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E-Commerce Sia

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14K views241 pages

E-Commerce Sia

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Manideep Konduru

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I

* SPECTRC1M
RLL-IN-ONE

E-COMMERCE
B.Com (OU) III-Year Vl-Semester (Computers & Computer Applications)

^As Per the Latest 2016-17 Syllabus of B.Com (OU) (CBCS)

Prepared by
SIA Team of Experts

Publishers & Distributors Pvt. Ltd.

Available Books for B.Com (OU) 111-Year Vl-Semester

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> E-Commerce (Computers, Computers Application)
> Business Forecasting (Computers, Computers Application)
> Relational Database Management System
> Business Analytics Programming (Computers, Computers Application)
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SKILL ENHANCEMENT COURSE
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GENERIC ELECTIVE
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ABOUT THE SUBJECT
E-Commerce or Electronic Commerce is simply an “online business” wherein buying and selling of the
product and services are carried out through Internet. It comprises of both the business-to-business and
business-to-consumer transactions. E-commerce also helps in marketing and servicing, as well as delivering
and payment of product through Internet, Extranet or some other network.

E-commerce is mostly considered as a mean of carrying out business activities in such a way that the firm’s
value chain is greatly effected in positive manner. E-commerce provides potential benefits to organizations,
consumer and society. The other online businesses beside E-commerce are Online marketing, E-business,
Online trading, E-leaming and E-training.

- ABOUT THE BOOK

The book entitled ‘E-Commerce’ is designed for B.Com III-Year Vl-Semester students. The content
provided in this book is strictly as per the latest (2016-17) syllabus prescribed by Osmania University.

Every concept is explained in a simple manner with sufficient number of examples so as to facilitate
better understanding and easy learning in a shorter span of time. Keeping in view the examination pattern
of B.Com students, this book provides the following features,

❖ Frequently Asked Questions are included to help the students to repare for Internal and External
Assessment.

❖ Every unit is structured into two main sections viz. Short Questions & Essay Questions with
? solutions along with Learning Objectives and Introduction.

❖ Very Short Answers are also provided.

❖ Three Model Papers are provided in order to help the students to understand the paper pattern in
the end examination.

❖ List of Important Definitions are provided before units.

❖ Lab Practical with Solutions are also Provided.

An attempt has been made through this book to present theoretical knowledge of “E-Commerce”.
This book is especially prepared for undergraduate students.

The table below illustrates the complete idea about the subject, which will be helpful to plan and score
good marks in the end examinations.
Unit
Unit Name Description
No.

1. Introduction The unit covers the topics like E-Commerce: Meaning, Advantages and

Limitations, E-Business: Traditional and Contemporary Model, Impact of

E-Commerce on Business Models, Classification of E-Commerce: B2B

- B2C - C2B - C2C - B2E, Applications of E-Commerce: E-Commerce

Organization Applications, E-Marketing, E-Advertising, E-Banking, Mobile

Commerce, E-Trading, E-Learning, E-Shopping.

2. Framework of E-Commerce This unit covers the topics like Framework of E-Commerce: Application

Services, Interface Layers, Secure Messaging, Middleware Services and

Network Infrastructure, Site Security, Firewalls and Network Security, TCP/

IP, HTTP, Secured HTTP, SMTP, SSL. Data Encryption: Cryptography,

Encryption, Decryption, Public Key, Private Key, Digital Signatures, Digital

Certificates.

3. Consumer Oriented This units covers the topics like Introduction to Consumer Oriented
E-Commerce Applications
Applications, Mercantile Process Model : Consumers Perspective and

Merchant’s Perspective, Electronic Payment Systems: Legal Issues and

Digital Currency, E-Cash and E-Cheque, Electronic Fund Transfer (EFT),

Advantages and Risks, Digital Token-based E-Payment System, Smart Cards.

4. Electronic Data Interchange This units covers the topics like Introduction EDI, EDI Standards, Types of

EDI, EDI Applications in Business, Legal, Security and Privacy Issues in

EDI, EDI and E-Commerce, EDI Software Implementation.

5. / E-Marketing Techniques This units covers the topics like Introduction to E-Marketing Techniques,

New Age of Information, Based Marketing, Influence on Marketing, Search

Engines and Directory Services, Charting the On-line Marketing Process,

Chain Letters, Applications of 5P’s (Product, Price, Place, Promotion,

People), E-Advertisement, Virtual Reality and Consumer Experience, Role

of Digital Marketing.

It is sincerely hoped that this book will satisfy the expectations of students and at the same time helps
them to score maximum marks in exams.

Suggestions for improvement of the book from our esteemed readers will be highly appreciated and
incorporated in our forthcoming editions.
E-Commerce
CONTENTS —
Syllabus (As per (2016-17) Curriculum)

List of Important Definitions L.1 - L.3

Unit/Topic No. Unit/Topic Name Question No. Page No.

UNIT-I INTRODUCTION 1 -42
SHORT QUESTIONS WITH SOLUTIONS Q1 - Q16 2-6
ESSAY QUESTIONS WITH SOLUTIONS Q17 - Q41 7-38
1.1 E-Commerce: Meaning - Advantages and Limitations Q17 - Q25 7
1.2 E-Business: Traditionai and Contemporary Model Q26 - Q29 18
1.3 Impact of E-Comfnerce on Business Models Q30 20
1.4 Classification of E-Commerce: B2B, B2C, C2B, C2C, B2E Q31 22
1.5 Applications of E-Commerce Q32 23
1.5.1 E-Commerce Organization Applications Q33 -. 034 27
1.5.2 E-Marketing, E-Advertising Q35 30 -
1.5.3 E-Banking, Mobile Commerce Q36 - Q37 33
1.5.4 E-Trading, E-Leaming, E-Shopping Q38 Q41 34

INTERNAL ASSESSMENT 39-42

UNIT-II FRAMEWORK OF E-COMMERCE 43-70

SHORT QUESTIONS WITH SOLUTIONS Q1 - Q12 44-46
ESSAY QUESTIONS WITH SOLUTIONS Q13 - Q31 47-66
2.1 Framework of E-Commerce: Application Services -
Interface Layers - Secure Messaging - Middleware
Services and Network Infrastructure Q13 Q15 47
2.2 Site Security - Firewalls and Network Security Q16 - Q20 49
2.3 TCP/IP - HTTP - Secured HTTP - SMTP - SSL Q21 - Q27 54
2.4 Data Encryption 61
2.4.1 Cryptography - Encryption - Decryption -
Public Key - Private Key Q28 Q30 61
2.4.2 Digital Signatures - Digital Certificates Q31 65
INTERNAL ASSESSMENT 67-70

UNIT-III CONSUMER ORIENTED E-COMMERCE APPLICATIONS 71 -106

SHORT QUESTIONS WITH SOLUTIONS Q1 - Q10 72-75
ESSAY QUESTIONS WITH SOLUTIONS Q11 - Q31 76 -102
3.1 Introduction Q11 - Q12 76
3.2 Mercantile Process Model: Consumer's Perspective
and Merchant’s Perspective Q13 - Q16 81
3.3 Electronic Payment Systems Q17 - Q19 87
3.3.1 Legal Issues and Digital Currency - E-Cash
and E-Cheque Q20 - Q23 91
3.3.2 Electronic Fund Transfer (EFT) Q24 95
3.3.3 Advantages and Risks Q25 98
3.3.4 Digital Token-based E-Payment System -
Smart Cards Q26 - Q31 99
INTERNAL ASSESSMENT 103 -106

UNIT-IV ELECTRONIC DATA INTERCHANGE 107-138

SHORT QUESTIONS WITH SOLUTIONS Q1 - Q8 108-110

ESSAY QUESTIONS WITH SOLUTIONS Q9 - Q24 111-134
4.1 Introduction Q9 - Q13 111
4.2 EDI Standards Q14 116
4.2.1 Types of EDI Q15 117
4.2.2 EDI Applications in Business Q16 - Q20 120
4.2.3 Legal - Security and Privacy Issues in EDI Q21 128
4.2.4 EDI and E-Commerce Q22 129
4.2.5 EDI Software Implementation Q23 - Q24 130
INTERNAL ASSESSMENT 135-138

UNIT-V E-MARKETING TECHNIQUES 139-168

SHORT QUESTIONS WITH SOLUTIONS Q1 - Q8 140 -141

ESSAY QUESTIONS WITH SOLUTIONS Q9 - Q25 142-164

5.1 E-Marketing Techniques - Introduction Q9 142

5.1.1 Search Engines - Directory Services - Chain Letters Q10 - Q13 144

5.2 New Age of Information Based Marketing Q14 147

5.3 E-Commerce Influence on Marketing Q15 149

5f4 Charting on the Online, Marketing Process Q16 150

5.5 Applications of 5P’s (Product, Price, Place, Promotion,

People) Q17 152

5.6 E-Advertisement Q18 - Q19 154

5.7 Virtual Reality and Consumer Experience Q20 - Q21 159

5.8 Role of Digital Marketing Q22 - Q25 161
INTERNAL ASSESSMENT 165-168

LAB PRACTICAL WITH SOLUTIONS LP.1 - LP.4

UNIT-WISE FREQUENTLY ASKED QUESTIONS F.1 F.6

MODEL QUESTION PAPERS WITH SOLUTIONS (As per OU Curriculum)

Model Paper-I MP.1

MP.1 - MP.1
Model Paper-H MP.2
MP.2 - MP.3
Model Paper-I 11 MP.4
MP.4 - MP.4
UNIT-I
INTRODUCTION

E-Commerce: Meaning - Advantages and Limitations - E-Business: Traditional and Contemporary

Model, Impact of E-Commerce on Business Models - Classification of E-Commerce: B2B - B2C - C2B
- C2C - B2E - Applications of E-Commerce: E-Commerce Organization Applications - E-Marketing -
E-Advertising - E-Banking - Mobile Commerce - E-Trading - E-Learning - E-Shopping.

UNIT-II
FRAMEWORK OF E-COMMERCE

Framework of E-Commerce: Application Services - Interface Layers - Secure Messaging - Middleware

Services and Network Infrastructure - Site Security - Firewalls and Network Security - TCP/IP - HTTP
- Secured HTTP - SMTP - SSL.

Data Encryption: Cryptography - Encryption-Decryption-Public Key-Private Key-Digital Signatures

- Digital Certificates.

UNIT-III
CONSUMER ORIENTED E-COMMERCE APPLICATIONS

Introduction - Mercantile Process Model: Consumers Perspective and Merchant’s Perspective - Electronic
Payment Systems: Legal Issues and Digital Currency - E-Cash and E-Cheque - Electronic Fund Transfer
(EFT) - Advantages and Risks - Digital Token-based E-Payment System - Smart Cards.

* UNIT-IV
*
ELECTRONIC DATA INTERCHANGE

Introduction - EDI Standards - Types of EDI - EDI Applications in Business - Legal - Security and
Privacy Issues in EDI - EDI and E-Commerce - EDI Software Implementation.

UNIT-V
E-MARKETING TECHNIQUES

Introduction - New Age of Information-based Marketing - Influence on Marketing - Search Engines

and Directory Services - Charting the On-line Marketing Process - Chain Letters - Applications of 5P’s
(Product, Price, Place, Promotion, People). E-Advertisement - Virtual Reality and Consumer Experience
- Role of Digital Marketing.
LIST OF IMPORTANT DEFINITIONS

UNIT -1
1. E-commerce
E-commerce or electronic commerce is simply an ‘online business’ wherein the buying and selling of products and
services are carried out through Internet.
2. World Wide Web
The World Wide Web (WWW) or the web is a repository of information spread all over the world and linked together.
The WWW has a unique combination of flexibility, portability and user-friendly features that distinguish it from
other services provided by the Internet.
3. Internet
It is the network of networks, the Internet is massive, worldwide collection of networks connecting many subnetworks
and computing information resources located on these subnetworks.
4. Search Engine
Search engine is defined as a technique of finding data according to the user typed query without being concerned
about its location.
5. E-banking
Electronic banking is an Internet-based banking process in which users are allowed to connect to the legitimate
websites of their respective bank..
6. E-Learning
Education, training or knowledge management achieved through the content delivered via Internet is known as
E-leaming.
7. E-shopping
E-shopping or online shopping is a new form of shopping which enables the customers to purchase their desired
product from intended seller over the Internet.
8. Online Trading
E-trading/online trading is also known as E-broking. E-broking provides up-to-date and on-time information about
the stock exchange prices to everyone across the world.
9. M-Commerce
Mobile commerce or M-commerce refers to any business activity or transaction that is done through mobile devices
which are connected to wireless networks.
10. Relationship Marketing
Relationship marketing is a strategy where companies advertise their product in a selected market in such a way
that a good relationship is built up and maintained with their customers.

UNIT
. - II ■ ■ • ■ . . ;
1. Architectural Framework of E-Commerce
Architectural framework of E-commerce is a combination of different available resources such as DBMS, data
repository, communication protocols and computer languages.
2. SGML
SGML is Standard Generalized Markup Language used for text based documents.
3. HTML

HTML stands for Hypertext Markup Language used for documents like hypertext, multimedia etc.

--------------------------------- -- -.......... - SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

L-2_______________________________________________________________________________________ E-COMMERCE
4. Authentication

The process wherein two entities can verify each other to know that they are the only users who claim to be called
authentication.
5. Authorization

It is the process of ensuring a person or a program that they have right to access particular resources.
6. Information Security

Information security refers to the process of protecting data or information from unauthorized user and to allow
legitimate users to access the data.
7. Computer Security

It refers to the branch of computer science that describes the application of ‘secure’ behaviour on the operation of
computers.
8. Network Security

Network security refers to the plans or arrangements made in the network infrastructure along with the various
techniques used by the network administrator.
9. HTTP

HTTP is a stateless protocol that is used for delivering the web pages over the Internet.
10. Cryptography

Cryptography is a method of transforming the plaintext into an unreadable form.

11. Cryptanalysis

Cryptanalysis is a type of attack that makes certain attempts possible for obtaining the plaintext and the key used.
12. Cryptology

Cryptology is the study of both cryptography and cryptanalysis.

13. Encryption

Encryption is a method of converting plain text into cipher text.

14. Snooping
Snooping is the process of accessing the confidential information in an unauthorized way.

UNIT - III
1. E-cash

Electronic cash is a form of electronic payment system which provides high level of security and reduces the overhead
of paper cash.
2. Debit Card
A debit card is a card that is used instead of cash in shopping.

3. Electronic Payment

Electronic payment means paying the amount for purchased goods electronically.
4. EPS

Electronic Payment System (EPS) is a building block of E-commerce which refers to the online exchange of money.

5. Smart Cards

Smart cards store massive volume of customer’s information such as verification ID, health sector care, financial
banking.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. ■
List of Important Definitions L.3

1. VAN

VAN is a network that makes communication possible among different business partners.
2. Intra-organizational E-commerce

Intra-organizational E-commerce refers to the activities that are performed within the organization so as to consistently
deliver superior quality service to consumers.
3. Electronic Data Interchange

Electronic Data Interchange (EDI) can be defined as a medium of transmitting business information in a standardized
format.
4. Electronic Mailbox

Electronic mailbox is a feature of software that stores EDI messages which user fetches depending on their needs.
5. Customization

Customization refers to the process of building the product according to the specifications given by the consumers.

UNIT - V
1. Spam Mail

Spam mail refers to the unwanted and unrequested on-line email called ‘junk mail’ which is repeatedly sent to
multiple recipients at a time.
2. E-Mail

Electronic mail is simply an information that is sent electronically from one computer user to another.
3. Digital Marketing

Digital marketing refers to the management and execution of marketing activities by using digital electronic
technologies and channels like digital TV, E-mails, web, wireless media and digital data concerning consumer
behavior and its attributes.
4. E-marketing

E-marketing is the achievement of marketing goals through the utilization of the Internet and the web based
technologies. E-marketing is also known as Internet marketing or marketing on the web or online marketing.
5. E-Advertisement

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT
INTRODUCTION
SIA GROUP
\_____ J

C LEARNING OBJECTIVES )
»
After learning this unit, a student will have thorough understanding about the following key concepts,

❖ Meaning of E-business and E-commerce

❖ Benefits, limitations of E-commerce

❖ Types of E-commerce

❖ Impact of E-commerce on Business model

❖ Different applications of E-commerce.

E-business performs business activities such as designing of products, operating supply chain, managing
marketing and providing services through the use of electronic technology. The E-business can be divided
into six types i.e., business-to-business, business-to-consumer, consumer-to-business, consumer-to-consumer
Govt, to business and Govt, to consumer. When goods or services are purchased and sold through networks
like Internet then it is termed as E-commerce, which facilitates the companies to promote their sales inter-
f- nationally. It is even possible to carryout E-marketing globally across the world with the help of electronic
methods.

A business model involves basic process flow and linkages of various business functions. Information and
communication technology. Internet and World Wide Web (WWW) has a wide range of applications for
various business activities like E-auctions, E-banking, E-directories, E-manufacturing, E-govemance, etc.

In today’s competitive world of globalization, business is expanding quickly around the world without any
global regulations either at national or international level as well as delivery of products electronically has
become a competitive issue.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

2 E-COMMERCE

part-a

B
Q1. Define E-commerce.

E-commerce
SHORT QUESTIONS WITH SOLUT

OR
Model Paper-ll, Q1

Answer : (March/April-15, Q1 | March/April-14, Q2 | Oct/Nov.-12, Q1)

E-commerce or electronic commerce is simply an ‘online business’ wherein the buying and selling of products and
services are carried out through Internet. It comprises of both the Business-to-Business (B2B) and Business-to-Consumer
(B2C) transactions. „.
In addition to buying and selling,'e-commerce also helps in marketing and servicing, as well as delivery and payment
of products through Internet, Extranets, Intranets or some other networks._______________________________________
02. What are the key components of E-commerce?
OR
Key Components of E-commerce
Answer : Sep./Oct.-15, Q1
The components of E-commerce vary based on the business and role of E-commerce in it. Generally, there are three
basic components of E-commerce. They are as follows.
1. Systematic Approach Requirement
To conduct business, a systematic approach is needed. Just.like traditional commerce, e- commerce should also deal
with all aspects of business. Some of these aspects are research and planning, operation and selling, customer service
marketing, budgeting and human resource management. Among all, some of them are performed using internet and
other electronic means.
2. Business Type
Even though e-commerce is treated as a special type of business but still it comes under the category of a business.
Just like any other traditional business, e-commerce businesses have been classified into different kinds. They are,
❖ Business- to-business e-commerce
❖ Business-to-consumer e-commerce
❖ Consumers-to-consumer e-commerce
❖ Consumpr-to-business e-commerce
❖ Govt, to Business
❖ Govt, to consumer
❖ Non-business e-commerce
❖ Intra-organizational e-commerce.
Thcf classification of e-commerce can also be done on the basis of products or services provided by businesses.
There are certain E-commerce businesses that sell concrete products like clothes, electronic devices etc. Whereas,
the other e-commerce business sells abstract products like reservations, e-leaming, etc.
-3____ Technology
A company in e-commerce can achieve its goals efficiently and effectively by making use of technologies for
conducting business. Hence, a company must always prefer to use latest technologies through which they can satisfy.
_____ the customer needs in the best possible ways. This intum will lead to the growth of the company...... ~~______ .
Q3. Write about World Wide Web. Model Paper-in, Q6

OR
WWW
Answer : March/April-15, Q2
The World Wide Web (WWW) or the web is a repository of information spread all over the world and linked together.
The WWW has a unique combination of flexibility, portability and user-friendly features that distinguish it from other
services provided by the Internet.
The WWW project was initiated by CERN (European Laboratory for Particle Physics) to create a system to handle
distributed resources necessary for scientific research. The WWW today is a distributed client-server service, in which a
client using a browser can access a service using a server. However, the service provided is distributed over many locations
called websites.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. ______---------------------
UNIT-1 : Introduction 3

Q4. How WWW act as enabler of E-commerce?

OR
WWW as Enabler of E-commerce
Answer: Oct./Nov.-H, Q1

OR
Internet
Answer : (March/April-12, Q1 | March-11, Q1)

It is the network of networks, the Internet is massive, worldwide collection of networks connecting many subnetworks
and computing information resources located on these subnetworks, including devices such as computers, servers and
directories. As a “network’, it provides a capability for communication to take place between research institutions, government
agencies, businesses, educational institutions, individuals and among all ‘Internet citizens’.
Q6. Define E-business. (Model Paper-n, Q6 i Oct./Nov.-12, Q7)

OR
E-Business
Answer : March/April-16, Q1

E-business involve carrying of business activities such as designing of products, operating supply chain, marketing
products and providing services to stakeholder using electronic technology. Under E-business, traditional business practices
and information system are integrated with World Wide Web (WWW).
Through E-business several online operations can be carried out such as,
(i) Buying and selling of goods and services.
(ii) Providing customer service.
(iii) z Providing E-leaming facilities
(iv) Joining with different partners to work together.
Q7. What are the limitations of E-commerce?
OR
Limitations of E-commerce
Answer : Oct/Nov.-13, Q7

The limitations of E-commerce are as follows,

1. Lack of communication protocols, system security, standards and reliability.
2. Lack of privacy and security
3. Lack of trust and user resistance.
4. Justification and cost
5. Not successful in rural are as because of lack of Internet facility.
6. Only educated people can use it.
7. Intenet knowledge is necessary.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.
4 E-C0MMER2':

Q8. What are the benefits of E-commerce to Organization, Consumers and Society? Model Paper-m, qi

Benefits of E-commerce.

Answer : Oct.-14, Q6

Benefits of E-commerce to Organization

The benefits offered by E-commerce to Organization are as follows,

1. Expansion of market (Nationally as well as international)
2. Reduction of purchasing administration cost
3. Reduction in time
4. Increasing the customers.
5. Expansion of the range of products.
Benefits of E-commerce to Consumers

The benefits offered by E-commerce to consumer are as follows,

1. Simplified transactions
2. Wider range
3. Time saving '
4. No need of standing in queues
5. Avail discounts.
Benefits of E-commerce to Society

The benefits offered by E-commerce to society are,

1. ECO-friendliness
2. Increase in standard of living
3. . Time saving.
Q9. What is hypertext publishing?

Answer^: Oct./Nov.-H, Q2

Web plays an important role in providing required functionalities to e-commerce. It consists of various technologies
and concepts such as hypertext publishing, universal reader and client server concepts.
Hypertext publishing provides a mean of accessing and retrieving information online without taking into consideration
the environmental boundaries. Hypertext publishing in a simple way can be defined as a primary application of web that
concentrates on hypermedia. It is Eco-friendly and does not require storage space.
Q10. Write a short note on Search Engine.

Answer :
Search engine is defined as a technique of finding data according to the user typed query without being concerned
about its location. Search engines are replacing WAIS broadband search engines because of their highly developed and
complex behaviour. It is being used through web browsers. They provide minute to minute updated information.
Example

Topic is a search engine that is basically used in Lotus Notes, Adobe Acrobat applications. The searching done by
employing Topic Search engine is done using both keywords and information. The result of this search is a hit-list arranged
according to the preference assigned by the search engine.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. --------------- -- -----
UNIT-1 : Introduction 5

Q11. What is E-banking? Model Paper-i, Q1

OR
E-banking
Answer : (March/April-15, Q7 | March/April-13, Q1)

E-Learning
Answer : (March/April-17, Q1 | March/April-14, Q1)

Education, training or knowledge management achieved through the content delivered via Internet is known as
E-leaming. It comprises of all electronically supported and web-enabled systems that allow access to the information to
anyone, anytime and anywhere. E-leaming is highly efficient for both training and teaching purposes. Hence, it has been
adopted by many world class universities and organizations.
Q13. List the applications of E-commerce.
Answer : Oct./Nov.-12, Q2

E-commerce applications comprisedifferent types of elements which are,

1. Multimedia content
2. Multimedia storage servers
3. Client server architecture
4. Video servers
5. Transport and delivery of information
6. Consumer access devices
7. ^nternal processes of multimedia servers.
Q14. What is E-shopping?
OR
E-shopping
Answer : Oct./Nov.-13, Q1

E-shopping or online shopping is a new form of shopping which enables the customers to purchase their desired
product from intended seller over the Internet. It can also be referred as E-store, web store or virtual store.
The advantages of E-shopping are,
1. Customer can carryout shopping irrespective of time and location
2. Customer need not visit the store thereby saving time and effort.
3. Online stores provide the customer with a link that helps them is gaining information regarding the product such as
instructions, safety procedures manufactures specification as well as image of product.
4. Customer can perform online price comparison prior purchasing the product.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

E-COMMERCE
6

Q15. Write about online trading. M°de| Papers a

Online Trading

Answer : (March/April-17, Q8 | Oct.-14, Q1)

E-trading/online trading is also known as E-broking. E-broking provides up-to-date and on-time information about
the stock exchange prices to everyone across the world. People can respond to the changes taking place in the stock market
by the information provided by E-broking. People having Internet bank account can buy and sell stocks online.

Before the Internet came into existence, buying and selling stock at the correct time relied upon the availability of
eminent brokers. These brokers used to be in shortage. Small investors always used to face difficulty in getting a broker.
Apart from brokers, the other sources from where the information about stock prices can be obtained were magazines,
newspapers, telecommunications and radios. These sources are cost consuming, slow and less comprehensive compared
to Internet.

Q16. What is E-advertising?

Answer: Oct./Nov.-16, qi

Online advertising is a marketing strategy that makes use of Internet to fetch website traffic and target, deliver
marketing related information (in the form of messages) to the right customers. This strategy provides quick promotion of
product information irrespective of geographical boundaries.

Internet advertising or online advertising can be classified into two types,

1. Push-based advertising

2. Pull-based advertising.

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6 E-COMMERCE

Q15. Write about online trading. Model Paper-i, Q6

Online Trading

Answer : (March/April-17, Q8 | Oct.-14, Q1)

Q16. What is E-advertising?

Answer: Oct./Nov.-16, Qi

Internet advertising or online advertising can be classified into two types,

1. Push-based advertising

2. Pull-based advertising.

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UNIT-1 : Introduction 7

PART-B
ESSAY QUESTIONS WITH SOLUTIONS
■ i .......................... . ............. — ■

1.1 E-COMMERCE: MEANING -ADVANTAGES AND LIMITATIONS

Q17. Define E-commerce from different perspectives along with its goal. Model Paper-m, Q9(a)

What is the electronic commerce? Discuss briefly the overview of electronic-commerce.

Answer : March-11, Q9(a)

E-commerce

E-commerce or electronic commerce is simply an ‘online business’ wherein the buying and selling of products and
services are carried out through internet. It comprises of both the Business-to-Business (B2B) and Business-to-Consumer
(B2C) transactions.

In addition to buying and selling, e-commerce also helps in marketing and servicing, as well as delivery and payment
of products through internet, extranets, intranets or some other networks.

Goals of Electronic Commerce

(a) Cost reduction

s' " '

(b) Lower product cycle time

(c) Improved service quality

(d) Faster customer response.

Electronic-commerce can be defined in several ways through different perspectives.

1. Communication Perspective

F.-commerce can be defined as the process of delivering products, services, information or payments through computer
networks or any other electronic medium.

2. Commercial Perspective

E-commerce can be defined as the process of buying and selling products, services and information through Internet
or any other online service.

3. Service Perspective

E-commerce is defined as a tool for dealing with the desires of government firms, management and consumers. Their
desire is to reduce the service cost, improve customer service quality, and increase service delivery speed.

4. Business Process Perspective

E-commerce is defined as a process that performs electronic business through electronic networks.

5. Collaborative Perspective

E-commerce is defined as a framework that collaborates both the inter and intra organizations.

6. Community Perspective

E-commerce is defined as a place where all the community members can gather, learn, transact and collaborate.

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8 E-COMMERCE

Q18. Write about importance of E-Commerce. Oct./Nov.-16, Q9(a)

Bring out the importance of E-commerce in modern business. March/April-17, Q9(a)

Answer :
Importance of E-Commerce

Widespread adoption of computerization in society are making businesses to become electronic. The following are
the significances of E-commerce.

(i) Improvement in Productivity

E-commerce has drastically reduced the time required for creating and processing a business transaction. Additionally,
E-commerce avoids several errors like duplication of records and also reduces data entry and re-entry work. This
results in the improvement of overall productivity.

(ii) Reduction in Cost

From the earlier experience of E-commerce adopters, a research has shown that using E-commerce in business has
resulted in 5% to 10% cost savings. This saving is due to quick and efficient communication and closer access to
markets and customers.

(iii) Automation of Business Processes

Computerizing and streamlining business processes involves further reduction in costs. If inventories are automated,
then business can use internet to share information like point-of-sale data and it can be used for forecasting sales.

(iv) Good Customer Service

An important advantage of E-commerce is that there is a direct and better communication with customers. The
feedback and suggestions of customers can be known quickly and respective changes in the product can be made.
Moreover, E-commerce allows customers to shop for 24 x 7 from any part of the world.

(v) Business Expansion Opportunity

Since E-business is done over internet, it has access to a broad range of customers from several parts of the world.
Therefore, there is a greater chance of business expansion.
ffi’ addition to the above benefits, E-commerce also improves profit margins by automating supply chain managements.
We can efficiently forecast the needs of customers. Labour costs can be drastically reduced. Therefore, it can said
that E-commerce in the current business world has a greatest significance.
Q19. What are the three pillars of E-commerce? March/Aprii-15, Q9(a)

Discuss the three pillars of electronic-commerce.

Answer: March/April-14, Q9(b)

Three Pillars of E-commerce

The three pillars of E-commerce include,

1. Electronic information

2. Electronic relationship

3. Electronic transactions.

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UNIT-1 : Introduction 9
1. Electronic Information

The electronic information pillar is about storing information. This pillar is constructed by assigning the information
in such a way that it is easily understood by the users. Before constructing the electronic pillar, the following rules need
to be considered.
(i) The content must be in web-readable format.
(ii) The webpage containing the required information should not hang up.
(iii) The links provided in the web page must navigate to correct location.
(iv) The user must easily find the necessary information.
2. Electronic Relationships

The central pillar i.e., electronic relationship pillar specify the way of constructing a web site such that a user viewing
the web site must revisit the same site in a positive manner. This pillar concentrates on establishing relationship with the
user in an electronic form. This relationship can be maintained if the constructed website consists of the following features.
(i) The website must be innovative and must contain certain new features that attracts the users.
(ii) The website must create forms for enabling the user to provide their valuable feedback.
(iii) This website must provide information and include interaction facility.
3. Electronic Transaction

The electronic transaction pillar is the third pillar which specifies the following two criteria.
(i) Ability to engage in meaningfill and sufficient negotiation process.
(ii) Ability to provide security of transaction data.

Figure: Three Pillars of E-commerce

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10 E-COMMERCE
Q20. Explain traditional value chain and customer oriented value chain.

Answer: (Model Paper-I, Q9(a) | March/April-14, Q9(a))

Traditional Value Chain

Traditional value chain shows the way of passing information between the suppliers and the customers in a sequential
manner. In this chain, the input/output are provided to the supplier at the back stage. That is, the information regarding
suppliers input/output are not revealed to the customer. Moreover, the input/output related to the customer are supplied
at the front end stage. This flow of information from supplier to customer is done via different processes such as inbond
logistics production and outbond logistics.
The major drawback of the value chain is that it fails to establish strong relationship between firm, cashier and
supplier.

Supplier

Figure: Traditional Value Chain

Customer Oriented Value Chain (COVC)
r
Customer oriented value chain is developed to overcome the loophole of traditional value chain. The customer oriented
value chain focuses on establishing relation between the firm and customer. In this chain, the information system of respective
firm links all the phases of the process together. The advantage of customer oriented value chain are,
(i) It enables the customer to have access over the information system of the firm irrespective of the place.
(ii) It enables the customer to receive specification regarding design and product in an electronic format before accessing
the sales information.
(iii) It enables the customers to read the status of the ordered product.
(iv) It enables the customer to read the shipping status of ordered product.
(v) It enables the supplier to provide better customer service.
(vi) It enables the supplier to have prior information regarding the damaged products that a customer is going to return
back.
In COVC, the procurement information system is linked with the information system of the supplier. The purpose
of enabling the supplier to have access over the information system is to provide better customer service.
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UNIT-1 : introduction 11

In this chain, it is very important that a supplier (who acts as a customer to another supplier) share its procurement
system with the information system of its supplier. This is required so that the supplier receives similar information that is
provided by him to his own customer.

Figure: Customer Oriented Value Chain

Q21. What are potential benefits of E-commerce? Sep./Oct.-15, Q9(a)

What are the benefits of E-commerce to the organization, consumer and society? Oct./Nov.-11, Q9(a)

What are the advantages of Internet electronic commerce over consumers?

(Refer Only Topic: Benefits to Consumers) • .

Answer: Oct./Nov.-12, Q9(b)

The revolution in e-commerce is same as the revolution in industries. The reasons being,
❖ Nature of technology.
❖ Reachable to millions of people within short span of time.
❖ Rapid growth in supporting infrastructures.
These three reasons mainly result in potential benefits to,
1. Organizations
2. Consumers
3. Society.
1. Benefits to Organization

E-commerce offers a number of benefits to organizations. These include,

(a) Expansion of Marketplace

The market place is expanded from a small region, town, city to national and international level. This makes the
companies to quickly and easily locate, best suppliers, most suitable business partners and more customers, with a
minimum investment. For expansions of market place, e-commerce provides a number of sites where companies
can even request for manufacturing of a subsystem.

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12 E-COMMERCE

(b) Reduction in Purchasing Administrative Costs

The cost of creating, processing, distributing, storing and retrieving paper-based information is reduced due to the
introduction of e-procurement system.
(c) Creating Specialized Businesses

E-commerce helps the organizations in creating specialized businesses. An example is the website for purchasing
cat toys “www.cattoys.com”. In physical world, cat toys can be purchased at departmental or gallery stores, thus
incurring the cost of travelling to buy a toy.
(d) Reduction in Inventories and Overheads

“Pull” - type supply chain management offered by e-commerce helps in the reduction of inventories and overheads.
The pull-type system uses just-in-time manufacturing. The implementors of a pull-type system achieves expensive
services and customization of products. For example Dell Computer Corporation.
(e) Reduction in Time

The time between the outlay of capital and the receipt of products and services is reduced by e-commerce.
(f) initiating Business Process Reengineering Projects

Reengineering business projects was initiated by e-commerce. Because it helps in increasing productivity of sales
people, administrators and knowledge workers by at least 100% more.
(g) Reduction in Communication Cost

The cost of communication is less in e-commerce as internet is cheaper than VANs.

In addition to these benefits, other benefits are as follows,
❖ Improvement in image and customer service
❖ Compressed delivery and cycle time
❖ Increased flexibility and productivity
❖ Elimination of paper
❖ Faster access to information
❖ Simple processes
❖ Newly found business partners.
2. Benefits to Consumers

The benefits offered by e-commerce to consumers are as follows,

(a) Easy Transactions

Shopping or exchanging over web can be done 24 hours a day and 7 days a week. This is offered by e-commerce
to its consumers so that they can shop or do other transactions from any location and at anytime.

(b) Wider Range

offered by many vendors. Customers can
The range of products offered by e-commerce is wider than the range
choose from this wider range and do a satisfying e-shopping.

(c) Quick Delivery .

E-commerce offers the most desirable feature “Quick delivery” to customers. The quick delivery ts more quteker

in case of digitized products.

Less Expensive Products and Services
(d)

Thus, achieving good customer satisfaction.

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UNIT-1 : Introduction 13
In addition to these benefits, the other benefits include,
❖ Detailed and product relevant information is given to the customer in few seconds but not in days/weeks.
❖ Participation in virtual actions is possible through e-commerce.
❖ Electronic communities are created to enable customers share their views and experiences.
❖ Due to the competition offered by e-commerce, the amount of discount given to customers is more.
3. Benefits to Society

The most important benefits offered by e-commerce to society are as follows,

(a) Eco-friendliness

Air pollution and traffic on roads are reduced by doing shopping at home. E-commerce also enables customer to
work from home.
(b) Increase in Standard of Living
*.
Few merchandise are sold at a lower price so that customers from any urban/rural area can buy them and increase
their standard of living.
(c) Delivery of Public Services

Public services are delivered by using e-commerce at a cheaper rate but with improved quality. These services
include education, distribution of government social services, health-care etc.
Q22. Explain the global information distribution networks.

Answer : (Model Paper-ll, Q9(a) | Oct./Nov.-11, Q9(b))

Global Information Distribution Network

Global information distribution network is a new way of interconnecting different networks that cross various countries
and continents. The two technologies that are included in GIDN are,
1. Fiber optic long distance network
2. Satellite network.
1. Long Distance Network

This technology is used for establishing connection between the components bearing longer distance from each other.
This connection is made using coaxial or fiber cables which are owned by inter exchange carriers. Among these cables,
fibre cablets mostly preferred for carrying out international transmission. A part from this, submarine cables can even be
used for enabling transmission, when there is requirement for high communication capacity.
Whenever connection is to be established locally, the interexchange carriers are used. These carriers are getting
enhanced so as to reduce the cost and increase the transmission speed.

The different communication technologies used in US for serving long distance connectivity include, AT and T.
MCT, WilTel and LiTel telecommunication. The major objective of long distance carrier is to concentrate on acquiring
wireless technologies for performing the transmission. Using these technologies, it is possible to connect multiple cellular
users and also to develop a reasonable, local area network for reaching their own subscribers.
2. Satellite Network

A combination of nodes used for providing communication from one point to another point on the earth is called
satellite network. A node can be a satellite, an end-user terminal or an earth station. The reason why artificial satellites are
used instead of natural satellites (such as moon which can be used in the network as a relaying node) is that, if the signal
losses its energy during-its traversal, then it can be regenerated by installing certain electronic equipments on the satellite
which is not possible in case of natural satellites. Also, natural satellite is not preferable because of its long distance from
the earth which causes long delay in communication.
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14 E-COMMERCE

The satellite networks are similar to that of cellular networks in which the planets are divided into cells. The satellites
provide the capability of transmission to and from any part on the earth irrespective of its remote location. Because of this,
even the undeveloped locations of the world can take the advantage of high-quality communication without investing on
ground base infrastructure.
Satellite Elevation Categories

The three satellite elevation categories are,

(i) Low Earth Orbit (LEO)
(ii) Medium Earth Orbit (MEO)
(iii) Geosynchronous Earth Orbit (GEO).
(i) Low Earth Orbit or LEO Satellites

These satellites are confined in the altitude range of (500 km to 1500 km). These are also referred to as Non-Geo-
Stationary Orbit (NGSO) satellites. These are operated in the frequency range of 1 GHz to 2.5 GHz. The main
advantage of LEO satellites is low value of path loss. Since, the LEO satellites are near to the earth, the distance
between this is low, hence the loss between the earth stations and space vehicles is very low compared to that of the
other high altitude orbit satellites.
Due to the less path loss, the specifications of the system like transmitting power, antenna size, weight are also
required to be less. The orbiting period of LEO satellites is above 90 minutes. These satellites are generally used
for communication purposes. For example, Motorola’s satellite based mobile telephone system called Iridium is a
LEO system. It has 67 satellites (forming a constellation) and it orbits approximately at 480 miles above the earth’s
surface.
(ii) Medium Earth Orbit or MEO Satellites

MEO satellites are at an altitude range of 6000 miles to 12000 miles. These are also called as Intermediate Circular
Orbit (ICO) because they are present in the space above the LEO satellites and below the GEO satellites. The orbital
period of MEO satellites is 2 to 24 hours.
These orbits are used for satellites that can serve for navigation applications, such as the Global Position System (GPS).
Examples

(i) The famous experimental satellite ‘Telstar’ orbits in MEO.

(ii) NAVSTAR which is a defence based GPS also orbits in MEO.
£(iii) GLONASS, Galileo are also orbiting in MEO.
(iv) MEO also has satellites that serve the communication for north and south poles.
(iii) Geostationary Earth Orbit or GEO Satellites

These orbits are above the equator, because they are parallel to it and are also called as equatorial orbits.
These are mostly circular in shape. The GEO satellites are at an altitude of 36000 km and above. The orbital period
of GEO satellites is same as that of the earth which is 24 hours.
These are used for communication purposes, climate conditions and study purposes. These.satellites appear to be
stationary, thus they alw'ays point a particular earth station. So, there is no necessity to adjust them from time to
time. They operate at the frequency range of 2 GHz to 18 GHz and are capable of covering large areas of earth’s
surface compared to LEO and MEO. But, the power involved is very high and also incur high path loss.
Examples

(i) The first satellite placed in GEO is Syncom-3.

(ii) The ‘US GOES’, METEOSAT, GMS (Japan), INSAT (India) are the GEO satellites launched to study the
earth’s surface and atmosphere.
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UNIT-1 : Introduction 15
Q23. “Internet and WWW are enablers of E-commerce” - Discuss.

.Answer: Sep./Oct.-15, Q9(b)

Internet and WWW as Enablers of E-commerce

Internet is a massive world wide collection of networks connecting set of subnetwork and computing resources
which are located on these subnetworks. The growth of Internet is increasing drastically because.
1. It have no geographical bond.
2. It helps the user in finding out the required information within few minutes.
Internet came into existence in 1969 with the name ARPANET. It links together military, scientific, academic
researches into a single network. Due to the constant growth, the management of ARPANET became difficult. Later on
different networks such as USENET, BITNET, NSFNET came into existence.
These networks were dedicated to be used by academic community, but were later used by commercial organizations
as well.
With the advent of Internet, the business can now appear globally and make many international clients around the
world. The Internet has come up with various business models belonging to e-commerce. These business models utilize
the privileges facilitated by the Internet capabilities which include communication, community building etc. Moreover,
e-commerce make use of Internet to perform on-line transactions.
The World Wide Web (WWW), or the web, is a repository of information spread all over the world and linked
together. The www has a unique combination of flexibility, portability and user-friendly features that distinguish it from
other services provided by the Internet.
The www project was initiated by CERN (European Laboratory for Particle Physics) to create a system to handle
distributed resources necessary for scientific research. The WWW today is a distributed client-server service, in which a
client using a browser can access a service using a server. However, the service provided is distributed over many locations
called websites.
The web consists of many web pages that incorporates text, graphics, sound, animation and other multimedia
components. These web pages are connected to one another by hypertext. In a hypertext environment, the information is
stored using the concept of pointers. Hypertext is a page linking system that connects the text present on one page with
the text on other pages. Inclusion of hypertext in the internet allowed the users to get to the related information with ease.
WWW uses a concept of HTTP which allows to communicate between a web browser and web server. The web pages can
be created by using HTML (Hyper Text Markup Language). This language has some commands which are used to inform
the browser about the way of displaying the text, graphics and multimedia files. HTML also has some commands through
which links can be provided to the web pages.
If a »ser wants to get a page from the web, he should type URL (Uniform Resource Locator) for the desired page,
or otherwise he must click on a link that provides the URL. The URL specifies the internet address of the web server, the
directory and name of the desired page. If there is no directory or web page specified, then the web server w ill provide a
default home page.
The WWW today is a distributed client-server service, in which a client using a browser can access a service using
a server.
The emergence of WWW had positive impact on many IT based organizations. These organizations were able to carryout
their transactions and operations online with no difficulty. Because of these potential benefits, WWW can be considered as a
mean for conducting many E-commerce based applications such as E-Marketing, E-Advertising and E-Banking.
’ A
Thus, both Internet and WWW together has made a huge change in the world of commerce by reducing the traditional
way of performing business activities. They allow easy access to information on wide variety of products. Also, they help
the companies to service their clients around the world. Thereby, facilitating a world wide connectivity between the clients
and the businesses. By performing on-line communication with their clients, they can significantly add extra value to the
existing products and services to increase the profit. Also by making research and study, the organizations can launch new
products, brands and services. Furthermore, the Internet radically reduces the expense of creating, sending and storing of
information with which the companies are able to reach the untouched potential customer.
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16 E-COMMERCE

Q24. Give the limitations of E-commerce.

Answer:
The limitations of e-commerce can be either of technical type or non-technical type.

Technical Limitations

The technical limitations of e-commerce are given below. However, they can be reduced by appropriate planning
and implementation.
(a) Lack of communication protocols, system security, standards and reliability is the first limitation of e-commerce.

(b) The telecommunication bandwidth is not sufficient as their is an increase in number of consumers.

(d) Integration of e-commerce and internet software with few existing applications and databases is very difficult.

(e) In addition to the network servers, vendors need some special infrastructure and web servers.

(f) Few e-commerce software are not compatible with few operating systems and hardware.

Non-technical Limitations

The non technical limitations of E-commerce are,

(a) Privacy and Security

Security and privacy issues are very important in B2C type of e-commerce. Security issues are a big concern even
after using good encryption. Privacy measures are improving at a constant rate. However, convincing customers
about secure on-line transactions and privacy in shopping is little difficult. As per the survey, 17.2% voted for security
and privacy as major concern.

(b) Justification and Cost

In order to justify the system, intangible benefits like good customer service and advertisement should be dealt
carefully and appropriately. The cost incurred in in-house e-commerce development may be high. The reason being,
lack of experience, which results in delays. The percentage given to justification and cost was 34.8%.

(c) Lack of Trust and User Resistance

Terms like “paperless transactions”, “e-money”, “unknown/faceless sellers” are difficult to catch-up in market as
customers can’t easily trust on faceless sellers. Switching from physical stores to virtual stores is a very slow process.
4.4% people voted for lack of trust and user resistance as one of the major limitations of e-commerce.

Other Limitations

❖ Lack of feel and touch plays an important role in stopping customers to switch from physical to virtual stores.

❖ Unresolved legal issues and improper government regulations and standards.

❖ There is a rapid change and evolution in e-commerce. But, customers look for stable areas before entering into it.

❖ E-commerce support services are very less.

❖ The number of sellers and buyers in few applications is very less. Thus, no chance for profitable e-commerce
operations.

❖ E-commerce may lead to barriers in human relationships.

1 ❖ Inconvenient and expensive internet access, resist most of the potential users from e-shopping.
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UNIT-1 : Introduction 17
Q25. What are the challenges facing the growth and spread of e-commerce in India?
Answer :
Limitations on the Growth of E-commerce
The factors such as internet speed, overall infrastructure etc., have their impact on the growth of e-commerce in
India. E-commerce is associated with some major limitations that must be overcome for its full-fledge development. They
are as follows,
1. Lack of trust
2. High prices of PCs
3. Computer illiteracy
4. Younger generation
5. Government negligence
6. Inadequate infrastructure.
1. Lack of Trust
For any transaction in e-commerce, both buyers and sellers are unknown to each other and the transaction between
the two takes place via electronic devices. The customers are aware of the issues associated with online trading so,
they cannot afford to trust any online website unless the following issues are resolved.
(a) Security
(b) Privacy
(c) Authenticity.
(a) Security
This issue is concerned with the integrity and confidentiality of the information being transmitted.
(b) Privacy
This issue deals with the privacy of personal information obtained as a result of electronic transaction.
E.g: Credit card number.
(c) Authenticity
The authenticity is concerned about the verification of business, customers and services offered. The authenticity
is provided with the help of user name, IDs, passwords, secret numbers etc.
If security measures are properly implemented, privacy of the customer’s information is preserved and proper
authentication is provided, the trust of the customer towards the e-commerce will ultimately grow.
2. Hi(jh Prices of PCs

In India, the cost of an ordinary PC is so high that a common man cannot afford it, this is also a major cause for the
slow growth in e-commerce.
If the price of the computer is brought under the affordable range of Indian customers, the significant growth in
e-commerce will be evident.
3. Computer Illiteracy
Most of the people in India are e-commerce/computer illiterate. This illiteracy is also responsible for the slow
pace in e-commerce development. Even the people in the top positions (like managers) are striving to adapt to this
continuous development in the internet technology and e-commerce.
In order to be competitive with the people of other countries, Indian people must undergo an appropriate training
on the use of computers and e-commerce applications.
4. Younger Generation
The Indian generation that can quickly adapt to the newer technologies is the younger generation but, in order to
make e-commerce successful, matured and reliable decision makers are needed which is not the case in India. So,
it will take some more time for viewing the true face of e-commerce growth.

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UNIT-1 : Introduction 17
Q25. What are the challenges facing the growth and spread of e-commerce in India?
Answer:
Limitations on the Growth of E-commerce
The factors such as internet speed, overall infrastructure etc., have their impact on the growth of e-commerce in
India. E-commerce is associated with some major limitations that must be overcome for its full-fledge development. They
are as follows,
1. Lack of trust
2. High prices of PCs
3. Computer illiteracy
4. Younger generation
5. Government negligence
6. Inadequate infrastructure.
1. Lack of Trust
For any transaction in e-commerce, both buyers and sellers are unknown to each other and the transaction between
the two takes place via electronic devices. The customers are aware of the issues associated with online trading so,
they cannot afford to trust any online website unless the following issues are resolved.
(a) Security
(b) Privacy
(c) Authenticity. <
(a) Security
This issue is concerned with the integrity and confidentiality of the information being transmitted.
(b) Privacy
This issue deals with the privacy of personal information obtained as a result of electronic transaction.
E.g: Credit card number.
(c) Authenticity
The authenticity is concerned about the verification of business, customers and services offered. The authenticity
is provided with the help of user name, IDs, passwords, secret numbers etc.
If security measures are properly implemented, privacy of the customer’s information is preserved and proper
authentication is provided, the trust of the customer towards the e-commerce will ultimately grow.
2. Hi^h Prices of PCs

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18 E-COMMERCE

5. Government Negligence
One more reason for the slow growth in e-commerce is the government’s negligence in implementing mandatory
rules and regulations. Since the taxation of e-commerce transactions has not yet been fully controlled, any step taken
by the government in this regard may have severe impact on the future of e-commerce.
If the rules and regulations laid down by the government are properly implemented and businesses follow those rules,
the e-commerce will view a rapid growth.
6. Inadequate Infrastructure
The infrastructure needed for the successful e-commerce transaction is not yet available. The introduction of broadband
networks have brought some hope to e-commerce development but, they are not fully implemented as a medium for
net access. This is also a major limitation in the growth of e-commerce. Significant changes or improvements have
to be made on broadband networks and other distribution media for providing a dominant access to the internet.
These improvements include the transmission speed, downloading capability, wider coverage etc.
If the above improvements are accomplished then, the success of e-commerce in India will be assured.

1.2 E-BUSINESS: TRADITIONAL AND CONTEMPORARY MODEL

Q26. Discuss in brief about E-business.

Answer : Model Paper-I, Q9(b)

E-business
E-business involves carrying out of business activities such as designing of products, operating supply chain, mar
keting products and providing services to stakeholder using electronic technology. Under e-business, traditional business
practices and information system are integrated with World Wide Web (WWW).
Through e-business, several online operations can be carried out such as,
1. Buying and selling of goods and services.
2. Providing customer service.
3. Providing e-leaming facilities.
4. Joining with different partners towork together.
This type of business is used by different organization for the following reasons,
(i) Business Efficiency
Most of the companies use e-business because it is capable of providing efficiency in production and distribution.
There can be increase in efficiency throughout, from purchasing goods to servicing the customer.
(ii) transaction Management

Using e-business, the customers and suppliers are brought together, which will decrease the transaction cost of
purchasing. This kind of business is also a solution for the problem of time and distance.
(iii) Reaching New Markets and Segments
As e-business is based on internet, it helps in exploring different markets across the globe without any physical
presence.
(iv) A Better Customer Relationship
The data collected through internet help organizations in targeting right customers and providing them, their product
and services.
To perform e-business, the following four distinct phases must be carried out.
(a) Implement a website that will help the respective organization in online buying and selling of products and services.
(b) Link multiple suppliers with enterprise by use of extranets and intranets. This will make the supply chain
management processes online.
(c) The organization must find partners to deal with content, marketing and commerce.
(d) The convergence will then result in new product and services.
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UNIT-1 : Introduction 19

Q27. State how e-commerce differ from traditional commerce.

Answer:

1. E-commerce is mainly concerned about purchasing and selling of products and services over internet using electronic
medium. The traditional or physical commerce involves a direct contact between the buyers and the sellers. For an
instance, if customers want to purchase some commoditiesthen, they need to directly approach a departmental store,
order goods, make payment and take the goods to home whereas in the pure e-commerce systems, if a customer
wishing to purchase a game offered by some software company then instead of making a direct approach to the
company, he/she can browse the company’s website to locate desired game and download it by paying via electronic
means such as credit cards, debit cards, e-checks, e-cash etc.

2. Although the traditional commerce systems and e-commerce systems follow different approaches, there are some
instances where both works concurrently. For example, with the existence of multiple online shopping stores, the
customer can purchase his/her daily commodities by sitting comfortably at his/her residence with just a click on
their mouse and the products are delivered to their doorsteps. In such a case, the payment is made electronically
while the products are delivered physically.

3. The study conducted by Schneider and Perry revealed that, e-commerce proves to be much feasible for the standard
products, low-value products, intangible products and digital products while, the traditional commerce is feasible
for nonstandard products, highly expensive products, very low-value products and perishable products. However,
e-commerce and traditional commerce must be combined when dealing with non-standard services and complex
products.

4. In traditional commerce, customers can verify the identity of the seller and their physical location whereas in
e-commerce, customers feel insecure because they cannot identify the seller and are also unaware of their physical
business location.

5. The face-to-face contact offered by traditional commerce is truly uncomparable in terms of convincing the customers.

6. In traditional commerce, the potential customers can directly get feedback about the merchant from other customers
whereas, in e-commerce, the feedback is posted by the company personnel themselves which may or may not be
correct.

7. Traditional commerce involves all the payments to be made in cash. Thus, customers do not need to worry about
transaction privacy whereas, the e-commerce transactions require customers to give their personal information.
Q28.. Distinguish between E-commerce and E-business.

Answef : March/April-13, Q9(a)

The differences between e-business and e-commerce are,

E-business E-commerce
1. It focuses on customer services, collaboration of 1. It focuses on buying and selling products, services
partners, distributors and suppliers, with buying selling on internet.
and information exchange as its primary focus.
2. More generic than e-commerce. 2. Less generic than e-business.
3. It supports the business processes along the entire value 3. The support is only for buying and selling products,
chain. information exchange.
4. It enables companies to efficiently and flexibly link 4. Such a linking does not exist in e-commerce.
their back-office (internal) and front-office (external)
processes.
5. It places the key processes like CRM, SCM and ERP 5. CRM, SCM and ERP are not included in the selling
on web. process of e-commerce.
6. The scope of e-business is wider than e-commerce. 6. Its scope is limited.

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20 E-COMMERCE

Q29. Write about the major features of E-commerce and how is it different from E-Business.

Answer : March/April-15, Q9(b)

Major Features of E-Commerce

The following are the features of E-commerce technology.

1. Ubiquity

Shopping (or) exchanging business data over web can be done 24 hours a day and 7 days a week. This is offered by
e-commerce to its consumer so that they can shop (or) do other transactions from any location at anytime.
2. Global Reach

The market place is expanded from a small region, town, city to national and international level in a cost-effective
and user-friendly environment.
3. Richness

E-commerce enables the use of text, video and audio to be delivered by the merchant to its consumers. This makes
the communication more attractive from the user’s point of view.
4. Reduced Costs

At the merchant’s point of view, the cost of creating, processing, distributing, storing and retrieving paper based
information is reduced. At the consumer’s point of view, the cost of products and services offered by e-commerce
to its customers is very less compared to other vendors.
5. Personalization and Customization

The data can be customized with the interests and past purchases of the individual customers. This helps in
understanding the user’s needs quickly.
6. Universal Standards

Unlike traditional e-commerce which carry different standards at different nations, e-commerce carry universal
standards that are shared globally.
Differences Between E-commerce and E-business

For answer refer Unit-I, Page No. 19, Q.No. 28.

1 yVIPACT OF E-COMMERCE ON BUSINESS MODELS
Q30. Explain about the impact of E-commerce on business model. (Oct./Nov.-13, Q9(a) | Oct./Nov.-12, Q9(a»

What is the impact of E-commerce on business models? (Model Paper-n, Q9(b) | Oct./Nov.-16,09(b))

Discuss in detail about the impact of E-commerce on business models.

Answer : March/April-16, Q9(a)

Impact of E-commerce on Business Model

E-commerce is a mean of carrying out business activities in such a way that the firms value chain is greatly effected
in positive manner. Generally, a management learning is required for viewing the market place by, crossing the physical
boundaries of the organization prior to the implementation of e-commerce application. However, it is very much essential
to innovate e-commerce application in accordance to business context, which would otherwise result in the failure of these
applications. Therefore, certain business models are to be developed, which have the capacity of integrating e-commerce
application with the overall business goals.
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UNIT-1 : Introduction 21
Aligning Business Goals and E-commerce Strategy

The strategy of e-commerce must be laid in such a way that is very easy for a business organization to achieve
the predefined goals. The goals can mostly be effected because of certain environmental change such as arrival of new
competitors in the market and business trends. Therefore, it is necessary to have a strong relationship between the goals
of the organization and plan of web-based e-commerce. This relationship is illustrated in the following figure.

Figure: Relationship Between Goals of Business and E-commerce

After defining the business goals, it is the responsibility of information system to achieve these goals. Finally, when
the goals are achieved, the e-commerce can set-up the required plan. Generally, these results help in forcing the organizations
to follow the way of setting up the goals and plans, which is however, not followed by every business organization. That
is, there are certain organizations which follow up their own strategy process for achieving organizational goals.
Impact of E-commerce on Value Chain

For answer refer Unit-I, Page No. 10, Q.No 20.

ICDT Business Strategy Model

^formation, Communication, Transaction and Distribution (ICDT) model is the fundamental model developed by
Albert-Angehm for specifying the strategy of business. This model is based on the following virtual spaces.
1. Information virtual space
2. Distribution virtual space
3. Transaction virtual space
4. Communication virtual space.
1. Virtual Information Space

This space of an organization contains information regarding the company, their products and services. Inorder to
enter into virtual market place, it is necessary to initially enter this space. The major concern to be considered here are,
(i) Only accurate and up-to-date information must be displayed.
(ii) Only authorized users should be given privilege of accessing the information.
(iii) Customers must find the required site without any difficulty.
(iv) Customers must not be allowed to have longer waiting time for accessing the website.

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22 E-COMMERCE

2. Virtual Distribution Space

This space of an organization is responsible for distributing the purchased or requested product to the desired
customer. This electronic delivery is pQssible if the product to be delivered is in digital form or the services provided must
be carried out digitally. The major concerns for virtual distribution space are,
(i) The delivery of product or services must be only to the requested, legitimate and approved customers.
(ii) The delivery process of product and service must be reliable.
3. Virtual Transaction Space
This space of an organization is responsible for carrying but business activities (transactions) such as purchase order.
The major concerns to be considered before entering into this space are,
(i) Data security must be high
(ii) Data accuracy and integrity must be maintained
(iii) Vendors must be reliable and trust worthy.
(iv) Private information about organization must be kept secure.
4. Virtual Communication Space
This space of an organization concentrates on establishing relationship, exchanging information via chat rooms,
forums and negotiating. If this space consists of negotiating agents or members who pay (prior to entering space) then this
would really have a drastic impact on growth of e-commerce.
Three Pillars of E-commerce
For answer refer Unit-I, Page No. 8, Q.No. 19.
j^CLAS^SCAHON OFE^COMMERCE: B2B, B2C, C2B, C2C, B2E

Q31. List the types of e-commerce. Explain each one briefly.

Answer:
E-commerce can be classified into different types on the basis of the nature of ongoing transactions.
1. Business-to-business e-commerce
2. Business-to-consumer e-commerce
3. Consumer-to-business e-commerce
4. Consumer-to-consumer e-commerce
5. Business-to-empioyee e-commerce
6. Non-business e-commerce
2
7. Intra-organizational e-commerce.
1. Business-to-Business (B2B) E-commerce (Organization-to-Organization)
In this type of e-commerce, transactions related to exchange of product or services, takes place only among the
organizations. Possible transactions of commerce that occur between organizations are,
(i) Transactions related to electronic market.
(ii) Transactions related to Inter-organizational Information Systems (IOS). Examples of these systems are EDI
systems, EFT (Electronic Funds Transfer) systems etc.
2. Business-to-Consumer (B2C) E-commerce (Organization-to-Consumer)
In this type of e-commerce, retail-based transactions are exchanged among organizations and customers. Here, ar
organization acts as a retailer or seller.
3. Consumer-to-Business (C2B) E-commerce
In this type of electronic commerce, the consumers play an important role i.e., they act as a retailer who sells then
products and services to the business organization.
4. Consumer-to-Consumer (C2C) E-commerce
In this type of electronic commerce, transactions take place among customers themselves that is, a customer purchas
the product from another customer. In short, customer acts as a retailer or seller in C2C electronic commerce.
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UNIT-1 : introduction 23
5. Business-to-Employee (B2E) E-Commerce

In this type of e-commerce, transactions related to products or services are exchanged among organizations and
their employees. Here, the aim is to increase the productivity of employee with respect to their personal use. These
systems treat their employees as customers. With such systems, the organizations get their work done in a productive
way while minimizing the cost. An example of B2E system is training employees over intranets.
6. Non-business E-commerce

In contrast to other types of e-commerce, non-business e-commerce involves small scale organizations for carrying
out all the transactions.
7. Intra-organizational E-commerce

In this type of electronic commerce, various organizations make use of Internet services for conducting transactions.

1.
5 APPLICATIONS OF E-COMMERCE
Q32. Explain about the E-commerce applications. (March/April-12, Q9(a) | March-11, Q9(b»

Write about E-commerce applications.

Answer : (Model Paper-Ill, Q9(b) | March/April-17, Q9(b))

E-commerce Applications

E-commerce applications comprise different types of elements which are,

1. Multimedia content
2. Multimedia storage servers
3. Client server architecture
4. Video servers
5. Transport and delivery of information
6. Consumer access devices
7. Internal processes of multimedia servers.
The diagrammatic representation of the E-commerce application elements is shown in figure (1).

Figure (1): E-commerce Application Elements

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24 E-COMMERCE

1. Multimedia Content
Multimedia content is the most important element of E-commerce applications. The word multimedia itself specifies
that it is a combination of more than one media. In other words, combination of various kinds of information like graphics,
text, audio, video etc., is called multimedia. Accessing of multimedia content is based on the hardware capabilities of the
customer. In addition to it, a variety of multimedia content and the type of packaging used are the important factors for the
success of E-commerce applications.

Text Images Audio

X 1
X
X
1
X 1
_____ii

Multimedia

Z -----1
z" 1
1
X.
X

Video Graphics Animation

Figure (2): Multimedia Content

2. Multimedia Storage Servers
Multimedia storage servers is the second element of E-commerce applications. For transmitting and storing large
amount of digital information, a large storage space is required. This form of storage is referred to as multimedia storage
servers. These servers are capable of handling large volumes of data ranging from books, newspapers and catalogs to
movies, X-ray images etc.
Responsibilities
The responsibilities of these servers include the following,
(i) Providing information when requested
(ii) Handling large volumes of data
(iii) Assuring information security
(iv) Providing reliability.
The main advantage of digitizing the multimedia content is that it reduces the bulkiness and unreliability of data,
thereby making it cost-effective to implement.
3. Client/Server Architecture
Client/server architecture is the third element of e-commerce applications. Apart from this architecture, mainframe
based architecture was used for the working of e-commerce applications. Since this architecture was very expensive and
was unable to transmit information of various forms (mainly audio and video), client server architecture was preferred over
main frame based models. The working of client server architecture is very simple. Clients are the systems that can request
the desired information for processing from the servers. Servers respond to the clients by providing the desired information
as requested by the client. Most of the processing is done on the client side. In client server architecture, the clients and
server can interact with each other through message passing model consisting of request and response messages.
Client s ide Server s ide

Response

( Application y*'"'' ( Application y

k logic logic )

Request
( Presentation^ ( Multimedia X
X. logic / content J

Figure (3): Client/Server Architecture

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UNIT-1 : Introduction 25
4. Video Servers

Video servers are the fourth element of E-commerce applications. E-commerce applications involving transmission
of digital video information, require different processing methods like,
1. Telecommunicating method
2. Video conferencing method.
For storing large amounts of video information, some special devices are required. These devices are called video
servers. The main function of video server is that it acts as an interface between the information provider and transport
provider. The information can be available in multiple forms like entertainment information, multimedia related information
etc., and the transmission can be done through cable wires, wireless networks, etc.
The main advantage of video servers architecture over client server architecture is that the video servers have the
ability to transmit information to several people at the same time with the help of telecommunication or cable devices /
networks.

Figure (4): Video Servers/Video on Demand Systems Architecture

5. Transport and Delivery of Information

This element focuses on two important processes,

(i) Mediums through which information is transmitted.
(ii) Providers to transport through each medium.
The four types of medias are,
(a) Long distance as well a&>16cjt:feiepfrqne IFHBS.
(b) Coaxial, fire optic
(c) Internet.

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26 E-COMMERCE

Providers for each of the medium are,

(a) Telecom Based Providers

These providers include both long distance and local telephone lines. These providers only provide telephone line
services for transmission of information. It employs a technique called ‘Asymmetric Digital Subscriber Line’ (ADSL)
which cannot handle live transmissions and fails to display pictures clearly.

(b) Cable Based Providers

These providers provide only cable services for transmission of information through fibre optic coaxial cables.

(c) Computer Network Based Providers For Internet

These providers are used only to provide on-line services for transmission of information.

(d) Wireless Based Providers For Cellular and Radio Networks/Devices

These providers are used exclusively for providing cellular and radio services for transmitting information.

6. Consumer Access Devices

Consumer access device'is the sixth element of E-commerce applications. This element focuses on two important
processes,
(i) Different types of customers.

/ (ii) Devices required for customers.

There are mainly four types of customers,

1. Customers who use audio and video information.

2. Customers who prefer telephonic information.

3. Customers who make use of electronic information.

4. Customers who employ PDAs ( Personal Digital Assistants ) for information.

Different Devices Required by Different Customers

1. Personal as well as Mobile Devices for Customers for Audio and Video Information: Examples of personal devices
are work stations, multimedia, personal computers etc. Examples of mobile devices are laptop device, note book
computers etc.

2. Video Phone Devices: For customers of telephonic information.

3. Television / Game Devices: For customers for electronic information.

4. Pen Based Devices / Voice Driven Devices I Software Agents: For customers of PDA information.
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UNIT-1 : Introduction 27

Voice
T

Figure: Customers and their Servers

7. Internal Processes of Multimedia Servers

Systems that consist of both hardware and software are called multimedia servers. These servers are used for,
(i) Converting any irrelevant information into relevant information and distributing the information in such a way that
it can be accessed by users at any time and from any place.
(ii) Hand lines information of different formats like image audio, video etc.
(iii) Creating and modifying of multimedia documents.
(iv) Storing and retrieving multimedia documents.
(v) Sending as well as receiving multimedia documents.
For making an application interactive, a multimedia server must do the following,
(i) Handle large number of users simultaneously
(ii) Deliver the desired information to the customers at affordable costs.

1.5.1 E-Commerce Organization Applications_______

Q33. Explain E-commerce organization applications.

Answer :
The different E-commerce organization applications are,
1. Variations in business environment
2. Marketing
3. Inventory Management
4. Supply Chain Management
5. Electronic Commerce and retail industry
1. Variations in Business Environment

Most of the companies today are adopting various ways to improve their business. Instead of working with the same
business partners, they are looking for new business partners to extend or globalise their business. The most surprising
thing is that companies are looking for business partners not only within their own fields but also in the other fields.

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28 ECOMMERCE

Following are the factors that lead to variations in business environment,

(i) Pressure of being one step ahead of the competitor.
(ii) Pressure of satisfying customers needs.
(iii) Pressure of keeping up with today’s business environment.
(iv) Pressure of satisfying investors/stakeholders.
(v) Pressure of getting globalized.
(vi) Pressure of reducing the costs associated with inventories and production.
2. Marketing and Electronic Commerce

Most of the companies are forced to change their marketing strategies due to various pressures on the business. The
most common marketing strategies that are in use by various companies are,
(i) Target Marketing
(ii) Relationship Marketing
(iii) Event Marketing.
(i) Target Marketing

A marketing strategy where companies advertise their product in selected segments of the market for only a limited
set of people.
(ii) Relationship Marketing

It is a strategy where companies advertise their product in a selected market in such a way that a good relationship
is built up and maintained with their customers.
(iii) Event Marketing

A marketing strategy where companies are not interested in targeting any set of people or establishing any relationship
with them. In this strategy, companies advertise their product into the market in such a way that if people are interested,
they can buy the product.
One marketing strategy that can be used by various companies and is much better than the existing marketing
strategies is called interactive marketing. In this type of marketing strategy, companies can advertise their product to the
peopl^ by providing special graphics to the product with the help of multimedia like giving a logo to the product.
3. Inventory Management

In order to get globalized, companies are looking to try out various business methods. One business method used
by many companies for globalization is inventory management.
This method is known by different names in various industries. For instance,
(i) In manufacturing industry, inventory management is known as JIT (Just In Time) inventory systems.
(ii) In retail industry, inventory management method is known as Quick Response (QR) retailing systems.
(i) Just in Time ( JIT )

These systems can be defined as a collection of various management practices used by different production systems.
The working of JIT systems is based on two important laws,
(a) Removing unnecessary materials, devices required for production and avoid wastage of time in manufacturing
of products.
(b) Providing good working conditions to the workers of the different management practices. JIT Purchasing is
the most widely used management practice which helps in establishing a good relationship between suppliers
and customers.
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UNIT-1 : Introduction 29
(ii) Quick Response (QR) Systems

These systems are the advanced versions of JIT purchasing management practices. Whenever someone goes to a
shop and wants to purchase a particular item and he is informed that item is not available, it leads to frustration of
the customer and embarrassment to the shopkeeper.
In order to avoid getting embarrassed again in front of the customer, retailers use special type of systems called quick
response or QR systems. QR systems provide a network between customers, shopkeepers/retailers and vendors. So,
whenever customer wants to purchase a product, the vendors will be asking to the retailers whether there are any
new requirements from the customers side to be fulfilled.
4. Supply Chain Management

There were various disadvantages of using inventory management methods like JIT and Quick Response systems
which include,
(i) Cost of using these systems was very high.
(ii) These systems were not ideal for those companies where suppliers take a long time in delivering the products.
In order to overcome these drawbacks, a special type of management chain was used called as Supply Chain
Management.
This management system established a chain/link between partners (internal as well as external) involved in
supplying and processing the products so that the manufacturers get their desired raw materials and customers get their
desired products.
There are mainly seven different types/functions of supply chain management,
(i) Supplier Management
(ii) Inventory Management
(iii) Distribution Management
(iv) Channel Management
(v) Payment Management
(vi) Financial Management
(vii) Sales force Productivity.
5. Electronic Commerce and Retail Industry

There has been a lot of changes in the economy system of the retail industry. Customers are expecting a lot more from
their retailers. For instance, improved quality of products, more products at lower costs. As a result, retailers are looking
for suppliers from outside the country in order to decrease the cost of the product. One more reason is that the labour costs
outside the country are more cheaper.
Q34. Discuss the key factors affecting online entertainment industry.

Answer :
Online Entertainment Industry

The key factors affecting online entertainment industry are as follows,

1. Scale and Growth of Populations

The major sources of online entertainment are generally the music downloads, online games, films and sports. But
this does not make the customers to spend more time on music sites, because they usually download the music and store
it for the future. However, the usage of those sites that allow high participation and control of the customers is quite high.
Further, new versions of non-traditional entertainment are defined by the customers in the absence of TV and film on
the site. These versions do not include the traditional media, which consists of blogs and user-generated content on social
networking sites.

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30 E-COMMERCE

2. Content

There have been wide alterations in the packaging, distribution, marketing and sales of music tracks with the
introduction of the Internet. That is the users can search for any song in the online digital searchable music archives and
can mix one another so as to produce their own personalized library. Due to this service, the users are capable of creating
their own music packages and distributing them. Hence the online entertainment provides high control to the users over
program content as well as program focus.

3. Revenue Models and their Results

Marketing model is used by most of the television and movie sites in order to publicize their products and for
increasing the number of customers. In case ofApple’s La-carte model, the customer can only pay for the downloading of
single music track which lead to an unexpected success. Furthermore, pay-per-view rental model and pay-for-download
model are used by most of the film sites which are also quite successful.

4. Convergence

The convergence in entertainment industry has been very slow because of technological and market forces. That is,
music systems have been converged from PC’s to handheld devices such as ipads and ipods etc. The PC’s behave as game
station competing with dedicated game stations. And on the other hand, most of the dedicated game stations are connected
with the web for the purpose of interactive play.

1.5.2 E-Marketing, E-Advertising

Q35. Explain about online marketing and advertising.

Answer:
Online Marketing

Online marketing is the achievement of marketing goals through the utilization of the internet and the web based
technologies. Online marketing is also known as internet marketing or marketing on the web. It is a part of e-business or
e-commerce. The Internet marketing has changed the way of working, buying and living of the people. It involves the
exchange of products, services, information and payments through the electronic medium of networks.

E-market is a virtual online market wherein, large number of buyers, suppliers, traders, sellers interact with each other
so as to perform information exchange. They try to build up a relationship with one another through content aggregation
created by different suppliers and member communications which are supported by collaboration tools. The major advantage
of e-rjfarket is that, it reduces the inefficiency by tightly coupling the relationship among customers and vendors and even
by increasing the reach of suppliers.

The following are the services offered by e-markets,

(i) Settlement services s

(ii) Conflict resolution services

(iii) Logistic services

(iv) Risk management services.

All the above services are generally needed by the trading members. All the operations of markets are carried out at
a single point referred to as trading hub. This hub is responsible for gathering relevant information from different suppliers
and then processing it in such a way that it becomes useful to all buyers.

Online marketing has two channels. They are as follows,

1. Commercial online services and

2. Internet.
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UNIT-1 : Introduction 31
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1. Commercial Online Services

Online services such as American online, CompuServe and Prodigy offer marketing services to subscribers that
pay a monthly fee. These services also provide information on education, sport, entertainment, shopping and the latest
international news.

2. Internet

This is a vast international network, connecting other computer networks as well as companies, universities, libraries
and so on. With the introduction of the world wide web, the usage of the internet increased very rapidly. The use of the
Internet itself is free. Users only need to pay for the services of a commercial provider that enables the user to access the
Internet.

Online Advertising

Online advertising is a marketing strategy that makes use of Internet to fetch website traffic and target, deliver
marketing related information (in the form of messaj. ) to the right customers. This strategy provides quick promotion of
product information irrespective of geographical boundaries.

Internet advertising or online advertising can be classified into two types,

1. Push-based advertising

2. Pull-based advertising.

1. Push-based Advertising

It is also known as active advertising. Push-based advertising is the most inefficient type of advertising. This is
because its does not convey relevant information to customers. In short it can be said that information sent through this
advertising is meaningless.

There are two types of push-based advertising,

(a) Broadcast advertising

(b) Direct mail advertising.

(a) Broadcast Advertising

This is the first type of push-based advertising. Through broadcast advertising, different companies can advertise
their products to unlimited number of customers. One of the ways by which broadcast advertising can be done is
by using television. Doing broadcast advertising with television has benefits and drawbacks.
^The benefit is companies through television can visually explain the importance of their products.

Using television for advertising is expensive. The time duration allotted for showing advertisements on television
is usually thirty sec. Hence in such short span of time, customers cannot get the complete idea about the product.
Thus, product advertisement has to be displayed at periodic intervals of times in order to understand the customer.
To display the add more than once requires a lot of cost.
Another way in which companies can do broadcast advertising is by using news groups. In other words, company
can advertise their products through news groups.

(b) Direct Mail Advertising

This is the second type of push-based advertising. Direct mail advertising is the process in which companies advertise
their products by sending mails to different customers. The benefits of this advertising technique are,

(i) Through direct mail advertising, companies can target only those customers who seems interested in buying
their products.
(ii) Companies can send the product information in their own way. In other words, companies have full control
over presentation of the message.
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The drawbacks of direct mail advertising are,

There is a possibility that some messages received by customers will be of less importance.
For this reason, direct mail is also referred to as junk mail. These junk mail messages not only waste the customers
time but also unnecessarily utilizes the space of the customers mailbox.
Another interesting point to note here is that companies sometimes purposely send junk mails thinking that there
will be few customers who will read the message and buy their products.
2. Pull-based Advertising

This type of online advertising is also called as passive advertising. Companies by using pull-based advertising can
have a better customer response than through push-based advertising. This is because with the help of pull-based advertising
paradigm, a feedback loop which directly connects a company and customer is established thereby providing meaningful
information to the customers.
Pull-based advertising can be classified into three types or forms,
(a) Bill board advertising
(b) Advertising through yellow pages
(c) Advertising through endorsements.
(a) Bill Board Advertising

This is the first type of pull-based advertising. It is also known as world wide web advertising. In this type of
advertising, one company has to take the help of other company for promotion of its products online. In other words,
one company promotes its products through other company’s online services.
Advantages

(i) Inexpensive to implement.

(ii) Companies through this advertising, can make their products reachable to different customers.

Disadvantage

Most of the customers don’t browse through one site for a long period of time. They constantly switch from one
site to another. So the product information provided by the company should be in such a format that it is simple and
short so that the customers can easily understand.
(b) Advertising through Yellow Pages or Yellow Pages Advertising

In this type of pull-based advertising, companies can promote their products by using yellow pages directory services.

Advantages

(i) Information can be kept for long time.

(ii) Using yellow pages for advertising is cheap.
Disadvantages

(i) Product information cannot be frequently updated.

(ii) Limited creativity in the ads.
There are different types of yellow pages that can be used by companies for promoting their products,
❖ Traditional yellow pages .
❖ Audio text yellow pages (talking yellow pages)
❖ Interactive or consumer search databases.
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UNIT-1 : Introduction 33

(c) Advertising through Endorsements or Endorsement Advertising

In this type of pull-based advertising, companies ask different celebrities, famous personalities, etc., to promote
their products. But in case of online endorsement advertising, a company asks the customers to give feedback for
its products. In other words company ask the customers to endorse its products.
Advertising on Internet has its own advantages and disadvantages. The advantages of advertising over
internet are,
(i) Through Internet advertising, companies can promote their products more efficiently.
(ii) By advertising through Internet, companies can satisfy the needs of different customers.
(iii) Customers get to know about the latest products available in the market.
(iv) Income of companies will increase as a result of advertising on Internet.
»
The disadvantages of advertising over Internet are,
(i) Customers sometimes receive unwanted messages in their mailbox.
(ii) No specific rules have been defined till date that describe how advertising should be done.

1.5.3 E-Banking, Mobile Commerce

Q36. Discuss briefly on,

(i) E-banking

(ii) M-commerce and its limitations.

Answer :
(i) E-Banking

Electronic banking is an Internet-based banking process in which users are allowed to connect to the legitimate
websites of their respective bank. Once the connection has been established, the users can use the banking services virtually
from their home location. Therefore, E-banking is also known as home banking, virtual banking and online banking. The
major advantage of E-banking is that, it provides convenient and safe form of anywhere, anytime banking. However, due
to wide usage of internet, there is a risk that the confidential information being transferred be intercepted by an intruder.
Hence, it is necessary to ensure that the security is not compromised. For this reason, many financial institutions have
adopted many security methods such as providing passwords, verifying the customer’s authentication, etc.
(ii) M-Commerce ,
X
Mobile commerce or M-commerce refers to any business activity or transaction that is done through mobile devices
which are connected to wireless networks. Here, the mobile or wireless devices like cell phones, Personal Digital Assistants
(PDAs), tablet PCs, laptops etc., are used. All these devices are required to have internet connection via the wireless networks
like GSM, CDMA, GPRS etc. The internet connectivity provided by these networks can be used to access information
stored on several providers and web servers.

Limitations of M-Commerce

The following are the limitations of mobile commerce,

(i) Mobile devices are battery operated handheld devices with limited hardware and software capability.

(ii) They have a small microprocessor, which cannot perform heavy computations.

(iii) They offer a small screen whose resolution is less and hence rich user experience like web browsing is not possible
on mobile devices.

(iv) Due to less computing power, they cannot run complex application and encryption services.

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34 E-COMMERCE

(v) The wireless networks provide limited bandwidth which is insufficient for supporting multimedia and other advanced
m-commerce applications. However, with the advent of 3G networks, the bandwidth of wireless networks has
improved a lot.
(vi) Mobile devices cannot fully handle HTML. Hence, to support web in mobile devices, two different standards were
developed (by two different organization), they are Wireless Mark up Language (WML) and CHTML needs to be
used.
Q37. Explain the applications of mobile commerce.

Answer : March/Aprii-13, Q9(t>)

Applications of M-commerce

M-commerce applications were introduced in order to serve time critical services. These applications enable the
users to accomplish their tasks more efficiently. Some of the M-commerce applications and services are given below,

1. Location-based Services

M-commerce helps the user in determining the location of nearby restaurants, food courts, ATMs, Petrol pumps,
theatres etc., using certain applications like zomato, smarter agents. Along with the locations, the user is also provided
with a map showing the way to reach the desired location.
2. Banking and Financial Services

With the emergence of M-commerce, several banks have become participants of mobile banking wherein, a user
can check his/her account balance, transfer amount, pay utility bills etc., via a cell phone.
3. Advertisement Over a Mobile

The mobile service providers have a complete record of their subscriber’s locations, their age, name, games and
other services they frequently use on their cell phones. This information is very essential for marketers. It helps
them to find millions of potential customers with an ease. Mobile marketing will certainly result in higher success
rate if done at the right time and in the right way.
4. Entertainment

Now-a-days, mobile phones serve as a portable platform for entertainment with their ability to play videos, audio,
3D games, movies etc. The service providers offer different forms of digital games, music, ringtones, news clips,
weather reports, mobile TV etc., with a minimal surcharge. Therefore, many companies are developing and selling
it mobile compatible softwares and games.
5. Mobile Brokerage

M-commerce enables the subscriber to have up-to-date information regarding the marketing developments irrespective
of physical location.
6. Mobile Purchase

M-commerce enables the customer to perform their shopping online irrespective of the time and location.
1.5.4 E-Trading, E-Learning, E-Shopping
Q38. Discuss in brief about online trading.

Answer:
E-trading/Online Trading

E-trading/online trading is also known as E-broking. E-broking provides up-to-date and on-time information about
the stock prices to everyone across the world. People can respond to the changes taking place in the stock market by the
information provided by E-broking. People having Internet bank account, can buy and sell stocks online.
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UNIT-1 : Introduction 35

Before the Internet came into existence, buying and Apart from students, e-training application is even
selling stock at the correct time relied upon the availability employed in many business-oriented organizations, where in
of eminent brokers. These brokers used to be in shortage. the higher level management spend large amount of money
Small investors always used to face difficulty in getting a in engaging their employees in using internet-based training
broker. A part from brokers, the other sources from where programmers. This training provides the employees with
the information about stock prices can be obtained were complete knowledge about the newer enhanced technology.
magazines, newspapers, telecommunications and radios. The software technologies of e-training made it possible
These sources are cost consuming, slow and less compre for educator, administrator and learning service provider in
hensive compared to Internet. creating, launching and evaluating the process of learning
over Internet using the student Internet browser. Before
Online-trading/E-trading is the best solution to the
selecting this learning management system, it is necessary
requirements of investors. All the problems which investors
to ensure that the system is capable of offering a wide range
used to face before the introduction on Internet will be sorted
of features and can update and build the site with advanced
out by E-trading.
educational features.
Advantages
The following are the two primary models of
1. The transaction cost is reduced by carrying out auto e-training using which instructions are delivered.
mating process.
(i) Asynchronous model
2. The transactions are executed quickly since there is
(ii) Synchronous model.
no paper work document involved.
(i) Asynchronous
3. The market efficiency is increased since there is a
possibility of achieving greater liquidity i.e., more In this type of model, the instruction is self-directed
number of buyers and sellers. and self-paced.
4. The information regarding the price is transparent i.e., Example
the user can have information regarding price of the
E-mail, Newsgroup, Webforums (bulletein boards).
stock, currencies etc., which was opaque earlier.
(ii) Synchronous Model
5. The level ofcompletion has increased to maximum level.
In this type of model, an instructor is provided that
Q39. Discuss in detail about,
trains the user in understanding the required concept.
(a) E-training
Example
(b) E-shopping.
ChatRooms, ShareWhiteBoards, Teleconferencing,
OR Video Conferencing.
Explain about E-Shopping? List out the Advantages
advantages and disadvantages of it.
1. There is no travel costs.
(Refer Only Topic: E-Shopping)
Answer : March/April-16, Q9(b) 2. There is no time spent commuting to class.
3. The user can learn at his/her own convenience location.
(a) E-training
4. It reduces the cost ofboth provider and organization
E-training is an application provided by e-commerce that require training.
and is defined as any where, any time training delivered
over the Internet. It is an effordable and easy-to-use 5. It is effective for learners who are shy and language
learning management system based on Internet. Learning challenged.
management system provides a trainer who is responsible Disadvantages
for monitoring the student’s participation and for calculating
student’s performance. The purpose of providing this 1. The instructor needs to be an effective online
application is to help students in, instructor.

(i) Accessing the knowledge remotely. 2. It consumes huge amount of instructors time when
individual feedback is required.
(ii) Making immediate assessment of their
understanding. 3. It requires students and providers to have prior
knowledge about the technologies and equipments
(iii) Providing peer-guidance. being used.
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36 E-COMMERCE

(b) E-shopping

E-shopping or online shopping is a new form of shopping which enables the customer to purchase their desired
product from intended seller over the Internet. It can also be referred as E-store, web store, virtual store.
Advantages

The advantages of online shopping are,

1. Convenience
2. Better information
3. Competitive prices
4. Any where and anytime shopping
5. Save time and fuel
6. Compulsive shopping.
Disadvantages

1. There is lack of security while performing online transactions.

2. There is no concept of look and touch (feel).
3. There is great chance of frauds to occur.
Q40. Define E-learning. Discuss its benefits and drawbacks.

Answer :
E-learning

Education, training, or knowledge management achieved through the content delivered via the Internet is known as
E-leaming. It comprises of all electronically supported and web-enabled systems that allow access to the information to
anyone, anytime and anywhere. E-leaming is highly efficient for both training and teaching purposes, hence, it has been
adopted by many world class universities and organizations.
Benefits of E-learning

Some particular useful benefits of E-leaming are as follows,

1. Time Reduction

It cuts down the amount of time required for teaching or training purposes to almost half.
f-
2. Large Volume and Diversity

It can offer training to a large number of employees with different cultural and educational backgrounds at the same
time, even if they are at different geographical locations in different time zones.
3. Reduction in Expenses

When used as an alternative to classroom lectures, E-leaming reduces the total expenditure on the education to SO
TO percent.
4. Higher Content Retention

In contrast to the students that opt for traditional classroom learning, the student’s of e-leaming retain the content
of the course upto 60% more. This is because, such students are self-initiated and self-paced and their motive for
obtaining more knowledge could be to increase their scope of view, or enhance career skills.
5. Flexibility

It offers a high level of flexibility to the students in learning, as it allows them to choose the time, locations, content
and speed of learning according to their convenience.

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UNIT-1 : Introduction 37

6. Up-to-Date and Consistent Material

As E-learning does not have any necessity of changing the teachers, it offers upto 60% more consistency of the
material when compared to it’s counter part classroom learning. And, it also provides instant and timely updation
of the information which is not possible with text-books.
7. Fear-free Environment
E-leaming is a very good platform for the student’s who are shy and reserved and does not like to join a face to face
group discussion in class. Hence, it offers a fear-free and privacy protected environment to the students in which
they can put forth their ideas, view, expression with ease.
Drawbacks of E-learning
Some of the major drawbacks faced by e-leaming are as follows,
1. Need for Instructor Retraining
As every instructor is not competent and comfortable in teaching through electronically supported system, it requires
time and money to prepare them for this task.
2. Need for Tools and Support Services
Offering support services for E-leaming’s creation, use and maintenance requires a whole bunch of multimedia
equipments which consumes more money.
3. Lack of Human Interaction and Campus Life
As it is a virtual classroom, E-leaming cannot replicate the intellectual simulation that happens via, instruction in a
classroom with a live instructor.
4. Assessment
Unlike real world classroom’s where the tutors can examine whether every student has completed his/her assignment,
E-leaming cannot assure such a facility and thus lacks one of the necessary features of education.
5. Maintenance and Updating
Though updating of content or information is easy in E-leaming, it consumes a lot of resources such as time, money
and effort. Also, because of lack of ownership and accountability for website material, it is difficult to maintain the
content of the e-leaming material.
6. Protection of Intellectual Property
Monitoring and controlling the transfers of copyrighted content downloaded from the E-leaming platform is difficult.
7. Computer Literacy
, ft is mandatory for the students of E-leaming to be equipped with computer knowledge. Hence, it cannot be extended
to the students who are computer illiterate.
8. Student Retention
ft is difficult to keep all the students psychologically interested and enthusiastic regarding E-leaming for a long time
without some human feedback.
Q41. Explain the approaches of E-learning. Oct.-14, Q9(b)

OR
What are the different approaches of E-learning?
Answer: Oct./Nov.-13, Q9(t>)

E-learning Approaches

There are many pedagogical approaches which are used for creating content that can be used for performing.
1. Computer based learning.
2. Computer based training
3. Technology based learning.
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38 E-COMMERCE

Pedagogical Approaches

The different pedagogical approaches include,

1. Social-constructive approach
2. Laurillord’s conversational approach
3. The cognitive perspective approach
4. The emotional perspective approach.
1. Social Constructive Approach

The content for e-leaming can be gathered by performing social meeting where in discussion can be made regarding
the required concept. This approach is generally used by different online communities like forums, wiki articles,
blogs etc.
2. Laurillord’s Conversational Approach

This approach is used for conducting higher learning processes in which the student can practically observe the
world. General conclusion even can acknowledge other peoples experiences. The content creation for e-leaming via
this approach is done using message boards and forums. Wherein users unite themselves to share their knowledge
and information.
3. The Cognitive Perspective Approach

This is a new approach that concentrates on the working of a human brain that is how learner’s brain work is considered
as an effective tool for gathering, conceptualizing, organizing the information. This way helps in creation of home
lessons and other type of e-leaming content.
4. The Emotional Perspective Approach

This approach gives importance to name learners as it focuses on emotional factors like, fun, motivation and
memorability.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT-1 : Introduction 39

INTERNAL ASSESSMENT
I. Multiple Choice
1. is a goal of e-commerce. [ 1

(a) Cost reduction

(b) Faster response time

(c) Improved service quality

(d) All the above

2. The central pillar of e-commerce is [ 1

(a) Electronic information

(b) Electronic relationship

(c) Electronic transactions

(d) None of the above

3. WWW stands for I 1

(a) World Wide Web

(b) World Wide Website

(c) Websites and Webpages on Web

(d) None of the above

4. In e-commerce, transactions related to exchange of product or services, exchange takes place only among
organizations. [ ]

(a) B2B

(b) B2C

(d) B2E
5. ________ e-commerce involves small scale organizations for carrying out all transactions.

(a) B2C

(b) B2E

(d) Intra-organizational

6. ICDT business strategy model is based on________. [ ]

(a) Information virtual space

(b) Distribution virtual space

(c) Transaction virtual space

(d) All the above

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40 E-COMMERCE

7. providers include both long distance and local telephone lines. [ J

(a) Telecom based *

(b) Cable based

(c) Computer network based

(d) Wireless based

8. is a marketing strategy where companies advertise their products in selected segments of the market
for a limited set of people. [ ]

(a) Relationship marketing

(b) Target marketing

(c) Event marketing

(d) All the above •

9. is also known as active advertising. [ 1

(a) Push-based advertising

(b) Pull-based advertising

(c) Bill-board advertising

(d) Yellow pages advertising

10. is used for shopping over the internet. [ 1
(a) E-training

(b) E-shopping

II. Fill in the Blanks

Xl. E-Commerce stands for

2. The first pillar of e-commerce is

3. In chain, input/output are provided to the supplier at the back stage.

4. In_________ chain, the information system of respective firm links all the phases of the process together.

5. Quick response systems are the advanced versions of_________ .

6. M-Commerce stands for_________.

7. Education, training or knowledge management achieved through the content delivered via the Internet is known as

8. _________ is also known as E-broking.

9. In_________ , banking transactions can be done over the internet.

10. _________ e-commerce involves retail-based transaction exchange among organizations and customers where
organization acts as retailer.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. _________

UNIT-1 : Introduction 41

KEY
I. Multiple Choice
1. (d)

2. (b)

3- (a)

4. (a)

5- (c)

6. (d)

7. (a)

8- (b)

9. (a)

10. (b)

II. Fill in the Blanks

1. Electronic Commerce

2. Electronic information

3. Traditional value

4. Customer Oriented value

5-. JIT purchasing management practices

6. Mobile commerce

7. E-leaming

8. E-trading

9. E-banking

10. Business-to-consumer

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42 E-COMMERCE

III. Very Short Questions and Answers

Q1. What is the role of central pillar of e-commerce?

Answer :
The central pillar i.e., electronic relationship pillar specify the way of constructing a web site such that a user viewing
the web site must revisit the same site in a positive manner. This pillar concentrates on establishing relationship with the
user in an electronic form.

Q2. What is the authenticity issue of e-commerce?

Answer :
The authenticity is concerned about the verification of business, customers and services offered. The authenticity is
provided with the help of user name, IDs, passwords, secret numbers etc.

Q3. Define relationship marketing.

Answer :
Relationship marketing is a strategy where companies advertise their product in a selected market in such a way
that a good relationship is built up and maintained with their customers.

Q4. What is online advertising?

Answer :
Online advertising is a marketing strategy that makes use of Internet to fetch website traffic and target, deliver
marketing related information (in the form of messages) to the right customers. This strategy provides quick promotion of
product information irrespective of geographical boundaries.

Q5. Write a note on pull-based advertising.

Answer :
This type of online advertising is also called as passive advertising. Companies by using pull-based advertising can
have a better customer response than push-based advertising.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT

2 FRAMEWORK OF E-COMMERCE

c LEARNING OBJECTIVES J
After learning this unit, a student will have thorough understanding about the following key concepts,

❖ Functionality of different layers of E-commerce architectures.

❖ Different security protocols.

❖ Working ofbasic and security enhanced mail protocol.

X'' ••
❖ Various web security issues.

❖ Symmetric and asymmetric encryption techniques.

❖ Digital signatures and Digital certificates.

C INTRODUCTION )

Architectural framework of E-commerce is a combination of different available resources such as DBMS,

data repository, communication protocols and computer languages. Some of the functionalities in this

framework are application services, brokerage services, interface and support layers and middleware

services. Each of these services have their own significance. For instance, the application services

determine the type of E-commerce application to be implemented. Whereas, the brokerage services and

data management govern and manage massive amount of data on Internet. Since data is transferred over

the Internet, it is necessary to carry out this transmission in a secured manner. This can be done using

different security protocols like FTP, SMTP and HTTP. Apart from this, there are various messaging

protocols which are used for performing data transfer. One way of ensuring data security is through the

concept of encryption. Encryption ensures that the data being transferred is in the form of cipher text

that cannot be intercepted by any intruder. The various encryption techniques include symmetric and

asymmetric techniques.

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44 E-COMMERCE
*
PART-A ‘ , Ji 'I?’*’

' ■■ . .■ •■■ ■ V

» ...................................
SHORT QUESTIONS WITH SOLUTIONS
Q1. List the types of application services in e-commerce.
OR
Application Services (March/April-15, Q6 | March/April-13, Q7)
I
Answer :
The different types of e-commerce applications available are as follows,
1. Business-to-business e-commerce
2. Business-to-consumer e-commerce
3. Consumer-to-business e-commerce
4. Consumer-to-consumer e-commerce
5. Business-to-employee e-commerce
6. Non-business e-commerce
7, Intra-organizational e-commerce.
Q2. Write about interface and support services. Model Paper-i, Q2

OR
Interface layers.
Answer : March/April-16, Q2

The functions of this layer is to provide interface for e-commerce applications which include,
(i) Interactive Catalogs
These are the customized interfaces for applications such as web based shopping. They are an extension to the
paper-based catalogs which possess additional characteristics like graphics and video for making the advertisement
much attractive.
(ii) Directory Support Services
Directory services help the user in searching and accessing the information by making data appear as local irrespective
of its remote locations. They usually work in the background and try to manage the huge amount of information and
transaction that are generated to ease electronic commerce.
The basic difference among interactive catalogs and directory services is that the former handles the people, whereas
the latter interacts directly with software applications.
Q3. Write a short note on web security.
OR
Web Security
Answer : Oct./Nov.-13, Q6

Web security services ensure reliable and secure electronic transmission or communication. There may be several
web security issues.
1. Auditing
2. Authentication
3. Authorization
4. Confidentially
5. Non-repudiation
6. Availability
7. Integrity.
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UNIT-2 : Framework of E-Commerce 45
Q4. What is HTML? Oct./Nov.-16, Q7 HTTP transaction consists of the following stages,
OR
❖ Connection: The client establishes a connection with
HTML March/April-15, Q5
the web server.
Answer :
HTML stands for HyperText Markup Language and ❖ Request: The client sends a request message to the
is immensely used in developing web pages. Here the word web server.
“markup” in real sense refers to highlighted instance of a
❖ Response: The web server sends a response (for
given aspect i.e., an author can highlight a particular word
example, HTML document) to the client.
of his written document to grab attention of readers. In the
similar way, the Hyper Text Markup Language highlights ❖ Close: The connection is closed by the web server.
different views of a given web page in terms of headers,
titles, plain text, images, sounds etc. Q7. Write a short note on S-HTTP.
It does these things by taking into consideration its OR
numerous inbuilt tags. A tag is nothing but a special keyword
supported by HTML, inscribed under gulliments “<” t “>”. S-HTTP
Q5. What is the TCP/IP reference model?
Answer : March/April-13, Q2
Model Paper-ll, Q2

OR S-HTTP or Secure Hyper Text Transfer Protocol is

an extension of HTTP protocol. It is a message oriented
TCP/IP
communication protocol that was designed to allow secure
Answer : (March/April-12, Q4 | March/April-17, Q2) exchange of messages on Internet. This protocol is used m
The TCP/IP reference model was developed prior to conjunction with HTTP message model so that it can be
the OSI model. The major design goals of this model were, integrated with applications of HTTP.
(i) To connect multiple networks together so that they
This protocol was developed in order to encrypt HTTP
appear as a single network.
based messages present on web and transmit them between
(ii) To survive after partial subnet hardware failures. client and server. Hence, to perform this encryption, various
(iii) To provide a flexible architecture. cryptographic algorithms like RSA, DES as well as digital
The TCP/IP reference model has only four layers. signature and authorization are used so as to protect the data
They are, from unauthorized or illegitimate access.
1. Host-to-network layer Q8. Write about FTP. Model Paper-I, Q7
2. Internet layer
OR
3. Transport layer
4. Application layer. FTP
f
Application layer Answer: (Oct./Nov.-13, Q21 Sep./Oct.-15, Q6)

Transport layer
FTP stands for File Transfer Protocol. It is a standard
Internet layer
protocol used to exchange files over internet. FTP runs on
Host-to-network layer port 21 i.e., the client establishes a TCP connection on port
number 21 of the server machine. It has been developed for
Figure: TCP/IP Reference Model the client/server architecture wherein the FTP server allows
Q6. What is HTTP? Model Paper-Ill, Q7 people located at remote locations over the internet to login
and download the required files located on the FTP sever.
OR
HTTP. FTP operates in two modes, active or passive modes.
Answer : (March/April-12, Q2 | March-11, Q2) In active mode, the client sends the IP address along with the
port number on which the client listen, to the server machine
HTTP is a stateless protocol that is used for delivering
the web pages over the Internet. It defines how clients which then establishes the TCP connection. In passive mode,
and server communicate. Moreover, it even provides the the client can’t accept the incoming TCP connection as it is
structures of the communication. It generally follows the behind the firewall. Here, the IP address and port number
request-response paradigm wherein the client sends a request are received in response to the PASV command sent by the
and the server acknowledge with a response. client to the server machine.
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46 E-COMMERCE

Q9. Write about SMTP. Oct./Nov.-16, Q8

OR
SMTP March/April-14, Q3

Answer :
SMTP is a simple ASCII protocol. After establishing the TCP connection to port 25, the sending machine (operating
as the client) waits for the receiving machine (operating as the server) to respond.
The server starts by sending a line of text giving its identity and telling whether or not it is prepared to receive
mail. If it is not, the client releases the connection and tries again later. If the server is willing to accept e-mail, the client
announces from whom the e-mail is coming and to whom it is going. If such a recipient exists at the destination, the server
gives the client the go-ahead message. Then the client sends the message and the server acknowledges it. Checksums are
generally not needed because TCP provides a reliable byte-stream.
When all the e-mails have been exchanged in both directions, the connection is released. The exchange of mail using
TCP/IP is performed by a Message Transfer Agent (MTA). Users normally do not deal with MTA. The system administrator
is responsible to set-up the local MTA.
Q10. What is menat by NNTP?
OR
NNTP
Answer : (Oct.-14, Q2 | Sep./Oct.-15, Q2)

NNTP stands for “Network News Transfer Protocol”. It is an application protocol that uses reliable stream like TCP
for distributing, retrieving and posting news articles on web. The main idea behind designing this protocol is, to store news
article on single server host'and allow subscribers residing on the network of other host to read it by establishing reliable
connection. NNTP uses interactive mechanism in order to make decision regarding the transmission.
Q11. Define Encryption. Model Paper-n, Q7

OR
Encryption. (March/April-13, Q6 | March/April-17, Q6)

Answer :
Encryption
Encryption is a method of converting plain text into cipher text. Using this method, security of data can be achieved
effectively. An encrypted file can be decrypted if the user has the capability of accessing a secret key or password. In this
context, unencrypted data is referred to as plain text whereas encrypted data is referred to as cipher text.
Secret key C= E (KT)
|k
P Encryption
Plain text Cipher text
Algorithm

Input Transmitted

Figure: Encryption Process

Types of Encryption
The following are the two major types of encryption,
1. Symmetric encryption
2. Asymmetric encryption.
Q12. Write about digital signatures.
Answer : Model Paper-Ill, Q2

A digital signature is one of the methods of encryption used to provide authentication. The main idea of the digital
signature is to protect the message or data from modifications. Digital signature is very popular in the world of network
security. Basically, it is a kind of asymmetric cryptography used to support the security properties of a handwritten signature
on paper. The digital signature scheme provides two algorithms where one algorithm is for signing, which requires the
user’s secret or private-key, and the other algorithm is for verifying signatures which requires the user’s public-key. The
result of the signature process is called the “digital signature”.
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UNIT-2 : Framework of E-Commerce 47

2.1 FRAMEWORK OF E-COMMERCE: APPLICATION SERVICES - INTERFACE LAYERS -

SECURE MESSAGING - MIDDLEWARE SERVICES AND NETWORK INFRASTRUCTURE
Q13. Explain architecture framework of E-commerce. (Oct./Nov.-12, Qio(a) | March/Aprii-17, Qio(a»

Discuss about the framework of E-commerce. Sep./Oct.-15, Qio(a)

Explain the different E-commerce application services. Oct.-14, Qio(a)

(Refer Only Topic: Application Services')

Answer :
Architectural Framework of E-Commerce

Architectural framework of E-commerce is a combination of different available resources such as DBMS, data
repository, communication protocols and computer languages. These resources allow the unification of data and software,
for generation of superior applications.

The framework has six functionalities or service layers. They are,

1. Application services.

2. Brokerage services and data management.

3. Interface and support layers.

4. Secure messaging and structured document interchange services.

5. Middleware services.

6. Network infrastructure of basic communication services.

1. Application Services

This layer of framework determines the type of E-commerce application which is to be implemented. The different
types of ^commerce applications available are as follows,

For remaining answer refer Unit-I, Page No. 22, Q.No. 31.

2. Brokerage Services and Data Management

It is an information handling layer of the framework that governs and manages huge amounts of data on the network.
It acts as a broker, or mediator that offers service integration between customers and information providers when provided
with some constraints like, low price, fast service, or profit maximization for a client. For instance, a customer looking to
purchase a specific book from the web goes through the sites of different publications. But, for this he/she wdll have to be
aware of the URL’s of these sites. In addition, the customer has to feed the details of the book repeatedly on different sites
to search the services at best prices. However, if the customer finds an information brokerage site which can provide the
book as per the need, then huge amount of time and effort is saved.

Some other characteristics of this layer are,

(i) It supports the data management and usual transaction services.

(ii) It offers tools to achieve much better, updates for future-compensating transactions.
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48 _________________ ' _______ E-COMMERCE
3. Interface and Support Layers 6. Network Infrastructure of Basic Communication
Services
The functions of this layer is to provide interface for
e-commerce applications which include, This layer of the framework is responsible for
(i) Interactive Catalogs providing a network infrastructure that creates an effective
and efficient linkage between the customer and the supplier.
These are the customized interfaces for applications Initially, telephone companies were the medium of creating
such as web based shopping. They are an extension the computer networks. But, advancements in computer
to the paper-based catalogs which possess additional connections led to the development of centrally-controlled
characteristics like graphics and video for making the single connection model known as circuit-switching.
advertisement much attractive.
But, this was not suitable in case of large networks,
(ii) Directory Support Services
hence another technique was introduced in the Internet which
Directory services help the user in searching and could send data efficiently across large networks and was
accessing the information by making data from any known as packet switching.
server to appear as local file. They usually work in
the background and try to manage the huge amount Q14. What are the different middleware services?
of information and transactions that are generated to
Answer : March/April-13, QlO(b)
ease electronic commerce.
The basic difference among interactive catalogs Middleware Services
and directory services is that the former handles the
For answer refer Unit-II, Page No. 48, Q.No. 13,
people, whereas the latter interacts directly with software
Topic: Middle Ware Services.
applications.
4. Secure Messaging and Structured Document Documents of Middle Ware Services
Interchange Services
The different documents of middleware services are,
This layer of the framework deals with the secure
transmission of messages by using an appropriate messaging 1. Structured documents
system. The messaging systems usually used in transmission 2. Compound documents.
of messages are fax, post, courier and phone. However, none
of these is totally dependable and expectedly fast. This is 1. Structured Document
because, anything can go wrong in their transmission and
these mechanisms consume time, depending on the distance This type of digital documents are more flexible than
between the source and destination. Therefore, enhanced the image documents. The reason is, they focus on different
electronic messaging systems like e-mail, enhanced fax document formats like audio, video etc.
and Electronic Data Interchange (EDI) are adopted in this Apart from this, structured documents have a solution
layer to overcome this problem. The primary advantages of
for documents whose content is too long and difficult to
using these systems are security, privacy and confidentiality,
understand. Structured documents use a technique called
which ar£ obtained by using encryption and authentication Table of Contents (TOC). It categorizes the book into various
techniques.
chapters, subtopics of the chapters, along with their page
Furthermore, this messaging systems are a form numbers. This makes searching of particular information
of structural documents which consist of the automated easy. Similar procedure is followed for different document
interchange of standardized and approved messages between formats.
computer applications.
Standards
5. Middle Ware Services
Different standards used in structured document are,
This layer of the framework is very important as it
brings together the different components of the architecture (i) SGML
such as, networks systems, software programs and acts as
a mediator among them to make them communicate with (ii) HTML.
each other. Also, these services shift the computing from
(i) SGML
application centric to data centric. The advantage with this
shift is that the application can be controlled by the remote The full form of SGML is Standard Generalized
data in the network instead of applications controlling the Markup Language. This standard is only used for text
data. based documents because,
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UNIT-2 : Framework of E-Commerce 49

❖ It defines how these documents can be Q15. Explain the applications of information technol
transmitted properly. ogy infrastructure.
Answer : March/April-15, Q10(b)
❖ It defines how text based documents can be
formatted more than once. Information technology is considered as the backbone
of e-commerce. It mainly relates to the authorization and
In addition to this, SGML also describes the verification of the identities of all its associated merchants
structure of text documents. This standard and customers. If a problem arises with respect to security
was developed by ISO (International Standards and authentication, it uses second-site mirroring system
Organization). with increase in the development of e-commerce, advanced
(ii) HTML multimedia with high security including firewalls,
encryptions and decryptions.
HTML stands for Hypertext Markup Language. This Applications of IT Infrastructure Services
standard was created under W3C consortium. HTML
standard is mainly used for documents like hypertext, ❖ They are needed to manage network services for
multimedia etc. uninterrupted communications over the organization.
❖ They provide standards for various components such
2. Compound Documents
as operating system, data, hardware etc., of the IT
Compound documents consist of data structures architecture.
that include data types like text, audio and video. This ❖ They provide help and support services.
document is a collection of user interfaces. This interface
❖ They provide services related to security and disaster
helps in creating single integrated perceptual environment.
recovery of the business and applications.
Compound documents also create application environment
by defining program object so as to interlink and interact ❖ They are required to provide multimedia support for
with users. various operations such as video conferencing.
❖ They can implement security services including di
Standards
saster management for individual business units of
Different standards used in compound documents are, the infrastructure.
❖ They manage messaging services associated with a
(i) Object Linking and Embedding (OLE)
group, business-unit (or) entire organization.
(ii) OPEN DOC. ❖ They can enforce certain architecture for the organiza
(i) Object Linking and Embedding (OLE) tion.

OLE is a technology that integrates several 2.2 SITE SECURITY - FIREWALLS AND
applications and multimedia data types within an NETWORK SECURITY
active document framework. It was developed on Q16. Discuss the security issues faced by
top of DDE which is a technique of Interprocess e-commerce site. Model Paper-I, Q10(a)
Communications (IPC). Here various applications are OR
allowed to interact with each other during execution.
Explain the security services of E-commerce.
But, the links between applications were found to be
easily disconnected while moving a file or updating Oct.-14, Q10(b)

application software, due to DDE fragility. OR

(ii) OPEN DOC Explain the issues related to security, when us
ing Web. March/Aprll-16, Q10(b)
OpenDoc contains document parts as its basic OR
building blocks. Here, each document part comprises
Explain about the various issues involved in
of data. The data can be,
web security.
❖ Text containing characters. Answer : Sep./Oct.-15, Qio(b)

❖ Graphics containing lines and shapes. Web Security Services

❖ Spreadsheet containing spread sheet cells with Web security services ensure reliable and secure
formulas. electronic transmission or communication. There may be
several web security issues. The major security issues faced
❖ Multimedia containing digitized videos. by e-commerce site are,
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50 E-COMMERCE
1. Auditing
According to e-commerce, it refers to the process of gathering information about usage of privileges, accessing of
specific resources, performing of security actions etc. It helps in re-development of particular actions taken and also
lets the IT personnel to determine the actions performed by the person or program.
2. Authentication
The process wherein two entities can verify each other to know that they are the only users who claim to be called
authentication. This ensures different types of users that their transaction or data will be secured.
In e-commerce content, it ensures the web page viewer that the site is not fraudulent and the sender is a correct
person etc. It is carried out through some types of credentials like, password, smart card and signature.
3. Authorization
It is the process of ensuring a person or a program that they have right to access particular resources. It is determined
by comparing access control information associated with the resource being accessed with a person or a program
information.
4. Confidentiality
Confidentiality refers to the process of protecting the data being transmitted, from all types of passive-attacks. In case
of the release of message contents, higher levels of protection can be provided. All the data which is transmitting
between the two systems for some specific period of time can be protected in case of broader forms of this service.
For example, in case of virtual connection between the two systems, any user data is prevented from its release over
the virtual circuit. Confidentiality can also be applied in a narrower form which protects a single message or some
fields within the message but this approach is more complex and expensive to implement.
5. Non-repudiation
This provides protection against the denial by one of the entities involved in communication. Thus, once a message
is sent, the receiver assures that the message was sent by an intended sender and upon reception, the sender assures
that the message is received by the correct receiver.
6. Availability
The availability can be significantly affected by a variety of attacks which are susceptible to authentication, encryption,
etc., whereas some attacks require physical action for preventing and recovering from the loss of availability.
7. Integrity
Integrity can be applied to a single message within a stream or to an entire stream. It can also be applied to some
specific fields within a message. Two types of integrity services are available,
(i) Connection-oriented integrity service
(ii) Connectionless integrity service.
A^connection-oriented integrity service is concerned with the message streams. It ensures that the messages are
received in the order in which they are sent with no alterations, insertions, deletions, duplications, reordering or replays.
It also deals with the destruction of data. Hence, it attends to both message-stream modification and denial of service.
A connectionless integrity service tackles only the individual messages irrespective of any context thereby providing
protection against the message alterations only.
An integrity service can be applied with or without recovery. As these services are related to active-attacks, the
major concern is to detect them rather than preventing them. If the integrity is violated and detected, then the service must
simply notify its violation and find out the ways of recovering from it.
Q17. Discuss in detail about firewalls.
Answer :
A firewall can be viewed as an information security program located at a network gateway server. It protects the
confidential information present in the network against attacks or by other insecure networks. It acts as a barrier that
allows only the authorized network traffic to pass through and stops the unauthorized traffic. In simple terms, firewalls are
designed to function either as a filter or as a security device. It is installed on a system so as to prevent the unauthorized
users to access the secure networks. In case of mobiles, firewalls use secure procedures and authentication keys to allow
remote access into the secure network.
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UNIT-2 : Framework of E-Commerce 51

Most organizations use firewalls to protect their private networks and communication facilities. These organizations
develop firewall programs that include features like remote logging and reporting, computerized alarms and a graphical
user interface to control firewall. As most of the applications are placed on the internet, they are inherently insecure. This
can lead to mishandling of information that can be a risk to the organization. Therefore, to avoid such type of offensive
activities, organizations use firewall to protect a public network that is connected to an insecure network.

Firewall

Packet-filtering Application-level Circuit-level

router gateway gateway
Figure: Firewall Consisting of Packet-filtering Router, Application Level Gateway and Circuit-level Gateway
The above figure represents that a firewall is a networking device that is placed between an internal LAN (trusted network)
and internet (untrusted network). This firewall protects the internal LAN from being attacked by the unauthorized internet users.
Thus, firewall can be considered as an effective software that is used to provide security to the local and remote systems from other
network risks.
Principles of a Firewall

The following are the design goals of a firewall,

1. To block the unauthorized network users from entering into the (secured) network.
2. To stop the vulnerable incoming services that attack the authenticated users and also protect the network from various
types of IP address spoofing and routing threats.
3. (To reduce the burden of security management services.
4. To handle the security related consequences by implementing alerts and audits on the firewall system.
5.To provide a well-suited platform for performing internet functions like network address translation, network security
management, etc.
6. To provide a platform for implementing virtual private network and IP sec.
7. To track various security-related events by establishing a monitoring point.
Limitations of a Firewall

1. Sometimes, the authorized users use their granted access permissions for doing malicious operations. In such situations,
the firewall stops functioning properly hence, cannot protect the network from such type of attacks.
2. Firewalls cannot fix the problems related to poorly designed security features.
3. Firewalls cannot prevent the attacks made on those packets that do not pass through them.
4. Firewall reduces its effectiveness if permissive rules (easy going) are frequently used during its configuration.
5. Firewall cannot stop the attacks made against the authorized networks when the network itself is insecure or faulty.
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6. It is impossible for the firewalls to scan the malicious (iii) Network Security
code like incoming messages, attachment files etc.
Network security refers to the plans or arrangements
There are various operating systems and applications
made in the network infrastructure along with the various
present in the internal boundary network.
techniques used by the network administrator. This is done
7. When an internal user unknowingly interacts with for protecting network and its resources from unauthorized
an external attacker, then firewall does not protect access. As a result, the distributed systems were introduced
the internal network against the threats of an external that provide various networks and communication facilities
network. for transmitting data between two computers or between a
terminal user and a computer.
8. When the firewalls are configured incorrectly, they Need for Network Security
may block the incoming authorized users from
Network security is needed for the following reasons,
accessing the network resources. This may result in
huge losses. 1. It is basically needed to secure the network from at
tackers and hackers.
9. Huge costs are incurred in firewall installations.
2. It is needed to eliminate transmission delays.
Q18. Describe the terms, 3. It is needed to perform secure information transfer
by eliminating unwanted editings.
(i) Information security
4. It is needed to protect organization assets.
(ii) Computer security
5. . It is needed to protect the data from unintentionally
(iii) Network security and its need. or intentionally accessed by unauthorized users.
6. It protects the network against passive and active attacks.
Answer : . „
7. It is also required to prevent data from getting mis-
(i) Information Security sused.
8. It is also required to recover the system from failures
Information security refers to the process of protecting
and data losses by applying various policies and pro
data or information from unauthorized user and to allow
cedures.
legitimate users to access the data. Hence, it prevents the
data from unauthorized access, revelation, alteration or 9. It is also required to protect the data from threats
disruption. It usually deals with the confidentiality, integrity which occur due to change technology infrastructure.
and availability regardless of the existential form of the data. 10. It is also required to avoid modification, exploitation
and refusal of the network and resources.
The major changes in the information security
requirements occur before the advancement in the use of data 11. It is also required to deliver accurate data to its des
processing equipment. Security to the valuable information tination.
in any organization was provided either by physical or by 12. It is also required to protect the data against cyber
administrative means. An example of physical security is the crime.
usage of rugged filling cabinets along with the proper locking Q19. Write short notes on threats.
facility for preserving sensitive documents. An example of
Answer :
the administrative approach is personnel screening process
employed during recruitment process. Threats
A threat violates the security that arises upon the oc
(ii) Computer Security
currence of an event, action or a circumstance. It affects the
network security and causes damage to it. In short, a threat
It refers to the branch of computer science that
is an expected danger that may lead to vulnerability. The
describes the application of ‘secure’ behaviour on the
possible threats to network security are discussed as follows,
operation of computers. Hence, with the advancements
in computer science, the requirement for protecting and 1. Insecure Network Architecture
securing files and other useful information by using a variety A network which is not configured in a proper manner
of automated tools have become necessary. This type of becomes an easier entry point for intruders. When a
security is more prevalent in case of shared systems such trust-based local network opens an insecure connec
as time-sharing systems. Thus, the technique of employing tion, it ultimately causes someone to make use of this
a wide variety of tools for protecting data and preventing opportunity to enter the network in an unauthorized
hackers from accessing the data is called ‘computer security’. way.
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UNIT-2 : Framework of E-Commerce 53

2. Broadcast Networks 1. Confidentiality

The hardware devices such as hubs and routers are de Confidentiality refers to the process of protecting the
pendent on the broadcast or non-switched principles. data being transmitted from all types of passive-attacks.
According to this principle once the data is transmitted The data which is transmitted between the two systems
to a recipient over a network, the connecting device for some specific period of time can be protected using
e., a hub or a router broadcasts the data packets till
i. this service. However, confidentiality can also be applied
it is received by the receiver. It causes a vulnerable in a narrower form to protect a single message or some
effect on the Address Resolution Protocol (ARP) and fields within the message. But this approach is more
Media Access Control (MAC) addressing. complex and expensive to implement. Another feature of
confidentiality is protecting traffic flow, because ofwhich
3. Centralized Servers
an intruder can’t monitor the source and destination,
The use of centralized computing is another threat frequency, length and any other traffic characteristics.
to network security. This can be reduced by integrat
2. Authentication
ing all the services into a single server rather than
distributing on multiple server configurations. This Authentication is a procedure which gives protection
reduces the overall cost and eases the task of network to the data against active attacks like falsification of
management. But the problem with this approach is data and transactions. It is a process that helps in
that it leads to network failure. It occurs when some verifying whether the received messages are authentic
malfunctioning occurs in the centralized server. In or not. It ensures that the content of the message
such situations, a central server acts as an entry point are not altered and the given source is authentic.
for the unauthorized users to enter and disrupt its Message Authentication can be done either by using
functioning. conventional encryption or without encryption.
4. No Firewall 3. Nonrepudiation
The most common error, often made by the administra It is a service that provides protection against the de
tors and home-users is their assumption about the net nial by any of the entities involved in communication.
work security. Hence they ignore the implementation Once a message is sent, the receiver can assure that
of a firewall or network packet filtering service. The the message was sent by an intended sender. Upon
firewall installation in a stand-alone or a gateway is im reception, the sender can assure that the message is
portant for segmenting internal and external network. received by the correct receiver. Digital signature
It simplifies the task of finding the network’s external mechanism is used so as to ensure non-repudiation
IP address for the crackers. Hence, an intruder enters in the message being transmitted.
into the network and acts as a proxy. This problem can 4. Integrity
be prevented by employing firewalls that perform the
task of packet filtering, port forwarding and network Integrity refers to correctness of data. It is applied
address translation. Improper firewall implementation to a single message within a stream or to an entire
makes the network completely vulnerable. stream. It can also be applied to some specific fields
within a message. Two types of integrity services are
Q20. Explain in detail about security services.
available,
Answer : (i) Connection-oriented integrity service
Security Services (ii) Connectionless integrity service.
A security service is a service that enhances the se (i) Connection-oriented Integrity Service
curity of a data processing system and the information flow
within an organization. They are meant to tackle security A connection-oriented integrity service is concerned
attacks by employing one or more security mechanisms. with the message streams. It ensures that the messages
are received in the order in which they are sent with
Security services available are as follows, no alterations, insertions, deletions, duplications, re
1. Confidentiality ordering or replays. It also deals with the destruction
2. Authentication of data.
(ii) Connectionless Integrity Service
3. Non-repudiation
A connectionless integrity service tackles only the in
4. Integrity
dividual messages irrespective of any context thereby
5. Availability providing protection against the message alterations
6. Access control. only.
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5. Availability 2. Internet Layer
The availability can be significantly affected The functionality of this layer is very similar to the
by a variety of attacks which are susceptible to network layer in OSI model. The responsibility of this
authentication, encryption, etc., whereas some attacks layer is to send IP packets from a source in one network
require physical action for preventing and recovering independently to the destination potentially in a different
from the loss of availability. network. The packets are routed independently each taking
6. Access Control a different path between source and destination. So they may
arrive at the receiver in a different order. The Internet layer
An access control refers to the ability for restricting defines the format of these packets and a connectionless
and controlling the access to the host systems and
protocol called Internet protocol.
applications through various communication links.
For achieving this access control, each entity wishing 3. Transport Layer
to get control must first identify and authenticate itself
in order to obtain the access rights according to the The transport layer allows peer entities on the source
and destination hosts to exchange data with each other.
requirements.
The layer defines two end-to-end protocols namely TCP
2.3 TCP/TF- HTTP - SECURED HTTP - (Transmission Control Protocol) and UDP (User Datagram
SMTP-SSL Protocol).
Q21. Explain briefly about TCP/IP model. TCP is a reliable connection-oriented protocol and
Answer : Model Paper-I, Q10(b)
allows error-free transmission. At the source end, it segments
the incoming byte stream into discrete messages and passes
TCP/IP Reference Model them to the Internet layer. At the receiving end, it groups the
The TCP/IP reference model was developed prior to received messages into the output stream. It also handles
the OSI mode! The major design goals of this model were, flow control so that the fast sender does not overwhelm the
slow receiver.
(i) To connect multiple networks together so that they
appear as a single network. UDP is an unreliable connectionless protocol. Unlike
(ii) To survive after partial subnet hardware failures. TCP, it does not handle message sequencing and flow control.
It is widely used in applications where prompt delivery is
(iii) To provide a flexible architecture. more important than accurate data, for example, speech and
Unlike OSI reference model, TCP/IP reference model video.
has only four layers. They are,
4. Application Layer
1. Host-to-network layer
The application layer defines all the higher-level
2. Internet layer protocols including TELNET, File Transfer Protocol (FTP),
3. Transport layer Simple Mail Transfer Protocol (SMTP) and Domain Name
4. Application layer. Service (DNS).
if Figure (2) shows the initial protocols and networks
r Application layer
defined in the TCP/IP model.
Transport layer
TELNET FTP SMTP DNS Application layer
Internet layer

Host-to-network layer TCP UDP Transport layer

IP Internet layer
Figure (1): TCP/IP Reference Model
ARPANET SATNET Packet LAN
Host-to-network layer
1. Host-to-Network Layer radio

Host-to-network layer in TCP/IP reference model

is equivalent to the combination of physical and data link Figure (2): Protocols and Networks in TCP/IP Reference Model
layer in OSI model. The TCP/IP reference model does not Q22. Explain in detail about following protocols.
describe the functionality of this layer. However it specifies
that a host must connect to a network using some protocol (a) FTP
to send IP packets over it. The model does not define any
(b) HTTP
specific protocol to be used. It varies from host to host and
network to network. (c) SMTP.

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UNIT-2 : Framework of E-Commerce 55
Answer : Model Paper-ll, Q10(a)

(a) FTP
FTP stands for File Transfer Protocol. It is a standard protocol used to exchange files over Internet. FTP runs on
port 21 i.e., the client establishes a TCP connection on port number 21 of the server machine. It has been developed for the
client/server architecture wherein the FTP server allows people located at remote locations over the Internet to login and
download the required files located on the FTP sever.
Objectives of FTP
The following are the main objectives of FTP.
(i) To transfer data in a reliable and efficient manner.
(ii) To allow sharing of files and other computer resources.
(iii) To permit implicit or indirect usage of remote computers.
(iv) To protect the users from the variations in the file storage systems.
FTP operates in two modes, active or passive modes. In active mode, the client sends the IP address along with the
port number on which the client listen, to the server machine which then establishes the TCP connection. In passive mode,
the client can’t accept the incoming TCP connection as it is behind the firewall. Here, the IP address and port number are
received in response to the PASV command sent by the client to the server machine.
Drawback
FTP is not a secure protocol. It is susceptible to spoof attacks, brute force attacks, packet sniffing, etc.
(b) HTTP
HTTP is a stateless protocol that is used for delivering the web pages over the Internet. It defines how clients and
server communicate. Moreover, it even provides the structures of the communication. It generally follows the request
response paradigm wherein the client sends a request and the server acknowledges with a response.
Stages
HTTP transaction consists c f the following stages,
❖ Connection: The client establishes a connection with the web server.
❖ Request: The client sends a request message to the web server.
❖ Response: The web server sends a response (for example, an HTML document) to the client.
❖ Close: The connection is closed by the web server.
Request line x
Header ine 1 x

Header ine k v
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Http Request

Figure: Request Message Format

Example
GET/servlet/index.jsp HTTP/1.1
Host: www.sia.com
Connection : close
User-agent: Mozilla/5.0
Accept-language : en-us
The first line of HTTP request message is called the request line and the subsequent lines are called header lines till
a blank line. The request line has three fields separated by a space.
1. The method field also called request type indicates the action to be performed (GET, POST, DELETE, PUT>.
2. The URL field indicates the page to be accessed.

3. The HTTP version field (HTTP/1.1).

The majority of HTTP request messages use the GET method. When a URL is requested in a web browser, the GET
method is used. A GET request does not have a body (i.e., the body is empty). When HTML form is sent, either GET or
POST can be used. When GET request parameters are encoded in the URL with a POST request, they are transmitted ■
the body. HTML editors and upload tools use PUT requests to upload resources to the web server and DELETE requests
to delete resources.
The main HTTP request types (or methods) are,
1. GET - Retrieves the resource the user has requested.
2. POST - Transfers data to the specified resource. Usually the data sent comes from HTML form that the us-r
had filled in.

3. HEAD - Similar to GET, but forces the server to return only HTTP header instead of response data.

4. PUT - Uploads the resource to the server.

5. DELETE - Deletes the resource from the server.
6. OPTIONS - Requests the server configuration options (for example the request methods supported by server I
Some of the header field names are, Host, Connection, User-agent, Accept, Accept-charset, Accept-encoding, Accep'-
language etc.
In the above example, the header line Host:www.sia.com specifies the host on which the object resides. By include
the Connectiomclose header line, the browser is telling the server that it should close the connection after sending da
requested resource. The User-agent header line specifies the browser type that is making the request to the server. Fina! j
the accept-language header indicates the user preferred language. The header is separated from the body by a black line
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HTTP Response - 1XX : Gives information message. For

example, request received, continuing
process.
-2XX : Gives success message. For example,
the action was successfully received,
understood and accepted.
- 3XX : Indicates that redirection should occur.
- 4XX : Indicates client error. For example, the
request contains bad syntax or cannot
be fulfilled.
- 5XX : Indicates server error. For example,
the server failed to fulfill an apparently
Figure: Response Message Format
valid request.
Example The server uses the Connection:close header line to
tell the client that it is going to close the TCP connection
Status line HTTP/1.1 200 OK
after sending the message. The Date header line indicates
Connection : Close the time and date when the HTTP response was created and
sent by the server. The Server header line indicates that the
Server: Apache Tomcat/ message was generated by Apache Tomcat server. The Last-
modified header line indicates the time and date when the
5.5 (HTTP/1.1 connector) resource was created or last modified. The Content-length
header line indicates the number of bytes in the object being
Header line Content-type : text html sent. The Content-type header line indicates that the object
in the entity body is HTML text.
Content-length : 625
(c) SMTP
Date : Sat, 02 May 2007
SMTP is a simple ASCII protocol. After establishing
09:50:03 GMT the TCP connection' to port 25, the sending machine,
operating as the client, waits for the receiving machine,
Last-modified : Fri, 01 May operating as the server, to respond.

2007 09:27:02 GMT The server starts by sending a line of text giving its
identity and telling whether or not it is prepared to receive
body {data for the client} mail. If it is not, the client releases the connection and try
again later. If the server is willing to accept e-mail, the client
The first line of HTTP response message is called announces from whom the e-mail is coming and to whom it is
status line, /* Blank line does not store anything, hence it is going. If such a recipient exists at the destination, the server
blank or empty*/ the subsequent lines till the blank line are gives the client the go-ahead message. Then the client sends
called header lines. The entity body contains the requested the message and the server acknowledges it. Checksums are
object itself. The status line has three fields separated by generally not needed because TCP provides a reliable byte
space. stream.
1. The protocol version field (HTTP/1.1). When all the e-mails have been exchanged in both
directions, the connection is released. The exchange of mail
2. The status code which is a 3-digit integer result using TCP/IP is performed by a Message Transfer Agent
code indicates success or failure (200). (MTA). Users normally do not deal with MTA. The system
administrator is responsible to set-up the local MTA.
3. The phrase is intended to give a short textual
description of the status code, hence it is The SMTP protocol describes how two MTAs
intended for the human (OK). communicate with each other using a single TCP connection.
The SMTP standard is one of the most widely used upper
The first digit of the status code defines the class of layer protocols in the Internet Protocol Stack. As its name
'espouse. The last two digits do not have any categorization implies, it is a protocol that defines h.ow to transmit messages
rOl®. There are 5 values for the first digit. They are, (mail) between two users.
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SMTP uses the concept of spooling. The idea of Status

spooling is to allow mail to be sent from a local application line
to the SMTP application, which stores the mail in some
General
device or memory. Once the mail has arrived at the spool,
it will been queued. Header
Response
A server checks to see if any messages are available Header
and then attempts to deliver them. Ifthe user is not available
Entity
for delivery, the server may try later. Eventually, if the mail
Header
cannot be delivered, it will be discarded or perhaps returned
to the sender. This is known as an end-to-end delivery Message
system, because the server is attempting to contact the Body
destination to deliver and it will keep the mail in the spool
for a period of time until it has been delivered. Figure (2): Response Format
Advantages of S-HTTP
Q23. Describe in detail about S-HTTP.
1. It allows secure end to end transactions.
Answer : Model Paper-ll, Q10(bXO 2. It supports symmetric key encryption modes.
S-HTTP 3. It provides compatibility with HTTP.
4. It supports various cryptographic algorithms like
S-HTTP or Secure Hyper Text Transfer Protocol is RSA and DES in order to protect the data from
an extension of HTTP protocol. It is a message oriented unauthorized access.
communication protocol that was designed to allow secure
exchange of messages on internet. This protocol is used in Q24. Explain in detail about SSL.
conjunction with HTTP message model so that it can be Answer : Model Paper-ll, Q10(bXil)
integrated with applications of HTTP. Secure Socket Layer (SSL)
This protocol was developed in order to encrypt HTTP Secure socket layer is a protocol developed by
based messages present on web and transmit them between Netscape communication to ensure the security of data
client and server. Hence to perform this encryption, various transmission over the internet. SSL has been universally
cryptographic algorithms like RSA, DES as well as digital accepted as a provider of secure data communication
signature and authorization are used so as to protect the data between web browser (client) and web server through HTTP,
from unauthorized or illegitimate access. LADP or POP3 application layers. SSL runs on top of TCP
and FTP layers to enable services for the application layer.
S-HTTP protocol also defines a set of security These services help higher layer protocols such as HTTP,
mechanisms to HTTP client .and server so as to provide LDAP or IMAP to use SSL functionality. The purpose of SSL
wide range of security services to end user. It also defines design is to use TCP as a communication layer to provide
symrtietric capabilities on web client and server in order to a reliable end-to-end secure and authenticated connection
generate equal response and request to all the required user. between two points over a network.
The request response format of S-HTTP which is similar to
Advantages of SSL
HTTP is shown in figure below.
1. Integrity
Request SSL ensures the correctness of data being passed
line between the client and server on a network.
General 2. Confidentiality
Header
It ensures that the SSL response being transferred
Request between the client and server on a network is secured
Header by encryption in order to avoid deciphering by a third
Entity party.
Header 3. Authentication
Message The server provides a set of credentials like username/
Body password to the browser in the form of a server
certificate. Thus, this certificate is used to verify for
Figure (1): Request Format the authenticity of the server.
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Q25. Briefly discuss about NNTP. (iii) SMTP
Answer : For answer refer Unit-ll, Page No. 57, Q.No. 22(c).
NNTP stands for “Network News Transfer Protocol”. (iv) NNTP
It is an application protocol that uses reliable stream like
For answer refer Unit-II, Page No. 59, Q.No. 25.
TCP for distributing, retrieving and posting news article on
web. The main idea behind designing this protocol is, to store Q27. Explain about the types of classes of IP ad
news articles on single server host and allow subscribers dresses.
residing on the network of other host to read it by establishing
Answer : Oct./Nov.-12, Qio(b)
reliable connection. NNTP uses interactive mechanism in
order to make decision regarding the transmission. The Network/IP Addressing
exchange mechanism is as follows, Network address helps in identifying the network
1. A host that requires/sends updated news, communicates across the globe. It contains network id and host id. The host
with its neighbor with the hello of NNTP. id is a unique address given to each host on the network. IP
protocol uses 32-bit address (4-bytes) for the network ad
2. The client host uses newness command and enquires
dressing. Depending on applications, the network addresses
about the new articles that have been arrived in the
are classified into 5 types. Class A, Class B, Class C, Class
newgroup.
D and Class E.
3. The server then sends list of new articles.
Class A Network
4. The client host requests transmission of those articles
from the server. In class A, 1 byte is used for network address and 3
bytes are used for host address. The first bit is always ‘0’ for
5. The server then checks for duplicate articles and sends class A network.
only articles that are required to the client.
-« 1 byte 3 bytes -»■
Since, NNTP uses TCP as its communication channel Class A 0 Net id Host id
it is considered as secured delivery system. Moreover this
protocol uses TCP port 119 in order to connect news server The range of class A addresses is,
with the client. The advantage of using TCP port 119 is that
whenever a news article gets created, it will immediately be 0 0000000 00000000 •00000000 00000000
transmitted to the news channel and updated. The process
of updation continues until all the clients attached to the Since all zero’s are for reserved address.
network gets the updated news. A client can obtain updated Starting address of class A is,
news message using two methods.
0 00000001 00000000 00000000 00000000
(a) Push Method
1 . 0 - 0 . 0
It is an active method that allows a server to send a
new message to all the clients present on the network. Maximum class A address is,
(b) fPull Method
0 1111111 11111111 11111111 11111111

It is a passive method, that enables a server to send 127 ■ 255 - 255 - 255
only those messages that are specified by client.
All the 8-bits are 1, therefore the decimal value is
Q26. State the security protocols. Discuss. 255. To determine any byte value, subtract that zero position
March/April-15, Q10(a) value from 255.
OR .'. For class A, the ‘0’ bit is in 27 position
Explain security protocols. .-. 27= 128 =>255- 128= 127
Answer : (March/April-12, Q10(b) | March/April-17, 010(b)) => 127.255.255.255
The different security protocols include, But 127 network address is reserved for loop back
(i) FTP test.

For answer refer Unit-II, Page No. 55, Q.No. 22(a). .'.Class A maximum network address is
126.255.255.255
(ii) HTTP
.'.Range of class A network addresses are
For answer refer Unit-II, Page No. 55, Q.No. 22(b). 1.0.0.0......126.255.255.255
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Class B Network Address

In this addressing method, 2 bytes are reserved for a network address and 2 bytes are reserved for a host address.
■<— 2 byte x 2 bytes ->■

Net id Host id

The first two bits for class B are ‘10’.

Range of class B network address is,

10 000000 00000000 00000000 00000000

128 0 0 0

The maximum class B network address is,

10 111111 11111111 11111111 11111111 [255-64= 191]

191 255 255 255

Range of class B is 128.0.0.0..... 191.255.255.255.

Class C Network Address

In this network address, 3 bytes are reserved for net id and 1 byte for host id. The first 3 bits are reserved as 110.
----- 3------ X----- 1------ >-
110 Net id Host id

Minimum class C address is,

110 00000 00000000 00000000 00000000

192 0 0 0
&

Maximum class C address is,

110 11111 11111111 11111111 11111111

223 255 255 255

Range of class C address is 192.0.0.0.... 223.255.255.255

Class D Network Address
jt
It is used for multicasting and indicating the multicast group address. It doesn’t contain any net id or host id. It
contains only a group id which specifies the group to which the packet belongs.
The first 4 bits are reserved as 1110.

1110 Multicast Address

4 bytes -»■

Minimum class D addresses are,

1110 0000 00000000 00000000 00000000

224 • 0 0 0
Maximum D addresses are,

1110 1111 11111111 11111111 11111111 [255- 16 = 239]

239 255 255 255

Range of class D addresses are 224.0.0.0....... 239.255.255.255

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UNIT-2 : Framework of E-Commerce 61
Class E Network Address
Class E address is reserved for future use.
The first byte bits are reserved as 11110.
Range of class E network address is 240.0.0.0.... 247.0.0.0
[255 - 8 = 247],

2.4 DATA ENCRYPTION

2.4,1 Cryptography - Encryption - Decryption - Public Key - Private Key

Q28. Define the following terms,
(a) Cryptography
(b) Cryptanalysis
(c) Cryptology
(d) Role of public key and private key.
Answer :
w
(a) Cryptography
Cryptography is a method of transforming the plaintext into an unreadable form. This unreadable form can only be
read by the authorized users. It is derived from ‘kryptos' which is a Greek word whose meaning is hidden (or) secret. It
employs techniques like encryption and decryption. In encryption, the plaintext is transformed into ciphertext (or) encrypted
text. Decryption is the reverse process of encryption where the encrypted text can be transformed back to plaintext. The
transformations are performed by using a cryptographic key. Thus cryptography is a process of providing information
security thereby protecting it from unauthorized access.
Cryptography provides security to the information as well as to other useful applications for improving authentication
methods like message digests, digital signatures, non-repudiation and encrypted network communications. If it is not
implemented properly then, it would lead to many security problems. The length and strength of an encryption key are also
important. This is because the strength of an encryption algorithm is dependent on the key.
(b) Cryptanalysis
Cryptanalysis is a type of attack that makes certain attempts possible for obtaining the plaintext and the key used. If it
is able to determine the key, the effect is disastrous and all the encrypted messages, which are already transmitted and those
that are ready to be transmitted in future are damaged.
(c) Cryptology
, Cryptology is the study of both cryptography and cryptanalysis. Cryptology is sometimes mistaken as cryptography
or cryptanalysis. But cryptology in essence encompasses both cryptography and cryptanalysis. Cryptanalysis is the process of
recovering the original text from encrypted text without the knowledge ofthe key. Cryptanalysis is the reverse of cryptography.
The attempts made by a cryptanalyst to unhide the plaintext depend upon the level of information available to him. The worst
case will be when only ciphertext is available for cryptanalysis. In such scenario, brute force attacks are used wherein every
single probable key is applied. The analyst may use one or more samples of ciphertext repeatedly and unhide the plaintext.
He can also replace the ciphertext with plaintext or use a random key that may help him to reveal the plaintext.
(d) Role of Public Key and Private Key
The pair of public and private keys are used for encrypting and decrypting the message respectively. Each public
key is broadcasted and the corresponding private-key is kept secret. The text, data or message which is encrypted with your
public-key can be decrypted only with your private-key. The figure below shows the roles of public and private keys.
Hi, Public-key Private-key Hi,
&h#^
I have I have
got lu T
J Bx T
J got ur
re sume D y resume
Encryption Decryption
Original text Unreadable form Original text

Figure: Role of Public-key and Private-key

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The user generates a pair of keys i.e., a public-key and a private-key. The public-key is made public by keeping it in
a public register or a file which can be accessed by all the users. The corresponding key i.e., the private-key is kept secret,
therefore it is known only to its owner. The user maintains the public keys of other users to exchange messages.
When user ‘A ’ wishes to send a message to user ‘5’ he needs to encrypt the message using B’s public key which
is known to him. When B receives the encrypted message, he decrypts it using his private-key. No other user except B
can decrypt the message because only B knows its private-key. The communication is secure as long as the private-key is
protected from attacker. At any time, a user can change his private-key and broadcast its corresponding public-key.
Q29. Explain encryption techniques. March/Aprii-u, Qio(b)

OR
Explain two security techniques of encryption.
Oct./Nov.-13, Q10(b)

OR
Briefly explain the encryption techniques. (Oct./Nov.-n, Qio(a) | Model Paper-m, Qio(a)j

Explain about encryption techniques.

Answer : Oct./Nov.-16, QlO(a)

Encryption
Encryption is a method of converting plain text into cipher text. Using this method, security of data can be achieved
effectively. An encrypted file can be decrypted if the user has the capability of accessing a secret key or password. In this
context, unencrypted data is referred to as plain text whereas encrypted data is referred to as cipher text.
Secret key C= E (K,P)
|k
P Encryption
—>
Algorithm

Input Transmitted

Figure: Encryption Process

Types of Encryption
The following are the two major types of encryption,
1. Symmetric encryption
2. Asymmetric encryption.
1. £ Symmetric Encryption
Symmetric encryption is also known as private key or secret key encryption. In this, only one secret key is required
for encryption and decryption of the message. This key is shared by both sender and recipient. It is a simple process when
compared to the asymmetric encryption.
2. Asymmetric Encryption
Asymmetric encryption is also known as pubic key encryption. In this, two keys are required for encryption and
decryption of a message i.e., a public key and a private key. Private key must be kept secret for security purposes while
the other key must be shared by both sender and recipient. It is a complex and time consuming process when compared
to symmetric encryption.
Public Key Cryptography
Public key cryptography was invented by Diffie and Hellman in the year 1976. For this reason, it is sometimes
known as Diffie-Hellman encryption. Public key cryptography is also known as asymmetric cryptography. It is a form
of cryptography in which a user has a pair of cryptographic keys i.e., public key and private key. The private-key is kept
secret, whereas the public key is distributed widely. A message or text data which is encrypted with the public-key can be
decrypted only with the corresponding private key. For instance, when Johny wants to send a secure message to Sunny, he
uses Sunny’s public key to encrypt the message. Sunny then uses his private key to decrypt it.
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UNIT-2 : Framework of E-Commerce 63
Elements of Public Key

A public key cryptography/encryption consists of the following five elements. They are,
(i) Textdata/Message
(ii) Encryption algorithm
(iii) Public key and private key
(iv) Cipher Text/Unreadable text
(v) Decryption algorithm.
(i) Textdata/Message
This can be any input data, such as textdata or message.
For example, Johny is a user of computer and wants to send his message, M = “Hello” securely to his friend Sunny,
who is also a user of computer.
(ii) Encryption Algorithm
To encrypt the message, an encryption algorithm performs certain transformations on it.
There are various encryption algorithms but the RSA public key encryption algorithm is mostly used to perform
certain transformations or calculations on the textdata or message.
For example, Johny uses the public key of Sunny and encrypted his message by using RSA algorithm.
(iii) Public Key and Private Key
These pair of keys are used to encrypt and decrypt the message respectively. The private key is always kept secret,
whereas public key is widely distributed.
For example, Johny uses a public key of Sunny to encrypt his message, whereas Sunny uses his private key to decrypt
the Johny’s message as shown in the figure.
(iv) Cipher Text/Unreadable Text
Once the encryption is done on the textdata, it is in unreadable format means it cannot be read by human beings.
For example, Johny’s message has converted into unreadable form so that nobody except Sunny can read his message,
as he has a corresponding private key for that message.
(v) Decryption Algorithm
A decryption algorithm takes the unreadable text and its corresponding key to convert this text into original text.
Hence, we it can be said that the decryption algorithm is the reverse of encryption algorithm.
^For example, decryption algorithm takes the unreadable text of Johny and also takes the Sunny’s private key to
decrypt that message and convert the unreadable text into readable form i.e., original text sent by Johny as shown in the
below figure.

Input RSA Public-key Encryption RSA Public-key Output

(Original Text) Algorithm Decryption Algorithm (Original Text)

Figure: Public Key Encryption

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^30. Define cryptography and classify different cryptographic attacks.
Model Paper-Ill, Q10(b)

Cryptography
For answer refer Unit-n, Page No-bir Q-No.28<a).
Classification of Cryptographic Attacks
Cryptographic attacks can be classified into two types. They are,
1. Cryptanalytic attacks
2. Non-cryptanalytic attacks.
1. Cryptanalytic Attack
This attack can be referred as a group of statistical and algebraic techniques. It exploits the mathematical features
to capture the secret key. They focus on the distinguishes that exist in the output distribution of algorithms. The main role
of this attack is to determine the cipher properties which are not found in random function. This scenario is generally
referred to as “distinguishes”. Typically all attacks are called as distinguishes. Now the attacker estimates or guesses the
key and searches the distinguishing property. An attack can be considered as correct if the guessed key matches any of the
distinguishes. If not, it is considered as incorrect and the hacking is continued.
To minimize the complexity of guessing, divide and conquer method is used. This method is used in the brute force
search method to generate efficient results.
2. Non-cryptographic Attacks
Non-cryptographic attacks focus on the three major goals of security. These goals include,
(i) Confidentiality
(ii) Integrity
(iii) Availability.
Different attacks can be calssified based on these three goals as follows,

(i) "Attacks on Confidentiality

The attacks that come under this category are snooping and traffic analysis.
(a) Snooping
Snooping is the process of accessing the confidential information in an unauthorized way. Interrupting the
transmission and accessing the confidentential data over the internet is an example of snooping. Different
encryption mechanisms can be applied on the information to avoid snooping attack.
(b) Traffic Analysis
Capturing the information such as sender’s or receiver’s e-mail address by tracking the traffic is referred to as
traffic analysis attack.
(ii) Attacks on Integrity
The attacks that come under this category are,
(a) Modification
(b) Masquerading
(c) Replaying
(d) Repudiation.
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UNIT-2 : Framework of E-Commerce 65

(a) Modification

Modification refers to the alteration of a specific portion of authorized information. It also refers to the deletion or
reordering of information to generate an unauthorized effect. An example for this type of attack is changing the
account number of banking transaction.

(b) Masquerading

Masquerading refers to the attack in which the attacker pretend to be some other person (authorized). Consider an
example where an attacker obtains customer ID and password of an online banking user. The obtained credentials
can be used by the attacker to pretend like the authorized user. Such an attack is referred to as masquerading.

Replaying refers to the process of capturing a particular information and retransmitting or resending it later for
causing an unauthorized effect. An example of such an attack is replaying an already completed transaction.

(d) Repudiation

Repudiation refers to the attack in which either sender (or) receiver denies the action it performed. For example,
receiver already received the message but denies.

(iii) Attacks on Availability

The attack that can be made on availability is Denial of Service (DOS).

Denial of Service «

This type of attack interrupts the normal usage of various facilities provided by system (or) network. It attacks a
specific target so that the messages destined to it can be destroyed. In some other situations, the attacker sends messages
continuously until the system (or) network becomes unavailable. Also, the attacker can crash down the server by sending
bogus messages.

All these attacks can also be categorized into passive and active attacks. Attacks on confidentiality i.e., snooping
and traffic analysis falls under passive attacks. All the other attacks belong to the category of active attacks.

(i) Passive Attacks

It refers to the process of monitoring or wiretapping of ongoing transmission. Here, the goal of opponent is to capture
the transmitting information but not to alter (or) harm the system. These types of attacks can be easily avoided by
using encryption techniques.

(ii) Active Attacks

in this types of attacks, attacker can alter the information (or) include some fraudulent information into the network.
These attacks harm the system and can easily be detected. However, they are difficult to prevent.

2.4.2 Digital Signatures - Digital Certificates

Q31. Write short notes on digital signatures and digital certificates. Discuss the role of digital signatures in
network security along with its properties and requirements.

Answer :
Digital Signatures

A digital signature is one of the methods of encryption used to provide authentication. The main idea of the digital
signature is to protect the message or data from modifications. Digital signature is very popular in the world of network
security. Basically, it is a kind of asymmetric cryptography used to support the security properties of a handwritten signature
on paper. The digital signature scheme provides two algorithms where one algorithm is for signing, which requires the
user’s secret or private-key, and the other algorithm is for verifying signatures which requires the user’s public-key. The
result of the signature process is called the “digital signature”.
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Digital Certificates
Digital certificates are the certificates that are used to verify one’s identity when he/she is doing any business or
transactions on the Internet. These certificates are issued by a trusted third party called as Certificate Authority or Certification
Authority (CA). A digital certificate contains the user’s name, a serial number, a copy of the certificate holder’s public key
(which is useful for message encryption and digital signature generation), expiration data and also the digital signatures
of the CA (so as to verify the identity of CA).
Role of Digital Signatures in Network Security
Digital signatures are used to provide authentication of any electronic information. For instance, assume that, there
are two users of the internet say, A and B. User A wants to send some confidential message to user B assuring that the
message is unmodified and is sent by him only.
The sender?! writes his message into an e-mail and applies a special function known as hash function on the message.
This creates the checksum i.e., a value that checks the authenticity during data transmission of the information. Then, A uses
its private-key that he has previously obtained from public-private key authority to encrypt the checksum. The encrypted
message becomes the A’s digital signature of the message. The checksum and the message is then sent to the receiver.
At the other end, the receiver B receives the message and the checksum. In order to make sure that, the message is
complete and unmodified from sender^, the receiver B applies the same hash function on the received message to produce
checksum. It also uses A’s public-key to decrypt the checksum it received with message. The two checksums are then
compared. If they are matched then the received message is complete and signature is valid. Otherwise, the message is
modified and signature is considered invalid.
The below figure shows the role or operation of a digital signature,
Sender A Receiver B

Private-key of Public-key of
Sender “A” Receiver “B”
Figure: Role of Digital Signature
Properties of Digital Signature
1. It must authenticate the contents when the signature is being done.
2. It must be responsible for verifying the author as well as date and time of the signature.
3. It must be verifiable by third party.
Requirements for Digital Signature
1. A digital signature must be in the form of bit pattern that is dependent on the message being signed.
/
2. The process of producing the digital signature must be easy.
3. A copy of digital signature must always be preserved.
4. A digital signature must be both easily recognizable and verifiable.
5. It must include some unique information to prevent forgery and denial by the sender.
6. It must be highly impractical for hacker to forge a digital signature by any means which may include creation of a
new message for the already existing digital signature. It may also include an attempt to replace the original digital
signature with duplicate signature for a given message.
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INTERNAL ASSESSMENT
I. Multiple Choice
1. E-commerce framework has__________ layers. [ 1

(a) Four (b) Five

(c) Six (d) Seven

2. The function of_______ layer is to provide interface for e-commerce applications. [ 1

(a) Interface and support

(b) Brokerage services and data management

(c) Secure messaging and structured document interchange services

(d) Middle ware services

3. OpenDoc contains________ as its basic building blocks. [ ]

(a) OLE

(b) Document parts

(d) HTML

4. _________ in e-commerce refers to the process of gathering information about usage of privileges accessing of
specific resources. [ ]

(a) Confidentiality

(b) Authorization

(d) Auditing

__________ is the process of ensuring a person or a program that they have right to access particular resources.
[ 1

(a) Confidentiality

(b) Authentication

(d) Availability

6. __________ refers to the plans or arrangements made in the network infrastructure along with the various techniques
used by network administrator. [ ]

(a) Network security (b) Computer security

(c) Information security (d) None of the above

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refers to the ability of restricting and controlling the access to the host systems and applications through
various communication links. [ 1

(a) Availability (b) Access control

(c) Integrity (d) Confidentiality

8. Number of layers in TCP/IP reference model is________ [ 1

(a) Four (b) Five

(c) Six (d) Seven

9. ________ is a simple ASCII protocol. [ 1

(a) FTP (b) HTTP

(c) SMTP (d) None of the above

10. __________ is an application protocol that uses reliable stream like TCP for distributing, retrieving and posting
news articles on web. [ ]

(a) S-HTTP (b) NTTP

(c) Network Addressing (d) None of the above

II. Fill in the Blanks

1. _________ is method of converting plain text into cipher text.

2. ________ is an information handling layer that governs and manages huge amounts of data on the networks.

3. SGML stands for__________ .

4. HTML stands for__________ .

5. _________ is a technology that integrates several applications and multimedia data types within an active document
framework.

6. __________is considered as the backbone of e-commerce.

7. ______ refers to the process of protecting the data being transmitted from all types of passive-attacks.

8. _________ refers to the branch of computer science that describes the application of ‘secure’ behaviour on the
operation of computers.

9. __ _______ violates the security that arises upon the occurrence of an event, action or a circumstance.

10. , is, a service that enhances the security of a data processing system and the information flow within an
organization.

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UNIT-2 : Framework of E-Commerce 69

1% c T

I. Multiple Choice

1- (c)

2. (a)

3- (b)

4. (d)

5. (c)

6. (a)

7. (b)

8- (a)

9. (c)

10. (b)

II. Fill in the Blanks

1. Encryption

2. Brokerage Services and Data Management Layer

3. Standard Generalized Markup Language

4. HyperText Markup Language

5. OLE

6. Information Technology

7. Confidentiality

,8. Computer Security

9. Threat

10. Security Service

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70 E-COMMERCE

III. Very Short Questions and Answers

Q1. What is a firewall?

Answer :
A firewall can be viewed as an information security program located at a network gateway server. It protects the
confidential information present in the network against attacks or by other insecure networks.
Q2. Define security service.

Answer :
A security service is a service that enhances the security of a data processing system and the information flow within
an organization. They are meant to tackle security attacks by employing one or more security mechanisms.
Q3. Write a note on symmetric encryption.

Answer :
Symmetric encryption is also known as private key or secret key encryption. In this, only one secret key is required
for encryption and decryption of the message. This key shared is by both sender and recipient.
Q4. What is cryptanalysis?

Answer :
Cryptanalysis is a type of attack that makes certain attempts possible for obtaining the plaintext and the key used. If it
is able to determine the key, the effect is disastrous and all the encrypted messages, which are already transmitted and those
that are ready to be transmitted in future are damaged.
Q5. What do you mean by snooping?

Answer :
Snooping is the process of accessing the confidential information in an unauthorized way. Interrupting the transmission
and accessing the confidential data over the internet is an example of snooping. Different encryption mechanisms can be
applied on the information to avoid snooping attack.

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UNIT ^Iprkatarl Ilw

CONSUMER ORIENTED

3 E-COMMERCE APPLICATIONS
SIA GROUP
____ J

c
After learning this unit, a student will have thorough understanding about the following key concepts,

❖ Applications of Consumer Oriented E-commerce.

❖ Mercantile Process Model from Consumer’s perspective.
❖ Mercantile Process Model from Merchant’s perspective.
❖ Definition of Electronic Payment System (EPS)
❖ Different types of Electronic Payment Systems.
❖ Risks and Advantages involved in Electronic Payments.

( INTRODUCTION )

Consumer Oriented E-commerce applications have been widely accepted around the world because of
its easy and simple applications like electronic shopping, online stores etc. Online shopping is similar
to general shopping. The only difference is that instead of going to a shop and selecting the item, the
customer can sit at home and carry out his/her shopping online. However, the problem with this mode of
shopping is that detailed information of the product is not provided. There are four types of Consumer
Oriented applications that are widely used,

❖ Personal finance/home banking

❖ Home Shopping
❖ Home Entertainment
❖ Micro transactions of information..
Electronic Payment System refers to processing oftransactions in a digitized environment i.e., it does not require
human intervention. It is also referred as Electronic Funds Transfer (EFT). Basically, there are different types
of electronic payment systems such as credit cards, smart cards etc. Despite of being advantageous, these
sort of payment systems mostly suffer from security issues.

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72 E-COMMERCE

E-cash

Answer : (March/April-17, Q3 I Oct-14, Q3 | March/April-14, Q4)

Electronic cash is a form of electronic payment system which provides high level of security and reduces the overhead
of paper cash. Because of its adaptable and flexible nature, it opened a way for new markets and applications. Inspite of
that, there are several reasons due to which paper currency is still superior over e-cash.
(i) Lack of belief or confidence in banking system.
(ii) Inadequate clearing and agreement of non-cash transactions.
(iii) Negative rate of real interest paid on all the bank deposits.
Due to its superior, dominant nature, business practises can be changed in order to improve the process of purchasing.
In order to replace cash, e-cash should possess some features of paper cash.
Q2. Write about E-Checks. Model Paper-ll, Q8

OR
E-checks

Answer : Oct./Nov.-12, Q3

Electronic check is another form of electronic payment system. These checks are preferred when a customer is willing
to make a payment without using paper cash. The e-cash system is generally an electronic implementation of paper check
system. These checks make use of digital signature for signing and endorsing and use digital certificates to authenticate
the buyer, the buyer’s financial institution and the buyer’s account. Digital signature authentication is provided by using
public key cryptography.
Online services provided by electronic checks allow,
1. The seller to verify if the buyer has sufficient funds in his/her account.
2, Improved security at each step of transaction processing.
Q3. What is a debit card?
OR
it
Debit Cards

Answer : March/April-15, Q3

A debit card is a card that is used instead of cash in shopping. Debit cards can be used for e-commerce transactions
in the same way as a credit card. The only difference in the credit card is the way to pay later, where as a debit card is a way
to pay then and there itself. Debit cards are also known as cash cards. When ever the buyer uses debit card for shopping,
his account will be instantly debited (i.e., the amount is immediately deducted from his savings account). The debit cards
can be used anywhere. It is mostly accepted by grocery stores, retail outlets, gasoline stations, restaurants etc.
Q4. Define EPS. Model Paper-I, Q3

OR
EPS

Answer : March/April-13, Q3

Electronic Payment System (EPS) is a building block of E-commerce which refers to the online exchange of money.
This exchange is carried out over different platforms such as E-cash, E-check, credit cards etc. The widespread adoption
of these methods is due to the fact that it reduces cost and time of a transaction.
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UNIT-3 : Consumer Oriented E-Commerce Applications 73
Electronic payment typically refers to paying the amount for purchased goods electronically. It is also referred as
Electronic Funds Transfer (EFT). This sort of process involves, transferring of funds electronically from one financial
institution to another. This type of electronic transfer started using different electronic devices like computers, telephone
devices, electronic terminals, telecommunication devices etc.

Q5. Write a short note on home banking. Model Paper-m, qs

Home Banking

Answer : March/April-12, qs

Q6. List out the risk involved in E-payments. (Oct./Nov.-11, Q3 | Model Paper-I, Q8)

Risks in E-payment (March/April-12, Q3 | March-11, Q3)

What are the risks of E-payment system?

Answer : Oct./Nov.-16, Q4

The risks that are associated with electronic payment system are,

1» Risks associated with fraud or mistakes

2. Risks associated with privacy

3. Risks associated with credit cards which can be,

(a) With guarantee

/ (b) Without guarantee.

Q7. What are the payment systems? Model Paper-n, Q3

Types of Payment Systems

Answer : March/April-14, Q8

Electronic payment systems can be categorized into three types,

1. Banking and Financial Payment

The banking and financial payment system is again classified into three types. They are,

(i) Large scale payment-

(ii) Small scale payment

(iii) Home banking.

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74 u.lG E-COMMERCE
2. Retailing Payment

Retailing is classified into three types,

(i) Credit payment
(ii) Debit payment
(iii) Charge card payment.
3. Online E-commerce Payment

(i) Token based payment system

(ii) Credit card based payment system.

EFT

Retailing payment
Online payment
Financial payment

Credit card Charge card

Debit card
Credit
Token
card
based
based

Q8. Write about credit card.

Credit Card . *

Answer : (March/April-16, Q71 SepJOct-15, Q7)

Credit card is a card that is used instead of cash in shopping. It can be used for processing transaction. There are
smart cards with which purchase of goods and services is done first, then the customer pays for it later.

Credit card based payments can be processed by using the following three methods,
Z
1. Using plain unencrypted credit card features for payment

2. Using encrypted credit card features for payment

3. Using third-party authorization for credit card payment.

A
Q9. What are the advantages of E-cash?

Advantages of E-cash

Answer : March/April-16, Q3

The advantages of e-cash are as follows,

1. E-cash provides shopping convenience to the customers, hence they are free to choose from a variety of products
available globally.

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UNIT-3 : Consumer Oriented E-Commerce Applications 75
2. E-cash provides a high transaction security compared to other credit card transactions because of its blind signatures.
3. It enables the merchants to think beyond the local markets. The merchants can now attract global customers because
they can send and receive money throughout the world with just a mouse click on their desktop.
4. Merchants can even restrict the E-cash on purchase of certain products. For example, a TV merchant can limit his
E-cash such that the E-cash cannot be used to purchase any other item except television.

Q10. List the benefits of smart card.

Benefits of Smart Cards

Answer : Sep./Oct.-15, Q3

There are numerous benefits of using smart cards. Some of them are mentioned below.

1. Highly Secure

It uses encryption and authentication technology for ensuring security.

2. Safely Portable

It is lightweight and can be easily carried. Hence, a person can carry smart card instead of carrying money with him,
and to access its stored amount, he just have to know the pin number.

3. Double as an ID Card

It provides complete identification, and therefore it can be used for identifying an individual. For example, incase of
home-banking, it can be used as a secure token for authenticating the person over an internet between the systems
of the person and the bank.

4. Prohibit Fraud

It can be used by government to ensure that the benefits and social welfare are received by the right person.

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■76 E-COMMERCE
—..... . .......... .... ... ........ ...... —...... ............................... . ................................ . ..
pARTB

_ _ ESSAY QUESTIONS WITH SOLUTIONS______

XI INTRODUCTION - — = - ——

Q11. Discuss in detail about consumer-oriented E-commerce application and its role in E-commerce.

March/April-15, Q11(b)

Explain about consumer-oriented E-commerce applications. (Model Paper-n, on(b) | Oct.-14, QH(b»

Discuss customer-oriented E-commerce applications. March/April-14, QH(b

Answer :
Consumer-Oriented Electronic Commerce Applications

There are mainly four types of consumer-oriented applications that are widely used,
1. Personal finance/home banking ' . ■*
2. Home shopping
3. Home entertainment
4. Micro transactions of information.
1. Personal Finance/Home Banking

This is the first consumer-oriented application in e-commerce. With the help of e-commerce, various banking
transactions can be done online. For instance, if a user wants to know the current status of his/her bank account, he/she jus:
needs to go to the respective bank’s website and login through the username and password. Once log in is done successfull}.
the user is asked to enter the account number. After entering the account number, account balance will be displayed in the
message box.

Services that are provided by home banking application can be classified into three types,
(a) Basic services
(b) Intermediate services
fc)' Advanced services.
j[a)> Basic Services

Th&&Ste'Services of home banking include,

(i) Wyihentof bills
Qigcking the account status
(hi) ATSJ services for depositing and withdrawing cash.
(B). Services

This fe the SfifiQhd type of service of home banking application. Like basic services, intermediate services also!
prov«l'e®R.'ices like paymentof bills, transfer of money etc. Only difference here is that basic services are used b} I
those cWomeiSVfio aw ffijt having enough knowledge about computers. In other words, customers have only basic!
knowledge of computers. Here, such customers use simple packages or software for accessing the basic services I
Whereas, intermediate services are used by those customers who have more knowledge than the customers of basic I
services. Therefore, these customers require more sophisticated software for accessing the intermediate services.
SiA Publishers and distributors pvt. ltd. I
WVIERCE
UNIT-3 : Consumer Oriented E-Commerce Applications 77
D
One of the software used by intermediate service customers is called Quick and Dirty Personal Money Management
(QDPMM). This software is used for payment of bills, money transfer etc. Moreover it allows the data to move
from/to the bank in standard format. Initially, QDPMM sends a request to the bank for displaying the image of a
cheque. Within few minutes, the image will be displayed on the screen.

Another type of software used by customers of intermediate services is called “check-free” software. Through this
B.
software, payment of cheques is done online. In order to download this software, high speed modem is required.
5, Q11(b) Suppose to issue the cheque to someone, click on the software and then a picture of cheque will be displayed on the
screen. Write all the details which are generally required to be filled in a cheque (like name of the person to whom
the cheque is to be paid, amount to be paid to the person, on what date amount should be paid to the person). After
writing all the details, press enter. The amount will be transmitted in either of the following two ways,
■ Q11(b))

(i) A mail of the cheque will be sent to the person, or

, Q11(b) (ii) The system on which “check-free” software is installed transfers the cheque information to a special type of
board called Federal Reserve Board through the modem.

Federal Reserve Board in turn transfers the amount to the other person’s bank account.

The diagrammatic representation of the cheque writing/clearing process is given below,

iking
sjust
fully,
n the

A
Payer Payee

Figure: Check Clearing Process

by I
sic I (c) Advanced Services
is. I
;ic I This is the third type of service of home banking application. Due to many technological advancements, banks will
not only provide banking transaction services, but also provide online shopping services to the customers. The most
striking feature is that customers living anywhere in the world can access these services.
' ■ . . SIA PUBLISHERSAND DISTRIBUTORS PVT. LTD.
78 E-COMMERCE
The diagrammatic representation of these advanced services is shown in the following figure.

Customer at
home

Figure: Advanced Services

2. Home Shopping
This is the second consumer-oriented application in E-commerce. With the help of this application, a user can perform
shopping on-line from home. Example of home shopping are online stores and electronic shopping malls.
There are mainly two forms of home shopping,
(a) Television based home shopping
(b) Catalog based home shopping.
(a) Television Based Home Shopping
This is the first form of home shopping. Television has changed our lives both positively and negatively.
Generally, there are various channels related to fashion, sports, health, teleshopping etc. which are shown on TV. The
user can view his/her required channel with an ease. For instance, if a user wishes to buy various home appliances or
exercising equipments to keep himself/herself fit and healthy, there is a channel called “teleshopping” which shows
different home appliances as well as items for excising along with their costs and warranty.
(b) Catalog Based Home Shopping
This is the second form of home shopping. Other than looking for products for shopping on TV, the user can look
for products for shopping through catalogs as well.
There are two ways in which catalog-based shopping can be done,
(i) Catalog based shopping through paper-based catalogs.
(ii) Catalog based shopping through online catalogs.
(if Catalog Based Shopping through Paper-based Catalogs

Suppose a customer visits a TV showroom to buy a TV but fails to find the desired TV, as he/she is not able to
explain the type of TV that is required to the shopkeeper. In such situation, the shopkeeper provides the customer
with a catalog which has detailed explanation of various models of TV. This may lead to the possibility of finding
the desired TV.
Benefits of Paper-based Catalogs
❖ This type of catalog is easy to develop and are less expensive.
❖ It doesn’t require computer for accessing them.
❖ It is relatively flexible than online catalogs.
Drawbacks of Paper-based Catalogs
❖ It is not possible to perform any sort of change in these catalogs.
❖ It displays the product information only in the form of text or photograph and doesn’t include any form of
video. • ,
It’limits the number of products to be displayed.
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UNIT-3 : Consumer Oriented E-Commerce Applications 79
(ii) Catalog Based Shopping through Online 3. Home Entertainment
Catalogs
This type of consumer-oriented application in
The procedure for catalog-based shopping through E-commerce has become more popular. A classic example
on-line catalogs is almost similar to paper-based of home entertainment application is home video service.
catalogs. Only difference is that these catalogs are Home video service is a type of service where latest movie
provided online. The online catalog that is mostly releases are converted or recorded in the form of DVD/VCD
used is CD-ROM catalogs. These catalog contains and are sold. Factors influencing the popularity of home
detailed information of the product provided by video are as follows,
the website of that particular product which can be
❖ In most cases, people don’t get enough time to go to
viewed just by inserting the CD.
theatres to watch movies.
Benefits of Online Catalogs ❖ Cost of watching a movie in theatres can be expensive.
The price of the ticket varies in every theatre. In some
❖ It is possible to perform changes in online
theatres, the ticket can cost around TSO. In some
catalogs.
theatres, the ticket price can be around T100.
❖ It helps the customer to easily search for the
Now, in addition to provide movies in CD/VCD
desired product.
format, even the latest television shows are also recorded
❖ It provides current and relevant product on CD as well as in DVD format and sold.
information.
Instead of going to a particular movie store and buying
a CD/DVD, customer can order it through Internet. For
❖ It displays the product information in the form
example, there is a site called www.moserbear. homevideo.
UNIT-3 : Consumer Oriented E-Commerce Applications 79
(ii) Catalog Based Shopping through Online 3. Home Entertainment
Catalogs
This type of consumer-oriented application in
The procedure for catalog-based shopping through E-commerce has become more popular. A classic example
on-line catalogs is almost similar to paper-based of home entertainment application is home video service.
catalogs. Only difference is that these catalogs are Home video service is a type of service where latest movie
provided online. The online catalog that is mostly releases are converted or recorded in the form of DVD/VCD
used is CD-ROM catalogs. These catalog contains and are sold. Factors influencing the popularity of home
detailed information of the product provided by video are as follows,
the website of that particular product which can be ❖ In most cases, people don’t get enough time to go to
viewed just by inserting the CD. theatres to watch movies.
Benefits of Online Catalogs ❖ Cost of watching a movie in theatres can be expensive.
The price of the ticket varies in every theatre. In some
❖ It is possible to perform changes in online
theatres, the ticket can cost around ?50. In some
catalogs.
theatres, the ticket price can be around ?100.
❖ It helps the customer to easily search for the
Now, in addition to provide movies in CD/VCD
desired product.
format, even the latest television shows are also recorded
❖ It provides current and relevant product on CD as well as in DVD format and sold.
information. Instead of going to a particular movie store and buying
a CD/DVD, customer can order it through Internet. For
❖ It displays the product information in the form
example, there is a site called www.moserbear. homevideo,
of text, audio, video etc.
com. Through this site, a user can order different types of
❖ It enables the customer to perform comparative Indian movies like Telugu, Hindi, Gujrati, Bengali etc.
shopping. Other entertainment services are as follows,
❖ It doesn’t restrict on the number of products to (a) Pay per view service
be displayed.
(a) Game on demand service.
Drawbacks of Online Catalogs
(a) Pay Per View Service
❖ It is costly to build. It is a special type of service provided by cable
operators. In this service, in order to watch a particular
❖ It becomes necessary for the customer to have
programme on TV, a user has to pay for it.
the knowledge of computers as well as the
Internet. (b) Game on Demand Service

Tire figure for different types of home shopping is as With the help of this service, a user can order and play
follows, desired games, which may include sports games, car
racing games, mind games or action games.

Other than ordering and watching movies, a user can

also hear different kinds ofmusic like Hindi, Gujrati, Spanish
etc. by downloading it through Internet.

4. Microtransactions of Information

Using this type of consumer-oriented application in

E-commerce, customers can download different types of
softwares or packages they want, through internet.

There are two main categories to download a software,

(a) Shareware software

Figure: Types of Home Shopping (b) Freeware software.

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80 E-COMMERCE
(a) Shareware Software (b) Consortia Sponsored Electronic Market Place

There are some websites which charges the user An electronic market place having more number of
for usage of a particular software. This category of suppliers and less number of customers.
software is called shareware software.
Example
(b) Freeware Software
Covisint electronic market place and exostar
There are some websites which don’t charge the electronic market place.
user for usage of a particular software. This type of
(c) Independent Industry Electronic Market Place
software is called freeware software.
The biggest advantage of this category of software A market place where there are equal number of
is that it is cost free. The problem that might occur suppliers and equal number of customers.
in shareware software category is the fraudulent use Example
of your credit card. In freeware category, no such
problem exists. Chem connect electronic market place.

Following is the diagrammatic representation of micro (d) Customer Portals Electronic Market Place
transactions of information application.
This market place is just the opposite of consortia
sponsored electronic market place. Instead of more
number of suppliers and less number of customers,
there are more number of customers and less number
of suppliers.

Example

Grainger electronic market place.

(e) Private Stores on Supplier’s Site Electronic

Market Place

This market place is complete contrast to the private

company electronic market place. There is only one
Figure: Microtransactions of Information supplier and more number of customers as compared
Q12. Discuss different types of electronic market
to only one customer and more number of suppliers
places. of private company electronic market place.

Example
Answer :
There are five different types of electronic market Cisco electronic market place and Dell electronic
places which are as follows, marketplace.

(a) Private company electronic market place The diagrammatic representation ofthe five electronic
market places in e-commerce is shown below,
(b) Consortia sponsored electronic market place
(c) Independent industry electronic market place
(d) Customer portals electronic market place
(e) Private stores on supplier’s site electronic market
place.
(a) Private Company Electronic Market Place

A market place which consists of more number of

suppliers and only one customer.
Example

Harley-Davidson supply net electronic market place. Figure: Five Electronic Market Places
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UNIT-3 : Consumer Oriented E-Commerce Applications 81

3.2_ MERCANTILE PROCESS MODEL: CONSUMER’S PERSPECTIVE AND MERCHANT’S

____ PERSPECTIVE ___ __
Q13. What are the mercantile process models from consumer’s perspective? March/April-12, Q11 (a)

OR
Discuss about mercantile process model from consumer’s perspective.
Answer: (Model Paper-I, Q11(a) | Oci./Nov.-16, 011(b))

Mercantile Process Models from Consumer’s Perspective

Mercantile process models enables the consumers to perform online shopping with same features as that of manual
shopping. This model consists of seven different functions and each of these functions are in turn placed in three different
phases,
Phase-i: Pre-purchase Preparation Phase
This is the first phase of the process model which includes,
(i) Searching and finding.those products on which consumers are dependent.
(ii) Comparing the qualities of the above products with the one that is rarely used.
(iii) Discussing on the price and delivery of the products.
Phase-ll: Purchase Consummation
This is the second phase of the process model. Once the customer has decided the product to purchase, there must
be some sort of transaction between the customer and seller regarding the product delivery and payment. This type of
transaction is called mercantile transaction. Various steps involved in mercantile transaction process are, t
Step 1
Customer informs the vendor/seller that he wants to buy a product. This intention can be done through Internet,
telephone etc.
Step 2
Vendor tells the customer about the cost of the product.
Step 3
Customer might bargain with the vendor regarding the cost or settle with the cost quoted by the vendor.
Step 4
Once both the parties have agreed upon the cost of the product, customer pays the amount to the vendor in an
encrypted format containing a digital signature.
Step 5''
Seller then checks the authenticity of the customer by sending the signed application to his respective bank.
Step 6
On receiving the form of payment the bank first decrypts it. Then bank of the vendor, calls the bank of the customer
to know whether any cash is available in the customer’s bank account.
Step 7
If the customer’s bank replied in a positive way, then the vendor’s bank sends the message saying payment done by
the customer is valid.
Step 8 ,
On receiving this message, vendor delivers the product to the customer along with the product delivery receipt.
Step 9
Customer on getting the product, signs and sends the receipt back to the vendor.
Step 10
Certain audit and customer service actions are then performed regarding overbilling.

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82 E-COMMERCE
A simple diagram of the above mercantile transaction process is shown below,
Customer

o
/\
Delivers Pays amount
The product To purchase product (i)
To the customer
Bank sends
(iv) enc*or Customer’s
Monthly
Document
(v)
Sends
Message
Vendor sends the
Saying
payment to the bank
Payment
for validation (ii)
Is valid
(iii)
L
□ □□
□ □□ -------
Bank

Figure: Simplified On-line Mercantile ModefTransaction

.• - ' * ' ■ '.■'••• ■ . .................

Phase-Ill: Post-purchase Interaction Phase

This is the third phase of the process model. This phase describes how to deal with various issues/disputes that takes
place between the customer and a company. For Example, disputes regarding the quality of the product.
However, there are certain issues that are not completely solved. The issues are as follows,
(a) Inventory issues
(b) Database access and compatibility issues
(c) Customer service issues.
(a) Inventory Issues

One of the issues that needs to be dealt is inventory issues. Suppose, a customer needs a particular product and that
product is not available in the company. In such situations, the company should immediately inform the customer
about the unavailability of the product rather than sending a notice after several days thinking that the customer
won’t mind.
Companies should not take their customers for granted. On the contrary, if the particular product the customer needs
is available, then the company must instantly deliver that product to the customer. By doing this, good relationship
with the customer can be maintained.
(b) Database Access and Compatibility Issues

Another issue that needs to be dealt is database access and compatibility issues. Only if the customer is able to have
information or access to those sellers who more often or not use the same software for marketing their products and
that too on Information Superhighway (I-way), only then the customer can have access to the kind of service that
is required.
(c) Customer Service Issues

Other than the above issues, there is another issue that needs to be resolved which is customer service issue. Suppose,
a customer has bought a particular product from a company and is facing certain problems regarding it. Then the
customer contacts the customer service section of the company for product enquiry. In such cases, the customer
service operator must respond immediately to the customer rather than making the customer wait.
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UNIT-3 : Consumer Oriented E-Commerce Applications 83

The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,
Pre purchase determination phase

Search and Comparison of large Discussion

Discovery of >■ Set of products i > On the cost and
Larger set of products smaller set of products the product

Purchase consummation phase

V
Checking whether
Delivery of Placing an
The payment is
Product receipt Order
authorized
UNIT-3 : Consumer Oriented E-Commerce Applications 83

The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,
Pre purchase determination phase

Search and Comparison of large Discussion

Discovery of >■ Set of products > On the cost and
Larger set of products smaller set of products the product

Purchase consummation phase

V
Checking whether
Delivery of Placing an
< The payment is *
Product receipt Order
authorized
UNIT-3 : Consumer Oriented E-Commerce Applications _______________________ 83

The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,
Pre purchase determination phase

Search and Comparison of large Discussion

Discovery of >- Set of products > On die cost and
Larger set of products smaller set of products the product

Purchase consummation phase

V
Checking whether
Delivery of Placing an
The payment is ■*
Product receipt Order
authorized
UNIT-3 : Consumer Oriented E-Commerce Applications 83
The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,
Pre purchase determination phase

Search and Comparison cf large Discussion

Discovery of >- Set of products > On the cost and
Larger set of products smaller set of products the product

Purchase consummation phase

V
Checking whether
Delivery of Placing an
The payment is *
Product receipt Order
authorized
UNIT-2 : Framework of E-Commerce 59
Q25. Briefly discuss about NNTP. (iii) SMTP
Answer : For answer refer Unit-II, Page No. 57, Q.No. 22(c).
NNTP stands for “Network News Transfer Protocol”. (iv) NNTP
It is an application protocol that uses reliable stream like
For answer refer Unit-II, Page No. 59, Q.No. 25.
TCP for distributing, retrieving and posting news article on
web. The main idea behind designing this protocol is, to store Q27. Explain about the types of classes of IP ad
news articles on single server host and allow subscribers dresses.
residing on the network of other host to read it by establishing Answer : Oct./Nov.-12,010(b)
reliable connection. NNTP uses interactive mechanism in
order to make decision regarding the transmission. The Network/IP Addressing
exchange mechanism is as follows, Network address helps in identifying the network
1. A host that requires/sends updated news, communicates across the globe. It contains network id and host id. The host
with its neighbor with the hello of NNTP. id is a unique address given to each host on the network. IP
protocol uses 32-bit address (4-bytes) for the network ad
2. The client host uses newness command and enquires
dressing. Depending on applications, the network addresses
about the new articles that have been arrived in the
are classified into 5 types. Class A, Class B, Class C, Class
newgroup.
D and Class E.
3. The server then sends list of new articles.
Class A Network
4. The client host requests transmission of those articles
from the server. In class A, 1 byte is used for network address and 3
bytes are used for host address. The first bit is always ‘0’ for
5. The server then checks for duplicate articles and sends class A network.
only articles that are required to the client. •<— 1 byte <- 3 bytes
Since, NNTP uses TCP as its communication channel Class A 0 Net id Host id
it is considered as secured delivery system. Moreover this
protocol uses TCP port 119 in order to connect news server The range of class A addresses is,
with the client. The advantage of using TCP port 119 is that
whenever a news article gets created, it will immediately be 0 0000000 00000000 ■00000000 00000000

transmitted to the news channel and updated. The process

of updation continues until all the clients attached to the Since all zero’s are for reserved address.
network gets the updated news. A client can obtain updated Starting address of class A is,
news message using two methods.
0 00000001 00000000 00000000 00000000
(a) Push Method
1 0 0 0
It is an active method that allows a server to send a
new message to all the clients present on the network. Maximum cl ass A addresj is,
(b) &ull Method
0 1111111 11111111 11111111 11111111

It is a passive method, that enables a server to send 127 255 255 255
only those messages that are specified by client.
All the 8-bits are 1, therefore the decimal value is
Q26. State the security protocols. Discuss. 255. To determine any byte value, subtract that zero position
March/April-15, Q10(a) value from 255.
OR .-. For class A, the ‘0’ bit is in 2 position
Explain security protocols. .-. 27 = 128 => 255 - 128 = 127
Answer : (March/April-12, Q10(b) | March/April-17, 010(b)) => 127.255.255.255
The different security protocols include, But 127 network address is reserved for loop back
(i) FTP test.

For answer refer Unit-II, Page No. 55, Q.No. 22(a). .-.Class A maximum network address is
126.255.255.255
(ii) HTTP
.-.Range of class A network addresses are
For answer refer Unit-II, Page No. 55, Q.No. 22(b). 1.0.0.0..... 126.255.255.255
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Class B Network Address

In this addressing method, 2 bytes are reserved for a network address and 2 bytes are reserved for a host address.
■<— 2 byte x 2 bytes

10 Net id Host id

The first two bits for class B are ‘ 10’.

Range of class B network address is,

10 000000 00000000 00000000 00000000

128 • 0 • 0 • 0
The maximum class B network address is,

10 111111 11111111 11111111 11111111 [255- 64= 191]

191 • 255 ’ 255 * 255

Range of class B is 128.0.0.0.... 191.255.255.255.

Class C Network Address

In this network address, 3 bytes are reserved for net id and 1 byte for host id. The first 3 bits are reserved as 110.
*----- 3------ --------- 1------
110 Net id Host id

Minimum class C address is,

110 00000 00000000 00000000 00000000

192 0 0 0

Maximum class C address is,

110 11111 11111111 11111111 11111111 [255-32 = 223]

223 255 255 255

Range of class C address is 192.0.0.0.... 223.255.255.255

Clauss D Network Address

It is used for multicasting and indicating the multicast group address. It doesn’t contain any net id or host id. It
contains only a group id which specifies the group to which the packet belongs.
The first 4 bits are reserved as 1110.

1110 Multicast Address

■<----------- 4 bytes--------------- *•

Minimum class D addresses are,

1110 0000 00000000 00000000 00000000

224 • 0 0 0

Maximum class D addresses are,

1110 mi 11111111 11111111 11111111 [255-16 = 239]

239 255 . 255 . 255

Range of class D addresses are 224.0.0.0....... 239.255.255.255

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UNIT-2 : Framework of E-Commerce
RCE
Class E Network Address

Class E address is reserved for future use.

ss.
The first byte bits are reserved as 11110.
Range of class E network address is 240.0.0.0.... 247.0.0.0
[255 - 8 = 247],

2.4 DATA ENCRYPTION

2.4.1 Cryptography - Encryption - Decryption - Public Key - Private Key

Q28. Define the following terms,
(a) Cryptography
(b) Cryptanalysis
(c) Cryptology
d Role of public kev a V<
UNIT-2 : Framework of E-Commerce 61
Class E Network Address
Class E address is reserved for future use.
The first byte bits are reserved as 11110.
Range of class E network address is 240.0.0.0.... 247.0.0.0
[255 - 8 = 247],

2.4 DATA ENCRYPTION

2.4.1 Cryptography - Encryption - Decryption - Public Key - Private Key

Q28. Define the following terms,
(a) Cryptography
(b) Cryptanalysis
(c) Cryptology
(d) Role of public key and private key.
Answer :
(a) Cryptography
Cryptography is a method of transforming the plaintext into an unreadable form. This unreadable form can only be
read by the authorized users. It is derived from ‘kryptos’ which is a Greek word whose meaning is hidden (or) secret. It
employs techniques like encryption and decryption. In encryption, the plaintext is transformed into ciphertext (or) encrypted
text. Decryption is the reverse process of encryption where the encrypted text can be transformed back to plaintext. The
transformations are performed by using a cryptographic key. Thus cryptography is a process of providing information
security thereby protecting it from unauthorized access.
Cryptography provides security to the information as well as to other useful applications for improving authentication
methods like message digests, digital signatures, non-repudiation and encrypted network communications. If it is not
implemented properly then, it would lead to many security problems. The length and strength of an encryption key are also
important. This is because the strength of an encryption algorithm is dependent on the key.
(b) Cryptanalysis
Cryptanalysis is a type of attack that makes certain attempts possible for obtaining the plaintext and the key used. If it
is able to determine the key, the effect is disastrous and all the encrypted messages, which are already transmitted and those
that are ready to be transmitted in future are damaged.
(c) Cryptology
, Cryptology is the study of both cryptography and cryptanalysis. Cryptology is sometimes mistaken as cryptography
or cryptanalysis. But cryptology in essence encompasses both cryptography and cryptanalysis. Cryptanalysis is the process of
recovering the original text from encrypted text without the knowledge of the key. Cryptanalysis is the reverse of cryptography.
The attempts made by a cryptanalyst to unhide the plaintext depend upon the level of information available to him. The worst
case will be when only ciphertext is available for cryptanalysis. In such scenario, brute force attacks are used wherein every
single probable key is applied. The analyst may use one or more samples of ciphertext repeatedly and unhide the plaintext.
He can also replace the ciphertext with plaintext or use a random key that may help him to reveal the plaintext.
(d) Role of Public Key and Private Key
The pair of public and private keys are used for encrypting and decrypting the message respectively. Each public
key is broadcasted and the corresponding private-key is kept secret. The text, data or message which is encrypted with your
public-key can be decrypted only with your private-key. The figure below shows the roles of public and private keys.

Figure: Role of Public-key and Private-key

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The user generates a pair of keys i.e., a public-key and a private-key. The public-key is made public by keeping it in
a public register or a file which can be accessed by all the users. The corresponding key i.e., the private-key is kept secret,
therefore it is known only to its owner. The user maintains the public keys of other users to exchange messages.
When user "A' wishes to send a message to user ‘B’ he needs to encrypt the message using B’s public key which
is known to him. When B receives the encrypted message, he decrypts it using his private-key. No other user except B
can decrypt the message because only B knows its private-key. The communication is secure as long as the private-key is
protected from attacker. At any time, a user can change his private-key and broadcast its corresponding public-key.
Q29. Explain encryption techniques. March/April-14, Qio(b)

OR
Explain two security techniques of encryption.
Oct./Nov.-13,Q10(b)

OR
Briefly explain the encryption techniques. (Oct./Nov.-n, Qio(a) | Model Paper-in, Qio(a»

Explain about encryption techniques.

Answer : Oct./Nov.-16, Q-iO(a)

Input Transmitted

Figure: Encryption Process ,

Types of Encryption
The following are the two major types of encryption,
1. Symmetric encryption
2. Asymmetric encryption.
£
1. Symmetric Encryption
Symmetric encryption is also known as private key or secret key encryption. In this, only one secret key is required
for encryption and decryption of the message. This key is shared by both sender and recipient. It is a simple process when
compared to the asymmetric encryption.
2. Asymmetric Encryption
Asymmetric encryption is also known as pubic key encryption. In this, two keys are required for encryption and
decryption of a message i.e., a public key and a private key. Private key must be kept secret for security purposes while
the other key must be shared by both sender and recipient. It is a complex and time consuming process when compared
to symmetric encryption.
Public Key Cryptography
Public key cryptography was invented by Diffie and Hellman in the year 1976. For this reason, it is sometimes
known as Diffie-Hellman encryption. Public key cryptography is also known as asymmetric cryptography. It is a form
of cryptography in which a user has a pair of cryptographic keys i.e., public key and private key. The private-key is kept
secret, whereas the public key is distributed widely. A message or text data which is encrypted with the public-key can be
decrypted only with the corresponding private key. For instance, when Johny wants to send a secure message to Sunny, he
uses Sunny’s public key to encrypt the message. Sunny then uses his private key to decrypt it.
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UNIT-2 : Framework of E~Commerce 63
Elements of Public Key

A public key cryptography/encryption consists of the following five elements. They are,
(i) Textdata/Message
(ii) Encryption algorithm
(iii) Public key and private key
(iv) Cipher Text/Unreadable text
(v) Decryption algorithm.
(i) Textdata/Message
This can be any input data, such as textdata or message.
For example, Johny is a user of computer and wants to send his message, M = “Hello” securely to his friend Sunny,
who is also a user of computer.
(ii) Encryption Algorithm
To encrypt the message, an encryption algorithm performs certain transformations on it.
There are various encryption algorithms but the RSA public key encryption algorithm is mostly used to perform
certain transformations or calculations on the textdata or message.
For example, Johny uses the public key of Sunny and encrypted his message by using RSA algorithm.
(iii) Public Key and Private Key
These pair of keys are used to encrypt and decrypt the message respectively. The private key is always kept secret,
whereas public key is widely distributed.
For example, Johny uses a public key of Sunny to encrypt his message, whereas Sunny uses his private key to decrypt
the Johny’s message as shown in the figure.
(iv) Cipher Text/Unreadable Text
Once the encryption is done on the textdata, it is in unreadable format means it cannot be read by human beings.
For example, Johny’s message has converted into unreadable form so that nobody except Sunny can read his message,
as he has a corresponding private key for that message.
(v) Decryption Algorithm
A decryption algorithm takes the unreadable text and its corresponding key to convert this text into original text.
Hence, we it can be said that the decryption algorithm is the reverse of encryption algorithm.
£ For example, decryption algorithm takes the unreadable text of Johny and also takes the Sunny’s private key to
decrypt that message and convert the unreadable text into readable form i.e., original text sent by Johny as shown in the
below figure.

Input RSA Public-key Encryption RSA Public-key Output

(Original Text) Algorithm Decryption Algorithm (Original Text)

Figure: Public Key Encryption

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64
....... ...................................w........................ ...................-......... .....................................
^30. Define cryptography and classify different cryptographic attacks.
Ansi* Model Paper-Ill, Q10(b)

Cryptography
Tor answer refer Unit-IT, page No. 6L Q-No. 28<a).
Classification of Cryptographic Attacks
Cryptographic attacks can be classified into two types. They are,
1. Cryptanalytic attacks
2. Non-cryptanalytic attacks.
1. Cryptanalytic Attack
This attack can be referred as a group of statistical and algebraic techniques. It exploits the mathematical features
to capture the secret key. They focus on the distinguishes that exist in the output distribution of algorithms. The main role
of this attack is to determine the cipher properties which are not found in random function. This scenario is generally
referred to as “distinguishes”. Typically all attacks are called as distinguishes. Now the attacker estimates or guesses the
key and searches the distinguishing property. An attack can be considered as correct if the guessed key matches any of the
distinguishes. If not, it is considered as incorrect and the hacking is continued.
To minimize the complexity of guessing, divide and conquer method is used. This method is used in the brute force
search method to generate efficient results.
2. Non-cryptographic Attacks
Non-cryptographic attacks focus on the three major goals of security. These goals include,
(i) Confidentiality
(ii) Integrity
(iii) Availability.
Different attacks can be calssified based on these three goals as follows,

(i) f Attacks on Confidentiality

(a) Modification

(b) Masquerading

Kb) Modification refers to the alteration of a specific portion of authorized information. It also refers to the deletion or
reordering of information to generate an unauthorized effect. An example for this type of attack is changing the
account number of banking transaction.

(b) Masquerading

res Replayinig refers to the process of capturing a particular information

UNIT-2 : Framework of E-Commerce 65
CE
(a) Modification

(b) Masquerading

res Replaying refers to the process of capturing a ^articular information and retransmitting or resending it later for
UNIT-2 : Framework of E-Commerce 65
(a) Modification

(b) Masquerading

(d) Repudiation

Repudiation refers to the attack in which either sender (or) receiver denies the action it performed. For example,
receiver already received the message but denies.

(iii) Attacks on Availability

The attack that can be made on availability is Denial of Service (DOS).

Denial of Service (

(i) Passive Attacks

(ii) Active Attacks

In this types of attacks, attacker can alter the information (or) include some fraudulent information into the network.
These attacks harm the system and can easily be detected. However, they are difficult to prevent.

2.4.2 Digital Signatures - Digital Certificates

Q31. Write short notes on digital signatures and digital certificates. Discuss the role of digital signatures in
network security along with its properties and requirements.

Answer :
Digital Signatures

A digital signature is one of the methods of encryption used to provide authentication. The main idea of the digital
signature is to protect the message or data from modifications. Digital signature is very popular in the world of network
security. Basically, it is a kind of asymmetric cryptography used to support the security properties of a handwritten signature
on paper. The digital signature scheme provides two algorithms where one algorithm is for signing, which requires the
user’s secret or private-key, and the other algorithm is for verifying signatures which requires the user’s public-key. The
result of the signature process is called the “digital signature”.
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Digital Certificates
Digital certificates are the certificates that are used to verify one’s identity when he/she is doing any business or
transactions on the Internet. These certificates are issued by a trusted third party called as Certificate Authority or Certification
Authority (CA). A digital certificate contains the user’s name, a serial number, a copy of the certificate holder’s public key
(which is useful for message encryption and digital signature generation), expiration data and also the digital signatures
of the CA (so as to verify the identity of CA).
Role of Digital Signatures in Network Security1
Digital signatures are used to provide authentication of any electronic information. For instance, assume that, there
are two users of the internet say, A and B. User A wants to send some confidential message to user B assuring that the
message is unmodified and is sent by him only.
The sender A writes his message into an e-mail and applies a special function known as hash function on the message.
This creates the checksum i.e., a value that checks the authenticity during data transmission of the information. Then, A uses
its private-key that he has previously obtained from public-private key authority to encrypt the checksum. The encrypted
message becomes the A’s digital signature of the message. The checksum and the message is then sent to the receiver.
At the other end, the receiver B receives the message and the checksum. In order to make sure that, the message is
complete and unmodified from sender J, the receiver B applies the same hash function on the received message to produce
checksum. It also uses A’s public-key to decrypt the checksum it received with message. The two checksums are then
compared. If they are matched then the received message is complete and signature is valid. Otherwise, the message is
modified and signature is considered invalid.
The below figure shows the role or operation of a digital signature,
Sender A Receiver B

Private-key of Public-key of
Sender “A” Receiver “B”

Figure: Role of Digital Signature

Properties of Digital Signature
1. It must authenticate the contents when the signature is being done.
2. It must be responsible for verifying the author as well as date and time of the signature.
3. It must be verifiable by third party.
Requirements for Digital Signature
1. A digital signature must be in the form of bit pattern that is dependent on the message being signed.
2. The process of producing the digital signature must be easy.
3. A copy of digital signature must always be preserved.
4. A digital signature must be both easily recognizable and verifiable.
5. It must include some unique information to prevent forgery and denial by the sender.
6. It must be highly impractical for hacker to forge a digital signature by any means which may include creation of a
new message for the already existing digital signature. It may also include an attempt to replace the original digital
signature with duplicate signature for a given message.
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UNIT-2 : Framework of E-Commerce 67

I. Multiple Choice
1. E-commerce framework has__________ layers. [ 1

(a) Four (b) Five

(c) Six (d) Seven

2. The function of_______ layer is to provide interface for e-commerce applications. [ ]

(a) Interface and support

(b) Brokerage services and data management

(c) Secure messaging and structured document interchange services

(d) Middle ware services

3. OpenDoc contains________ as its basic building blocks. [ J

(a) OLE

(b) Document parts

(d) HTML

4. ________ in e-commerce refers to the process of gathering information about usage of privileges accessing of
specific resources. [ ]

(a) Confidentiality

(b) Authorization

(d) Auditing

5. __________ is the process of ensuring a person or a program that they have right to access particular resources.
[ J

(a) Confidentiality

(b) Authentication

(d) Availability

6. __________ refers to the plans or arrangements made in the network infrastructure along with the various techniques
used by network administrator. [ ]

(a) Network security (b) Computer security

(c) Information security (d) None of the above

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________refers to the ability of restricting and controlling the access to the host systems and applications through
various communication links. [ ]
•
(a) Availability (b) Access control

(c) Integrity (d) Confidentiality

8. Number of layers in TCP/IP reference model is_______ [ ]

(a) Four (b) Five

(c) Six (d) Seven

9. ________ is a simple ASCII protocol. [ ]

(a) FTP (b) HTTP

(c) SMTP (d) None of the above

10. __________is an application protocol that uses reliable stream like TCP for distributing, retrieving and posting
news articles on web. [ ]

(a) S-HTTP (b) NTTP

(c) Network Addressing (d) None of the above

II. Fill in the Blanks

1. _________ is method of converting plain text into cipher text.

2. ________ is an information handling layer that governs and manages huge amounts of data on the networks.

3. SGML stands for___________ .

4. HTML stands for__________ .

5. _________ is a technology that integrates several applications and multimedia data types within an active document
framework.

6. __________ is considered as the backbone of e-commerce.

7. __________refers to the process of protecting the data being transmitted from all types of passive-attacks.

8. _________refers to the branch of computer science that describes the application of ‘secure’ behaviour on the
operation of computers.

9. __________violates the security that arises upon the occurrence of an event, action or a circumstance.

10. _____ . is, a service that enhances the security of a data processing system and the information flow within an
organization.

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UNIT-2 : Framework of E-Commerce 69

I. Multiple Choice

1- (c)

2. (a)

3- (b)

4. (d)

5. (c)

6- (a)

7. (b)

8- (a)

9- (c)

10. (b)

II. Fill in the Blanks

1. Encryption

2. Brokerage Services and Data Management Layer

3. Standard Generalized Markup Language

4. HyperText Markup Language

5. OLE

6. Information Technology

7. Confidentiality

. 8. Computer Security

9. Threat

10. Security Service

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70 E-COMMERCE

III. Very Short Questions and Answers

Q1. What is a firewall?

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UNIT
CONSUMER ORIENTED
E-COMMERCE APPLICATIONS

( LEARNING OBJECTIVES J
After learning this unit, a student will have thorough understanding about the following key concepts,

❖ Applications of Consumer Oriented E-commerce.

c INTRODUCTION
Consumer Oriented E-commerce applications have been widely accepted around the world because of
its easy and simple applications like electronic shopping, online stores etc. Online shopping is similar
to general shopping. The only difference is that instead of going to a shop and selecting the item, the
customer can sit at home and carry out his/her shopping online. However, the problem with this mode of
shopping is that detailed information of the product is not provided. There are four types of Consumer
Orientedapplications that are widely used,

❖ Personal finance/home banking

❖ Home Shopping
❖ Home Entertainment
❖ Micro transactions of information..
Electronic Payment System refers to processing of transactions in a digitized environment i.e., it does not require
human intervention. It is also referred as Electronic Funds Transfer (EFT). Basically, there are different types
of electronic payment systems such as credit cards, smart cards etc. Despite of being advantageous, these
sort of payment systems mostly suffer from security issues.

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Cijiijsk' :<3hO
72 E-COMMERCE

PART-A
■

-
SHORT QUESTIONS WITH SOLUTIONS
Q1. What is E-cash? Model Paper-Ill, Q3

E-cash

Answer : (March/April-17, Q3 | Oct.-14, Q3 | March/April-14, Q4)

OR
E-checks
Answer : Oct./Nov.-12, Q3

Electronic check is another form of electronic payment system. These checks are preferred when a customer is willing
to make a payment without using paper cash. The e-cash system is generally an electronic implementation of paper check
system. These checks make use of digital signature for signing and endorsing and use digital certificates to authenticate
the buyer, the buyer’s financial institution and the buyer’s account. Digital signature authentication is provided by using
public key cryptography.
Online services provided by electronic checks allow,
1. The seller to verify if the buyer has sufficient funds in his/her account.
2. Improved security at each step of transaction processing.
Q3. What is a debit card?

/f OR
Debit Cards
Answer : March/April-15, Q3

OR
EPS
Answer : March/Aprii-13, Q3

Electronic Payment System (EPS) is a building block of E-commerce which refers to the online exchange of money.
This exchange is carried out over different platforms such as E-cash, E-check, credit cards etc. The widespread adoption
of these methods is due to the fact that it reduces cost and time of a transaction.
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UNIT-3 : Consumer Oriented E-Commerce Applications 73
Electronic payment typically refers to paying the amount for purchased goods electronically. It is also referred as
Electronic Funds Transfer (EFT). This sort of process involves, transferring of funds electronically from one financial
institution to another. This type of electronic transfer started using different electronic devices like computers, telephone
devices, electronic terminals, telecommunication devices etc.

Q5. Write a short note on home banking. Model Paper-m, qs

Home Banking

Answer : March/April-12, Q5

E-banking/online banking made the life of individuals and companies easy. Today customers are no more required to
rush to banks for making deposits, withdrawals and payment of bills. All these can be done online; customers can withdraw
money by using Automated Teller Machine (ATM). Both individual and companies can save their money and time through
E-banking. E-banking is one among the very successful online businesses.
With the help of e-commerce, various banking transactions can be done online. For instance, if a user wants to know
UNIT-3 : Consumer Oriented E-Commerce Applications 73
Electronic payment typically refers to paying the amount for purchased goods electronically. It is also referred as
Electronic Funds Transfer (EFT). This sort of process involves, transferring of funds electronically from one financial
institution to another. This type of electronic transfer started using different electronic devices like computers, telephone
devices, electronic terminals, telecommunication devices etc.

Q5. Write a short note on home banking. Model Paper-m, qs

Home Banking

Answer : March/Aprii-12, qs

E-banking/online banking made the life of individuals and companies easy. Today customers are no more required to
rush to banks for making deposits, withdrawals and payment of bills. All these can be done online; customers can withdraw
money by using Automated Teller Machine (ATM). Both individual and companies can save their money and time through
E-banking. E-banking is one among the very successful online businesses.
With the help of e-commerce, various banking transactions can be done online. For instance, if a user wants to know
the current status of his/her bank account, he/she just needs to go to the respective bank’s website and login through the
username and password. Once log in is done successfully, the user is asked to enter the account number. After entering the
AVI
UNIT-3 : Consumer Oriented E-Commerce Applications__________ ___ _________ 73
Electronic payment typically refers to paying the amount for purchased goods electronically. It is also referred as
Electronic Funds Transfer (EFT). This sort of process involves, transferring of funds electronically from one financial
institution to another. This type of electronic transfer started using different electronic devices like computers, telephone
devices, electronic terminals, telecommunication devices etc.

Q5. Write a short note on home banking. Model Paper-m, qs

Home Banking

Answer : March/April-12, Q5

Q6. List out the risk involved in E-payments. (Oct./Nov.-11, Q3 | Model Paper-I, Q8)

Risks in E-payment (March/April-12, Q3 | March-11, Q3)

What are the risks of E-payment system?

Answer : Oct./Nov.-16, Q4

The risks that are associated with electronic payment system are,

1» Risks associated with fraud or mistakes

2. Risks associated with privacy

3. Risks associated with credit cards which can be,

(a) With guarantee

/ (b) Without guarantee.■

Q7. What are the payment systems? Model Paper-n, Q3

Types of Payment Systems

Answer : March/April-14, Q8

Electronic payment systems can be categorized into three types,

1. Banking and Financial Payment

The banking and financial payment system is again classified into three types. They are,

(i) Large scale payment-

(ii) Small scale payment

(iii) Home banking.

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2. Retailing Payment

Retailing is classified into three types,

(i) Credit payment
(ii) Debit payment
(iii) Charge card payment.
3. Online E-commerce Payment

(i) Token based payment system

(ii) Credit card based payment system.

EFT

Retailing payment
Online payment
Financial payment

Credit card Charge card

Debit card Credit

Token
card
based
based

Q8. Write about credit card.

Credit Card

Answer : (March/April-16, Q71 SepJOct-15, Q7)

Credit card based payments can be processed by using the following three methods,
F
1. Using plain unencrypted credit card features for payment

2. Using encrypted credit card features for payment

3. Using third-party authorization for credit card payment.

Q9. What are the advantages of E-cash?

Advantages of E-cash

Answer : March/April-16, Q3

The advantages of e-cash are as follows,

1. E-cash provides shopping convenience to the customers, hence they are free to choose from a variety of products
available globally.

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Q10. List the benefits of smart card.

Benefits of Smart Cards

Answer : Sep./Oct.-15, Q3

There are numerous benefits of using smart cards. Some of them are mentioned below.

1. Highly Secure

It uses encryption and authentication technology for ensuring security.

2. Safely Portable

It is lightweight and can be easily carried. Hence, a person can carry smart card instead of carrying money with him,
and to access its stored amount, he just have to know the pin number.

3. Double as an ID Card

4. Prohibit Fraud

It can be used by government to ensure that the benefits and social welfare are received by the right person.

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76 E-COMMERCE

3/1 INTRODUCTION
Q11. Discuss in detail about consumer-oriented E-commerce application and its role in E-commerce.

March/April-15, Q11(b)

Explain about consumer-oriented E-commerce applications. (Model Paper-n, qh(b) | Oct.-14, QH(b))

Discuss customer-oriented E-commerce applications. March/April-14, QH(b)

Answer :
Consumer-Oriented Electronic Commerce Applications

There are mainly four types of consumer-oriented applications that are widely used,
1. Personal finance/home banking *
2. Home shopping
3. Home entertainment
4. Micro transactions of information.
1. Personal Finance/Home Banking

This is the first consumer-oriented application in e-commerce. With the help of e-commerce, various banking
transactions can be done online. For instance, if a user wants to know the current status of his/her bank account, he/she just
needs to go to the respective bank’s website and login through the username and password. Once log in is done successfully,
the user is asked to enter the account number. After entering the account number, account balance will be displayed in the
message box.
Services that are provided by home banking application can be classified into three types,
(a) Basic services
(b) Intermediate services
(£)■ Advanced services.
(a) Basic Services

Tto services of home banking include,

(i) Payment of bills
(© Checking the account status
(iii) AliM services for depositing and withdrawing cash.
(b) , Ibterfhecliate Services
This is the second type of service of home banking application. Like basic services, intermediate services also
of bills, transfer of money etc. Only difference here is that basic services are used by
• those CItSiomers‘Stoarwot having enough knowledge about computers. In other words, customers have only basic
knowledge <rfcomputers. Here, such customers use simple packages or software for accessing the basic, services.
Whereas, intermediate- services are used by those customers who have more knowledge than the customers of basic
services. Therefore, these customers require more sophisticated software for accessing the intermediate services.
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UNIT-3 : Consumer Oriented E-Commerce Applications 77
One of the software used by intermediate service customers is called Quick and Dirty Personal Money Management
(QDPMM). This software is used for payment of bills, money transfer etc. Moreover it allows the data to move
from/to the bank in standard format. Initially, QDPMM sends a request to the bank for displaying the image of a
cheque. Within few minutes, the image will be displayed on the screen.

Another type of software used by customers of intermediate services is called “check-free” software. Through this
software, payment of cheques is done online. In order to download this software, high speed modem is required.
Suppose to issue the cheque to someone, click on the software and then a picture of cheque will be displayed on the
screen. Write all the details which are generally required to be filled in a cheque (like name of the person to whom
the cheque is to be paid, amount to be paid to the person, on what date amount should be paid to the person). After
writing all the details, press enter. The amount will be transmitted in either of the following two ways,

(i) A mail of the cheque will be sent to the person, or

(ii) The system on which “check-free” software is installed transfers the cheque information to a special type of
board called Federal Reserve Board through the modem.

Federal Reserve Board in turn transfers the amount to the other person’s bank account.

The diagrammatic representation of the cheque writing/clearing process is given below,

Figure: Check Clearing Process

(c) Advanced Services

This is the third type of service of home banking application. Due to many technological advancements, banks will
not only provide banking transaction services, but also provide online shopping services to the customers. The most
striking feature is that customers living anywhere in the world can access these services.
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78 E-COMMERCE
The diagrammatic representation of these advanced services is shown in the following figure.

Customer at
home

Figure: Advanced Services

2. Home Shopping
This is the second consumer-oriented application in E-commerce. With the help of this application, a user can perform
shopping on-line from home. Example of home shopping are online stores and electronic shopping malls.
There are mainly two forms of home shopping,
(a) Television based home shopping
(b) Catalog based home shopping.
(a) Television Based Home Shopping
This is the first form of home shopping. Television has changed our lives both positively and negatively.
Generally, there are various channels related to fashion, sports, health, teleshopping etc. which are shown on TV. The
user can view his/her required channel with an ease. For instance, if a user wishes to buy various home appliances or
exercising equipments to keep himself/herself fit and healthy, there is a channel called “teleshopping” which shows
different home appliances as well as items for excising along with their costs and warranty.
(b) Catalog Based Home Shopping
This is the second form of home shopping. Other than looking for products for shopping on TV, the user can look
for products for shopping through catalogs as well.
There are two ways in which catalog-based shopping can be done,
(i) Catalog based shopping through paper-based catalogs.
(ii) Catalog based shopping through online catalogs.
(i) f' Catalog Based Shopping through Paper-based Catalogs

Suppose a customer visits a TV showroom to buy a TV but fails to find the desired TV, as he/she is not able to
explain the type of TV that is required to the shopkeeper. In such situation, the shopkeeper provides the customer
with a catalog which has detailed explanation of various models of TV. This may lead to the possibility of finding
the desired TV.
Benefits of Paper-based Catalogs
❖ This type of catalog is easy to develop and are less expensive.
❖ It doesn’t require computer for accessing them.
❖ It is relatively flexible than online catalogs.
Drawbacks of Paper-based Catalogs
❖ It is not possible to perform any sort of change in these catalogs.
❖ It displays the product information only in the form of text or photograph and doesn’t include any form of
video. ,
❖ It'limits the number of products to be displayed.
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VIERCE UNIT-3 : Consumer Oriented E-Commerce Applications 79
(ii) Catalog Based Shopping through Online 3. Home Entertainment
Catalogs
This type of consumer-oriented application in
The procedure for catalog-based shopping through E-commerce has become more popular. A classic example
on-line catalogs is almost similar to paper-based of home entertainment application is home video service.
catalogs. Only difference is that these catalogs are Home video service is a type of service where latest movie
provided online. The online catalog that is mostly releases are converted or recorded in the form of DVDINCD
used is CD-ROM catalogs. These catalog contains and are sold. Factors influencing the popularity of home
detailed information of the product provided by video are as follows,
the website of that particular product which can be
❖ In most cases, people don’t get enough time to go to
viewed just by inserting the CD.
theatres to watch movies.
Benefits of Online Catalogs ❖ Cost of watching a movie in theatres can be expensive.
The price of the ticket varies in every theatre. In some
❖ It is possible to perform changes in online
theatres, the ticket can cost around ?50. In some
catalogs.
theatres, the ticket price can be around ?100.
UNIT-3 : Consumer Oriented E-Commerce Applications 79
(ii) Catalog Based Shopping through Online 3. Home Entertainment
Catalogs
This type of consumer-oriented application in
The procedure for catalog-based shopping through E-commerce has become more popular. A classic example
on-line catalogs is almost similar to paper-based of home entertainment application is home video service.
catalogs. Only difference is that these catalogs are Home video service is a type of service where latest movie
provided online. The online catalog that is mostly releases are converted or recorded in the form of DVDINCD
used is CD-ROM catalogs. These catalog contains and are sold. Factors influencing the popularity of home
detailed information of the product provided by video are as follows,
the website of that particular product which can be
❖ In most cases, people don’t get enough time to go to
viewed just by inserting the CD. theatres to watch movies.
Benefits of Online Catalogs ❖ Cost of watching a movie in theatres can be expensive.
The price of the ticket varies in every theatre. In some
❖ It is possible to perform changes in online
theatres, the ticket can cost around ?50. In some
catalogs.
theatres, the ticket price can be around ?100.
❖ It helps the customer to easily search for the
Now, in addition to provide movies in CD/VCD
desired product.
format, even the latest television shows are also recorded
❖ It provides current and relevant product on CD as well as in DVD format and sold.
information. Instead of going to a particular movie store and buying
a CD/DVD, customer can order it through Internet. For
❖ It displays the product information in the form
example, there is a site called www.moserbear. homevideo,
of text, audio, video etc.
com. Through this site, a user can order different types of
❖ It enables the customer to perform comparative Indian movies like Telugu, Hindi, Gujrati, Bengali etc.
shopping. Other entertainment services are as follows,
❖ It doesn’t restrict on the number of products to (a) Pay per view service
be displayed.
(a) Game on demand service.
Drawbacks of Online Catalogs
(a) Pay Per View Service
❖ It is costly to build. It is a special type of sendee provided by cable
operators. In this service, in order to watch a particular
❖ It becomes necessary for the customer to have
programme on TV, a user has to pay for it.
the knowledge of computers as well as the
Internet. (b) Game on Demand Service

Hie figure for different types of home shopping is as With the help ofthis service, a user can order and play
follows, desired games, which may include sports games, car
racing games, mind games or action games.

Other than ordering and watching movies, a user can

also hear different kinds ofmusic like Hindi, Gujrati, Spanish
etc. by downloading it through Internet.

4. Microtransactions of Information

Using this type of consumer-oriented application in

E-commerce, customers can download different types of
softwares or packages they want, through internet.

There are two main categories to download a software,

(a) Shareware software

Figure: Types of Home Shopping (b) Freeware software.

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80 E-COMMERCE

(a) Shareware Software (b) Consortia Sponsored Electronic Market Place

Example

Grainger electronic market place.

(e) Private Stores on Supplier’s Site Electronic

Market Place

This market place is complete contrast to the private

Example
Answer :
. There are five different types of electronic market Cisco electronic market place and Dell electronic
places which are as follows, market place.

(a) Private company electronic market place The diagrammatic representation of the five electronic
market places in e-commerce is shown below,
(b) Consortia sponsored electronic market place
(c) Independent industry electronic market place
(d) Customer portals electronic market place
(e) Private stores on supplier’s site electronic market
place.
(a) Private Company Electronic Market Place

A market place which consists of more number of

suppliers and only one customer.
Example

Harley-Davidson supply net electronic market place. Figure: Five Electronic Market Places
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UNIT-3 : Consumer Oriented E-Commerce Applications 81

3.2 MERCANTILE PROCESS MODEL: CONSUMER’S PERSPECTIVE AND MERCHANT’S

PERSPECTIVE ________
Q13. What are the mercantile process models from consumer’s perspective? March/Aprii-12, QH(a)

OR
Discuss about mercantile process model from consumer’s perspective.
Answer : (Model Paper-I, Q11(a) | Oct./Nov.-16, 011(b))

Mercantile Process Models from Consumer’s Perspective

Mercantile process models enables the consumers to perform online shopping with same features as that of manual
shopping. This model consists of seven different functions and each of these functions are in turn placed in three different
phases,
Phase-i: Pre-purchase Preparation Phase
This is the first phase of the process model which includes,
(i) Searching and finding.those products on which consumers are dependent.
(ii) Comparing the qualities of the above products with the one that is rarely used.
(iii) Discussing on the price and delivery of the products.
Phase-ll: Purchase Consummation
This is the second phase of the process model. Once the customer has decided the product to purchase, there must
be some sort of transaction between the customer and seller regarding the product deliveiy and payment. This type of
transaction is called mercantile transaction. Various steps involved in mercantile transaction process are,
Step 1
Customer informs the vendor/seller that he wants to buy a product. This intention can be done through Internet,
telephone etc.
Step 2
Vendor tells the customer about the cost of the product.
Step 3
Customer might bargain with the vendor regarding the cost or settle with the cost quoted by the vendor.
Step 4
Once both the parties have agreed upon the cost of the product, customer pays the amount to the vendor in an
encrypted format containing a digital signature.
Step S'
Seller then checks the authenticity of the customer by sending the signed application to his respective bank.
Step 6
On receiving the form of payment the bank first decrypts it. Then bank of the vendor, calls the bank of the customer
to know whether any cash is available in the customer’s bank account.
Step 7
If the customer’s bank replied in a positive way, then the vendor’s bank sends the message saying payment done by
the customer is valid.
Step 8 ,
On receiving this message, vendor delivers the product to the customer along with the product delivery receipt.
Step 9
Customer on getting the product, signs and sends the receipt back to the vendor.
Step 10
Certain audit and customer service actions are then performed regarding overbilling.
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A simple diagram of the above mercantile transaction process is shown below,
Customer

o->

Delivers Pays amount

The product To purchase product (i)
To the customer
(iv) ^Vendor Bank sends
Customer’s
Monthly
Document
(v)
Sends
Message
Vendor sends the
Saying
payment to the bank
Payment
for validation (ii)
Is valid
(ii>)
□ □□
□ □□
Bank

Figure: Simplified On-line Mercantile Mode/Transaction

Phase-Ill: Post-purchase Interaction Phase

Another issue that needs to be dealt is database access and compatibility issues. Only if the customer is able to have
information or access to those sellers who more often or not use the same software for marketing their products and
that too on Information Superhighway . (I-way), only then the customer can have access to the kind of service that
is required.
(c) Customer Service Issues

Other than the above issues, there is another issue that needs to be resolved which is customer service issue. Suppose,
a customer has bought a particular product from a company and is facing certain problems regarding it. Then the
customer contacts the customer service section of the company for product enquiry. In such cases, the customer
service operator must respond immediately to the customer rather than making the customer wait.
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UNIT-3 : Consumer Oriented E-Commerce Applications 83
The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,

Pre purchase determination phase

Search and Comparison of large Discussion

Discovery cf >■ Set of products i > On the cost and
Larger set of products smaller set of products the product

Purchase consummation phase

Delivery of < Checking whether

Placing an
Product receipt The payment is <
Order
authorized

Post purchase interaction phase

IERCE UNIT-3 : Consumer Oriented E-Commerce Applications 83
The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,
Pre purchase determination phase

Search and Comparison of large Discussion

Discovery of > Set of products i > On the cost and
Larger set of products smaller set of products the product

Purchase consummation phase

V
Checking whether
Delivery of Placing an
The payment is *
Product receipt Order
authorized

v
Post purchase interaction phase

To solve
Disputes between
company and customer

Figure: Three Phases of Mercantile Models from Consumer's Perspective

Q14. Discuss in detail the two forms of payment used in purchase consummation phase.

ikes Answer : Model Paper-ll, Q11(a)

Based on mode of payment used, interaction/transaction between customer and vendor (also known as mercantile
process) varies. There are two forms of payment used in purchase consummation phase. They are,
(i) Mercantile process transactions using digital cash (e-cash).
(ii) Mercantile process transactions using credit cards.
(i) Mercantile Process Transactions Using Digital Cash (E-cash)
E-cash stands for electronic cash. It is one of the forms of on-line payment. It is similar to paper currency that can
be easily transmitted through some electronic means. It also has a risk of theft or loss, so requires security for its storage.
that
Following are the various steps involved in this process,
ner
ner Step 1
Customer takes out e-cash from the bank.
eds Step 2
hip
Customer informs the vendor that he wants to purchase a particular product.
Step 3
Vendor tells the customer about the cost of the product.
ive
nd Step 4
iat I Customers pay e-cash to the vendor purchasing the product.
UNIT-3 : Consumer Oriented E-Commerce Applications 83

The diagrammatic representation of all the three phases of the process model from consumer’s perspective is provided
below,
Pre purchase determination phase

Search and Comparison of large Discussion

Discovery of >- Set of products i > On the cost and
Larger set of products smaller set of products the product

Purchase consummation phase

Y
Checking whether
Delivery of < Placing an
The payment is <
Product receipt Order
authorized

Post purchase interaction phase

To solve
Disputes between
company and customer

Figure: Three Phases of Mercantile Models from Consumer's Perspective

Q14. Discuss in detail the two forms of payment used in purchase consummation phase.

Answer : Model Paper-ll, Q11(a)

Customer takes out e-cash from the bank.

Step 2
Customer informs the vendor that he wants to purchase a particular product.
Step 3
Vendor tells the customer about the cost of the product.
Step 4
Customers pay e-cash to the vendor purchasing the product.
Step 5
On receiving e-cash, vendor sends this e-cash to the bank for validation.
Step 6
Bank of the vendor validates e-cash. If found valid, vendor’s bank sends a message to the vendor saying that the
e-cash is valid.
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Step 7

Vendor on getting this message from the bank, delivers the product to the customer.
Step 8

Finally, after delivery of the product, vendor informs its bank to mark e-cash sent by the customer as already used.
So, next time customer in order to purchase a new product, must provide new e-cash.
(ii) Mercantile Process Transactions using Credit Cards

Mercantile transactions using credit cards is based on two major processes,

❖ Authorization
❖ Settlement.
For authorization, two types of devices are required,
❖ Third party processors/devices.
❖ Point Of Sale (POS) devices.
All the necessary information that is required for authorization of transaction process done through credit cards is
obtained by third party processors. The same information is also stored on point of sale devices by using dial up/ telephone
connection. With the help of this connection, information is transferred from third party processor to point of sale devices.
So, both systems have the same information. But the actual authorization is done on POS devices. Here, credit card
number used for transaction is compared with the actual credit card number of the customer. The actual credit card number
information will be known from the bank of the customer. If both the numbers match, then the transaction is successful.
Otherwise, this process is stopped immediately. Once, the authorization process is complete, the final process is done on
a third party processor.
This transaction process in a step wise fashion is described below,
Step 1

Once the customer has taken the product, he gives his credit card to the retailer for payment of the product. Retailer
uses different devices for scanning the credit card information. For Example, an electronic cash register, point of
sale device.
Step 2 , .

The information of transaction done through credit card is transmitted to the network access point by POS device.
The purpose of this access point is to establish a connection so that the information is distributed or stored over the
network.
Step 3

Transaction information is now available on the network. Hence, POS device checks whether the source of transaction
is valid or not. Then, the transaction information is sent through the network to the customer’s bank to check whether
the credit card is authorized or not. The confirmation is displayed on the screen of POS device.
Step 4
Once the transaction process is complete, the retailer starts a new type of transaction called “close out” transaction.
This transaction deletes all the current transaction information from point of sale device for space for new transactions.
Q15. Describe briefly the mercantile model from the merchant’s perspective.

Answer : Oct./Nov.-n, QH(a)

Mercantile Models from Merchant’s Perspective (or) Order to Delivery Cycle from Merchant’s Perspective

The two important factors that various organizations must keep in mind from the order to delivery of the product
are,
❖ Quality of the product.
❖ Cost of that product.

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UNIT-3 : Consumer Oriented E-Commerce Applications 85

Organizations must make sure that the products they produce are of good quality and maintain that quality for a
long time. Another point that organizations must consider is to ensure the cost of the product is reasonable.
There are eight different steps from product ordering to delivery (also known as order management cycle).
1. Order planning and order generation
2. Cost estimation and pricing
3. Order receipt and entry
4. Order selection and prioritization
5. Order scheduling
6. Order fulfillment and delivery
7. Order billing and account/payment management
8. Post sales service.
1. Order Planning and Order Generation
This is the first step of order management cycle. In this step, a plan regarding the requirements for a particular order
is made. This requires a proper coordination between the particular departments of a company for completing the order of
the customer. For example, the concerned departments must discuss together the workers required to complete the order,
cost for completing the order etc. If there is no proper coordination between the departments, the end result will not be as
expected. With proper planning of order, order can be properly generated.

2. Cost Estimation and Pricing

This is the second in order management cycle. Now, after a company has completed an order given by the customer, it
must know how to fix a price forthat order. Pricing acts as a link between the requirements of the customer for an order and
ability of the company to complete that order. There are various factors that help the company to fix a price for an order,

❖ When company has created an order, it must ensure whether that order will be of any help to customer.

❖ Consideration on the cost that will be good for order completion.

3. Order Receipt and Entry

This is the third step of the order management cycle. Checking whether the order is received properly or not by
the customer, whether the entry of the order is done correctly or not. All these tasks are handled by a separate department
of the company which is customer service department. The people working in this department might be experienced or
inexperienced. Irrespective of this, customer service people are in regular contact with the customers.

4. Order Selection and Prioritization

This is the fourth step of the order management cycle. Other than handling order receipt and entry tasks, customer
service department also decides which orders are good or bad for the company. Selection of those orders are made from
which the company can profit.

After order selection, next step is order prioritization. Prioritizing an order is nothing but taking a decision on which
order can be carried out more quickly. Unfortunately, these decisions are taken by those people of the company which are
having absolutely no knowledge of prioritizing an order.

5. Order Scheduling

This is the fifth step of the order management cycle. In this step, orders which are prioritized are placed in different
company departments. As a result, scheduling the orders will be more difficult because every department will be having
its own way of scheduling the orders.

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86 E-COMMERCE
6. Order Fulfillment and Delivery

This is the sixth step of the order management cycle. Order fulfillment and delivery process is carried out from more
than one place of the company. For example, separate places are required for creation of orders, manufacturing of orders,
and storage of orders etc.

7. Order Billing and Account/Payment Management

This is the seventh step of the order management cycle. Order billing and account/payment management task is
handled by finance department of the company. The only functionality of this department is just to deliver the bills to
the customers and receive the payments from them. This department is beneficial only for the company and not for the
customers. This is because most of the customers are not satisfied with the billing system.
8. Post Sales Service

This step provides different services that will help in the development of a company. The services are,
(a) Providing training to the customers

(b) Installing the product in the system as well as repairing and maintaining the product.

The diagrammatic representation of order management cycle is as follows,

Figure: Order Management Cycle/Order to Delivery Cycle

Q16. Explain mercantile process model.
March/April-17, 011(a)

Explain about Electronic Payment Systems. Oct./Nov.-16, 011(a)

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IMERCE UNIT-3 : Consumer Oriented E-Commerce Applications 87
Discuss about merchantile process model. March/Aprii-16, QH(a)

m more OR

orders, Discuss in detail about mercantile process models. March/Aprii-13, QH(a)

OR
What are mercantile process models from consumer’s and merchant’s perspective.
Answer : March-11,011(b)
task is
Mercantile Process Model from Consumer’s Perspective
>ills to
for the For answer refer Unit-Ill, Page No. 81, Q.No. 13.
Mercantile Process Model from Merchant’s Perspective

For answer refer Unit-Ill, Page No. 84, Q.No. 15.

3.3 ELECTRONIC PAYMENT SYSTEMS I
Q17. Define electronic payment system. What are the advantages of electronic payment system?

Model Paper-Ill, 011(a)

Explain electronic payment system.

Answer : March/April-17, 011(b)

Electronic Payment System (EPS)

Electronic payment system is a building block of E-commerce which refers to the online exchange of money. This
exchange is carried out over different platforms such as E-cash, E-check, credit cards etc. The widespread adoption of
these methods is due to the fact that it reduces cost and time of a transaction.
Advantages
The advantages of electronic payment system are as follows,
1. Globally Accepted
Electronic payment system has been widely accepted around the world because of its hassle free process of converting
money or funds into accepted form and it requires less amount of time for processing. Whereas traditional payment
system has some of the political and geographical restrictions due to which the processing becomes difficult and
requires more amount of time.
2. Enhanced Security
Electronic payment systems provides enhanced security by minimizing frauds related to cheques and physical cash.
Whereas traditional payment system donot hold much security.
3. Low Transaction Expenses
Electronic payment refers to the process of a transaction in a digitized way i.e., it does not require human intervention.
The expenses that occur in paper less transactions are relatively low when compared to paper based transactions.
4. Speedy Transactions
Electronic payment system is the fastest way of operating transactions in the present era. It resolves the problems
which are faced by the people in traditional payment system. In EPS, transactions are processed in just a click or
by swiping the cards through card readers. It provides users an easy way to perform transactions feature by using
their PDA’s, Phones, Laptops. .
(•)
5. Providing Real Time Access
Electronic payment systems facilitate users to access funds which are deposited in the accounts as per their
(■)
requirement. Some of the methods which are used by the users to spend according to their needs are E-cheque,
E-cash and Store Value Card. On the otherhand, methods adopted by traditional payment system does not allow
accessing funds, anytime, anyway, anywhere according to user’s will.
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Q18. Discuss the factors to be considered for designing EPS.

Answer :
Designing Electronic Payment System
The different factors that are to be considered while designing electronic payment systems are,
1. Privacy and confidentiality
2. Security and protection
3. Intuitive interfaces
4. Database integration
5. Network bankers
6. Cost assigning
7. Standards.
1. Privacy and Confidentiality
Privacy must be ensured and maintained by every electronic payment system. Every user must be assured that details
of their transactions are kept confidential so that they can trust the payment systems.
2. Security and Protection
Different security techniques must be embedded within the system such as access control and authentication that
verifies the identity of parties that are involved in the transaction.
3. Intuitive Interfaces
The electronic payment system should be developed using a convenient and easy to use interfaces.
4. Database Integration
It is very important to integrate different databases that store various accounts associated with a customer. This
customer related information is kept up-to-date and free from any errors so that a customer can gain access to any
database using home banking service.
5. Network Bankers
A broker is essentially required while designing a payment system. Broker is the one who is responsible for clearing
conflicts and performing financial operations electronically.
6. Cost Assigning
How to price the services offered by electronic payment system is of major concern while designing payment system.
For example, is it necessary to use any subsidies to motivate the customer for changing their form of payment since
£ they consume more resources that waste a lot of money. Without subsidies it is impossible for any payment system
to assign the cost to a service accurately.
7. Standards ■ .
With the help of standards, it is possible for different customers, operating on different networks by using a variety
of payment systems to interoperate. Interoperability is assured by using standard protocols and message formats.
Q19. Explain credit card based electronic payments system.

Answer :
There are two steps in which credit card payment is negotiated,
1. The seller presents the buyer with cost of goods or services, confirmation of order and its status, notification of
delivery and choices for payment that the seller can accept.
2. The buyer presents the seller with the payment option and required information in a secure way.
Electronic payment system that is based on credit card is used to avoid the difficulties and time-consuming issues that
were present while processing e-cash or e-checks. Here, the processing is done by credit card company when a customer
wishes to purchase any goods or services.

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UNIT-3 : Consumer Oriented E-Commerce Applications 89
Types of Credit Card Payment Methods

Credit card based payments can be processed by using the following three methods,
1. Using plain unencrypted credit card features for payment
2. Using encrypted credit card features for payment
3. Using third-party authorization for credit card payment.
1. Plain Unencrypted Credit Card Feature for Payment

This is the simplest form of payment over public network such as Internet. The problems that arise using plain credit
card are,
(i) Security level provided by Internet is very low that allows any hacker to interpret the network and gather valuable
information like credit card number, account number etc.
(ii) Lack of authentication techniques.

Security and authorization can be provided by using a third-party which is a company that gathers and verifies the
payment of funds that flows from one party to another.
Companies that are providing infrastructure to on-line credit card processing are First Virtual Holdings (FVH),
interactive transaction partners, VISA interactive, master banking.
2. Encrypted Credit Card Features for Payment

In this type of payment, credit card is encrypted before performing any transaction using various encryption
techniques like PGP, PEM. One important factor to be considered is its cost that limits micro-payment transactions to be
executed because they even add to total transaction cost.
As soon as credit card details are entered into a browser which is used to navigate over the internet, encryption
process is started so that these details are encoded into cipher text while it is being transmitted from a payer PC to payee
PC such that it is not intercepted by any intruder. This encrypted credit card system fails to meet the requirements of a
financial institute such as providing protection, high speed and non-repudability.
. . . . .
The following sequential steps are followed to provide protected and non-reputable credit card transaction,
(i) A payer gives the credit card details to the payee with payment choice in a secure manner.
(ii) Payee performs authentication to verify the identity of card holder.
(iii) Payee presents the charge details and digital signature to online processors of credit card.
(iv) (The processor then presents the details to the payer’s financial institution for validating and verifying the ownership
of a card holder.
(v) Payer’s financial institution then returns the charge authentication, credit card verification details to the payee.
Encryption is provided using two numerical keys viz., private key and a public key which are generated by each
buyer and seller. The public key is stored on public key server in a credit card company which sends a unique credit card
number and limits the usage of credit card to payer.
Encryption is performed again on the private key using the password of buyer and seller. In order to start the
transaction, buyer must initially sign the message using the public key. Buyer does this by encrypting the message using
the own password. After the completion of buyer’s transaction, seller digitally signs the message using the private key.
The information about the card is transferred to credit card company, which is responsible for sending the bill to the buyer.
The seller stores the receipt and presents it to acquiring bank that transfers the amount to sellers account by deducting it
from payer’s account.
It is not possible to misuse the system because neither there is a chance for buyer to disagree to transaction nor a
seller can introduce fake charges. In order to make credit card payment system to work efficiently, it is necessary to develop
distributed key servers and card checkers.

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3. Third-party Authorization for Credit-card Payment

Third-party is a company that gathers and verifies the payment of funds that flow from one party to another. In this
type of processing, a buyer needs to register himself with the third-party company.
The differences between third-party processor and electronic tokens are,
(a) Third-party processors are dependent on current financial devices.
(b) For providing additional security, they require an extra party or numerous parties to perform the transactions
online that sometimes make processing very difficult.
Using the following steps that are created by Online Third-Party Processor (OTPP), it is very easy to purchase any
software or information online,
1. After filling all the fields of registration form accurately, OTPP account number is given to buyer that relays to the
processor, information about buyers profile who uses a credit card as their financial device.
2. The buyer sends a request to seller regarding the online purchase by specifying OTPP account number.
There are two ways in which the purchase request is made,
(i) The buyer gives the access privileges to seller who can access their account number and produces the bill.
(ii) The buyer himself can enter the account details.
3. The seller then submits the buyer’s account number to OTPP accounting server.
4. Accounting server after receiving the account detail verifies if the account number specified is accurate and checks
if the account has sufficient amount for purchase.
5. The accounting server then sends an e-mail or any electronic message to the buyer who can reply in any of the
following three ways,
(i) Yes, I am ready to pay the bill
(ii) No, I disagree to pay the bill
.
(iii) Fake, I have never sent a purchase request.
6. If OTPP server receives a positive acknowledgment, a message is sent to the seller who then allows the buyer to
download the software or information.
7. OTPP server will store the buyer’s account details unless it receives and acknowledges about the completion of the
purchase process.

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UNIT-3 : Consumer Oriented E-Commerce Applications ’ 91
The prerequisites for using this system is that, both buyer and seller must be registered with OTPP accounting server.

For performing low-value payments online, it is necessary to automate the previous steps. This can be made possible
by using WWW browser that consists of two servers (1) Seller server, (2) Billing or accounting server.

In order to initiate the transaction, both buyer and seller need to register themselves with accounting server by creating
an account. Then, a buyer sends a purchase request to seller server by clicking on the URL of the accounting server. The..
URL contains the following details that are required for making any purchase,
1. Cost of product " “ ..........

2. Destination URL

3. Time duration.

The above information is encoded and transmitted to accounting server that verifies the buyer by requesting their
account number and other associated information for verifying the identity. If accurate information is provided, the transaction
is processed by accounting server which then gives the items web page along with access URL that encodes the purchase
information.

The access URL ensures the seller that the buyer has paid for the purchase which acts as an invoice in digital form
that has been marked and paid by accounting server. The access URL is the actual destination URL transmitted by seller
server with extra field such as,

(i) Time of expiry

(ii) Address of buyer.

A HTTP server is executed by a seller that is manipulated and edited to access URL’s. This HTTP server verifies the
validity of URL and gives the necessary privileges if the time is not expired. If access becomes invalid i.e., if the expiration
time is exceeded, then server gives the buyer a chance to purchase a product again.

After verifying customer’s authentication, the payment is processed automatically. Payment paradigm is implemented
by accounting server that maintains various payment accounting systems such as credit card account wherein the server
system has to establish a connection with the clearing house of credit card. All micro transactions are then executed by
this system after collecting and providing instant settlement in aggregate format. Online statement is used for recording
each and every transaction that gives a within overview of all purchases that have been done recently where eachlihe in
this overview is the hypertext link.

3.3.1 Legal Issues andT Digital Currency - E-Cash and E-Cheque

Q20. Explain briefly about the digital currency or electronic cash. Model Paper-m, QH(t>)
r
OR

What is E-cash? What are the properties of E-cash?

Answer : Sep,/Oct,-15,011(b)

Digital Currency/Electronic Cash (E-cash)

(ii) Inadequate clearing and agreement of non-cash transactions.

(iii) Negative rate of real interest paid on all the bank deposits.

Due to its superior, dominant nature, business practises can be changed in order to improve the process of purchasing.
In order to replace cash, e-cash should possess some features of paper cash.
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Properties of E-cash
The four important properties of e-cash are,
1. Monetary value
2. Interoperability
3. Retrievability and storability t
4. Security and protection.
1. Monetary Value
E-cash possesses monetary value that is evaluated in terms of money, credit/debit cards or cashier’s check that is
certified by bank. There should not be any confusion or conflicts while e-cash transaction is being processed between two
financial institutions. Every e-cash token should be certified by bank in order to avoid the risk of disagreement.
2. Interoperability
E-cash has the ability to be exchanged easily with either other e-cash, paper cash or other electronic payment systems
including credit cards or banks commitment etc. Multiple banks are responsible for managing this e-cash exchangeability
along with cosmopolitan clearing house that involves an association of banks.
3. Retrievability and Storability
It is possible to perform storage and retrieval operations remotely that allows customers to perform transactions
involving e-cash exchange either from their office or while on a business trip. These remote operations are performed by
storing cash either in smart card device or electronic purses that can be easily transported. In order to provide security, it is
better to store cash on specialized devices that are static and cannot be changed. These devices provide security by means
of various authentication and access control techniques.
4. Security and Protection
It is very important to provide security while an e-cash exchange transaction is being processed so that it is not easy
to copy or swindle the transaction. The major problem present in the internet is forgery, which is very difficult to detect if
appropriate conformity is not available. Methods should be implemented to detect and avoid double spending of e-cash.
It is very difficult to prevent this issue, if multiple banks are responsible for handling transaction exchange.
Advantages of E-cash to Customers

Electronic cash or digital cash offers a large number of advantages to both customers and merchants. E-cash
transactions are more efficient than traditional cash transactions. Hence, more business can be done and businessmen can
offer lower prices to consumers.
1. Traditional money exchange systems involve banks, clerks, automated teller machines and many others. As a result,
traditional money exchange becomes expensive. On the other hand, e-cash transfer simply uses Internet and hence
£ the operating cost of e-cash transfer is considerably low.
2. Moving physical cash or checks over a distance will incur some cost. The cost of movement of currency depends
on the distance it is moved. However, movement of electronic cash is independent of the distance of movement i.e..
transferring money from Hyderabad to Delhi will cost the same as transferring it from Hyderabad to New York.
3. One consumer can pay e-cash directly to other consumer, in the same way as one merchant pays to other merchant in
a business-to-business relationship. There is no need of an authorization, as in the case of credit card transactions.
4. E-cash provides shopping convenience to the customers, hence they are free to choose from a variety of products
available globally.
5. E-cash eliminates the risks associated with carrying the paper cash all the time.
6. E-cash also provides a high transaction privacy compared to other credit card transactions because of its blind signatures.
7. E-cash system uses several transaction protocols which employ RSA public key cryptography to avoid message
tampering and eavesdropping.
8. The protection of e-cash on the local machine can be done by using password protection and encryption mechanisms,
so e-cash is safe on both sides i.e., during the transit and also on the local machine.
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Advantages of E-cash to Merchants

E-cash offers tremendous advantages to merchants,

1. It enables the merchants to think beyond the local markets. The merchants can now attract global customers because
they can send and receive money throughout the world with just a mouse-click on their desktop.
2. Merchants can even restrict the E-cash on purchase of certain products. For example, a TV merchant can limit his
E-cash such that, the e-cash cannot be used to purchase any other item except televisions.
3. The currency limitations of a particular country can also be eliminated because, E-cash can be filed into and withdrawn
from a smart card from anywhere and in any currency.
lat is
i two 4. It is much more difficult to forge (duplicate) electronic cash than physical currency.
Disadvantages of E-cash

1. E-cash is susceptible to forgery.

terns
>ility 2. It may act as a major disadvantage in case of power failures, loss of records.
3. It is very difficult to trace electronic cash due to which problem of money laundering is faced.
4. It faces the problem of hacking and retrieving personal information in an illegal way which can lead to intrusion in
dons someone’s privacy without its knowledge.
d by
it is Q21. What are the legal issues and business issues related to electronic cash?
eans
Answer :
Legal Issues
*
;asy I Bankers and regulators are forced to form lawful policies with the implementation of e-cash because paper cash is
ct if I not versatile with cunent taxation and enforcement system. Transaction that are anonymous i.e., confidential transactions
ash. I occupy a place in underground economy which is limited to process micro-transactions.
If micro-transactions are processed and if they can be expressed in terms of monetary value, then they are accepted
by lawful bodies as a mean of advanced mercantile state that is mostly irrelevant. If larger transactions are being processed,
ash I 'he lawful bodies are more conscious and report flow of funds using the cash related reporting law.
can Business Issues

Two main functions that are accomplished by e-cash are,

;ult,
1. It acts as a medium for performing exchange transactions.
nee
It acts as a storage of values.
nds 1. Medium for Performing Exchange Transactions
i.e., E-cash has become an important and easy way of processing exchange transactions. The complexity of interlocking
credits and liabilities is simplified by assigning value in terms of money to e-cash and by making settlements of transaction
t in instantaneously. Using this method, a small-scale organization doesn’t have to wait for a longer period for getting their
ns. bills paid.
2. Storage of Values

Paper currency is perceptible and treated as legal tender which means that payee cannot refuse to accept it. If this
cash is bank certified, many people wishes to use financial institutions like banks to store their money and settle their
payments using checks or debit cards. On the otherhand. If e-cash is treated as a legal tender it would create a problem
if each component of e-cash represent a real cash element then there will be no rate of interest earned on real balances of
e-cash.
The other business issue that is related to e-cash arises if there is huge up and down in face value of cash. E-cash
is more suitable for being exchanged at traditional rates of market rather than using it for by passing foreign exchange
market. The only way of starting conventional exchange market is to develop its own gray market.
94 E-COMMERCE

Q22. Write short notes on electronic cash in action.

Answer ?
Electronic Cash in Action

A cryptographic technique called digital signature, is used to perform secure e-cash transaction. This technique
makes use of two keys,
1. Public key used for decoding
2. Private key used for encoding.
Both the public and private keys used are numeric keys that are basically very large prime numbers. When a message
is being transmitted, it is encoded into cipher format by using private key and decoded into plain message format by using
public key. The private key is kept secret whereas public key is known to everyone.
Bank gives the public key to all its customers and allows them to decode the message that was encoded using the
private key. If decoding is performed successfully, then the customer is assumed that the encoding was done by bank but
not by an intruder.
Purchasing Digital Cash from Currency Server

There are two steps that are to be considered while purchasing e-cash from online bank,
1. Creating an account
2. Maintenance of sufficient funds in the account.
Many users prefer to buy e-cash using paper cash because they do not possess any bank account or they want to
preserve their anonymity.
The primary prerequisite of purchasing e-cash from any online bank is to create an account with currency server.
E-cash must be present in multiple currencies that are supported by different financial institutions in order to gain global
privileges. If this is made possible, then a person residing in one country can purchase an e-cash token from a person
residing in another country and perform the exchange transaction locally.
Steps for Purchasing E-Cash

1. Creating an account with central online bank or currency server by filling the registration form. This account is used
for withdrawing and depositing e-cash.
2. A series of random numbers are generated using e-cash software which can be used as a digital note.
3. Before transmitting the note to customer, the bank signs the note digitally for the requested amount by using its secret
key. This digital signature specifies that the bank is responsible for representing the face value of note in terms of
.. dollar amount.
Digital signature is very secure to use since neither the buyer nor the seller can swindle that signature. By applying
digital signature method, the following types of protection can be achieved,
(i) Bank is protected against any counterfeit.
(ii) Sellers are protected against a situation wherein a legal digital note is rejected by a bank.
(iii) Buyers are protected against fake charges.
Q23. Explain in detail about electronic checks.

Answer :
Electronic Checks (E-Checks)

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Q22. Write short notes on electronic cash in action.

Answer ?
Electronic Cash in Action

1. Creating an account with central online bank or currency server by filling the registration form. This account is used
for withdrawing and depositing e-cash.
2. A series of random numbers are generated using e-cash software which can be used as a digital note.
3. Before transmitting the note to customer, the bank signs the note digitally for the requested amount by using its secret
key. This digital signature specifies that the bank is responsible for representing the face value of note in terms of
.. dollar amount.
f-
Digital signature is very secure to use since neither the buyer nor the seller can swindle that signature. By applying
digital signature method, the following types of protection can be achieved,
(i) Bank is protected against any counterfeit.
(ii) Sellers are protected against a situation wherein a legal digital note is rejected by a bank.
(iii) Buyers are protected against fake charges.
Q23. Explain in detail about electronic checks.

Answer :
Electronic Checks (E-Checks)

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UNIT-3 : Consumer Oriented E-Commerce Applications 95
Online services provided by electronic checks allow,
1. The seller to verify if the buyer has sufficient funds in his/her account.
2. Improved security at each step of transaction processing.
The following are the steps for performing e-check transaction,
1. Before using an e-check, the purchaser must register himself with the billing server which also acts as an account server.
2. Depending on billing server, the registration process may differ in a way that some account server require a credit/
debit card to prove one’s identity or needs to have a bank account.
3. After registration process is completed, a buyer can purchase any product or service by contacting a seller.
4. After purchasing has been done, purchaser sends the details along with e-check information to seller which presents
it to the accounting server for verification.
5. Once the check is deposited in the bank, the payer’s identity is authenticated and the balance in the account is
checked.
Electronic check is a form of electronic document which contains the following information,
(i) Payer’s name
(ii) Bank’s name
(iii) Account number of payer
(iv) Payee’s name
(v) Amount to be paid.
Using electronic check, security and authentication is provided using digital signature. If the process of authorization
is completed successfully, the checks can be exchanged electronically between banks using electronic clearing network as
a medium.

3.3.2 Electronic Fund Transfer (EFT)

Q24. Write about the types of E-payments. March/Aprii-16, QH(b)

Discuss about categories of EFT. March/Aprii-15, on(a)

Discuss the different types of payment systems.

Answer : March/April-13, Q11(b)

Electronic Fund Transfer (EFT)

Electronic payment means paying the amount for purchased goods electronically. Electronic Fund Transfer (EFT)
is defined as a process of transferring funds electronically from one financial institution to another. Thistype of electronic
transfer started using different electronic devices like computers, telephone devices, electronic terminals, telecommunication
devices.

Electronic fund transfer is different from traditional methods of payment that depends on physical delivery of cash
by using physical means of transport.

Electronic payment media can be grouped into three types depending on information being transferred online,
1. Banking and financial payment
2. Retailing payment

3. Online e-commerce payment.

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1. Banking and Financial Payment

The banking and financial payment system is again classified into three types. They are,
(a) Large-scale payment
(b) Small-scale payment
(c) Home banking.
(a) Large-scale Payment

Bank-to-bank transfer is a good example for this kind of payment where the funds flow from one bank to another
instantaneously.
(b) Small-scale Payment

ATMs and cash dispensers are examples for this kind of payment using ATM. A customer can withdraw money from
anywhere at anytime.
(c) Home Banking

Home banking service can be classified into three types,

(i) Basic services include personal finance service
(ii) Intermediate services include financial management
(iii) Advanced services include trading service.
2. Retailing Payment

Retailing payment is classified into three types. They are,

(a) Credit payment
(b) Debit payment
(c) Charge-card payment.
(a) Credit Payment

If a customer purchases any product or service using credit card, then the card details can be transferred to the service
provider and then the credit-card company processes the transaction.
(b) Debit Payment

In this type of retailing payment, the customer pays in advance for enjoying the privileges of information to be
retrieved. Examples for such prepaid payment system is the electronic purses.
(c) f' Charge-card Payment

Charge-card is a way of getting a short-term loan for a purchase. It is similar to credit card, except that the customer
makes an agreement with the financial institution that he will pay some fixed charges to it each month. Example of
charge-card payment include American Express.
3. Online E-commerce Payment

Online payment system is classified into two types. They are,

(a) Token-based payment system
(b) Credit-card based payment system.
(a) Token-based Payment System
Three different types of token-based payment are,
(i) E-cash
(ii) E-check
(iii) Smart cards.
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UNIT-3 : Consumer Oriented E-Commerce Applications 97
(i) E-cash

It is a form of digital cash which provides a high level of security. It also reduces the overhead of paper
cash.
(ii) E-check

E-check is another form of electronic payment system. These checks are preferred when a customer is willing
to make a payment without using paper currency.
Example: Net cheque, net bill.

(iii) Smart Cards

Smart cards are similar to debit/credit cards but with enhanced features such as micro processors that
UNIT-3 : Consumer Oriented E-Commerce Applications 97
(i) E-cash

It is a form of digital cash which provides a high level of security. It also reduces the overhead of paper
cash.
(ii) E-check

E-check is another form of electronic payment system. These checks are preferred when a customer is willing
to make a payment without using paper currency.
Example: Net cheque, net bill.

(iii) Smart Cards

Smart cards are similar to debit/credit cards but with enhanced features such as micro processors that
have the ability to store massive amount of information which is 80 times greater than conventional and
magnetic strip cards.
Example: Mondex electronic currency card.

(b) Credit-card Based Payment Systems

The different types of credit-card based payment systems are,

(i) Plain credit-card payment system
(ii) Encrypted credit-card payment system
(iii) Online third-party credit-card payment system.
(i) Plain Credit-card Payment System

In this type of payment system, the credit-card transaction is provided without using any encryption
techniques. It is one of the simplest form of payment system.
(ii) Encrypted Credit-card Payment System

In this type of payment, credit-card is encrypted before performing any transaction using various encryption
schemes like Privacy Enhanced Mail (PEM) and Pretty Good Privacy (PGP).
(iii) Online Third-party Credit-card Payment System
Security and verification can be provided by using third-party, which is a company that gathers and verifies
the payment of funds that flow from one party to another.

Figure: Types of Electronic Payment System

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3.3.3 Advantages and Risks

Q25. What are the advantages and risks involved in electronic payment system? Discuss.

Discuss about the risks involved in E-payments.

{Refer Only Topic: Risks Involved in EPS)

Answer : ...... Sep./Oct.-15,011(a)

Advantages of EPS

For answer refer Unit-Ill, Page No. 87, .Q.No. 17, Topic: Advantages.

Risks Involved in EPS

The risks that are associated with electronic payment system are,

1. Risks associated with fraud or mistakes

2. Risks associated with privacy

3. Risks associated with credit cards.

1. Risk Associated with Fraud or Mistakes

Every electronic payment system has the capability of recording data automatically and electronically. It is very
easy and less expensive to store data in electronic devices. This automatic record gives the deflated description of the
transactions without any external effort made by any other involved party.

When transactions are imperceptible and depend only on automatic records, then all the financial institutions follow
a principle which states that “it is not necessary to delete any requirement of data”. Characteristics of records that are stored
automatically using electronic systems are,

(i) Persistent storage

(ii) Attainability and traceability

(iii) Database for electronic payment system

- (iv) Capable of transferring data to financial institutes like banks.

One of the important purpose of maintaining automatic records is risk management that conflicts with the anonymity
of currency. This conflict arises, because paper cash was introduced earlier before the development of electronic devices.
Most of the customers or users always desire that there should be anonymity in their operation i.e., their transaction should
be kept confidential because of the occurrence of many forged attempts such as tax evasion, smuggling. A query that is
raised by anonymity is that, is it possible for an electronic payment system to exist without automatic record?

The problem of anonymity can be resolved by using regulation that provides security to customers. It is not possible
for bankers or government to accept electronic payment system that is unremarkable in the absence of automatic record.
With the help of statement of accounts, forgery and frauds can be solved easily only if regulation is applied correctly.
2. Risk Associated with Privacy

It is essential for all the electronic payment systems to maintain and ensure privacy. Whenever a purchase is made
using smart card or credit card, the information is stored in the database that consists of various records. All these records
in the payment system database are linked together to form a single folder that gives information about what or when the
products were purchased, from where the purchase was made etc. However tracking these informations contradicts a law
which states that privacy of customers should be ensured.
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UNIT-3 : Consumer Oriented E-Commerce Applications 99
All customers must ensure that information about their transactions are confined to parties that are involved in the
transaction process. Privacy should be provided by protecting the transaction from intruders present on the network and
from persons that are not authorized to access the transaction. It should be protected from being deceived, cheated until
the whole transaction processing is completed. This protection can be provided using trusted third party agents that can
verify the identification of parties that are involved in transaction processing.

3. Risk Associated with Credit Cards

In order to handle credit card risk, digital online central bank have developed various procedures to reduce insolvencies.
Every procedure has its own benefits and drawbacks,

(i) Either the bank settles its net position with guarantee, or

(ii) Bank settles its net position without guarantee.

(i) With Guarantee

This procedure eliminates the need of insolvency test because the bank presumes that risk associated with credit
card is from different banks and not from buyers and sellers.

(ii) Without Guarantee

In this policy, it is necessary for digital banks to define the terms and conditions needed to extend the liquidity for
settlement of their net position.

3.3.4 Digital Token-based E-Payment System - Smart Cards

Q26. Explain about digital token-based electronic payment system.

Answer :
Electronic token or electronic token is one of the e-commerce system which is entirely based on internet. The payment
systems that are based on this system are used to resemble paper currency.

For remaining answer refer Unit-Ill, Page No. 96, Q.No. 24, Topic: Token-based Payment System.

Q27. Describe smart cards as an electronic payment system. Model Paper-i, QH(b)

Explain relationship based smart credit cards and electronic purses.

Answer :
Hybrid/Smart Card

As electronic tokens are not very secure and do not have the ability to manage multiple transactions, another form
of electronic payment system was developed that replaced the electronic token. This form of system is called smart cards
that provide more security while exchange transaction is being performed.

Smart cards are also known as store value cards and are similar to credit cards but with enhanced features such as
microprocessor or integrated circuit chip technology that stores massive amount of customer specific information such as
electronic money and is 80 times greater than the conventional magnetic strip cards.

Electronic payment in the form of smart card is mostly used in countries like Japan, France, Germany that use these
cards for transaction, phone calls payments.
There are two types of smart cards,
1. Relationship based smart cards
2. Electronic purses.
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1. Relationship Based Smart Cards When a purchase is made, the amount is deducted
Relationships based smart cards are generally used from the buyer’s account immediately and saved in the
to replace conventional credit cards in order to fulfill the electronic cash box. The balanced amount is displayed on
demands of technical customers and to satisfy the need the electronic machine or it can be checked by using balance
of using well-developed electronic payment system. reading device. When there is no amount left on electronic
Relationship based smart cards are nothing but improvement purse, it can be recharged again at any ATM center or using
in services of existing cards or introducing new services that special telephone. The drawback of electronic purses is that
a bank gives to its customers using integrated chip based they are very expensive.
card. New services such as,
Q28. What is a smart card? What are their types and
(i) Providing access to many financial accounts uses?

(ii) Developing value-added marketing program Answer :

(iii) Storing customer-specific information. Smart Card and its Types

Chip-based cards are used to meet particular accounting For answer refer Unit-Ill, Page No. 99, Q.No. 27.
and personal needs of an individual. The customer-specific Uses of Smart Card
information is used by seller to track the behavior of a buyer. Smart cards are used in a huge collection of
Advantages of Relationship based Smart Cards
applications as follows,
1. Pay phones
(i) They access to many financial accounts.
2. Mobile communications
(ii) They provide different kinds of functions like
3. Banking and retail
bill payment, balance enquiry etc.
4. Health caresector
(iii) They provide various means of accessing the
5. ID verification and access control.
account that is situated at multiple locations
using different types of devices such as ATM, 1. PayPhones
PDA or a screen phone. By integrating smart card option in the pay phone,
both the customers and the company will be beneficial
2. Electronic Purses
because the customer does not have to worry about carrying
Though relationship-based smart cards are flexible the appropriate number of coins, remembering large access
and versatile, their payments are done based on credit and codes, pin codes etc. On the other hand, the company does
there is no instant settlement using them. Electronic purses not require coin recognizer, storage box for coins etc. Also
have been developed by many financial companies as well the need for a company professional to collect the coins from
as government organizations for meeting their demands for various terminals is eliminated.
developing a financial device that substitutes paper cash. 2. Mobile Communication
Electronic purses are wallet sized smart cards that include In GSM digital mobile phones, smart card serves as
a microchip for storing electronic money that a card holder an identification device because it contains all the significant
utilizes for purchasing products or services. information about the users so that the user will be billed
according to their usage irrespective of the phone terminal
Working of Electronic Purse
utilized.
When the required amount of electronic money is 3. Banking and Retail
stored in electronic purse, it can be used for purchasing any
The smart card can also be used in banking and retail
product or service. The transaction of electronic purse is
sector i.e., a smart card can serve as a credit card, debit card
processed using electronic device that is embedded with a or a stored value card. The smart card is integrated with
card reader. The two things that an electronic device needs a highly powerful microchip that authenticates the user
to verify is, (customer and merchant). Another microchip present in the
smart card reader authenticates the bank. Thus, fraudulent
1. Authentication of card holder
usage is avoided. The smart card also supports other features
2. Balance in the account (to know if there is sufficient like phone banking, automatic memory dialing and online
money for the purchase). services.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. —. . _____ -----........
UNIT-3 : Consumer Oriented E-Commerce Applications 101
4. Health Care Sector

The smart card helps the hospital staff to obtain the history of the patient so that they could be treated by keeping
their past medical conditions in mind. Smart card also helps in the identification of doctors and provides them with a secured
multi-level access to the private information. It also helps in designing an insurance policy for the patients.
5. ID Verification and Access Control

Smart cards are also capable of storing the finger prints of the user, their pictures etc. This information is used for
revealing the identification of the card owner. A smart card reader enabled network can be easily accessed by the user after
proper authentication.

Q29. Explain the functionality of smart cards. March/Aprii-14, on(a)

Answer :
Smart Cards

Smart cards store massive volume of customer’s information such as verification ID, health sector care, financial
banking. Apart from this, it even stores electronic money which can be used for processing transactions. It stores more
information when compared to traditional magnetic strips cards. It can be programmed to support distinct applications.
Some smart cards has the feature of editing and updating even after issuing it to the customers. Smart cards can be used
by customer’s in their daily life.

Working of Smart Cards

1. The user inserts the smart card in the slot.

2. The card reader reads the information which is embedded on it.

3. The user enters the PIN.

4. The entered PIN security authorities checks based on the certifications issued.

5. The trusted CA verifies the certificates.

Thus, if the certificates are valid then the transaction is processed or else it is terminated. Once the transaction gets
successful then the information is updated in the card.

Q30. Explain about,

£(i) Electronic purses

(ii) Debit cards.

Answer :

(i) Electronic Purses

For answer refer Unit-Ill, Page No. 100, Q.No. 27, Topic: Electronic Purses.

(ii) Debit Cards

A debit card is a card that is used instead of cash in shopping. Debit cards can be used for e-commerce transactions
in the same way as a credit card. The only difference in the credit card is the way to pay later, whereas a debit card is a way
to pay then and there itself. Debit cards are also known as cash cards. Whenever the buyer uses debit card for shopping,
his account will be instantly debited (i.e., the amount is immediately deducted from his savings account). The debit cards
can be used anywhere merchants display the debit cards brand name or logo. ATM cards have the features of debit card.
It is mostly accepted by grocery stores, retail outlets, gasoline stations, restaurants etc.
- ----- ' SIA PUBLISHERSAND DISTRIBUTORS PVT. LTD.
_ NIT-3 : Consumer Oriented E-Commerce Applications 101
4 Health Care Sector

The smart card helps the hospital staff to obtain the history of the patient so that they could be treated by keeping
r.eir past medical conditions in mind. Smart card also helps in the identification of doctors and provides them with a secured
- Jti-level access to the private information. It also helps in designing an insurance policy for the patients.
5 ID Verification and Access Control

Smart cards are also capable of storing the finger prints of the user, their pictures etc. This information is used for
-sealing the identification of the card owner. A smart card reader enabled network can be easily accessed by the user after
~roper authentication. '

Q29. Explain the functionality of smart cards. • March/Aprii-14, QH(a)

Answer :

Smart Cards

Working of Smart Cards

1. The user inserts the smart card in the slot.

2. The card reader reads the information which is embedded on it.

3. The user enters the PIN.

4. The entered PIN security authorities checks based on the certifications issued.

5. The trusted CA verifies the certificates.

Thus, if the certificates are valid then the transaction is processed or else it is terminated. Once the transaction gets
successful then the information is updated in the card.

Q30. Explain about,

tAectrotoc purses

(ii) Debit cards.

Answer :

(i) Electronic Purses

For answer refer Unit-Ill, Page No. 100, Q.No. 27, Topic: Electronic Purses.

(ii) Debit Cards

A debit card is a card that is used instead of cash in shopping. Debit cards can be used for e-commerce transactions
in the same way as a credit card. The only difference in the credit card is the way to pay later, whereas a debit card is a way
to pay then and there itself. Debit cards are also known as cash cards. Whenever the buyer uses debit card for shopping,
his account will be instantly debited (i.e., the amount is immediately deducted from his savings account). The debit cards
can be used anywhere merchants display the debit cards brand name or logo. ATM cards have the features of debit card.
It is mostly accepted by grocery stores, retail outlets, gasoline stations, restaurants etc.

" SIIA PUBLISHERSAND DISTRIBUTORS PVT. LTD.

102 E-COMMERCE

Advantages of Debit Card

1. It is much easier to obtain a debit card then a credit card.

2. Using of debit card saves individuals from showing personal identification.

3. Debit card frees the user from carrying cash and cheque book.

4. In most of the countries merchants accept debit cards than cash or cheques.

Disadvantages of Debit Cards

1. They are less secured than the commonly used credit cards.

2. The liability for unauthorized debit cards will be more when it is stolen.

Q31. What is a hybrid card? What is its role in e-commerce?

Answer :
Hybrid Card

For answer refer Unit-Ill, Page No. 99, Q.No. 27, Topic: Hybrid/Smart Card.
Role of Hybrid Cards in E-commerce

❖ Smart cards or hybrid cards are used as credit/debit cards, transit payment cards etc. Therefore, a consumer can
perform electronic payment through these cards.
❖ They act as a reliable medium for carrying password protected personal data like bank account information, passwords
etc.
❖ Other confidential data like medical records, secret cryptographic keys etc., can also be stored in the card in a form
that is understandable to the card reader only.
❖ The micro-controller chip present in hybrid/smart card has the ability to decide with whom to share data. These
cards work with only those vendors that they trust.
❖ Mostly the smart cards are register based stored value cards. The secret keys that are present in the card are known
only to the issuing authority and not even to the card owner. If the card owners got to know the secret keys then
they can mint electronic cash.
❖ Hybrid cards are multiple application smart cards. A single hybrid card may serve multiple purposes. For example, a
single hybrid card may store personal information (driver’s license information, social security, medical information).
£ website passwords, digital signatures, works as a phone card, a debit card, a credit card.
With such a secure and flexible environment, smart or hybrid cards are definitely of much use. Use of these cards
in future is beyond expectation.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT-3 : Consumer Oriented E-Commerce Applications 103

I. Multiple Choice

are used by those customers who are not having enough knowledge about computers.

(a) Intermediate services

(b) Basic services

(c) Advanced services

(d) None of the above

2. _____ . is an electronic market place having more number of suppliers and less number of customers [ ]

(a) Private company

(b) Independent industry

(c) Customer portals

(d) Consortia sponsored electronic market place

In_______ step of purchase consummation phase of mercantile model, the vendor tells the customer the cost of
the product. [ ]

(a) Second (b) Third

(c) Fourth (d) Fifth

4. is the first step of order management cycle. [ J

(a) Order scheduling

(b) Order selection and Entry

(c) Cost estimation and pricing

f-
(d) Order planning and order generation

5. is the final step of mercantile model from Merchant’s perspective. [ ]

(a) Order fulfillment and delivery

(b) Order billing and account/payment management

(c) Post sales service

(d) None of the above

is a type of e-payment system. • [ 1

(a) E-cash (b) E-check

(c) Credit card (d) All the above

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.
104 E-COMMERCE
7. _______ is the simplest form of payment over public network such as Internet.

(a) Encrypted credit card features for payment

(b) Plain unencrypted credit card feature for payment

(c) Third-party authorization for credit-card payment

(d) None of the above

8. Bank-to-bank transfer is an example of [ ]

(a) Large-scale payment (b) Small-scale payment

(c) Home banking (d) Debit payment

9. In_________ type of payment system, the credit-card transaction is provided is provided without using any
encryption techniques. [ ]

(a) Plain credit-card

(b) Encrypted credit-card

(c) Online third- party credit card

(d) All the above

10. _________ cards store massive volume of customer information such as verification ID, health sector care, financial
banking etc. [ ]

(a) Debit card (b) Smart card

(c) Credit card ~ (d) Electronic purse

II. Fill in the Blanks

1■ ________ is an example of intermediate service customer software.

X
2. Full form of QDPMM is_____ _____ .

3. The most commonly used online catalog is _ _______ catalog.

4. The term used to refer software that are available free of cost is________ software.

5. Grainger electronic market place is an example of

6. Number of phases involved in Mercantile model from Consumer’s perspective is_________ .

7. EPS stands for_________ .

8. A cryptographic technique called________ is used to perform secure e-cash transaction.

• •
9. EFT stands for_____ .

10. __________ cards are also known as cash cards.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. _

1ERCE UNIT-3 : Consumer Oriented E-Commerce Applications 105
[ ]
KEY
I. Multiple Choice

1- (b)

2. (d)

3. (a)
[ ]
4. (d)

5- (c)

6- (d)
! any
7. (b)
[ ]
8- (a)

9- (a)

10. (b)

II. Fill in the Blanks

1. QDPMM

icial 2. Quick and Dirty Personal Money Management

1 3. CD-ROM

4. Freeware

5. Customer Portals Electronic Market Place

6. Three

7. Electronic Payment System

8. Digital Signature

9. Electronic Funds Transfer

10. Debit

———5IIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

106 E-COMMERCE
III. Very Short Questions and Answers
Q1. Write a note on mercantile process model.

Answer :
Mercantile process models enables the consumers to perform online shopping with same features as that of manual
shopping. This model consists of seven different functions and each of these functions are in turn placed in three different
phases.

Q2. What is the third step of order management?

Answer :
Order receipt and entry is the third step of the order management cycle. Checking whether the order is received
properly or not by the customer, whether the entry of the order is done correctly or not. All these tasks are handled by a
separate department of the company which is customer service department. .

Q3. Define EFT.

Answer :
Electronic Fund Transfer (EFT) is defined as a process of transferring funds electronically from one financial
institution to another. This type of electronic transfer started using different electronic devices like computers, telephone
devices, electronic terminals, telecommunication devices.

Q4. List the factors to be considered for designing EPS.

Answer :
The different factors that are to be considered while designing electronic payment systems are,
*

1. Privacy and confidentiality

2. Security and protection

3. Intuitive interfaces

4. Database integration

5. Network bankers

6. Cost assigning

7. Standards.

Q5. Write a brief note on electronic purse.

Answer :
Electronic purse is a wallet sized smart card that include a microchip for storing electronic money that a card holder
utilizes for purchasing products or services.

5IIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT
ELECTRONIC DATA
4 INTERCHANGE
\✓
SIA GROUP

( LEARNING OBJECTIVES

After learning this unit, a student will have thorough understanding about the following key concepts,

❖ Meaning of Electronic Data Interchange.

Way information flows in an organization with Non-EDI system.

❖ Way information flows in organization with partial EDI system and fully integrated EDI system.

❖ Different prerequisites for EDI.

❖ Legal, security and privacy issues of EDI.

In today’s electronic market, most of the companies are trying out different methods for improving their
business. For instance, they are using a method called Electronic Data Interchange (EDI). EDI is a method
that deals with exchange and sharing of business documents between organizations or businessmen
electronically. Before EDI, organizations had to rely on postal systems for exchange of business information.
pDI has made a positive impact on the working of various organizations. Business information can be
transferred quickly to various parts of the world. Organizations can have access to their business partners
anytime and anywhere in the world.

Partially integrated EDI system is a system consisting of both Non-EDI system and EDI system, that is there
are certain operations that are carried out manually and certain operations which are carried out electronically.
Fully integrated EDI is an EDI system that carries out information flow electronically. In contrast to partially
integrated EDI, the fully integrated EDI performs their transactions with high speed and high-level of accuracy
but with a trade-off cost. The components that are required for EDI implementation are standards, translation
software, banks, VAN services, trading partners and proprietary hardware and network. It is necessary to
ensure that transaction data is legalized and secured.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT
ELECTRONIC DATA

4 INTERCHANGE
v
SIA GROUP
J

( LEARNING OBJECTIVES )

After learning this unit, a student will have thorough understanding about the following key concepts,

❖ Meaning of Electronic Data Interchange.

❖ Way information flows in an organization with Non-EDI system.

❖ Way information flows in organization with partial EDI system and fully integrated EDI system.

❖ Different prerequisites for EDI.

❖ Legal, security and privacy issues of EDI.

( INTRODUCTION )

In today’s electronic market, most of the companies are trying out different methods for improving their
business. For instance, they are using a method called Electronic Data Interchange (EDI). EDI is a method
that deals with exchange and sharing of business documents between organizations or businessmen
electronically. Before EDI, organizations had to rely on postal systems for exchange of business information.
E^DI has made a positive impact on the working of various organizations. Business information can be
transferred quickly to various parts of the world. Organizations can have access to their business partners
anytime and anywhere in the world.

Partially integrated EDI system is a system consisting of both Non-EDI system and EDI system, that is there
are certain operations that are earned out manually and certain operations which are carried out electronically.
Fully integrated EDI is an EDI system that carries out information flow electronically. In contrast to partially
integrated EDI, the fully integrated EDI performs their transactions with high speed and high-level of accuracy
but with a trade-off cost. The components that are required for EDI implementation are standards, translation
software, banks, VAN services, trading partners and proprietary hardware and network. It is necessary to
ensure that transaction data is legalized and secured.

__________ . SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

108 E-COMMERCE

PART-A

* SHORT QUESTIONS WITH SOLUTIONS

Q1. What is EDI? (Model Paper-ll, Q4 | Oct./Nov.-16, Q3 | Oct./Nov.-11, Q6)

Electronic Data Interchange March/April-17, Q4

EDI

Answer : f (Oct./Nov.-13, Q4 | March-11, Q4)

EDI can be defined in many different ways. Few possible definitions of EDI are,

1. Electronic Data Interchange (EDI) is a technique which follows a standardizedprocedure for electronically transmitting
various kinds of information. For instance, commercial information, administrative information etc.

2. EDI can be referred to as a process used by various trading partners for transmitting information among themselves
without any interference.

3. EDI can be defined as a medium of passing business information in a standardized format.

Q2. Write a short note on Internet based EDI. (Oct./Nov.-11, Q7 | March-11, Q6)

Internet Based EDI Sep./Oct.-15, Q4

Write a note on Internet based EDI. March/April-14, Q5

Answer :

In this type of service, transfer of EDI data is possible through Internet without using VAN network. In order to
perform this type of transaction, business partners must use same protocol for exchanging messages.

This service offers two types of methods through which messages are exchanged. They are,

(i) E-mail based messaging

(ii) FTP-based messaging.

(i) E-mail Based Messaging

E-mail is the conventional method of exchanging message . Every e-mail message should encapsulate EDI interchange
and encryption techniques for ensuring e-mail privacy.

(ii) FTP Based Messaging

FTP-based messaging is another message exchange method provided by VAN-free Internet EDI service. In order
to exchange EDI messages using FTP, the trading partner needs to create an agreement.
5IIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. -
UNIT-4 : Electronic Data Interchange 109

Q3. What are the benefits of EDI? Model Paper-i, Q4

Benefits of EDI

Answer : Oct./Nov.-12, Q4

The benefits of EDI are as follows,

1. It reduces paper-based systems

2. It improves problem resolution and customers service

3. It expands the customer/supplier base.

4. It offers higher transmission accuracy.

5. It enhances the communication thereby improving the customer service.

6. It reduces the number of data entry errors, human intervention, processing delays etc. So, the quality of the outcome
will be good.

Q4. Define VAN.

VAN

Answer : March/April-13, Q4

VAN is a network that makes communication possible among different business partners. These partners exchange
EDI messages such as purchase orders, invoices. The other services provided by VAN’s are,

(i) Holding EDI messages in electronic mailboxes.

(ii) Interfacing with other VAN’s.

(iii) Supporting various telecommunication modes and transfer protocols.

Q5. j/Vhat are the features of supply chain management?

Answer : Oct./Nov.-n, Q5

The features of supply chain management are as follows,

1. It has the capability to act as a source of raw-materials as well as finished goods from any part of the world.

2. All management as well as global business strategies results from accurate execution.

3. As the real time information is processed online, the information associated with supply chain is transparent.

4. It has the capability of managing information within the organization or between the organizations.

5. It is capable of performing integration of all processes present in supply chain that consist of various users,
standards, information systems etc.

6. It is capable of developing and implementing accounting models that are used as the tools for reducing cost
and increasing performance.

■■ ■ 5IIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

110 E-COMMERCE
Q6. Write about Intra-organizational E-commerce.

Answer :
Intra-organizational E-commerce refers to the activities that are performed within the organization so as to consistently
deliver superior quality service to consumers. These activities include methods and technologies that support the internal
business processes of the organization. The main focus of intra-organization commerce activities is to achieve the most
efficient business process. The various activities of intra organizational commerce are work flow management, supply
chain management and product and service customization.
(i) Work Flow Management

Work flow management is a process of coordinating the tasks of various individuals or departments within the
enterprise. The departments usually work in isolation with each other. However, work flow management collaborates
their individual work to get a complete product.
(ii) Supply Chain Management

A supply chain refers to a network in which customers and suppliers are present. Management of supply chain is
an important activity for any enterprise as it makes the business operation possible. In this competitive world, it is
impossible for a single company to stand alone and work isolated from others.
(iii) Product and Service Customization

Q7. Explain in brief the privacy issues in EDI. oct./Nov.-n, Q4

Privacy issues of EDI Oct.-14, Q4

Answer :
Privacy issues play an important role in most of the organizations. Since, they are the mean to collect consumer
information easily using digital tool like digital signatures. In order to ensure the privacy of consumers, there is a requirement
of timely resolution with government and business working together. This is made possible by developing a few particular
standards that are part of uniform business code to carry out transaction over Internet.

Q8. List the EDI standards. Model Paper-Ill, Q4

OR
EDI Standards
f
Answer : , (March/April-16, Q81 March/April-15, Q4)

Standard play a very important role in the success of EDI system. Standards make sure that the information is
properly transmitted.
Some of the financial EDI standards are,
1. BAI (Bank Administration Institute)
2. 820 and 823
3. CCD (Cash, Concentration and Disbursement)
4. CTP (Corporate Trade Payments)
5. CCD+
6. CTX (Corporate Trade Exchange)

7. EDIFACT (EDI For Administration, Commerce and Transport):

SIA PUBLISHERSAND DISTRIBUTORS PVT. LTD. —-___

UNIT-4 : Electronic Data Interchange Ill

PART-B
ESSAY QUESTIONS WITH SOLUTIONS
....... —..................................... ■■■............... I III- ...................... ..... I HI ...... -

4.1 INTRODUCTION
Q9. What is EDI? Explain four layers of EDI architecture.
Answer : Model Paper-I, Q12(a)

Electronic Data Interchange (EDI)

EDI can be defined in many different ways. Few possible definitions of EDI are,
1. Electronic Data Interchange (EDI) is a technique which follows a standardized procedure for electronically transmitting
various kinds of information. For instance, commercial information, administrative information etc.
;rce -NIT-4 : Electronic Data Interchange Ill

- ' ■ ..
PART-B
....... . .

ESSAY QUESTIONS WITH SOLUTIONS

nth
■mal
4.1 INTRODUCTION
nost
PPb Q9. What is EDI? Explain four layers of EDI architecture.
Answer : Model Paper-I, 012(a)

Electronic Data interchange (EDI)

the EDI can be defined in many different ways. Few possible definitions of EDI are,
ates
Electronic Data Interchange (EDI) is a technique which follows a standardized procedure for electronically transmitting
various kinds of information. For instance, commercial information, administrative information etc.
or
tn is
it is 2 EDI can be referred to as a process used by various trading partners for transmitting information among themselves
without any interference.
or

ays ? EDI can be defined as a medium of passing business information in a standardized format.
Electronic Data Interchange is a method using which relevant business information is exchanged from one computer
to another computer in an electronic format. Other than companies, this method is also used by banks, government
. 04
organizations etc.
EDI Architecture
.04
Architecture of EDI mainly consists of four different layers,
(i) EDI semantic/application layer
ner (ii) EDI standards translation layer
lent (iii) EDI transport/packaging layer
liar
(iv) Physical network infrastructure/EDI document transport layer.
The EDI layered architecture is shown below.
. 04
EDI Semantic
Application Level Services
Layer (1st Layer)

EDI Standard EDIFACT

ANSI X12 Standards
04) Layer (2nd Layer) Standards
i is EDI Transport c .. X435, Point to FTP www HTTP
E-mail
Layer (3rd Layer) MIME Point TELNET

EDI Physical
Internet, I-way Dial Up Lines
Layer (4th Layer)

Table: EDI Layered Architecture

Description of each of these layers is as follows,
(i) EDI Semantic/Application Layer
This is the first layer of the EDI architecture. EDI semantic layer tells which business application plays an important
role in the development of EDI. It is particularly based on,
(a) The type of company that operates on this layer
(b) The kind of software used by the company for the operation.

■„ ..... .................... SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

112 ECOMMERCE
Therefore, data available on this layer will be in companys specified format. Hence, a company must convert the
data into universally accepted format before transmitting the data to their partners. In order to do this, the company requires
usage of different EDI standards. The current EDI standards that can be used are,

(a) ANSI X12 I These standards definethe appearance

(b) EDIFACT J a particular EDI form

Consider two trading partners who want to transmit a file between them. A special type of software is used by trading
partners for file transmission. This type of software is called EDI translation software. This software converts the file sent
by the trading partner at the sender’s side into a format that is easily understood by the trading partner at the receiver’s
side.

(ii) EDI Standards Translation Layer

This is the second layer of the EDI architecture. This layer describes the structure of EDI form that was available
on the EDI application layer and the appearance of EDI form on the higher layer.
(iii) EDI Transport/Packaging Layer

This is the third layer of the EDI architecture. In this layer, the business form is sent from one company to another.
Various companies do not use any electronic medium for transmission of business information among themselves. They
transmit information either by using regular postal system, or a special type of carrier service called a united parcel service.
Often the information is exchanged via e-mail.

(iv) Physical Network Infrastructure/EDI Document Transport Layer

This is the fourth layer of the EDI architecture. In this layer, transmitting business document is more complex when
compared with the transmission of e-mail information, or file sharing through a modem or some other electronic device.
The reason behind this is that the business document information is far more organized than the e-mail information and
hence requires lots of processing.
Q10. What is EDI? List out the advantages and disadvantages of EDI.

Answer : Sep./Oct.-15,012(b)

EDI

For answer refer Unit-IV, Page No. Ill, Q.No. 9, Topic: Electronic Data Interchange (EDI).
Advantages of EDI

EDI offers numerous advantages as given below,

It reduces the paper work.

2. It reduces the time consumed by order-invoice-payment cycle.

3. It increases the customer base for an organization significantly.
4. It offers higher transmission accuracy.

5. It enhances the communication thereby improving the customer service.

6. It reduces the number of data entry errors, human intervention, processing delays etc. So, the quality of the outcome
will be good.

7. It enhances the transmission rate and transaction processing speed.

8. It reduces the need for having large inventory.

9. It reduces the number of personnel required. Also, EDI reduces the data entry cost.
10. It simplifies order entry and processing.

SIIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

UNIT-4 : Electronic Data Interchange 113
Disadvantages of EDI

The following are the disadvantages associated with EDI.

1. EDI forces management to heavily rely on computer systems because, it reduces the number ofpersonnel involved.
As a result, fewer individuals are responsible for handling more tasks via computer systems. So, there is a possibility
of having a greater impact in-case any of the system fails.
2. If errors occur during data processing and transmission, the information sent to the trading partners will be inaccurate.
Thus, inconsistency issue arises which possibly results in losses to the trading partners.
3. EDI transaction data must always be maintained and secured for a long period of time because, it is the only evidence
of transmission between the trading partners. In case of any dispute between the trading partners, EDI transaction
data serves as the substantial evidence. Thus, a backup copy of all the EDI transactions must be maintained which
in turn involves additional overhead.
4. EDI also requires an organization to hire several third party softwares and applications so as to provide transaction
security. •
5. For serving the business operations of the client, the organization simply rely on the computer systems of the trading
partners. As a result, any errors, vulnerabilities, viruses in those systems (i.e., trading partners) will certainly have
an impact on the business operations.
6. If the application serving EDI is corrupted, then all EDI transactions will be affected.
7. Inappropriate operating decisions will be resultant, if errors remain undetected in transactions received from trading
partners.
8. Since, EDI involves heavy utilization of computer and communication systems, the possibility of intruders and
hackers will be more. Thus, there is no guarantee for the consistency of information exchanged. Apart from this,
privacy may not be completely preserved.
Q11. Explain tangible benefits of EDI.

Answer :
In order to be successful in today’s electronic market, companies have to satisfy customers as well as their suppliers.
This requires lot of money and time.
Following are the ways by which EDI can reduce the time and cost,
(a) By reducing paper based systems
(tf) By improving problem resolution and customer’s service
(c) By expanding the customer/supplier base.
(a) By Reducing Paper-based Systems

Before EDI, various companies required a lot of man power for doing their work. For instance, keeping records of
the customers as well as suppliers, storing company’s relevant information consumed both time and effort. Because
of this, everything is done automatically and making payments through EDI also became a lot easier and quicker.
(b) By Improving Problem Resolution and Customer’s Service

Companies with the implementation of EDI can solve their business problems a lot quicker. EDI also plays an
important role in improving the customer service of the company. By using EDI, the order of the customers can be
completed faster without any errors.
(c) By Expanding Customer/Supplier Base

By using EDI, companies not only interact with different customers having different needs, but also with different
kinds of suppliers.
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Q12. Explain in detail about the working of Non-EDI system.

Answer :
The working of Non-EDI system can be illustrated with the help of following example.
Consider an example wherein customer and vendor communicate regarding purchasing application.
The interaction takes place between customer and vendor by using mailrooms called paper based mailrooms. These
mailrooms are available on both customer side as well as vendor side. Suppose a customer wants to pass a purchase order
request to vendor, then the following steps are involved,
(i) Customer must first take out a receipt of purchase order information from his/her mailroom.
(ii) Customer must then transmit this receipt to the vendor.
(iii) Vendor gets the receipt of purchase order in a letter or fax format.
(iv) Finally, this receipt of purchase order is stored in vendor’s mailroom.
This can be as shown in figure below,
I I

Figure: Working of NON-EDI System

Q13. Explain prerequisites of EDI. March/April-17, Q12(a)

OR
Explain the prerequisites for EDI. March/April-14, Q12(b)

OR
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What are the prerequisites of EDI?

Answer : Oct./Nov.-12, 012(b)

When two companies or organizations agree for conducting business with each other, the both parties need to sign
an agreement or a contract which consists of the information regarding,
(i) Kind of business transaction to be done.
(ii) How the business transaction will be done.
* '
(iii) Source of transmission for business transactions.
(iv) Standard that will be used for transactions.
Similarly, the same procedure is followed when carrying out business in e-commerce, wherein EDI technique is
used for doing transactions. It is important to ensure that if the concerned parties are willing for the business proposal,
then it is necessary for these parties to agree for use of EDI. Only then EDI can be implemented otherwise, it cannot be
implemented.
The benefit of using EDI process is that there will be no inference during transmission. This is because EDI system
provides a standard by which information can be transferred.
Prerequisites of EDI

The prerequisites of EDI are the components that forms the basic kit necessary for EDI implementation. These
components include,
1. Standards
2. Translation software
3. Bank
4. VAN services
5. Trading partners
6. Proprietary hardware and network.
1. Standards

Standards play a very important role in the success of EDI system. They make sure that the information is properly
transmitted.
2. Translation Software
The translation software is responsible for,
(eft Sending messages among trading partners.
(b) Integrating data into current computer applications as well as from current complete application.
(c) Translating the data between EDI message standards.
3. Bank
It offers payment as well as remittance.
4. VAN Services

VAN is a service provider that allows communication possible among different business partners. These business
partners exchange electronic data such as purchase orders and invoices.
5. Trading Partners

Trading partners are nothing but suppliers and customers of firm who are responsible for running the business.
6. Proprietary Hardware and Network

If the company is a sponsor or hub company, then it allows the use of EDI. Sponsors are the bigger companies such
as Ford, GM and Toyota.
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Q12. Explain

Answer :
The wor is and structure of EDI transaction.

Consid Model Paper-ll, Q12(a)

The
mailroo’
reque' just to make sure that two concerned parties communicate properly but also to
vare devices can be used at the same time for smooth flow of business data.
.Mards were developed but most of them were found to be incompatible. This affected the usage
—to overcome this incompatibility, two standards were developed. These standards are as follows,
1. ANSI X 12 standard
2. EDIFACT standard. '
1. ANSI X 12 Standard

One of the standards that is used to describe how EDI based transactions should be done is X 12 standard. This
standard was developed by American National Standards Institute (ANSI) along with Accredited Standards Committee
(ASC) in 1979. Hence, this standard is also referred to as ANSI ASC X 12 standard.
Types of transactions defined by this standard are,
(a) Purchase order transactions
(b) Delivery order transactions
(c) Invoice transactions
(d) Shipping transactions.

This type of standard is mostly used by United States. The protocols used for ANSI X 12 defined transactions are,
(i) MIME based protocol
(ii) X.400 protocol

There are different types of X 12 standards. Some of them are as follows.

X 12 finance standard

❖ X 12 transportation standard
❖ X 12 insurance standard.
2. EDIFACT Standard

The full form of this standard is Electronic Data Interchange for Administration, Commerce and Transport. This
standard was developed under United Nations in the year 1987. Hence, it is also referred as UN/EDIFACT. ANSI X 12
Stannard got merged with ED1FACT standard in the year 1997. The purpose of these standards is make the system versatile.
EDIFACT standard was further developed with the help of UN/ECE. It stands for United Nations Electronic Commission
for Europe.

Some of the transactions defined by this standard are similar to those defined by ANSI X 12 standard. For instance,
purchase order transaction, delivery order transaction, invoice transaction etc. This type of standard can be used to transmit
information among various countries or companies. Most of the transactions under this standard are done by using an
Interactive Exchange Protocol called I-EDI. EDIFACT standard specifies how data can be properly organized by defining
some rules.

With so many benefits provided by EDIFACT standard, in future there are chances that all the countries will be
using only this standard for doing transmissions.
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Q12. Explain in deta;

Answer :
o
The world-' £ is and structure of EDI transaction.

Consid Model Paper-ll, Q12(a)

The in
mailroo’
just to make sure that two concerned parties communicate properly but also to
reque'
vare devices can be used at the same time for smooth flow of business data.
.^ards were developed but most of them were found to be incompatible. This affected the usage
Io overcome this incompatibility, two standards were developed. These standards are as follows,
1. ANSI X 12 standard
2. EDIFACT standard.
1. ANSI X 12 Standard

This type of standard is mostly used by United States. The protocols used for ANSI X 12 defined transactions are,
(i) MIME based protocol
(ii) X.400 protocol

There are different types of X 12 standards. Some of them are as follows.

X 12 finance standard
X 12 transportation standard
X 12 insurance standard.
2. EDIFACT Standard

The full form of this standard is Electronic Data Interchange for Administration, Commerce and Transport. This
standard was developed under United Nations in the year 1987. Hence, it is also referred as UN/EDIFACT. ANSI X 12
standard got merged with EDIFACT standard in the year 1997. The purpose of these standards is make the system versatile.
EDIFACT standard was further developed with the help of UN/ECE. It stands for United Nations Electronic Commission
for Europe.

With so many benefits provided by EDIFACT standard, in future there are chances that all the countries will be
using only this standard for doing transmissions.
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Structure of EDI Transaction

Structure of EDI consists of three important fields. They are,

(a) Transaction set

112(a)

(b) Data segments

so to (c) Data elements.

1.
Each field is interrelated to one another.
isage
ys, (a) Transaction Set

Transaction set is the first field in the structure of EDI message. It can be defined as a collection of data segments or
JNIT-4 : Electronic Data Interchange 117

Structure of EDI Transaction

Structure of EDI consists of three important fields. They are,

(a) Transaction set

(b) Data segments

(c) Data elements.

Each field is interrelated to one another.

(a) Transaction Set

Transaction set is the first field in the structure of EDI message. It can be defined as a collection of data segments or
documents that are transmitted using EDI. There are around three hundred transaction sets in ANSI X 12 standard.

(b) Data Segments

This is the second field in the EDI structure. Data segments are nothing but a set of data elements. The purpose of
using data segments is that they provide information regarding different transactions like,

❖ Information related to invoice transaction

❖ Information related to shipping transaction

❖ Information related to purchase order transaction.

(c) Data Elements

Third and final field in EDI structure is data elements. This field comprises numerical data like,

(i) Identification of number of the transaction

(ii) Cost of the product to be sold.

4.2.1 Types of EDI

Q15. Explain the types of EDI. March/April-17, 012(b)

.Write about,

(i) Partial EDI

(ii) Fully integrated EDI. Oct./Nov.-16, 012(a)

Describe EDI systems.

Answer : (Model Paper-ll, 012(b) | Oct.-14, 012(b))

There are two types of EDI systems that are as follows,

(i) Partial EDI System

Partially integrated EDI system is a system consisting of both Non-EDI system and EDI system, that means there are
certain operations that are performed manually (paper-based work) and certain operations which are performed electronically.
The information flow in this system can be understood by considering the following example which is explained :
step-wise manner.
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Customer/Buyer Vendor/Seller

Figure: Partially Integrated EDI System

1. Purchase requisition is done by a department and to the purchasing department.

2. y?This requisition is reviewed by purchasing agent.
3. 'Phis agent manually completes the purchasing order but places a purchase order form in a computerised manner.
4. This form is filled-up by the agent and is submitted to the selling department.
5. Upon submission of the data to the VAN it is stored in the respective mailbox of a vendor.
6. The receiving vendor retrieves the order from VAN, thereby generating a sales order automatically.
7. Credit-card information is authenticated by EDI system.
8. If authentic, the electronic system sends a notification to the inventory to ship the requested item.
9. If a particular item is out-of-stock, then EDI system automatically generates the back-order notice.
Advantages of Partially Integrated EDI System

1. Clerical errors incurred because of the data pntry is decreased. Since, purchasing agent is not filling out the form
manually.
2 The time period for completing the purchase order is reduced.

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UNIT-4 : Electronic Data Interchange 119
(ii) Fully Integrated EDI System

Fully integrated EDI is an EDI system that carries out information flow electronically. In contrast to partially
integrated EDI, the fully integrated EDI performs their transactions with high speed and high-level of accuracy but with a
trade-off cost.

Consider the following example wherein customer and vendor communicate regarding purchasing products to
illustrate the fully integrated EDI system.
1. Customer transmits purchase order request from the EDI-enabled computer to vendor’s EDI-enabled computer.
2. Vendor responds to the request by giving confirmation message from the EDI-enabled computer.
3. Vendor transmits booking request from the computer to transport company’s EDI-enabled computer.
4. Transport company responds to the request by giving a confirmation message from the computer.
5. Vendor transmits advance shipment notice from the computer to customer’s EDI-enabled computer.
6. Transport company transmits status message to the vendor in order to know about the status of the vendor.
7. Customer passes receipt advice message to the vendor in order to know about the detailed list of various
products supplied.
8. In response, vendor sends list of products supplied along with their cost to the customer.
9. Finally, customer transmits the payment check to the vendor.
This can be as shown in figure below,

Figure: Example of Fully Integrated EDI System

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* ■
4.2.2 EDI Applications in Business
~ 1 " ............... . 1 , ...... ■.... c .............. ............... ........... ii 1 ..........

Q16. Describe about EDI applications in business. (Sep/Oct.-15,012(a) | Oct-14,012(a))

What is an EDI? What are the various EDI applications in business?

(Model Paper-Ill, Q12(a) | March-11, 012(a))

Discuss about EDI applications in business. Oct./Nov.-13, Q12(a)

What are the EDI applications in business? Oct./Nov.-11, Q12(a)

Explain about financial EDI and types of financial EDI. March/April-16, Q12(b)

{Refer Only Topic: Financial EDI}

Answer :
Electronic Data Interchange

Electronic Data Interchange (EDI) can be defined as a medium of transmitting business information in a standardized
format. Generally, there are several applications of EDI that are still under development. Some of them include monitoring
of railway rolling stock, plans for containerships, notification of explosive goods on ships, trains, buses or aeroplanes,
exchanging of CAD/CAM (Computer Aided Design)/(Computer Aided Manufacturing) documents, tracking of different
tenders, storing of trade related documents like airway bills, custom clearance, air ticket settlements, goods purchase and
supply related documents exchange etc.

EDI Applications in Business

The various applications of EDI in business include,

1. EDI in International Trade

The main objective of doing international trade transaction is to transmit the documents containing goods information
and goods simultaneously and on time. It should not be the case where goods have arrived earlier and the documents
containing goods information have arrived late. These delays in arrival of documents is due to improper management of
documents. Transmission of information is made easier by the use of EDI method. For most of the time, paper based systems
have been used for doing international trade. However, there have been several drawbacks with such systems. They are,

(a) Delay in delivery of information.

(b) More labour is required in these systems. As a result, cost incurred is more.

Due to these drawbacks, paper based systems have been replaced by EDI. EDI makes the task easier for small-scale
traders for doing international trade transaction by providing good and efficient services.
Advantages of Using EDI for International Trade

Some of the advantages are as follows,

(a) Cost of transaction is less.
(b) Transmission of goods on time.
(c) Better customer service.
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2. Financial EDI

2(a)) r urTT1 EleCtJ°nic Data ^change is a special type of EDI mechanism used for doing financial transactions
cons6 ’ 1 F CUSe° financial EDI’ the transmission of financially related transactions will be more quick and less time
consuming. For instance, transfer of money or payment transactions.
Types of Financial EDI
2(a))
Financial EDI consists of three types of payment methods. They are,
(a) Checks
12(a)
(b) Electronic Funds Transfer (EFT)

(c) Automated Clearing Houses (ACH).

12(a)
(a) Checks
UNIT-4 : Electronic Data Interchange 121

2. Financial EDI

Financial Electronic Data Interchange is a special type of EDI mechanism used for doing financial transactions
online. With the use of financial EDI, the transmission of financially related transactions will be more quick and less time
consuming. For instance, transfer of money or payment transactions.
Types of Financial EDI

Financial EDI consists of three types of payment methods. They are,

(a) Checks

(b) Electronic Funds Transfer (EFT)

(c) Automated Clearing Houses (ACH).

(a) Checks

It is one of the payment methods used in financial EDI. It is the most commonly used payment method.
(b) Electronic Funds Transfer (EFT)

Electronic Funds Transfer is the second payment method used in financial EDI. EFT is a transmission technique
used by various banks to do payment transactions among each other. Different kinds of payment transactions are
possible like credit transactions, debit transactions etc. In simple terms, EFT is a technique used for bank-bank
communication.

The two most commonly used EFT techniques are,

(i) E-checks

(ii) E-cash.

(c) Automated Clearing House (ACH)

This is the third type of payment method used in financial EDI. All transactions are processed through a special
type of central server called Automated Clearing House (ACH). For instance, credit based transactions like payroll
payments, payments to contractors and vendors etc., and debit based transactions like consumer payments, payments
of bills, mortgage loans etc., are all possible through Automated Clearing House. Therefore, rather than using credit
cards or debit cards for doing transactions, most of the businesses today are doing transactions through ACH payment
system. This type of payment system is particularly useful for two types of customers,

❖ Industrial corporate customers

❖ Financial corporate customers.

Advantages

■ a) Quick transfer of money for the customer is possible with financial EDI.

ib) Transactions can be done at any time i.e., round the clock.

(c) Eliminates the need to approach a bank to carry out a transaction.

d) Replaced all labour-intensive activities.

Disadvantages

a) There are chances of losing cash if connection terminates abruptly.

b) They are more prone to cyber attacks.

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3. Manufacturing/Retail Procurement using EDI

Manufacturing process in e-commerce is basically done by using a special type of technique called JIT or Just in
Time. The importance of EDI with JIT is as follows,
(a) EDI with JIT

Many of the companies using EDI with JIT are finding it easier to do manufacturing process. Companies can now
deliver the products on time to their suppliers. This is because, once the orders get completed, the respective products
are delivered to the suppliers electronically, which helps in decreasing the time-consumed in delivering the products.
(b) EDI with Quick Response

Retailing process in e-commerce can be done efficiently using a technique called Quick Response (QR). The usage
of this technique depends on the individuals using it. Customers use quick response technique so that they get to
know about the latest products and their services in the market. Retailers and suppliers use this technique to have
an edge over their competitors. Just like EDI was used along with JIT to make the manufacturing process easier,
similarly, EDI is used with Quick Response for simplification of the retailing process.
There are mainly two reasons why EDI is used with quick response,
(i) To minimize the time that is taken for order generation till order completion.
(ii) To identify the type of goods are for sale and the type of goods are for purchase. For this, a special EDI technique
called Point of Sale (POS) is used. In other words, this technique is used for proper inventory management.
Advantages

(a) The overhead and the cost involved in storing a large inventory of products is eliminated by using Just-In-Time
technique.
(b) The retailers make use of the Quick Response (QR) technique, which mainly focuses on the inventory-level of al.
the products. Once the product inventory goes below a specific level, QR technique automatically generates purchase
orders for its suppliers.
Disadvantages

(a) There is a possibility of losing bulk orders if inventory level becomes low.
(b) JIT and QR techniques work well till the relationship between retailers, suppliers and manufacturers is good bu:
once this relationship breaks then the suppliers and the retailers will not have sufficient stock to satisfy customer
demands until they get a new manufacturer.
(317. Explain the working of financial EDI for E-commerce.

Answer :
Financial EDI Payments

There are two types of information that are absolutely necessary in financial EDI,
❖ Payment information
❖ Remittance information.
So, financial EDI payments can be done in two possible ways,
(i) Transmitting payment information and remittance information simultaneously
(ii) Transmitting payment information and remittance information separately.
(i) Transmitting Payment and Remittance Information Simultaneously

Consider two companies, say company A and company B involved in financial EDI payment transaction. For doinj
such type of payments, a special central bank server called ACH(Automated Clearing House) is needed. ACH manage;
transactions that take place between customers bank and supplier’s bank. In this example, assume company A as th;
customer and company B as the supplier.
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The steps involved in payment transaction process between company A and B are as follows,
1. Company A passes the remittance information and payment instructions to its bank. Both the information contains
the details of the amount to be paid to the supplier as well as the date that was given for payment respectively.
•2. On receiving both the information, bank of company A sends them to ACH.
3. ACH operator updates the payment instructions, extracts accounting data and then sends the payment instructions
remittance information to the bank of company B.
4. Finally, the bank of company B sends both these pieces of information to company B.
The diagrammatic representation of transmission process of payment and remittance information simultaneously is
as follows,

Transmits
Goods or
Services
Bought

Figure: Simultaneous Transmission of Payments and Remittance Information -----

(ii) Transmitting Payment and Remittance Information Separately
In the previous transmission process, company A transmitted payment instructions and remittance information
simultaneously to company B. In the current type of process, both these pieces of information are transmitted separately
to company B.
The steps involved in this type of transmission process are as follows,
1. Company A passes the payment instructions to its bank.
2. On receiving this information, bank of company A sends the information to ACH.
3. ACH transmits payment instructions to bank of company B.
4. Bank of company B on getting the information passes it to company B„
5. For passing remittance information to the company B} Company'A uses a special type of network called Value Added
Network, Company A sends remittance information to. Value Added Network (VAN).'
6, VAN pn receiving the remittance information, sends it to"COmpahy B.
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is as shown below,

Figure: Separate Transmission of Payment and Remittance Information

Q18. Discuss in brief about Value-Added Network (VAN).

Answer :
Value Added Network (VAN)

(i) Holding EDI messages in electronic mailboxes.

(ii) Interfacing with other VAN’s.

(iii) Supporting various telecommunication modes and transfer protocols.

Electronic MailBoxes

It is a feature of software that stores EDI messages which users fetch depending on their requirements. It is ven
much similar to home personal mailboxes.
Many business transactions are performed by establishing a connection directly between businesses or by making
use of VAN. VAN acts as middleman and allows companies to automatically and securely exchange crucial data over the
network. Through VAN, the exchange of EDI messages takes place in the following order,

(a) A company transmits an EDI message

(b) This message is stored in VAN mailbox

(c) It is present in the mailbox, until it is fetched or retrieved by destination company.

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EDI process can be understood by considering the following example.

Figure: Working of VAN

Company A sends an EDI message to VAN mailbox. This message consists of a destination address. Using this
destination address, VAN transmits the EDI message to mailbox of company B. It is stored over there until company B
retrieves it by logging in. Company B sends a reply message to company A in the same way. This cycle is repeated on
regular basis. This type of service is termed as mail-enabled EDI. The drawback of this service is that it is very slow and
very costly.
An organization that has many trading partners opt for VAN for using EDI. However, it is not optional for small
organization with less number of trading partners. There are various factors that are needed to be considered while selecting
VAN,
(a) Reputation of VAN, level of technical support
(b) Experience of VAN, service capacity cost, ways of making connection with VAN.
VAN Pricing Structures

Pricing structure of VAN is based on services that are provided by it. Different services offered by VAN are,
(i) E-mail capability
(ii) Inter-VAN connectivity
(iii) EDI to fax support
(iv) Supporting EDI translation software
(v) Transmission of X. 12 documents.
There are three categories of costs that are associated with VAN services,
1. Account start up costs
2. Usage or variable costs
3. Interconnect costs.
1. Account Start Up Costs

> very i Whenever an account with VAN is created, start up cost and network usage cost is incurred. Network usage cost is
the monthly rent that should be paid even if services are not utilized.
laking | It may also incorporate mailbox fee that maintains an account and a password. There are various factors on which
'er the | start up costs depend,

(a) Number of trading partners

(b) Line configuration
(c) Application software •
(d) Whether an organization and trading partner are willing to utilize EDI services.
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2. Usage or Variable Cost

This is a variable cost that depends on the utilization of EDI services. In E-commerce, usage refers to the number
of transactions carried out by a particular customer. In order to reduce the transaction cost, many transactions are merged
together and transmitted in a single envelope.

3. Interconnect Costs

Interconnect cost is the cost that is incurred while establishing a connection for the purpose of exchanging EDI
messages. Interconnect cost includes monthly rent and even incorporate other charges only when a transaction is performed.
Usage cost on each transaction is reduced when there is increase in number of transactions conducted. This is because
VAN offers discounts depending on volume of transaction. There is a lot of difference in incurrence of costs while sending
message to a customer using same VAN or using another VAN.

Q19. Describe about Internet based EDI.

Answer : March/April-15, Q12(b)

In Internet-based EDI, the data is transferred through Internet without using VAN network. This is possible only
when both communicating business partners use same protocol for exchanging messages.

This service offers two types of methods through which messages are exchanged. They are,

(i) E-mail based messaging

(ii) FTP based messaging.

(i) E-mail Based Messaging

E-mail is the conventional method of exchanging message. Every e-mail message should encapsulate EDI interchange
and encryption techniques for ensuring e-mail privacy. The following information is exchanged among business
partners,

(a) E-mail address for EDI messages and personal communications.

(b) Agreement on various encryption and authentication techniques used including e-mail feedback in the form
of acknowledgment.

(X d) Agreement on message format.

(ii) FTP Based Messaging

(a) FTP login and password for each trading partner

(b) Rules for naming a file or directory

(c) Encryption techniques, public keys

(d) EDI headers that are encapsulated within an EDI message

(e) Agreement on format of the message.

Most of the organisations today are using Internet for carrying out EDI based transactions. The researchers of DOD
(Department of Defence) states that a trading partner can make a choice of using either VAN or Internet as their
communication medium if VAN and Internet interoperate with each other.
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Q20. What is intra-organisational E-commerce? What are its features?

Answer :

Intra-Organisational E-commerce

Intra-organizational E-commerce refers to the activities that are performed within the organization so as to consistently
deliver superior quality service to consumers. These activities include methods and technologies that support the internal
business processes of the organization. The main focus of intra-organization commerce activities is to achieve the most
efficient business process. The various activities of intra organizational commerce are,

(i) Work flow management

(ii) Supply chain management

(iii) Product and service customization.

(i) Work Flow Management

Effective intra-organization commerce can be obtained by,

(i) Removing the useless or unnecessary operational steps from the business process.

(ii) Replacing the internal paper work with computerized processes. By doing so, the processing time and speed
of the business process is reduced.

(iii) Using electronic commerce methods in coordinating enterprise processes.

(iv) Using new technology to improve the automation process of work-flow.

(ii) Supply Chain Management

X
A supply chain refers to a network in which customers and suppliers are present. Management of supply chain is an
important activity for any enterprise as it makes the business operation possible. In this competitive world, it is impossible
for a single company to stand alone and work isolated from others. A successful business is not just a single company but
a network of companies like suppliers, distributors, retailers, manufacturers and others. In order to effectively manage the
supply chain, many companies are using technology to coordinate the supply chain. It requires online, real-time distributed
information processing system that provides the overall information about the supply chain. The information processing
system must have the ability to manage the information not only within a company but also across the industries and
enterprises.

(iii) Product and Service Customization

Customization refers to build the product according to the specifications given by the consumer. Consumers always
want their customized products to be of high quality, high reliability and of longer life spans. This activity is related with
agile manufacturing wherein elimination of inventory and other useless activities are performed. This is done to achieve
more flexibility in production scheduling a help quality product.

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4.2.3 Legal - Security and Privacy Issues in EDI

Q21. Write about the various issues involved in EDI. March/April-16, 012(a)

Write about legal, security and privacy issues in EDI. March/April-15, Q12(a)

Explain about the legal, privacy issues in EDI. March/April-14, Q12(a)

Explain about legal issues of EDI.

(Refer Only Topic: Legal and Security Issues) Oct./Nov.-13, Q12(b)

What are the legal and security issues in EDI? (March/April-13, Q12(b | Model Paper-I, Q12(b))

(Refer Only Topic: Legal and Security Issues)

Explain about the security issues in EDI. March/Aprii-12,012(b)

(Refer Only Topic: Legal and Security Issues)

Answer :
Legal and Security Issues

Mostly, EDI transactions are carried out on a large scale. For example,
❖ Transactions between two countries
❖ Transactions between two corporations.
Therefore, it is necessary that transaction data is legalized and secured before transmission. Legalizing and securing
process also plays an important role when any particular application is designed, especially an EDI based application. In
order to use an EDI globally, it is mandatory that transactions through EDI should be legalized. Efforts have been made to
legalize EDI based transactions. Generally, a law is used for making transactions legal in e-commerce. This law contains
three types of communication standards which basically define the type of transactions that are legalized. These standards
are bfsed on special type of service called USPS (United States Postal Service).

The three communication standards are as follows,

(i) Instantaneous communication standard via USPS
(ii) Delayed communication standard via USPS
(iii) Delayed communication standard via Non-USPS.
(i) Instantaneous Communication Standard Via USPS
This is one of the standards based on United State Postal Service. This standard is used to make telephone based
transactions legal.
(ii) Delayed Communication Standard via USPS
This is another standard based on USPS. It is mailing system transactions especially USPS mailing system.
(iii) Delayed Communication Standard via Non-USPS

Unlike previous two standards, this standard does not use features of USPS. This standard legalizes telegram based
transaction.
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Privacy Issues

Privacy issues play an important role in most of the organizations. Since, they are the mean to collect consumer
information easily using digital tool like digital signatures. In order to ensure the privacy of consumers, there is a requirement
of timely resolution with government and business working together. This is made possible by developing a few particular
standards that are part of uniform business code to carry out transaction over Internet.
Digital Signatures and EDI

Digital signatures are cryptographic process of making sure that the transactions between the sender and receiver
is legal. Digital signatures guarantee that no alterations occur during transactions.
Transactions between Sender and Receiver using Digital Signatures

Before transmitting a message, the sender uses hashing technique to convert it into a special type of message called
message digest. This message digest is then encrypted by using a private key which is known only to its owner (the sender).
This encrypted private key is called digital signature. Now, the original message as well as the digital signature is sent to
the receiver.
Receiver gets the original message as well as the digital signature. In order to check the authenticity of the sender
or in other words, if receiver wants to know whether sender is authorized or not, the receiver decrypts the digital signature
into a message digest by using its public key. Also, receiver with the help of hashing techniques converts the original
message into another message digest. Hence, there will be two message digests. Finally, the receiver cross checks both
the message digests. If both the message digest matches, receiver will be assured that the sender is authorized. There is no
question of alteration of such type in transaction process. If digital signature process is implemented for EDI transactions,
then legalization of EDI is possible which intum ensures security and privacy of transactions.

4.2.4 EDI and E-Commerce

Q22. Explain different types or services of EDI used to support e-commerce.

Answer :
EDI transactions require some latest EDI services that have been developed to support e-commerce. They are as
follows,
1. Traditional EDI service
2. Open EDI service.
1. Traditional EDI Service

Traditional EDI service is a type of EDI service where orders are transmitted through a special type of network
called Value Added Network (VAN). In other words, traditional EDI service is a service where EDI transactions are done
through Value Added Network. This service can also be referred to as conventional EDI service.
Traditional EDI service is used for converting EDI based documents into a standard that can be easily understood
by trading partners. It uses a special technique called EDI Translation Software which sends the documents to partners
over communication channels.
Different techniques are used in traditional EDI service. Few of them are as follows,
❖ Electronic funds transfer
❖ Trade data inte-change.
Electronic funds transfer is issued in traditional EDI service to carry out financial transactions.
Trade data interchange technique is used in traditional EDI service carry out trade based transactions.
Traditional EDI service can be classified into two types,
(a) Old EDI service
(b) New EDI service.

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(a) Old EDI Service

Old EDI service is one of the traditional EDI services that is used to carry out business related transactions. For
example, retail transactions between retailer and supplier.' -
Old EDI service can also be defined as a service used for standardizing or defining the documents to ensure proper
transmission.. Documents are defined by using standards like ANSI X 12, EDIFACT etc. The drawback ofthis service
is that it is very costly to use. Moreover, to access this type of service, some special programs must be built.
(b) New EDI Service
New EDI is also used for defining the documents for proper document transmission. The difference is that in new
EDI service, no standards are used. The standardization of documents is done by the programmer using a set of
programs.
In new EDI service, documents are defined not only for simplifying transmission, but also for simplifying processing.
Other than this, new EDI service also plays an important role in transmission of documents that are structured. For
example, XML documents. For this, the new EDI uses a special technique called DTD (Document Type Definitions).
An example of new EDI service is Interactive EDI Service also called Interactive Query Response. This service can
be defined as a service where business transactions are done using internet as a medium of transmission rather than
value added network.
2. Open EDI Service
Open EDI service is used as an alternative for traditional EDI service. The problem in traditional EDI service is that
the time is taken for transactional exchange through EDI between two companies is more. For EDI based transactions,
companies should sign an agreement. After signing, transactional standards must be defined for legalization of transactions.
For different transactions, different standards are needed. So, creating standard for each transaction will take a long time.
Thus, till the development of standards both companies have to be associated with each other. Without them the transactions
cannot be considered as legal.
To overcome these drawbacks, open EDI service is used. In open EDI service, there is no need of signing an agreement
for doing transactions.
Working of open EDI service is based on two important standards.
❖ Business Operational View (BOV) standard.
❖ Functional Service View (FSV) standard.
It former defines the process of business transactions in open EDI service whereas FSV defines how I.T plays an
important role in doing transactions. ■

4,2.5 EDI Software Implementation

Q23. Explain basic kit necessary for EDI implementation.
Answer :
When two companies or organizations want to do business collaboratively, they sign an agreement or a contract
which consists of the information regarding,
(i) Kind of business transaction to be done
(ii) Process of business transaction
(iii) Source of transmission for business transactions
(iv) Standard that will be used for transactions.
The same procedure is followed when doing business in e-commerce. In e-commerce, EDI technique is followed
for doing transactions. An important point to be noted here is that if the concerned parties agree to use EDI, then only EDI
can be implemented. Otherwise, it cannot be implemented.
The benefit of using EDI process is that there will be no interference during transmission. This is because EDI system
provides a standard by which information can be transferred.
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UNIT-4 : Electronic Data Interchange 131

Standards play a very important role in the success of EDI system. These standards make sure that the information
is properly transmitted. Other than standards, there are few other components that are also important in implementing EDI
successfully,

(a) Translation software

(b) Banks

(c) VAN services

(d) Trading partners.

Features of EDI

Some of the features of Electronic Data Interchange are,

1. Messages are created anatomically through EDI. This means that no human involvement is required in message
generation.

2. Integrity of the message is also verified automatically. In short, EDI minimizes the human interference.

3. Information can be received quickly through Electronic Data Interchange.

4. Using EDI, different forms of business documents can be transmitted. For instance, purchase orders, invoices etc.

Q24. Explain EDI software implementation and how much an EDI cost.

Answer : Model Paper-Ill, Q12(b)

EDI Software Implementation

The four layers of EDI software implementation are,

1. Business application layer

2. Internal format conversion layer

3. EDI translator layer

4. EDI communication layer.

Using these four layers, message is encapsulated in the form of packets and transmitted to the destination using VAN
network. When receiver gets the packets, it performs decapsulation in order to retrieve actual message.

1. Business Application Layer

In this EDI layer, a document in a software application is created which is then transferred to EDI translator. The
responsibility of EDI translator is to convert a message into the format aS specified in EDI standard. If EDI translator and
software application belong to different vendors, it becomes necessary to merge document preparation application with
EDI translation software. If both the softwares belong to same vendor, then data transmission can be performed with high
speed. EDI translator also helps in creation and wrapping of document into EDI package.

The document that is created has a unique mailbox ID that is used to identify target business partners.

2. Internal Format Conversion

In this layer, the document is converted to a specific format so that it can be used by translator.

3. Translator Layer

The main purpose of using translator is to define the association that exists between data elements present in software
application and EDI standards. Translation is the core part of EDI process.
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The task of translator is to ensure that data is translated according to the format as specified in EDI standards that
business partners can use to understand the message. There is a chance of running a business without EDI translator, which
could be a risk if business partners are unable to read the message that is transmitted.
Many companies themselves have developed their own custom EDI translators as,
(i) When compared to commercial translator, custom translator does not get any support or help when required
or if any difficulty arises.
(ii) Custom translator is confined to transact with only one business partner i.e., it is limited and performs the
operation within the organization boundary.
(iii) It is extremely difficult to update custom translator.
4. Communication Layer

Communication can be a module of translation software or it can be a separate application.

The different types of access methods through which communication is possible are as follows,
(a) Direct-dial systems
(b) Limited VAN services
(c) Full VAN services.
(a) Direct-dial Systems

Using these systems, business partners can communicate with each other through modem. The benefit of such systems
is that they are more simple to use.
(b) Limited VAN Services
♦

The technical services offered by limited VANs are as follows,

(i) Converting one network protocol to another
(ii) Detecting and correcting errors
(iii) Routing EDI message envelope to several business partners including buyers and sellers
(iv) Delivering the received envelope to appropriate mailbox of the intended business partner.
(c) Full VAN Services
X ....
The important features of third party VANs include electronic mailbox and also offer features like providing security
through access control and tracking the document.
Gateways are used in order to have inter connectivity between dissimilar third party networks.
There are various reasons why a company is using EDI VAN service provider,
(i) Route EDI message to correct destination
(ii) Perform data translation between different message formats
(iii) Set up an audit trail for enabling an organization for validating the message.
Steps that are Required for Performing EDI Transaction

(a) Business layer creates an application which is transferred to EDI translation layer.
(b) EDI translation layer performs translation so that application is based on EDI standards.
(c) EDI communication layer receives the application in the form of an EDI envelope. This layer transfers the envelope
to VAN mailbox.
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. ............ ........... ————
On the receiving end,
(a) EDI communication layer fetches the envelope from the mailbox using VAN network.
(b) EDI translator decapsulates the envelope and retranslates the message into a form that can be read by the receiver.
(c) EDI business layer performs validation of the application received from EDI translator layer.
The diagrammatic representation of the four layers is as follows,

Company A Company B

rity Figure: Four Layers of EDI Software

EDI Implementation Cost

There are various factors on which the cost of EDI product depends,
1. Expected volume of electronic documents
2. Economics of EDI translation software
3. Implementation time
4. Maintenance fees
5. VAN charges.
1. Expected Volume of Electronic Documents

The number of documents managed by EDI products depends on the cost of EDI products. If the cost of EDI products
is more, then EDI products can manage more number of electronic documents. If cost of EDI products are less, then
they can manage less number of documents.

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2. Economics of EDI Translation Software

Cost of this type of software varies based on two things,

(a) Usage of latest transaction sets
(b) Upgrading of transaction sets.
3. Implementation Time

To implement or carry out any particular application or software, it is necessary to have knowledge about it. Another
important point to be noted is that, the implementation time of any particular application depends on the time taken
to learn that application. If more time is involved, implementation time will be more. Else, implementation time
will be less.
4. Maintenance Fees

Following are few services on which maintenance fees are charged by company,
(a) On using its customer support service
(b) On using its technical support service
(c) On using its software updation service.
5. VAN Charges

VAN charges are based on,

(a) The number of characters present in the document
(b) The time taken to transmit the document
(c) The time taken to connect.

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INTERNAL ASSESSMENT
I. Multiple Choice
1. The first layer of EDI architecture is [ ]
(a) EDI semantic/application layer

(b) EDI standards translation layer

(c) EDI transport/packaging layer

• . ■
(d) EDI document transport layer

2. In layer, business form is sent from one company to another. [ ]

(a) EDI semantic/application layer

(b) EDI standards translation layer

(c) EDI transport/packaging layer

(d) EDI document transport layer

3.- is a special type of EDI mechanism used for doing financial transactions; [ ]
a
(a) Manufacturing EDI

(b) Financial EDI

(d) None of the above

4. is prerequisite of EDI. [ 1
(a) Standards

(b) VAN services

(c) Trading partners

(d) All the above

S. is the conventional method of exchanging messages. [ ]
(a) FTP based messaging

(b) E-mail based messaging

(d) None of the above

6. refers to the activities that are performed within the organization so as to consistently deliver superior
quality service to consumers. I 1
(a) Intra-organizational E-commerce

(b) Inter-organizational E-commerce

(c) Non-EDI system

(d) None of the above

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7. Number of layers involved in EDI software implementation is_________ . [

(a) Four

(b) Five

(d) Seven

8. The number of documents managed by EDI products depends on__________ of EDI products. [

(a) Economics

(b) Demand

(d) Maintenance fees

9. CCD stands for_________ . [

(a) Corporate Cash Distribution

(b) Cash, Concentration and Disbursement

(c) Cash Collection Data

(d) None of the above

10. Maintenance fees are charged by company on using__________ . [ ]

(a) Customer support service

(b) Technical support service

(c) Software updation service

(d) All the above

II. Fill in the Blanks

1• ________ is the second layer of EDI architecture.

/. Full form of VAN is_______ .

3- . _____ prerequisite of EDI is responsible for sending messages among trading partners.

4. EDIFACT stands for______ .

5. The first field in the structure of EDI message is_________ .

6- _________ is a system consisting of both Non-EDI system and EDI system.

7. The main objective of doing international trade transaction is to transmit_________ containing goods information
and goods simultaneously and on time.

8. The two most commonly used EFT techniques are_________ and

9- _______ ___ is the monthly rent that should be paid even if services are not utilized..

10- __________ is a variable cost that depends on the utilization of EDI services.

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UNIT-4 : Electronic Data Interchange 137
toil
KEY
I. Multiple Choice

1. (a)

2. (c)

3. (b)

4. (d)

5- (b)

6. (a)

7. (a)

8- (c)

9. (b)

10. (d)

II. Fill in the Blanks

1. EDI Standards Translation Layer

2. ValueAddedNetwork

3. Translation Software

4. EDI For Administration, Commerce and Transport

5. Transaction Set

6. Partially Integrated EDI System

t-
7. Documents

8. E-Checks and E-Cash

9. Network Usage Cost

10. Usage Cost

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III. Very Short Questions and Answers

Q1. List the layers of EDI architecture.

Answer :
Architecture of EDI mainly consists of four different layers,
(i) EDI semantic/application layer
(ii) EDI standards translation layer
(iii) EDI transport/packaging layer
(iv) Physical network infrastructure/EDI document transport layer.
Q2. What are the types of information that are needed in financial EDI?

Answer :
There are two types of information that are needed in financial EDI. They are,
❖ Payment information
❖ Remittance information. '
Q3. How data is transferred in internet based EDI?

Answer :
In Internet-based EDI, the data is transferred through Internet without using VAN network. This is possible only
when both communicating business partners use same protocol for exchanging messages.
Q4. Write a note on electronic mailbox.

Answer :
Electronic mailbox is a feature of software that stores EDI messages which user fetches depending on their needs.
It is very much similar to home personal mailboxes.
Q5. Define customization.

Answer :
Customization refers to the process of building the product according to the specifications given by the consumers.
Consumers always want their customized products to be of high quality, high reliability and of longer life spans. This
activity is related with agile manufacturing, wherein elimination of inventory and other useless activities are performed.

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/—------------
UNIT
E-MARKETING TECHNIQUES
SIIA GROUP
V J

( LEARNING OBJECTIVES

After learning this unit, a student will have through understanding about the following key concepts,

❖ Meaning of E-Marketing and different E-Marketing Techniques.

❖ New Age of Information based Marketing.

❖ Influence of E-Commerce on Marketing.

❖ Charting the On-Line Marketing Process.

❖ Applications of 5P’s in E-Marketing.

❖ E-Advertisement.

❖ Virtual Reality and Consumer Experience.

❖ The Role of Digital Marketing.

INTRODUCTION
E-marketing is the achievement of marketing goals through the utilization of the Internet and the web based
technologies. E-marketing is also known as Internet marketing or marketing on the web or online marketing.

A search engine can be defined as a software system designed to search information on Internet. Unlike
directories, the search engines are considered to be the most popular method in finding sites. The search
engines operates by taking user-defined words and boolean expression in search bar.

Online advertising is a marketing strategy that make use of Internet to fetch website traffic and target, deliver
marketing related information (in the form of messages) to the right customers.

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Q1. What is E-Marketing?

Answer :
E-marketing is the achievement of marketing goals through the utilization of the Internet and the web based
technologies. E-marketing is also known as Internet marketing or marketing on the web or online marketing.
Online marketing is a part of e-business or e-commerce. The Internet marketing has changed the way of working,
buying and living of the people. It involves the exchange of products, services, information and payments through the
electronic medium of networks.____________________________. ____________________________________________
Q2. Write about Internet Marketing Techniques.
Answer :
The different Internet advertising techniques are,
1. Search engines
2. Solicited targeted emails
3. Interactive sites
4. Banners advertising
5. Spam mails
6. Email chain letters.____________________________ _________________________________________________
Q3. Wr»ta cbout spam mail.
OR
Spam Mail
Answer : (Model Paper-Ill, Q5 | March/April-17, Q7 | March/April-13, Q5 | March/April-12, Q7)

Spam mail is a forceful means of attracting customers. The term spam mail refers to the unwanted and unrequested
on-line email called ‘junk mail’ which is repeatedly sent to multiple recipients at a time. Here, the word spam means
“postage due marketing”, which indicates thousands or millions of messages residing on the host systems of recipients.
These messages reside until they are deleted. This mail can be an advertisement from an organization that tries to sell
something to the recipient. Usually spam mails are send to those who have never visited the site. Sending of spam mail
requires e-mail addresses. Spammers usually collects the e-mail addresses from the social websites, chat rooms etc. They
also employ an e-mail appending techniques that makes use of known information about the Internet users and searches
the e-mail addresses of such users based on the available information._________________________________________
Q4. f¥Vrite a short note on E-mail.
OR
E-Mail
Answer : (Model Paper-I, Q5 | March/April-16, Q5)

Electronic mail is simply an information that is sent electronically from one computer user to another. E-mail is a
fast and convenient way to handle correspondence. E-marl is a system for sending and receiving text messages, graphics,
audio and videos through the user’s computer. E-mail provides fast, inexpensive and convenient service to the computer
users.
E-mail system has five functions. They are,
(i) Compose
(ii) Send
(iii) Report
(iv) Display
(v) Disposition.
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Q5. Write about directories.
Answer : Oct./Nov.-16, Q5

The applications of 5P’s in internet are,

(i) Product
Product refers to the goods or services provided to the customers by a company.
(ii) Pricing
Pricing is a mechanism using which price of the physical good or service is determined.
(iii) Place
Place corresponds to the distribution of the product i.e., moving of the product from the producer’s warehouse to
customer.
(iv) Promotion
Promotion refers to the marketing activities which are involved in order to create awareness of the products among
the users.
(v) People/Personalization
People is an element which refers to individual, staff and customers. Personalization is a technique in which users
_____ are allowed to customize their home pages according to their individual preferences._________________________
Q8. What is Search Engine?
Answer : Oct./Nov.-13, Q8

A search engines can be defined as a software system designed to search information on Internet. Unlike, directories,
the search engines are considered to be the most popular method in finding sites. The search engines operates by taking
user-defined words and boolean expression in search bar. The generated search results are represented in a line of strings,
which are a list of closely matched websites and are often called as Search Engine Results Pages (SERPs). The generated
result content may be the combination of web pages, images and various types of files. So, when the user types certain
string in search bar and clicks enter, the search engine periodically “crawls” through the Internet searching for new pages
and updates the existing databases. The speed with which the engine performs updation and searches the number of location
have major impact on the total number of sites indexed as well as on the revenue to the site. That is the more number of
clicks to a site by user, the higher income to the site owner. In addition to this, the search engines maintains real-time
information by using an algorithm on web-crawler.
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5.1 E-MARKETING TECHNIQUES -INTRODUCTION ____ _ _____

Q9. Explain the E-marketing techniques in detail. ' (Model Paper-n, qi3(a) | March/Aprii-14, qi3(b)
OR
Write about E-marketing techniques. Oct./Nov.-16, Qi3(a)

OR
Explain any three E-marketing techniques in detail.
(Refer Only Topics: Search Engine and Directory Registration, Solicited Targeted E-mail, interactive Sites)
Answer : March/April-17, Q13(a)

Internet Marketing Techniques

\ . .

There are two types of Internet marketing techniques,

(a) Passive
Passive technique refers to the methods in which users retrieves i.e., “pull” information from the website. The user
actively participates and retrieves the required information.
(b) Aggressive
Aggressive technique refers to the methods in which website actively searches potential user’s and tries to communicate
with them. In this method “Push” technology is used by the websites without considering whether the customers
are really interested or not.

Figure: E-marketing Structure

The different Internet marketing techniques are,
1. f Search Engine and Directory Registration
A search engine can be defined as a software system designed to search information on Internet. Unlike directories,
the search engines are considered to be the most popular method in finding sites. The search engines operates by taking
user-defined words and boolean expression in search bar. The generated search results are represented in a line of strings,
which are a list of closely matched websites and are often called as Search Engine Results Pages (SERPs). The generated
result content may be the combination of web pages, images and various types of files. So, when the user types certain
string in search bar and clicks enter, the search engine periodically “crawls” through the Internet searching for new pages
and updates the existing databases. The speed with which the engine performs updation and searches the number of location
have major impact on the total number of sites indexed as well as on the revenue to the site. That is the more number of
clicks to a site by user, the higher income to the site owner. In addition to this, the search engines maintains real-time
information by using an algorithm on web-crawler.
The designing of a webpage must be done in such a way that, it should increase the site’s “Hit rates” and “Ranking”.
Both hit rates and ranking is very important because the designing of website list on Internet entirely depends on it. The
hit rate can be defined as total number of matches obtained from user entered text and website given results. On the other
hand, based on the hit-rates ranking is assigned to the websites. That is, that website with maximum hit rate is ranked first.
Subsequently, the following sites will be those sites that matches less with the user-typed text and the user’s probability of
visiting will also be less. However, different search engines operates differently and yields slightly different results.
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2. Solicited Targeted E-mail
E-mail marketing is the most popular type of communicating channel. It offers quite reasonable charges for its services
and supports HTML messages which comprises of colorful text with images of the products. It also provides links to the
users through which they can order the product. There is a technique which has been adopted in order to attract visitors to
the website. The aim is not only to gain their attention but to involve both the customer and website promoter. This type
of techniques helps in promoting the products which are available on the Internet. It helps in promoting its own product
as well as redirects them to the other sites of other products. These type of techniques attains benefits to the business by
helping them in unloading the products which are not in use from the warehouse. So, the mutual agreement of businesses
for offering services to the customers retain their interest thereby, forcing them to sign up for the services. Now signing
up requires customers to furnish their details on the websites. If the websites requires more amount of information to be
furnished then they can expect less number of visitors therefore websites should try to retrieve only the information that
is necessary.
The above techniques can be considered as a “pull” technique because the user has requested the information but
it can also be considered as a “soft push” technique because the website has gained user’s interest by attracting them with
the services offered by firm.
3. Interactive Sites
There are few websites which are trying to retain customers attention in an interactive manner. It is done only to create
awareness about the benefits offered by them. This is to enable the user to makes a choices whether to buy the product or
not. For instance, there is a website of an attorney who provides answer to the users for their queries on any kind of legal
services. The site helps the visitors to clearly understand their situation and make them think whether they really need an
attorney or not. Thus, the attorney is attracting its website visitors indirectly.
4. Banner Advertising
Online banner advertising is an effective technique but at the same time it is highly expensive. Companies pay some
amount of money to the Internet marketing firms for providing them flash advertising banners which link to its business
site. These links are usually provided on the pages of other websites. One of the advantage is, firms can easily keep a track
of the visitors who visited the site by clicking on the link.
5. Off-line Advertising
Some of the off-line advertising methods used for promoting a website are television, print and radio. These techniques
require more money when compared to the other methods. One of the example of this technique is victoria secret’s website
promoting live fashion show. It promoted it’s event not only on national and local televisions but also invested in the
highest paid advertising event called the super bowl. Apart from this, it also gave its advertisement in some of the popular
newspaper such as USA today, Barron’s, the Wall Street Journal, the New York Times. Due to all these, the show got its
success and massive number of people turned on to watch the show.
6. Spam Mail
Spam mail is a forceful means of attracting customers. The term spam mail refers to the unwanted and unrequested
on-line email called ‘junk mail’ which is repeatedly sent to multiple recipients at a time. Here, the word spam means
“postage ftlue marketing”, which indicates thousands or millions of messages residing on the host systems of recipients.
These messages reside until they are deleted. This mail can be an advertisement from an organization that tries to sell
something to the recipient. Usually spam mails are send to those who have never visited the site. Sending of spam mail
requires e-mail addresses. Spammers usually collects the e-mail addresses from the social websites, chat rooms etc. They
also employ an e-mail appending techniques that makes use of known information about the Internet users and searches
the e-mail addresses of such users based on the available information.
7. Unsolicited, Targeted E-mail
In this method, the customer receives e-mails related to sales/promotion of items even if they do not request for
it. This method would be inefficient if too many emails are sent due to which the customer gets annoyed and may block
the service. However, the method proves to be efficient if the e-mails are not sent in bulk. This can be done with the help
of cookies. Cookies track the response of customers to those e-mails advertisements. Based on that, the e-mails are sent
which grab the customers attention instead of annoying them.
8. E-mail Chain Letters
It is an aggressive advertising technique which is designed to attract the attention of the users. It is a low-cost
technique which can be used by firms for promoting their products or services. For instance, whenever a user registers by
visiting a site and forwards its link to others, then the referring individual gets extra benefits for every person who visited
the site by clicking on the link.
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5.1.1 Search Engines - Directory Services - Chain Letters

Q10. Explain,
(i) Search Engines
(ii) Directory Services
(iii) Chain Letters.
Answer :
(i) Search Engines
A search engines can be defined as a software system designed to search information on Internet. Unlike, directories,
the search engines are considered to be the most popular method in finding sites. The search engines operates by taking
user-defined words and boolean expression in search bar. The generated search results are represented in a line of strings,
which are a list of closely matched websites and are often called as Search Engine Results Pages (SERPs). The generated
result content may be the combination of web pages, images and various types of files. So, when the user types certain
string in search bar and clicks enter, the search engine periodically “crawls” through the Internet searching for new pages
and updates the existing databases. The speed with which the engine performs updation and searches the number of location
have major impact on the total number of sites indexed as well as on the revenue to the site. That is the more number of
clicks to a site by user, the higher income to the site owner. In addition to this, the search engines maintains real-time
information by using an algorithm on web-crawler.
The designing of a webpage must be done in such a way that, it should increase the site’s “Hit rates” and “Ranking”.
Both hit rates and ranking is very important because the designing of website list on Internet entirely depends on it. The
hit rate can be defined as total number of matches obtained from user entered text and website given results. On the other
hand, based on the hit-rates ranking is assigned to the websites. That is, that website with maximum hit rate is ranked first.
Subsequently, the following sites will be those sites that matches less with the user-typed text and the user’s probability
of visiting will also be less. However, different search engines operates differently and yields slightly different results.
Generally the ranking is done based on the following tags of Hyper Text Markup Language (HTML).
(ii) Directory Services

Directories are new online advertising mechanism that helps in representing business functionalities. These
functionalities are represented in the index format that list and supplies links to the websites. The listing of the websites
can be done either alphabetically or category wise. The indexes which are listed category wise displays the indexes in a
sequential order. So, when the users click on one category, they are then navigated to the respective page. However, the role
of the directory service is critical and it is important that the categories are listed inaccordance to the user’s expectations.
This is necessary because if any category is missing or listed somewhere else, the user may think that the intended content
is not present on that site. Apart from this, they exist many directory services that depict the organization businesses in
multiple categories.
These days, there are many directory services that registers the websites free of cost. Some of these include info
seek, Internet mall, the yellow pages and yahoo.
(iii) E-mail Chain Letters
E-mail Chain Letters is an aggressive advertising technique which is designed to attract the attention of the users. It
is a low-cost technique which can be used by firms for promoting their products or services. For instance, whenever a user
registers by visiting a site and forwards its link to others, then the referring individual gets extra benefits for every person
who visited the site by clicking on the link._________________________________________________________________
Q11. List out the advantages and disadvantages of E-marketing.
Answer : (Model Paper-Ill, Q13(a) | Oct./Nov.-13, Q13(b))

Advantages of E-marketing

E-marketing is a readily accessible, inexpensive, fastest means of bringing together various buyers and sellers,
large and small all over the world. When the buyers and sellers are electronically linked, huge volumes of data can be
interchanged which ultimately results in increasing trading activities. The advantages of E-marketing can be divided into
the following,
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(a) Advantages to sellers
(b) Advantages to customers.
Advantages of E- markeing

Advantages to sellers Advantages to customers

__ I ' I

► Access to all markets Convenience

► Renders global marketing Accuracy
► Offers many services and products Transparency
from a single stop Can getmore for lefes
► Helps target the customers individually Search advantage and options
► Helps building relationship with customers Customers can bargain on net with a host of sellers
► Helps reduce costs Shifting of the power equation in favour
of the customer
Business costs
Marketing costs
Channel costs
Communication costs
Promotion cost

Helps unimpeded and constraints free growth

Figure: Benefits of Online Marketing

(a) Advantages to Sellers

1. Access to all Markets

Online marketing provides competition from the various parts of the world. Unlike, the traditional marketing wherein
the buyers and sellers were confined only to certain specific geographic areas, online marketing enables them to
access any comer of the world. An online marketer can access global customers, follow global strategies, compete
globally and fluid global supply chains. Opening a website is equivalent to opening a marketing office.
2. Global Marketing
With the help of online marketing, even small firms can have access to all the markets at a cheaper rate. Example,
a sole trader having the business of hair oil in some local area in India can sell its products and services anywhere
in the globe and that too at a comparatively lower marketing cost.
3. Scope for Unimpeded, Constraints Free Growth

Limitations of showroom’s space, warehouses, sales staff, office building, retail shop and many other do not cause
apy effect on the running of the business. The marketers can operate through web by using a single warehouse and
limited staff members.
4. Offers Many Services and Products from a Single Stop 6

A huge number of buyers and sellers interact with each other and they offer a very big variety of goods and services
on a single website. This is possible because of the direct and indirect access of the marketer to the customer.
5. Targets the Customer Individually

The online direct and interactive communication help marketers to target the customers individually. They can get
all the necessary information about the customer irrespective of the location and the marketer also provides all the
necessary information to the customer. Targeting customers individually helps to provide a tailor made product and
personalized services.
6. Helps in Building Relationships with Customers

Online marketing being interactive and one-to-one marketing helps in building relationship with customers. Due to
good relationship between the seller and the customer, the seller can offer more customized products, services and
incentives. They may also offer a product totally according to the customer’s specifications. Example, customized
services provided by the Dell computers.
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7. Helps to Reduce Costs 5. Customers can get ‘More for Less’
The online marketing helps in reducing various costs Online marketing helps the customers to get more
such as business costs, channel costs, Communication value for their money. The sellers offer the product to
costs etc. Business costs includes various costs which the customers at appropriate price and value keeping
are incurred to carry out the business operations without the point in mind that, the customer can purchase the
the use ofpaper. It is estimated that web business costs product anywhere in the world. So, they follow the
only one-tenth of the traditional business. Channel policy ‘more for less’.
costs are reduced as the product is marketed through the
6. The Power Equation Shifts in Favour of the
web. It reduces the cost of showrooms, warehouses etc.
Customer
Communication or promotion costs are also reduced as
the product is advertised through web to large group The web marketing alters the power equation from
of people. the marketer to the customer. In case of traditional
8. A Versatile Medium of Communication
marketing more focus was laid on the supply side
and the customer was taken as granted. There was
Online is said to be a versatile medium of
an assumption that the customer will make and take
communications as it is a combination of newspaper,
all troubles to purchase the product from the stores
magazines, radio, billboards, telephone and T.V.
as long as the stores are fully stocked.
The online marketing is flexible in nature which is a
distinctive feature of it. Internet is a unique medium as Due to the benefits of online marketing it has become
it is a mass, personalized medium in reaching people fast and has manifested itself in three ways,
and at a low cost. ❖ Growth in volume
(b) Advantages to Customers ❖ Enlargements in the range ofproducts marketed
1. Convenience ❖ Growth in Internet subscriber base.
The customer can purchase the product just by
Disadvantages of E-marketing
clicking a mouse button staying at home. Lots of
time and money is saved in online marketing. The The disadvantages of online marketing are,
customers can have 24 x 7 access to the online 1. All Products do not Lend Equally Well for
marketing. There is online interaction between the Web Marketing
marketer and the customer. The customer can have The first and foremost drawback of online marketing
the demonstration of the product, make online orders, is that it is not suitable for any and every product.
make online payments and accomplishes the entire For instance, when Philips India went in for web
purchase process through net. marketing it had to select a few products and keep
2. Search Advantage and Wider Options the others off.
In traditional shopping customer was provided with 2. Costs Involved are Not Inconsequential
limited choices. They had to visit 4 or 5 outlets in
Costs involved in web marketing are not low as it is
order to get the best of it, which used to be tedious. But
f the whole scenario is changed with the use of online often made out. The costs are not incurred just once
at the time of creating up a website but the marketer
marketing. Online marketing provides the customers
is required to spend money on running, maintaining
with a large variety of products throughout the world.
and updating the site. If the marketer does not spend
3. Customers can Bargain on Net with a Host
sum on the above mentioned activities then there are
of Sellers
chances of losing a large number of customers.
Online marketing being interactive in nature helps its
3. No Reliability about Profitability
customers to bargain with sellers for the low prices.
The customer can make comparisons regarding the Many marketers in the present era are struggling
brands, prices and makes the best deal. to make their business viable and profitable. Even
4. Transparency and Accuracy Amazon the world’s biggest online marketer is yet
to break even.
The online marketing provides the customer with high
level of transparency unlike, the business transactions. 4. Lack of Personal Interaction While Making a
Nothing is hidden from the customers. Just by a click Purchase
of mouse the customer comes to know about every Many people prefer the live interaction when they
minute detail of the product regarding its prices and buy. They believe in having face to face conversation
terms. rather than online marketing.
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5. Security 5.2 NEW AGE OF INFORMATION BASED

Security is a major concern for about 70% of Internet MARKETING
users. There is a real fear of their privacy being
Q14. Explain about new age of information based
invaded as their personal details are being revealed
marketing.
to or exchanged with other online companies. And
also the possibility of their credit card numbers being Answer : Model Paper-I, Q13(a)
intercepted and used for any number of purchases.
With the emergence of information based marketing
Consumers and even policy makers are extremely
(i.e., interactive marketing) in electronic commerce, there
worried that marketers are going a little too far and
breach all rights to privacy. will be a change in the working of retailers, manufacturers
different organizations and companies. This change can be
6. Can Leave Businessman Feeling Isolated classified into following areas,
This is very common. Because the world wide web (i) Retailers against manufacturers
is faceless, it can appear cold and inhuman. This can
make the businessman feel isolated and very inward. (ii) Target and micro marketing
Everyone likes to socialize and meet people, but in (iii) Small organization against large organizations.
this case it is quite difficult.
(i) Retailers Against Manufacturers
7. Hard to Tell if People are Lying
Previously, in electronic commerce, manufacturers
There is so much information on the world wide dominated the retailers i.e., manufacturers were given
web now, it is sometimes hard to tell the difference more importance than the retailers. But today, the trend had
between crap and quality. changed. The reason for this is that the retailers started using
8. Costly for Marketers
a special type of system called Point of Sale (POS) scanning
systems. Through these systems, retailers are aware of the
. Online marketing is costly for marketers as it latest information available in the market. Another benefit of
includes the cost of software, hardware peripherals, POS systems is that they allow retailers to know the needs
website designing, website maintenance and online of different customers much earlier than they are available
distribution cost. to the manufacturers.
Q12. Explain about E-marketing techniques and write Through information based marketing, retailers and
about advantages and disadvantages. manufactures can do the following tasks,
Answer: March/April-15, Q13(a) (a) Market research and customers anticipation
E-marketing Techniques (b) Establishment of market presence
For answer refer Unit-V, Page No. 142, Q.No. 9. (c) Developing bundles of customized products
Advantages and Disadvantages (d) Establish a relation between the price and
For answer refer Unit-V, Page No. 144, Q.No. 11. priority of information based products.
------- ?----------------------------------- - ----------------------------- (a) Market Research and Customer Anticipation
Q13. What is E-Marketing? What are the advantages
and disadvantages of E-Marketing? In today’s time, companies have to be clever as well as
efficient in order to have good impression on the customers.
Answer : March/April-16, Q13(b)
For instance, companies instead of using traditional methods
E-Marketing for gathering information about different needs of the
E-marketing is the achievement of marketing goals customer, must make use of internet services. In this way,
through the utilization of the Internet and the web based the cost of collecting information can be reduced. Also, the
technologies. E-marketing is also known as Internet companies can provide better service to customers through
marketing or marketing on the web or online marketing. internet.
Online marketing is a part ofe-business or e-commerce. (b) Market Presence
The Internet marketing has changed the way of working, Companies advertise their products in mostly two ways,
buying and living of the people. It involves the exchange of
products, services, information and payments through the 1. Through “in your face” advertising, the companies
electronic medium of networks. advertises their products in such a manner that they
don’t consider the profit or loss of selling the product.
Advantages and Disadvantages of E-Marketing If customers are interested, they can buy the product.
For answer refer Unit-V, Page No. 144, Q.No. 11. Otherwise, they don’t buy the product.
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148 ■ E-COMMERCE
2. By using value added corporate advertising method. The two important factors that must be considered
In contrast to the above method, here the companies by customers while using the services of information based
keep in mind the needs of customers when marketing marketing,
their products. Consider an example, where you want ❖ Pricing factor in information based marketing.
to purchase a car online. The company on its website
will display all the possible facilities that the customer ❖ Priority factor in information based marketing.
wants in a car. Company also allows customers to Customer must keep in mind that whenever he
post their suggestions regarding the car. In this way, purchases any product he has to pay not only for the product,
company can improve its standard of performance. but also for the various services provided by that product. In
addition to this, customer should also pay for connectivity
In order to establish the market presence, it is
services offered through information based marketing
important for the companies to know how they should
strategy.
promote their products. Some companies promote their
products by offering discounts on them. The cost of information based products varies with the
rate at which the product is received and also the standard
(c) Product or Service Bundling of information available in the product.
Companies can also attract their customers by using The information products cost can also vary depending
a special method called product bundling method. Product on these products need to be delivered to the customers. In
bundling can be defined as a strategy in which company other words, we can say that the cost depends on the priority
sells a product in combination with another product at a given by the customers. Suppose the customer wants the
reasonable cost. For example, selling of particular software product to be delivered in two hours, then the cost of that
or hardware along with the computer etc. product will be less when compared to the customer who
Bundling method can be categorized into three types. needs the product in one hour.
They are, (ii) Target and Micromarketing

1. Only Component Method Previously, companies found difficulty in targeting

the customers by using micromarketing method. This is
In this method each product is sold individually.
because they could not understand how to use the method
2. Only Bundles Method properly. These problems were overcome with the use of
Only bundles method is just the opposite of the above
different computer based technologies. Companies can now
implement the method more easily for fulfilling the customer
method. In this type of method, product is not sold
needs.
separately, but is combined or bundled with another
product and then sold. Micromarketing can be done in mostly two ways,
3. Mixed Method (a) Micromarketing through direct mail

This is the combination of only component and only (b) Micromarketing through tele marketing.
bundles methods. Here, the product is sold separately (a) Micromarketing through Direct Mail
^ls well as by combining with other products.
In this micromarketing method, companies persuade
The feasibility of the above three methods depends people to buy their products by writing to them.
on the following factors, (b) Micromarketing through Telemarketing
(i) Cost of using each method. In this method of micromarketing, companies tell
(ii) Profit incurred with each method. people to buy their products by talking to them through
telephones.
(d) Relation between Pricing and Priority of
Information based Products The working of both the methods might be different
from one another but their objectives are same in order to
New type of products are slowly making an impact satisfy the needs of the customers.
on e-commerce. These products are called information based
products. The possible forms of information based products Micromarketing can be classified into two types,
are, 1. Direct-relationship Marketing

(i) Software related products This is the first type of micromarketing. In this type,
companies try to establish a relationship with the
(ii) Electronics related products
customers by direct contacting with them for the
(iii) Entertainment related products. purpose of improving their sales.
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2. Direct-order Marketing E-commerce has brought a drastic change in many
economies with the effects that turned as the marketing
This is the second micromarketing type. In direct-
aspects of the products. They are,
order marketing, companies are not concerned about
how the sales will improve. They just concentrate on (i) Availability of new technology-based or technology-
how to sell their products and services to different enhanced products.
customers.
(ii) Availability of e-commerce results in change in the
(iii) Small Organisations Against Large presentation, distribution and assortment of existing
Organizations products.
Both large and small organizations used television as (iii) Availability of new opportunities for the participation
a medium of advertising. Despite of this, large organizations in Business-to-Business (B2B) commerce have come
dominated sm'all organizations for a long period of time. to the lime light.
The reason for this was that through television, large
The common attributes which a customer compares
organizations not only promoted their products in local
whether it may a product sold online or product sold from
markets, but also in global markets. For example, they
department stores is value, brand and product design.
advertised their products in India as well as outside India.
Whereas, small organizations could only do local advertizing 2. E-Commerce on Physical Distribution
as cost required for doing global advertizing through
E-Commerce has a great impact on retailing, physical
television was beyond the reach of small organizations.
distribution and supply chain management. Internet has
All this has changed with the emergence of electronic brought a wide change in the area of physical distribution
commerce. Now, small organizations can also promote with Just In Time (JIT) system, EDI and RFID. Supply Chain
their products globally by using services like internet. This Management (SCM) is one of the major influences of the
is because using internet is far more cheaper than using internet’s open standards for information flow. The efficient
television for global advertising. flow of information sharing is acquired through some
strategies which are leveraged by leading organizations.
5.3 E-COMMERCE INFLUENCE ON They include material planning, inventory planning,
MARKETING enhanced participation of partners, extending the research
Q15. Explain the impact of E-commerce on Marketing. and the distribution channels on the internet.

Answer: Model Paper-ll, Q13(b)

Thus, internet reduces the interaction costs too on
the market place among the manufacturers, wholesalers,
E-Commerce is simply an ‘online business’ wherein distributors, dealers, retailers and customers.
the buying and selling of products and services are carried
3. E-Commerce on Price
out through internet. It comprises of both the Business-
to-Business (B2B) and Business-to-Consumer (B2C) E-Commerce avails a great impact on the price by
transactions. Online marketing is a part of e-business or providing the case of comparing prices at different websites.
e-comrrferce. It has changed the way of working, buying and
For example: E-campus come forward with an offer
living of the people. It involves the exchange of products, that it provides cheaper textbooks compared to bookstores.
services, information and payments through the electronic
medium of networks. The price of a product in the market consists of the
elements such as production costs, coordination costs, profits
The e-commerce has influenced the field of marketing and also the search cost.
resulting the benefits followed by the general set of activities
that are observed in the marketing mix with the evolution Another mode of impact by the e-commerce on the
of information technology. The influence of e-commerce on price is the development of internet auctions. It enables
marketing mix is discussed as below. the internet users to auction a wide variety of goods. The
best example for online website offering internet auction is
1. E-Commerce on Product ‘ebay’.
There is a great impact of e-commerce oh the ‘product’ However, e-commerce involves selling of goods
part of marketing mix. It has transformed many physical directly to the customer without the involvement of retailers
products/goods to digital goods. Audio music, videos, and distributors to reduce the intermediary barriers. It
movies and even digital books are some of the examples of provides products to the customers directly at low
transformed goods. compared to the offline shopping.
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4. E-Commerce on Promotion Step-1: Divide and Identify Potential Customers
The promotion of goods and services has a huge In this criteria, the market is divided or segmented into
influence on the e-commerce as a medium of communication different customers. Based on the segmentation, capacity of
and a commercialisation tool. It provides an endless offers to customers is rated.
promote a company and its products and services. Internet as
Various methods are used for segmentation which are
a powerful platform has emerged the number of subscribers
as follows,
for reaching large audiences and to delivery brand messages.
1. Demographic method
Online marketing has many ways of promoting a
product of a company. E-mail advertising is one among 2. Benefit or behavioral method
them. It is considered as e-marketing strategy that effects
3. Volume method
the e-marketing with the use of technology.
4. Business specialization method.
The promotion of products through internet not only
influenced the digital products but also has influence on 1. Demographic Methods
tangible products. In this method, market segmentation is carried out
The e-commerce can achieve an effective promotion with respect to the human characteristics of like age, sex,
impacts through the promotional strategies and mixes. religion, income etc. For instance, in banking, the market is
They are, divided into different customer groups with respect to age
factor like
❖ Advertising on websites where customers can aware
about the product by clicking on icons or hypertext to Age Group
know about the complete information of the product.
1. >50 Savers
❖ Sales promotion where it facilitates the movement of 2. 25-44 Heavy borrowers
product from producers to consumers by short term
3. 18-25 Credit risk groups
incentives.
❖ Information retrieval through various available 2. Benefit or Behavioral Methods
websites as shopping assistants. In this method, market segmentation is carried out
with respect to the people behavior, way of thinking, their
5.4 CHARTING ON THE ONLINE, MARKETING attitudes, etc. For instance, in finance market is divided on
PROCESS___ _____________ the basis of two factors.
Q16. Explain the different steps for interface (i) On the basis of customers position in financial
marketing process on the internet. process, which includes borrowing saving, investing,
Answer : protecting, cash managing etc.

The steps involved in the process of interactive (ii) On categorizing the people using online firms,
marketing on internet are as follows, (a) For transaction processing
(b) For exploring the information.
3. Volume Methods

In this method, market segmentation is carried out

with respect to the volume of the product which includes
light, medium, heavy or nonusers of a product. After
identifying the worthy product the aim is to target on product
sales for acquiring the accurate product volume. For instance,
marketing programs centered on business users helps in
identifying the volume segmentation.
4. Business Specialization Methods
In this method, market segmentation is carried out
with respect to the industry size or its type.
Basically this is meant for business or institutional
markets. For instance, special programs are carried out for
Figure: Charting the Online Marketing Process small business.
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As internet is a large network we can still divide The advertising methods are divided into two types.
these segments into smaller ones called “News groups” 1. Interactive Advertising
which provide customized marketing. News groups are
again segmented into relevant areas of the product. With Interactive form of advertising is called nonlinear
the assistance of news groups, advertisers read the FAQ advertising. In this form, a reader is allowed to retrieve
any kind of information instantly just by “clicking” on the
(Frequently Asked Question) files to know the exact nature
of internet forum and figure out the selected news groups highlighted items. For instance still images, animations,
for tailoring the product information. digital video, audio etc. Hence, the interactive content is
nonlinear and informative in nature.
Distinguishing the Product
2. Content-oriented Advertising
Product distinguishing plays a central role in business Product advertising is not enough to expand the
process. business but the content should also be good (which adds
For an effective marketing, “Law of differentiation” value to the product). In this form, companies are used to
was introduced in which “value-added services should exists publish relevant news and aims on customer’s requirements
while doing online business with the organizations”. to develop the product, usage of product with country
specific etc. Based on these factors, customer grasps
The process of differentiation is based on two factors, knowledge about the different products.
1. Identifying the needs of tangible and intangible Thus, content-oriented marketing should have a broad
customers. knowledge about the product’s technology, new sources
2. Appropriate creation of products value-added services of technology, customer views, capabilities, robustness in
in order to meet the customer needs. business etc.

Step-2: Creation of Advertising Plan Step-3: Providing Content to the Customer

The content or material is provided to the customer
The main purpose for creating an advertising plan is
by using two strategies,
to improve and expand the business level so that it provides
positive return on the advertising investment. In order to (a) Push-based Marketing
model the advertising plan, following steps are carried out, This is a direct type of marketing which takes place
through news groups, e-mails, listservs etc. It is also named
1. Determining the advertising goals which includes
as dynamic marketing.
business awareness, generating immediate sales,
keeping the current customers by developing their (b) Pull-based Marketing
loyalties etc. This is an indirect type of marketing that occurs
2. Once the goals are specified, determine the target through WWW pages. It is also named as static marketing.
audience in order to meet the basic requirements of The primary aspect of this strategy is. skilled customer
the customers. management by using predictive models which get activated
to carry right message at right time to right people and in
3. Finally, the selected target audience will be motivated right format.
by the advertising plan.
In order to force the marketing program and to step
For producing major benefits in product four aspects up greater efficiency and productivity valuable, feed back
are necessary (AIDA), i.e., attract Attention, hold Interest, loops are included which stores the respondent names along
arouse Desire and motivate Action. with the response rates and other customer activities etc.
Advertising options are of two types, Step-4: Customer Interaction

(i) Traditional Option There are four types of customer interactions. They are,
1. Passive Interaction
Ads are placed in airports, television, monitors on ski
lifts etc. It is carried out via anonymous FTP sites (File Transfer
Protocol), which is done by just dialling and utilizing the
(ii) Online Option
user name and password. The main goal is to provide a way
Ads are placed in news groups, yellow page in which customer is unrestrained completely.
directories, bulletin boards, WWW pages etc. 2. Direct Interaction (Active Interaction)
Once an advertising campaign is planned the It is carried out via e-mail or chatting, which allows
development of promotional materials is carried out which two users to have online discussion. The main goal is to
includes traditional advertising and knowledge oriented follow a customer with answers to questions and requesting
material. for answers.
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3. Group Dialog
It is carried out through news groups, bulletin boards across the company and customers. The main goal is to provide
customer interaction such that the solutions of unexpected problems are carried out in an easy manner.
4. Video Conferencing
It is carried out via Multicast Backbone called MBone on internet. The main goal is to provide active participation
among customers and to analyze. The product activities through digital broadcasting audio, video and text etc., supported
by MBone.
Step-5: Mastering through Customers
In this aspect, product evaluation criteria plays a vital role which is carried out by the marketing plan. Marketing
plan includes measuring or estimating productivity of elements like price, product, repeat purchase, market share, sales
volume etc. Analysis on company’s materials compared with channels like endsales, distributor contacts etc. Which is later
modified as per the needs of target groups.
Step-6: Online Customer Service
In the process of interactive marketing support for online services to customers plays a crucial role where the
customers interaction is compared with other marketing strategies.
Some of the online services which are supported by vendors, public forums incorporates bulletin boards, knowledge
bases on the business services like news groups, CompuServe etc.
Vendors should develop brand loyalty among consumers, so that the products are purchased repeatedly.

5.5 APPLICATIONS OF 5P’s (PRODUCT, PRICE, PLACE, PROMOTION, PEOPLE)

Q17. Explain the E-applications of five P’s. March/April-16, Q13(a)

OR
Discuss about applications of 5P’s. (Model Paper-I, Q13(b) | Oct./Nov.-16, Q13(b))

How do you link 5P’s of marketing to the Internet?

Answer : March/April-15, Q13(b)

The applications of 5P’s of marketing are,

1. Product
2. Pricing
f 3. Place
4. Promotion
5. People/Personalization.
1. Product
Product can be referred as a “good” or a “service” provided to the customers by a company. A “good” signifies
physical items which shows its presence. For example grocery items, automobiles and books. On the other hand, “service”
refers to execution of some action or a task for the customers. For example, the actions done by accountants, engineers,
doctors and lawyers.
With the evolution of Internet, there are many virtual services which are provided to the customers electronically.
For example stock market news, online worldwide news. These services have helped many customers due to its ease of
use feature. But differentiating between the goods and services which are provided on-line is difficult. For example, one
cannot distinguish whether an electronic greeting card is a physical good or a service. Because, after receiving it, if the
person prints it then it becomes a physical good, and if that person opens, views and deletes it then it becomes a service.
Therefore, it is not necessary to know the difference between a physical good and service. But it is really important to
determine the attributes and the advantages offered by the goods and services.
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Apart from this, firms also provide prepurchase service and post purchase service on their products to the customers,
purchase service is the service which is provided before the customer buy the product in order to minimize congnitive
- ssonance. Post purchase is the service which is provided after the customer bus the product. For example, if the customer
- s automobiles then it receives post purchase service which includes 24 hour round side service. Thus online services
provided by the firms enables its customers to easily provide their feedback and to ask their queries.
2. Pricing

Pricing is a mechanism using which price of the physical good or service is determined. It is the amount of money
. - arged to the customers for the goods or services offered by a firm. There are many different strategies which are adopted
?y a firm in relation to price. For example, a customer is given discounted price if he buys the goods or service in larger
olume at a time. There are various strategies used by web based marketers to attract customers. For instance, few sites
are offering free of cost services to the customers only to create a community through which it can earn profits by selling
advertising space, for example parenthood.com. In another case there are few sites which are paying their customers for
_jing their services on hourly basis only to place its advertising bar on their web browsers. Frequent purchase systems are
-'eing introduced in order to gain customers trust and loyalty which indirectly will earn their interest in buying the products
nline again. Search engines provides an extra functionality to the customers by helping them compare the prices of the
products of all the goods and services which are available on the Internet. Now a days online auctions are also attracting the
?eople who frequently shop online. The auctioneers who wants to sell the product sets the price of the product at its lowest,
vhereas the bidders bid the highest prices sometimes or the prices which are fair enough. There is another technique wherein
die price of the product is set according to the prices offered by consumers. For example priceline.com which enables its
?uyers itself to set prices for hotel reservations, online airline tickets, cars on rent. Prices charged by the different firms for
die goods and services are freely available on the Internet. Due to which competition between them is increasing day by
day thus forcing each of them to lower down the prices of their products. Apart from this, there are many other criteria on
which the price of the product depends. They are,
(i) Reliability of sellers
(ii) Availability
(iii) Service
(iv) Incentives.
Thus, difference in the price tags of the products offerred by different firms brings a challenge to the web based
sites. There are different issues faced by the web based sites. One of them is how to standardize the prices. Therefore, it is
necessary to employ some stratergies which should set the price of the product according to it.
3. Place (Distribution)

Plaqe corresponds to the distribution of the product i.e., moving of the product from the producer’s warehouse to
customer. There are different channels or mediums through which product is delivered to the consumers, one channel is
that the product is sent directly to the consumer whereas the other channels obtains an indirect way. That is products are
distributed with the use of intermediaries such as retailers, warehouses, wholesaler. E-commerce can be revolutionary in
terms of business and delivery of goods within on time. At present it is the fastest communication channel through which
information about the products can be delivered to the customers. For example, insight enterprises is a real time firm which
has formed a strategic alliance with federal express. Thus, now federal express delivers the services to the customers directly
without the need of warehousing the products.
Internet is a boom in todays era because of its instant delivery of online services to the needy customer. For example,
if a person needs to convert its business file into French on urgent basis then he/she requires a English-French business
document translation software. Thus, an only option a customer can opt at depending on the moment is to buy an online
English-French business document software by visiting an online store using either its debit or credit card.
4. Promotion

Promotion refers to the marketing activities such as press release advertisements, word of mouth, news stories which
are used to create awareness of the products or services among the users. It is done with the goal of generating a positive
customer response. Some of the methodologies adopted for marketing communication are,
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(i) New stories 5. People/Personalization
(ii) Paid advertisement channels People is an element which refers to individual, staff
(iii) Consumer’s personal experience and customers. It covers the customer service levels as well
(iv) Packaging as effective communication and training for the staff because
(v) Word of mouth. both are significant for growth of the business.
Paid advertisements is a form of marketing Personalization is a technique in which users are
communication in which the advertising media channels are allowed to customize their home page according to the
paid for advertising firm’s products or services. This includes individual preferences. User of the site are given the ability
billboards, television, special events, magazine, newspaper, to choose what information they want to see when they
direct mail. Apart from this, Internet acts as a new advertising open their web browser. For example, a user can customize
channel to inform customers about the benefits offered by its homepage for its favourites websites such as facebook,
the product and services. It is a new medium which charges gmail. Its functionality is far better than the product and
minimum money for advertising. Therefore, every year promotion as it covers both of their functionality. Personalize
companies issue a fixed amount of budget for advertising feature is present in user domain because they use it for
purpose. customizing and controlling. For example, Hallmark is the
Companies tries to keep track of the advertising media best example of it. It not only provides services to the users
in order to analyse whether their money which is being upon its request but also stores their personal details in the
spend is leading to success or growing their business scale. database in order to remind them of any special occasion,
But analysing and keeping track of the different number of or event. So that the users can easily arrange a greeting
advertising media is very difficult. Especially to determine or anything for others without any difficulty. They also
the advertising media which has caused the consumer to buy suggest gift items to the users based on the preferences they
the service or products is a challenging task. submitted previously.
There are two types of channels.
(i) One Way Channels 5.6 E-ADVERTISEMENT____________________
In this channel, a message is sent to the customer Q18. What is E-Advertisement? Mention the types of
without providing a direct technique through which a E-Advertising.
customer can contact the business person. Some of the
Answer :
examples are roadside bulletin boards, television, magazines,
radio, newspaper direct mail. E-Advertisement
(ii) Two Way Channels
Online advertising is a marketing strategy that make
In this channel, a message is sent to the customer use of Internet to fetch website traffic and target, deliver
and a technique is provided using which the customer marketing related information (in the form of messages) to
communicates with the business person. Some of the the right customers. This strategy provides quick promotion
examples are direct mail via phone responses, informercials of product information irrespective of geographical
via phone responses and inquiries, electronic mail with boundaries.
hypertext links to interactive websites, telemarketing.
Types of E-Advertising
Two way channels does not always provide two
communication. For instance, there are some website which Internet advertising or online advertising can be
~ provide complete information about their product or services classified into mainly two types,
without enabling the user to communicate in return. On the
1. Push-based advertising
other hand, when ever a firm takes all the benefits which
are offered by two way channels then a customer receives 2. Pull-based advertising.
a personalized message through which it gets attracted 1. Push-based Advertising
towards the services. Apart from this, there are three other
advertising channels which has acted as a powerful tools It is also known as active advertising. Push-based
for advertising. The techniques are consumer personal advertising is the most inefficient type of advertising. This
experience, word of mouth and news stories. The impact is because its does not convey relevant information to
of these techniques are either positive or negative from the customers. In short we can say that information sent through
customer. Positive message outcome can be beneficial to this advertising is meaningless.
company’s reputation and success which can strengthen its There are two types of push-based advertising,
position in the market. On the other hand, negative message
(a) Broadcast advertising
outcome can lead to company’s failure and decline in
business sale. (b) Direct mail advertising.
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(a) Broadcast Advertising Pull-based advertising can be classified into three
This is the first type of push-based advertising. types or forms,
Through broadcast advertising, different companies can (a) Bill board advertising
advertise their products to unlimited number of customers.
(b) Advertising through yellow pages
One ofthe ways by which broadcast advertising can be done
is by using television. Doing broadcast advertising with (c) Advertising through endorsements.
television has benefits and drawbacks. (a) Bill Board Advertising
The benefit is companies through television can This is the first type of pull-based advertising. It is
visually explain the importance of their products. also known as world wide web advertising. In this type
The drawbacks are, of advertising, one company has to take the help of other
company for promotion of its products online. In other
Using television for advertising is expensive. The time
words, one company promotes its products through other
duration allotted for showing advertisements on television
company’s online services.
is usually thirty sec. Hence in such short span of time,
customers cannot get the complete idea about the product. Advantages
Thus, product advertisement has to be displayed at periodic (i) Inexpensive to implement.
intervals of times in order to understand the customer. To
display the add more than once requires a lot of cost. (ii) Companies through this advertising, can make their
products reachable to different customers.
Another way in which companies can do broadcast
advertising is by using news groups. In other words, Disadvantages
company can advertise their products through news groups. Most of the customers don’t browse through one site
(b) Direct Mail Advertising for a long period of time. They constantly switches from one
site to another. So the product information provided by the
This is the second type of push-based advertising.
company should be in such a format that it is simple short
Direct mail advertising is the process in which companies
so that the customers can easily understand.
advertise their products by sending mails to different
customers. The benefits of this advertising technique are, (b) Advertising through Yellow Pages or Yellow
Pages Advertising
(i) Through direct mail advertising, companies can target
only those customers who seems interested in buying In this type of pull-based advertising, companies
their products. can promote their products by using yellow pages directory
services.
(ii) Companies can send the product information in their
own way. In other words, companies have full control Advantages
over presentation of the message. (i) Information can be kept for long time.
The drawbacks of direct mail advertising are, (ii) Using yellow pages for advertising is cheap.
'There is a possibility that some messages received by Disadvantages
customer will be of less importance.
(i) Product information cannot be frequently updated.
For this reason, direct mail is also referred to as
junk mail. These junk mail messages not only waste the (ii) Limited creativity in the ads.
customers time but also unnecessarily utilizes, the space of There are different types of yellow pages that can be
the customers mailbox. used by companies for promoting their products,
Another interesting point to note here is that ❖ Traditional yellow pages .
companies sometimes purposely send junk mails thinking
that there will be few customers who will read the message ❖ Audiotext yellow pages (talking yellow pages).
and buy their products. ❖ Interactive or consumer search databases.
2. Pull-based Advertising (c) Advertising through Endorsements or
This type of online advertising is also called as passive Endorsement Advertising
advertising. Companies by using pull-based advertising In this type of pull-based advertising. Companies
can have a better customer response than through push ask different celebrities, famous personalities, etc., to
based advertising. This is because with the help of pull promote their products. But in case of online endorsement
based advertising paradigm a feedback loop which directly advertising, a company asks the customers to give feedback
connects a company and customer is establish thereby for its products. In other words company ask the customers
providing meaningful information to the customers. to endorse its products.
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Advertising on Internet has its own advantages and disadvantages. The advantages of advertising over
internet are,
(i) Through internet advertising companies can promote their products more efficiently.
(ii) By advertising through internet, companies can satisfy the needs of different customers.
(iii) Customers get to know about the latest products available in the market.
(iv) Income of companies will increase as a result of advertising on internet.
The disadvantages of advertising over internet are,
(i) Customers sometime receives unwanted messages in their mailbox.
(ii) No specific rules have been defined till date that describes how advertising should be done.
Q19. Explain various E-advertising techniques.
Answer : < March/April-17, Q13(b)

Online Advertising Mechanisms/ E-advertising Techniques

Online advertising is a marketing strategy that make use of Internet to fetch website traffic and target, deliver
marketing related information (in the form of messages) to the right customers. This strategy provides quick promotion of
product information irrespective of geographical boundaries.
The different online advertising mechanisms include,
1. Directories
2. Search engines
3. Banners
4. Sponsorships
5. Portals
6. Online coupons. »
1. Directories
Directories are new online advertising mechanism that helps in representing business functionalities. These
functionalities are represented in the index format that list and supplies links to the websites. The listing of the websites
can be done either alphabetically or category wise. The indexes which are listed category wise displays the indexes in a
sequential order. So, when the users click on one category, they are then navigated to the respective page. However, the role
of the directory service is critical and it is important that the categories are listed inaccordance to the user’s expectations.
Thishs necessary because if any category is missing or listed somewhere else, the user may think that the intended content
is not present on that site. Apart from this, they exist many directory services that depict the organization businesses in
multiple categories.
These days, there are many directory services that registers the websites free of cost. Some of these include info
seek, Internet mall, the yellow pages and yahoo.
2. Search Engines
A search engines can be defined as a software system designed to search information on Internet. Unlike, directories,
the search engines are considered to be the most popular method in finding sites. The search engines operates by taking
user-defined words and boolean expression in search bar. The generated search results are represented in a line of strings,
which are a list of closely matched websites and are often called as Search Engine Results Pages (SERPs). The generated
result content may be the combination of web pages, images and various types of files. So, when the user types certain
string in search bar and clicks enter, the search engine periodically “crawls” through the Internet searching for new pages
and updates the existing databases. The speed with which the engine performs updation and searches the number of location
have major impact on the total number of sites indexed as well as on the revenue to the site. That is the more number of
clicks to a site by user, the higher income to the site owner. In addition to this, the search engines maintains real-time
information by using an algorithm on web-crawler.
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The designing of a webpage must be done in such a way that, it should increase the site’s “Hit rates” and “Ranking”.
Both hit rates and ranking is very important because the designing of website list on Internet entirely depends on it. The
hit rate can be defined as total number of matches obtained from user entered text and website given results. On the other
hand, based on the hit-rates ranking is assigned to the websites. That is, that website with maximum hit rate is ranked first.
Subsequently, the following sites will be those sites that matches less with the user-typed text and the user’s probability
of visiting will also be less. However, different search engines operates differently and yields slightly different results.
Generally the ranking is done based on the following tags of Hyper Text Markup Language (HTML).
(i) Keyword Tag

It identifies keywords for search engines that uses the information.

(ii) Description Tag

It is the body of the text generated by search engine in order to describe the contents of the websites.
(iii) Title Tag

It is the title of the website lists which is typically generated by search engines.
Furthermore keywords, meta tags and frequency of words plays a critical role in search engines. This is essential
because, a repeated word throughout the page can increase the rating for searches using that word. Although, this form of
searching is most prevalent but it has been known that few website designers has made an incorrect use of it. This enabled
search engine designers to make it as an abuse act. And such abuses are referred to as “search engine spamming”. This
sort of spamming is done using any of the following methods,
(i) In the first method, the word is consecutively repeated at prescribed intervals in the keyword section.
(ii) In the second method, the word is repeated using the same color text as background all over the page. Such words
on the web page becomes invisible to the user but will be visible to search engine. This results in degrading the
ranking of the site and may also results in dropping the sites from the indexes.
Depending upon certain criteria the search engines performs ranking. The criteria includes,
(a) Location of Words on Websites

The ranking is done based on the location of the words on the website. The listing of words is done in order of
importance. That is the words which are highly important are placed closer to the top of the page. This way of
initially locating important words prior to table increases the ranks of the sites.
(b) Popularity of Links

Popularity of links represents how popular the links are? If the links popularity is high then its ranks will also
beftiigh. Also, an ideal site is that site if its links are created from other sites. Such strategies can be improved by
employing reciprocal linking agreements with other sites.
(c) Reviewing Sites

The search engines performs the task of site reviewing and after reviewing it they rank the reviewed site prior to
non-reviewed sites. Therefore, sites are relevant, if they are attention gaining.
(d) Case Sensitive

The search engines can be case sensitive. So, in such cases if the words are repeated with many variations, then the
search engines pulls that sites and displays in the list.
3. Banners

Banners are the most popular form of online advertising method which is used to attract visitors. A banner typically
can be defined as a rectangular shape box, about 60 pixels high and 360 pixels wide. Generally banner advertisements
contain texts, graphics or some times only graphics. They are meant to appear on screens of each engines, web browser
software and web-sites so as to capture the attention of WWW users. These advertisements are referred to as “click-through”
advertisements. They contain hypertext links corresponding to the site about which the banner is advertising.
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The click-through advertising strategy is a unique kind of advertising wherein, it directly navigates the potential
user to its intended transaction location. In contrast to other advertisements the click through is fastest as it enables the
customer to just click the banner, perform necessary purchases and complete the purchase order instantly. The price of the
banner advertisement is based on two features namely,
(i) Cost Per thousand Impressions (CPM)
(ii) Click Through Rate (CTR).
(i) Cost Per Thousands Impressions (CPM)
It can be defined as each time the act of viewing that page which displays the banner. Sometimes, it happens that the
user doesn’t wish to include graphics on the site, so he filters them out. By doing this, the banner wont be visible to
the WWW user but it exist on the web page and is still considered as an impression.
(ii) Click Through Rate (CTR)
It is one of the most important feature in advertising rates. The role of the CTR is to count the number of users that
visited the site.
Subsequently, also the firms keep monitoring their sites in order to track whether the visitors are interested on
navigating through multiple pages on site, or whether they make any purchase from the site. Such an act is known as
fulfillment. This term is used to keep track of those product or services that sold out as a result of making advertisements.
To ease this task many software tracking devices were introduced, but they turned out to be imperfect and imprecise due
to the following reasons,
❖ Sharing of computers by multiple users.
❖ Use of network servers and ISPs as gateways. This makes even more complex for keeping track of each individual
user.
❖ Users disabling their cookie feature of their browsers
❖ Availability of intelligent agents or ‘bots’ and web crawlers in order to make advancements in WWW and updating
indexes.
Apart from this, the advertising of banner can also be done by subscribing to a network such as double click. These
firms role is to track visitors, visiting the sites within the network. It accomplishes this track by making use of cookies in
the browser. Now, based on the generated reports on users, it targets specific types of banner advertisements.
4. Sponsorships
The sponsorships are one of the popular on-line advertising method. It is an ideal mechanism for generating brand
recognition. They are similar to banners but there are two features that distinguishes it from banners.
❖ K With sponsorships, the firm’s banner can stay on the site for longer period of time may be a prespecified time slots
or certain number of days.
❖ The sponsorships sends a assurance message specifying that sponsors has full trust in the company behind the
website.
Besides this, firms that are interested in sponsoring the websites require minimum number of CPMs or click through
or may also pay a flat rate.
5. Portals
Portals can be defined as a site that are designed to provide information to the WWW user. Apparently, they servers
as “port of entry” onto the web and are meant to sell advertising space on their sites. The portal offers customized pages,
customized news items, stock quotes, search indexes and engines.
6. Online Coupons
The online coupons is one of the popular method of online advertisement. Many firms employs this type of advertising
It is basically a token or ticket which is offered online to the customers. They can be re-claimed online, or can be printed for
using in stores or can be mailed via postal mail. Beside this, they can be distributed through those sites that are specifically
meant to distribute such coupons.
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i
e 5.7 VIRTUAL REALITY AND CONSUMER EXPERIENCE
e
Q20. Discuss in detail virtual reality and consumer experience.

Answer :
The development of real-time www based 3D environment is one of the significant achievements for web browsers.
The next generation browsers make use of 3D enabled user interfaces for navigating the web for giving visual appearances
to the grouping of documents and their relationships. Complex relationships within the document collection can also
e be visualized by merging the virtual reality with the servers. These servers are capable of classifying and merging of
j documents.
Consider an example of virtual air-ticket booking counter. Apart from booking the air-tickets the customers can
virtually move inside the aeroplane to locate his/her seat, can sit on the seat to know the comfort level, can know in
advance the extra benefits he/she might be provided with etc.
i
With virtual reality taking off, the users can virtually realize their dreams like meeting the top celebrities, travelling
different countries, making their favorite actors dance, sing, talk, smile etc., for them. On the otherhand the companies are
a
striving hard to set the attention of their potential customers with attractive websites.
s
While creating 3D environments, designers should keep focus on customers who are diversified into various types.
e They include,
(i) First Category Shoppers

The first category shoppers include those who does not care the products available either in 3D or 2D but focuses
d only on one priority that is price.
(ii) Second Category Shoppers

The second category shoppers includes replacement shoppers who focuses to minimize the shopping time. So the
2 virtual environment for such customer is offered with a product in the category the customer is interested in.
(iii) Third Category Shoppers
e
n The third category shoppers are the numerous and sophisticated shoppers. They only focus on the quality rather than
anything. The virtual environment is to be sophisticated enough to acquire diverse qualities of products.
Therefore, there are numerous ways of ideas for a virtual environment such as opportunity for education, experiments,
story telling and exploration using 3D environment.
d
Q21. Explain various emerging tools that are available in e-commerce for consumer data interface.

s Answep :
Most of the e-commerce applications need a complex interface between the users and the information resources,
e such applications make use of high-level interfaces in order to meet the customer’s requirements and preference. The
efforts being made for developing an efficient and effective consumer data interfaces can be classified as follows,
h 1. Human Computer Interface (HCI)

Different emerging technologies provides an effective interaction between the humans and computers. In near
future, voice-based machines that can recognize and reproduce speech signals, the GUI’s that enable quick browsing of
s massive amount of data user sensitive interfaces that can customize and display the available information as per the user’s
5, understanding capabilities will be available. The interaction with the machines will be through touch, facial expressions
and gestures.
2. Heterogeneous Database Interface
r
v The access methods for databases comprising of multiformated data (i.e., multiple structure databases) will be
»r developed. In the coming years, users will be capable of generating and broadcasting and query directly to the relevant
y database, thereby receiving the timely response with respect to that broadcasted query. Some examples of multiformated
data include plain text, spread sheet, programs, video, etc.
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3. User Centered Design Tools/Systems

Different methods and models that are capable of producing interactive tools and architecture-centric software
systems will be developed. The data driven capabilities and the knowledge-based capabilities are combined to form highly
effective and easily implemented interactive tools such as, document-oriented computing interface.
4. Virtual Reality and Telepresence

The virtual environment creating tools and methods will be developed in order to facilitate the real time
human interaction with machines and communication devices. This interaction will be via sensors, effectors and other
computational resources. For e-commerce applications, efforts are being made for creating shared virtual environments
that can be accessed by multiple network users.
The development of URL (Uniform Resource Locator) facilitates the users in locating different types of information
in internet. In other words, URL serves as a standard addressing mechanism for obtaining desired information from the
massive volume of data stored in the cyber space. It also enables merging of data obtained from different parts of the
internet. Now-adays, in order to access the information the user must be capable of identifying or locating the desired
information, he/she must also be capable of determining how that particular information is implemented and where can it
be applied.
5. Virtual Reality and Consumer Experience

The development of real-time www based 3D environment is one of the significant achievements for web browsers.
The next generation browsers make use of 3D enabled user interfaces for navigating the web for giving visual appearances
to the grouping of documents and their relationships. Complex relationships within the document collection can also
be visualized by merging the virtual reality with the servers. These servers are capable of classifying and merging of
documents.
Consider an example of virtual air-ticket booking counter. Apart from booking the air-tickets the customers can
virtually move inside the aeroplane to locate his/her seat, can sit on the seat to know the comfort level, can know in
advance the extra benefits he/she might be provided with etc.
With virtual reality taking off, the users can virtually realize their dreams like meeting the top celebrities, travelling
different countries, making their favorite actors dance, sing, talk, smile etc., for them. On the otherhand the companies are
striving hard to set the attention of their potential customers with attractive websites.
6. Virtual Reality and Consumer Choice and Behavior

Virtual reality plays a significant role in internet advertising and marketing. In coming years, it will become the
backbone fpr all internet advertisements. However, the users are still unaware of the distinct features that have been
added to it in order to facilitate marketing strategies and consumer influencing factors. This unawareness is due to lack of
communication between the developers and the marketing research teams.
The choice of the consumer is very important and research is being conducted on it since, ‘convincing the
customer’s is the main motive of any organization. Moreover, the requirements vary from customers to customers i.e.,
some customers may be technologically inexperienced while the others may be technologically independent. These
technologically inexperienced customers may require timely guidance when they are working in e-commerce environments
but the technologically experienced customers may find these guideline to be unnecessary. If customer preferences and
requirements are known in advance then, e-commerce user interfaces will be designed and implemented accordingly. The
outcome of the consumer choice research suggests two significant technological enhancements.
(i) Enhance the quality of the web pages so that they are more attractive to the custonlers. This can be done by
improving the features of HTML (Hyper Text Markup Language) and VRML (Virtual Reality Modeling Language).
(ii) The choice information is encapsulated into the applets for integrating domain-specific customer characteristics.
These applets enable the customization of the consumer’s client browser environment.
VRML will be interpreted by the web browsers of future generations like Gopher VR.
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7. Virtual Reality Modeling Language (VRML)

The 3D data can be integrated into the web using VRML. In other words, VRML is the cunent specification for
integrating 3D images into the internet. The present version of VRML 1.0 was designed to satisfy the following three
requirements. They are,
(i) Platform independence .
(ii) Extensibility
(iii) Low-bandwidth access.
The 3D web pages created by using VRML does not require any special type of hardware or other peripherals
instead, any standard 486 PC with windows as an operating system is capable of running those applications. However, the
speed of the modem will be helpful.

5.8 ROLE OF DIGITAL MARKETING

Q22. What do you mean by digital marketing? State its objectives.
Answer :
Digital Marketing
Digital marketing refers to the management and execution of marketing activities by using digital electronic
technologies and channels like digital TV, E-mails, web, wireless media and digital data concerning consumer behavior
and its attributes. Digital marketing helps in reaching the target customers on-time without consuming much resources and
in an interactive manner. Internet marketing is one of the types of digital marketing.
Digital marketing comprises various activities and these activities undergo frequent changes as per the development
innovations in the digital resources. Consumer preference to digital resource, cost effectiveness, execution speed and
customer experience with digital resources are the factors which are forcing the marketers to focus on ‘digital marketing
activities’.
Thus, it may be stated that digital marketing helps towards the integration of the markets with the consumers, which
intum would facilitate the purchase and consumption of the product or service, further the field of digital marketing also
involves knowledge of traditional marketing. It performs the same role as that of traditional marketing i.e acting as a
platform to connect potential customers with the market.
Objectives of Digital Marketing
The following are the major objectives of digital marketing,
1. It aims to promote new products and services by acting as a platform for potential marketers to reach their target
customers.
2. To create brand awareness for the product/service.
3. To help the marketer to understand the present and potential needs of the consumers.
4. Digital marketing also facilitates engagement among the audience in relation to the business.
5. It aims to create brand awareness for a given product or service.
6. It facilitates publicity and promotion of new products and services in the market.
7. It also aims to increase the level of customers satisfaction and generate brand loyalty.
8. Its aim also involves the transfer of goods and services from the marketers to the end users.
9. It aims to create demand for products through attractive advertisements.
10. It helps the marketers to reach the customer through a variety of digital marketing tools such as social media, videos,
audio chats, web blogs, web apps etc.
* - . ‘ —~~~

11. It helps in market segmentation of the marketers products.

12. It aims to help the marketer reach their target audience.
Thus it may be concluded that digital marketing is a new and evolving field which possess potential for immense
growth in future.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

162 E-COMMERCE
Q23. Discuss various components of digital marketing.
*
Answer :
The various digital marketing comporients/activities include the following,
1. Online Internet/Web Marketing

Online marketing is the achievement of marketing goals through the utilization of the internet and the web based
technologies. Online marketing is also known as internet marketing or marketing on the web.
Online marketing is a part of e-business or e-commerce or electronic commerce. The internet marketing has changed
the way of working, buying and living of the people. It involves the exchange of products, services, information and
payments through the electronic medium of networks.
2. Internet or Online Advertising

Intemet/web advertising is a form of advertising that uses internet and world wide web so as to deliver marketing
information and also to gain customers attention. Banner ads, E-mail marketing, search engine result pages are
some of the examples of web advertisement. The major advantage of this kind of advertising is information is not
restricted to any particular geography or time. This form of advertising is also referred to as interactive advertising
that uses interactive media (interactive Tv, mobile devices, internet) to promote the customer’s buying decision.
3. Search Engine Marketing

Search engine marketing is one of the types of internet advertising which attempts to enhance the accessibility of
websites in Search Engine Results Pages (SERPs) by using Search Engine Marketing (SEM) activities and Search
Engine Optimization (SEO) strategies.
4. Mobile Marketing

Mobile marketing is one of the types of digital marketing which helps the organizations in communicating and
interacting with target customers through mobile device or wireless network. For example, mobile phone/cell phone,
MMS/SMS, PDA etc.
5. E-mail Marketing

E-mail marketing refers to the marketing done through electronic mail. In E-mail marketing, E-mail/messages are
sent only to those people who have agreed to receive messages. E-mail marketing is a highly economical digital
marketing. For digital marketers, E-mail marketing is considered as highly powerful and highly economical tool.
6. Viral Marketing

Viral marketing is also known as Electronic Word-of-Mouth (EWOM) or word-of-mouse. In viral marketing, word-
of-mouth communication is done through e-mail or SMS and social networking technology is used to pass on the
f‘ messages via self-replicating viral processes which affects marketing activities.
7. Social Media Marketing
Social media marketing is a type of internet marketing where social web channels and technologies or online
collaborative media is used for carrying out marketing activities like sales, distribution, public relations and customer
service. Social networks, online communities, blogs, Twitter, Youtube, Whatsapp and wikis are some of the examples
of social web channels and technologies.
8. Blog Marketing

A major component of digital marketing is blog marketing. Many companies host their own blogs wherein they
promote their new products or services. Alternatively, the company may take the help of specialized bloggers to
publicize and promote its products.
Generally in case of blog marketing , it needs to be updated on a regular basis.
9. Interactive Marketing

This component/mode of digital marketing includes chat box and other types of interactive platforms wherein the
customers interact with the marketers.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. - ----- ——-
UNIT-5 : E-Marketing Techniques 163
10. Audios and Videos

One of the most popular form of digital marketing is audio and video marketing. A good example of audio marketing
is the ‘podcasts’. Further, video marketing is carried out using digital videos which carry the marketers message to—
the target audience. B2C (Business to Consumers) and B2B (Business to Business) videos are regularly broadcasted
on popular digital video platforms such as Youtube etc.

11. Digital or Online Public Relations

Most of the B2B organizations are opting for web based, digital public relations over the traditional public relation
media. Organizations are opting for online contacts wherein postal mails and virtual press releases are becoming
common methods of digital Public Relation (PR).

Q24. Write the need and scope of digital marketing.

Answer :

The concept of digital marketing had gained importance in recent years. To remain competitive in the business world,
organizations need to be visible to their target audience. In todays highly digitalized world, this is possible only through
digital marketing.

Need for Digital Marketing

The following points highlight the need for digital marketing,

(a) To Remain Competitive

A primary reason for organizations to go for digital marketing is for it to remain competitive. Most of the firm’s
competitors are already employing digital marketing tools. Further a firms present and potential customers expect
the firm to be visible on the digital marketing platform. Thus, it is a basic need for every organization to utilize the
platform of digital marketing to remain competitive.

(b) To Improve Customer Relations

The use of digital marketing is needed for the organization to improve its relation with its customers. This is all the
more true in case of B2B (Business to Business) customers where the customers are smaller and more influential.
Targeted PPC advertising is an excellent way for the organization to improve its relationship with its customers.

Digital marketing is needed because the traditional tools of marketing are declining and more and more firms are
shifting their marketing budget from traditional marketing sources to digital marketing. For example, a research
study carried out by Forester Research Inc had found that by the year 2014, $ 2.3 billion dollars would be spent
towards digital marketing.

Scope of Digital Marketing

The scope of digital marketing is very wide. It encompasses all areas of marketing and has replaced traditional
marketing sources, to become the top tool of marketing worldwide. Most global organizations are opting for digital marketing
rather than traditional marketing.

According to a research study organizations are focusing their marketing budget towards inbound digital marketing
tools such as social media marketing, company’s website, popular search engines etc.

The competition for effective digital marketing has become intense. Researcher Shepra conducted a survey of potential
customers and found that 71% of B2B customers look for information on the internet. Further customers are influenced by
the information found on the internet, web blogs, social media posts and videos. Thus it may be stated that the influence
and scope of digital marketing is very wide.

--- SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

164 E-COMMERCE
Q25. State the role/benefits and limitations of digital marketing.

Answer : Model Paper-Ill, Q13(b)

Digital marketing is a powerful and effective marketing tool which, if employed correctly would provide the
organization multiple benefits in the form of increased market share and profitability.
Role/Benefits of Digital Marketing

Following are the benefits of digital marketing,

1. Easy Effective Marketing

Digital marketing is an easy and effective means for the organization to communicate its marketing message to a
large number of present and potential customers. It has revolutionized marketing activities on popular social media
platforms such as Facebook, Twitter, Linked In etc.
2. Enables Direct Advertising

It acts as an effective platform for the organization to advertise about its product and create brand loyalty for its product.
3. Permanent Ad Display

Unlike traditional ads, ads on digital platforms are more permanent and can be accessed by potential customers any time.
4. International Advertisement

A major benefit of digital marketing is that it provides the company a good platform to advertise its offerings to the
global customers very easily.
5. Brand Promotion

It acts as an effective mode for brand promotion. Thus strengthening the organizations loyal customer base.
6. Boosts Sales

Digital marketing has made it possible for a prospective customer to shop any time (24/7) across any geographic
area. Thus it boosts the overall sales figure for the company.
7. Cost Effective

It has been found that digital marketing tools are very cheap and cost effective, in comparison to traditional marketing
modes such as TV, radio, magazines etc. Social media marketing platform such as Facebook, Linked In, Whatsapp,
Instagram have become cost effective platform of digital marketing.
Limitations of Digital Marketing
£
Digital marketing suffers from the following limitations,
(a) Highly dependent upon Internet

Most modes of digital marketing are dependent upon internet facility. Thus in areas where there is no internet facility,
digital marketing would not be effective.
(b) Fierce Competition

A major limitation of digital marketing is the intense competition from local, national and international brands. The
customer is provided with many alternative choice.
(c) Limited to Consumer Products

A major limitation of digital marketing is that it is effective mode for marketing consumer products but is not
impactful incase of industrial and pharmaceutical products.
(d) Lack of Privacy

There is no privacy on the digital marketing platform, competitor may copy the firms product, pricing strategy or
may even sell the product in their own name.
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. ............. .......
UNIT-5 : E-Marketing Techniques 165

I. Multiple Choice
1. ________ is the achievement of marketing goals through the utilization of the internet and the web based
technologies. [ ]

(a) E-mail

(b) E-marketing

(d) E-advertising

2. A software system designed to search information on internet is_________.

(a) Search Engines
(b) Directory services
(c) Chain letters
(d) None of the above

3. _________ are the new online advertising mechanism that helps in representing business functionalities.! ]
(a) Banner advertising

(b) Off-line advertising

(c) Directory services

(d) Spam mail

4. __________ allows retailers to know the needs of different customers much earlier than they are available to
the manufacturers. [ ]

(a) POS system

(b) Direct-order marketing

(c) Direct-relationship marketing

X
(d) None of the above

5. Interactive form of advertising is called as_________ . [ ]

(a) Off-line advertising

(b) Banner advertising

te (c) Online-advertising

(d) Nonlinear advertising

6. _______ is the process in which companies advertise their products by sending mails to different customers. [ ]
X
(a) Direct mail advertising
(b) Push-based advertising
(c) Pull-based advertising
(d) None of the above

......... ............... ■ ■ SIA PUBLISHERSAND DISTRIBUTORS PVT. LTD.

166 E-COMMERCE
7. is one of the types of digital marketing which helps the organizations in communicating and interacting
with target customers through mobile device. [ J
(a) Online advertising

(b) Web marketing .

(c) E-mail marketing

(d) Mobile marketing

8. are defined as a site that are designed to provide information to the www user. [ 1
(a) CTR

(b) CM

(d) None of the above

9. are some of the internet marketing techniques. [ ]
(a) Search engines

(b) Solicited targeted emails

(c) Spam mails

(d) All the above

10. refers to the goods or services provided to the customers by a company. [ 1
(a) Price

(b) Product

(d) Place

II. Fill in the Blanks

1. E-marketing is also known as_________ .

2/ _________refers to the unwanted and unrequested on-line email called ‘Junk mail’ which is repeatedly sent
to multiple recipients at a time.

3. ________ _is an aggressive advertising technique which is designed to attract the attention of the users.

4. _________ is a readily accessible, inexpensive, fastest means of bringing together various buyers and sellers
all over the world.

5. In_________, market segmentation is carried out with respect to the people behaviour, way of thinking, their
attitudes, etc.

6. Push-based marketing is also called as_________.

7. Pull-bused marketing is also called as_________ .

8. _________ is a mechanism using which price of the physical good or service is determined.

9. _________ refers to the marketing activities such as press release advertisements, word of mouth etc.

10. _________ helps in reaching the target customers on-time without consuming much resources and in an interactive
manner.
SIA PUBLISHERSAND DISTRIBUTORS PVT. LTD. .. ..... ------------- ■-------- ------ -
UNIT-5 : E-Marketing Techniques 167

KEY

I. Multiple Choice
1- (b)
2. (a)

3. (c)

4. (a)

5. (d)
6. (a)
7. (d)

8- (c)
9. (d)

10. (b)

II. Fill in the Blanks

1. Internet marketing

2. Spam mail

3. e-mail chain letters

4. E-marketing

5. Behavioural method

6. Dynamic marketing

7. Static marketing

8. Pricing

9. Promotion

10. Digital marketing.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

168 E-COMMERCE
III. Very Short Questions and Answers

Q1. What is E-marketing?

Answer :

Q2. Define E-Advertisement.

Answer :

Online advertising is a marketing strategy that make use of Internet to fetch website traffic and target, deliver
marketing related information (in the form of messages) to the right customers.

Q3. What is Digital Marketing?

Answer :

Q4. Write about Search Engine.

J
Answer :

A search engine can be defined as a software system designed to search information on Internet. Unlike directories,
the search engines are considered to be the most popular method in finding sites. The search engines operates by taking
user-defined words and boolean expression in search bar.

Q5. What are Directory Services?

Answer :

Directories are new online advertising mechanism that helps in representing business functionalities. These
iities are represented in the index format that list and supplies links to the websites.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

LAB PRACTICAL WITH SOLUTIONS
Q Using Microsoft Front Page Editor and HTML in Designing a Static Webpage/Website.
?3| Miaosoft FrentP^e • CAUseraV
£>te fcrfrt ¥>ew insert Fjjrma* loots Table Qata f tames JJmdew tfetp

Jb SpSt Bcode QPreview ]

Q:42®56Kbc5 1261 x 56G Default Custom

Answer :
Program
<html>
<head>
<meta http-equiv=“Content-Language” content=“en-us”>
<meta http-equiv=“Content-Type” content=“text/html; charset=windows-1252”>
^script language=“JavaScript”>
<!-
function FP_swapImg() {//v 1.0
var doc=document,args=arguments,elm,n; doc.$imgSwaps=new Array(); for(n=2; n<args.length;
n+=2) { elm=FP_getObjectByID(args[n]); if(elm) { doc.$imgSwaps[doc.$imgSwaps.length]=elm;
elm.$src=elm.src; elm.src=args[n+l]; } }
}
function FP_preloadImgs()
{//vl.O
var d=document,a=arguments; if(!d.FP_imgs) d.FP_imgs=new Array();
for(var i=0; i<a.length; i++) { d.FP_imgs[i]=new Image; d.FP_imgs[i].src=a[i]; }
} ' •

SNA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

LP.2 E-COMMERCE

<img border=“0” id=“img4” src=“buttonlO,jpg” height=“2O” width=“100” alt=“Student Zone” fp-stjle=

Embossed Capsule 2” fp-title=“Student Zone” onmouseover=“FP_swapImg( 1,0,/*id*/‘img4’,/*url*/‘button 1 1 ; z _
onmouseout=“FP_swapImg(0,0,/*id*/‘img4’,/*url*/‘buttonl0.jpg’)”onmousedown=“FP_swapImg(l,0. *id’ ~_
4’,/*url*/‘button 12.jpg’)” onmouseup=“FP_swapImg(0,0,/*id*/‘img4’,/*url*/‘buttonll.jpg’)”x/p>

<img border=“0” id=“img5” src=“buttonlC.jpg” height=“20” width=“100” alt=“About” fp-style=“fp-btn:
Embossed Capsule 2” fp-title=“About” onmouseover=“FP_swapImg(l,0,/*id*/ ‘img5’,/*url*/‘buttonlD.jpg’)”
onmouseout=“FP_swapImg(0,0,/*id*/‘img5’,/*url*/‘buttonlC.jpg’)” onmousedown=“FP_swapImg(l,0,/*id*/‘im
g5’,/*url*/‘buttonlE.jpg’)” onmouseup=“FP_swapImg(0,0,/*id*/‘img5’,/*url*/‘buttonlD.jpg’)”x/p>

<img border=“0” id=“img6” src=“buttonlF.jpg” height=“20” width=“100” alt=“Careers” fp-style=“fp-btn:
Embossed Capsule 2” fp-title=“Careers” onmouseover=“FP_swapImg(l,0,/*id*/‘img6’,/*url*/‘button20.jpg’)”
onmouseout=“FP_swapImg(0,0,/*id*/‘img6’,/*url*/‘buttonlF.jpg’)” onmousedown=“FP_swaplmg(l,0,/*id*/‘im
g6’,/*url*/‘button21.jpg’)” onmouseup=“FP_swapImg(0,0,/*id*/‘img6’,/*url*/‘button20.jpg’)”x/p>

<img border=“0” id=“img7” src=“button34.jpg” height=“20” width=“100” alt=“Contact” fp-style=“fp-btn:
Embossed Capsule 2” fp-title=“Contact” onmouseover=“FP_swapImg(l,0,/*id*/‘img7’,/*url*/‘button35.jpg’)”
onmouseout=“FP_swapImg(0,0,/*id*/‘img7’,/*url*/‘button34.jpg’)” onmousedown=“FP_swapImg(l,0,/*id*/‘im
g7V*url*/‘button36.jpg’)” onmouseup=“FP_swapImg(0,0,/*id*/‘img7’,/*url*/‘button35.jpg’)”>
 </td>
<td width=“757”>
<img border=“0” src=“IMAGEl%20(2).jpg” width=“796” height=“535”x/td>
<td bgcolor=“#008080”>
SIA Group, a modem publishing company was initiated in the year
1919. We are the leading publishers and book distributors across South India with decades of experience. SIA
became as one of the finest destination and a trusted brand for millions of students across India. We believe
in delivering high quality content at reasonable prices.
    "Enlightening Lives through
Education" we are passionate about Education and our motivating goals in everything we do in preparing
today’s student for successful career Reading Education with equal values and technologies creates diverse approach
in Education. We are aim to be a true companion guiding students on their success through hardships and serving
them in achieving goals.</fontx/p>
 
 
 
 
 </td>
</tr>
<tr>
<td width=“130” height=“137” bgcolor=“#008080”>
Connect to us at:
   <img border=“0” src=“IMAGE2.jpg” width=“48” height=“53”> 
<img border=“0” src=“IMAGE3.jpg” width-‘43” height=“54’X/p>
   <img border=“0” src=“IMAGE4.jpg” width=“48” height=“47”> 
<img border=“0” src=“IMAGE5.jpg” width=“46” height=“48”x/p>

_____________________ SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

LP.4 E-COMMERCE
 </td>
<td height=“137” width=“757” bgcolor=“#333333”>
About Us
This Enterprise was possible because of one man, Mr. Syed Ibadath Ali,
who had the vision, mission & courage to accomplish his dreams. Laid the strong foundation for the company
with his passion, persistence & dedication towards publishing educational books & his commitment to
serve the student community.</fontx/p>
More than 3 decades of excellence in student services (since 1979) the
leading educational publishers, book distributors and the most popular retail mega book store chain.</td>
<td height=“l37” bgcolor=“#333333”>
Our Address</fontx/b>
Putli Bowli Lane, Koti,
Hyderabad, Telangana
Phone: 040-44 999 999
Mail: [email protected]</td>
</tr>
</table>
</body>
</html>
In the Microsoft Front Page editor, the design of the static web page will be as shown in the below figure.
Output
& CAUserAAdowttstrator abdu!-PC',Oocurr*-n’s My A’eb Srtes-my:.Ue4vnd^mrn - Windows Internet £*plerer |

<' ' C:'l.!ser^Acy-ni"i>str3tot.abauMM\Documents\t4y MX XMr,-y::.--4\i-XXtrr

X Convert ” Select

Favorites i Suggested Sites ” g Web Slice Salleiy ■”

C:\Usere\Administtetot.abdul PCXDocun^ents'.M. «W ” Page” Safety” Tools” # ”

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

Unit-wise Frequently Asked Questions

Unit-1
H

SHORT QUESTIONS Q8. What are potential benefits of E-commerce?

Sep./0ct.-15, Q9(a)
Q1. E-commerce
OR
Answer : (March/April-15, Q11 March/April-14, Q21 Oct/Nov.-12, Q1)
What are the benefits of E-commerce to the
For answer refer Unit-I, Page No. 2, Q.No. 1. organization, consumer and society?
Q2. What is Internet? Oct./Nov./16, Q6 Oct./Nov.-11, Q9(a)

OR OR
Internet. What are the advantages of Internet electronic
commerce over consumers?
Answer : (March/April-12, Q1 | March-11, Q1)
Answer: Oct./Nov.-12, Q9(b)
For answer refer Unit-I, Page No. 3, Q.No. 5.
For answer refer Unit-I, Page No. 11, Q.No. 21.
Q3. E-banking
Q9. Explain about the impact of E-commerce on
Answer : (March/April-15, Q7 | March/April-13, Q1)
business model.
For answer refer Unit-I, Page No. 5, Q.No. 11.
(Oct./Nov.-13, Q9(a) | Oct./Nov.-12, Q9(a))
Q4. E-Learning
OR
Answer : (March/April-17, Q1 | March/April-14, Q1)
*
What is the impact of E-commerce on business
For answer refer Unit-I, Page No. 5, Q.No. 12.
models? Oct./Nov.-16, Q9(b)
Q5. Online Trading
OR
Answer : (March/April-17, Q8 | Oct.-14, Q1)
Discuss in detail about the impact of E-commerce
For answer refer Unit-I, Page No. 6, Q.No. 15. on business models.
ESSAY QUESTIONS Answer : March/April-16, Q9(a)

Q6. Write about importance of E-Commerce.

For answer refer Unit-I, Page No. 20, Q.No. 30.
Oct./Nov.-16, Q9(a)
Q10. Explain about the E-commerce applications.
OR (March/April-12, Q9(a) | March-11, Q9(b))

Bring out the importance of E-commerce in OR

modern business.
Write about E-commerce applications.
Answer : March/April-17, Q9(a)
Answer : March/April-17, Q9(b)
For answer refer Unit-I, Page No. 8, Q.No. 18.
For answer refer Unit-I, Page No. 23, Q.No. 32.
Q7. What are the three pillars of E-commerce? Q11. Explain the approaches of E-learning.
March/April-15, Q9(a) Oct.-14, Q9(b)

1 0R OR
Discuss the three pillars of electronic-commerce. What are the different approaches of E-leaming?
Answer : March/April-14, Q9(b) Answer: Oct./Nov.-13, Q9(b)

For answer refer Unit-I, Page No. 8, Q.No. 19. For answer refer Unit-I, Page No. 37, Q.No. 41.
- SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.
F.2 E-COMMERCE

Unit-

SHORT QUESTIONS ESSAY QUESTIONS

Q1. Application Services. Q9. Explain architecture framework of E-com
merce.
Answer : (March/April-15, Q6 | March/April-13, Q7)
(Oct./Nov.-12, Q10(a) | March/April-17, Q10(a))
For answer refer Unit-II, Page No. 44, Q.No. 1.
OR
Q2. What is HTML? Oct./Nov.-16, Q7
Discuss about the framework of E-commerce.
OR Sep./Oct.-15, Q10(a)

HTML March/April-15, Q5
OR

Explain the different E-commerce application

Answer :
services.
For answer refer Unit-II, Page No. 45, Q.No. 4.
Answer : Oct.-14, Qio(a)

Q3. TCP/IP
For answer refer Unit-II, Page No. 47, Q.No. 13.
Answer : (March/April-12, Q4 | March/April-17, Q2) Q10. Explain the security services of E-commerce.
Oct.-14, Q10(b)
For answer refer Unit-II, Page No. 45, Q.No. 5.
OR
Q4. HTTP.
Explain the issues related to security, when us
Answer : (March/April-12, Q2 | March-11, Q2)
ing Web. March/April-16, Q10(b)
*
For answer refer Unit-II, Page No. 45, Q.No. 6. OR

Q5. FTP Explain about the various issues involved in

web security.
Answer : (Oct./Nov.-13, Q2 | Sep./Oct.-15, Q6)
Answer : Sep./Oct.-15, QlO(b)
For answer refer Unit-ll, Page No. 45, Q.No. 8.
For answer refer Unit-II, Page No. 49, Q.No. 16.
Q6. Write about SMTP. Oct./Nov.-16, qs
Q11. Explain encryption techniques.
* OR March/April-14, Q10(b)

SMTP OR

Answer : March/April-14, Q3
Explain two security techniques of encryption.

Oct./Nov.-13, Q10(b)
For answer refer Unit-II, Page No. 46, Q.No. 9.
OR
Q7. NNTP
Briefly explain the encryption techniques.
Answer : (Oct.-14, Q2 | Sep./Oct.-15, Q2)
Oct./Nov.-11, Q10(a)
For answer refer Unit-II, Page No. 46, Q.No. 10.
OR
Q8. Encryption.
Explain about encryption techniques.
Answer : (March/April-13, Q6 | March/April-17, Q6) Answer : Oct./Nov.-16, Q10(a)

For answer refer Unit-II, Page No. 46, Q.No. 11. For answer refer Unit-II, Page No. 62, Q.No. 29.

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

Frequently Asked Questions F.3

Unit-3

SHORT QUESTIONS Discuss about mercantile process model from

consumer’s perspective.
Q1. E-cash

Answer : (March/April-17, Q3 I Oct.-14, Q3 | March/April-14, Q4) Answer : Oct./Nov.-16, QH(b)

For answer refer Unit-Ill, Page No. 72, Q.No. 1. For answer refer Unit-III, Page No. 81, Q.No. 13.
Q2. List out the risk involved in E-payments. Q6. Explain mercantile process model.
Oct./Nov.-11, Q3
March/April-17, 011(a)
OR
OR
Risks in E-payment
Explain about Electronic Payment Systems.
(March/April-12, Q3 | March-11, Q3)
Oct./Nov.-16, 011(a)
OR
OR
What are the risks of E-payment system?

Answer : Oct./Nov.-16, Q4
Discuss about merchantile process model.
March/April-16, 011(a)
For answer refer Unit-Ill, Page No. 73, Q.No. 6.
OR
Q3. Credit Card

Answer : (March/April-16, Q7 | Sep./Oct.-15, Q7)

Discuss in detail about mercantile process
models. March/April-13,011(a)
For answer refer Unit-Ill, Page No. 74, Q.No. 8.
OR
ESSAY QUESTIONS
Q4. Discuss in detail about consumer-oriented What are mercantile process models from
E-commerce application and its role in consumer’s and merchant’s perspective.
E-commerce.
Answer : March-11, 011(b)
March/April-15, Q11(b)
For answer refer Unit-Ill, Page No. 86, Q.No. 16.
x OR
Q7. Write about the types of E-payments.
Explain about consumer-oriented E-commerce
March/April-16, 011(b)
applications. Oct.-14, on(b)

OR OR

Discuss customer-oriented E-commerce Discuss about categories of EFT.

applications.
March/April-15, 011(a)
Answer : March/April-14, 011(b)
OR
For answer refer Unit-Ill, Page No. 76, Q.No. 11.
Q5. What are the mercantile process models from Discuss the different types of payment
consumer’s perspective? systems.

March/April-12, 011(a) Answer : March/April-13, 011(b)

OR For answer refer Unit-Ill, Page No. 95, Q.No. 24.

SIA PUBLISHERSAND DISTRIBUTORS PVT. LTD
F.4 E-COMMERCE

Unit-4

SHORT QUESTIONS •

Q1. What is EDI? (Oct./Nov.-16, Q3 | Oct./Nov.-11, Q6)

Electronic Data Interchange March/April-17, Q4

OR
5r
EDI

Answer : (Oct./Nov.-13, Q4 | March-11, Q4)

For answer refer Unit-IV, Page No. 108, Q.No. 1.

Q2. Write a short note on Internet based EDI. (Oct./Nov.-11, Q7 | March-11, Q6)

Internet Based EDI Sep./Oct.-15, Q4

Write a note on Internet based EDI. March/April-14, Q5

Answer :
For answer refer Unit-IV, Page No. 108, Q.No. 2.

Q3. Explain in brief the privacy issues in EDI. Oct./Nov.-11, Q4

Privacy issues of EDI Oct.-14, Q4

Answer :
For answer refer Unit-IV, Page No. LIO, Q.No. 7.

Q4. EDI Standards

X
Answer : (March/April-16, Q8 | March/April-15, Q4)

For answer refer Unit-IV, Page No. 110, Q.No. 8.

ESSAY QUESTIONS

Q5. Explain prerequisites of EDI. March/April-17, Q12(a)

Explain the prerequisites for EDI. March/April-14, Q12(b)

What are the prerequisites of EDI?

Answer : Oct./Nov.-12,012(b)

For answer refer Unit-IV, Page No. 114, Q.No. 13.

5IA PUBLISHERS AND DISTRIBUTORS PVT. LTD. .

Frequently Asked Questions F.5
Q6. Explain the types of EDI. March/April-17, Q12(b)

Write about,

(i) Partial EDI

(ii) Fully integrated EDI. Oct./Nov.-16, 012(a)

Describe EDI systems. Oct.-14, 012(b)

Answer :
For answer refer Unit-IV, Page No. 117, Q.No. 15.

Q7. Describe about EDI applications in business. (Sep/Oct.-15, 012(a) | Oct./Nov.-13, 012(a))

What is an EDI? What are the various EDI applications in business? March-11, Q12(a)

Explain about EDI applications in business. Oct.-14, 012(a)

What are the EDI applications in business? Oct./Nov.-11, 012(a)

OR
*
Explain about financial EDI and types of financial EDI. March/April-16, 012(b)

Answer :
For answer refer Unit-IV, Page No. 120, Q.No. 16.

Q8. Write about the various issues involved in EDI. March/April-16, 012(a)

fWrite about legal, security and privacy issues in EDI. March/April-15, Q12(a)

Explain about the legal, privacy issues in EDI. March/April-14, 012(a)

Explain about legal issues of EDI. Oct./Nov.-13, 012(b)

What are the legal and security issues in EDI? March/April-13, 012(b)

Explain about the security issues in EDI. March/April-12, 012(b)

Answer :
For answer refer Unit-IV, Page No. 128, Q.No. 21.
_________ SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.
F.6 E-COMMERCE
r-
Unit-O

SHORT QUESTIONS
Q1. Spam Mail

Answer : (March/April-17, Q7 | March/April-13, Q5 | March/April-12, Q7)

For answer refer Unit-V, Page No. 140, Q.No. 3.

Q2. Banners

Answer : (March/April-15, Q8 | March/April-14, Q6 | March/April-13, Q8

For answer refer Unit-V, Page No. 141, Q.No. 6.

ESSAY QUESTIONS
Q3. Explain any three E-marketing techniques in detail. March/April-17, Q13(a)

Write about E-marketing techniques. Oct./Nov.-16, 013(a)

Explain the E-marking techniques in detail.

Answer : March/April-14, Q13(b)

For answer refer Unit-V, Page No. 142, Q.No. 9.

Q4. Explain the E-applications of five P’s. March/April-16, Q13(a)

Discuss about applications of 5P’s. Oct./Nov.-16, 013(b)

How do you link 5P’s of marketing to the Internet?

Answer : March/April-15, 013(b)

^or answer refer Unit-V, Page No. 152, Q.No. 17.

SIIA PUBLISHERS AND DISTRIBUTORS PVT. iTn . ____________________

MODEL
FACULTY OF COMMERCE PAPER X
B.Com (CBCS) lll-Year Vl-Semester Examination

E-COMMERCE
( Common Paper for Computers, Computer Applications )

Time: 3 Hours Max. Marks: 80

PART - A ( 5 x 4 = 20 Marks )

Note : Answer any Five of the following questions in not exceeding 20 lines each

1. What is E-banking? (Unit-I, Page No. 5, Q11)

2. Write about interface and support services. (Unit-ll, Page No. 44, Q2

3. Define EPS. (Unit-Ill, Page No. 72, Q4)

4. What are the benefits of EDI? (Unit-IV, Page No. 109, Q3)

5. Write a short note on E-Mail. (Unit-V, Page No. 140, Q4)

6. Write about online trading. (Unit-I, Page No. 6, Q15)

7. Write about FTP. (Unit-ll, Page No. 45, Q8)

8. List out the risk involved in E-payments. (Unit-Ill, Page No. 73, Q6)

PART - B ( 5 x 12 = 60 Marks )

Note: Answer the following questions in not exceedingfour pages each.

9. (a) Explain traditional value chain and customer oriented value chain. (Unit-I, Page No. 10, Q20)

(b) Discuss in brief about E-business. (Unit-I, Page No. 18, Q26)

10. (a) Discuss the security issues faced by e-commerce site. (Unit-ll, Page No. 49, Q16)
f
OR

(b) Explain briefly about TCP/IP model. (Unit-ll, Page No. 54, Q21)

11. (a) Discuss about mercantile process model from consumer’s perspective. (Unit-Ill, Page No. 81, Q13)

(b) Describe smart cards as an electronic payment system. (Unit-Ill, Page No. 99,027)

12. (a) What is EDI? Explain four layers of EDI architecture. (Unit-IV, Page No. 111, Q9)

(b) What are the legal and security issues in EDI? (Unit-IV, Page No. 128,021)

13. (a) Explain about new age of information based marketing. (Unit-V, Page No. 147, Q14)

(b) Discuss about applications of 5P’s. (Unit-V, Page No. 152, Q17)

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

MP. 2 E-COMMERCE

MODEL
FACULTY OF COMMERCE
B.Com (CBCS) lll-Year Vl-Semester Examination
PAPER
"13 v-eeC'
12
E-COMMERCE
( Common Paper for Computers, Computer Applications )

Time: 3 Hours Max. Marks: 80

PART - A ( 5 * 4 = 20 Marks )

Note : Answer any Five of the following questions in not exceeding 20 lines each

1. Define E-commerce. (Unit-I, Page No. 2, Q1)

2. What is the TCP/IP reference model? (Unit-ll, Page No. 45, Q5)
3. What are the payment systems? (Unit-Ill, Page No. 73, Q7)
4. What is EDI? (Unit-IV, Page No. 108, Q1)
5. Write about Applications of 5P’s in Internet. (Unit-V, Page No. 141, Q7)
6. Define E-business. (Unit-I, Page No. 3, Q6)
7. Define Encryption. (Unit-ll, Page No. 46, Q11)
8. Write about E-checks. (Unit-Ill, Page No. 72, Q2)
PART - B ( 5 x 12 = 60 Marks )

Note: Answer the following questions in not exceeding four pages each.

9. (a) Explain the global information distribution networks. (Unit-I, Page No. 13, Q22)

(b) What is the impact of E-commerce on business models? (Unit-I, Page No. 20, Q30)
10. (aX Explain in detail about following protocols.

(i) FTP

(ii) HTTP

(iii) SMTP. (Unit-ll, Page No. 54, Q22)

(b) (i) Describe in detail about S-HTTP. (Unit-ll, Page No. 58, Q23)
(ii) Explain in detail about SSL. (Unit-ll, Page No. 58, Q24)
11. (a) Discuss in detail the two forms of payment used in purchase consummation
phase. (Unit-Ill, Page No. 83, Q14)

(b) Explain about consumer-oriented E-commerce applications. (Unit-Ill, Page No. 76, Q11)

SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.

MODEL QUESTION PAPERS WITH SOLUTIONS_______________________________________________________ MP.3
12. (a) Explain two major standards and structure of EDI transaction. (Unit-IV, Page No. 116, Q14)

(b) Describe EDI systems. (Unit-IV, Page No. 117, Q15)

13. (a) Explain the E-marketing techniques in detail. (Unit-V, Page No. 142, Q9)

(b) Explain the impact of E-commerce on Marketing. (Unit-V, Page No. 149, Q15)

SIA PUBLISHERS AND DISTRIBUTORS PVT LTD.

MP.4 ECOMMERCE

MODEL
FACULTY OF COMMERCE
B.Com (CBCS) lll-Year Vl-Semester Examination
PAPER I3
E-COMMERCE
( Common Paper for Computers, Computer Applications )

Time: 3 Hours Max. Marks: 80

PART - A ( 5 x 4 = 20 Marks )
Note : Answer any Five of the following questions in not exceeding 20 lines each

1. What are the benefits of E-commerce to Organization, Consumers and Society? (Unit-I, Page No. 4, Q8)
2 Write about digital signatures. (Unit-ll, Page No. 46, Q12)
3. What is E-cash? (Unit-Ill, Page No. 72, Q1)
4. List the EDI standards. (Unit-IV, Page No. 110, Q8)
5. Write about Spam Mail. (Unit-V, Page No. 140, Q3)
6. Write about World Wide Web. (Unit-I, Page No. 2, Q3)
7. What is HTTP? (Unit-ll, Page No. 45, Q6)
8. Write a short note on Home Banking. (Unit-Ill, Page No. 73, Q5)

PART - B ( 5 x 12 = 60 Marks )

Note: Answer the following questions in not exceeding four pages each.

9. (a) Define E-commerce from different perspectives along with its goal. (Unit-I, Page No. 7, Q17)
OR
(b) Write about E-commerce applications. (Unit-I, Page No. 23, Q32)

10. (a) Briefly explain the encryption techniques. (Unit-ll, Page No. 62, Q29)

(f °R
(b) Define cryptography and classify different cryptographic attacks. (Unit-ll, Page No. 64, Q30)
11. (a) Define electronic payment system. What are the advantages of electronic
payment system? (Unit-Ill, Page No. 87, Q17)
OR
(b) Explain briefly about the digital currency or electronic cash. (Unit-Ill, Page No. 91, Q20)
12. (a) What is an EDI? What are the various EDI applications in business? (Unit-IV, Page No. 120, Q16)
OR
(b) Explain EDI software implementation and how much an EDI cost. (Unit-IV, Page No. 131, Q24)
13. (a) List out the advantages and disadvantages of E-marketing. (Unit-V, Page No. 144, Q11)
OR

(b) State the role/benefits and limitations of digital marketing. (Unit-V, Page No. 164, Q25)
SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD___

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