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Introduction to E-Commerce

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- What is Commerce? - What is E-Commerce? - Different Definitions of E-Commerce - Scopes of E-Commerce - Difference of E-Commerce and Traditional Commerce - Benefits of E-Commerce - Types of E-Commerce Topic: Introduction t o E-Commerce Introduction To E- Commerce

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Introduction To Commerce Commerce is the exchange of something of value between two entities. That "something“ may be goods, services, information, money, or anything else the two entities consider to have value. Commerce is the central mechanism from which capitalism is derived. Topic: Introduction t o E-Commerce

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There are many different definitions and understanding about E-Commerce. According to Frederick J. Riggins and Hyeun-Suk Rhee, a recent pilot survey shows that some practitioners and managers view E-Commerce --> buying and selling goods and products over internet. However, researchers believe the E-Commerce practice should include a wide variety of presale and post-sale activities. Topic: Introduction to E-Commerce What is “E-Commerce”?

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Treese and Stewart gave their view of Internet-commerce as follows: “… the use of the global Internet for purchase and sale of goods and services, including service and support after the sale. The Internet may be an efficient mechanism for advertising and distributing product information, but our focus is on enabling complete business transactions.” Topic: Definitions of E-Commerce Different Definitions of Electronic Commerce

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“…. Speaking broadly, electronic commerce includes the use of computing and communication technologies in financial business, online airline reservation, order processing, inventory management... Historically speaking, the best known idea in electronic commerce has been Electronic Data Interchange (EDI)…” Although their view of e-commerce has been expanded to services and support after sale. Topic: Definitions of E-Commerce Different Definitions of Electronic Commerce

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Daniel Minoli and Emma Minoli gave their view of Internet-based commerce as follows: “… This revolution is known as electronic commerce, which is any purchasing or selling through an electronic communications medium. … Internet-based commerce, in general, and Web-based commerce, in particular, are important sub-disciplines of electronic commerce.” Different Definitions of Electronic Commerce Topic: Definitions of E-Commerce

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“Electronic commerce is the symbiotic integration of communications, data management, and security capabilities to allow business applications within different organizations to automatically exchange information related to the sale of goods and services.” Different Definitions of Electronic Commerce Topic: Definitions of E-Commerce

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Electronic Commerce encompasses one or more of the following: EDI EDI on the Internet E-mail on the Internet Shopping on the World Wide Web Product sales and services on the Web Electronic banking or funds transfer Outsourced customer and employee care operations Topic: Scope of E--Commerce The Scope of Electronic Commerce

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Differences between Electronic Commerce and traditional commerce The major difference is the way information is exchanged and processed: Traditional commerce: face-to-face, telephone lines , or mail systems manual processing of traditional business transactions individual involved in all stages of business transactions E-Commerce: using Internet or other network communication technology automated processing of business transactions individual involved in all stages of transactions pulls together all activities of business transactions, marketing and advertising as well as service and customer support Topic: Introduction to E-Commerce

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Benefits to Organizations: -Market expansion to national and international markets -Reduced cost of creating, processing, distributing, storing and retrieving paperbased information - Reduced inventories.(Just-in –time manufacturing) - Automated business processing - Cost-effective document transfer - Reduced time to complete business transactions, speed-up the delivery time Improved customer service. Increased productivity Reduced transportation Costs Topic:Benefits of E-Commerce Benefits of E- Commerce

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Benefits to Consumers: -Tranactions can be done 24 hrs a day, all year round and from any location - Customer has more choices - Rapid inter-personal communications and information accesses - Wider access to assistance and to advice from experts - Save shopping time and money - Fast services and delivery Topic:Benefits of E-Commerce Benefits of E- Commerce

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Technical Limitations: Lack of security,reliability,standards Insufficient bandwidth Rapid change in software development tools Difficult to integrate the Internet and EC s/w with existing applications and databases Venders require special web servers and other infrastructures Incompatibility of certain operating systems with certain h/w or s/w. Topic:Benefits of E-Commerce Limitations of E- Commerce

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Non-Technical Limitations: Cost and justification Security and privacy Lack of trust and user resistance Other factors Topic:Benefits of E-Commerce Limitations of E- Commerce

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Business to Consumer (B2C) Business to Business (B2B) Consumer to Consumer (C2C) Consumer to Business (C2B) Business to Government (B2G) Government to Business(G2B) Government to Citizen(G2C) Mobile Commerce TopicTypes of E-Commerce Types of E- Commerce B2B B2C B2G C2B C2C C2G G2B G2C G2G B C G B C G

Business-to-consumer E-commerce :

Business-to-consumer E-commerce On-line Retailer B B B Order Order Order Shipment Shipment Shipment

B2C applications:

B2C applications Offer directly to the customer an interface of activity Typical examples: Online book store (e.g. amazon.com) Online car purchasing (e.g. automall.com) Booking and purchase of airline tickets (e.g. ryanair.com) Correspond to retail sale Growth of B2C applications thanks to Internet A new kind of B2C applications are the Cybermalls

B2C applications: advantages and disadvantages :

B2C applications: advantages and disadvantages Advantages: Allow company to extend existing services to customers Allow company to increase its customers Offer a wider choice and allow cheaper prices May give to the company a worldwide visibility Online shops are accessible 24h a day Disadvantages: Low order conversion rates High risk (see Cyberphobia)

Direct Business-to-Business Relationship :

Direct Business-to-Business Relationship Seller (Supplier) Buyer Order Shipment

B2B applications:

B2B applications Realize transactions needed to perform financial or commercial activities by companies over the Internet Some typical applications: E-procurement E-Marketplace The turnover is much greater than that dealed with B2C applications

B2B applications: advantages and disadvantages:

B2B applications: advantages and disadvantages Advantages: Help to automate communications between companies making them easier and quicker Allow to cut prices drastically Help in reducing mistakes Disadvantages: Often need legacy integration

Hub-based Business-to-Business E-Commerce :

Hub-based Business-to-Business E-Commerce Hub (Electronic Market) Suppliers Suppliers Suppliers Buyers Buyers Buyers Buyers Buyers Buyers Order Order Order Order Order Order Orders Orders Orders Shipment Shipment Shipment Shipment

Consumer-to-consumer E-commerce :

Consumer-to-consumer E-commerce Hub (or Electronic market) S S S B B B Products shipped Products shipped Products shipped Cash Cash Cash

C2C applications:

C2C applications Concern the consumers who run negotations with other consumers sometimes utilizing as intermediary a company Examples: Ebay Autotrader.com

C2C applications: advantages and disadvantages:

C2C applications: advantages and disadvantages Advantages Allow consumers to interact directly among them Give to the consumers a new way of purchasing and selling services and goods Disadvantages Little earning capacity

B2G applications:

B2G applications Correspond to all kind of transactions between company and public administrator Utilized mostly in the USA

Mobile commerce applications:

Mobile commerce applications Concern doing businesses by means of mobile wireless devices Can be both B2B and B2C Have a growing importance in the future of e-commerce applications Will introduce completely new forms of electronic commerce E.g. E-tickets The development of such applications faces some of the greatest challenges in the security area to secure the trust of consumers

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Improving Direct Marketing Product Promotion New Sales Channels Direct Savings Reduced Cycle Time Customer Service Brand or Corporate Image Topic:Benefits of E-Commerce Impact of E- Commerce

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Transforming Organizations Technology and Organizational Learning Changing Nature of Work Transforming New Product Capabilities New Business Models Topic:Benefits of E-Commerce Impact of E- Commerce

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Impact on Manufacturing Manufacturing systems are changing from mass production to demand-driven Just –In-time Manufacturing Web-based systems Flexible sytems Topic:Benefits of E-Commerce Impact of E- Commerce

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Impact on finance and Accounting: On-line payments systems Security involved in electronic payment systems Impact on HRM, Training and Education Topic:Benefits of E-Commerce Impact of E- Commerce

Kalakota and Whinston’s E-commerce framework:

Kalakota and Whinston’s E-commerce framework Four key building blocks: Common business services infrastructure Message and information distribution Multimedia content and network publishing The Internet (infrastructure) Two supporting pillars: Public policy (“governance”) Technical standards

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Topic:Benefits of E-Commerce Generic Framework of E-commerce Electronic commerce applications Public Policy: Legal and Privacy issues Technical Standards For Documents, Security, and network Protocols Common Business Services infrastructure Messaging and Information Distribution Infrastructure Multimedia content and Network Publishing Infrastructure Network Infrastructure

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Topic:Benefits of E-Commerce E-commerce Applications Supply Chain Management Video-on-demand Procurement and purchasing On-line Marketing and Advertising Home Shopping

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Topic:Benefits of E-Commerce Common Business Services infrastructure The common business infrastructure for electronic commerce consists of four main elements: Security Authentication Encryption Electronic Payments


Security Major concern for doing business on the Internet. Businesses feel vulnerable to attack. Encryption is used to help secure data. HTTPS (HTTP with SSL) is used to encrypt data to ensure its integrity and safety. Secure Sockets Layer (SSL) is a standard for secure interactions use on the Web. SSL, uses a combination of private key encryption (using a one-time session key) and digital signatures to enhance the security of transmission. Concerns remain for e-commerce transactions since there are numerous examples of data and privacy issues.


Authentication Authentication is the security process of verifying that a user is who he or she says they are. Passwords are the most common type of authentication. It is important that users understand strong passwords. Digital signatures are now gaining popularity for authenticating transmitted information.

Authentication: Digital Signatures:

Authentication: Digital Signatures Digital signatures take the place of ordinary signatures in online transactions to prove that the sender of a message is who he or she claims to be. When received, the digital signature is compared with a known copy of the sender’s digital signature. Digital signatures are also sent in encrypted form to ensure they have not been forged.


Encryption Encryption systems translate data into a secret code (many types of encryption used). Encryption systems include 4 main components: Plaintext : the unencrypted message An encryption algorithm : that works like the locking mechanism to a safe A key that works like the safe’s combination Ciphertext is produced from the plaintext message by the encryption function. Decryption is the same process in reverse (like a modulation/demodulation), but it doesn’t always use the same key or algorithm. Plaintext results from decryption.

Encryption Techniques:

Encryption Techniques The two main encryption techniques now in use (see figure 7.5): Symmetric encryption in which both sender and receiver use the same key. Asymmetric or public key encryption, which uses two separate keys, called public and private keys.

Symmetric Encryption:

Symmetric Encryption Symmetric or private key encryption , uses the same algorithm and key to both encrypt and decrypt a message. Historically, this is the most common encryption technique. Since the key must be distributed, however, it is vulnerable to interception. This is an important weakness of symmetric key encryption. DES uses symmetric encryption.

Asymmetric or Public Key Encryption:

Asymmetric or Public Key Encryption A second popular technique is asymmetric or public key encryption (PKE). PKE is called asymmetric since it uses two different “one way” keys: a public key used to encrypt messages, and a private key used to decrypt them. PKE greatly reduces the key management problem since the private key is never distributed. PGP (pretty good privacy) is a popular form of PKE available as shareware.

Figure 7.5 Encryption:

Figure 7.5 Encryption

Electronic Payments:

Electronic Payments A number of payment methods are used by businesses to make and receive payments on the Internet. These methods are basically the equivalent of off-line payment methods. Here are a few of the most popular types: Virtual Terminals. Transaction Processors. Internet Checking. Electronic Funds Transfer (EFT).

Search Engines:

Search Engines Search engines are used to index the contents of the Internet so that information about a specific topic can be located. Managers should pay attention to search engines for two reasons: They provide useful and extensive access to information. And, they can provide the visibility that becoming listed with them provides. Google, founded in 1991 by two Stanford Ph.D. students, is the most popular search engine.

Web Services & Personalization:

Web Services & Personalization A web service is a standardized way of integrating web-based applications. Organizations can share data transparently. Web services are the basic building blocks of the SOA (Service Oriented Architecture). They are excellent for integrating systems across organizational boundaries. Personalization is the “selective delivery of content and services to customers and prospective customers”. Can offer customized services to meet the past and future interests of customers.

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Topic:Benefits of E-Commerce Messaging and Information Distribution Infrastructure Second building block of supporting framework for e-commerce. Includes email, instant messaging, Voice over IP (VoIP), point-to-point file transfers (FTP), and groupware. E-mail is still largest use in this area. ISP (Internet Service Provider) connects the user to the Internet.

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Topic:Benefits of E-Commerce Multimedia content Third building block of supporting framework for e-commerce. Includes standards for various multimedia file types. Examples of materials transported in this way include: Video Audio Text/Electronic documents Graphics & Photos Realtime/Non-realtime applications

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Topic:Benefits of E-Commerce Network Publishing Infrastructure Fourth building block of supporting framework for e-commerce. Includes data communications circuits over which information travels. Includes: Packet-switched networking (telephony is circuit-switched) Packets contain overhead information including addressing They are also routed, like mail All of this flows across Internet backbones Newer Internet access technologies include wireless access, cable access and DSL.

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Topic:Benefits of E-Commerce Public Policy Public policy is one of two supporting pillars for e-commerce. Public policy issues include: universal access, privacy, information pricing, information access. Privacy issues include what information is private and/or who should have the right to use/sell information about Internet users: Requesting personal information on visiting a web site Creating customer profiles Leaving electronic footprints when visiting a web site

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Topic:Benefits of E-Commerce Technical Standards Standardization is the second supporting pillar for e-Commerce. Standards are critical for electronic interaction. Secure Electronic Transaction (SET) for secure payments of online credit card transactions is one of the most heavily promoted standards Other application standards include file transfer protocol (FTP), hypertext transfer protocol (HTTP), simple network management protocol (SNMP), post office protocol (POP), and multimedia internet mail extensions (MIME)

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