E-BUSINESS

UNIT 1

INTRODUCTION TO E-BUSINESS:
E-business, is the application of Information and Communication Technologies (ICT) in support of
all the activities of business. Commerce constitutes the exchange of products and services between
businesses, groups and individuals and can be seen as one of the essential activities of any business.
Electronic commerce focuses on the use of ICT(Information and Communication Technologies) to
enable the external activities and relationships of the business with individuals, groups and other
businesses or e business refers to business with help of internet (i.e.) doing business with the help of
internet network. The term "E-Business" was coined by IBM's marketing and Internet teams in 1996.
In 1997, IBM marketing, with its agency Ogilvy & Mather began to use its foundation in IT solutions
and expertise to market itself as a leader of conducting business on the Internet through the term "e-
business." Then CEO Louis V. Gerstner, Jr. was prepared to invest $1 billion to market this new
brand.
After conducting worldwide market research, in October 1997, IBM began with an eight-page piece
in the Wall Street Journal that would introduce the concept of "e-business" and advertise IBM's
expertise in this new field. IBM decided not to trademark the term "e-business" in the hopes that
other companies would use the term and create an entire new industry. However, this proved to be
too successful and by 2000, to differentiate itself, IBM launched a $300 million campaign about its
"e-business infrastructure" capabilities. Since that time, however, the terms, "e-business" and "E-
Commerce " have been loosely interchangeable and have become a part of the common vernacular
E-business includes E-Commerce, but also covers internal processes such as production, inventory
management, product development, risk management, finance, knowledge management and human
resources. E-business strategy is more complex, more focused on internal processes, and aimed at
cost savings and improvements in efficiency, productivity and cost savings.

Meaning of E-Business:
E-Business is the conduct of business on the Internet, not only buying and selling, but also servicing
the customers and collaborating with the business partners. E-Business includes customer service (e-
service) and intra-business tasks.
Example of E-Business:
• An online system that tracks the inventory and triggers alerts at specific levels is E-Business
Inventory Management is a business process. When it is facilitated electronically, it becomes part of
E-Business.
• An online induction program for new employees automates part or whole of its offline counterpart.

Meaning of E-Commerce:
(a) E-Commerce is defined as those commercial transactions carried out using the electronic means,
in which goods or services are delivered either electronically or in their tangible or intangible form.
Examples of E-Commerce:
(a) Online shopping:
Buying and selling goods on the internet is one of the most popular examples of ECommerce .
(b) Electronic payments:
When we are buying goods online, there needs to be a mechanism to pay online too. That is where
the payment processors and payment gateways come into the picture. Electronic payments reduce the
inefficiency associated with writing the Cheque books. It also does away with many of the safety
issues that arise due to the payments made in currency notes.

Main difference between E-Business and E-

 Commerce :
E-BUSINESS E-Commerce

E-Business covers the online transactions, but E-Commerce refers to the online transactions
also extends to all the internet based transactions (i.e.) buying and selling of goods and/or services
with the business partners, suppliers and over the internet.
customers like: selling directly to the consumers,
manufacturers and suppliers; monitoring and
exchanging information; auctioning surplus
inventory; collaborative product design. These
online interactions are aimed at improving or
transforming the business processes and
efficiency. An E-Business status is received
when we handle the business using phone calls,
E-Mail orders, postal orders, and also the online
activities.

The following are some of the differences or relationship between an e-commerce and e-
business.
1. The terms e-business and e-commerce are often used interchangeably. When electronic
medium is used in all the day-to-day activities, then it may be termed as e-business. When
a commercial transaction takes place over electronic network, then it is termed as e-
commerce.
2. E-business is a very broad concept that involves a business organization to use electronic
medium to carry out all specialized or overall business activities. In e-business, information
and computing technologies are used to enhance one’s business. It includes any process that
a business organization conducts over electronic and computer enabled network.
3. E-business deals with recruiting, training employees and sharing any internal information
to enhance business process. In e-commerce, information and computing technologies are
used in inter business and intra-business transactions and in business to consumer
transactions.
4. Some experts consider when business is completely carried on through an electronic
medium, it may be referred to as e-business. E-business does not have physical presence in
a market. When a business organization physically owns an office and along with its
physical presence carries out a business transaction over internet, it may be referred as e-
commerce.
5. Amazon (Amazon.com) and ebay (ebay.com) are considered to be the world’s two
biggest e-business units. When Nalli Stores along with its physical presence sells textiles
through its web site (nalli.com), then it may be referred as e-commerce.
E-business and E-commerce both address the business processes, as well as a technology
infrastructure of databases, application servers, security tools, systems management and
legacy systems.

Types of E-Commerce Models

E-commerce, or electric commerce, is the process of buying and selling of various products
and services by businesses through the internet.

Nowadays e-commerce has become very popular among the people who want to buy and
sell different things because of the convenience it offers and the cost benefits to retailers
and the cost savings to the customers, and also the secrecy it offers.

E-commerce draws on such technologies as 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 one point in the
transaction's life-cycle, although it may encompass a wider range of technologies such as e-
mail, mobile devices and telephones as well.

E-commerce is the purpose of internet and the web to conduct business but when we
concentrate on commercial deals among organizations and individuals demanding selective
information systems under the guarantee of the firm it accepts the form of e-business.
Nowadays, the word ‘e’ is hitting momentum.

There are primarily five types of e-commerce models:

1. Business To Consumer (B2C)

Business to consumer is the first type of e-commerce that is also the most common one. It is
also known as B2C model. In this type online business selling is offered to individual
customers. This type started to expand after 1995 and now became one of the most common
e-commerce.

The B2C model works by retailers and marketers that use clear data in various marketing
tools so can sell their products to the internet users.

The internet users can use the shopping cart for everything they need. Payment is mostly
done through credit cards or by payment gateways like the PayPal.

Direct interaction with the customers is the main difference with other business model. B2C
normally deal with business that are related to the customer. The basic concept of this
model is to sell the product online to the consumers.

2. Business To Business (B2B)

Business to business, known as B2B model, is the largest e-commerce model that is based
on revenue which involves trillions of dollars. In this both the buyers and sellers are
business entities. B2B describes commerce transactions between businesses, such as
between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

The volume of B2B transactions is much higher than the volume of B2C transactions and
any other transaction.

The primary reason for this is that in a typical supply chain there will be many B2B
transactions involving sub components or raw materials, and only one B2C transaction,
specifically sale of the finished product to the end customer.

Benefits of B2B model:

 Encourage businesses online.

 Products import and export.
 Determine buyers and suppliers.
 Position trade guides.

3. Consumer To Consumer (C2C)

Consumer to consumer (C2C) or citizen-to-citizen electronic commerce involves the

electronically facilitated transactions between consumers through some third party. A
common example is the online auction, in which a consumer posts an item for sale and
other consumers bid to purchase it; the third party generally charges a flat fee or
commission.

The sites are only intermediaries, just there to match consumers. They do not have to check
quality of the products being offered.

The C2C model facilitates online transactions of goods and services between the individual
net users. But in this both the web users or both the parties cannot carry out any transaction
without the platform that is provided by an online market maker such as the eBay.

There is also the Customer to Business (C2B) model which is relatively less common. It's a
complete reversal of the traditional sense of transaction, but could be found in
crowdsourcing based projects.

4. Peer To Peer (P2P)

Peer to peer, peer-to-peer or usually said as P2P, is a communications model in which each
party has the same capabilities and either party can initiate a communication session.
This type that is a technology that helps their customers to share a computer resource and
computer files to anyone they require without the need of a central web server.

In recent usage, peer-to-peer has come to describe applications in which users can use the
internet to exchange files with each other directly or through a mediating server. In some
cases, peer-to-peer communications is implemented by giving each communication node
both server and client capabilities.

Those who are going to implement this model, both sides demand to install the expected
software so that they could convey on the mutual platform.

This kind of e-commerce has very low revenue propagation as from the starting it has been
tended to the release of use due to which it sometimes caught involved in cyber laws.

5. Mobile Commerce

Mobile commerce or m-commerce, uses mobile devices like the mobile phones as can carry
out online transactions. Nowadays, web designers are trying to optimize website so they can
easily view on mobile phones and to allow the use of this model.

Mobile Commerce conduct commerce using a mobile device, such as a mobile phone, a
Personal Digital Assistant (PDA), a smartphone, or other emerging mobile equipment such
as dashtop mobile devices.

Mobile commerce products and services that are available:

 Mobile ticketing - tickets can be sent to mobile phones using a variety of

technologies. Users are then able to use their tickets immediately, by presenting their
phones at the venue.
 Mobile vouchers, coupons and loyalty cards - mobile ticketing technology can
also be used for the distribution of vouchers, coupons, and loyalty cards. These items are
represented by a virtual token that is sent to the mobile phone.
 Content purchase and delivery - mobile content purchase and delivery mainly
consists of the sale of ring-tones, wallpapers, and games for mobile phones. The
convergence of mobile phones, portable audio players, and video players into a single
device is increasing the purchase and delivery of full-length music tracks and video.
 Location-based services - the location of the mobile phone user is an important
piece of information used during mobile commerce transactions.
 Information services - a wide variety of information services can be delivered to
mobile phone users in much the same way as it is delivered to PCs. These services
include: news, stock quotes, sport scores, financial records and traffic reports.
 Mobile banking - banks and other financial institutions use mobile commerce to
allow their customers to access account information and make transactions, such as
 purchasing stocks, remitting money.
 Mobile StoreFront - mobile phone as a touch sensitive handheld computer has for
the first time made mobile commerce practically feasible
 Mobile brokerage - stock market services offered via mobile devices have also
become more popular. They allow the subscriber to react to market developments in a
timely fashion and irrespective of their physical location.
 Auctions - unlike traditional auctions, the reverse auction (or low-bid auction) bills
the consumer's phone each time they place a bid.
 Mobile Browsing - with a mobile browser, customers can shop online without
having to be at their personal computer.
 Mobile Purchase - catalog merchants can accept orders from customers
electronically, via the customer's mobile device. In some cases, the merchant may even
deliver the catalog electronically, rather than mailing a paper catalog to the customer.
 Mobile marketing and advertising - refers to marketing sent to mobile devices.

Other Models

While e-commerce has encompass many transactions that are conducted online, there are
also lesser common types which include

 Business to Administration (B2A) - encompasses all online transactions between

companies and public administration. The model has increased due to governments
investing in e-government.
 Consumer to Administration (C2A) - This model includes all electronic
transactions conducted between individuals and public administration.

These two can be found in education field, fiscal, social security, taxes, employment,
health, legal documents, registers, etc..

Both use B2A and C2A because the models are strongly associated to the idea of efficiency
and easy usability of the services, with the support of information and communication
technologies.

E-COMMERCE AND VALUE CHAIN MODEL

VALUE CHAIN MODEL
 
A value chain for a product is the chain of actions that are performed by the business to add
value in creating and delivering the product. For example, when you buy a product in a store or
from the web, the value chain includes the business selecting products to be sold, purchasing the
components or tools necessary to build them from a wholesaler or manufacturer, arranging the
display, marketing and advertising the product, and delivering the product to the client.

The value chain model, as originally demonstrated by Porter (1985), identifies nine strategically
relevant activities that create value and reduce cost in a specific business. These nine value-
creating activities consist of five primary activities and four support activities. The primary
activities represent the sequence of bringing materials into the business (inbound logistics),
converting them into final products (operations), shipping out final products (outbound logistics),
marketing, and service. The support activities include procurement, technology development,
human resource management, and firm infrastructure. This model is very helpful for identifying
specific activities in business where competitive strategies can be applied and where information
systems are most likely to have a strategic impact. Successful implementation of e-commerce in
an organization should be based on a thorough understanding of the areas in the value chain
where e-commerce can add value most. More importantly, to succeed in gaining competitive
advantage, e-commerce is to be based on the overall corporate strategy . Among a host of critical
areas/ factors in the value chain that major organizations have taken into consideration for
establishing a sound e-commerce strategy include role of intermediaries, value pricing,
logistics/purchasing, fulfilment, and value nets among others. Following sections present an
analysis of these areas.
1. Role of Intermediaries
 Intermediaries may be more important now than ever before because most of the rapidly
growing Internet businesses are essentially middlemen . For example, companies such as
Amazon, CD-Now, Egghead.com, Cisco, and E*Trade can all be thought of as middlemen-
resellers of products provided by some other source. Intermediaries will continue to be important
because they provide consumers with selection, specialized distribution, and expertise . Some
internal disintermediation may take place, in which employees will be removed if they add little
value or even negative value to the distribution channel. For example, Dell, Cisco, and some
online brokerages have eliminated staff in an attempt to realize cost savings in certain areas.
Exhibit 1 illustrates an example of the role of intermediaries in the process of purchasing a book
online from Amazon.com.
2. Value Pricing
 In addition to employing e-commerce technology to enhance distribution channels, this
technology is also used to redefine pricing strategies. Most companies pursuing a premium
pricing strategy, for example, can use the Internet to better understand their customers. The
Internet allows companies to price with far more precision than they can off-line and to create
enormous value in the process. Value pricing involves several approaches. One approach to
pricing involves businesses offering heavily discounted prices in an attempt to attract customers
to their web sites. Another approach involves businesses transferring their “off-line” prices to the
Internet. Neither of these approaches is very efficient because they do not maximize value. An
attractive alternative approach is to utilize the Internet to track customers buying habits and
adjust prices accordingly, thereby uncovering new market segments. The Internet allows
companies to test prices continually in real time and measure customer responses.
3. Brand Differentiation/Loyalty
Pricing is just one of several ways for a company to differentiate itself from the competition.
Another way in which a company can differentiate itself is by promoting brand loyalty. Brand
loyalty encourages repeat customers and helps to create long-term profitability. A major benefit
of customer loyalty is that loyal customers often refer new customers to a supplier.
4. E-Procurement
 E-commerce technology has provided organizations with the capabilities to improve the
effectiveness and efficiency of the logistics and purchasing functions. Firms such as Wal-Mart
and Amazon.com are currently outsourcing delivery, relying on logistics companies to deliver
the product to the customer. E-procurement is the term currently used to denote the process of
using the Internet to integrate supply chain partners through collaboration on key initiatives and
to improve the purchasing process within organizations. A major benefit of e-procurement is the
cost savings aspect. In fact, organizational costs of placing orders can be reduced by as much as
75% through utilization of the Internet. It also offers organizations the ability to use the Internet
to search for the best pricing available. The overall advantage of practising e-procurement is the
fact the more automation allows partners quicker access to information. E-procurement also
results in better communication among supply chain partners and consequently better supplier-
customer relationships. Organizations are able to maintain tighter control over the purchasing
process. Only those suppliers that organizations deem to be “preferred suppliers” will be able to
transact business with the organization. Currently, e-procurement is being utilized primarily for
the purchase of office supplies and items which are used for repair and maintenance of the
organization’s facilities (Smock, 2001).
 5. E-Fulfilment
Today’s marketplace offers new challenges to organizations. A key initiative organizations have
undertaken to better compete is that of “E-fulfilment”. It can alter the way customers purchase as
well as the manner in which manufacturers deliver the product to consumers. Technology has
also allowed distributors and suppliers to focus on providing value-added services to
complement their product offering. E-Fulfilment contrasts with traditional fulfilment. Suppliers
are now capable of accepting order online via the Internet and having the information sent
directly into their order processing systems, something not possible via traditional fulfilment.
Orders placed via e-fulfilment tend to be smaller than those placed via traditional fulfilment
channels. The expected and actual lead times are shorter than those witnessed via traditional
fulfilment.
6. Value Nets
 Firms are continually seeking out new ways to attract and maintain customers. A development
that has proven to be effective in attracting and servicing customers is that of the Value Net. A
value net is a network consisting of partnerships, which assists in the transfer of information
among supply chain partners on a regular basis. The main benefit of a value net is the
competitive advantage it offers to all participating organizations. The primary concept behind a
value net is its ability to allow firms to address and solve customer problems, rather than just
selling a product. A popular trend in the marketplace to address niche markets is that of the
online-service company. This form of business interacts directly with the customers primarily via
the Internet. The advantage of this form of business is that it provides enhanced service to the
customer in the form of direct door-to-door delivery for customers. This is a distinct competitive
advantage that firms are looking to exploit
 In the world of e commerce companies can use the internet technology to improve the efficiency
and effectiveness of particular value chain activities.There are commercially available hardware
ad software specifically meant to address management problems associated with the supply and
distribution chain or the value chain system as a whole.
Specifically,the Internet technology benefits business organizations in the following ways:
1. It is a powerful tool for better supply chain management.
2. It is critical to internal operations such as just in time inventory,gear production schedules
and production quantities to buyer orders,more accurate monitoring of buyer preferences
and shifts in demand and
It is extremely useful for collaborative data sharing with distribution channel partners-online
systems reduce transactions costs.
E-commerce in India

 
Introduction
The e-commerce has transformed the way business is done in India. The Indian e-commerce
market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Much
growth of the industry has been triggered by increasing internet and smartphone penetration. The
ongoing digital transformation in the country is expected to increase India’s total internet user
base to 829 million by 2021 from 560.01 million as of September 2018. India’s internet economy
is expected to double from US$125 billion as of April 2017 to US$ 250 billion by 2020, majorly
backed by ecommerce. India’s E-commerce revenue is expected to jump from US$ 39 billion in
2017 to US$ 120 billion in 2020, growing at an annual rate of 51 per cent, the highest in the
world.
Market Size
Propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer
wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$
38.5 billion in 2017 Online retail sales in India are expected to grow by 31 per cent to touch US$
32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall.
During 2018, electronics is currently the biggest contributor to online retail sales in India with a
share of 48 per cent, followed closely by apparel at 29 per cent.
Investments/ Developments
Some of the major developments in the Indian e-commerce sector are as follows:
 Flipkart, after getting acquired by Walmart for US$ 16 billion, is expected to launch more
offline retail stores in India to promote private labels in segments such as fashion and
electronics. In September 2018, Flipkart acquired Israel based analytics start-up
 Upstream Commerce that will help the firm to price and position its products in an
efficient way.
 Paytm has launched its bank - Paytm Payment Bank. Paytm bank is India's first bank
with zero charges on online transactions, no minimum balance requirement and free
virtual debit card
 As of June 2018, Google is also planning to enter into the E-commerce space by
November 2018. India is expected to be its first market.
 E-commerce industry in India witnessed 21 private equity and venture capital deals worth
US$ 2.1 billion in 2017 and 40 deals worth US$ 1,129 million in the first half of 2018.
 Google and Tata Trust have collaborated for the project ‘Internet Saathi’ to improve
internet penetration among rural women in India
Government initiatives
Since 2014, the Government of India has announced various initiatives namely, Digital India,
Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective
implementation of such programs will likely support the e-commerce growth in the country.
Some of the major initiatives taken by the government to promote the e-commerce sector in
India are as follows:
 In order to increase the participation of foreign players in the e-commerce field, the
Indian Government hiked the limit of foreign direct investment (FDI) in the E-commerce
marketplace model for up to 100 per cent (in B2B models).
 In the Union Budget of 2018-19, government has allocated Rs 8,000 crore (US$ 1.24
billion) to BharatNet Project, to provide broadband services to 150,000 gram panchayats
 As of August 2018, the government is working on the second draft of e-commerce policy,
incorporating inputs from various industry stakeholders.
Achievements
Following are the achievements of the government in the past four years:
 Under the Digital India movement, government launched various initiatives like Udaan,
Umang, Start-up India Portal etc.
 Under the project ‘Internet Saathi’, the government has influenced over 16 million
women in India and reached 166,000 villages
 Udaan, a B2B online trade platform that connect small and medium size manufacturers
and wholesalers with online retailers and also provide them logistics, payments and
technology support, has sellers in over 80 cities of India and delivers to over 500 cities.
  According to the UN’s eGovernance index, India has jumped 11 positions to 107 in 2016
from 2018 in 2014.
 The government introduced Bharat Interface for Money (BHIM), a simple mobile based
platform for digital payments.
Road Ahead
The e-commerce industry been directly impacting the micro, small & medium enterprises
(MSME) in India by providing means of financing, technology and training and has a favourable
cascading effect on other industries as well. The Indian e-commerce industry has been on an
upward growth trajectory and is expected to surpass the US to become the second largest e-
commerce market in the world by 2034. Technology enabled innovations like digital payments,
hyper-local logistics, analytics driven customer engagement and digital advertisements will
likely support the growth in the sector. The growth in e-commerce sector will also boost
employment, increase revenues from export, increase tax collection by ex-chequers, and provide
better products and services to customers in the long-term.
Influencing factors of successful E‐commerce
The crucial factors to be considered while launching an E‐commerce web site are
1. Website
Website must be easy to navigate since the surfer should not have to search for the product or
details he or she is looking for. The website should project its products in as provocative way so
the surfer wants to see more. Place testimonials or photos of the products.
2. Merchant Account
All major credit cards have to be accepted for an e‐commerce transaction. So there arises a need
for a merchant account.
3. Shopping cart and Secure server
The online shopping cart allows the customers to choose and place their chosen products in the
cart just as one would do in shopping mall. This cart will, at the end of the shopping, total the
products and give the total cost of the products chosen.
4. Payment gateway
This is the link from the credit card to the credit card processor. This gateway helps information
to pass from the website to the authorization centre where the credit card is verified and then
charged, after that the reply will come back into the website that the processing has been
successful. A payment gateway will always check for details in credit card information and reject
any discrepancy in the information.
5. Pricing
One of the main reasons why consumers buy online is to save money. besides convenience, the
internet has always been a place for the consumers to compare prices and buy what they are
looking for at the best possible price.
6. User Friendliness
The price is indeed important, but User- Friendliness and easy of use of store is really the
decisive factor.
7.Product Line
A niche product line is a vey good thing. The product that we offer is available with other sellers
like on Amazon, and then we should ask ourselves what we can offer as a value-add, such as
service ,information ,guarantees and possibly some entertainments.
8. Adequate stock level
A new Customer could defintely be turned-off by desiring a product that is in backorder.
9. Quickness
Websites should load quickly.Every component of the site should move fast in order to avoid
customers leaving the site.
10. Exhibit information clearly
It is important that all companies should post th contacts more visibly for easy access in the cas
of any problem to the customers
Reasons for the failure of E-commerce:
There are quite a few mistakes that unsuccessful e-commerce businesses have in common. The
important among them are the following.
1. Poor Management:
The main reason for failure of e-commerce is poor management. Many e-commerce business
starts without planning and in many cases business may not be suitable for an on-line market.
2. A poorly designed website:
A professional website needs to feature the items clearly with photos and descriptions. Another
issue is too much colour, flash animation or graphics that slowed down the downloading process.
3. Lack of marketing:
Marketing of the site is needed for both on-line and off-line. Firms have to identify their
competitive advantage, and to show the customers the best price that can be offer.
4. Selling the wrong product on-line:
There are products that are not suitable to be sold on-line. Products which are inexpensive, and
could be easily bought from the local store are not worth selling on the Internet. Products that
need trying would be difficult to sell.
5. Poor order fulfilment:
Information on the Internet spreads like anything. If words of unhappiness are being spread
around to potential customers, the reputation would be damaged. Therefore, create a good
impression on customers by fulfilling their orders according to their wishes.
6. Poor customer service:
Poor customer service would send our customers running away. Providing excellent service
would not only satisfy our customer, but also bring in potential customers.
7. Inadequate Resources:
A majority of these companies were expecting to experience tremendous growth in the
foreseeable future and when that did not happen they had no saved capital.
8. Poor Channel Integration:
A common mistake committed by firms is poor channel integration. Some companies may just
try to market their goods or services via the Internet and ignore the other channel such as
catalogues and physical stores.
9. Ignoring Customers:
Another common mistake that some of these companies have made is ignoring the customers.
Some companies did not focus on customer fulfilment or product availability.
10. High Cost:
Another major mistake is that some e-commerce companies did not pay attention to is costs.
Most of the companies that fail fun through an enormous amount of money in a relatively short
period of time.
11. Poor Planning:
Lastly, and greatest of all, mostly all failed e-commerce companies have done poor planning.
These companies have focused too much energy on low prices and not enough on product
diversification and good service.

WEB BASED TOOLS FOR ELECTRONIC COMMERCE

MANAGING E‐BUSINESS INFRASTRUCTURE

The Internet
Internet is the world’s largest computer network. The internet is a network or more precisely
“Inter‐network” of hundreds of connecting networks made up of different types of computers all
over the
world that can share messages and information with one another. Internet is a global network of
computers. The Internet has revolutionized the computer and communications world like nothing
before. Anybody can access the Internet and can use the resources available on the Internet.
The Internet is a worldwide, publicly accessible series of interconnected computer networks that
transmit data by packet switching using the standard Internet Protocol (IP)It is a “network of
networks” that consists of millions of smaller domestic, academic, business, and government
networks, which together carry various information and services, such as electronic mail, online
chat, file transfer, and the interlinked web pages and other resources of the World Wide Web
[WWW]
The different purposes of Internet are as follows:‐
1. Sending and receiving E‐mails ( It is an instantaneous way of sending and receiving messages,
called electronic mail0 round the world at minimal price
2. Finding information on any topic or can be used as an educational tool.
3. Helps in participating in discussion on wide range of topics
4. Used to send data in the form of files from one computer to other with the facility called FTP
[File Transfer Protocol]
5. It is used for research purpose.
6. Internet provides a great learning experience
Internet Protocols
The most commonly used protocols are
1.Transmission Control Protocol/ internet protocol (TCP/IP)
2. File Transfer Protocol(FTP)
3.Hyper Text Transfer Protocol (HTTP)
4.Telnet
5.Gopher
6. Wide Area Information Service (WAIS)
e different uses of internet in Business:
Business Use of Internet :
Business concerns use internet for a variety of purpose. Some of the major use of interest in the
business field are enumerated below.
1. Access to database:
Internet is highly useful to a business to access complex databases. For example with the help of
internet, a company can access financial database.
2. Electronic Commerce:
Now a days, commercial on interest is becoming popular. Buying and selling products and
services on interest is called electronic commerce. Companies can carry out electronic commerce
including advertising, selling, buying, distributing products and providing after sales service.
3. Electronic Mail:
A major use of internet in the field of business is for speedy communication. The electronic mail
(E-mail) is widely used by companies to communicate faster between companies, customers,
workers and outsiders.
4. Companies area also making use of interest to conduct both audio and video conferencing to
discuss important issues by executives locating at distant places.
5. Worldwide audience:
The Internet is a worldwide network allowing the business to reach people all over the world. It
helps to capture the attention of customers even very expensive advertising could not achieve.
6. Provide product information:
Internet give customers direct access to information about your products. Some people prefer to
collect information about products by themselves. The Internet has a great ability to make
information about your company’s products or services available to potential customers.
7. Save on literatures costs:
Providing the information on-line reduces the need to print and mail product literature, thereby
resulting in significant cost reductions.
8. Provide easy access to customer service representatives:
Human interaction cannot to totally replaced by even he best graphical interface. When
customers have a question, or would like to speak with a person, provide a list of contacts and
phone numbers or allow them to send e-mail directly to customer service representative,
requesting that they be contacted.
9. Recruit new employees:
Many companies provide current information about job openings and attract talented people
from places hey could not reach otherwise.
10. Provide on-line service:
Many products and services can be delivered over the Internet. Online service will become an
even brighter option for many businesses. Since the transaction is electronic, billing and
inventory control can be automated, increasing accuracy and reducing your accounting and
product storage costs.
11. Eliminate the middleman:
Middlemen exist in some industries where there are barriers to direct contact between producers
and consumers. The Internet is a vehicle for removing these barriers. This lower prices for
consumers and increases profits for producers.
12. Entertainment programs:
Media and entertainment companies use the internet to broadcast audio and video, including live
radio and television programs.
Intranets and Extranets
Intranets
An intranet is an internal, secured business environment, which uses HTML and TCIP protocols
like the Internet, but operates on a LAN [Local Area Network]. If the LAN Provides access to
the Internet, the Intranet resides behind a firewall, with no gateway to, or from the Internet. If a
gateway exists, it is not an intranet, but an extranet.
An intranet is a private computer network that uses Internet protocols and network connectivity
to insecurely share part of organizations information or operations with its employees. Growth of
Internal networks based on Internet technologies known as the Intranet is out spacing the growth
of the global internet itself. An Intranet is a company‐ specific network that uses software
programs based on the Internet TCP/IP Protocol and common Internet user interfaces such as the
web browser. Intranet is the application of Internet technologies within an organization private
LAN or WAN Network. The Intranet environment is completely owned by the enterprise and is
generally not accessible from the Internet at large. An Intranet incorporates a working,
interactive custom environment to serve the business model, with familiar internet‐like
functionality and navigation. An intranet can be as basic or comprehensive as need dictates.
Advantages of Intranet:
Intranet offers of following advantages.
1. Workforce productivity:
Intranets can be very beneficial in increasing the work force productivity because employees cab
easily collaborate and share information. Intranets can help users to locate and view information
faster and use applications relevant to their roles and responsibilities. With the help of a web
browser interface, user can access data held in any database the organization wants to make
available, anytime and from anywhere within the company workstations. Intranet also increase
the ability of employee’s by performing their job
confidently very fast, and accurately. It also helps to improve the services provided to the users.
2. Information sharing:
Intranet permits business companies to share out information to employees according to their
need or requirements. Employees may also link to appropriate data at their expediency.
3. Communications:
Intranets can serve as powerful tools for communication within an organization. Easy and instant
communication can be done by intranets in the situations where emergency call for conferences
is made.
The well known examples of transportation are chat, e-mail, and blogs. An actual world example
of Intranet is Nestle had a number of food processing plants.
4. Web publishing:
Web publishing is another important advantage which allows organizations to up-to-date and
maintain the online information as required and anytime. Employees can stay updated with the
latest business update and standards, policies and orders. Web publishing allows bulky corporate
knowledge to be maintained and easily accessed throughout the company using hypermedia and
Web technologies. Example include : employee manuals, benefits documents, company policies,
business standards, newsfeeds, and even training, can be accessed using common Internet
standards. Because each business unit can update the online copy of a document, the most recent
version is always is always available to employees using the infranet.
5. Business operations and management:
Intranets are also being used as a platform for developing and deploying applications to support
business operations and decisions across the internet worked enterprise.
6. Time saving:
Another advantage of Intranet is time saving because there is no need to maintain physical
documents such as procedure manual, requisition forms, and internet phone list. As organizations
using intranets in their networks can distribute information on website rather than posting and
dispatching manually which save a lot of time and effort.
7. Cost savings:
Intranet working has reduced the cost of the business because all the things and tasks that were
done physically can be done easily with web media involved in the networks. Publishing and
online information providing has noticeably reduced the printing and manual publishing cost
including the transportation cost.
8. Same information:
Through Intranet common corporate culture every user can view the similar information.
9. Team work:
Intranet offer improve teamwork through which teamwork is enabled and all certified users can
get access to information.
10. Customized site:
Intranet is a Web-based tool that permits users to produce a customized site according their
requirements. We can pull all Internet actions and most wanted contented into a single page
which make easier to access.
11. Platform Independence:
Another great advantage is the platform independence which means that intranet works doesn’t
restrict any software specification typically UNIX, Windows. All is required is the access to the
global web to view the internal websites. There is no need to install same operating system in all
the connected computers.
Drawbacks of intranet
Intranet has great features for interconnected manners but has some disadvantages too.
1. Cost:
Setting up an intranet incurs a cost. Some of this is the direct hardware and software cost.
Indirect costs are more difficult to estimate. These include time spent defining the intranet’s
purpose and choosing which intranet capabilities are essential for the organization. The cost of
maintaining the intranet is a major consideration and budgets for upgrading hardware is another
element.
2. Security:
Unauthorized access to the intranet is a security issue. An organizational intranet relies on
privacy and confidentiality to prevent outsiders accessing sensitive information. An intranet
structure should not allow universal access to all information, and people should only have
access appropriate to their position in the organization.
Connections between an intranet and the Internet potentially compromises security, by allowing
virus infections or system hacking. Staff members should change their passwords regularly and
security audits should check the firewall.
3. Productivity:
Information overload is another disadvantage because it reduces productivity. Staff members
may end up having to read so much that work decreases. Also, departmental heads may rely on
e-mails rather than direct contact with staff to circulate information.
4. Training:
An intranet is a new budget item it itself for any organization. However, added to this cost,
management needs to consider two additional ones. First, the staff needs training to ensure
workers know how to use the system effectively. In some organizations, a few staff members
may resist learning how to share information via the intranet, or try to continue using older
methods of disseminating information.
Extranet
Extranet is a business to business intranet that allows limited controlled, secure access between a
company’s internet and authorized users from remote locations. The information stored on the
web of one organization can be shared by other organizations if they are in good terms. Extranet
is also a private network of an organization. However, it allows trusted external partners or
clients such as suppliers, customers and business partners to access the network. An intranet
extended to trusted external parties becomes an extranet. An external party would have limited
access to the network compared to an internal employee of the organization.
An extranet can be viewed as part of a company’s Intranet that is extended to users outside the
company .An extranet can be understood as a private intranet mapped onto the Internet or some
other transmission system not accessible to the general public, but is managed by more than one
company’s administrator.
Extranet is an extension of an intranet which makes the later accessible to outside companies or
individuals with or without an intranet. Parts of an intranet are made available to customers to
business partners for specific applications. The links between an intranet and its business
partners are achieved through TCP/IP, the standard internet protocol. Extranets provide the
privacy and security of an intranet while retaining the global reach of the internet. Business to
business E‐commerce is growing on Extranets.
Companies gain competitive advantage through speedier transactions and access newer markets,
as also by simplified and faster distribution of information, products and services.
Advantages of Extranet
Extranet offers the following advantages.
1. Provide Information:
Extranets are used to provide information to business partners, clients, special customers, or
anyone else who need access to information that would not be meant for the general public.
Extranets can contain special pricing information for retailers, resellers, or wholesalers. Extranets
might contain detailed product specifications and instructions, resources for product reps, or
information on their product’s latest features.
2. Sharing of information:
Extranets provide an extremely convenient method for sharing information with business
partners and clients. For example, clients know exactly where to find all of the information
relating to the projects.
The client page can be accessed by anyone in the organization who need to review and have
input into he project. Client pages can be accessed from anywhere in the world at any time.
3. Updated content:
Another benefit or extranet is the the extranet’s content is always current. Printed material
presents the risk that old, out of date information might be in circulation. In contrast extranets
“live” in only the place, and therefore the content they contain is always the most up to date.
Companies can save a lot of time and money by replacing frequently changing printed versions
of information with extranet versions.
4. Eliminate the inefficiencies:
The use of an extranet eliminates the inefficiencies of this process. Instead of maintaining a
printed book, the extranet contain the information. This allows the person responsible for the
information to keep the extranet current, and anyone who needs the information to access it from
there. Additionally, the information is always available right when they need it, rather than of
having to wait for an updated book, or a returned call to confirm information.
World Wide Web
WWW or World Wide Web is used for people around the world and it would easily link to other
pieces of information, so that only the most important data would quickly found by a user.
WWW is a global web in which millions of users are communicating with each other with the
help of computers. It is a wide‐area hypermedia information retrieval initiative aiming to give
universal access to a large universe of documents. It is an Internet based computer network that
allows users on one computer to access information stored on another through the world wide
network.
Working of the WWW
The WWW works on a Client‐server approach. Whenever the user wants to retrieve a webpage,
the www works as follows:
1. A user enters the URL of the webpage in the address bar of the web browser.
2. The web browser requests the Domain Name Server for the IP address corresponding to
www.yahoo.com
5. Convenience:
Extranets provides much convenience to exchange information with business partners. Since
extranets are usually accessible 24 hours per day and there is relatively no downtime, associates,
clients, vendors and other business partners can communicate with business at a time that is
convenient for them.
6. Increased Efficiency:
Because of direct access to information, the use of extranets can improve efficiency and increase
productivity. For example, a customer can get answers to question regarding the policy
information without having to wait for a response from customer service staff. Direct access to
business information via extranet enable users’ change and update their personal information.
This not only increase productivity but also helps to reduce error.
7. Security:
Security is an added advantage of extranet because organization can control the accessing of site
and thus gets information regarding the details of parties who access to our data. To grant access
to external associates, organization must create openings in our firewalls. Multiple openings in
our firewalls create higher risks for unauthorized entries.
8. Cost saving:
While start-up costs may be significant, firm may experience reductions in other expenses areas
due to extranet. For example, because your affiliates have direct access to documents on your
network, costs associated with mailing or faxing information are significantly reduced or
eliminated.
Disadvantages
1. Costly:
Extranets can be costly to apply to maintain within an organization.
2. Protection:
One of big problem is the protection of extranets when dealing with precious information.
System access should be controlled and checked properly to protect the system and information
going into the incorrect hands.
3. Decrease personal contact:
Extranets can decrease personal face-to-face contact with clients and business partners. This can
cause a lack of communication between employees, clients and organization.
3. After receiving the IP address, the browser sends the request for the webpage to the Internet
using HTTP protocol which specific the way the browser and Web Server communicates. The
Internet Routers send the request to the intended web server
4. Then the web server receives the request using HTTP protocol. It then examines the hard disk
or memory and if the requested file is found it returns it back to the web browser and closes the
Http connection.
5. The Web browser then interprets the file and displays the contents of the webpage in the
browser window.
Advantages of WEB
 It helps in faster communication
 Millions of people have a access to the WWW with more and more added everyday.
 Provides Busniess information
 Customerservice
 Opportunity to conduct business access 24*7
 Provide files to download
 Helps in E- Commerce and Advertising
Disadvantages
 Websites may be unreliable
 A website crashes is no good to anyone
 Difficulty in reaching the right people
 Creates Bad Publicity
 Theft of personal information (insecurity)
 Spamming
 Virus Threat
 Social Disconnect
Voice over IP [VoIP]
Voice over Internet Protocol [VoIP] is simply the transmission of voice traffic over IP based
networks. The internet Protocol (IP) was originally designed for data networking. The success of
IP in becoming a world standard for data networking has led to its adaption to voice networking.
Thus, Voice over Internet Protocol (VoIP) is a technology that allows to make voice calls using a
broadband Internet connection instead of a regular phone line.
VoIP is one of the new technologies that have the capability to dramatically change the
telecommunications scene of tomorrow. VoIP is a technology that helps people to use the
Internet as a transmission medium for telephone calls. By using VoIP, callers can avoid long
distance phone charges and save expensive telephone infrastructure costs.
VoIP services convert our voice into a digital signal that travels over the Internet. If we are
calling a regular phone number, the signal is converted to a regular telephone signal before it
reaches the destination. VoIP can allow us to make a call directly from a computer, a special
VoIP phone, or a traditional phone connected to a special adapter. In addition, wireless “hot
spots” in locations such as airports, parks, and cafes allows connecting to the Internet and may
enable to use VoIP service wirelessly.
VoIP Telephones
There are three methods of connecting to VoIP network
1. Using a “normal” telephone with a VoIP adapter
It is through the use of a device called an ATA {Analog Telephone Adaptor}.The ATA allows us
to connect a standard phone to computer or Internet connection for use with VoIP. The ATA is
an analog‐to‐digital converter. It takes the analog signal from traditional phone and converts it
into digital data for transmission over the INTERNET.
2. Using a VoIP telephone
These specialized phones look like normal phones with a handset, cradle and buttons. But instead
of having standard RJ‐11 phone connectors, IP phones have an RJ‐45 Ethernet connector. IP
phones connect directly to our router and have all the hardware and software necessary right
onboard to handle IP call. Wi‐Fi phones helps to subscribe callers to make VoIP calls from any
wi‐fi hot spot.
3. Using a computer with speakers and a microphone
This is certainly the easiest way to use VoIP. We need not even have toi pay for long distance
calls. All that is required is software, microphone, speakers, a soundcard and an Internet
connection. A broadband high speed internet] connection is required for VoIP technology. This
can be through a cable modem, or high speed services such as DSL or a local area network. A
computer, a adaptor, or a specialized phone is required./ Some VoIP services only work over
your computer or a special VoIP phone, while other services allows to use a traditional phone
connected to a VoIP adaptor.
Benefits of VoIP
• Low cost
• Eliminating phone lines
• Increased functionality and Reliability
• Eliminating Long Distance Charges
• Number portability
• Computer Telephony Integration [CTI]
The Internet Standards
At the technical and developmental level, the Internet is made possible through creation, testing
and implementation of Internet Standards. These standards are developed by the Internet
Engineering Steering Group, with appeal to the Internet Architecture Board, and promulgated by
the Internet Society as international standards. The RFC Editor is responsible for preparing and
organizing the standards in their final form. The standards may be found at numerous sites
distributed throughout the world, such as the Internet Engineering Task Force.
An Internet Standard [STD] is a normative specification of a technology or methodology
applicable to the Internet. Internet Standards are created and published by the Internet
Engineering Task Force [IETF].An internet Standard is a special Request for Comments [RFC]
or set of RFCs. The definitive list of Internet Standards is maintained in Internet Standards
document STD 1: Internet Official Protocol Standards.
INTERNET PROTOCOLS
A communication protocol allows different kinds of computers using different operating systems
to communicate with one another. It is highly essential because Internet is not made up of
computer system.
Instead there are great diversities found in the computers used on the internet. The user
connected on any network on the Internet can communicate with others or software located on
any other network connected to the internet using common set of protocols. An internet protocol
is a set of standards or rules for exchanging information between computer systems in a network.
The most commonly used protocols are:‐
1. Transmission control Protocol/Internet Protocol [TCP/IP]
It is actually a collection of protocols that govern the way data travel from one computer to
another across networks. A user connected on any network on the Internet can communicate with
people or software located on any other network connected to the internet using this common set
of protocols. On the internet, the protocol that permits two internet connected computers to
establish a reliable connection is called TCP/IP.
2. File Transfer Protocol [FTP]
FTP is the protocol or set of rules, which enables files to be transferred from one computer to
another computer. FTP works on the client/server principle. A client program enables the user to
interact with a server in order to access information and services on the server computer. Files
that can be transferred are stored on server computers. A client can access these files only
through a client application program. This program helps a client computer to locate the required
file to be transferred and starts the process of transfer.
3. Hyper Text Transfer Protocol [HTTP]
HTTP is an internet standard or set of rules that allows the exchange of information on the World
Wide Web. Hyper text is a method of preparing and publishing text, ideally suited to the
computer, in which users can select their own text. To prepare hyper text, the whole material
should be divided into small segments such as single pages of text. These small segments are
called nodes. Then hyper links are embedded in the text. When the user clicks on a hyper link,
the hyper text software displays a different node. The process of navigating among the nodes
linked in this way is called browsing. A collection of nodes that are interconnected by hyper
links is called a web. A Hyper text is prepared using Hyper Text Markup Language [HTML].The
html codes are used to create links.
Http is also based on the client/server principle. It allows the client computer to contact with
server computer and make a request. The server accepts the connection requested by the client
and sends back a response. An Http request identifies the information or text that the client is
needed and it tells the server to supply the text.
4. Telnet
Telnet is an Internet protocol or set of rules that enables internet users to connect to another
computer linked to the internet. This process is also called as remote login. The user’s computer
is referred to as the local computer and the computer being connected to is referred to as remote
or host computer.
Once access is established between local and host computer, local computer can give commands
do that they are executed in the host computer.
5. Gopher
Gopher is a protocol linked to the internet to search , retrieve and display documents from
remote sites on the internet, It is a menu based program that helps the user to find files,
programs, definitions and other topics that the user specifies. Gopher protocol allows the user to
free from the troubles of specifying the details of host, directory and file names. Instead, the user
can browse through menus and press Enter when he finds some interesting topic. Gopher is
interacting with a large number of independently owned computers around the world.
6. Wais
Wais stands for Wide Area Information Service. WAIS is a internet search tool and describes as
a protocol for computer to computer information retrieval. It is a program that permits the user to
search information worldwide based on a service of key words. WAIS has the capability of
simultaneously searching in more than one database.
Audio and video standards
Audio‐Video Standard, or AVS, is a compression codec for digital audio and video. Chinese
companies own 90% of AVS patents. The audio and video files have an .avs extension as a
container format. Development of AVS was initiated by the government of the People’s
Republic of China. Commercial success of the AVS would not only reduce China’s electronics
industry recognition among the more established industries of the developed world, where China
is still seen as an outlet for mass production with limited indigenous design capability.
In January 2005, The AVS workgroup submitted their draft report to the Information Industry
Department [IID]. On march 30, 2005,the first trail by the IID approved the video portion of the
draft standard for a public showing time. The dominant audio/ video compression codec’s,
MPEG and VCEG ,enjoy widespread use in consumer digital devices, such as DVD players.
Their usage requires Chinese manufacturers to pay substantial royalty fees to the mostly ‐ foreign
companies that hold patents on technology in those standards.
AVS was expected to be approved for the Chinese high definition successor to the Enhanced
Versatile Disk, and when CBHD was released it shipped with 30gb blue laser discs and video in
the AVS format, which rapidly gained market share‐ standing at 30% of the video in the AVS
format, which rapidly gained market share‐ standing at 30% of the video disc market after four
months.
Web Services and Service‐ oriented architecture [SOA]
Web services are typically application programming interfaces [API] or web APIs that can be
accessed over a network, such as Internet on a remote system hosting the requested services. A
web service is a service that communicates with clients through a set of standard protocols and
technologies. These web services standards are implemented in platforms and products from all
the major software vendors, making it possible for clients and services to communicate in a
consistent way across a wide spectrum of platforms and operating environments. This
universality has made web services the most prevalent approach to implementing an SOA. Web
service is a software system designed to support interoperable machine to machine interaction
over a network. It has an interface described in a machine processable format.
Service oriented Architecture [SOA]
Service oriented Architecture is an information technology approach in which applications make
use of services available in a network such as the World wide web. Implementing service
oriented architecture can involve developing applications that use services, making applications
available as services so that other applications can use those services, or both.
SOA is an approach to connect various applications so that they can communicate with each
other. It is a way of sharing functions, typically business functions, in a widespread and flexible
way. It is an architectural style which aims at to achieve loose coupling among interacting
software agents. A service is a unit of work done by a service provider to achieve desired end
results for a service consumer. Both provider and consumer are roles played by software agents
on behalf of their owners.
What distinguishes an SOA form other architectures is loose coupling. Loose coupling means
that the client of a service is essentially independent of the service. The way a client
communicates with the service doesn’t depend on the implementation of the service. This means
that the client does not have to know very much about the service to use, it. Loose coupling
enabling services to be document oriented. A document oriented service accepts a document as
input, as opposed to something more granular like a numeric value or java object. The client does
not know or care what business function in the service will process the document. It is up to the
service to determine what business function to apply based on the content of the document
An SOA can also include a service that provides a directory or registry of services. The registry
contains information about the service such as its interface. A client can discover services by
examining the registry. A registry can also be coupled with a repository component that stores
additional information about each service
Rules of SOA
• The messages must be descriptive, rather than instructive, because the service provider is
responsible for solving the problem
• Service providers will be unable to understand your request if your messages are not written in
a format, structure, and vocabulary that is understood by all the parties. The more restricted
a message is, the easier it is to understand the message, although it comes at the expense of
reduced extensibility.
 Extensibility is vitally important. The world is an ever‐ changing place so is any environment
in which a software system lives. Those changes demand corresponding changes in the software
system, service consumers providers and the messages they exchange. If messages are not
extensible, consumers and providers will be locked into one particular version of a service.
• SOA must have a mechanism that enables the consumer to discover a service provider under
the context of a service sought by the consumer. The mechanism can be really flexible, and it
doesn’t have to be a centralized registry.
New access Devices
An access device is a network component used to gain access to network resources from a
remote location, and vice versa. Common access devices are routers and modem pools. An
access device aggregates multiple channels of information including voice and data across a
single shared access link to a carrier or service provider PoP [Point of presence].The Access link
may be a TI line, a DSL connection, acable network or a broadband access link to a metro
Ethernet connection.
An access Device is typically installed at the customer premises. Sometimes, an access device is
installed by the service provider if chosen by the customer. This allows the service provider to
control the features of the access link and manage its operation during use. Some of the Internet
access devices include
• Cell phones
• Mobile Internet Devices [MIDs]
• Two‐ way Pagers
• Personal Digital Assistants

Electronic Data Interchange

EDI stands for Electronic Data Interchange. Electronic data interchange (EDI) is the computer-
to-computer exchange of business documents between companies. EDI replaces the faxing and
mailing of paper documents.
EDI documents use specific computer record formats that are based on widely accepted
standards. However, each company will use the flexibility allowed by the standards in a unique
way that fits their business needs.
Used in a variety of industries, over 160,000 companies have made the switch to EDI software to
improve their efficiencies. Many of these companies require all of their partners to also use EDI.
Overview of EDI Benefits and Drawbacks
The EDI process provides many benefits. Computer-to-computer exchange of information is
much less expensive than handling paper documents. Studies have shown that manually
processing a paper-based order can cost $70 or more while processing an EDI order costs less
than one dollar.
 Much less labor time is required
 Fewer errors occur because computer systems process the documents rather than
processing by hand
 Business transactions flow faster.
Faster transactions support reduction in inventory levels, better use of warehouse space, fewer
out-of-stock occurrences and lower freight costs through fewer emergency expedites.
Paper purchase orders can take up to 10 days from the time the buyer prepares the order to when
the supplier ships it. EDI orders can take as little as one day.
One drawback is that companies must ensure that they have the resources in place to make an
EDI program work; however, the need for buying and hiring these resources or outsourcing them
may be offset by the increased efficiency that EDI provides.
Each term in the definition is significant:
 Computer-to-computer– EDI replaces postal mail, fax and email. While email is also an
electronic approach, the documents exchanged via email must still be handled by people
rather than computers. Having people involved slows down the processing of the
documents and also introduces errors. Instead, EDI documents can flow straight through
to the appropriate application on the receiver’s computer (e.g., the Order Management
System) and processing can begin immediately. A typical manual process looks like this,
with lots of paper and people involvement:
 The EDI process looks like this — no paper, no people involved:

 Business documents – These are any of the documents that are typically exchanged
between businesses. The most common documents exchanged via EDI are purchase
orders, invoices and advance ship notices. But there are many, many others such as bill of
lading, customs documents, inventory documents, shipping status documents and
payment documents.
 Standard format– Because EDI documents must be processed by computers rather than
humans, a standard format must be used so that the computer will be able to read and
understand the documents. A standard format describes what each piece of information is
and in what format (e.g., integer, decimal, mmddyy). Without a standard format, each
company would send documents using its company-specific format and, much as an
English-speaking person probably doesn’t understand Japanese, the receiver’s computer
system doesn’t understand the company-specific format of the sender’s format.
o There are several EDI standards in use today, including ANSI, EDIFACT,
TRADACOMS and ebXML. And, for each standard there are many different
 versions, e.g., ANSI 5010 or EDIFACT version D12, Release A. When two
businesses decide to exchange EDI documents, they must agree on the specific
EDI standard and version.
o Businesses typically use an EDI translator – either as in-house software or via an
EDI service provider – to translate the EDI format so the data can be used by their
internal applications and thus enable straight through processing of documents.
 Business partners – The exchange of EDI documents is typically between two different
companies, referred to as business partners or trading partners. For example, Company A
may buy goods from Company B. Company A sends orders to Company B. Company A
and Company B are business partners.

Electronic Data Interchange EDI – Components,Applications, Advantages

Electronic Data Interchange EDI – is the exchange of business documents between any two
trading partners in a standard or structured, machine readable form. EDI is used to electronically
transfer documents such as purchase orders, invoice, shipping bills, and communicate with one
another.  A Specified format is set by both the parties to facilitate transmission of information.
Traders use Electronic Data Interchange EDI to exchange financial information in electronic
form.

Electronic Fund Transfer facility provided by banks is an example of Electronic Data

Interchange EDI. EDI helps to eliminate paper based system, reduces data entry task and
improves business cycle.

Components of Electronic Data Interchange EDI

Standard Document Format – A standard format agreed upon by both parties which do not
require complicated hardware or software to access information. Both parties communicate
directly through a business application.

Translator and Mapper – A translator is used to convert the raw data into meaningful
information according to specifications provided by a mapper. A mapper is used to create
conversion specification. It compiles the specification and then gives instructions to the
translator on how to convert the data.

Communication Software – A communication software is used to transmit data and convert

business documents into a standard format. It follows a standard communication protocol which
is incorporated in the software. 

Communication Network – A communication network provides a direct link between trading
partners who are will to exchange business documents through Electronic Data Interchange EDI.

 Modem – It is a hardware device that transmits data from one computer to another.
 VAN – A network that connect the computer system of one organization to another.
  Point to Point link – A direct communication link between two computers.

Advantages of Electronic Data Interchange EDI

 It is less costly than traditional system

 It aids in improved customers service and delivery
 It reduces error and clerical work.
 It improves business cycle
 It has a faster response time
 It aids in better planning and forecasting.

Applications of Electronic Data Interchange EDI

Retail Sector – In the retail sector profit margins usually depend upon efficient inventory
management. EDI provides a structured way to maintain and replenish goods stocked at a retail
outlet. Retailers use a common model stock for each shop location and the point of sale stock
position is updated continuously and data in fed via EDI enabled SCM (supply chain
management) network. The EDI software monitors all the logistics and makes updates in the
original stock.
Manufacturing Sector – EDI ensures effective and efficient management of materials required
for production of a commodity. In manufacturing sector EDI facilitates Material requirement
planning and just in time manufacturing. The Inventory position of OEM is constantly updated
through EDI and the supplier is notified about shortage of materials. This helps the supplier to
plan and schedule supply according to requirements of the manufacturer. The suppliers respond
via EDI with an ASN to identify the parts/materials to be delivered and the approximate delivery
time and as soon as the shipment is delivered at the production plant the inventory is updated
again.   

Automobile Sector – In automobile sector EDI is used to keep customers updated with the
current product and pricing information during the purchase cycle. An advance shipping notice is
transmitted through EDI to the customers to prepare a loading schedule and to ensure proper
receipt of the product. The customer may also make payment on receipt of goods via EDI to
speed up the payment process.  

 Financial Sector – In the financial sector EDI replaces the labour intensive activities of
collecting, processing and dispersing payments with an electronic system. It facilitates the flow
of payment between the bank accounts of trading partners without requiring any human
intervention. A payee`s bank account is electronically credited and the payer`s account is
electronically credited on the scheduled day of payment; such an exchange is known as
electronic fund transfer (EFT).

EDI WORKING PROCESS

All of your company’s information is stored within your ERP system, such as details related to
purchasing, inventory levels, invoicing and billing, shipping and so on. EDI solutions
like Mapadoc or Edisoft integrate with your Sage ERP system, accessing and using the
information needed to create the documents you need to do business with other companies.
Both your suppliers and your clients have specific requirements as to how they do business.
Things like ship-to addresses, unique pricing, and so on, that are determined when a deal is made
and have to be taken into account when transactions take place. This is the data that gets used by
EDI solutions to facilitate trading between businesses.
EDI uses the standard of data (ANSI or EDIFACT) to ensure requests from one party are
compatible with the supplier’s information system so that the supplier can fulfill orders placed. It
helps companies doing businesses with each other, particularly suppliers that can consistently
meet the requirements and terms of their clients, like retailers and distributors.
This is all organized during the implementation of EDI software, when fields are mapped to each
other so that the relevant data is used. When a request is received, the data is converted to fit the
system of the recipient and crucial information for the transaction is used to generate all
incoming and outgoing documents.
EDI BENEFITS BUSINESSES
Relying on manual processes to ensure conditions of a deal are met is a cumbersome and
obviously error-prone process. An EDI solution will replace a lot of manual processes with
automated transactions, by setting up a communication network between systems in a supply
chain.
The growth of EDI software solutions is a lot like that of other business software systems like
ERP. Once a luxury of large enterprises, it’s made its way into the hands of small and medium
businesses. It differs, however, in that a large trading partner, retailer, or distributor often
imposes EDI as a requirement on members of its supply chain. So, being able to trade with large
companies who require partners to have an EDI solution for transactions is the big picture benefit
of implementing the software. On a smaller scale, the EDI software also improves efficiency for
a growing small and medium enterprise.   
BENEFIT #1 – TIME SAVING AND SPEED IMPROVEMENTS 
Some of the benefits of EDI solutions are quite straightforward. The speed in which information
flows with EDI systems is a clear example of that. With an EDI solution, incoming orders are
created automatically, not needing user input or taking up employee time.
There are no delays due to different time zones, or having to get a person familiar with the term
on the phone. No faxes, or paper trails, leading to better cash flow, faster buy-sell cycle time,
shorter lead times, and reduced inventories.
BENEFIT #2 – ACCURACY AND ELIMINATION OF MANUAL ERRORS
The reliability of the information being exchanged between businesses improves with an EDI
solution. Companies see a reduction of errors by eliminating manual and duplicate data entry.
With access to the data of ERP systems, EDI solutions serve as not only the medium in which
the information travels, but also ensures that information accessed and received is not only
accurate but that conditions for the transactions are met.
This leads to improved relationship with trading partners, minimizing costly charge backs, late
deliveries, or incorrect product prices.
BENEFIT #3 – SECURITY, AND SIMPLICITY
The standardization of data within your systems will help your IT staff and employees know
where to find it. The automatic generation of sales orders, invoices, shipment reports and so on
will also make the work simpler for sales and warehouse staff.
 EDI solutions are set up to be only accessible to pre-defined authorized users, equipped with
audit trails and archives to track use and ensure security. With electronic confirmations to ensure
receipt of documents between parties, it brings transparency to business relationships.
Integrating EDI with your ERP system can bring other benefits, as further business processes can
be mapped and automated. A company looking for EDI is a company that is on the right path of
growth and may find further benefits investing in business software solutions.
 Unit 2
Security threats to e- business
E-COMMERCE SECURITY
Security is the component that affect e-commerce which includes Computer Security, Data
Security and other areas. Security is one of the concern which is affecting customer and
organizations trade. Web application which are offering online payment system (net banking,
credit card, debit card, PayPal or other token) are at more risk from being targeted and there is
big loss if data is being hacked. The e-commerce website those offering online payment are
giving guidelines for securing systems and networks available for the ecommerce system. To
educate the customer is the more critical part of the ecommerce security architecture. Trojan
horse programs are the biggest threat to e-commerce because they can overthrow the
authorization and authentication mechanisms used in trading transaction. These programs are
installed on remote computers by simple means: mail attachments. Privacy has become the
biggest issue for consumers with the rise of identity theft, this cause’s major concern for e-
commerce providers.
E-COMMERCE SECURITY TOOLS
 Firewall – Software and Hardware
 Public Key infrastructure
 Encryption software
 Digital certificates
 Digital Signatures
 Passwords
 Locks and bars – network operations center

Threats to E-Commerce
E-Commerce refers to the activity of buying and selling things over the internet. Simply, it refers
to the commercial transactions which are conducted online. E-commerce can be drawn on many
technologies such as mobile commerce, Internet marketing, online transaction processing,
electronic funds transfer, supply chain management, electronic data interchange (EDI), inventory
management systems, and automated data collection systems.
E-commerce threat is occurring by using the internet for unfair means with the intention of
stealing, fraud and security breach. There are various types of e-commerce threats. Some are
accidental, some are purposeful, and some of them are due to human error. The most common
security threats are an electronic payments system, e-cash, data misuse, credit/debit card frauds,
etc.
Electronic payments system:
With the rapid development of the computer, mobile, and network technology, e-commerce has
become a routine part of human life. In e-commerce, the customer can order products at home
and save time for doing other things. There is no need of visiting a store or a shop. The customer
can select different stores on the Internet in a very short time and compare the products with
different characteristics such as price, colour, and quality.
The electronic payment systems have a very important role in e-commerce. E-commerce
organizations use electronic payment systems that refer to paperless monetary transactions. It
revolutionized the business processing by reducing paperwork, transaction costs, and labour cost.
E-commerce processing is user-friendly and less time consuming than manual processing.
Electronic commerce helps a business organization expand its market reach expansion. There is a
certain risk with the electronic payments system.
Some of them are:
The Risk of Fraud
An electronic payment system has a huge risk of fraud. The computing devices use an identity of
the person for authorizing a payment such as passwords and security questions. These
authentications are not full proof in determining the identity of a person. If the password and the
answers to the security questions are matched, the system doesn't care who is on the other side. If
someone has access to our password or the answers to our security question, he will gain access
to our money and can steal it from us.
The Risk of Tax Evasion
The Internal Revenue Service law requires that every business declare their financial transactions
and provide paper records so that tax compliance can be verified. The problem with electronic
systems is that they don't provide cleanly into this paradigm. It makes the process of tax
collection very frustrating for the Internal Revenue Service. It is at the business's choice to
disclose payments received or made via electronic payment systems. The IRS has no way to
know that it is telling the truth or not that makes it easy to evade taxation.
The Risk of Payment Conflicts
In electronic payment systems, the payments are handled by an automated electronic system, not
by humans. The system is prone to errors when it handles large amounts of payments on a
frequent basis with more than one recipients involved. It is essential to continually check our pay
slip after every pay period ends in order to ensure everything makes sense. If it is a failure to do
this, may result in conflicts of payment caused by technical glitches and anomalies.
E-cash
E-cash is a paperless cash system which facilitates the transfer of funds anonymously. E-cash is
free to the user while the sellers have paid a fee for this. The e-cash fund can be either stored on
a card itself or in an account which is associated with the card. The most common examples of e-
cash system are transit card, PayPal, GooglePay, Paytm, etc.
E-cash has four major components-
1. Issuers - They can be banks or a non-bank institution.
2. Customers - They are the users who spend the e-cash.
3. Merchants or Traders - They are the vendors who receive e-cash.
 4. Regulators - They are related to authorities or state tax agencies.
In e-cash, we stored financial information on the computer, electronic device or on the internet
which is vulnerable to the hackers. Some of the major threats related to e-cash system are-

Backdoors Attacks
It is a type of attacks which gives an attacker to unauthorized access to a system by bypasses the
normal authentication mechanisms. It works in the background and hides itself from the user that
makes it difficult to detect and remove.
Denial of service attacks
A denial-of-service attack (DoS attack) is a security attack in which the attacker takes action that
prevents the legitimate (correct) users from accessing the electronic devices. It makes a network
resource unavailable to its intended users by temporarily disrupting services of a host connected
to the Internet.
Direct Access Attacks
Direct access attack is an attack in which an intruder gains physical access to the computer to
perform an unauthorized activity and installing various types of software to compromise
security. These types of software loaded with worms and download a huge amount of sensitive
data from the target victims.
Eavesdropping
This is an unauthorized way of listening to private communication over the network. It does not
interfere with the normal operations of the targeting system so that the sender and the recipient of
the messages are not aware that their conversation is tracking.
Credit/Debit card fraud
A credit card allows us to borrow money from a recipient bank to make purchases. The issuer of
the credit card has the condition that the cardholder will pay back the borrowed money with an
additional agreed-upon charge.
A debit card is of a plastic card which issued by the financial organization to account holder who
has a savings deposit account that can be used instead of cash to make purchases. The debit card
can be used only when the fund is available in the account.
Some of the important threats associated with the debit/credit card are-
ATM (Automated Teller Machine)-
It is the favourite place of the fraudster from there they can steal our card details. Some of the
important techniques which the criminals opt for getting hold of our card information is:
Skimming-
It is the process of attaching a data-skimming device in the card reader of the ATM. When the
customer swipes their card in the ATM card reader, the information is copied from the magnetic
strip to the device. By doing this, the criminals get to know the details of the Card number, name,
CVV number, expiry date of the card and other details.
Unwanted Presence-
It is a rule that not more than one user should use the ATM at a time. If we find more than one
people lurking around together, the intention behind this is to overlook our card details while we
were making our transaction.
Vishing/Phishing
Phishing is an activity in which an intruder obtained the sensitive information of a user such as
password, usernames, and credit card details, often for malicious reasons, etc.
Vishing is an activity in which an intruder obtained the sensitive information of a user via
sending SMS on mobiles. These SMS and Call appears to be from a reliable source, but in real
they are fake. The main objective of vishing and phishing is to get the customer's PIN, account
details, and passwords.
Online Transaction
Online transaction can be made by the customer to do shopping and pay their bills over the
internet. It is as easy as for the customer, also easy for the customer to hack into our system and
steal our sensitive information. Some important ways to steal our confidential information during
an online transaction are-
o By downloading software which scans our keystroke and steals our password and card
details.
 o By redirecting a customer to a fake website which looks like original and steals our
sensitive information.
o By using public Wi-Fi

POS Theft
It is commonly done at merchant stores at the time of POS transaction. In this, the salesperson
takes the customer card for processing payment and illegally copies the card details for later use.

Encryption Key
Encryption is a type of security that converts data, programs, images or other information into
unreadable cipher. This is done by using a collection of complex algorithms to the original
content meant for encryption.
Symmetric forms of encryption systems make use of a single password to serve as both
decryptor and encryptor. Symmetric types use algorithms that are very safe. One of such type
was adopted by the US Government as Advanced Encryption Standard (AES) to store classified
information. However, one drawback is that since a single key is shared, it can be leaked or
stolen. As part of key management, it is very important to change the key often to enhance
security.
Public asymmetric encryption systems make use of highly secure algorithms as well, but using a
different strategy for encryption and decryption. The asymmetric encryption method uses two
keys, referred to as a key pair. One is a public key, and the other one is a private key. The public
key can be freely shared among various users as it is only meant for encryption. The private key
is not shared, and is used to decrypt anything that was encrypted by the public key.
The algorithms used in the encryption process depends on the key pair. In order to reverse the
encryption process, only the private key of that particular key pair can be used. The message or
mail is then delivered to the public key owner. When the mail is received, the private key
requests a passphrase before the decryption process. In order to maintain optimal security, this
passphrase must be delivered manually; however, the software lets a user locally store the
passphrase so that messages may be automatically decrypted.
Since the key that causes decryption is not shared, asymmetric encryption is believed to be more
reliable when compared with symmetric encryption.

Cryptography
Cryptography is the practice and study of techniques for securing communication and data in the
presence of adversaries.
Alright, now that you know ” what is cryptography ” let’s see how cryptography can help secure
the connection between Andy and Sam.
So, to protect his message, Andy first convert his readable message to unreadable form. Here, he
converts the message to some random numbers. After that, he uses a key to encrypt his message,
in Cryptography, we call this ciphertext. 
Andy sends this ciphertext or encrypted message over the communication channel, he won’t have
to worry about somebody in the middle of discovering his private messages. Suppose, Eaves here
discover the message and he somehow manages to alter it before it reaches Sam.

Now, Sam would need a key to decrypt the message to recover the original plaintext. In order to
convert the ciphertext into plain text, Sam would need to use the decryption key. Using the key
he would convert the ciphertext or the numerical value to the corresponding plain text.
After using the key for decryption what will come out is the original plaintext message, is
an error. Now, this error is very important. It is the way Sam knows that message sent by Andy is
not the same as the message that he received. Thus, we can say that encryption is important to
communicate or share information over the network.
Now, based on the type of keys and encryption algorithms, cryptography is classified under the
following categories:
Encryption Algorithms
Cryptography is broadly classified into two categories: Symmetric key
Cryptography and Asymmetric key Cryptography (popularly known as public key
cryptography).

Now Symmetric key Cryptography is further categorized as Classical Cryptography and Modern
Cryptography.
Further drilling down, Classical Cryptography is divided into Transposition Cipher and
Substitution Cipher. On the other hand, Modern Cryptography is divided into Stream Cipher and
Block Cipher.
So, let’s understand these algorithms with examples.
How various Cryptographic Algorithms Works?
Let’s start with the Symmetric key encryption
Symmetric Key Cryptography
An encryption system in which the sender and receiver of a message share a single,
common key that is used to encrypt and decrypt the message. The most popular symmetric–
key system is the Data Encryption Standard (DES)
Transposition Ciphers
In Cryptography, a transposition cipher is a method of encryption by which the positions held by
units of plaintext (which are commonly characters or groups of characters) are shifted
according to a regular system, so that the ciphertext constitutes a permutation of the plaintext.
That is, the order of the units is changed (the plaintext is reordered). Mathematically, a bijective
function is used on the characters’ positions to encrypt and an inverse function to decrypt.
Example: 

Substitution Cipher
Method of encryption by which units of plaintext are replaced with ciphertext, according to a
fixed system; the “units” may be single letters (the most common), pairs of letters, triplets of
letters, mixtures of the above, and so forth.
Example:
Consider this example shown on the slide: Using the system just discussed, the keyword
“zebras” gives us the following alphabets:

Stream Cipher
Symmetric or secret-key encryption algorithm that encrypts a single bit at a time. With a Stream
Cipher, the same plaintext bit or byte will encrypt to a different bit or byte every time it is
encrypted.

Block Cipher
An encryption method that applies a deterministic algorithm along  with a symmetric key to
encrypt a block of text, rather than encrypting one bit at a time as in stream ciphers
Example:  A common block cipher, AES, encrypts 128-bit blocks with a key of predetermined
length: 128, 192, or 256 bits. Block ciphers are pseudorandom permutation (PRP) families that
operate on the fixed size block of bits. PRPs are functions that cannot be differentiated from
completely random permutations and thus, are considered reliable until proven unreliable.
Asymmetric Key Encryption (or Public Key Cryptography)
The encryption process where different keys are used for encrypting and decrypting the
information. Keys are different but are mathematically related, such that retrieving the plain text
by decrypting ciphertext is
feasible. 

RSA is the most widely used form of public key encryption, 

RSA Algorithm
 RSA stands for Rivest, Shamir, and Adelman, inventors of this technique
 Both public and private key are interchangeable
 Variable Key Size (512, 1024, or 2048 bits)
Here’s how keys are generated in RSA algorithm

Digital Signature
A digital signature is a mathematical technique used to validate the authenticity and integrity of a
message, software or digital document.

1. Key Generation Algorithms : Digital signature are electronic signatures, which assures
that the message was sent by a particular sender. While performing digital transactions
authenticity and integrity should be assured, otherwise the data can be altered or someone
can also act as if he was the sender and expect a reply.
2. Signing Algorithms: To create a digital signature, signing algorithms like email
programs create a one-way hash of the electronic data which is to be signed. The signing
algorithm then encrypts the hash value using the private key (signature key). This
encrypted hash along with other information like the hashing algorithm is the digital
signature. This digital signature is appended with the data and sent to the verifier. The
reason for encrypting the hash instead of the entire message or document is that a hash
function converts any arbitrary input into a much shorter fixed length value. This saves
time as now instead of signing a long message a shorter hash value has to be signed and
moreover hashing is much faster than signing.
 3. Signature Verification Algorithms : Verifier receives Digital Signature along with the
data. It then uses Verification algorithm to process on the digital signature and the public
key (verification key) and generates some value. It also applies the same hash function on
the received data and generates a hash value. Then the hash value and the output of the
verification algorithm are compared. If they both are equal, then the digital signature is
valid else it is invalid.
The steps followed in creating digital signature are :
1. Message digest is computed by applying hash function on the message and then message
digest is encrypted using private key of sender to form the digital signature. (digital
signature = encryption (private key of sender, message digest) and message digest =
message digest algorithm(message)).
2. Digital signature is then transmitted with the message.(message + digital signature is
transmitted)
3. Receiver decrypts the digital signature using the public key of sender.(This assures
authenticity,as only sender has his private key so only sender can encrypt using his
private key which can thus be decrypted by sender’s public key).
4. The receiver now has the message digest.
5. The receiver can compute the message digest from the message (actual message is sent
with the digital signature).
6. The message digest computed by receiver and the message digest (got by decryption on
digital signature) need to be same for ensuring integrity.
Message digest is computed using one-way hash function, i.e. a hash fucntion in which
computation of hash value of a is easy but computation of a from hash value of a is very difficult.
Digital Certificate
Digital certificate is issued by a trusted third party which proves sender's identity to the receiver
and receiver’s identity to the sender.
A digital certificate is a certificate issued by a Certificate Authority (CA) to verify the identity of
the certificate holder. The CA issues an encrypted digital certificate containing the applicant’s
public key and a variety of other identification information. Digital signature is used to attach
public key with a particular individual or an entity.

Digital certificate contains:-

1. Name of certificate holder.
2. Serial number which is used to uniquely identify a certificate, the individual or the entity
identified by the certificate
3. Expiration dates.
4. Copy of certificate holder's public key.(used for encrypting messages and digital
signatures)
5. Digital Signature of the certificate issuing authority.
Digital ceritifcate is also sent with the digital signature and the message.

Digital certificate vs digital signature :

Digital signature is used to verify authenticity, integrity, non-repudiation ,i.e. it is assuring that
the message is sent by the known user and not modified, while digital certificate is used to verify
the identity of the user, maybe sender or receiver. Thus, digital signature and certificate are
different kind of things but both are used for security. Most websites use digital certificate to
enhance trust of their users.

Security Protocols
Network security protocols are primarily designed to prevent any unauthorized user, application,
service or device from accessing network data. This applies to virtually all data types regardless
of the network medium used.

Network security protocols generally implement cryptography and encryption techniques to

secure the data so that it can only be decrypted with a special algorithm, logical key,
mathematical formula and/or a combination of all of them. Some of the popular network security
protocols include Secure File Transfer Protocol (SFTP), Secure Hypertext Transfer Protocol
(HTTPS) and Secure Socket Layer (SSL)
HTTP
The hypertext transfer protocol, abbreviated HTTP, is a system by which computers talk to each
other across the World Wide Web. It's used by computers and smart phones to ask web servers to
send the contents of websites and to submit data through online forms. HTTP is text-based, and
it's designed to be readable by humans as well as machines.

Purpose of HTTP Protocol

The name hypertext transfer protocol refers to HTTP's role in transmitting website data across
the internet. Hypertext refers to the standard form of websites in which one page can refer users
to another page through clickable hyperlinks, usually simply called links. The purpose of the
HTTP protocol is to provide a standard way for web browsers and servers to talk to each other.
Web pages are designed using the hypertext markup language, or HTML, but HTTP is used
today to transfer more than simply HTML and the cascading style sheets, or CSS, used to
indicate how pages should be displayed. HTTP is also used to transfer other content on websites
including images, video and audio files.
Computers can connect to web servers using HTTP simply to request the files at particular web
addresses, such as http://www.example.com/folder/file.html or to submit data through web
forms. When a computer is simply fetching data, it usually sends an HTTP message called a
GET request, and when it's sending form data or uploading a file it uses other formats of
messages called PUT or POST requests. You can see the HTTP messages your web browser is
sending in many browsers through the built-in developer tools.
Today, HTTP is used by many applications other than web browsers to send messages to servers.
People creating applications choose HTTP on purpose because it's well understood by many
developers and partly because HTTP is typically unfiltered by network firewalls designed to
allow web traffic, meaning that HTTP messages can get through without a problem on most
home and business networks.
HTTP and HTTPS
In some cases, you may notice that a web address begins with HTTPS rather than simply HTTP.
HTTPS refers to hypertext transfer protocol secure and, as the name suggests, is a more secure
variant of HTTP.
Specifically, it opens an encrypted connection between the web browser and server so that data
can be sent encoded in a way that won't be readable by eavesdroppers. By contrast, HTTP
messages and data are sent as plain text, so anyone who is able to observe your connection,
whether through a shared Wi-Fi network or by connecting to a computer between your computer
and the web server, can read your messages.
Shopping sites and apps, as well as others that require credit card information or handle personal
correspondence, such as email or instant messages, almost invariably use HTTPS.
SSL
Stands for "Secure Sockets Layer." SSL is a secure protocol developed for sending information
securely over the Internet. Many websites use SSL for secure areas of their sites, such as user
account pages and online checkout. Usually, when you are asked to "log in" on a website, the
resulting page is secured by SSL.
SSL encrypts the data being transmitted so that a third party cannot "eavesdrop" on the
transmission and view the data being transmitted. Only the user's computer and the secure server
are able to recognize the data. SSL keeps your name, address, and credit card information
between you and merchant to which you are providing it. Without this kind of encryption, online
shopping would be far too insecure to be practical. When you visit a Web address starting with
"https," the "s" after the "http" indicates the website is secure. These websites often use SSL
certificates to verify their authenticity.
While SSL is most commonly seen on the Web (HTTP), it is also used to secure other Internet
protocols, such as SMTP for sending e-mail and NNTP for newsgroups. Early implementations
of SSL were limited to 40-bit encryption, but now most SSL secured protocols use 128-bit
encryption or higher.

Firewall Security
As cybercrime continues to increase and threaten businesses across the world, you probably
know that your organization needs firewall security; in fact, you may even already have a
firewall management program in place. But what exactly is firewall security, and what does
firewall management entail?
The word firewall originally referred literally to a wall, which was constructed to halt the spread
of a fire. In the world of computer firewall protection, a firewall refers to a network device which
blocks certain kinds of network traffic, forming a barrier between a trusted and an untrusted
network. It is analogous to a physical firewall in the sense that firewall security attempts to block
the spread of computer attacks.

Packet filtering firewall

This type of firewall has a list of firewall security rules which can block traffic based on IP
protocol, IP address and/or port number. Under this firewall management program, all web
traffic will be allowed, including web-based attacks. In this situation, you need to have intrusion
prevention, in addition to firewall security, in order to differentiate between good web traffic
(simple web requests from people browsing your website) and bad web traffic (people attacking
your website).
A packet filtering firewall has no way to tell the difference. An additional problem with packet
filtering firewalls which are not stateful is that the firewall can't tell the difference between a
legitimate return packet and a packet which pretends to be from an established connection, which
means your firewall management system configuration will have to allow both kinds of packets
into the network.
Stateful firewall
This is similar to a packet filtering firewall, but it is more intelligent about keeping track of
active connections, so you can define firewall management rules such as "only allow packets into
the network that are part of an already established outbound connection." You have solved the
established connection issue described above, but you still can't tell the difference between
"good" and "bad" web traffic. You need intrusion prevention to detect and block web attacks.
Deep packet inspection firewall
An application firewall actually examines the data in the packet, and can therefore look at
application layer attacks. This kind of firewall security is similar to intrusion prevention
technology, and, therefore, may be able to provide some of the same functionality.
There are three caveats, however: first, for some vendors, the definition of "deep" extends to
some particular depth in the packet and does not necessarily examine the entire packet. This can
result in missing some kinds of attacks. Second, depending on the hardware, a firewall may not
have adequate processing power to handle the deep packet inspection for your network. Be sure
to ask questions about how much bandwidth it can handle while performing such inspection.
And finally, embedded firewall management technology may not have the flexibility to handle
all attacks.
Application-aware firewall
Similar to deep packet inspection, except that the firewall understands certain protocols and can
parse them, so that signatures or rules can specifically address certain fields in the protocol. The
flexibility of this approach to computer firewall protection is great and permits the signatures or
rules to be both specific and comprehensive. There are no specific drawbacks to this approach to
firewall security as generally it will yield improvements over a standard "deep packet inspection"
approach. However, some actual attacks may be overlooked (false negatives) because the
firewall security parsing routines are not robust enough to handle variations in real-world traffic.
Application proxy firewall
An application proxy acts as an intermediary for certain application traffic (such as HTTP, or
web, traffic), intercepting all requests and validating them before passing them along. Again, an
application proxy firewall is similar to certain kinds of intrusion prevention. The implementation
of a full application proxy is, however, quite difficult, and each proxy can only handle one
protocol (e.g. web or incoming email).
For an application proxy firewall to be effective as computer firewall protection, it has to be able
to understand the protocol completely and to enforce blocking on violations of the protocol.
Because implementations of the protocol being examined often do not follow a protocol
correctly, or because implementers add their own extensions to a protocol, this can result in the
proxy blocking valid traffic (false positives). Because of these kinds of problems, end users will
often not enable these technologies.
As you can see, there are areas of overlap between intrusion prevention and certain types of
firewall security. The terminology in this field is still being worked out, so it can be confusing at
times.

Public Key Infrastructure (PKI)

The Public key infrastructure (PKI) is the set of hardware, software, policies, processes, and
procedures required to create, manage, distribute, use, store, and revoke digital certificates and
public-keys. The PKI is the foundation that enables the use of technologies, such as digital
signatures and encryption, across large user populations. PKIs deliver the elements essential for a
secure and trusted business environment for e-commerce and the growing Internet of Things
(IoT).
PKIs help establish the identity of people, devices, and services – enabling controlled access to
systems and resources, protection of data, and accountability in transactions. Next generation
business applications are becoming more reliant on public key infrastructure (PKI) technology to
guarantee high assurance as evolving business models are becoming more dependent on
electronic interaction requiring online authentication and compliance with stricter data security
regulations.
The Role of Certificate Authorities (CAs)
In order to bind public keys with their associated user (owner of the private key), PKIs use
digital certificates. Digital certificates are the credentials that facilitate the verification of
identities between users in a transaction. Much as a passport certifies one’s identity as a citizen
of a country, the digital certificate establishes the identity of users within the ecosystem. Because
digital certificates are used to identify the users to whom encrypted data is sent, or to verify the
identity of the signer of information, protecting the authenticity and integrity of the certificate is
imperative to maintain the trustworthiness of the system.
Certificate authorities (CAs) issue the digital credentials used to certify the identity of users. CAs
underpin the security of a PKI and the services they support, and therefore can be the focus of
sophisticated targeted attacks. In order to mitigate the risk of attacks against CAs, physical and
logical controls as well as hardening mechanisms, such as hardware security modules (HSMs)
have become necessary to ensure the integrity of a PKI.
PKI Deployment
PKIs provide a framework that enables cryptographic data security technologies such as digital
certificates and signatures to be effectively deployed on a mass scale. PKIs support identity
management services within and across networks and underpin online authentication inherent in
secure socket layer (SSL) and transport layer security (TLS) for protecting internet traffic, as
well as document and transaction signing, application code signing, and time-stamping. PKIs
support solutions for desktop login, citizen identification, mass transit, mobile banking, and are
critically important for device credentialing in the IoT. Device credentialing is becoming
increasingly important to impart identities to growing numbers of cloud-based and internet-
connected devices that run the gamut from smart phones to medical equipment.
Cryptographic Security
Using the principles of asymmetric and symmetric cryptography, PKIs facilitate the
establishment of a secure exchange of data between users and devices – ensuring authenticity,
confidentiality, and integrity of transactions. Users (also known as “Subscribers” in PKI
parlance) can be individual end users, web servers, embedded systems, connected devices, or
programs/applications that are executing business processes. Asymmetric cryptography provides
the users, devices or services within an ecosystem with a key pair composed of a public and a
private key component. A public key is available to anyone in the group for encryption or for
verification of a digital signature. The private key on the other hand, must be kept secret and is
only used by the entity to which it belongs, typically for tasks such as decryption or for the
creation of digital signatures.
The Increasing Importance of PKIs
With evolving business models becoming more dependent on electronic transactions and digital
documents, and with more Internet-aware devices connected to corporate networks, the role of a
public key infrastructure is no longer limited to isolated systems such as secure email, smart
cards for physical access or encrypted web traffic. PKIs today are expected to support larger
numbers of applications, users and devices across complex ecosystems. And with stricter
government and industry data security regulations, mainstream operating systems and business
applications are becoming more reliant than ever on an organizational PKI to guarantee trust.
 Unit 3
Electronic Payment System
E-payment system is a way of making transactions or paying for goods and services through an
electronic medium without the use of check or cash. It’s also called an electronic payment
system or online payment system. Read on to learn more.
The electronic payment system has grown increasingly over the last decades due to the widely
spread of internet-based banking and shopping. As the world advance more on technology
development, a lot of electronic payment systems and payment processing devices have been
developed to increase, improve and provide secure e-payment transactions while decreasing the
percentage of check and cash transaction.
Electronic payment methods
E-payment methods could be classified into two areas, which are:
1. Cash Payment System
Electronic Funds Transfer (EFT): this is an electronic system used to transfer money from one
bank account to another without any cash exchange by hand.
EFT comprises many other concepts of payment system include:
 Direct debit, that is a financial transaction in which the account holder instructs the bank
to collect a specific amount of money from his account electronically for payment of
goods or services.
 E-Check, a digital version of an old paper check. It’s an electronic transfer of money
from a bank account, usually checking account without the use of the paper check.
 Electronic billing: this is another form of electronic funds transfer used by companies or
businesses to collect payments from customers over electronic method.
What Is an Issuing Bank?
If you’re a credit or debit card owner, you probably heard about an issuing bank. Read on to see
what’s behind the issuing bank term.
Why Card Security Code Matters In Online Shopping?
Ecommerce is growing fast and credit cards are still the most popular online payment method.
Read the full post and see what card security code is and why you need one to pay for the goods
on the internet.
 Electronic cash (e-Cash): it is a form of an electronic payment system of which certain amount
of money is stored on a client device and made accessible for internet transaction. Electronic
cash is also referred to as digital cash and it make use of e-cash software installed on the user PC
or electronic devices.
 Stored value card: this is another form of EFT used by stores. Stored value card is a card
variety that has a certain amount of money value stored and can be used to perform the
transaction in the issuer store. A typical example of stored value cards are gift cards.
2. Credit Payment System
 Credit Card: this is another form of the e-payment system which required the use of the
card issued by a financial institute to the cardholder for making payments online or
through an electronic device without the use of cash.
 E-Wallet: it is a form of prepaid account that stored user’s financial data like debit and
credit card information to make an online transaction easier.
 Smart card: this use a plastic card embedded with the microprocessor that can be loaded
with funds to make transactions and instant payment of bills. It is also known as a chip
card.
Benefits of using an e-payment system
eCommerce websites use an e-payment system to make it easier and more convenient to pay for
their customers. It comes with many benefits, which are:
 More effective and efficient transactions. It’s because these are made just in minutes
(even with one-click), without wasting customer’s time.
 It also lowers the whole transaction cost.
 Today it’s easy to add payments to the website, so even a non-technical person may
implement it in minutes and start processing online payments.
 Payment gateways and payment providers offer highly effective security and anti-fraud
tools to make transactions reliable.
eCommerce, as well as m-commerce, is getting bigger and bigger, so having e-payment system
at your online store is a must. It’s simple, fast and convenient for the online shoppers to pay.
Still, one of the most popular payment methods are credit and debit card payments, but people
also choose some alternatives or local payment methods. If you run an online business, find out
what your target audience need, and provide the most convenient and relevant e-payment system.

Electronic Payment system is a financial exchange that takes place online between buyers and
sellers. The content of this exchange is usually some form of digital financial instrument {such
as encrypted credit card numbers, electronic cheques or digital cash) that is backed by a bank or
an intermediary, or by a legal tender. The various factors that have leaded the financial
institutions to make use of electronic payments are:‐
1. Decreased technology cost
2. Reduced operational and processing cost
3. Increasing online commerce
The Internet Payment Processing System
The participants in an online electronic payment transaction include the following:‐
1. The Customer:‐Customer in an e‐commerce may be the holder of a payment card such as
credit card or debit card from an issuer
2. The issuer:‐The issuer means a financial institution such as bank that provides the customer
with a payment card .The issuer is responsible for the card holder’s debt payment.
3. The Merchant – The person or organizations that sells goods or services to the cardholder via a
website is the merchant. The merchant that accepts payment cards must have an Internet
Merchant account with the acquirer
4. The acquirer – is a financial institution that establishes an account with the merchant and
processes payment card authorizations and payments. The acquirer provides authorization to the
merchant that given card account is active and that the proposed purchase doesn’t exceed the
customer’s credit limit. The acquirer also provides electronic transfer of payments to the
merchant’s account, and is then reimbursed by the issuer via the transfer of electronic funds over
a payment network.
5. The Processor – The Processor is a large data centre that processes credit card transactions and
settles funds to merchants, connected to the merchant on behalf of an acquirer via a payment
gateway.
Basic steps of an online payment
The basic steps of an online payment transaction include the following:‐
 The customer places an order online by selecting items from the merchant’s Website and
sending the merchant a list. The merchant often replies with an order summary of the items, their
price, a total, and an order number
 The customer places an order along with their credit card information and sends it to the
business. The payment information is usually encrypted by an SSL pipeline set up between the
customer’s web browser and the merchant’s web server SSL certificate.
The merchant confirms the order and supplies the goods or services to the customer. The
business sends the consumer an invoice, their certificate and their bank’s certificate.
 The business then generates an authorization request for customer’s credit card and sends it to
their bank
 The business’s bank then sends the authorization request to the acquirer
 The acquirer sends an acknowledgement back to the business’s bank after receiving an
acknowledgement from the customer’s Bank.
 Once the consumer’s bank authorizes payment, the business’s bank sends an
acknowledgement back to the business with an authorization number
Various Online Payment Systems
1. Electronic Tokens
An Electronic token is a digital analog of various forms of payment backed by a bank or
financial institution. There are two types of tokens:‐
1] Real Time (or Pre‐paid tokens) – These are exchanged between buyer and seller, their users
pre‐pay for tokens that serve as currency. Transactions are settled with the exchange of these
tokens. Eg. Digicash , Debit Cards, Electronic Purse etc.
2] Post Paid Tokens – are used with fund transfer instructions between the buyer and seller. Eg.
Electronic Cheques, Credit card data etc.
2 Electronic or Digital Cash
This combines computerized convenience with security and privacy that improve upon paper
cash. Cash is still the dominant form of payment as : The consumer still mistrusts the banks. The
non cash transactions are inefficiently cleared. The properties of Digital cash are :‐
• Must have a monetary value
• It must be backed by cash [currency],bank authorized credit or a bank certified cashier’s check
• Digital cash is based on cryptographic systems called “Digital Signatures” similar to the
signatures used by banks on paper cheques to authenticate a customer.
• Maintenance of sufficient money in the account is required to back any purchase.
• Must be interoperable or exchangeable as payment for other digital cash, paper cash, goods or
services, lines of credit, bank notes or obligations, electronic benefit transfers and the like.
3. Electronic Cheques
The electronic cheques are modeled on paper checks, except that they are initiated electronically.
They use digital signatures for signing and endorsing and require the use of digital certificates to
authenticate the payer, the payer’s bank and bank account. They are delivered either by direct
transmission using telephone lines or by public networks such as the Internet. Integration of the
banking and the information technology industry has benefitted the consumers in many aspects
with respect to time, cost and operational efficiency
PREPAID AND POST PAID PAYMENT SYSTEMS
Electronic payment systems are broadly classified in to prepaid and post paid payment Systems:
A] Prepaid payment systems
It provides a service that is paid prior to usage. Here the customer is allowed to spend only up to
the amount that have pre‐determined into the account. This type of payment system is highly
useful to those customers who would like to control overspending. E.g. Prepaid debit cards or
prepaid credit cards. Prepaid payment system is taken by the customer by depositing money with
the credit given company. It can be deposited in the savings account or the current account. Once
the money is deposited, the card is used as a regular credit card. It is very effective card as it
doesn’t put in to debt. nce the money is exhausted in the account, the credit card cannot be used.
There is no interest charges related to this card.
Benefits of the pre‐paid payment system
1. It is accepted at the entire merchant establishment worldwide according to the affiliation of the
credit given company.
2. It can be used to withdraw cash from the ATMs
3. Reloadable anytime anywhere
4. It can be used to withdraw cash in any international currency
5. It is usually backed up by personal accident insurance cover
6. Customer has the facility to get online and track spending , check balance, change pin
Post paid Payment System
This system is like a credit card used to make incremental purchases through the web site. As
purchases are made, the accumulated debt on the post paid credit instrument increase until a
credit Limit is reached, or until an arrangement has made to settle the debt such as monthly
payment.
Normally all credit cards are post paid cards. The customer gets the eligibility of spending
through the income statement and credit history produced before the credit card company. The
customer gets a credit limit and a credit period by which the customer is supposed to pay back
the money to the credit card company.
Features of Post paid payment system
 Global acceptance – accepted by all the merchant establishments according to the network set
by the credit card company.
 Balance transfer option – It is possible to transfer outstanding funds from one card to other
cards with low interest rates.
 Revolver facility – Customer can pay only a small amount of the total outstanding and
revolve the rest for the payment o the next month.
 Cash advance facility – Customer can withdraw around 30% of the credit limit at any ATM
connected to the credit card company
 Teledraft – These facilities are available at the door steps of the customer
 Other services – Credit card can be used for railway tickets and airline ticket purchase
 Convenience – as the customer is not required to carry cash for any purchase
 Easy availability – holder can load prepaid credit cards at anytime they need.
E‐Cash or Electronic cash
E‐Cash or Electronic Cash is a new concept to execute cash payment using computers connected
with network. E‐cash is an electronic medium for making payments. The primary function of e ‐
cash is to facilitate transactions on the Internet. Many of these transactions may be small in size
and would not be cost efficient through other payment medium such as credit cards.
Electronic money [also known as e‐currency, e‐money, electronic cash, electronic currency,
digital money, digital cash or digital currency] refers to money or scrip which is exchanged only
electronically. Typically, this involves the use of computer networks, the internet and digital
stored value systems. Electronic Fund Transfer and direct Deposit are all examples of electronic
money.
E‐cash is a system of purchasing cash credits in relatively small amounts, storing the credits in
our computer, and then spending them when making electronic purchases over the Internet. The
e‐cash is the creation of electronic money or tokens, usually by a bank, which buyers and sellers
trade for goods and services. It consists of a token, which may be authenticated independently of
the issuer. This is commonly achieved through the use of self‐authenticating tokens or tamper
proof hardware. It includes credit cards, smart cards, debit cards, electronic fund transfer etc.
An e‐cash system must have the following properties:‐
• Digital cash must have a monetary value. It must be backed by cash
• Digital cash must be exchangeable.
• It should be storable and retrievable
• It should not be easy to copy or tamper with while it is being exchanged
E‐cash can be used for making or receiving payments between buyer and seller. The bank’s
server computer sends a secure e‐cash packet to the customer effect the network currency server
of the bank is issuing a bank note with a serial number for a specified amount. The bank uses its
private key to digitally sign such a bank note.
2. Electronic Cheque
E‐cheques are a mode of electronic payments. Integration of the banking and the information
technology industry has benefitted the customers in many aspects with respect to time, cost and
operational efficiency. Cheque is the most widely accepted negotiable instrument to settle
transactions in the world. Paper cheques provide consumers an important payments mechanism.
This technology was developed by a consortium of Silicon Valley IT Researchers and merchant
bankers and since then has been promoted by many of the financial bodies. E‐cheques work the
same way as paper cheques and are a legally binding promise to pay. Electronic cheques are
gathered by banks and cleared through existing banking channels, such as automated clearing
houses.
The advantages of Electronic cheques are :‐
1. The online merchants could receive payments instantly
2. Similar to traditional cheques and eliminates need for customer education
3. Much faster
4. Less chance for cheque bouncing
5. Cost – effective manner
3. Credit Cards
They are the convenient method of making online payment. Credit cards work around the globe
regardless of the location of country of the issuing bank. They also handle multiple currencies
through a series of clearing houses. The credit card holders can purchase goods and services
either offline or online without making immediate payment. Payment to the merchant’s will be
made by the customer’s Bank. The credit card is a financial instrument which can be used more
than once to borrow money or buy products and services on credit. It also contains a validity
period and other important particulars.
To accept a credit card for payment, we have to open a merchant account with our bank. A
merchant account allows sellers to accept and process credit card transactions. In these
transactions, the card number and transaction details are processed with no identification of the
buyer. To implement the payments over the internet, the web merchant needs some form of
secure and encrypted line using the Secure sockets Layer [SSL] that is standard on Netscape and
Microsoft browsers. The merchant server needs an encryption key for the purpose.
4. Smart Card
A smart card is a plastic card about the size of a credit card, with an embedded microchip that
can be loaded with data, used for telephone calling, electronic cash payments, and other
applications and then periodically refreshed for additional use. A smart card, chip card, or
integrated circuit card [ICC] is any pocket sized card with embedded integrated circuits which
can process data. The card connects to a reader with direct physical contact or with a remote
contactless radio frequency interface.
Smart card technology conforms to international standards and is available in a variety of form
factors, including plastic cards, fobs, subscriber identification modules [SIMs] used in GSM
Mobile phones and USB based tokens.
These cards can be used to purchase goods and services. Smart cards are very useful to
merchants and consumers to settle the transaction between them. Smart card provides a lot of
benefits to consumers. It helps to manage expenditures more effectively, reduce the paper work
and ability to access multiple services and the Internet. A multiple application card can support
services like health care, travel and financial data access.
The benefits of smart cards for the consumer are the following:‐
a. Security – unauthorized access is prevented by a lock function
b. Convenience
c. Flexibility
d. Control
e. International use
f. Interest free loan
5. Debit Cards
It is a popular method of making payment. Banks issue debit cards to their customers who have
maintained an account in the balance with sufficient credit balance. Each time the customer
makes a purchase, an equal amount of the purchase is debited in his account.
The transaction works much like a credit card transaction. For Eg. A customer gives an ATM
card to the seller for the purchase. The merchant read the card through a transaction terminal and
the customer enters his personal identification number. Then the terminal route the transaction
through the ATM networks back to the customer’s bank for authorization against customer’s
deposit account. The funds, are approved, are transferred from the customer’s bank to the sellers
bank.
6. Electronic Purse
Electronic Purse is a card with a microchip that can be used instead of cash and coins for
everything from vending machines to public transportation. The Electronic Purse would consist
of micro‐ chip embedded in a credit card, debit card, or stand alone card to store value
electronically. The card would replace cash and coins for small ticket purchases such as gasoline
stations, pay phones, road/bridge tolls, video games, school cafeterias, fast food restaurants,
convenience stores, and cash lanes at supermarkets. Cardholders can “reload” the microchip and
control the amount of value stored in the card’s memory. The Electronic Purse provides
cardholders with the security and convenience of carrying less cash and coins, eliminating the
need for exact change.
Electronic purse is a term applied to a number of formats, each with different applications. At the
moment, smart card based systems are used as a direct replacement for money that the user
would have in his pocket and software based systems are used for online purchases. The e ‐ purse
is an electronic / cash less payment option for making small purchases within the campus.
To load an electronic purse, the user must be able to operate an ATM or card loading machine.
Usually this requires the user to be able to read a visual display, but methods for alleviating this
problem have been developed. To use the electronic purse, the user hands the card to the shop
assistant who inserts the card in a terminal and keys in the amount of the transaction. This is
displayed visually to the customer. Once again, the person must be able to read a display screen.
The customer confirms that the amount is correct, and the money is transferred from the card to
the terminal. In some systems the customer need to key in their PIN [Personal Identification
Number] before the transaction can be completed.
INFRASTRUCTURE ISSUES IN EPS
Infrastructure is necessary for the successful implementation of electronic payments. Proper
Infrastructure for electronic payments is a challenge.
1. For electronic payments to be successful, there is the need to have reliable and cost
effective infrastructure that can be accessed by majority of the population.
2. Electronic payments communication infrastructure includes computer network. such as
the internet and mobile network used for mobile phone.
3. In addition, banking activities and operations need to be automated. A network that links
banks and other financial institutions for clearing and payment confirmation is a pre-
requisite for electronic payment systems. mobile network and Internet are readily
available in the developed world and users usually do not have problems with
communication infrastructure.
4. In developing countries, many of the rural areas are unbanked and lack access to critical
infrastructure that drives electronic payments.
5. Some of the debit cards technologies like Automated Teller Machines (ATMs) are still
seen by many as unreliable for financial transactions as stories told by people suggested
that they could lose their money through fraudulent deductions, debits and other lapses
for which the technology had been associated with by many over the last few years.
6. Telecommunication and electricity are not available throughout the country, which
negatively affect the development of e-payments. The development of information and
communication technology is a major challenge for e-payments development. Since ICT
is in its infant stages in Nepal, the country faces difficulty promoting e-payment
development.
ELECTRONIC FUND TRANSFER
Electronic Funds Transfer (EFT) is the electronic transfer of money from one bank account to
another, either within a single financial institution or across
multiple institutions, via computer-based systems, without the direct intervention of bank staff.
EFT transactions are known by a number of names. In the United States, they may be referred to
as electronic checks or e-checks.
Types
The term covers a number of different payment systems, for example:
 Cardholder-initiated transactions, using a payment card such as a credit or debit card
  Direct deposit payment initiated by the payer
 Direct debit payments for which a business debits the consumer’s bank accounts for
payment for goods or services
 Wire transfer via an international banking network such as SWIFT
 Electronic bill payment in online banking, which may be delivered by EFT or paper
check
 Transactions involving stored value of electronic money, possibly in a private currency.
HOW IT WORKS ?
EFTs include direct-debit transactions, wire transfers, direct deposits, ATM withdrawals and
online bill pay services. Transactions are processed through the Automated Clearing House
(ACH) network, the secure transfer system of the Federal Reserve that connects all U.S. banks,
credit unions and other financial institutions.
For example, when you use your debit card to make a purchase at a store or online, the
transaction is processed using an EFT system. The transaction is very similar to an ATM
withdrawal, with near-instantaneous payment to the merchant and deduction from your checking
account.
Direct deposit is another form of an electronic funds transfer. In this case, funds from your
employer’s bank account are transferred electronically to your bank account, with no need for
paper-based payment systems.
Types of EFT payments
There are many ways to transfer money electronically. Below are descriptions of common EFT
payments you might use for your business.
Direct deposit lets you electronically pay employees. After you run payroll, you will tell your
direct deposit service provider how much to deposit in each employee’s bank account. Then, the
direct deposit provider will put that money in employee accounts on payday. Not all employers
can make direct deposit mandatory, so make sure you brush up on direct deposit laws.
Wire transfers are a fast way to send money. They are typically used for large, infrequent
payments. You might use wire transfers to pay vendors or to make a large down payment on a
building or equipment.
ATMs let you bank without going inside a bank and talking to a teller. You can withdraw cash,
make deposits, or transfer funds between your accounts.
Debit cards allow you to make EFT transactions. You can use the debit card to move money
from your business bank account. Use your debit card to make purchases or pay bills online, in
person, or over the phone.
Electronic checks are similar to paper checks, but used electronically. You will enter your bank
account number and routing number to make a payment.
Pay-by-phone systems let you pay bills or transfer money between accounts over the phone.
Personal computer banking lets you make banking transactions with your computer or mobile
device. You can use your computer or mobile device to move money between accounts.

Unit 4
E-Business Applications and Strategies
Business Models Of The Internet
Unlike traditional models of running a business in the bricks-and-mortar world, techniques to
generating revenue online continue to evolve and be defined. After over 15 years of witnessing,
working with and corroborating on various methods of online business effectiveness, I have
categorized the approaches into six basic business models of the Internet.
These website business models are as follows: the Ad Units Revenue model, the Subscription
Revenue model, the Commission model, the Data Distribution Revenue model, eCommerce, and
Build to Sell.   Below are my descriptions of each model with some examples and advantages.
The Ad Unit Revenue Model
Displaying ads on a website is one of the most popular approaches to generating revenue. The
Ad Unit Revenue model works best when the volume of traffic is high or very targeted. With this
model the assumption is that visitors to a website will be attracted by the related advertisements.
Both contextual and/or image based banner ads are displayed on top, beside, under, and in
between articles, services, search results, or other published materials. Many of the earliest
websites employed this method and it continues to be popular today.
The Subscription Revenue Model
This model generates revenue through subscriptions to a website's premium content such as
articles, videos, audio, software, tools, and applications or service. The offering is information or
service that cannot otherwise be easily acquired.  This model works off of economies of scale.
Once a break-even point of memberships is reached, every additional subscription is strictly
profit. An example of  a "pay as you go" version of this approach would be Slashdot.com. The
Subscription Revenue Model is sometimes combined  with the Ad Units model.  However, if the
subscription is a paid one, ads are less likely to be presented.  National newspapers or magazines
in print often use this model to establish their online presence.
The Commission Model
This website business model is based on generating revenue by taking a percentage of a sale.
eBay, PayPal, and Priceline.com are best examples of the Commission Model, where the item
being sold is not owned by the website administrator but available via  referral. This approach
relies on the advantage of offering a hassle-free way of selling personal items and products
through a website that promotes and brings in the right prospects. As a pay-per-performance
approach the affiliate pays commission only after a sale is made. Arbitrage is another form of
this model that has to do with buying of traffic in bulk and reselling it and/or making profit using
other business models. Here's a scenario of this approach in practice.  You bid on  pay-per-click
keywords for a word that directs the visitor to a landing page with multiple advertisements.
Instead of paying on your own for each click, in this manner you share the expense and still have
fewer competitors to fight for attention. With enough clients, the re-seller of the bulk purchase
can make profit on each keyword.
The Data Distribution Revenue Model
This approach is exemplified by  websites that sell  their network contacts or data about its
consumers and their habits.  The Data Distribution revenue model is about providing valuable
material for target marketing initiatives. Online business directories, like the Yellow Pages, and
newsletter distributors like the Apple store that sells audio files, and Amazon’s Kindle are
perfect examples of this approach.
eCommerce
This most recognizes model is employed by websites that sell products and services online, and
are referred to as ecommerce websites.  Selling products online is a lot less expensive then
selling in a traditional retail store.  Advantages of eCommerce include less overhead, more
efficiency, and the ability to track visitors' experiences. This approach is a natural progression for
a typical retail store that wants to expand its market reach into the online world.  Amazon is the
most renowned example of this business model. Online stores will continue to grow in popularity
as people become more comfortable buying through the web and as more different products and
services become available.
Build to Sell
If a business model's success is measured by a track record of sales, this model could be the most
valuable to a purchaser. The Build to Sell approach refers to a website's approach that builds a
strong online presence with the goal of selling it to another company that can capitalize on its
online value. The website's value is established either with its domain, value in its website
application, content, number of members, or  high position in the search engine results, and/or all
of the above.  Mostly used during the 2000 Internet boom, this model still has a lot of potential.
It's difficult to say if one approach is more effective than another in generating greater return. As
with traditional business models the success equally dependents on the value of the proposition
being offered. It's important to keep in mind that none of the methods are exclusively
independent. Variations of the basic website business models can create levels of effectiveness
that are as unique as each business - with the objective of healthy revenue growth, of course.

Emerging Trends in e –Business

E-commerce has helped expand industries and telecommunications enabling small-scale
businesses to flourish and spread internationally. This new form of interaction has brought along
many new trends, a few of which are given below:
1. Deals
Offline deals and coupons were always a trend, but have not been taken up online. Depending on
certain seasons, anniversaries or holidays, businesses offer their promising customers with
irresistible deals and coupon codes. Upon making your purchase, these deals will significantly
lower the cost of what you desire.
2. Innovations
From being a site that offers only information about hotels, or just offers bookings, these have
been consistently transformed and recreated. Jovago.com offers its customers with not only the
best deals on hotels and destinations, but also detailed reviews and pictures about them.
3. Online Sales
Massive department sales have been transferred online, with exclusive online sales occurring that
encourage online shopping. Brands enjoy sample sales, distributing samples to their valued
customers!
4. Global Consumption
Through e-commerce, purchase of foreign goods has become easily accessible. This has resulted
in more vendors featuring their products online that facilitates further consumption and sales.
5. Virtual advertising
Since shopping has become readily available online, so has the advertisement of such goods.
Visual and video imagery is very popular, featured on television, Internet and spread further
through sponsorships.

Digital Commerce (D-Commerce)

The pay-as-you-go model is applied to digital commerce. Customers start an account with a
digital commerce company and can purchase text and content from publishers, but they only
have to relay their financial information once. This makes for a more secure online environment.
Publishers of books, news, magazines, white papers and academic research papers are big users
of digital commerce. Some digital commerce companies resell publishers' content. This form of
business can be very profitable for publishers and digital commerce companies alike and,
depending on the business contract, the d-commerce company may get a cut of the publishing
company's profit.

Mobile Commerce
Mobile commerce, also called m-commerce or mcommerce, includes any monetary transaction
completed using a mobile device.
It is an advancement of ecommerce, enabling people to buy and sell goods or services from
almost anywhere, simply using a mobile phone or tablet device.
But mobile commerce is more than just a simple evolution of ecommerce.
It has also served as a trigger for new industries and services, or helped existing ones grow,
including:
 Mobile money transfers.
  Electronic tickets and boarding passes.
 Digital content purchases and delivery.
 Mobile banking.
 Contactless payments and in-app payments.
 Location-based services.
 Mobile marketing, coupons, and loyalty cards.
Types Of Mobile Commerce
While m-commerce covers a wide variety of transactions, they can all be categorized as one of
three types:
1. Mobile shopping.
Mostly similar to ecommerce, but accessible via a mobile device. Mobile shopping is now
possible through mobile optimized websites, dedicated apps, and even social media platforms.
2. Mobile banking.
Not too different to online banking, though you may find some transaction types are limited or
restricted on mobile devices. Mobile banking usually involves a dedicated app, though some
banks have started experimenting with the use of chatbots and messaging apps.
3. Mobile payments.
There are so many diverse mobile payment options that we have chosen to cover them in detail
further in this article.
As a business owner, and user of BigCommerce, your exposure and interest in mobile commerce
would mostly relate to shopping and payments, which is what the rest of this article will focus
on.
Advantages (and Disadvantages) of Mobile Commerce
There are disadvantages to many forms of doing business, but this should never be viewed as a
significant hindrance.
The advantages usually outnumber the disadvantages, and there are ways to overcome many of
the pitfalls, especially when you know what some of them are.
Let’s start with the good, first.
Common Benefits of Mobile Commerce
1. Better overall experience for customers.
Ecommerce already made shopping more convenient.
Consumers were given access to:
 A wider variety of products.
 More competitive pricing.
 All without ever having to step away from their computer.
With mobile commerce, they still have these benefits, but now they don’t even need a desktop
computer.
As long as they have a mobile device, they can shop whenever they want, wherever they are.
New mobile commerce applications that enhance the customer experience even further include:
 Augmented reality, with Ikea and Sephora among top retailers using augmented reality
apps to complement their mobile commerce business
 Chatbots and messenger apps which making it easier for businesses to interact with their
customers using apps and services their customers already use and love.
2. Phenomenal growth potential.
eMarketer expects global ecommerce sales to reach $4.058 trillion by 2020, representing 15% of
total retail sales.
And the percentage of that belonging to m-commerce will also continue to grow, as more online
retailers see more than 50% of traffic coming from mobile devices.
This suggests that retailers investing more in mobile commerce can ultimately expect a higher
conversion rate and ROI.
3. A true omni-channel experience.
An omni-channel experience is when stores sell both online and offline — likely also selling
through multiple online channels (i.e. on Amazon, eBay, Facebook, B2B).
We’ve also been referencing the importance of listing your product wherever consumers are
already spending their time. This is increasingly known as contextual commerce, a more
strategic take on the overarching omni-channel term.
Omni-channel is about being where your customers are, and making it possible for them to buy
what they want.
11 Essential Marketing Strategies for Your eCommerce Business
Whether your company is just starting up or has reached the point of maintaining a well-
established customer base, it’s important to stay up to date with the most current marketing
trends and techniques for your eCommerce business. Structuring and finally launching an
eCommerce website is a milestone achievement for your brand. Therefore, it’s crucial to invest
in an effective website structure and marketing strategy.
1. Produce Original Content
The first step in setting up an eCommerce website is creating the content for it. Creating high-
quality and original content will set you up for success because it will resonate with your
customers in a way that makes them want to interact with you, purchase from you, and maintain
a following.
Be creative. Be original.
Promoting original content is a great way to make a statement, strike a compelling idea, and
make a mark on the user’s mind. There is a fine line between content that engages users and
content that deters them. Why not take an extra step, put in a little effort, and create something
that will be genuinely compelling?
2. Optimize your website layout
After launching your e-commerce site, it’s important to test your website’s layout, language, and
placement of conversion elements. When customers visit your website, you want to make sure
it’s easy and simple to check out -- that they feel naturally inclined to purchase your products
and that it’s abundantly clear how to do so.
3. Content Marketing
Proper content marketing can attract more positive attention, interaction, and sustainable
conversions in a way no other marketing method can. By creating and promoting original
content, you are ensuring that your audience is receiving new information that matters to them on
a continual basis.
Brainstorm with your team to create a list of the different types of content you wish to create,
such as blog posts, videos, and newsletters. Also, make sure you are utilizing your marketing
budget by consulting with experts, outsourcing work when necessary, and investing in high-
quality software, subscriptions, employees, and training for your team. You will also find that if
you work with the right people, many of the things you’ve paid for in the past can be done
internally. Create diversity within your team and listen to everyone’s ideas.
We also suggest that you create content based on Pareto’s 80/20 rule, which means that your
promotions should comprise of 80% informational content, and 20% promotional content. All of
the content you publish should be relevant, interesting, and unique.
4. Social Media Marketing
Social media marketing is a very powerful tool that allows you to communicate with your
industry, customers, and market in a personal way. You can utilize social media to generate
engagement and interaction, boost traffic to your website, and develop a larger base of
customers. Utilizing different social media platforms for different purposes also creates a rich
presence for your company that diversifies your abilities, efforts, and will ultimately help you
cater to your customers’ needs in a way that grows your business over time.
Maintaining a solid tone and personality of your company through social media is very important
because consistency is what will create trust within your audience. In order to develop and
maintain brand recognition and authority, make sure your outreach efforts are unified by
ensuring your team is on the same page with your company’s communication style.
5. Email Marketing
One of the most effective forms of reaching out to your customer base is through email
marketing. Although you have to be very careful about the content within your emails and who is
included in your outreach, the reason email marketing has been around for so long is because it
works.
In order to reach your audience most effectively, provide useful content within your emails.
Make them as personal as you can, offer valuable promotions, and use it as an opportunity to
socialize. Open up about what your business is doing, any events you are attending, new features
or products, and be transparent about your company. You want to relate to your customers on a
level that gauges their interest and keeps them engaging with your emails.
As always, make sure you are monitoring the analytics of your email marketing efforts. One
great tool that can help you with this is the Google Analytics Dashboard, which is a free solution
that gives you useful data about your email marketing efforts.
6. Search Engine Optimization
One of the most important and manual methods of optimizing a successful eCommerce website
is making sure it’s optimized for search engines. With today’s Search Engine Optimization
(SEO) standards, it’s now more important than ever to make sure your website is constantly
updated with rich and relevant content, promotes a good user experience (UX), and is optimized
to be as error-free as possible.
The content within your website should be rich, reliable, and provide information to the public
that is useful and relevant to what they’re looking for. For example, if you have an eCommerce
store selling camping supplies, it’s wise to provide detailed product information and possibly
even host sections of your website that offer generous amounts of content that elaborates on the
topics of camping, supplies, or related subjects. Using keywords within your content in a genuine
way will also flag your website as a matching result in search engines when users are looking for
something specific.

7. Pay-Per-Click Marketing
There are three basic elements to any pay-per-click marketing campaign: the ad, the offer, and
the landing page.
All three must be in good harmony and synchronization if you want to maintain the interest of
the lead. The landing page must be a continuation of your ad, delivering what was promised as
the reward of clicking on the ad, in order to take the visitor through your conversion funnel. It
must also be customized for keywords to appear somewhere near the top of search engine results.
Keep the landing page free of distractions and unnecessary bells and whistles. Also, keep in
mind that your landing page is the most appropriate place to boast your product benefits to the
customer.

8. Optimize Your Marketing Efforts for Mobile Devices

It is absolutely crucial to make sure your website is responsive to any user layout. Mobile users
are starting to dominate the sea of internet use, and it’s important to accommodate their needs to
provide a good user experience (UX) for everyone.
People who visit your website do not want to be redirected to an app or web version of your
website, they want the full-meal-deal. So, make sure you deliver what they are expecting and
make the investment to enhance your website so that it’s fully responsive.
You can also use mobile marketing techniques to target mobile users specifically. One of the
most popular marketing trends is called geo-targeting, which advertises to mobile users based on
their location. This technique enables you to reach out to customers who are within a specific
distance of your business, and provide them with an incentive to stop by or make a purchase.
9. Target Wearable and VR Technology
Targeting wearable and Virtual Reality (VR) technology is a trending technique that grabs users
in a new and exciting way. People are still getting used to this technology, and are not yet
overwhelmed by or habituated to advertisements.
Your target audience for these mediums will be very refined, as these users are the part of the
population that carries the latest technology at the palm of their hands at all times, keeps up to
date with trends, and doesn’t mind dropping some extra cash for items they desire. Although
creating campaigns that are designed for these technologies can be expensive, the right approach
can be worth the initial investment because a filtered audience is more likely to convert.
10. Launch Stores on Multiple Platforms
Consumers have become the power player in the eCommerce industry, which means your
business needs to stand out in a unique way. Because of this, it’s more important than ever to
customize your user experience (UX) to cater to the needs of your audience.
Make your outreach efforts personal by taking the time to learn about your customers. People
love it when they feel special, and if you make sure to add personal touches like addressing your
prospects by name, sharing videos and pictures of your employees, and being transparent about
your company processes and procedures, you will reap the benefits of a loyal customer base. All
of this will add to the overall ‘face of the business’ and will hopefully make its way to the hearts
of your customers.
11. Retargeting
Customers who have already shown an interest in your website are more likely to make a later
purchase. Retargeting is a technique that tracks customers who have visited your website and
displays ads to them while they’re browsing the internet with the intent of getting them back on
your website. When these visitors enter your website again, they are far more likely to make a
purchase.
To effectively manage a retargeting campaign, make sure your ads are as specific as possible.
Was the customer looking at a specific product? Make sure the ads displayed to them are ads of
that specific product and link to the page of the product. Just like with Search Engine
Optimization (SEO) and Pay Per Click (PPC) marketing, it’s important to display the
information the user is looking for the instant they click on your ad. If they click on an ad for
hiking boots and are redirected to the home page of your camping website, they aren’t going to
be thrilled. But, if they are directed to the exact hiking boots they were considering, or even had
added to their cart, before leaving your website, they will be much more likely to continue with a
purchase.

In Conclusion
Staying current with the latest marketing trends and techniques is crucial for any successful
eCommerce website. It’s important to deliver relevant, interesting and valuable content and
products that truly suite the needs of your target market. Reach out to your customers in a variety
of ways and make sure you are working with a team of experts with varying skill sets. If you
listen to everyone’s ideas, you may find new ways of improving your current campaigns and
outreach methods. And, as always, make sure you are monitoring your website analytics to
examine trends, keep your website optimized, and track your results!
With the right mix of marketing techniques, you can improve your conversion rate and attract
sustainable business that will continue growing over time.

Internet Business Models & Strategies

If you're looking to start a business, the Internet offers an affordable way to get started. The key
to success is to find the right Internet business model for you. Even if you don't currently have a
product that you want to sell, you can get started with just a bit of research.
Advertising Revenue
In the advertising model, you create content and companies pay you to place advertisements on
your website. The advertisements are typically banner advertisements, but companies may also
pay for link advertisements or reviews as well. You can ask companies to pay on a yearly or
monthly basis.
Product Sales
If you have a physical product that your company produces, you can increase your sales by
offering a website where customers can purchase online. This allows you to sell your products all
over the world instead of in your local area.
Affiliate Marketing
Affiliate marketing is similar to the ad-based business model. However, instead of seeking you
out, you choose companies that you think match your readers' needs. The company does not pay
you to display the ad--it pays you when someone clicks on your ad and makes a purchase. You
receive a percentage of the sale.
Information Sales
Many people come to the Internet looking for information and if you have the information that
people want, they may pay you for that. You can create an ebook that explains the topic in detail,
then sell it to those who need the information.
Service Sales
You can also use the Internet to offer services to businesses or individuals. For example, you
could offer legal or business consulting, computer programming, website design or secretarial
skills.
Membership Website
In a membership website, individuals pay you a monthly fee to access the information that you
provide. You set it up as you would a regular website except that you make it password protected
so that only certain people can view the content.
 UNIT 5
E –BUSINESS INFRASTRUCTURE AND E-
MARKETING
Key Ecommerce Infrastructure Decisions
Every business requires an infrastructure to support its customers and operations. This includes
facilities, equipment, and processes for all functional areas. Choosing the correct infrastructure to
match your business strategies enables your operations to run efficiently. Conversely, if an
element of your infrastructure is out of sync with your strategies, you will likely feel the pain in
every aspect of your business.
Here’s an example. If your value proposition is to provide the highest level of customer service
for premium products, your infrastructure should include processes to deliver quick and
responsive service, including live chat, self-service tools, and quick turnaround on questions and
orders. I addressed strategies for value propositions earlier, in “What’s the Value Proposition of
Your Ecommerce Company?.”
Choosing the correct infrastructure to match your business strategies enables your operations to
run efficiently.
If your value proposition is to provide the lowest prices every day, your infrastructure should
reflect that goal. You can accomplish this in various ways. But the cost of goods sold and
overhead expenses — which include infrastructure items — should be as low as possible.
Typically, ecommerce businesses try to maintain a high degree of flexibility in their
infrastructure to keep fixed costs low, to react quickly to market changes or competitive
pressures. A key infrastructure decision is whether to outsource or manage operations in-house.
Most ecommerce businesses are small, with fewer than 25 employees. If you look at all the
functional areas of the business that must be managed on a daily basis, it will be hard to find and
afford an in-house staff with all the skills required to be successful. When deciding on your
business infrastructure and operations, be sure to evaluate what your core strengths are. Know
what you do well and know what you do not do well. They are equally important. Look to
outsource part-time activities or ones that require high levels of skill or specialization.
Here are seven important infrastructure decisions that ecommerce businesses face.
7 Key Ecommerce Infrastructure Decisions
1. Marketing. Of all the infrastructure elements, marketing may be the most important. To
succeed, your website must be found. Once visitors are on your site, you need to keep them there
and compel them to buy from you. That’s the job of your marketing team. Whether it’s website
design, social media, search marketing, merchandising, email, or other forms of advertising, it’s
all about marketing.
Managing marketing activities in-house is very challenging. Most small ecommerce businesses
outsource at least part of it.
2. Facilities. A key competitive advantage that ecommerce businesses have over brick-and-
mortar stores is not having to invest in physical facilities. In many cases, you can run your
business out of a home office, basement, or garage. If you drop ship or outsource fulfillment, you
may be able to do that for a long period of time. Even with many employees, you can set up your
offices in class B or C space, as you have no need for a fancy store in a high-traffic location.
A word of advice is to keep your options flexible. Try to find an office park with a variety of
spaces of different sizes. You may be able to start in a smaller space and move up to a larger one
(without penalty), as your needs change.
A key competitive advantage that ecommerce businesses have over brick-and-mortar stores is
not having to invest in physical facilities.
3. Customer service. There are many choices today for delivering high-quality customer
service. You can manage those activities in-house or outsource to a third party. Basic customer
service for sales and post-sales activities can be handled using email and, for more extensive
needs, phone support. A customer-management system will make those activities easier, but for
smaller companies, it is not a requirement.
Live chat will impact your operations — someone needs to be available during specified hours of
operation. Be sure to gauge the impact of that on your organization, if you decide to handle those
activities in-house.
4. Information technology. Choosing an ecommerce platform is one of the most important
decisions you will make in your business. Do you want to build and host your own system,
outsource the development and then manage the system going forward, or use a hosted, software-
as-a-service platform that is turn-key and externally managed?
If you build and host your own system, you may need more cash upfront and skilled
administrators and developers on your staff. By using a SaaS platform, you will not need to host
or manage the system in-house, but you may still need web developers on staff. Choosing to
outsource the development and hosting will reduce your staffing costs, but you will incur higher
costs for any future enhancements or changes to your websites.
There are pros and cons to any approach. Think through the impacts on your staffing, cash
flow, and bottom line before you move forward.
5. Fulfillment. Another key decision is whether you will manage your own inventory
or outsource those activities to a fulfillment house or through drop shipping arrangements with
your suppliers.
Managing your own inventory will provide a high level of control, but you will tie up cash in
warehouse space and fulfillment staff. In some industries — such as the jewelry supply industry
that my previous business was in — managing your own inventory was the most logical choice.
We had no alternative for drop shipping, and most items were purchased in bulk and were very
small. We did not trust preparation and fulfillment to an outside service.
Select the best fulfillment option to meet your needs. Be sure to understand the costs involved
and analyze the other options before moving forward.
6. Finance and administration. You can manage your finance and administration activities in-
house, outsource them, or use a hybrid of the two. If your ecommerce platform is tightly
integrated into your accounting system, you may have very little need for an in-house
bookkeeper. If you use separate systems for your website, order management, and accounting,
you may need more help for data entry and making sure that the information is properly
managed.
Many ecommerce companies use outside services for vendor payments, payroll, and other basic
accounting activities. They decide to focus on the sales, marketing, and customer service. This
allows them to maintain a focus on growing their businesses, instead of paying an internal
accountant — or doing that work yourself as the business owner.
On the administration side, you need a leadership team. Good communication is important,
whether you have three or 100 employees. Be authoritative or democratic in your management
style — it is up to you. But choose a style and stay consistent. Be sure that everyone understands
their roles, as well as the overall business strategies. You may need to adjust your approach as
your business evolves.
Good communication is important, whether you have three or 100 employees.
7. Human Resources. Many small-business owners avoid the human resources function.
Recruiting, setting up compensation, maintaining compliance, and other HR activities are
specialized and time-consuming. You may choose to bring the resources in-house. But, should
you outsource, there are many individuals and agencies well equipped to do the job.
Value Proposition
When planning any part of your company’s infrastructure, reflect on your target market and the
value proposition you have defined. Make sure that each element of your infrastructure supports
your value proposition. Be careful not to overcommit either human resources or financial capital
in one area. It is easy to overspend on, say, rent or people, only to discover that other forces
impact your growth and profit.

Internet Service Provider (ISP)

An Internet service provider (ISP) is a company that provides customers with Internet access.
Data may be transmitted using several technologies, including dial-up, DSL, cable modem,
wireless or dedicated high-speed interconnects.
Typically, ISPs also provide their customers with the ability to communicate with one another by
providing Internet email accounts, usually with numerous email addresses at the customer’s
discretion. Other services, such as telephone and television services, may be provided as well.
The services and service combinations may be unique to each ISP.
An Internet service provider is also known as an Internet access provider (IAP).
The Internet began as a closed network between government research laboratories and
universities and colleges. As universities and colleges began giving Internet access to their
faculty and other employees, ISPs were created to provide Internet access to those employees at
home and elsewhere. The first ISP began in 1990 as The World, based in Brookline,
Massachusetts.
Individual customers and businesses pay ISPs for Internet Access. ISPs are interconnected to one
another at network access points. In turn, ISPs pay other, larger ISPs for their Internet access,
which in turn pay still other ISPs. This cascades multiple times until transmissions reach a Tier 1
carrier, which is an ISP capable of reaching every other network on the Internet without
purchasing IP transit or paying settlements. However, it is difficult to determine the status of a
network because the business agreements to pay settlements are not made public.
However, the situation is more complex than simply a single connection established to an
upstream ISP. ISPs may have more than one point of presence (PoP), which is an access point to
the Internet comprised of a physical location housing servers, routers, ATM switches and
digital/analog call aggregators. Some ISPs have thousands of PoPs. Multiple PoPs may have
separate connections to an upstream ISP. And each ISP may have upstream ISPs and connections
to each one of them at one or multiple PoPs.

 E-Marketing
E-marketing is referred to those strategies and techniques which utilized online ways to reach
target customers. There are millions of Internet users that daily access different websites using a
variety of tools like computers, laptops, tablet and smart or android phone devices, and the
number of internet users are increasing very rapidly. So every business seems to be jumping on
the internet marketing bandwagon. The internet is most powerful tool that can put any business
on solid footing with market leaders companies. There are many free as well as economical way
on internet to promote your business. Successful companies must ask themselves some tough
questions about how they will promote their business online? What their company expectations
are? And what will be their plan to meet those expectations? After answer all these questions a
company should design an effective marketing plan.
Definition
E marketing also known as online or internet advertising which uses the internet technology to
promote online message to customer. E-marketing examples are email or social media
advertising, web banners and mobile advertising.

Advantages and Disadvantages of E-Marketing

Advantage of E-Marketing
1. Internet provides 24 hours and 7 days “24/7” service to its users. So you can build and
make customers relationships worldwide, and your customer can shop or order product at
any time.
2. The cost of spreading your message on internet is nothing. Many social media sites like
Facebook, Linkedin and Google plus allow you freely advertise and promote your
business.
3. You can easy and instantly update your registered customers or subscribers through
email.
4. Visitors or potential customers of your website can get up to the minute information on
each visit.
5. If you are having a sale, your customers can start shopping at the discounted prices
literally as soon as they open their email.
6. If a company has an information sensitive business, like a law firm, newspaper or online
magazine, that company can also deliver its products directly to customers without
having to use a courier.

Disadvantages of E-Marketing
1. If you want a strong online advertising campaign you have to spend money. The cost of
web site design, software, hardware, maintenance of your business site, online
distribution costs and invested time, all must be factored into the cost of providing your
service or product online.
2. Almost over 60% of households now a day shop online. While that numbers are
continuously growing, your company needs to reach maximum people.
3. Some people prefer the live interaction when they buy any product. And if your company
has a small business with one location, this may also deter customers from buying who
lives on long distances.
4. Your company should have updated information on your site. This requires research and
skills and thus timing of updates is also critical.
5. Is your company web site secure? There are many incorrect stereotypes about the security
of the internet. As a result, many visitors of your business web site will not want to use
their credit card to make a purchase. So there is a fear in the minds of your visitors of
having their credit card info stolen.

Types of e-marketing
There are several ways in which companies can use internet for marketing. Some ways of e-
marketing are:
1. Article marketing
2. Affiliate marketing
3. Video marketing
4. Email marketing
5. Blogging
All these and other methods help a company or brand in e-marketing and reaching customer
through the internet..

Nine Steps to a Strategic Marketing Plan

For many physicians, marketing is simply a matter of putting an advertisement in the local
newspaper, redecorating the waiting room or conducting a direct mailing to people in the
community. But this is a haphazard approach that will accomplish little more for your practice
than draining its marketing budget.
The key to successfully marketing your practice begins with developing a strategic marketing
plan in which each activity is based on solid research and specific goals, and is implemented and
carefully evaluated in a timely manner. The plan serves as a road map to help you achieve your
marketing goals.
Why should you market your practice?
Some physicians still feel that marketing is at best unprofessional and at worst unethical. In fact,
good marketing is no more than educating your patients and your community about your
expertise and services, and there are a wide range of reasons for doing it, not all of which have a
purely financial basis. However, if you do want to determine the value of each new patient to
your practice, calculate the average of the revenue that 10 new patients generated during their
first 12 months with you.
You might consider marketing your practice for any or all of the following reasons: to increase
your income, expand your patient base, discourage competition, improve your practice image,
promote current and new services, introduce new providers, enter a new marketplace or gain or
retain market share. Whatever your motivation, make sure to get your staff involved right from
the start. Share your reasons for marketing with them, and ask them for their ideas. If your staff
is not involved early, it will be difficult to convince them to support the marketing plan and take
on any additional work that comes with it.
The elements of a plan
There are nine major steps required to develop a well-crafted, strategic marketing plan: set your
marketing goals, conduct a marketing audit, conduct market research, analyze the research,
identify your target audience, determine a budget, develop specific marketing strategies, develop
an implementation schedule for the strategies and create an evaluation process.
1. Set your marketing goals. 
Once you’ve decided to market your practice, you need to set realistic and measurable goals to
achieve over the next 18 to 24 months. This time span allows you to plan activities around
community events that are in line with your marketing goals. For example, you might help
sponsor an annual walkathon for breast cancer or speak at your community’s annual health fair.
Because of the rapid changes occurring in the health care environment, we don’t recommend
planning specific activities more than two years in advance. One way to define your goals is to
separate them into the following three categories: immediate, one to six months; short-term, six
to 12 months; and long-term, 12 to 24 months. Here are some examples of measurable goals:
 Increase the number of new patients seen in the practice by 5 percent within the first six
months and 10 percent by the end of the first year.
 Shift your patient mix by expanding the pediatric and adolescent patient base from 15
percent to 25 percent of total patient visits within 18 months.
 Increase your gross revenue by 30 percent within 24 months.
 Improve your practice’s image, which may be measured by “before” and “after” scores
on a community survey or by reviews from focus group participants.
It’s important to share these goals with your staff members. They can tell you from their
perspectives whether they believe the goals are reasonable. If you want your marketing plan to
be successful, your staff needs to support your efforts to achieve the marketing goals.
KEY POINTS
 Marketing can increase your income, introduce new providers or improve your practice
image, among other things.
 A strategic marketing plan requires you to define your practice in terms of what it does
for patients.
 Every goal, strategy and action in your marketing plan is subject to change as you
evaluate your progress.
2. Conduct a marketing audit.
 A marketing audit is a review of all marketing activities that have occurred in your practice over
the past three years. Be as thorough as possible, making sure to review every announcement,
advertisement, phonebook ad, open house, brochure and seminar and evaluate whether it was
successful.
3. Conduct market research. 
The purpose of market research is to draw a realistic picture of your practice, the community you
practice in and your current position in that community. With this research, you can make fairly
accurate projections about future growth in the community, identify competitive factors and
explore nontraditional opportunities (such as offering patients nutritional counseling, smoking-
cessation programs or massage therapy). Your research may even bring to light some problem
areas in your practice as well as solutions you can implement right away. (See “A guide to
market research” to find out what kind of information you need to gather and where to find it.)
Conducting market research is often the most time-consuming step in this process. However, it’s
also one of the most important steps. It’s from this research that you’re able to find out what your
practice does best and what you need to work on, what the needs of your community are, who
your practice should be targeting and how you should go about it.
4. Analyze the research. 
Next, you need to analyze the raw data you collect and summarize it into meaningful findings
that will be the foundation for determining which marketing strategies make the most sense and
will get the best results for your practice The research will identify the wants and needs of your
current and potential patients and will help you to define your target audience (for more on target
audiences, see step 5, below). This is also a good time to look back at the goals you’ve chosen.
Based on your research findings, you may need to modify some of your goals.
A strategic marketing plan requires that your practice be defined in terms of what it does for
patients. The research analysis will reveal your practice’s strategic advantages. After looking
closely at your own practice as well as your competitors’, you can ask yourself some key
questions: What are the similarities and differences between your practice and your
competitors’? What sets your practice apart from your competition? Is your location more
desirable than your competitors’? Do you offer a broader scope of services than the competition?
Is there a service you provide that no one else in the community currently offers? Your
competitive edge may lie in your style of practice, the range of services you offer, the ease of
making an appointment or the way you and your staff communicate with patients.
A GUIDE TO MARKET RESEARCH
To gather the kind of information you need to develop a strategic marketing plan for your
practice, you need to conduct market research on your practice, your competition and your
community. You can’t rely on intuition, judgment and experience; your practice needs hard data.
Although it will take some time to gather this information, a number of resources are available
that can make the process easier for you.
Your practice
Much of the information you need about your own practice can be found through discussions
with staff members and other physicians, or by reviewing your patient records. You can also find
out about your practice and whether it’s meeting the needs of your current patients by asking
them to fill out a patient survey about the practice. Here are some of the questions you need
answered about your practice:
 What is the background and history of your practice? Has it been in the current
community for a long time?
 What are your practice’s strengths and weaknesses? Are there problems with scheduling,
cancellations, staff turnover or reimbursement management?
 Who are your current patients in terms of their age, sex, ethnic origin, type of insurance
coverage, chief complaints and where they live?
 What are the services provided by your practice? Who needs these services? Are these
needs changing?
 How is your practice perceived by your patients?
Your competition
You need to find out who your competitors are and what they have to offer. Check with your
county or state medical society and your local hospital to find out how many other family
physicians, nurse practitioners and general internists are in your service area, how long they’ve
practiced in that location and how many have moved into your area over the past five years.
Once you’ve determined who your competitors are, you need to assess them. This information
may be a little harder to come by, but you can try to gather as much information as you can by
simply asking other physicians, listening to your patients, friends and neighbors when they talk
about their physicians and keeping your eye out for competitors’ advertisements. To assess your
competition, you need to ask the following questions:
 What are your competitors’ target audiences and niche markets?
 Why do certain patients or groups of patients particularly like or dislike your
competitors?
 How are your competitors viewed within the community?
 What marketing activities have your competitors tried?
Your community
In addition to gathering information about your practice and your competitors’ practices, you
need to learn as much as you can about the people in your community. You can find answers to
the following questions by contacting your local Chamber of Commerce, your state vital
statistics department or the U.S. Census Bureau (www.census.gov). Census data is available for
every state, county, city, ZIP code, neighborhood, etc.:
 How many people live in your service area? Is the population expected to grow or
shrink? What are the demographic characteristics of the population in your area?
  How is your practice perceived in the community? Are you known in the community?
 Who are your potential patients? Are their wants and needs being met elsewhere in the
community? If not, how can your practice meet those needs?
5. Identify a target audience. 
With the help of your market research analysis, you should be able to identify your practice’s
“target audience,” which is the specific group of patients to which you’d like to direct your
marketing efforts. Your target audience might include patients of a certain age, gender, location,
payer type or language/ethnicity and patients with certain clinical needs. Keep in mind that your
target audience should not only be the patients you want to attract but also the people who can
influence and provide exposure to that segment of the population. For example, if you wish to
treat patients with arthritis, you might want to get involved in the local and regional Arthritis
Foundation and explore senior organizations in the community. If you want to treat young
athletes, you might consider giving talks on sports safety and first-aid tips to coaches and athletes
at the local high schools, colleges and YMCAs. The key to marketing lies in targeting the
audience that your practice can serve better than your competition – and communicating this to
that group.
6. Determine a budget. 
Before you can decide what specific marketing strategies you want to implement to achieve your
goals, you need to examine your financial information and come up with a marketing budget.
Marketing budgets vary by the type of market a practice is in, the age of a practice and whether
the practice has marketed before. There’s no standard for how much a practice should spend.
However, in our experience, practices in open markets have spent 3 percent to 5 percent of their
annual gross incomes on marketing. If your practice is new, in a highly competitive market or
has never been marketed before, or if you intend to roll out an ambitious new program or service,
you can expect to spend 10 percent or more of your annual gross income the first year you
implement the plan.
Some of the initial marketing activities can be expensive. For example, it can cost more than
$5,000 to have a corporate image package (i.e., logo, stationery and collateral pieces) developed
by a professional and as much as $10,000 if you add a brochure. On the other hand, some of the
best marketing activities cost practically nothing. For example, to build your referral network,
you might try meeting with new physicians in your community and sending follow-up/thankyou
notes to referring physicians. Big or small, these are all worthwhile investments that will give the
community a positive image of your practice.
7. Develop marketing strategies. 
With your budget in place, you can begin to define specific marketing strategies that will address
your goals, reach your target audience and build your patient base. Remember to focus your
strategies on the elements of your practice that can be used to create a special value in the minds
of patients and referral sources. Each strategy should be related to a specific goal and should be
made up of numerous actions. For example, one strategy related to the goal of increasing patient
satisfaction might be to make the office more patient friendly. The actions required for that
strategy might include the following:
 Provide patient satisfaction training sessions to staff;
 Develop a patient self-scheduling system within the practice Web site to eliminate the
need to telephone the office for an appointment;
 Improve the reception-room decor;
 Provide name tags for staff;
 Require staff to introduce themselves to each new patient;
 Conduct post-encounter telephone interviews with new patients within three days of their
appointments.
8. Develop an implementation schedule. 
An implementation schedule is a time-line that shows which marketing actions will be done
when and by whom. The schedule should also include the cost of each marketing action and how
it fits into the budget estimates for the 24-month period. When creating the schedule, carefully
consider how the activities will affect the current practice operations and whether there are
sufficient resources (such as staff, time and money) to accomplish the necessary tasks. In some
cases, it may be necessary to whittle down the list or postpone some activities. In other cases, it
might be best to go ahead with full implementation of your plan. If you want to fully implement
the plan but don’t quite have the staffing resources, you might consider bringing in a consultant
to coordinate the marketing activities and/or adding a part-time staff member to handle the
majority of the marketing tasks. The implementation schedule will also give you a basis on
which to monitor the progress of your marketing plan.
9. Create an evaluation process.
 The value of a marketing plan is its effectiveness, which requires deliberate and timely
implementation and monitoring and evaluation of results. It’s important to measure your results
against the standards you set in establishing your goals. Review your plan periodically (we
recommend quarterly) by comparing your progress with the implementation schedule. There are
several ways you can measure the results of your progress: patient survey scores, referral
sources, increased income, increased new patients and decreased complaints.
If at any time you find your progress does not measure up to your expectations, you need to
determine why. Perhaps the advertisement about a new service you are marketing has not
attracted new patients. If the ad campaign has been carried out as directed without results, dump
the campaign and try other actions. Perhaps you’ll want to try giving a series of seminars
specifically targeted to the group you want to attract or developing a new segment on your Web
site for patients that describes the benefits of the new service. You may even find that if each
physician in the practice talks about the new service with his or her patients as merely
informational conversation, favorable results will follow. In other words, the actions – and even
the strategies and goals – in the marketing plan are not written in stone. By regularly monitoring
and evaluating each action, you can always change and try new approaches.
As good as you make it
A good marketing plan outlines realistic marketing goals, strategies and actions based on sound
information and research about your practice and your community. But the plan is only as good
as your commitment to implementing it, dedicating sufficient resources to the endeavor,
involving your staff and communicating openly with them. The marketing plan should not
merely be written, reviewed and put away on a shelf. Instead, your practice marketing plan
should be an evolving blueprint that guides your efforts and monitors your success. Marketing
works when the dedication is there. It’s up to you!

E-marketing strategy
The importance of developing an effective e-marketing strategy is indicated by Michael Porter
(2001) who has said:
‘The key question is not whether to deploy Internet technology – companies have no choice if
they want to stay competitive – but how to deploy it.’
An e-marketing strategy is needed to provide consistent direction for an organisation’s e-
marketing activities that integrates with its other marketing activities and supports the overall
objectives of the business.
Emarketing trends.
For many companies, the first forays into e-marketing or Internet marketing are not the result of
a well-defined, integrated Internet strategy; rather, they are a response to competitors activities or
customers demand.
After a site has been in existence for a year or so, marketing staff and senior managers in a
company will naturally question its effectiveness. This is often the point at which the need for a
coherent Internet marketing strategy becomes apparent. As a result, the starting point used in this
summary of approaches to e-marketing strategy, is when a company that has an existing site and
it is reviewing the current site and its effectiveness with a view to future improvements.
The e-marketing strategy process
There is no evidence to suggest that the approach to developing and implementing a strategy
should be significantly different for e-marketing. Established frameworks for corporate strategy
development or strategic marketing planning should still be followed.
These frameworks provided a logical sequence to follow which ensures inclusion of all key
activities of strategy development. It can be argued, however, that with e-marketing there is an
even greater need for a highly responsive strategy process model where rapid reaction can occur
to events in the marketplace. The use of Soviet-style 5 year planning does not seem appropriate,
a preferable approach is an emergent e-marketing strategy process that is part of a continuous
improvement.
Chaffey (2012) notes that e-business or e-marketing strategy process models tend to share the
following characteristics:
 Continuous internal and external environment scanning or analysis are required.
 Clear statement of vision and objectives is required.
 Strategy development can be broken down into formulation and selection.
 After strategy development, enactment of the strategy occurs as strategy implementation.
 Control is required to detect problems and adjust the strategy accordingly.
 They must be responsive to changes in the marketplace.
In this article, we will use a four stage model for e-marketing strategy development. The four
stages are:
1. Strategic analysis. Continuous scanning of the micro and macro-environment of an
organization are required with particular emphasis on the changing needs of customers, actions
and business models of competitor and opportunities afforded by new technologies. Techniques
include resource analysis, demand analysis and competitor analysis, applications portfolio
analysis, SWOT analysis and competitive environment analysis.
2. Strategic objectives. Organisations must have a clear vision on whether digital media will
complement or replace other media and their capacity for change. Clear objectives must be
defined and in particular goals for the online revenue contribution should be set.
3. Strategy definition. We will discuss strategy definition by asking eight questions. These will
be considered in next month’s article:
 Decision 1. Target market strategies.
 Decision 2. Positioning and differentiation strategies.
 Decision 3. Resourcing - Internet marketing priorities – significance to organization.
 Decision 4. CRM focus and financial control
 Decision 5. Market and product development strategies.
 Decision 6. Business and revenue models including product development and pricing
strategies.
 Decision 7 Organisational restructuring required.
 Decision 8. Channel structure modifications.
4. Strategy implementation
Includes devising and executing the tactics needed to achieve strategic objectives. This includes
relaunching a web site, campaigns associated with promoting the site and monitoring the
effectiveness of the site. These issues have been dealt with in other articles.
We will now examine specific issues of strategic analysis and objective setting that are related to
e-marketing.
1. Strategic analysis.
In common with traditional marketing strategy, strategic analysis or situation analysis for e-
marketing involves review of the:
- internal resources and processes of the company and a review of its activity in the marketplace;
- immediate competitive environment (micro-environment) including customer demand and
behaviour, competitor activity, marketplace structure and relationships with suppliers and
partners.
- wider environment (macro-environment) in which a company operates including the social,
legal, economic, political and technological factors.
In this section we will highlight the key aspects of the internal and external environment that
need to be assessed when developing an e-marketing strategy.
Internal resources
These are of particular importance for e-marketing:
- Portfolio analysis and stage models – Considers the sophistication of online services offered to
prospects and customers. From basic ‘brochureware’ sites with no interaction through those
offering online catalogues to fully transactional sites offering full support for all stages of the
customer lifecycle from acquisition, retention to extension and all stages of the buying process.
- E-marketing effectiveness – How effective is the organisation at converting browsers to visitors
and visitors to prospects and buyers? Analysis of web logs using diagnostics such as those
available from www.marketing-insights.co.uk is important here.
- Financial resources and cost/benefit – in particular the breakdown for costs of running the
online presence between site development, promotion and maintenance. Many organisations still
do not have good visibility of these costs and the benefits such as those described in the objective
setting section.
- Service quality – human resources and software assistance for answering customer queries and
dispatching goods.
- Technology infrastructure resources – availability and performance (speed) of web site and
service level agreements with the ISP.
- Structure – what are the responsibilities and control mechanisms used to co-ordinate Internet
marketing across different departments and business units. We return to this topic next month.
- Strengths and Weaknesses – SWOT analysis can be readily applied to e-marketing specific
issues.
The Internet micro-environment
Pertinent factors for the Internet include demand analysis, competitor analysis intermediary
analysis, channel structure. Porter (2001) has written extensively about how the Internet has
changed the dynamic of the marketplace and has reinterpreted his often-quoted five forces model
in the Internet era.
Demand analysis or online customer activity is a key factor driving e-marketing and e-business
strategy objectives. It assesses the current level and future projections of customer demand for e-
commerce services in different market segments. In a B2B context customer activity can be
determined by asking for each market:
- What % of customer businesses have access to the Internet?
- What % of members of the buying decision in these businesses have access to the Internet?
- What % of customers are prepared to purchase your particular product online?
- What % of customers with access to the Internet are not prepared to purchase online, but
choose or are influenced by web-based information to buy products offline?
- What are the barriers to adoption and the facilitators amongst customers and how can we
encourage adoption?
Qualitative research is important to informing strategy since it identifies the differences in
psychographics between current online customers and those that are not offline.
Resources for assessing the ratio of ‘Access : Choose : Buy’ online have been reviewed in
WNIM 5 and 6.
Competitor analysis or the monitoring of competitor use of e-commerce to acquire and retain
customers is especially important in the e-marketplace due to the dynamic nature of the Internet
medium. Chaffey (2002) suggests comparing the activity of an organisation and its competitors
for their different channels by trying to answer these questions:
1. Business contribution
How does Internet marketing contribute to the bottom line? What is the online revenue
contribution (direct and indirect), costs and profitability?
2. Marketing outcomes
How many marketing outcomes are achieved online? For example, what proportion of leads,
sales, service contacts occur online? How effective is online marketing at acquiring, converting
and retaining customers?
3. Customer satisfaction
What are the customers’ opinions of the online experience and how does this affect their loyalty?
4. Customer behaviour (Web analytics)
This assesses how different customer segments interact with web site content and assesses how
the actions they take are influenced by usability, design, content, promotions and services.
5. Site promotion
How effective are the different promotional tools such as search engines, e-mail, direct
marketing and advertising at driving quality traffic to the web site? Measures include attraction
efficiency, referrer efficiency, cost of acquisition, reach and the integration between tools.
Analysis of the use of intermediaries to build and service business is also important here.
The Internet macro-environment
It can be suggested that of the different Social, Legal, Economic, Political and Technological
characteristics of the macro-environment, the three most significant factors described in more
depth in chapter 3 are legal constraints – What are the legal limitations to online promotion and
trade such as data protection and taxation, ethical constraints such as privacy and technological
constraints – what is the current availability and usage of technology to access the Internet and
offer distinctive services and how is this likely to vary in the future?
2. Strategic objectives.
Smith and Chaffey (2001) suggest there are five broad benefits, reasons or objectives of e-
marketing. This framework is useful since it presents a comprehensive range of objectives.
Marketers will decide whether all or only some will drive e-marketing:
 Sell – Grow sales (through wider distribution to customers you can’t service offline or
perhaps through a wider product range than in-store, or better prices)
 Serve – Add value (give customers extra benefits online: or inform product development
through online dialogue and feedback)
 Speak – Get closer to customers by tracking them, asking them questions, conducting
online interviews, creating a dialogue, monitoring chat rooms, learning about them
 Save – Save costs - of service, sales transactions and administration, print and post. Can
you reduce transaction costs and therefore either make online sales more profitable? Or
use cost-savings to enable you to cut prices, which in turn could enable you to generate
greater market share?
 Sizzle – Extend the brand online. Reinforce brand values in a totally new medium. The
Web scores very highly as a medium for creating brand awareness, recognition and
involvement.
Specific objectives should be created for each of the 5Ss. Consider Sales – a typical objective
might be:
‘To grow the business with online sales e.g. to generate at least 10% of sales online. Within 6
months.’
or
‘To generate an extra £100,000 worth of sales online by December’.
These objectives can be further broken down according to CRM objectives of acquisition,
conversion and retention, e.g. to achieve £100,000 of online sales means you have to generate
1,000 online customers spending on average £100 in the time period. If, say, your conversion
rate of visitors to customers was 1% then this means you have to generate 100,000 visitors to
your site. Achieving repeat visits and sales would form further objectives.
The online revenue contribution
The key objective for e-marketing is the online revenue contribution. This is a measure of the
extent to which a companies online presence directly impacts the sales revenue of an
organisation. Online revenue contribution objectives can be specified for different types of
products, customer segments and geographic markets.
Companies that can set a high online revenue contribution objective of say 25% for 2 years time
will need to provide more resource allocation to the Internet than those companies who anticipate
a contribution of 2.5%. Cisco Systems Inc (www.cisco.com) maker of computer networking
gear, is now selling around 90% of its 20 billion dollars sales online. This was achieved since
senior executives at Cisco identified the significance of the medium, setting aggressive targets
for the online revenue contribution and resourcing the e-commerce initiative accordingly.
A further example is provided by Sandvik Steel. The Financial Times reported in June 2001 that
around 20 per cent of all orders from Denmark are online and 31 per cent of those from Sweden.
The proportion in the US, however, is only 3 per cent, since most business goes through
distributors and is conducted by EDI (electronic data interchange), the pre-internet means of e-
commerce. Over the next six months, the company hopes to raise the US figure to 40 per cent.
Mr Fredriksson hopes that in two years, between 40 and 50 per cent of total orders will come via
the web.
However, for some companies such as an FMCG manufacturer, it is unrealistic to expect a high
direct online revenue contribution. In this case, an indirect online contribution can be stated. This
considers the Internet as part of the promotional mix and its role in reaching and influencing a
proportion of customers to purchase the product or in building the brand. In this case a company
could set an online promotion contribution of 5% of its target market visiting the web site and
interacting with the brand. Where sales achieved offline are a consequence of online selection of
products this is referred to as the indirect revenue contribution.
Summary - E-marketing strategy
We have looked at the first two parts of a strategy process, key issues for these are:
1. Situation analysis. Internal audit including review of services/portfolio analysis, cost/benefit
analysis, e-marketing effectiveness analysis. External audit of which the macro-economic factors
of demand analysis and competitor analysis are arguably most important.
2. Objectives setting. The 5 S s of Sell, Speak, Serve, Save and Sizzle. The direct and indirect
online revenue contribution.