E - COMMERCE

Content

Introduction

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 Market

The 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 Middleman

Businesses 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 Field

A 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 Day

With 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 Satisfaction

An 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 Information

You 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.

Security

Most 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 Structure

The 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-commerce

Understandably, 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 Business

Often, 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 Business

The 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 Model

The 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.

Conclusions

The 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-Commerce

Supply 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-commerce

E-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 purchae 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 oftheir

data than the providers of online services realise. If this survey hadonly been

conducted in Germany and Europe, I would not have been surprised atthe

results, however the use of the UK and the USA, in part reflect the changein

public opinion and their attitude towards data protection. It would seemfrom these

results that an e-commerce firm would have an advantage over theircompetitors

if they reflected the consumer's desire of stronger data protectionof their data.

Whilst the cost of implementing stronger data protection(especially in Europe

following Directive 95/46) (footnote on cost so far

ofimplementing the directive) may be a worry, it would seem that the increase

inbusiness 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 microelectromechanical

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

processescan 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 purcchase 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, goverments 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.