations with a unique medium to

analyze, requiring information relating specifically to it's environment. E-commerce ideals place

particular emphasis on environmental factors, due to the high rate of change and development it

constantly undergoes. An understanding of both environmental influence on the Internet and E-

commerce, and that of a particular organization is imperative basing any strategic formulation.

Strauss, J. Frost, R. (1999) includes these macro and micro environmental factor as key issues,

and they are extremely useful in constructing a basic for strategic planning.

Macro Environment Technology: Obviously technology is a key environmental issues that

must be addressed when analyzing and understand E-commerce. Technology is ever-changing,

and as such E-commerce is absolutely influenced by it's evolution. Rapid changes in recent

technological advances have bought about the Internet and in turn E-commerce, and such

dramatic evolution is likely to continue. In terms of strategic formulation, technology is a huge

issue that any organization must be aware of when realizing E-commerce’s strategic

implications. For example, an organization thinking of developing a Web site must be strongly

aware of technological issues that pertain to such initiations. The decision to develop a web-site

internally or externally would be a key issue for any organization. Internal web-site development

would require a vast understanding of technology and require this environmental factor to be

constantly reviewed and analyzed. In any case, awareness of technology is vital in planning

marketing and business strategies, and should be closely followed.

World Economies: Another key environmental influence is an awareness and understanding of

global activity such as world economies. As the Internet provide a basis for global

communication, the awareness of world economies must be understood in regards to E-

commerce. The linking of the Internet world-wide, in turn affects the way in which E-commerce

behaves, and therefore makes an understanding of world economies imperative.

Legal/Political: As with the need to understand world economies, global integration of E-

commerce highlights fundamental environment issues such as legal and political influences. As

independent countries operate different legal and politic systems, it is obvious that an

understanding of such ideals is also important in addressing E-commerce.

Micro Environment Market environment: The growth of E-commerce has transformed the way

in which consumers purchase products as well as how organizations operate. The Internet

provides the necessary tools; easy operation and exchange of information; and therefore effects

all diverse industries and organizations. The Internet has become a useful tool for selling, buying

and distributing goods and services globally in a rapidly growing supply chain. The potential

market that the Internet provides has little or no restrictions by either geography or time, and

therefore poses a huge impact on any organisation considering E-commerce in it's strategic

marketing formulation. Opportunities in E-commerce are enormous, as present growth and

development have proved.

User trends: The trends of Internet users and in fact the use of E-commerce in general is

extremely valuable information that the organisation must be aware of. By knowing how the

advances of the Internet are being used, a marketing strategy can be focused keeping these

ideals in mind. As E-commerce provides different uses to varying companies or industries, user

trends and their relative importance differ. For example business to business electronic

communication would represent different characteristic than communication relating directly to

the end-consumer. Ideals such as customer tracking can be found as an integral advantage in

the use of Internet based marketing. Information regarding users use of resources can be

tracked reasonably easily on the Internet, and is a direct result of the information-based platform

the Internet provides. For example Amazon.com provide e-mail announcements when a new

product or service become available to its customers.

The Graphics, Visualisation, and Usability (GVU) Centre conducted the research of this

information that was found in on an information-based Web site. Such information may be

particularly useful when implementing strategic formulation, however should not be treated as

sacred. Because of the limited nature in which this research is presented, it is hard to gauge its

validity as a neutral and independent source. Organisation must be aware of such information's

credibility, and clear of its context and meaning. Without doing so, an organisation risks initiating

a strategy that is based on inaccurate information. In keeping in mind the limitations of various

consumer analysis information, it should be understood that there is still a place for its use in

strategic formulation and planning. Having an awareness of the varying user trends aids in

strategy formulation in a number of ways.

Consumer analysis: Possibly the major factor in understanding the effects of E-commerce

towards marketing within an organisation is the awareness of who in fact has access to such

resources. By having an understanding of users of the Internet and E-commerce resources, the

marketing strategy can be further advanced, and tailored in a favourable direction to the

organisation. Various factors make-up the analysis of the consumer when addressing both E-

commerce and the more tradition means of commerce. Ideals such as demographics and

cultural influences must be identified when assessing the characteristic of any market. It is

important that the users of Internet technology are identified, and the relevant consumer

attributes understood. In terms of E-commerce, this aspect of the environment provides a basis

for how an organisation would structure their marketing strategies based on the attributes that

make up the general Internet consumer. It is important to get some idea of the degree to which

the marketing approach will be accepted by potential customers

It is also imperative that awareness of the consumer does not limit organizations to just the end-

consumer. Business-to-business relationships must also be taken into account when planning

strategy based around the E-commerce framework. By being aware of how industries and

organizations utilise tools such as the Internet, a marketing strategy can be further guided in the

right direction.

Identifying the Strategic Options/SWOT Analysis:

Having provided a situation analysis and environmental analysis, an organisation must use the

information, in order to implement its strategic plan. In implementing a strategic plan is it

appropriate to identify the four key elements in an organisation's environment. They are: the

internal strengths and weaknesses; and the external opportunities and threats. (Or SWOT

analysis). By matching the organizations resources, and any apparent opportunities it may be

possible to conclude an effective match, and hence, a favourable outcome.

These four major environmental factors are important for the organisation, and are vital in

assessing its strategy in an E-commerce situation. For example a farming supplier whom

currently possesses an e-mail ordering system may be thinking about developing a web-site. As

they currently already operate basic E-commerce facilities, they may identify this as a strength in

their business. Hence, in doing so, their strategic formulation has been based around the

fundamental practice of SWOT analysis. These ideals keep with common literature and practice,

however they can be further explored by looking at some of the external forces that E-commerce

poses. As such, E-commerce provides strategic advantages and disadvantages that have been

widely discussed and challenge. As opportunities and threats can often be rather blurred, these

E-commerce or Internet advantages or disadvantage pose some interesting question.

Strategic Advantages/Disadvantages:

In having a comprehensive analysis of the environment in which the organisation is face with

when dealing with E-commerce, the task is now rather simple. The organisation must identify

how to use the Internet towards a useful business advantage.

There are huge amount of interesting approaches to achieving such an ideal, and the basic

ideals varying across different industries and organizations. For example, CD Now and

Amazon.com are building businesses based on immediate availability and ordering of,

respectively, any CD or book. While this may be an ideal medium for companies such as

Amazon.com it may prove rather less successful for different organizations. Unless clearly define

objectives are set when approaching E-commerce, strategic ideals may prove derogatory to an

organisation.

While it is obvious that dynamic organisation possess varying attributes, there are some general

advantages and disadvantages that E-commerce offers across all different industries. As E-

commerce advances at it rapid rate, it is clear that no industry will be exempt from its impact.

Therefore key issues in its possible uses must be address across all diverse industries.

Advertising: Advertising on the Internet presents a significant opportunity for an organisation to

enter the world of E-commerce. As part of strategic planning any organisation must be ready to

develop it's brand image and as such, the Internet offers a wide range of opportunities. Such as

the use of billboards in the real world, the Internet can provide ideal locations to further

developing their offer. Obviously the information received on site hits and relevant user data

acquired, helps to focus such ideals towards the appropriate target market. There are, however

many views that Internet advertising will not gain distinctive popularity because of the difficulty in

assessing it effectiveness.

While Strauss, J. Frost, R. (1999) believes that advertising on the Internet helps reach its

revenue objectives, Johns, R. (1996) suggests that Internet advertising is full of clutter, and

therefore proves difficult to gain the attention of the target market. Virtual stores are another

significant ideal in which strategic planning can base significant interest in, when addressing E-

commerce. Virtual store can provide an inexpensive form of direct sales or help to supplement

existing sales channels. By using the Internet, manufacturers are possible to reach the end-

consumer without going through intermediaries. Successful exponents of such strategies are

organizations such as Amazon.com, and their success in the distribution of books. When

aligning a strategic plan based around the development of a virtual store, there are some key

issues that must be addressed. As with any strategic development, there are usually threats, and

virtual stores pose considerable threats due to intense competition. In a marketplace such as the

Internet, other company can apply huge pressure, perhaps due to a sustainable competitive

advantage.

Electronic Cost-cutting: By replacing existing print and publishing cost, organisation can use

E-commerce for their electronic publishing. Distribution on the Web, as opposed to mail, for

example can have a huge impact on cost, and may be a strategic driver. The initial strategy

might be for lowered cost of the product offer, and hence lowering cost in documentation

distribution may help in the financial control of such a strategy

The Strategy Hierarchy:

As a vital aspect of understanding the implications of E-commerce to marketing strategy, it's vital

to look at all levels of the strategic hierarchy. The strategy hierarchy identifies the: · corporate

strategy · business strategy · And at a functional level, the marketing strategy. It is imperative

that when addressing the strategic implication of E-commerce, that all three areas of the

organisation must be addressed. In doing so, the marketing role within the organisation is not

isolated, and is in keeping with the overall organizations core objectives. The first step is to

address the corporate strategy and define the its link to the strategic development of E-

commerce. The basis for the corporate strategy identifies where the business wants to focus its

attention in regards to the scope of the organisation. In doing so bases it's mission and vision to

align with key objectives.

Paxton, B. Baker, T. (1997) suggests that it is essential that the Internet planning process is not

divorced from the corporate strategic management process but is integrated into each stage of

your company's existing process. The focus of the corporate strategy is to develop synergy

between the various Strategic Business Units (SBUs). This is a vital element to any organisation

that is evolving its strategies into new domains, particularly as a result of environment shifts.

Therefore when formulated a strategy based around the use of E-commerce, it is imperative that

the SBU planning is in synergy with the core corporate objectives. In doing so, the other relevant

SBUs will follow the corporate strategies lead. As the varying SBUs are aligned within the

corporate strategy, they too have influence over their relative functional levels. The business

strategy possesses more defined objectives as well as a clearly defined competitive strategy.

Because the SBUs operate in their relevant markets, such clearer focused goals are possible. At

this level the focus is on building, defending and maintaining competitive positions through the

development and implementation of competitive marketing strategies.

The role of the SBU strategy is clear, and is also highly relevant to E-commerce issues. This

drive to maintain competitiveness in a SBU's market may be the foundation for a move into E-

commerce development. As the core goals are to sustain a competitive position, an organisation

may decide that E-commerce provide this and inherits it's use in their strategic planning.

However, some organizations may find that E-commerce provide them with no significant

competitive offering, and hence chooses to ignore it as part of their strategic formulation. The

decisions must follow a well prepared business plan and require a thorough understanding of the

impact of the bottom line.

The marketing strategy level of strategic planning identifies some key functional issues that the

organisation must implement. This identifies the relevant marketing objectives that the

organisation wishes to implement as well as the product market strategies. This level gains a

clearer focus on the consumer in each particular target market. This integrates many key

marketing ideals, and is used to co-ordinate marketing resource and the marketing mix to reach

the desired markets in which are targeted. The Marketing strategy is by far the most relevant in

measuring the impact of E-commerce on the marketing strategy formula. While the upper levels

in the hierarchy shapes the direction in which various marketing strategies are planned; it is this

level that develops the functional elements of this strategy.

Retailing in E-commerce:

A major shift in the evolution of E-commerce is it's impact on the traditional retailing system, in

particular the shift of intermediaries from the distribution channel. In theory, the Internet allows

manufacturers to sell directly to the consumer, cutting out the traditional ideals of a middleman or

intermediary.

The evolution of the second phenomenon is commonly believe to the basis for future E-

commerce practices. Hutchinson, A. (1997) suggests that this middleman effect with combine

with global integration and widespread network connections. Once again Amazon.com provides

are useful example of a strong electronic intermediary. When devising a marketing strategy an

organisation must be aware of this shift in E-commerce structures. The awareness of how

intermediaries in the distribution channel is absolutely vital to marketing strategy, and the

implications of how this is changing could have a profound effect on marketing strategy

formulation

Disintermediation and Reintermediation, Implementation Issues, Financial: The

development of Web site is fundamentally used to result in some level of revenue or a decrease

in the cost. Revenue is typically based around increase sales, and decrease cost could arise due

to elimination of intermediary forces.

Therefore the basis for integration into E-commerce has an effect on financial issues, and may

perhaps be the basis for the strategic formulation. As with almost any strategic plan, there are

associated costs that derive, and this is reflected also in E-commerce. Such cost could be

identified as follows: · Connecting to the Internet (The Internet Service Provider) · Hardware and

software · Web site and advertising designers · Staff to maintain the Web sites and manage e-

mail with stakeholders. Performance monitoring As with any strategic formulation, E-commerce

requires appropriate performance monitoring to ensure that is place in the organisation continues

to be in sync with the functional goal and objectives put in place. This includes ensuring that any

adaptation to E-commerce is monitored, including staff training and awareness. The use of E-

commerce in an organisation must be carefully monitored to ensure that it remains productive,

and that they generate some sort of gain. As well as these functional aspects, it is imperative

that the actual strategies that are formulated as constantly review, and future developments are

adapted into such strategies.

Conclusion:

E-commerce is revolutionising the way in which an organisation thinks, and in particular how an

organisation bases it's future goals and objective. An understanding of the critical make up of

organizations, and how they develop their strategies, helps to close the gap between E-

commerce and strategic marketing. An organizations strategic planning process helps to cover

the vital issues that any new paradigm may invoke. This structure helps provide a basis for

assessing the impact of E-commerce and it's relationship with marketing strategy. By

understanding the organisation as a whole, it becomes clear what initiates strategic

development, and hence provides clear reasons why E-commerce may become prevalent in

strategy formulation. Such an understand allows the organisation to develop E-commerce

strategy that is in sync with the organizations corporate strategies. Such fundamental

comparisons help to gauge the effect E-commerce has and will have on modern organizations. If

Organizations gain an understanding of E-commerce and its relationship to marketing and

operational strategies, they will be better ready for future development and technological change.

In order to be competitive in modern business it is imperative that the organisation's corporate

strategies are constantly review, and environmental influences addressed. One of the major

shifts in recent years is the technological shift towards the Internet, and as a result E-commerce.

E-commerce has developed into an enormous aspect of the Internet and as such, organizations

have been required to address this in their strategic planning. For example, the University of

Otago's strategic plans would be to look forward to technological changes, and be ready to adapt

to these.

As such, perhaps the introduction of an E-commerce Degree may be a resultant of their strategic

plans. Organizations that are looking towards E-commerce as a strategic option are met with

numerous issues that must be addressed. Analysing theories and thoughts on E-Commerce

helps to gain a better understanding of how an organisation would approach such a strategy. As

with any strategy, many attributes must be considered, and carefully evaluated. As a

fundamental component of strategic planning is to envision future development, perhaps these

ideals could be advanced further. While E-commerce does and will have a profound effect on

marketing strategy formulation, what will the future of E-commerce hold? As organizations

implement their strategic plans in respect to E-Commerce, it must be realised how this will effect

other part of the organizations. It is also important to understand how society is impacted as a

result of their strategic plan. Is promoting a greater number of Internet users irresponsible?

Perhaps promoting regular use of computers is affecting the general health of the consumer.

While such suggestion seen rather extreme, it is feasible to assume that such ideals warrant

further investigation. In keeping with these future ideals, research may be sought on

developments in technology and the potential for total media packages and what they would

mean to the advertiser. Perhaps the next step in the Internet, is total home entertainment, and

identification of this early, could lead to a sustainable competitive advantage in E-commerce.

Such forward thinking epitomises the fundamentals of formulating a successful.

E-Commerce Security and Controls:

Security Implications

There are a few security implications that come about when setting an E-Commerce website,

especially when handling sensitive information such as credit card information and personal

details such as address. Many parts will have to be protected well including communication

between the customer and the website server and the server itself from any hacker trying to

intercept information or from trying to retrieve existing information from databases.

Customer & Server:To secure data between the customer and the webserver there is a system called SSL (Secure

Socket Layer) which encrypts the information between them so no one else can read it. The

theory of it is quite basic and uses the following steps:

User want to send data to the server, before it leaves it is encrypted with a unique key for

the session.

The server recieves this information then encrypts the information one more time this time

using its own unique session, this is completly different from the users unique key. It then

sends back the data.

The users computer now unlocks the data with the key it locked it with earlier, the data is

still encrypted but now only with the servers key. The users computer then sends the data

back.

The server then recieves this information and unlocks it with its key and now has the

unencrypted data of what the user was sending to the server.

This type of encryption comes in different streghs depending on the SSL certificate you purchase

for your server, you can get certificates from 40-bit encryption up to 256-bit encryption.

Server Security:

As well as security between the consumer and server there is also security needed on the

server(s) as well, especially if sensitive information is stored under customers accounts, such as

credit card information and other personal information.

Servers will have to be protected to withstand any hack attempts to retrieve the information that is

stored. Prevention measures such as firewalls, checking for root kits, antivirus systems and others

should be put in place, as well as encryption of the data if possible so should a hacker gain entry

the information he see's is useless to him or her.

Information Security:

Information has been valuable since the dawn of mankind: e.g. where to find food, how to build

shelter, etc. As access to computer stored data has increased, information security has become

correspondingly important. In the past, most corporate assets were "hard" or physical, such as

factories, buildings, land and raw materials. Today far more assets are computer-stored

information such as customer lists, proprietary formulas, marketing and sales information, and

financial data. Some financial assets only exist as bits stored in various computers. Many

businesses are solely based on information -- the data IS the business.

Information Security is a Process:

Information Security is very simply the process of protecting information availability, data integrity,

and privacy.

No collection of products or technologies alone can solve every information security problem

faced by an organization. Effective information security requires the successful integration of:

security products such as firewalls, intrusion detection systems, and vulnerability scanners

technologies such as authentication and encryption

security policies and procedures

Security Policies and Procedures:

An information system security policy is a well-defined and documented set of guidelines that

describes how an organization manages and protects its information assets, and how it makes

future decisions about its information system security infrastructure.

Security procedures document precisely how to accomplish a specific task. For example, a policy

may specify that virus checking software is updated on a daily basis, and a procedure will state

exactly how this is to be done -- a list of steps.

Security is Everyone's Responsibility:

Although some individuals may have "Security" in their title or may deal directly with security on a

daily basis, security is everyone's responsibility. As the old saying goes, a chain is only as strong

as its weakest link. A workplace may have otherwise excellent security, but if a help desk worker

readily gives out or resets lost passwords, or employees let others tailgate on their opening secure

doors with their keycard, security can be horribly compromised. Despite the robustness of a

firewall, if a single user has hardware (e.g. a modem) or software (e.g. some file sharing software)

that allows bypassing the firewall, a hacker may gain access with catastrophic results. There are

examples where a single firewall, misconfigured for only a few minutes, allowed a hacker to gain

entrance with disastrous results.

Security is an issue during an application's entire lifecycle. Applications must be designed to be

secure, they must be developed with security issues in mind, and they must be deployed securely.

Security cannot be an afterthought and be effective. System analysts, architects, and

programmers must all understand the information security issues and techniques that are

germane to their work. For example:

programmers must understand how to avoid race conditions and how to implement proper

input filtering

system architects must understand concepts such as defense in depth and security through

obscurity shortcomings.

Computer user awareness is critical, as hackers often directly target them. Users should be

familiar with security policies and should know where the most recent copies can be obtained.

Users must know what is expected and required of them. Typically this information should be

imparted to users initially as part of the new hire process and refreshed as needed.

Information Protection Involves a Tradeoff between Security and Usability:

There is no such thing as a totally secure system -- except perhaps one that is entirely unusable

by anyone!

Corporate information security's goal is to provide an appropriate level of protection, based on

the value of an organization's information and its business needs. The more secure a system is,

the more inconvenience legitimate users experience in accessing it.

Protecting the E-Commerce Environment:Security issues and threats in an e-commerce environment are varied and can be caused

intentionally and unintentionally by both insiders and outsiders. Many experts believe that insiders

create the majority of the security threats and issues. At the same time experts believe that

security concerns are one of the major reasons that many individuals are reluctant in doing online

transactions and conducting e-commerce activities. Security issues and threats related to an e-

commerce environment can be categorized as controllable, partially controllable, and

uncontrollable.

Creating security awareness, employees and key decision-makers first should understand what

security is and why is it important to create and implement a comprehensive security program in

an e-commerce environment. Also, the consequences of not having such a plan should be

explained.

Conducting risk analysis, information should be considered as a commodity with a value

attached to it. This means more/less financial analysis and capital budgeting techniques could be

applied to this process.

Formation of the security task force, key employees and decision-makers have to be involved

in the design and implementation of a security program. A buy-in process and sense of ownership

have to be created at the early stages of the security program design and implementation.

Identification of basic security safeguards, Uninterruptible Power Supply (UPS), redundant

arrays of independent disks (RAID), and mirror disks are the most basic security safeguards that

have to be in place in any security program development.

Identification of general security threats, natural and human created disasters as they apply to

an e-commerce environment have to be identified.

Identification of intentional threats, computer viruses, worms, Trojan horse programs, and

other intentional threats must be identified.

Identification of security measures and enforcements, as a part of an e-commerce security

program biometric, nonbiometric, physical, software, and electronic transaction securities must

be identified and be integrated into the security program.

Identification of computer emergency response team services, network administrators,

webmasters, and e-commerce site managers should always review the latest information

provided by CERT (Computer Emergency Response Team). This information may assist in

protecting vital e-commerce and network resources.

Formation of a comprehensive security plan, a security plan should include hardware,

software, and policy measures that collectively protect the information resources of an ecommerce

site.

Preparing for a disaster, an organization must be prepared to respond to a disaster if it occurs.

One of the best security measures is to plan for disaster. The response process known as the

disaster recovery planning or contingency planning system can play a major role in putting the

organization back on its feet.

Data protection and E-commerce:Data protection is not in itself a new concept, (footnote) but has become an increasingly important

issue in the digital age. Previously a jurisprudence interest data protection has increasingly

become part of the mainstream of the legal debate in part due to e-commerce. Data protection

can be defined as safeguards to protect the integrity, privacy and security of data. The focal point

of Data protection is that of individual autonomy, the ability to control. However private companies

have seen the ease of collecting, collating, manipulating and using data become increasingly easy

due to technological

advances. E-commerce itself is perhaps the ideal medium to collect the most information in the

most cost efficient way about consumers. It is the claims of e-tailers and telecommunication

companies (footnote) that this ability to gain information will help these companies to greater

understanding of the consumer's needs.

Many people including those involved in e-commerce and those looking in from the outside say

the key to increasing the number of people using e-commerce is a matter of trust. Therefore if e-

tailers increase the protection of your everyday data e.g. your e-mail address you are more likely

to trust them with your credit card details. Thus an e-tailer which has a very strict data-protection

regime may see their orders increase. Likewise a business with an ineffective data-protection

programme may see their business suffer Businesses instead of being anti data-protection should

instead be embracing it, however for this to happen the case in favour of data-protection needs to

be made once more.

Data Protection:Data protection/privacy should in principle be based around the maximum control for the individual

(information self-determination). Data protection is an ideal idea, and it is unclear what it is. It

indicates a direction rather than a specific level. Data protection can not be fixed but rath r alters

as society values change. The integrity perspective interacts with a protected private sphere, the

closer you get to this private sphere the stricter the law should be.

Data protection is used as the basis for decisions, not only formal decisions but also other

decisions. This can include video surveillance in a shopping mall, where young people could be

asked to leave due to bad conduct. The basis for these decisions is very important, and the use of

technology has the power the change the classical structure between business and consumers.

Thus due to the information imbalance the consumer may be tricked into buying a product. The

business may have a detailed customer profile built up and either use that themselves, or

alternatively sell to other businesses who can target you as a consumer. This leads to an

imbalance of power.

Data protection and E-commerce; compatible ideas?:One of the main issues concerning E-commerce, is that of trust. In this respect data protection has

an important role to play. Strong data protection should increase consumers trust in the Internet

and as such lead to an increase in e-commerce.

This is reflected in a survey, which Harris International carried out with 3,000 customers for IBM in

the USA, Great Britain and Germany. (Hoping to arrange a meeting with IBM to discuss the

survey and future impact on e-commerce.) In all three countries customers felt that their data

should have the highest degree of protection when shopping on-line. Thus the expense of

providing a strong data protection could be off set by the increased demand in business which

would be achieved.

The IBM multinational consumer privacy study was able to show that companies which clearly

formulated their privacy policy and, made it transparent enjoy advantages with customers.

Furthermore on-line customers with a good education, technical knowledge and a higher income

saw data protection as very important. The group of people which many e-commerce businesses

want to attract. Around 50 percent of British and American people questioned requested an

explanation on the website about the use of their personal data. 63 percent of the people

questioned would not be willing to disclose their personal data on a website that does not

guarantee data protection. Perhaps the most important statistic for e-commerce is that 40 percent

declared that they would not purchase an item from that e-tailer if they had fears about the misuse

of data for online purchasers.

IBM draws the conclusion that customers have less trust in the handling of their data than the

providers of online services realise. If this survey had only been conducted in Germany and

Europe, I would not have been surprised at the results, however the use of the UK and the USA,

in part reflect the change in public opinion and their attitude towards data protection. It would

seem from these results that an e-commerce firm would have an advantage over their competitors

if they reflected the consumer's desire of stronger data protection of their data. Whilst the cost of

implementing stronger data protection(especially in Europe following Directive 95/46) (footnote on

cost so far Of implementing the directive) may be a worry, it would seem that the increase in

business would off set any additional costs.

Electronic Payment Systems:

An electronic payment system is needed for compensation for information, goods and services

provided through the Internet - such as access to copyrighted materials, database searches or

consumption of system resources - or as a convenient form of payment for external goods and

services - such as merchandise and services provided outside the Internet. it helps to automate

sales activities, extends the potential number of customers and may reduce the amount of

paperwork.

Electronic Payment Systems Hacker Definition:

Today, many users make payments electronically rather than in person. Hundreds of electronic

payment systems have been developed to provide secure Internet transactions. Electronic

payment systems are generally classified into four categories: credit card and debit cards;

electronic cash; micropayment systems; and session-level protocols for secure communications.

A secure electronic financial transaction has to meet the following four requirements: ensure that

communications are private; verify that the communications have not been changed in

transmission; ensure that the client and server are who each claims to be; and ensure that the

data to be transferred was, in fact, generated by the signed author.

To meet these objectives, every electronic payment system developed depends on some type of

encryption and/or utilization of digital certificates. Using an encryption algorithm, the plaintext (also

known as the original text) is changed into ciphertext, which is decrypted by the receiver and

transformed into clear-text. The encryption algorithm utilizes a key, a binary number often ranging

in length from 40 to 128 bits. After being encrypted, the information is considered to be coded and

therefore locked. The recipient uses another key to unlock the coded information, restoring it to its

original binary form.

Two cryptographic methods used in electronic payment systems include the secret key (which

uses the same key to encrypt and decrypt and is the fastest method; however, in the initial

transmission to the recipient, the secret key is not secure) and the public key (which uses both a

private and a public key).

In the latter, each receiver owns a secret private key and a publishable public key. In public-key

cryptography, the sender finds the receivers public key and uses it to encrypt the message,

whereas the receiver uses the private key to decrypt the message. The important point here is

that because key holders do not need to send their private keys to anyone else to have their

messages decrypted, the private keys are not in circulation and therefore are not vulnerable to

crack attacks. In short, the security of a cryptographic system rests with the secrecy of the key

rather than with the secrecy of the algorithm.

Theoretically, any cryptographic technique using a key can be broken, just as doors on a house

can be broken into if someone finds a key compatible with the doors key core. In virtual space, a

cracker can break the cryptographic method by trying all possible keys in sequence. As an aside,

using brute-force to attempt all keys requires computing resources that grow exponentially with

the keys length. In short, cryptographic keys of 80 bits and 128 bits in length those commonly

used in electronic payment systems will likely stay unbreakable by brute-force for quite some time.

Requirements for Payment System:

Security:1. Information services are provided today on relatively open networks.

2. Payments involve actual money; such systems will be a target for

criminals.

3. The infrastructures supporting electronic commerce must be usable on

open networks and resistant to attack.

Reliability:

1. Commerce will depend on the availability of the billing

infrastructure.

2. The infrastructures may be a target of attack for vandals.

3. The infrastructure must be highly available and should not

present a single point of failure.

Flexibility:

1. Different models for different situations: credit card, cash, check.

2. Different assurances are provided: accountability, anonymity, risk

3. There is a need for a common framework.

4. Convertibility is needed across models.

Scalability:

1. The payment infrastructure should support multiple independent accounting servers and

should avoid central bottlenecks.

2. Users of different accounting servers must be able to transact business with one another

and the funds must be automatically cleared between servers.

Computational Efficiency:

1. Frequent payments for small amounts must be supported (micropayments).

2. Performance must be acceptable, even when multiple payments are required.

3. Merchants and payment servers must be able to handle the load.

Economic Efficiency:

1. Frequent payments for small amounts must be supported (micropayments).

2. Per-transaction cost must be small enough that it is insignificant.

Unobstrusiveness:

1. The payment system should blend into the background.

2. Users should not be constantly interrupted to provide payment information.

3. However, users do want to control when, to whom, and how much is paid.

4. Users must be able to monitor their spending.

Payment Methods:

secure (or non-secure) presentation: the customer provides credit card information over

a secure (or even clear) transportation means.

customer registration: the customer gets a password or digital signature based on a

credit card (hides the credit card information from the merchant, but still clears through the

credit card).

credit-debit instruments: similar to customer registration but only one bill per month either

through credit card or debit check.

electronic currency: this method has potential for anonymity but requires tamper resistant

hardware.

server scrip: the customer gets a kind of coupons from an agent that can be spend only

with one particular merchant. this reduces the risk of double spending and allows off-line

transactions.

direct transfer: the customer initiates the transfer of funds to the account of the merchant.

this method provides no anonymity.

collection agent: the merchant refers the customer to a third party who collects payment

using one of the methods mentioned above.

Electronic Payment Schemes:A Layered Protocol Model:

A three layer model is used to compare payments schemes.

Policy: The semantics of the payment scheme. This includes refunds policies, and the liabilities

incurred by customers, merchants and financial institutions.

Data flow: The requirements for storage of data by and communications between the parties.

This includes not only the data flows for payments themselves but also for refunds, account

enquiries and settlement.

Mechanism: The methods by which the necessary security requirements for messages and

stored data are achieved.

All three abstraction levels are tightly coupled since policy makes requirements of data flow and

data flow makes requirements of mechanism.

Payment Protocol Models:

Cash: Cash consists of a token which may be authenticated independently of the issuer. This is

commonly achieved through use of self authenticating tokens or tamper proof hardware.

Cheque: Cheques are payment instruments whose validity requires reference to the issuer.

Card: Card payment schemes provide a payment mechanism through the existing credit card

payment infrastructure. Such schemes have many structural similarities to cheque models except

that solutions are constrained by that structure. A key feature of card payment systems is that

every transaction carries insurance.

Mobile Commerce and Pervasive Computing:

Mobile Commerce:

Mobile Commerce (also known as M-Commerce, m-Commerce or U-Commerce, owing to the

ubiquitous nature of its services) is the ability to conduct commerce, using a mobile device e.g. a

mobile phone (cell phone), a PDA, a smartphone and other emerging mobile equipment such as

dashtop mobile devices. Mobile Commerce has been defined as follows:

"Mobile Commerce is any transaction, involving the transfer of ownership or rights to use goods

and services, which is initiated and/or completed by using mobile access to computer-mediated

networks with the help of an electronic device."

M-commerce (mobile commerce) is the buying and selling of goods and services through wireless

handheld devices such as cellular telephone and personal digital assistants (PDAs). Known as

next-generation e-commerce, m-commerce enables users to access the Internet without needing

to find a place to plug in. The emerging technology behind m-commerce, which is based on the

Wireless Application Protocol (WAP), has made far greater strides in Europe, where mobile

devices equipped with Web-ready micro-browsers are much more common than in the United

States.

In order to exploit the m-commerce market potential, handset manufacturers such as Nokia,

Ericsson, Motorola, and Qualcomm are working with carriers such as AT&T Wireless and Sprint to

develop WAP-enabled smart phones, the industry's answer to the Swiss Army Knife, and ways to

reach them. Using Bluetooth technology, smart phones offer fax, e-mail, and phone capabilities all

in one, paving the way for m-commerce to be accepted by an increasingly mobile workforce.

As content delivery over wireless devices becomes faster, more secure, and scalable, there is

wide speculation that m-commerce will surpass wireline e-commerce as the method of choice for

digital commerce transactions. The industries affected by m-commerce include:

Financial services, which includes mobile banking (when customers use their handheld

devices to access their accounts and pay their bills) as well as brokerage services, in which

stock quotes can be displayed and trading conducted from the same handheld device

Telecommunications, in which service changes, bill payment and account reviews can all

be conducted from the same handheld device

Service/retail, as consumers are given the ability to place and pay for orders on-the-fly

Information services, which include the delivery of financial news, sports figures and traffic

updates to a single mobile device

IBM and other companies are experimenting with speech recognition software as a way to ensure

security for m-commerce transactions.

Evolution of Mobile Commerce Applications:

Factors and Risks:

The development of advanced m-commerce applications, in combination with the evolution of key

infrastructure components such as always-on high-speed wireless data networks (e.g., 2.5G, 3G,

etc.) and mobile phones with multi-functionality (e.g., built-in-camera, music player, etc.) is

stimulating the growth of m-commerce. Other key drivers of m-commerce are ease-of-use,

convenience, and anytime-anywhere availability. On the other hand, a customer’s fear of fraud is

a major barrier. The nature of m-commerce requires a degree of trust and cooperation among

member nodes in networks that can be exploited by malicious entities to deny service, as well as

collect confidential information and disseminate false information. Another obvious risk is loss or

theft of mobile devices. Security, therefore, is absolutely necessary for the spreading of m-

commerce transactions with two main enablers

A payment authentication to verify that the authorized user is making the transaction; and

Wireless payment-processing systems that make it possible to use wireless phones as

point-of-sale terminals.

These elements of security are fundamental in order to gain consumer trust.

Mobile phones can implement payment authentication through different solutions: single chip

(authentication functionality and communication functionality integrated in one chip—SIM

[Subscriber Identification Module]); dual chip (separate chips for authentication and

communication); and dual slot (authentication function is built in a carrier card separate from the

mobile device, and an external or internal card reader intermediates the communication of the

card and the mobile device.

Furthermore, several industry standards have been developed: WAP, WTLS (Wireless Transport

Layer Security), WIM (Wireless Identity Module), and so forth. In particular, as far as

authentication is concerned, many security companies have increased their development efforts in

wireless security solutions such as Public Key Infrastructure (PKI), security software (Mobile PKI),

digital signatures, digital certificates, and smart-card technology (Centeno, 2002). PKI works the

same way in a wireless environment as it does in the wireline world, with more efficient usage of

available resources (especially bandwidth and processing power) due to existing limitations of

wireless technology. Smart-card technology allows network administrators to identify users

positively and confirm a user’s network access and privileges. Today, mobile consumers are using

smart cards for a variety of activities ranging from buying groceries to purchasing movie tickets.

These cards have made it easier for consumers to store information securely, and they are now

being used in mobile banking, health care, telecommuting, and corporate network security. An

example of a security mechanism is the Mobile 3-D Secure Specification developed by Visa

International (Cellular Online, Visa Mobile, 2004; Visa International, 2003).

New advanced mobile devices have tracking abilities that can be used to deliver location-specific

targeted advertisements or advanced services (e.g., directions for traveling, information about

location of the nearest store, etc.). This additional convenience, however, has its risks due to its

intrusive nature, since tracking technology may be seen as an invasion of privacy and a hindrance

to an individual’s ability to move freely (the “Big Brother” syndrome).

The existence of many different solutions for m-commerce leads to a need for standardization,

which can result from market-based competition, voluntary cooperation, and coercive regulation.

Voluntary Cooperation

Some significant forums for the development of m-commerce are the following:

Mobile Payment Forum (http://www.mobilepaymentforum.org/): A global, cross-

industry organization aiming to develop a framework for secure, standardized, and

authenticated mobile payment that encompasses remote and proximity transactions, as

well as micro-payments. It also is taking a comprehensive approach to the mobile

payments process and creating standards and best practice for every phase of a payment

transaction, including the setup and configuration of the mobile payment devices, payment

initiation, authentication, and completion of a transaction. Members include American

Express, Master Card, Visa, Japan Card Bureau, Nokia, TIM, and so forth.

MeT—Mobile Electronic Transaction (http://www.mobiletransaction.org/): It was

founded to establish a common technology framework for secure mobile transactions,

ensuring a consistent user experience independent of device, service, and networks, and

building on existing industry security standards such as evolving WAP, WTLS, and local

connectivity standards such as Bluetooth. Members include Ericsson, Motorola, Nokia,

Siemens, Sony, Wells Fargo Bank, Verisign, Telia, and so forth.

Mobey Forum (http://www.mobeyforum.org/): A financial industry-driven forum, whose

mission is to encourage the use of mobile technology in financial services. Activities include

consolidation of business and security requirements, evaluation of potential business

models, technical solutions, and recommendations to key-players in order to speed up the

implementation of solutions. Members include ABN AMRO Bank, Deutsche Bank, Ericsson,

Nokia, Siemens, Accenture, NCR, and so forth.

Open Mobile Alliance (OMA) (http://www.openmobilealliance.org/): The mission of

OMA is to deliver high-quality, open technical specifications based upon market

requirements that drive modularity, extensibility, and consistency among enablers, in order

to guide industry implementation efforts and provide interoperability across different

devices, geographies, service providers, operators, and networks. Members include Bell

Canada, British Telecommunications, Cisco Systems, NTT DoCoMo, Orange, Lucent

Technologies, Microsoft Corporation, Nokia, and so forth.

Simpay (http://www.simpay.com/): In order to facilitate mobile payments and deal with

the lack of a single technical standard open to all carriers, four incumbent carriers (Orange,

Telefonica Moviles, T-Mobile, and Vodafone) founded a consortium called Simpay (formerly

known as Mobile Services Payment Association [MPSA]). Simpay was created to drive m-

commerce through the development of an open and interoperable mobile payment solution,

providing clearance and settlement services and a payment scheme that allow customers

to make purchases through mobile-operator-managed accounts

The mobile merchant acquirer (MA), after signing an agreement with Simpay, aggregates

merchants (e-commerce sites that sell goods or services to the customer [in Figure1,

retailers/content providers]) by signing them up and integrating them with the scheme. Any

industry player (i.e., mobile operators, financial institutions, portals, etc.) can become an MA,

provided that they have passed the certification and agree on the terms and conditions

contractually defined by Simpay.

Membership in Simpay includes mobile operators and other issuers of SIM cards such as service

providers and Mobile Virtual Network Operators (MVNOs).

When the customer clicks the option to pay with Simpay, the mobile operator provides details of

the transaction to the customer’s mobile phone screen. The customer clicks to send confirmation.

Simpay then routes the payment details (the payment request and the authorization) between the

mobile operator (a Simpay member) and the merchant acquirer who, in turn, interacts with the

merchant. Purchases will be charged to the customer’s mobile phone bill or to a pre-paid account

with the customer’s particular operator.

The technical launch for Simpay was expected at the end of 2004 and the commercial one early in

2005 (Cellular Online, Simpay Mobile, 2004). At launch, Simpay would focus on micropayments of

under 10 euros for digital content (e.g., java games, ringtones, logos, video clips, and MP3 files).

Higher-priced items such as flights and cinema tickets with billing to credit or debit cards will

follow.

Wireless Advertising Association (http://www.waaglobal.org/): An independent body that

evaluates and recommends standards for mobile marketing and advertising, documents

advertising effectiveness, and educates the industry on effective and responsible methods.

Members include AT&T Wireless, Terra Lycos, Nokia, AOL Mobile, and so forth.

Pervasive Computing:

Pervasive computing may be defined as the smart computing environments in which tiny, invisible,

wireless and/or mobile computing devices are embedded in objects like pens, clothing, toys,

sunglasses, chairs, cars, electronic appliances, and so forth; communicating and coordinating with

each other anywhere and at anytime to make human life easier. Although the applications of

pervasive computing are in the infant stage but are growing very fast with the technological

developments and improvements. The networked embedded devices are leaving the concept of

personal computers far behind. Devicesare now offering new opportunities for businesses,

hospitals, educational institutes, governments and other organizations to avail and to offer to their

stakeholders—(including customers), suppliers, employees, students, patients, citizens, and so

forth.

Opportunity starts with tracking traffic by means of a cell phone, a smart coffee mug with

preferences, seamless mobile and car audio system integration, a robot that moves on a ball, a

tiny self-contained wireless memory chip, podcasting for education or politics, e-ICUs, cell phones

as study guides, a printing mailbox, and microprocessor- based encryption for mobile devices; the

list is endless. The idea of pervasive computing is to use simple wearable and handheld devices

which need no manual to start like sub notebooks, PDAs, smart phones, screen phones, and so

forth, bring entertainment, education, shopping, politics, preferences, work, friends, news and all

controls near you—wherever you go and whenever you need. These devices are intended to be

very tiny, simple, networked, and diffused in the environment.

The fortitude of the pervasive computing lies in the fact that people want an environment in which

technology is dissolved naturally and no one feels it exists. “MIT’s Oxygen project also sees the

future of computing to be human-centred. It envisions computing to be freely available

everywhere, like batteries and power sockets, or oxygen in the air we breathe. Configurable

generic devices, either handheld or embedded in the environment, will respect human desires for

privacy and security in such an environment. People will not have to type, click, or learn new

computer jargon. Instead, they will communicate naturally, using speech and gestures that

describe their intent (“send this to Hari” or “print that picture on the nearest colour printer”), and

leave it to the computer to carry out our will,” (MIT Project Oxygen, 2004). Wearable computing

devices is not new. People have been using these special-purpose wearable devices for more

than two decades. for example hearing aids, a pacemaker for stabilizing irregular heartbeats, a

pedometer for counting steps, or a noise-cancellation headset. Of the recent wearable computing

devices, like anoise-reducing Bluetooth headset, an eye-glass mounted display for doctors and

soldiers, virtual retinal displays to scan an image on a viewer’s retina, wearable keyboard like

twiddler; IBM’s Meta Pads, ThinkPad, Vision Pad and Linux watch and so forth are becoming very

popular.

Pervasive computing is to improve user’s productivity and efficiency by making location and

exchange of information easy; by remembering their preferences and repetitive tasks; by

becoming available whenever required, without being complex; and even acting like the users

while communicating for them, doing their jobs, and measuring their performances to make sure

that they achieve their quality and financial goals. There are another two technologies, called Grid

Computing and Ambient Intelligence, which can be effectively integrated with pervasive computing

in achieving its goals.

Pervasive computing is the trend towards increasingly ubiquitous (another name for the

movement is ubiquitous computing), connected computing devices in the environment, a trend

being brought about by a convergence of advanced electronic - and particularly, wireless -

technologies and the Internet. Pervasive computing devices are not personal computers as we

tend to think of them, but very tiny - even invisible - devices, either mobile or embedded in almost

any type of object imaginable, including cars, tools, appliances, clothing and various consumer

goods - all communicating through increasingly interconnected networks. According to Dan

Russell, director of the User Sciences and Experience Group at IBM's Almaden Research Center,

by 2010 computing will have become so naturalized within the environment that people will not

even realize that they are using computers. Russell and other researchers expect that in the

future smart devices all around us will maintain current information about their locations, the

contexts in which they are being used, and relevant data about the users.

The goal of researchers is to create a system that is pervasively and unobtrusively embedded in

the environment, completely connected, intuitive, effortlessly portable, and constantly available.

Among the emerging technologies expected to prevail in the pervasive computing environment of

the future are wearable computers, smart homes and smart buildings. Among the myriad of

tools expected to support these are: application-specific integrated circuitry (ASIC); speech recognition; gesture recognition; system on a chip (SoC); perceptive interfaces; smart matter; flexible transistors; reconfigurable processors; field programmable logic gates (FPLG);

and microelectro mechanical systems (MEMS).

A number of leading technological organizations are exploring pervasive computing. Xerox's Palo

Alto Research Center (PARC), for example, has been working on pervasive computing

applications since the 1980s. Although new technologies are emerging, the most crucial objective

is not, necessarily, to develop new technologies. IBM's project Planet Blue, for example, is largely

focused on finding ways to integrate existing technologies with a wireless infrastructure. Carnegie

Mellon University's Human Computer Interaction Institute (HCII) is working on similar research in

their Project Aura, whose stated goal is "to provide each user with an invisible halo of computing

and information services that persists regardless of location." The Massachusetts Institute of

Technology (MIT) has a project called Oxygen. MIT named their project after that substance

because they envision a future of ubiquitous computing devices as freely available and easily

accessible as oxygen is today.

Some Personal Uses of Pervasive Computing:

A. Personal Information: PDA with wireless connections to web, broker, child's school,

appointments, telephone numbers

B. Flight Schedules: Your phone rings. Its the computer at American Airlines. Your

flight departure is delayed by 20 minutes.

C. Networked coffee shop: Wi-Fi at StarBuck's and Schlosky's

D. Location: finding friends at the mall (or hiding from), texting

E. Home interaction: The networked coffee pot/an alarm clock sync'd with Outlook /

Electricity Peak Conservation/Thermostat/Hot Water Heater connected via wireless network

(security issues)

F. Car: schedule oil change seamlessly w/ garage; maps; traffic; kid movies streamed

to back seat ("Only if its quiet back there")

G. Finding Possessions: "Dude, where's my dog?"

H. Others?

Some Business Uses of Pervasive Computing:

A. Healthcare:

a. records, lab order entry and results reporting (MRIs on the patient's TV)

b. prescription writing (mistakes, loss of paper copy, forgeries)

c. medications (what if every pill had a UPC code on it?)

d. billing and costs (why do I have to file my records?)

e. personnel scheduling

B. Mall interviewing with semi-connected TabletPCs

C. Vending: improved routing, re-supply, ordering; price changes pushed to machines

D. Service Industry: "Cable guy will be at your home between 8am and noon." / GPS

E. Distribution: "Where is my package?"

F. MicroPayments: with cell phone for vending, train tickets, ...

G. Micro/Nano devices Hitachi's Mu Chip 0.4mm square, 128 bit ROM, Interrogated at

2.45GHz, useful for documents, currency, shopping, preventing "shrinkage"

H. Military: Operation Anaconda

I. Others?

Relation of Pervasive Commerce with E-Commerce:

It is amazing to look at how the dimensions of commerce and business have changed over last

one decade. Internet has transformed all the commercial transactions and business processes

into digital transactions and processes.

E-commerce is the name given to the use of Internet technologies and private networks for buying

and selling products and services. Though e-commerce can also be conducted through private

networks such as local area networks, value-added networks and direct-leased lines networks;

Internet is considered to be the backbone of e-commerce.

Features like cheapest alternative, global reach, increasing number of computer hosts connected

to Internet, and amazing growth in its security measures have made Internet the most popular

medium for communication and commerce. ”The Internet is the result of some visionary thinking

by people in the early 1960s who saw great potential value in allowing computers to share

information on research and development in scientific and military fields. Originally the Internet

was funded by the government and it was limited to research, education, and government uses.

Commercial uses were prohibited unless

they directly served the goals of research and education. This policy continued until the early 90s,

when independent commercial networks began to grow. All pretences of limitations on commercial

use of Internet disappeared in May 1995, when the National Science Foundation ended its

sponsorship of the Internet and all traffic relied on commercial networks,”

According to the Government of UK (1999), “E-commerce encompasses the exchange of

information across electronic networks, at any stage in the supply chain, whether within an

organisation, between businesses, between businesses and consumers, or between the public

and private sector, whether paid or unpaid”. Awad (2004) has referred to e-commerce from a

range of perspectives like communications, interface,

business process, online, and market.

Communication: From communications perspective, e-commerce is the ability to deliver

products, services, information, or payments via networks such as the Internet and the World

Wide Web. It is one of the cheapest means of communication.

Interface: From an interface perspective, ecommerce allows transaction between different parties

and accepts various information and transaction exchanges through business-to-business,

business-to-consumer, and business-to-government e-commerce.

Business: From a business process perspective, e-commerce includes activities that directly

support commerce electronically by means of networked connections. Within business processes

(manufacturing, inventorying, and operation) and business-to-business processes (supply-chain

management) are managed by the same networks

as business –to-consumer processes.

Online: From an online perspective, e-commerce is an electronic environment that makes it

possible to buy and sell products, services, and information on the Internet. It is available 24/7.

Structural: From a structural perspective, ecommerce involves various media: data, text, Web

pages, Internet Telephony, and Internet desktop video, and so forth.

Market: As a market, e-commerce is a world-wide network. A local store can open a

Web storefront and find the world at its doorstep— customers, suppliers, competitors, and

payment services.

Relation of Pervasive Commerce with M-Commerce:

In e-business environments, the customers, employees, and other stakeholders have to come to

the computer, login, and work on it. For many people and employees it is difficult to do that

because the individuals are highly mobile(for example customers who travel often, police,

construction workers, drivers, sales clerks, mountaineers, etc.). Globalisation has also created a

trend towards more and more fieldwork, remote collaboration, and geographic mobility of

employees, fast services, competition, and lack of time for decision-making. To facilitate the

people who are always on the move or in fields, needing a to make a quick decision on site, e-

commerce was extended into m-commerce and e-business into m-business.

M-commerce is supported by mobile devices like mobile phones, laptops, PDAs, pagers,

enhanced alphanumeric communicators (such as Blackberry devices), palm-tops, and other

handheld devices which are smaller and lighter to carry. Now people can download or upload their

information from their desktops with the help of synchronisation or they can use wireless

technology to directly access the Internet or intranet from out of office. Varshney and Vetter (2002)

defined m-commerce as, “all activities related to a potential) commercial transaction conducted

through communications networks that interface with wireless (or mobile) devices. M-commerce

is buying and selling with help of wireless and network technologies including the Internet. It has

become very popular in the service industry such as share and stock trading, banking, and travel,

and so forth. Decreasing cost of mobile devices and increasing number of the users of mobile

devices, especially cell phones, are making m-commerce more feasible. Mobility, small

size, Internet and telephone network connectivity, simplicity in using mobile devices, low cost,

powerful batteries, and global reach are some of the drivers of m-commerce.’

Not just when buying and selling, but a large number of supply-chain processes can be made

more productive and effective using mobile technologies (including inventory management, order-

processing, sales force automation, control, job dispatching, wireless office, marketing and

advertising, communicating with stakeholders, etc.).

This process is called m-business. By converging Internet and wireless technologies, m-

commerce and m-business are providing more opportunities for businesses to expand their

markets, reduce time required in supply-chain processes, improve services, and reduce costs.

Growth of m-commerce does not mean closure of the chapter of e-commerce, nor does the

introduction of pervasive commerce lead to an end of m-commerce. Research indicates strong

growth at year-end in 2010 for U.S. households in access-related services, including more than 80

million broadband households; 65 million bundled-services subscribers; 30 million bundled-VoIP

subscribers; more than 6.5 million residential Telco TV subscribers; and nearly $3 billion in cable

video-on-demand revenue (Scherf, 2007). This clearly implies shrill prospects of e-commerce in

coming years. Juniper Research estimates the global market for mobile entertainment products

and services totaled US$17.3 billion in 2006 and will grow at a 35 % cumulative annual growth

rate, reaching $47 billion in 2009 and $76.9 billion in 2011(Regan, 2007). These are very

optimistic assessments for the future of m-commerce. Competitive e-businesses are adopting

pervasive computing to benefit from millions of autonomous tiny entities interacting with each

other. They are inclined to adopt the new technology and be the leaders. For them, it is high time

managing e-business harvest and sowing seeds of pervasive computing.

The four major types of Wireless Telecommunications Networks:

Wireless PAN:

Wireless Personal Area Network (WPAN) is a type of wireless network that interconnects devices

within a relatively small area, generally within reach of a person. For example, Bluetooth provides

a WPAN for interconnecting a headset to a laptop. ZigBee also supports WPAN applications.

Wireless LAN:

Wireless Local Area Network (WLAN) is a wireless alternative to a computer Local Area Network

(LAN) that uses radio instead of wires to transmit data back and forth between computers in a

small area such as a home, office, or school. Wireless LANs are standardized under the IEEE

802.11 series.

Wi-Fi: Wi-Fi is a commonly used wireless network in computer systems to enable

connection to the internet or other devices that have Wi-Fi functionalities. Wi-Fi networks

broadcast radio waves that can be picked up by Wi-Fi receivers attached to different

computers or mobile phones.

Fixed Wireless Data: This implements point to point links between computers or networks

at two locations, often using dedicated microwave or laser beams over line of sight paths. It

is often used in cities to connect networks in two or more buildings without physically wiring

the buildings together.

Wireless MAN:

Wireless Metropolitan area networks are a type of wireless network that connects several

Wireless LANs.

WiMAX is the term used to refer to wireless MANs and is covered in IEEE

802.16d/802.16e.

Mobile Devices networks:

In recent decades with the development of smart phones, cellular telephone networks have been

used to carry computer data in addition to telephone conversations:

Global System for Mobile Communications (GSM): The GSM network is divided into three

major systems: the switching system, the base station system, and the operation and

support system. The cell phone connects to the base system station which then connects

to the operation and support station; it then connects to the switching station where the call

is transferred to where it needs to go. GSM is the most common standard and is used for a

majority of cell phones.

Personal Communications Service (PCS): PCS is a radio band that can be used by mobile

phones in North America. Sprint happened to be the first service to set up a PCS.

D-AMPS: D-AMPS, which stands for Digital Advanced Mobile Phone Service, is an

upgraded version of AMPS but it is being phased out due to advancement in technology.

The newer GSM networks are replacing the older system.

Legal and Ethical Issues in e-Commerce:

When using the Internet and E-Commerce is is important to remember that there are many legal,

moral and ethical issues to consider.

Ethical & Morel Implications:Businesses entering the e-commerce world will be facing a new set of ethical challenges. It is

easy for businesses to become sidetracked in the technical challenges of operating in this way

and to pay little attention to the ethical implications.

There are many ethical implications for businesses to run into that would normally be addressed

when doing business face to face, for example selling tabacco and alcohol to an under age minor

over the internet, this is impossible to regulate easily and affectivly as it would be if the person

walked into a store, not only is this unethical but it is also illegal.

Another case of this was a case when a community pharmacy decided to start up a E-Commerce

site, of course here there was plenty of Morel and Ethical decisions to be made here, as

Pharmaceuticals are different from other items of commerce, particularly in that they should only

be used as and when they were required.

Obviously there any a list of items that have Morel & Ethical decisions to be made about them

being sold online such as Weight Loss Pills, which could be bought by a already underwright

anerexic girl on eBay, Viagra, which could be flown in from America and taken by someone with a

high risk of heart attacks and suffers from one. You could say that cases like these the person

shouldn't be so stupid, but then again isn't it unethical and immorel to sell these items on the

bases that you know that could happen?

Legal Implications:The central issues of E-Commerce and the law include the development of E-Commerce, the role

of consumers and regulation of e-commerce in regards to consumer protection.

E-commerce is a new way of conducting business that takes place on the Internet, it has become

an important way in which consumers purchase goods across the world as well as due to internet

technology progesssing rapidly in the last few years.

Although E-Commerce has a big effect on the global trade, governments also have a large effect

on the growth of E-Commerce on the internet by regulating is accordingly. As Governments set

regulations for E-Commerce organizations managers are starting to worry if the regulations will be

to tight or may reduce the market in the online trade.

Regulation of E-commerce is very important for the cyberspace market as it can help or stop the

organizations working with E-Commerce, as well as being able to protect the consumers in the

online market.

Legal Issues Involved in E-Commerce:

Approximately 100 countries now enjoy Internet access, and a recent survey reported that there

are approximately 20 million Internet hosts worldwide. The number of Internet users is currently

estimated to be in the region of 100 million people.

The exponential growth of the Internet and online activity raise a number of new regulatory issues

and legal questions. How does copyright apply to digital content? How can national laws apply to

activities in cyberspace? Can privacy and data protection exist on the Web? Can electronic

commerce really be secure? Should governments tax cyber trade? Can cyberspace be regulated

by one, or by many authorities? In seeking to apply the law to the Internet, problems arise owing

to the fact that most laws largely apply to the pre-cyberspace world.

In the modern era of electronic technology, many people want to get their work done quickly with

little effort. At times, people forget or do not consider the legal and ethical values of their

procedures. In traditional commerce, it's not easy to start a business. You must implement

strategies that follow rules and regulations enforced by government. Electronic commerce makes

it possible to do almost any kind of business in a very simple way. What makes it simple? The

reason is that existing legal frameworks and enforcement mechanisms are not strong.

E-commerce presents a world of opportunity for doing businesses, reaching global markets and

purchasing without leaving the home or office. E-commerce can provide opportunities to improve

business processes, just as phones, faxes and mobile communications have in the past.

However, just as any new business tool has associated issues and risks so does e-commerce. It's

important to understand the legal issues and potential risks to ensure a safe, secure environment

for trading with customers and other businesses.

The issue of law on the Internet is a complex one. Between the two all-or-nothing extremes lies a

broad spectrum of possibilities. Many people revel in the freedom to express themselves and the

freedom from prohibitions such as zoning restrictions that the Internet apparently affords. With no

law at all, however, the Internet would be no place to conduct business or pleasure. Laws give

people certainties about their rights and responsibilities: they make life more predictable. "Without

predictability, business will not be able to act efficiently, or price services effectively," said Thomas

Vartanian, a Washington, D.C.-based lawyer.

Electronic Transaction:

Some federal, state and territory governments encourage the adoption of electronic commerce by

enacting and enabling legalisation. In Australia many bills and acts have been passed to resolve

legal issues and make electronic transaction more authenticated, such as the Electronic

Transaction Act (ETA)[3]. ETA enables contractual dealings, such as offers, acceptances and

invitations, to be conducted electronically, and also allows people to use an electronic signature to

satisfy any legal requirement. Even the electronic transfer of land is covered, "Importantly, the Act

is similar in all material respects to those operating both in other States and at the Federal level,

so people can be confident that electronic transactions carry the same legal weight nationwide,"

states Jim McGinty, Attorney General for Western Australia.

Moreover the bill is expected to boost electronic commerce as an effective tool for businesses to

increase their efficiency. This may reduce administrative duties, storage and operational costs for

businesses. In McGinty's words," This is why it is crucial that we ensure the legal infrastructure

around cyberspace is beyond doubt".

Global companies have the responsibility to deal with some of the legal issues such as how to

form contracts, abide by consumer protection laws, create privacy policies and protect databases.

"As of now, there is no comprehensive set of laws or regulations that exist for international

electronic commerce," says David D. Barr. He added that it is difficult to establish uniform

worldwide laws for e-commerce, but some building block legislation within individual countries is

necessary.

By applying laws and sketching boundaries around the borderless Internet do we negate the term

"freedom of information"? How will legal structure affect international transactions on the Internet?

Will it restrict the potential growth of the Internet prematurely? Rapid changes in technology do not

allow enforcement of specific laws in cyberspace. For now many organizations are promoting

global coordination of legal structures.

Privacy & Security:

While shopping on the Internet, most people typically do not think about what is happening in the

background. Web shopping is generally very easy. We click on a related site, go into that site, buy

the required merchandise by adding it to our cart, enter our credit card details and then expect

delivery within a couple of days. This entire process looks very simple but a developer or

businessmen knows exactly how many hurdles need to be jumped to complete the order.

Customer information has to pass through several hands so security and privacy of the

information are a major concern. The safety and security of a customer's personal information lies

within the hands of the business. Therefore businesses have to give the customer first their

guarantee, and second peace of mind, that the information passed over is of no risk to any

invading eyes.

In traditional and online trading environments, consumers are entitled to have their privacy

respected. Websites should provide the customers with choices regarding the use of their

personal information, and incorporate security procedures to limit access to customer information

by unauthorised parties. Privacy policies and procedures should be clearly explained to

customers. Although respecting consumer privacy rights is a legal requirement, it also represents

good business practice. If customers trust a site and business then they are more likely to trade

with it.

Many people are not willing to disclose their personal information on the Web. It is up to

individuals to decide how much personal information they are willing to disclose and how it might

be used. Interestingly, one survey found that many people who disclose personal information do

so in hope of financial benefit, such as winning a sweepstakes.

Copyright & Trademark:

Many attempts have been made to address the issues related to copyrights on digital content. E-

commerce has a tremendous impact on copyright and related issues, and the scope of copyrights

is affecting how e-commerce evolves. It is essential that legal rules are set and applied

appropriately to ensure that digital technology does not undermine the basic doctrine of copyright

and related rights. From one perspective, the Internet has been described as "the world's biggest

copy machine". Older technologies such as photocopying, recording and taping are bound by

rules and regulations regarding quantity, content, quality and time constraints. In contrast, on the

Internet one person can send millions of copies all over the world.

Generally, a trademark can be owned by an individual, a company, or any sort of legal entity.

When someone else tries to use that trademark (e.g., your distinctive name or logo) without

authorisation, it could be considered an illegal dilution of the distinctive trademark. If someone

uses a trademark in such a way as to dilute the distinctive quality of the mark or trade on the

owner's reputation, the trademark owner may seek damages.

Some Web-based applications have enabled large-scale exploitation of music samples and audio

formats. Software that is available free of cost on the Net allows the transfer of songs and videos

without the authorization of rights holders (e.g. Napster, MP3 Providers). Moreover, CD burners

and portable MP3 players allow copyright violations to occur rather easily.

A number of important recent developments have occurred in the field of copyright and related

issues that have far-reaching implications for the industry, and are being addressed in

legislatures, judiciaries and international forums. During the last couple of years, new laws have

passed in some countries to ensure effective protection and enforcement of rights in the digital

era. At the same time, copyright industries are also adapting their business methods and uses of

technology to exploit digital opportunities, while guarding against new risks.

A Pew Research Center survey, conducted among roughly 2,500 Americans through March and

May 2003, indicates that 35 million US adults download music files online and about 26 million

share files online. The downloading population has grown by approximately 5 million users since

February of 2001"Ultimately, the music industry's war on illegal downloading can never be won"

say Charles Shoniregun.

Online Terms, Conditions, Policies and Laws:

At the moment, most online privacy policies are produced by private businesses for individual

companies. Governments are developing legislation to support and strengthen the privacy

protection measures of many businesses. These initiatives are aimed at regulating the storage,

use and disclosure by businesses of personal information.

Privacy legislation is designed to protect a person's personal information. The privacy laws of their

host country affect overseas companies. Every organisation should be very careful while applying

terms and conditions for the electronic transaction for Internet users. Privacy and security policies

not only reflect the organizations practice but also the rules and regulations for doing business

with the company. Major issues regarding the legalization of electronic transactions include the

following.

— Ensure proper online contracts.— Record retention obligations.— Original documentation, in terms of TAX and VAT requirements.— Import/export regulations.— Exchange control regulation.

— Foreign data protection law.

Legislation Dilemma:

Electronic transactions separate e-business from traditional types of businesses. When a

transaction takes place, Who has jurisdiction? Who has the authority to apply law over the

transaction?

For example, if you buy a laptop in your local computer store, you know your legal rights. If the

computer does not work when you take it home, and the store refuses to settle up, then you can

probably take the dispute to your local small claims court. But if you buy the same computer

online, from a vendor on the other side of the world, perhaps through a dealer based in yet a third

country, then your rights are a lot less clear. Which country's protection laws apply: yours, those in

the vendor's home country, or those of the intermediary? Without knowing which particular set of

laws apply, it's impossible to know whom to sue. "Small claims courts don't work in cyberspace,"

according to Ron Presser of the American Bar Association.

A little legislation can go a long way toward helping parties to establish better boundaries to work

within. When a transaction that takes place between two different parties located in two different

countries goes wrong then a number of complex questions arise.

This is not the first time the question of extra-territorial jurisdiction over Web content has been

raised. In November of last year, Felix Somm, ex-manager of CompuServe Deutschland, was

cleared on appeal of pornography charges brought against him in Germany after newsgroups

carried on parent company CompuServe's US servers were found to contain pornographic

material. The judge determined that it was technically impossible for Somm to close the illegal

newsgroups in question. Following in the footsteps of the CompuServe's case, Yahoo is arguing

that it would be technically impossible to block only French citizens from access to its online

auctions if should the auctions contain objectionable items.

E-Business and Legal Issues:

The technological basis of e-commerce is basically Web client/server middleware, or what is

called three-tier architectures. The client tier is the Web browser involving some type of form

processing. The middle tier is the Web server, often with transaction processing. The Web server

in turn links to the third tier, a database processing the order information. Some of the issues are

strictly Internet-related, such as domain names and trademarks, linking and framing, clickware

(and shrinkware), and metatag use. Others are traditional issues applied to the Internet, such as

copyright, contracts, consumer protection, privacy, taxation, regulated industries and jurisdiction.

E-commerce site development, its advertising, electronic transaction, money transactions and

such involve many legal issues, which need to be taken into account step by step. Before

developing an e-commerce site a registered domain and a registered trademark should be

established. There must be some copyright protection on the site. The business must ensure that

it displays the terms and condition/policies within its site. Security involving the privacy of a user's

data is always one of the main concerns while doing business online. Defining rules and

regulations for the advertisement of the site by placing banners on other known sites is another. It

is of great value when dealing with such complex issues to consult an attorney who specializes in

the issues of cyberspace.

Conclusion:

Most of the legal issues surrounding electronic commerce are not new. Lawyers should, however,

be able to recognise the increased significance of certain legal issues to the online environment.

In understanding the technical, contractual, intellectual property and regulatory issues, which have

enhanced importance in the new economy, the lawyer is well placed to assist clients in pro-

actively minimising their exposure to legal liability.

Before allocating resources to the initiative it must be determined whether it is legally possible to

perform the business process or transaction electronically. For example, the Electronic

Communication and Transaction (ECT) Act facilitates the conclusion of most transactions and

communications electronically by placing such transactions on an equal footing with traditional

transactions or communications.

The popular view of the Internet as an unregulated medium is not true. The laws of the world's

jurisdiction still apply when you surf the Net: the only difference is that the way they might apply.

The colonisation of cyberspace is both technology and opportunity driven. Indeed technology is at

the same time both a threat as well as a solution, because on the one hand it challenges existing

legal and regulatory infrastructures and yet offers the solution to many of those threats, including

security, integrity and authenticity.

Social and Other Issues in e-Commerce:

Social   Issues:

As electronic commerce expands it has a greater social impact. In order for the expansion of e-

commerce to occur there will be a need to improve education about the business side of e-

commerce and the technical side. As rapidly as e-commerce is growing changes are inevitable

and in order to deal with these changes people will have to have education available. Traditional

educational institutes will have to adapt to try and provide experience for the e-commerce market

and information technology in general. Also, there already been expansion of learning about e-

commerce into other forms of education rather then through traditional institutes. Institutes solely

based on learning information technology, including e-commerce, have been opened and in

addition to this online training can also be found.

The health sector of society can also be affected by the development of e-commerce. Electronic

commerce applications can be developed for use by the health care systems. In some cases the

use of these e-commerce sites can be help the system work more efficiently in turn be more cost

effective. By reducing costs using these methods more money can be made available to other

areas of the health sector.

Another aspect of society that is affected by electronic commerce is the sense of community.

Consumers can now belong to a more global community by being able to buy goods from around

the world, however this has its own societal effects. There is a loss of direct physical interaction

between individuals. Also the sense of loyalty that can occur during traditional business can be

harder to develop due to the global aspect and the lack of physical interaction of e-commerce.

Companies have to deal with an entire global market and can face difficulties in maintaining a

focus on specific customers to gain loyalty. There are also concerns that traditional businesses

may begin to suffer significantly is electronic commerce continues to grow.

As well, e-commerce plays a part increasing use and improving computer technology that can be

used by society. Electronic commerce can help the expansion of computer technology to more

people. As more people begin to use e-commerce more companies will begin to take part. This

will lead to better infrastructure and easier access to the Internet in order to encourage an even

larger market. By expanding like this it will not only help companies make more profit, but it

should make the resources of the Internet easier to attain to more people in society. Again, as

companies look better methods to expand their online-businesses new technologies may be

developed. These new technologies may not only help e-commerce, but may be useful in other

parts of society as well.

Economic   Issues:

From an economic aspect there have been several advantages to electronic commerce. In

particular consumers have more suppliers, sometimes including foreign suppliers. Searching the

Internet can also be done to find the lowest price. In general the market becomes larger and

makes for more competition. This increased competition can bring down prices for consumers

and other businesses. Further, the increase in information and choice available can help increase

the efficiency of a supply and demand equilibrium.

Also, with increased competition companies themselves will try to become more efficient. This

may be by new technologies or methods that reduce costs and increase productivity. In turn from

this lower prices may occur or the emergence of new technology.

Electronic commerce does have some negative effects on the economy. The availability of goods

online should increase competition and in turn lower prices, but this does not always occur. A

good reputation may allow a retailer to hold some control over their area of the market. Further,

companies can also find with ease the prices of their competitors allowing them to react

immediately to changes. In the worst-case scenario this monitoring may not involve any changes

to price. A price that is not advantageous to the consumer may be kept because no company is

willing to lower their price because it would not be profitable. That is, a company may be willing to

lower their price because the increase in sales would offset the lower price. However, since other

companies can quickly change their price the original company would not make any extra revenue

from increased sales.

Also the increased competition may cause product differentiation. This involves making similar

products that have the same general purpose, but are still unique. In this situation consumers will

have a difficult time comparing different products. As a result of the minimal information

competition will not be as high and prices may not be lower.

Privacy   Issues :

Strategy to successfully run an e-commerce business requires that as much consumer information

as possible. The need for information often has great effects on an individual’s privacy. There are

many methods that businesses use to collect this information often times this collection is

unknown to the users. One of these is offering a free service if the individual will fill in a

questionnaire. Tools, such as cookies and web bugs, are being used to monitor consumer’s web

behaviour. There are also companies whose sole purpose, DoubleClick, is to collect Internet user

information. These companies can use the data for themselves and also provide it to other

companies.

This collection of personal information has been found to be a concern to Internet users. A Pew

Internet survey found 84% of US web-users had this concern. Another survey by IBM found 72%

of people surveyed were troubled about Internet privacy. Still many consumers are not completely

against providing information, they just would prefer to know when and what is being collected.

The majority, 86%, of those poled in the Pew Internet survey said they would prefer websites use

“opt-in” methods. This would make e-commerce businesses ask for permission before collecting

their consumer’s information. Regardless of this preference by consumers few businesses

implement the option.

There are also self-regulating methods that have been attempted to increase consumer

satisfaction. These include joining privacy seal programs such as TRUSTe, members of these

organizations agree to abide by the programs privacy policy. Other methods simply involve

putting up privacy policies on their sites. Even though there are these options out there only 8%

of all US electronic commerce sites have a privacy seal.

In order for e-commerce to grow further the issue of privacy concerns must be resolved. People

will be wary to buy goods online if they cannot trust companies. If companies exploit the

information they collect not only their reputation will be tarnished, but it has a detriment on the

whole e-commerce world. By making the effort to ensure customers feel secure about their

privacy e-commerce business will be more successful. Customers will be easier to retain and will

most likely return to the online store. Also, as customers become more comfortable with an online

store it will be easier to build consumer trust and loyalty. This trust and loyalty can make it easier

for an electronic commerce business to collect consumer information willingly. As more

companies become aware of the importance of the customer’s privacy electronic commerce in

general will be more successful.

Conclusion:

Electronic commerce may be a new form of doing business, but it has developed rapidly. Even

though e-commerce has a short history there have been several important turning points in its

development. Further, as progress took place more markets opened up for the use of electronic

commerce. It became apparent it could be used more then just for Consumer-to-Consumer, but

also for other markets such as Business-to-Business. Current research in e-commerce is

focusing on making the experience more natural and comfortable for the customer, through such

technology as virtual agents. As with other forms of business, e-commerce has impacted some

industries more then others, such as the culture and information sector. Other industries, like

banking, have the potential for large future growth via electronic commerce. As this growth

continues this type of business has to face social, economic and privacy issues. In each of these

aspects of society we can see areas that e-commerce is being successful, but there are also

areas for improvement. A major are of concern is the issue of privacy. Consumers are hesitant to

use online business because they often have limited guarantees about the privacy of their

information. If concerns like these can be reduced, electronic commerce can play a positive role

in helping improve the world of business.