Maseno University

School of Computing & Informatics

ECOMMERCE NOTES

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 VALUE CHAIN ANALYSIS

Value chain examines the activities performed within an organization to establish how they
interact, and where improvements could be a source of competitive advantage.

Why value chain?

An organization is a “chain” of activities, each providing a value.
Components of the value chain include:
i) Research and development(R & D)- develops products
ii) Sales- promotes the products
iii) Production- manufactures products
iv) Final Inspection- assures quality
v) Logistics- delivers the products
vi) Technical support- maintains the products

Typical Company Value Chain

Re-configuring the Value Chain

(a) Vertical Reconfiguration
i) Forward Integration- gaining ownership or increased control over distributors or retailers
ii) Backward integration- gaining ownership or increased control over suppliers
(b) Horizontal Reconfiguration-Seeking increased control over competitors

Appropriateness of electronic technology in business processes

It is important to identify which business processes can be streamlined using e-commerce
technologies. Some processes make effective use of traditional commerce and cannot be improved
upon using technology. Therefore, using technology when it is not necessary or helpful can be a
costly mistake.
(a) Processes well suited for e-commerce
Business processes that are well suited for e-commerce include commodity items, i.e. a product or
service that has become standardized.
These may include:
• Online delivery of software
• Advertising and promotion of travel services
• Online tracking of shipments
• Sale/purchase of new books and CDs

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 (b) Processes well-suited for traditional commerce
In this category fall products that buyers prefer to touch, smell or otherwise closely examine and
these include:
• Sale/purchase of high fashion clothing
• Sale/purchase of perishable food products
• Sale/purchase of expensive jewellery and antiques

(c) Processes well suited for a combination of both

Some business processes can be handled well using a combination of electronic and traditional
methods and these include:
• Sale/purchase of auto mobiles
• Online banking
• Sale/purchase of investment or insurance products

Advantages of e-commerce
Advantages to the seller
i) Increases sales/ decreases cost
ii) Makes promotion easier for smaller firms
iii) Can be used to reach narrow market segments
Advantages to the buyer
i) Makes it easier to obtain competitive bids
ii) Provides a wider range of choices
iii) Provides an easy way to customize the level of detail in the information obtained.
Advantages in general
i) Increases the speed and accuracy with which businesses can exchange information.
ii) Electronic payments (tax refunds, paychecks, e.t.c.) cost less to issue and are more secure
iii) Can make products and services available in remote areas
iv) Enables people to work from home, providing scheduling flexibility
Disadvantages of e-commerce
i) Some business processes are not suited to e-commerce, even with improvement in
technology
ii) Many products and services require a critical mass of potential buyers (e.g. online grocers).
iii) Costa and returns on e-commerce can be difficult to quantify and estimate.
iv) Cultural impediments- people are reluctant to change in order to integrate new technology.
v) The legal environment is uncertain- courts and legislators are trying to catch up.

EVOLUTION OF E-COMMERCE
Internet and Its Characteristics
i) Global connectivity
ii) Reduced communications costs
iii) Lower transaction costs
iv) Reduced agency costs
v) Interactivity, flexibility, customization
vi) Accelerated knowledge

Intranets and Its Characteristics

• This is an internal network that uses Internet technology.

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 • The internal private network is protected from invasion coming from the public Internet
through a firewall.
• An intranet is often installed on an existing network infrastructure.

Extranet
• Allows select users outside an organization to use its intranet through the use of virtual
Private Networks (VPNs).
• These users include: customers, business partners and vendors.

Deployment of Internet Technologies: Stages of Evolution

Reasons for this choice:

• Gain experience from the situation of networking internally, and naturally evolve from there.
• The maintenance of a successful web site is highly demanding and requires a detailed
planning.
• Electronic Commerce needs further maturing of IT.

BUSINESS MODELS FOR E-COMMERCE

• A business model describes architecture for product, service and information flows, including
a description of the various business actors and their roles.
• In addition, it is a description of the potential benefits for the various actors and the source of
revenue.
Note: The section of a business model that describes how financial value is generated is called a
revenue model.
• Business models are used to generate the following modes of e-commerce:

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 a) Business-to-Business (B2B)
b) Business-to-Consumer (B2C)
c) Business-to-Government (B2G)

a) Business-to-Business (B2B)
• Involves business transactions involving one or more businesses.
• Both businesses must provide a means for exchanging business documents.
• Particularly common among large organizations
• Aspects of B2B include:
o Electronic funds transfer
o Electronic payment fulfillment
o Electronic tracking of transactions

b) Business-to-Consumer (B2C)
• Involves a seller (business) and consumers
• The business is the information source while the customer is the information seeker.

c) Business-to-Government (B2G)
• Involves government agencies/ departments and a business
• Could be operated like B2C or B2B

DEVELOPING A BUSINESS MODEL

A business model represents the activities of a business including:
i). Activity models- describe what a business does
ii). Process models- describe how a business accomplishes what it does
iii). Data models- represents information structure of a business.
Based on the above activities a business model can be broken down into:
• Buy side and sell side i.e. the payment direction
o With whom is commerce being conducted?
• Product or service type- refers to the basis of the transaction i.e. category, price, advertising,
sales and delivery.

Developing the e-commerce Business Model

• E-commerce strategies are best when driven by business strategy. They must be technically
feasible & financially viable.
• Dissect the buying/selling process into elements & then, think about whether you can apply
internet technology
• Also, analyze how the other party’s needs are changing from a business perspective, then
think about whether you can address them

Examples of e-commerce business models

a). E-shop (virtual Storefront):
Web marketing of a company or shop
Goals
 Main goal: to sell goods and services
 Secondary goal: to promote the company
 Challenge is to develop strategies to increase demand
 Other goals: cost-reduction of business processes

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 Revenues from reduced costs, increased sales, affiliates, and advertising
Problems:
 Current access speeds and hardware/software configurations make online shopping
frustrating
 Online shopping is not as immediate as real-world experiences (glossy catalogues or
department stores)
 Security and privacy are major issues
 Consumer behavior issues are relatively unknown e.g. marketing, getting repeat customers,
using promotions and incentives effectively

b). Market aggregators

i). E-mall:
A collection of e-shops, under a common umbrella
 Might use a common payment method (one shopping cart)
 Might have a single entry point to individual e-shops
 Industry (or horizontal) marketplace: When ‘stores’ belong to an identified market segment
 Challenge for stores is to distinguish themselves

ii). Virtual communities:

The value of these comes from members’ loyalty (customers or partners) and repeat visits
 They add their information to a basic environment provided by the virtual community
company
 The membership fees and advertising are two main sources of revenue
 Can also use affiliate marketing
 A virtual community can also be an important add-on to other marketing operations
 It can be used to build customer loyalty and receive customer feedback

c). Market integrator

 Bringing buyers and sellers in a specific market sector together
 The company provide the setting for business
 This is an example of a vertical market
 The company is a disinterested third party
 It generates revenue from transaction fees
 Some charge sellers a listing fee as well
 It can sell premium services (security, logistics)
 Problem is achieving and sustaining critical mass

d). E-Procurement
 Electronic tendering & procurement of goods/services
Benefits
 For buyer: wider choice of suppliers & hoping for lower cost, better quality, improved
delivery, reduced cost of procurement
 For supplier: more tendering opportunities, lower cost of submission, potential collaborative
tendering (i.e. for parts of tender)

e). The auction model

 The site provides the “virtual space” for an ongoing auction
 People register with the site to participate

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 All types of digital and non-digital products are being sold
 The site makes money by taking a commission on all sales
 Challenge: The development of trust is essential to the success of this business model

f). Information Services

 Add value to data (e.g.. Information searches, customer profiling, investment advice, business
opportunity brokerage, business intelligence services)
 May pay on subscription, or per use
 Certification Authorities (e.g. eTrust, Verisign) – offer services of authentication, verification

Types of E-Commerce where the models can be used

 Electronic Data Exchange
 Brochureware
 Help Desk and Support
 Electronic Transactions
 Consumer Purchases
 Advertising
 Application Service Providers (ASPs)

a) Electronic Data Exchange

 Business-to-Business
 Standards Based Messages
o ANSI X.12
o UN EDIFACT
 Industry Based Schemas/Usage
 Transport Mechanisms
o Traditional via Private Network/Brokers
o Direct via Internet
 Selected Areas of Interest
o Insurance, Transportation, Finance, Government, Procurement

b) Brochureware
 Product / Service Information
 Electronic Catalogues
 Indexes and Search Engines
 Distribution Methods
o CD-ROMs, Dial-Up Networking and Internet Web Sites
 Distribution Formats
o HTML and PDF Documents

c) Help Desk and Support

 Product / Service Documentation
o CD-ROMs, Downloadable PDFs, On-Line Web Sites
 Knowledgebase and FAQs
 Updates and Patches
 Message Boards and News Groups

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  Problem Submission

d) Electronic Transactions
 Electronic Funds Transfers (EFT)
o Financial Institutions, X9 Standards, Private Networks
 Bill Payments
 Credit Card Payments
o Consumer, Merchant, Processor, Financial Institutes

e) Consumer Purchases
 Hard/Soft Goods
o Traditional Mail-Order, Direct Delivery Services
 Intellectual Property
o Traditional Mail-Order, Downloadable Files, Steaming Media, Subscriptions

f) Advertising
 Web Banner Ads
 SPAM
 Trial Offers and Coupons
 Trial Use Intellectual Property
 Tracking and Monitoring

g) ASPs
 Evolving Business Models
o Application Rental, Added Value Services, Hosting Services
 Mostly Server-Based Today
 Significant Growth Area

THE BENEFITS OF ELECTRONIC COMMERCE

Benefits to Organizations
i). Expands the marketplace to national and international markets
ii). Decreases the cost of creating, processing, distributing, storing and retrieving paper-based
information
iii). Allows reduced inventories and overhead by facilitating pull-type supply chain management
iv). The pull-type processing allows for customization of products and services which provides
competitive advantage to its implementers
v). Reduces the time between the outlay of capital and the receipt of products and services
vi). Supports business processes reengineering (BPR) efforts
vii). Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)

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 Benefits to consumers
i). Enables consumers to shop or do other transactions 24 hours a day, all year round from almost any
location
ii). Provides consumers with more choices
iii). Provides consumers with less expensive products and services by allowing them to shop in many
places and conduct quick comparisons
iv). Allows quick delivery of products and services (in some cases) especially with digitized products
v). Consumers can receive relevant and detailed information in seconds, rather than in days or weeks
vi). Makes it possible to participate in virtual auctions
vii). Allows consumers to interact with other consumers in electronic communities and exchange ideas as
well as compare experiences
viii). Facilitates competition, which results in substantial discounts
Benefits to society
i). Enables more individuals to work at home, and to do less traveling for shopping, resulting in less
traffic on the roads, and lower air pollution
ii). Allows some merchandise to be sold at lower prices, benefiting less affluent people
iii). Enables people in Third World countries (e.g. Kenya) and rural areas to enjoy products and services
which otherwise are not available to them
iv). Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves
quality
The Limitations of EC
Technical limitations
i). There is a lack of universally accepted standards for quality, security, and reliability
ii). The telecommunications bandwidth is insufficient
iii). Software development tools are still evolving
iv). There are difficulties in integrating the Internet and EC software with some existing (especially
legacy) applications and databases.
v). Special Web servers in addition to the network servers are needed (added cost).
vi). Internet accessibility is still expensive and/or inconvenient

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 The Digital Revolution and the Economic Impact of EC
•In the Digital Revolution the economy is based on digital technologies including:
–Digital communication networks, Computers, Software, and other related information technologies
•Digital revolution is also called Internet economy, New economy or Web economy
i). Digital networking and communication infrastructures provide a global platform where people
and organizations can Interact, Communicate, Collaborate, and Search for information
o The global platform includes the following characteristics:
–A vast array of digitizable products
–Consumers and firms conduct financial transactions digitally
–Microprocessors and networking capabilities embedded in physical goods
ii). The term digital economy also refers to the convergence of computing and communication
technologies on the Internet and other networks and the resulting flow of information and
technology that is stimulating e-commerce and vast organizational changes.
o This convergence enables all types of information (data, audio, video, etc.) to be stored,
processed, and transmitted over networks to many destinations worldwide
iii). Web-based EC systems are accelerating the digital revolution by providing competitive
advantage to organizations
iv). Reach vs. richness
Another economic impact of EC is the trade-off between the number of customers a company can
reach (called “reach”) and the amount of interactions and information services they can provide to
customers (called “richness”)

Impacts of EC to Organizations
•The New World of doing Business based on e-commerce is characterized by the following:
–Business pressures
–Organizational responses
–The role of Information Technology (including electronic commerce)
a). Business Pressures
•Business pressures are related to the business environment
•The term business environment refers to the social, economic, legal, technological, and political
actions that affect business activities
•Business pressures are divided into the following categories:
i). Market
–The market is Global, Competitive, and is characterized by a changing workforce and powerful
consumers
ii). Societal
–These includes factors such as Social responsibility, Government regulations, budgets/ subsidies
and ethics
iii). Technology
–Technology includes innovations, obsolescence, and Electronic Commerce e.t.c.

b). Organizational Responses

i). Strategic systems
–Provide organizations with strategic advantages, enabling them to increase their market share, better
negotiate with their suppliers, and outsmart competitors
ii). Continuous improvement efforts
–Many companies continuously conduct programs to improve: Productivity, Quality, and Customer service
iii). Business process reengineering (BPR)
–Strong business pressures may require a radical change. Such an effort is referred to as BPR

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 iv). Business alliances
–Alliances with other companies, even competitors, can be beneficial to a business. This can lead to
establishment of virtual corporations.
–Virtual corporation—electronically supported temporary joint venture for a specific time-limited
mission
v). Electronic markets
–Require the collaboration of the different companies and competitors
vi). Reduction in cycle time and time to market
–Cycle time reduction—shortening the time it takes for a business to complete a productive activity from its
beginning to end
–Extremely important for increasing productivity and competitiveness
–Extranet-based applications expedite steps in the process of product or service development, testing, and
implementation
vii). Empowerment of employees and collaborative work
–Employees given the authority to act and make decisions on their own improves
•Productivity
•Customer relationship management (CRM)
–Empowered sales people and customer service employees make customers happy and help increase
customer loyalty
viii). Supply chain improvements
– Help reduce supply chain delays, inventories and eliminate other inefficiencies
ix). Mass customization—production of large quantities of customized items
–Business problem is how to efficiently provide customization. EC is an ideal facilitator of mass
customization by enabling electronic ordering to reach the production facility in minutes
Note
i). The task facing each organization is how to put together the components that will enable the
organization to gain competitive advantage by using EC
ii). The first step is to put in the right connective networks e.g. LANs, Intranets e.t.c.
iii). The vast majority of EC is done on computers connected to Internet, Intranet, or Extranet
c). The role of Information Technology (including electronic commerce)

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 E-COMMERCE MARKET MECHANISMS
a). Electronic Marketplaces
•Markets facilitate exchange of Information, Goods, Services, and Payments
•They create economic value for Buyers, Sellers, Market intermediaries and Society at large
•3 main functions of markets
–Matching buyers and sellers
–Facilitating the exchange of information, goods, services, and payments associated with market
transactions
–Providing an institutional infrastructure
Marketspace Components
•Marketspace—a marketplace in which sellers and buyers exchange goods and services for money (or
for other goods and services), but do so electronically.
•Components include: Customers, Sellers, Goods (physical or digital), Infrastructure, Front-end,
Back-end, Intermediaries/business partners, and Support services.
i). Customers
–Web surfers looking for Bargains or customized items, Collectors’ items, entertainment etc.
–Organizations
ii). Sellers
–Hundreds of thousands of storefronts are on the Web advertising and offering millions of Web sites
iii). Products
–Physical products- can only be delivered in conventional ways
–Digital products—goods that can be transformed to digital format and delivered over the Internet
iv). Infrastructure
–Hardware, Software, and Networks
v). Front-end business processes
–These include: Seller’s portal, Electronic catalogs, shopping cart, Search engine, and Payment
gateway
vi). Back-end activities
These are related to:
–Order aggregation and fulfillment
–Inventory management
–Purchasing from suppliers
–Payment processing
–Packaging and delivery
vii). Intermediary
–A third party that operates between sellers and buyers e.g. banks, insurers, credit card companies
e.t.c.
viii). Other business partners
–Collaborate on the Internet, mostly along the supply chain
ix). Support services such as
–Certification and trust services and Knowledge providers

Categories of E-Marketplaces
i). Private e-marketplaces—online markets owned by a single company:
–Sell-side marketplaces—company sells either standard or customized products to qualified companies
–Buy-side marketplaces—company makes purchases from invited suppliers
ii). Public e-marketplaces—B2B markets, usually owned and/or managed by an independent third
party, that include many sellers and many buyers (exchanges)
b). Supply Chains

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• Supply chain—the flow of materials, information, money, and services from raw material suppliers
through factories and warehouses to the end customers
• Includes organizations and processes that create and deliver the following to the end customers:
•Products, Information, Services
•A supply chain involves activities that take place during the entire product life cycle and it also
includes:
–Movement of information and money and procedures that support the movement of a product or a service
–The organizations and individuals involved
A Simple Supply Chain

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 i). Supply Chain Components
•Upstream supply chain—includes the activities of suppliers (manufacturers and/or assemblers) and
their suppliers
•Internal supply chain—includes all in-house processes used in transforming the inputs received from
the suppliers into the organization’s outputs
•Downstream supply chain—includes all the activities involved in delivering the product to the final
customers
ii). Types of Supply Chains
•Integrated make-to-stock
•Continuous replenishment
•Build-to-order—model in which a manufacturer begins assembly of the customer’s order almost
immediately upon receipt of the order
•Channel assembly—model in which product is assembled as it moves through the distribution
channel

c). Value Chain & Value System

•Value chain—the series of activities a company performs to achieve its goal(s) at various stages of the
production process; each activity adds value to the company’s product or service, contributes to
profit, and enhances competitive position in the market
•Value system—a set of value chains in an entire industry, including the value chains of tiers of
suppliers, distribution channels, and customers
Effect of EC in Supply Chain & Value Chain
•Value chain and the supply chain concepts are interrelated
•EC increases the value added by:
–Introducing new business models
–Automating business processes
•EC smoothes the supply chain by:
– Reducing problems in the flows of material, money, and information
•EC facilitates the restructuring of business activities and supply chains
d). E-Market Success Factors
•Product characteristics: Type, Price, Availability
•Industry characteristics
•Seller characteristics
•Consumer characteristics: Impulse, Patient and Analytical buyers

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e). Electronic Catalogs
•Electronic catalogs—the presentation of product information in an electronic form; the backbone of
most e-selling sites
•Evolution of electronic catalogs
–Merchants—advertise and promote
–Customers—source of information and price comparisons
–Consist of product database, directory and search capability and presentation function
–Replication of text that appears in paper catalogs
–More dynamic, customized, and integrated
Classifications of Electronic Catalogs
•Dynamics of information presentation—static or dynamic
•Degree of customization—ready-made or customized
•Electronic catalogs allow integration of:
–Order taking and fulfillment
–Electronic payment
–Intranet workflow
–Inventory and accounting system
–Suppliers’ extranet
–Relationship to paper catalogs
Customized Catalogs
•Assembled specifically for:
–A company
–An individual shopper
•Customization systems can:
–Create branded, value-added capabilities
–Allows user to compose order
–May include individualized prices, products, and display formats
–Automatically identify the characteristics of customers based on the transaction records
f). Search Engines
•Search engine—a computer program that can access a database of Internet resources, search for
specific information or keywords, and report the results
•Software (intelligent) agent—software that can perform routine tasks that require intelligence
Search Engines, Intelligent Agents and Shopping Carts
•E-commerce users use both search engines and intelligent agents
–Search engines find products or services
–Software agents conduct other tasks (comparisons)
•Electronic shopping cart—an order-processing technology that allows customers to accumulate
items they wish to buy while they continue to shop

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B EC
•Basic B2B Concepts
–Business-to-business e-commerce (B2B EC)—transactions between businesses conducted electronically
over the Internet, extranets, intranets, or private networks; also known as eB2B (electronic B2B) or just B2B
•B2B EC Characteristics
i). Parties to the transaction
Online intermediary—an online third-party that brokers a transaction between a buyer and a
seller; can be virtual or click-and-mortar; buyers; sellers
ii). Types of transactions
•Spot buying—the purchase of goods and services as they are needed, usually at prevailing market
prices
•Strategic sourcing—purchases involving long-term contracts that are usually based on private
negotiations between sellers and buyers
iii). Types of materials
•Direct materials—materials used in the production of a product (e.g., steel in a car or paper in a
book)
•Indirect materials—materials used to support production (e.g., office supplies or light bulbs)
•MROs (maintenance, repairs, and operations)—indirect materials used in activities that support
production
iv). Direction of trade
•Vertical marketplaces—markets that deal with one industry or industry segment (e.g., steel,
chemicals).
•Horizontal marketplaces—markets that concentrate on a service or a product that is used in all
types of industries (e.g., office supplies, PCs)
•The Basic B2B Transaction Types
–Sell side—one seller to many buyers
–Buy side—one buyer from many sellers
–Exchanges—many sellers to many buyers
–Collaborative commerce—communication and sharing of information, design, and planning among
business partners
Types of B2B E-Commerce

Sell-Side B2B Marketplace Architecture

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Buy-Side B2B Market Architecture

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•Barriers to C-Commerce
•C-commerce is moving ahead fairly slowly because:
–Technical reasons involving integration, standards, and networks
–Security and privacy concerns over who has access control of information stored in a partner’s database
–Internal resistance to new models and approaches
–Lack of internal skills to conduct c-commerce
•Infrastructure for B2B
 Server to host database and applications
 Software for executing sell-side (catalogs)
 Software for conducting auctions and reverse auctions
 Software for e-procurement (buy-side)
 Software for CRM
 Security hardware and software
 Software for building a storefront
 Software for building exchanges
 Telecommunications networks and protocols
•Extranet and EDI
•Value-added networks (VANs)—private, third-party-managed networks that add
communications services and security to existing common carriers; used to implement traditional
EDI systems
•Internet-based EDI—EDI that runs on the Internet and so is widely accessible to most companies,
including SMEs
•Extranets—secured networks (by VPN), usually Internet-based, that allow business partners to
access portions of each other’s intranets; “extended intranets.”
•Integration
i). Integration with existing information systems issues
–Intranet-based work flow
–Database management systems (DMBS)
–Application packages
–ERP
–Back-end sell-side integration works for sellers but not buyers and vice versa
ii). Integration with business partners
–Easy integration with one company-centric side
–Not easy to integrate for many buyers or sellers
–Need buyer owned shopping cart that can interface with back-end information systems
•The Role of XML in B2B Integration
 Companies interact easily and effectively by connecting to their servers, applications, databases
 Standard protocols and data-representation schemes are needed
 Web is based on the standard communication protocols useful only for displaying static visual
Web pages:
•XML (eXtensible Markup Language)—standard (and its variants) used to improve compatibility
between the disparate systems of business partners by defining the meaning of data in business
documents
–Used to increase:
•Interactivity
•Accessibility with speech recognition systems

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•The Role of Software Agents in B2B EC
i). Agent’s role in the sell-side marketplace
–B2C comparison-shopping
–B2B agents collect information from sellers’ sites for buyers
ii). Agent’s role in the buy-side marketplace
–Assisting large number of buyers requesting quotes from multiple potential suppliers in buy-side

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WEB COMMERCE INFRASTRUCTURE
COMMERCIAL WEBSITES
• A commercial website is a website that offers products and /or services for sale.
What makes one successful?
• Attractiveness?
• However, even the most attractive web pages will not make a person come back to a website
where it takes too long to find the right product or where order forms don’t work.
COMPONENTS OF A WELL-FUNCTIONING COMMERCIAL WEBSITE
The most important elements of a good website are:
1). A well organized collection of products and/or services
• There should be a way for customers to get all the necessary information about products,
compare several products, and get advice on related products e.t.c
• Changes in product information must avoid inconsistencies. Such changes reflect on every
day’s availability, change in price, product cross-references e.t.c
2). A convenient way for a costumer to select products
• This can be implemented using a shopping cart or basket
• The costumer should be able to select and delete products while browsing
3). Convenient order forms
• Should have as few fields as possible
• A returning costumer should be provided with default information
• The form should also catch simple typographical errors e.g a three-character password
4). Convenient ways of payment
• Many options for effecting payment should be provided
• Also there should be a quick way to verify the payment commitment, to check if they are valid,
for the owner of the site
5). Secure communication system
• This protects transmission of payment information and guarantees privacy of the customer
• Also prevents unauthorized access to the site
6). A way of storing information about customers
• Avoids re-entry of some information by customers
• Allows to” customize” the website for someone’s interest
• Achieved via customer registration or “cookies”
Benefits of this to the owner
 Customize ads based on customer profiles or send emails advertising a new product
(Spam?)
 Ability to monitor customer behavior
7). A way of keeping information about orders
• Allows customers to track their orders and owners to get all kinds of financial and statistical
information
• Also helps during later disputes
8). Customer support and feedback
• This aspect cannot be completely mechanized: a human being has to answer e-mail, judge
tolerance of customer’s comments, organize comments by topics e.t.c
• Achieved through online documentation of all products, FAQs, and a way for customers to
post their opinion
NB: The above mostly address B2C. For B2B, sites have to be optimized if a company has stable
business partners.

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TECHNOLOGIES USED TO IMPLEMENT ABOVE FEATURES
1). A database implements convenient storage of information about products
• Implemented using DBMS’s e.g Oracle, access, and MS SQL e.t.c. This applies for ((6) and (7) )
and (8) only nominally
2). A convenient interface to the database is provided through the website
• Implemented through HTML, Java or JavaScript, PHP e.t.c.
• We can use ODBC or JDBC to connect remotely to databases
3). Ability to process forms is through various server-site scripts e.g CGI, PERL, Asp or Java
Servelets
4). Cookies are used to keep track of a user during a session
• Defn: A cookie is a small text file placed by a web server on the client machine and gets sent
back every time the client requests a web page from the server.
• Implemented through Java Servelets, Asp e.t.c
5). Encryption and security is implemented via secure sockets layer (SSL), e.t.c.
6). Electronic payment systems and credit card payment methods are used for payment options
THREE-TIER (LAYER) ARCHITECTURE FOR E-COMMERCE
• E-commerce systems can be implemented using a multi-tier architecture consisting of three
tiers or layers. In a typical three-tier architecture (Fig. 1) for e-commerce systems, the first tier
is the data services layer; the second tier is the business services layer, while the third tier is
the presentation services layer.
(a) Data Services Layer
• The underlying technology to implement this layer could be a variety of things, including
client side cookies, server-side files or a database.
• This layer is usually best satisfied with a database, running either on the web server itself or
easily accessible to the web server, that is in the database server.
(b) Business Services Layer
• This layer consists of business and data components and is composed of a web server running
a simple language providing database access.
• The business components assist in handling business processes/operations while data
components provide database access and hide underlying database structure.
• In this layer, where you code any rules regarding the data you have stored and generally is the
bulk of your system.
• This layer representing the middleware of the integrated system is implemented through a
variety of middleware technologies including Common Gateway Interface (CGI) scripts and
Java Servelets.
• Data components hide the underlying data structure from clients
(c) Presentation Services Layer
• This layer is the application or user-agent (such as a browser) rendering the output of your
markup or scripting code for your users.
• Through the very nature of the Internet, this tier’s processing is distributed to many computers
browsing your site. This layer enables users to see results of your business logic applied to the
data you have stored.
• Provides the user interface to system and converts input data to a format that can be
understood at business layer and vice-versa

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Fig. 1: E-commerce three-tier system architecture

SHOPPING CART FUNDAMENTALS

• A shopping cart is an e-commerce ordering system.
• Also called wheelbarrow, shopping bag, shopping basket
a). Operation of shopping Cart
 Users initially go to a website and look for the products and/or services they need, thereafter
they can click on or “tag ” items of interest for later purchase.
 This process is called “adding up” items for purchase to a “Shopping cart”.
 The concept (Metaphorically) of a shopping cart helps users understand the actions available
to them including:
i). Adding additional items to their purchase list
ii). Deleting items they selected and
iii). Adjusting the quantity of each item to purchase.
 Similar metaphors; wheelbarrow, shopping bag, shopping basket can be used.
 They provide creative ways of giving users a mental mode for shopping online.
b). Checkout process
 When users finish shopping, they proceed to this process to provide their address and payment
information.
 Checkout process may include:
i). Specifying a shipping preference
ii). Shipping address
iii). Method of payment and
iv). Any gift-wrapping preferences.
c). Information Architecture of the shopping cart:
• Information architecture refers to the method of structuring and organizing information
environments to help people achieve their goals.
• Information architecture of the shopping cart depends on:
 Clear organization, Labeling, Navigation and Searching systems

Principles for designing the information architecture of the shopping cart and checkout
processes
Aimed at providing a foundation for rich functionality of e-commerce systems. Include:
Shopping cart process
1. Make the shopping cart easy to find
2. Provide clear ordering options
3. Provide for rich functionality of the shopping cart
4. Make related items available for the shopping cart
5. Provide fro the items in the shopping cart to be saved for future purchase

22
Checkout process
6. Give advance notice of what the checkout process involved
7. Keep order forms simple
8. Ensure secure transactions.
1) Making it easy to find
 Users should be able to begin ordering process once they have located the items they want
 There should be multiple entry points to the cart from the site.
 For each item in the shopping cart users should see at a glance
o Description of item.
o Option to remove or add item
o Option to add item to shopping list for future purchase
o Items current availability
2) Provide clear ordering options
 Provide clear distinction between different options
 New ordering options help users process orders quickly, but may confuse or slow down
users.
3) Provide rich functionality
 These include:
 Options to add items
 Remove items
 Find out more information
 Users should be able to add items during the shopping process or to easily return to
shopping in the site after adding an item to the cart.
 Provide appropriate navigational links.
 Should include options to easily modify quantity of each item or remove items.
 Provide links from each item back to the detailed description for that item.
4) Make related items available
 Gather users information about past purchases to identify trends
 Associate items with related items
 Can help increase sales
5) Save items for future purchase
 Enables comparison-shopping as well as people purchasing when there is money.
 Most sites implement this as wish or shopping lists.
6) Provide advanced notice
 Let users know in advance what they can expect in the checkout process e.g. shipping costs
 Provide users with clues as to where they are in the ordering process e.g. show steps
completed and those left
 Also provide users upfront with the information they need to make their decisions to
complete the purchase (e.g. costs of shipping options available)
7) Keep order forms simple
 Should be as simple as possible to help users complete them quickly and without confusion
but should have the necessary functionality to meet a users needs.
 Indicate required fields as well as optional ones (these can be eliminated).
 Order process should give the user the opportunity to confirm that all the information is
correct before submitting their order
 Should keep in mind an international audience.

23
8) Ensure secure transactions
 To address users concerns about security; have an established brand, provide secure web
servers and processes and provide a satisfaction warranty
 Provide information about security and safety of purchases.
 Enforce trust as a user goes through the checkout process e.g enable user to call with credit
card number or mail a personal check instead of filling details in a form
 Also provide order confirmations and e-mail customers to further establish user’s trust. You
could also send an e-mail message at the time the user’s order is shipped.
 Provide FAQs, email address for questions and phone number for customer representative, to
help address problems encountered by users.

24
IMPLEMENTING A SIMPLE SHOPPING CART APPLICATION
 Best implemented using databases and database connectivity tools e.g. php, asp e.t.c.
Database
 Special kind of file that stores data and allows updates and modifications in a uniformed way
Database Connectivity and Structured Query Language
 SQL is language used to interact with databases; it allows you to create, delete and update
records
 SQL connects to databases using middleware e.g. ODBC, JDBC, OLE DB e.t.c.
Activities carried out with Database
 Connect
 Modify
 Disconnect
NB: We can use server side scripts
OVERVIEW OF SERVER-SIDE SCRIPTING AND ACTIVE SERVER PAGES (ASP)
 ASP refers to pages that are processed on the server, while the results are displayed on the
client.
 ASP code can be written in JavaScript, JSP, or VBScript
Advantages of Server-Side Programming/Scripting
i). Can tailor output to particular browsers
ii). Easier to achieve portability and maintainability
Disadvantages of Server-Side Programming/Scripting
i). Security risk
 Easy to compromise host security
 Easy to allow users to do things that get you into trouble
ii). Problems with concurrency
 More people can hit your script at the same time?
 Easy to erase information inadvertently by misunderstanding concurrency limits
INVOKING ASP
 Files are named in the format filename.asp
 ASP files are started by the markup tag:
 <%@ language=value%>
 Where value is Jscript, JavaScript, VbScript e.t.c.
 Within the code there are several ways to invoke server side scripts i.e.
i). Within special script tags annotated with runat=server
<script language=Jscript runat=server>
Response. write(“<h2>Leah Kamunge Njiri</h2>”);
</script>
ii). Within special script tag <% …%>
<%
Response. write(“<h2>Leah Kamunge Njiri</h2>”);
%>
Differences between Client-side and Server-side Scripts
1). The browser never sees the server-side script-it only sees the output
2). Server-side script operation cannot be overridden by user actions- client-side scripts can be
disabled under user control
3). Server-side scripts have full power to manipulate files on host machine
4). Server-side scripts can keep records and remember user preferences- utilized to implement
cookies
5). Server-side scripts include new objects e.g.

25
 (a) Request-represents data sent to server from browser e.g. CGI parameters (form values and
url parameters), cookies e.t.c.
(b) Response- represents document to be sent to browser
6). There is no document object since we are on the server
7). There is no access too window object for server-side scripts
Example
Write a CGI script that gets values from a form and prints out those values as a web page.
Solution- we write both html page to give form structure then an asp file to process form.
form_submit.html
<html><body bgcolor="pink">
<h4 align=center>Please tell me about yourself</h4>
<form action="form_values.asp" method="post" target="_blank">
<center><table border=20 bgcolor="biege">
<tr><th>Name<td><input type="text" name="names">
<tr><th>Postal Address<td><input type="text" name="postal">
<tr><th>Physical Address<td><input type="text" name="location">
<tr><th>Country<td><select name="country">
<option value="Kenya" selected>Kenya</option>
<option value="Uganda">Uganda</option>
<option value="Tanzania">Tanzania</option></select>
<tr><th>Gender
<td><input type="radio" name="gender" value="Male">Male&nbsp;
<input type="radio" name="gender" value="Female">Female&nbsp;
<input type="radio" name="gender" value="Non of the above">None
<tr><th>Email Address
<td><input type="text" name="email">
<tr><td><input type="submit" value="Send Details">
<td><input type="reset" value="Clear">
</table></center></form></body></html>
form_values.asp
<%@ language=JScript%>
<html><body><h4 align=center>Here is what you submitted</h4>
<center><table bgcolor="pink" border=20 width="100%">
<%
name=Request.Form('names');
postal=Request.Form('postal');
location=Request.Form('location');
country=Request.Form('country');
gender=Request.Form('gender');
email=Request.Form('email');
Response.write("<tr><th>Name<td>"+name+"</tr>");
Response.write("<tr><th>Postal Address<td>"+postal+"</tr>");
Response.write("<tr><th>Physical Address<td>"+location+"</tr>");
Response.write("<tr><th>Country<td>"+country+"</tr>");
Response.write("<tr><th>Gender<td>"+gender+"</tr>");
Response.write("<tr><th>Email Address<td><a href='mailto:"+email+"'>"+email+"</a></tr>");
%>
</table></center></body></html>

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Collections
 Un-exposed ordered arrays, which can be accessed using indices
 Can also be accessed using enumerators- objects designed to process data in sequence
Example
form_enum.html
<html><body bgcolor="pink">
<h4 align=center>Please tell me about yourself</h4>
<form action="form_enum.asp" method="post" target="_blank">
<center><table border=20 bgcolor="biege">
<tr><th>Name<td><input type="text" name="names">
<tr><th>Postal Address<td><input type="text" name="postal">
<tr><th>Physical Address<td><input type="text" name="location">
<tr><th>Country<td><select name="country">
<option value="Kenya" selected>Kenya</option>
<option value="Uganda">Uganda</option>
<option value="Tanzania">Tanzania</option>
</select>
<tr><th>Gender<td><input type="radio" name="gender" value="Male">Male&nbsp;
<input type="radio" name="gender" value="Female">Female&nbsp;
<input type="radio" name="gender" value="Non of the above">None
<tr><th>Email Address<td><input type="text" name="email">
<tr><td><input type="submit" value="Send Details">
<td><input type="reset" value="Clear"></table></center></form></body></html>
form_enum.asp
<%@ language=JScript%>
<html><body background="Tapi.jpg">
<h4 align=center>Here is what you submitted</h4>
<center><table bgcolor="pink" border=20 width="100%">
<%
var en=new Enumerator(Request.Form);//creates an object en
for(en.moveFirst();!en.atEnd();en.moveNext())
{//for all members or form fields
var field=en.item();//get one field
var value=Request.Form(field);//get field's value
Response.write('<tr><th>'+field);
Response.write('<td>'+value);
}
%></table></center></body></html>
Explanation of Example
 en is an enumerator object that enables you to access elements of a collection.
 item() is a method and en.item() accesses the current item or element
 en.moveFirst() sets en.item() as the first item/element.
 en.moveNext() makes en.item() the next item in the sequence
 en.atEnd() is true when we have no more items, is false otherwise
Connecting to a Database
<%
var con=Server.CreateObject(“ADODB.Connection”);
con.Open(“myData”);

27
var name=Request.Form(‘name’);
var salary=Request.Form(‘salary’);
var email=Request.Form(‘email’);
var command=”insert into Okeyo values(‘”+name+” ‘,’ “+email+” ‘, “+salary+”)”;
con.Execute(command);
%>
NB:
 We call the above using a form
 Strings must be single quoted
 Numbers must not be quoted
Select and Display Records from a Database Table
select.asp
<%@ language=Jscript%>
<html><body><h2>Reading from a table</h2>
<%
var con=Server.CreateObject(“ADODB.Connection”);//create a connection object
con.Open(“myData”);//create a connection
var command=”select * from Okeyo”;//select all records
var recordset=con.Execute(command);//retrieve records
Response.write(“<table border=’”+1+’”+”>”);
Response. Write(“<tr><th>Name<th>E-mail<th>Salary”):
for(recordset.moveFirst();!recordset.EOF;recordset.moveNext())
{
var name=recordset.Fields(0).Value;
var email=recordset.Fields(1).Value;
var salary=recordset.Fields(2).Value;
Response.write(“<tr><td>”+name+”<td>”+email”+”<td>”+salary);
}
Response.write(“</table>”);
%>
</body></html>
Note:
 Recordset is an enumerable collection i.e. it has its own enumerator
 recordset.Fields(0).Value is first field of first row

28
PAYMENTS AND ORDER FULFILLMENT
Electronic Payments
(a) Paying with credit cards online
–Until recently consumers were extremely reluctant to use their credit card numbers on the Web
• Four parties involved in e-payments
i). Issuer-Customers must obtain e-payment accounts from an issuer. Issuers are usually
involved in authenticating a transaction and approving the amount involved.
ii). Customer/payer/buyer
iii). Merchant/payee/seller
iv). Regulator
• The following key issue of trust must be addressed
– PAIN
–Privacy
–Authentication and Authorization
–Integrity
–Nonrepudiation
Characteristics of successful e-payment methods
 Independence
 Interoperability and portability
 Security
 Anonymity
 Divisibility
 Ease of use
 Transaction fees
Security for E-Payments
a). Public key infrastructure (PKI)—a scheme for securing e-payments using public key
encryption and various technical components
b). Public key encryption
c). Digital signatures
d). Digital certificates
e). Certificate authorities (CAs)—third parties that issue digital certificates
Standards for E-Payments
i). Secure socket layer (SSL)—protocol that utilizes standard certificates for authentication
and data encryption to ensure privacy or confidentiality
ii). Transport Layer Security (TLS)—as of 1996, another name for the Secure Socket Layer
protocol
iii). Secure Electronic Transaction (SET)—a protocol designed to provide secure online
credit card transactions for both consumers and merchants; developed jointly by
Netscape, Visa, MasterCard, and others
(b) Electronic Cards and Smart Cards
1). Electronic Cards
i). Payment cards—electronic cards that contain information that can be used for payment
purposes
ii). Credit cards—provides holder with credit to make purchases up to a limit fixed by the
card issuer
iii). Charge cards—balance on a charge card is supposed to be paid in full upon receipt of
monthly statement

29
 iv). Debit card—cost of a purchase drawn directly from holder’s checking account (demand-
deposit account)
v). Virtual credit card—an e-payment system in which a credit card issuer gives a special
transaction number that can be used online in place of regular credit card numbers
vi). Electronic wallets (e-wallets)—a software component in which a user stores credit card
numbers and other personal information; when shopping online; the user simply clicks
the e-wallet to automatically fill in information needed to make a purchase
Security risks with credit cards
o Stolen cards
o Reneging by the customer—authorizes a payment and later denies it
o Theft of card details stored on merchant’s computer—isolate computer storing
information so it cannot be accessed directly from the Web
vii). Purchasing cards—special-purpose payment cards issued to a company’s employees to
be used solely for purchasing non-strategic materials and services up to a preset dollar
limit
o Instrument of choice for B2B purchasing
2). Smart Cards
o An electronic card containing an embedded microchip that enables predefined
operations or the addition, deletion, or manipulation of information on the card
3). E-Cash and Innovative Payment Methods
a). E-cash—the digital equivalent of paper currency and coins, which enables secure
and anonymous purchase of low-priced items
b). Micropayments—small payments, usually under $10
c). E-Coin.net-Users purchase some eCoins with a credit card
d). Wireless payments- Vodafone “m-pay bill” system that enables wireless
subscribers to use their mobile phones to make micropayments
e). Qpass (qpass.com)- Charges to qpass account, are charged to a specified credit card
on a monthly basis
4). Stored-Value Cards- Stores cash downloaded from bank or credit card account
(a) Visa cash—a stored-value card designed to handle small purchases or
micropayments; sponsored by Visa
(b) Mondex—a stored-value card designed to handle small purchases or
micropayments; sponsored by Mondex, a subsidiary of MasterCard
(c) Internetcash- primary reason for going online is teenage market. Uses are
 Communicating with friends via email and chat rooms, Researching information, Playing
games, Downloading music or videos
 InternetCash offers prepaid stored-value cards sold in amounts of $10, $20, $50, and $100
and purchases are automatically deducted from the value of the card
5). Person-to-Person Payments- e-payment schemes (such as paypal.com) that enable the
transfer of funds between two individuals
 Applications include: Repaying money borrowed, Paying for an item purchased at online
auction, Sending money to students at college, Sending a gift to a family member,
6). Global B2B Payments
(a) Letters of credit (LC)—a written agreement by a bank to pay the seller, on account
of the buyer, a sum of money upon presentation of certain documents
(b) TradeCard (tradecard.com) Payments —innovative e-payment method that uses a
payment card

30
  TradeCard allows businesses to effectively and efficiently complete B2B transactions
whether large or small, domestic or cross-border, or in multiple currencies

7). E-Checking
 E-check—the electronic version or representation of a paper check
 Eliminate need for expensive process reengineering and takes advantage of the
competency of the banking industry. Used mainly in B2B
Order Fulfillment: Overview
Order fulfillment—all the activities needed to provide customers with ordered goods and
services, including related customer services
–Back-office operations—the activities that support fulfillment of sales, such as accounting and
logistics
–Front-office operations—the business processes, such as sales and advertising, that are visible to
customers
EC Order Fulfillment Process
1. Payment clearance
2. In-stock availability
3. Arranging shipments
4. Insurance
5. Production (planning, execution)
6. Plant services
7. Purchasing and warehousing
8. Customer contacts
9. Returns (Reverse logistics—movement of returns from customers to vendors)
10. Demand forecast
11. Accounting, billing
Order Fulfillment and the Supply Chain
•Order fulfillment and order taking are integral parts of the supply chain.
•Order fulfillment problems are created due by lack of coordination and inability or refusal to
share information
Solutions to Order Fulfillment Problems
•Improvements to order taking process
–Order taking can be done on EDI, EDI/Internet, or an extranet, and it may be fully automated.
Handling Returns
•Necessary for maintaining customer trust and loyalty using:

31
LAW, ETHICS, AND CYBER CRIME
Legal Issues vs. Ethical Issues
Ethics—the branch of philosophy that deals with what is considered to be right and wrong
–Businesspeople engaging in e-commerce need guidelines as to what behaviors are reasonable
under any given set of circumstances. What is unethical in one culture may be perfectly acceptable
in another
(a) Privacy- the right to be left alone and the right to be free of unreasonable personal intrusions
Protection of Privacy
 Notice/awareness
 Choice/consent
 Access/participation
 Integrity/security
 Enforcement/redress
(b) Intellectual Property Rights
Intellectual property (IP)—creations of the mind, such as inventions, literary and artistic works,
and symbols, names, images, and designs used in commerce
i). Copyright—an exclusive grant from the government that allows the owner to reproduce
a work, in whole or in part, and to distribute, perform, or display it to the public in any
form or manner, including the Internet
ii). Trademarks—a symbol used by businesses to identify their goods and services;
government registration of the trademark confers exclusive legal right to its use
iii). Patent—a document that grants the holder exclusive rights on an invention for a fixed
number of years
CYBER CRIME
(a) Fraud- Intentional deceit or trickery, often with the aim of financial gain
(b) Cyber attack- An electronic attack, either criminal trespass over the Internet (cyber intrusion)
or unauthorized access that results in damaged files, pro-grams, or hardware (cyber
vandalism)
The Players: Hackers, Crackers, and Other Attackers
i). Hackers
–Original hackers created the Unix operating system and helped build the Internet, Usenet, and
World Wide Web; and, used their skills to test the strength and integrity of computer systems
–Over time, the term hacker came to be applied to rogue programmers who illegally break into
computers and networks
ii). Crackers
• People who engage in unlawful or damaging hacking short for “criminal hackers”
iii). Other attackers
•“Script kiddies” are ego-driven, unskilled crackers who use information and software (scripts)
that they download from the Internet to inflict damage on targeted sites
Internet Security
•Cyber attacks are on the rise
•Factors have contributed to the rise in cyber attacks:
–Security and ease of use are antithetical/opposing to one another
–Security takes a back seat to market pressures
–Security of an EC site depends on the security of the Internet as a whole
–Security vulnerabilities are mushrooming
–Security is compromised by common applications
Basic Security Issues

32
From the user ’s perspective:
–How can the user be sure that the Web server is owned and operated by a legitimate company?
–How does the user know that the Web page and form do not contain some malicious or
dangerous code or content?
–How does the user know that the Web server will not distribute the information the user
provides to some other party?
From the company ’s perspective:
–How does the company know the user will not attempt to break into the Web server or alter the
pages and content at the site?
–How does the company know that the user will not try to disrupt the server so that it is not
available to others?
From both parties ’perspectives:
–How do they know that the network connection is free from eavesdropping by a third party
“listening in ”on the line?
–How do they know that the information sent back and forth between the server and the user ’s
browser has not been altered?
Major Internet security issues
a). Authorization -the process that ensures that a person has the right to access certain resources
b). Authentication- the process by which one entity verifies that another entity is who they claim
to be by checking credentials of some sort
c). Auditing- the process of collecting information about attempts to access particular resources,
use particular privileges, or perform other security actions
d). Confidentiality (privacy)
e). Integrity- As applied to data, the ability to protect data from being altered or destroyed in an
unauthorized or accidental manner
f). Availability
g). Nonrepudiation- The ability to limit parties from refuting that a legitimate transaction took
place, usually by means of a signature
General Security Issues at E-Commerce Sites

33
Types of Cyber Attacks
(a) Technical attack
 An attack perpetrated using software and systems knowledge or expertise
(b) Nontechnical attack
 An attack in which a perpetrator uses chicanery or other form of persuasion to trick people
into revealing sensitive information or performing actions that compromise the security of a
network
(c) Common vulnerabilities and exposures (CVEs)
 Publicly known computer security risks or problems; these are collected, enumerated, and
shared by a board of security-related organizations (cve.mitre.org)
(d) Denial-of-service (DoS) attack
 An attack on a Web site in which an attacker uses specialized software to send a flood of
data packets to the target computer with the aim of overloading its resources
(e) Distributed denial of service (DDoS) attack
 A denial-of-service attack in which the attacker gains illegal administrative access to as
many computers on the Internet as possible and uses these multiple computers to send a
flood of data packets to the target computer
(f) Malware
 A generic term for malicious software
(g) Virus
 A piece of software code that inserts itself into a host, including the operating systems, to
propagate; it cannot run independently but requires that its host program be run to activate
it
(h) Worm
 A software program that runs independently, consuming the resources of its host from
within in order to maintain itself and propagating a complete working version of itself onto
another machine
(i) Trojan horse
 A program that appears to have a useful function but that contains a hidden function that
presents a security risk
Security Technologies
 Internet and EC security is a thriving business
(a) Firewalls and Access Control
•Firewall

34
  A network node consisting of both hardware and software that isolates a private network
from a public network
•Access control- primary means is use of passwords
(b) Intrusion detection system (IDS)
 A special category of software that can monitor activity across a network or on a host
computer, watch for suspicious activity, and take automated action based on what it sees
(c) Security risk management
 A systematic process for determining the likelihood of various security attacks and for
identifying the actions needed to prevent or mitigate those attacks

35
MARKETING & ADVERTISING ON THE INTERNET
e-Marketing?
• e-Marketing is the online management process responsible for identifying, anticipating, and
satisfying customer requirements profitably.
Characteristics of marketing communications via Internet (& new media technologies)
6 ’I’s
(a) Interactivity-Opportunities for customer to ‘pull’ message (traditionally ‘push’ has
dominated)
(b) Intelligence- Low cost market research about markets
(c) Individualization- messages can be tailored to individuals (point casting -v- broadcasting) -
also known as personalization
(d) Integration- How Internet allows organizations to contact customer, & how this fits with
existing means of communication and how customer can contact organization
(e) Industry restructuring-few middlemen
(f) Independence of location- how marketing developed for one nation (culture) work in
another
Branding
• Features of a successful brand are awareness, quality, associations, and loyalty
ADVERTISING MODELS FOR THE WEB
The basic questions are:
• How can content best be delivered to customers?
• Will advertising techniques used in print and electronic broadcast media work on the web?
• Will standard methods used to track the success of advertising in these media work on the
web?
Two principles about advertising on the web influence many of the advertising practices
i) The direction of the advertising message is reversed:
• In traditional advertising, the message is imposed on the consumer, who is passive; the
customer is delivered over to the advertiser in a one-to-many model of marketing
communications.
• On the web, the consumer chooses to view an advertisement on a site, takes actions to uncover
the information the advertiser wishes to deliver and enters the “clickstream” (taking further
action).
ii) Content regains importance as the core of the advertising effort
• Traditional advertising uses brief distilled messages to catch and hold our attention and
depends on repetition to deliver the message. Content is minimized and simplified to fit the
time constraints of media or the size constraints of the page
• However, packing the maximum amount of meaning into the minimum amount of content is
critical
Getting ready to advertise
• Know why you want to advertise on a site and can articulate this to a complete stranger
• Know who the audience is on the site (demographics and psychographics)?
TYPES OF ADVERTS
(a) Banner ads
• This involves the placement of an image or banner of varying size on the remote page
• The image contains the corporate logo and perhaps a tag line indicating that the user can
obtain information or visit an interesting site by clicking on the image
Issues:
i) Branding: you want users to know who you are

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 ii) Clickthrough: industry average is 0.4%
iii) Design: Good design enhances clickthrough
(b) Interstitial ads
• These are a way of placing full-page messages between the current and destination page
• They are pages that pop up between what the viewer is looking at and what they are
expecting to get
Note
• With banner ads, viewers quickly learn at some level to recognize banner ads and filter them
out
• Interstitial messages, like TV commercials make viewers a captive of the message. Typical
interstitials last ten seconds or less where the viewer is (hopefully) doing nothing but looking
at the ad
Measuring Effectiveness of an E-commerce Web site
(a) Site activity analysis-traffic generated by site
(b) User profiling-eliciting demographic information using registration forms
(c) Auditing-ad statistics audited by independent third parties
The following represent some measures of site effectiveness, which can be based upon analysis
& auditing:
(a) Site awareness = Number of site visitors/total Internet users
(b) Site attractiveness = Number of those seeking information/Number of site visitors
(c) Promotion effectiveness = Number of those initiating dialogue/ Number of those seeking
information.
(d) Purchase effectiveness = Numbers placing order/Numbers initiating dialogue
(e) Loyalty effectiveness = Number of repeat customers/Total customers ordering

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ELECTRONIC DATA INTERCHANGE AND VALUE ADDED NETWORKS (VANS)
Defn 1: Electronic Data Interchange (EDI) is the computer-to-computer exchange of routine
business information in a standard format.
Defn 2: EDI is the computer-to-computer interchange of strictly formatted messages that
represent documents other than monetary instruments.
Defn 3: Electronic Data Interchange (EDI) represents the computer-to-computer transfer of
information in a structured predetermined format between 2 or more business partners, over a
secured network.
EDI Standards
(a) UN/EDIFACT standards
What?
 The International Standard for Electronic Data Interchange (EDI): United Nations/EDI For
Administration, Commerce and Transport
 The UN/EDIFACT standards may be used for any application, domestic or international.
 Developed by the United Nations (UN) Economic Commission for Europe - Working Party
(Four) on Facilitation of International Trade Procedures (UN/ECE/WP.4).
 In 1986 the UN/ECE approved the acronym "UN/EDIFACT", which translates to United
Nations EDI For Administration (Government or Public Administration), Commerce and
Transport. The concept is simple: A single international EDI standard flexible enough to meet
the needs of government and private industry.
(b) X12 standards
 The X12 standards may be used for any domestic application.
 Developed by Accredited Standards Committee X12 on Electronic Data Interchange (ASC
X12), accredited by the American National Standards Institute (ANSI).
 In January 1995, ASC X12, by a membership vote, approved the ASC X12 Plan For Technical
Migration To And Administrative Alignment With UN/EDIFACT.
(c) XML/EDI standard
 Put simply, the goal of XML/EDI is to deliver unambiguous and durable business
transactions via electronic means.
 Associated with this is a goal to establish a standard for commercial electronic data
interchange that is open and accessible to all, and which delivers a broad spectrum of
capabilities suitable to meet the full breadth of business needs.
What Are The Benefits Of EDI?
Tangible benefits
 The most tangible benefit of EDI is it saves you money. Users report improvements in the
following major areas due to EDI:
(a) Transaction Handling/Processing Accuracy
 Less time spent in reconciling differences/errors
 Fewer credit/debit adjustments
 Reduced back order situations
 Fewer product returns
(b) Administrative and Clerical Costs
 Reduced document matching, filing
 Reduced manual document preparation
 Decreased key entry for computer input
 Reduced clerical time requirements for buyers
 Direct savings in paper, mailing, telex, and other physical costs
Intangible Benefits
(a) Increased accuracy

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 (b) Improved cycle times (order-shipping-invoice cycle from 10 days to 2 days)
(c) Allows your company to accommodate greater volumes without added costs
(d) Closer relationship with trading partners
(e) Improved service to customers, increasing business
EDI Networks or Value Added Networks (VANs)
• A privately (third party) owned network that provides a specific service, such as legal
research or access to a specialized database, for a fee. A Value Added Network usually offers
some service or information that is not readily available on public networks.
• In a sense, the VANs resemble a postal service, delivering documents to the addressee on the
"envelope" which accompanies every transmission.
Why Use a VAN over Direct Internet Communications?
 Some companies have adopted a direct Internet communications link for transmission of
documents. While in some cases, this may offer a reasonable and affordable solution; there
are several reasons why a VAN should be used instead.
(a) Single Connection –What your customers or suppliers use to connect to the network need not
concern you at all, as the VAN will take care of all these individual connections to their
services.
(b) Mailbox Services – At its core, the VAN is essentially an electronic post office. It receives
electronic messages which may be orders, invoices etc., reads the addressing information
contained in the EDI envelope surrounding these messages and posts them into the mailbox of
the recipient.
(c) Security –Access to VANs services are password controlled and most VANs offer Trading
Relationship validation as a means of ensuring that only authorized messages or documents
may be transmitted.
(d) Audit Control – It is essential for the VANs to provide the end user with a full audit trail, so
that users have information at their disposal with which to manage their use of such services.

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BUILDING E-COMMERCE APPLICATIONS AND INFRASTRUCTURE
Points to Note
•There is a large variety of EC applications
•EC applications keep changing over time
•There are several options for developing EC application
•Building a complex applications from components is a viable strategy
•One EC application may have many component from several different vendors
•EC application may involve several business partners, including consultants
•The web sites and application can be developed in-house, outsourced or a combination of
both.
LANDSCAPE AND FRAMEWORK OF EC APPLICATION DEVELOPMENT
•Development process
–Step 1: EC architecture creation--systems analysis approach
–Step 2: Select a development option
–Step 3: Installing, connecting, and more
–Step 4: Deployment
–Step 5: Operation and maintenance
•Project management
–Development process is complex and must be properly managed
–Team formed to manage the process and vendors
–Collaborations with business partners is critical
–Appropriate management includes periodic evaluations of system performance
Developing an EC Architecture
•An EC architecture is a plan for organizing the underlying infrastructure and applications of a
site.
•The plan includes the business goals and vision for the site, the information and data required
to fulfill the goals and vision, the application modules that will deliver and manage the
information and data, the specific hardware and software on which the application modules
will run, as well as the security, scalability, and reliability required by the application.
•The 6 steps of development are (according Koontz 2000):
–Step 1: Define business goals and vision
–Step 2: Define the information architecture
–Step 3: Define data architecture
–Step 4: Define your application architecture
–Step 5: Define the EC technical architecture
–Step 6: Define the organization architecture-Human resources and procedures required
DEVELOPMENT STRATEGIES FOR EC APPLICATIONS
(a) Buy the applications (turnkey approach)
(b) Lease
–Types of leasing vendors
•Lease the application from an outsourcer and install it on company premises
•Use an application system provider (ASP)
(c) In-house development: insourcing
–Development approaches
•Build from scratch
•Build from components

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–Prototyping methodology
(d) Other development options
 Join an e-marketplace or exchange
 Join a third-party or reverse auction
 Joint ventures
 Join a consortia
 Hybrid approach
CRITERIA FOR SELECTING A DEVELOPMENT APPROACH
a). For aspiring business
 Functionalities of development packages and criteria of choice
•Information requirements
•User friendliness
•Hardware and software resources
•Installation
•Maintenance services
•Security
•Vendor quality and track record
•Estimating costs
•Measuring benefits
•Personnel
•Forecasting and planning for technology evolution
•Scaling
•Sizing
•Performance
•Latency time(time to complete the task)
•throughput
–Reliability
–Security
b). For ASP vendor:
•Database format and portability
•Application and data storage
•Scope of service
•Support services
•Integration: ERP, CRM, SCM, accounting
System Analysis Activities and Tools
a). Requirements analysis
b). Modeling approaches may be based on:
c). Component-based development
d). Enterprise application integration

CONNECTING TO DATABASES, LEGACY SYSTEMS, AND BUSINESS PARTNERS

a). Connecting to business partners
–Issues to be dealt with are Connectivity, Compatibility, Security and Scalability
b). Web to Database Connection

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VENDOR AND SOFTWARE SELECTION
a). Steps in selecting software package (Martin et al, 2000)
b). Identification of suitable packages
c). Determination of evaluation criteria
d). Evaluation of candidate packages
e). Choosing the package once the short list has been prepared
f). Contract negotiation (EC managers and/or IS department)
g). Service level agreements (SLAs)

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