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What is e-Commerce? E-commerce is an emerging concept that describes the process of buying and selling or exchanging of products, services, and information via computer networks including the internet. A modern business methodology ... to cut costs while improving the quality of goods and services and increasing the speed of service delivery. Definition of E-Commerce from Different Perspective 1. Communications Perspective EC is the delivery of information, products/services, or payments over the telephone lines, computer networks or any other electronic means. 2. Business Process Perspective EC is the application of technology toward the automation of business transactions and work flow. 3. Service Perspective EC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery. 4. Online Perspective EC provides the capability of buying and selling products and information on the internet and other online services. Benefit of e-Commerce Access new markets and extend service offerings to customers Broaden current geographical parameters to operate globally Reduce the cost of marketing and promotion Improve customer service Strengthen relationships with customers and suppliers Streamline business processes and administrative functions Scope of E-Commerce Marketing, sales and sales promotion Pre-sales, subcontracts, supply Financing and insurance Commercial transactions: ordering, delivery, payment Product service and maintenance
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Co-operative product development Distributed co-operative workingUse of public and private services Business-to-administrations (e.g. customs, etc) Transport and logistics Public procurement Automatic trading of digital goods Accounting Dispute resolution
FORCES ARE FUELING E-COMMERCE 1.Economic forces 2. Marketing and customer interaction forces 3. Technology and digital convergence Convergence of content Convergence of transmission 4. Implications of various forces
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TYPES OF E-COMMERCE
Business-to-Business (B2B): electronic market transactions that take place between organizations Typically in the B2B environment, E-Commerce can be used in the following processes: Procurement; order fulfilment; Managing trading-partner relationships. Business-to-Consumer (B2C): retailing transactions with individual shoppers typical shopper at Amazon.com is a consumer Business to Consumer e-commerce is relatively new. This is where the consumer Accesses the system of the supplier. It is still a two way function but is usually done solely through the Internet. Consumer-to-Consumer (C2C): consumer sells directly to consumers, examples individuals selling in classified ads, auction sites allowing individuals to put up items for auction e.g, e-bay These sites are usually some form of an auction site. The consumer lists items for sale with a commercial auction site. Other consumers access the site and place bids on the items. The site then provides a connection between the seller and buyer to complete the transaction. The site provider usually charges a transaction cost. In reality this site should be call C2B2C.
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Consumer-to-Business (C2B): individuals who sell products or services to organizations and those who seek sellers and conclude a transaction Consumer to Business is a growing arena where the consumer requests a specific service from the business.
Types of Electronic Payment Systems Banking and financial payments Large-scale or wholesale payments (e.g., bank-to-bank transfer) Small-scale or retail payments (e.g., automated teller machines and cash dispensers) Home banking (e.g., bill payment) Retailing payments Credit cards (e.g., VISA or MasterCard) Private label credit/debit cards (e.g., J.C. Penney Card) Charge cards (e.g., American Express)
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On-line electronic commerce payments oToken-based payment systems Electronic cash (e.g., DigiCash) Electronic checks (e.g., NetCheque) Smart cards or debit cards (e.g., Mondex Electronic Currency Card) oCredit card-based payment systems Encrypted credit cards (e.g., World Wide Web form based encryption) Third-party authorization numbers (e.g., First Virtual) Electronic or Digital Cash
E-cash is a kind of currency that exists in the form of digits. It transforms the cash amount to a series of encrypted numbers, representing the currency value by the serial numbers. After the client opens an account and deposit money in the bank that provides e-cash service, he will be able to go shopping in stores that accept e-cash.
Properties of Electronic Cash oDigital cash must have a monetary value; it must be backed by cash (currency), bankauthorized credit, or a bank-certified cashiers check. When digital cash created by one bank is accepted by others, reconciliation must occur without any problems. Without proper bank certification, digital cash carries the risk that when deposited, it might be returned for insufficient funds. oDigital cash must be interoperable or exchangeable as payment for other digital cash, paper cash, goods or services, lines of credit, deposits in banking accounts, bank notes or obligations, electronic benefits transfers, and the like. oDigital cash must be storable and retrievable. Remote storage and retrieval (such as via a telephone or personal communications device) would allow users to exchange digital cash (withdraw from and deposit into banking accounts) from home or office or while travelling. oDigital cash should not be easy to copy or tamper with while it is being exchanged. It should be possible to prevent or detect duplication and double spending of digital cash. ELECTRONIC CHECKS Electronic checks are designed to accommodate the manyindividuals and en-tities that might prefer to pay on credit orthrough some mechanism other than cash. Electronic checks aremodeled on paper checks, except that they are initiated electronically,use digital signatures for signing and endorsing, andrequire the use of digital certificates to authenticate the payer, thepayers bank, and bank account. The security/authenticationaspects of digital checks are supported via digital signaturesusing public-key cryptography.
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Benefits of Electronic Checks Electronic checks have the following advantages: Electronic checks work in the same way as traditional checks,thus simplifying customer education. By retaining the basic characteristics and flexibility of paper checks while enhancing the functionality, electronic checks can be easily understood and readily adopted. Electronic checks are well suited for clearing micro payments; the con-ventional cryptography of electronic checks makes them easier to process than systems based on public-key cryptography (like digital cash). The payee and the payees and payers banks can authenticate checks through the use of public-key certificates. Digital signatures can also be validated automatically. Electronic checks can serve corporate markets. Firms can use electronic checks to complete payments over the networks in a more cost-effective manner than present alternatives. Further, since the contents of a check can be attached to the trading partners remittance information, the electronic check will easily integrate with EDI applications, such as accounts receivable. Electronic checks create float, and the availability of float is an impor-tant requirement for commerce. The third-party accounting server can earn revenue by charging the buyer or seller a transaction fee or a flat rate fee, or it can act as a bank and provide deposit accounts and make money from the deposit account pool. New forms of payment include: Digital cash: Systems that generate a private form of currency that can be spent at ecommerce sites. Online stored value systems: Systems that rely on prepayments , debit cards, or checking accounts to create value in an account that can be used for e-commerce shopping. Digital accumulating balance systems: Systems that accumulate small charges and bill the consumer periodically. These systems are especially suited for processing micropaymentsfor digital content. Digital credit account: System that extend the online functionality of existing credit card payment systems. Digital checking: Systems that create digital checks for e-commerce remittances and extend the functionality of existing bank checking systems. Credit card Credit card represents an account that extends credit to consumer, permits consumers to purchase items while deferring payment, and allows consumers to make payment to multiple vendors at one time. TYPES OF CREDIT CARD PAYMENTS
Payments Using Plain Credit Card Details Payments Using Encrypted Credit Card Details
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Payments Using Third-Party Verification Payments Using Encrypted Credit Card Details
OTHER EMERGING FINANCIAL INSTRUMENTS Debit Cards at the Point of Sale (POS) The fastest growing number of electronic transactions today is debit card point-of-sale transactions. Such a transaction occurs when a customer uses a debit card to make a purchase from a merchant (supermarket, gas station, convenience store, or some other store thataccepts such cards instead of us-ing cash, check, or credit card)
Debit Cards and Electronic Benefits Transfer. Debit cards are being used extensively for electronic benefits transfer (EBT). Electronic benefits transfer uses debit cards for the electronic delivery of benefits to individuals who otherwise may not have bank accounts.
SMART CARDS Smart cards, also called stored value cards, use magnetic stripe technology or integrated circuit chips to store customer-specific information, including electronic money. The cards can be used to purchase goods or services, store information, control access to accounts, and perform many other functions. ELECTRONIC FUNDS TRANSFER Electronic Funds Transfer is used to settle credit card transactions by transferring funds between the seller and the bank, which has issued the credit card to the customer. A Clearing House would settle the accounts of the sending bank and the receiving bank.
A credit card is a system of payment named after the small plastic card issued to
users of the system. A credit card is different from a debit card in that it does not remove money from the users account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user) to be paid to the merchant. It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. Advantages and Disadvantage of credit cards:
Credit cards have advantages over checks in that the credit card company assumes a larger share of financial risk for both buyer and seller in a transaction. One disadvantage to credit cards is that their transactions are not anonymous, and credit card companies do in fact compile valuable data about spending habits. Record keeping with credit cards is one of the features consumers value most because of disputes and mistakes in billing. Encryption and transaction speed must be balanced, however, as research has show that on-line users get very impatient and typically wait for 20 seconds before
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What is a debit card? A debit card (also known as a gift card) is a plastic card which provides an alternative payment method to cash when making purchases. Physically the card is an ISO 7810 card like a credit card; however, its functionality is more similar to writing a cheque as the funds are withdrawn directly from either the cardholders bank account (often referred to as a check card), or from the remaining balance on the card. An example of the reverse side of a typical debit card: 1. Magnetic stripe 2. Signature strip 3. Card Security Code Advantages and Disadvantages Debit and check cards, as they have become widespread, have revealed numerous advantages and disadvantages to the consumer and retailer alike. Advantages are as follows: A consumer who is not credit worthy and may find it difficult or impossible to obtain a credit card can more easily obtain a debit card, allowing him/her to make plastic transactions.
Use of a debit card is limited to the existing funds in the account to which it is linked, thereby preventing the consumer from racking up debt as a result of its use, or being charged interest, late fees, or fees exclusive to credit cards. For most transactions, a check card can be used to avoid check writing altogether. Check cards debit funds from the users account on the spot, thereby finalizing the transaction at the time of purchase, and bypassing the requirement to pay a credit card bill at a later date, or to write an insecure check containing the account holders personal information. Like credit cards, debit cards are accepted by merchants with less identification and scrutiny than personal checks, thereby making transactions quicker and less intrusive. Unlike personal checks, merchants generally do not believe that a payment via a debit card may be later dishonored. Unlike a credit card, which charges higher fees and interest rates when a cash advance is obtained, a debit card may be used to obtain cash from an ATM or a PIN-based transaction at no extra charge, other than a foreign ATM fee.
Electronic Tokens An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution.
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Short notes
EFT: An electronic funds transfer (also known as EFT) is a system for transferring money from one bank to another without using paper money. Its use has become widespread with the arrival of personal computers, cheap networks, improved cryptography and the Internet. Credit card: A credit card is a system of payment named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the users account after every transaction. Debit card: A debit card (also known as a gift card) is a plastic card which provides an alternative payment method to cash when making purchases. Physically the card is an ISO 7810 card like a credit card; however, its functionality is more similar to writing a cheque as the funds are withdrawn directly from either the cardholders bank account (often referred to as a check card), or from the remaining balance on the card. E-checks: Electronic checks are designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash. Electronic checks are modelled on paper checks, except that they are initiated electronically, use digital signatures for signing and endorsing, and require the use of digital certificates to authenticate the payer, the payers bank, and bank account. Smart cards: Smart cards, also called stored value cards, use magnetic stripe technology or integrated circuit chips to store customer-specific information, including electronic money. The cards can be used to purchase goods or services, store information, control access to accounts, and perform many other functions. Smart cards are basically of two types: Relationship-based smart credit cards, Electronic purses. E-cash: Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. E-token: An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution. Electronic tokens are of three types: 1. Cash or real-time. 2. Debit or prepaid. 3. Credit or post-paid.
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A home banking service, in connection with a PC and modem, lets the bank become an electronic gateway to customersaccounts, enabling them to transfer funds or pay bills directly to creditors accounts.
Off-the-shelf Home Finance Software
This category is a key player in ce-menting relationships between current customers and helping banks gain new customers. Examples include Intuits Quicken, Microsoft Money, and Bank of Americas MECA software. This software market is attracting interest from banks as it has steady revenue streams by way of upgrades and the sale of related products and services.
Online Services-Based Banking
This category allows banks to set up re-tail branches on subscriber-based online services such as Prodigy, CompuServe, and America Online.
World Wide Web-Based Banking
This category of home banking allows banks to bypass subscriber-based online services and reach the cus-tomers browser directly through the World Wide Web. The advantages of this model are the flexibility at the back-end to adapt to new online transaction processing models facilitated by electronic commerce and the elimination of the constricting intermediary (or online service). Open Versus Closed Models While it is clear that electronic commerce and electronic banking are in-evitable, the technology models for providing these services may not yet be fully understood by the banking industry at large. Two technology models of online banking are open and closed systems. Briefly, in an open system, content changes can occur easily because of the use of standard technology and components. For instance, a banking interface developed around the Web is an open system that is easy to customize to a banks changing needs. On the other hand, a closed system is one in which the changes are difficult since everything is proprietary. For example, a banking interface developed around a package such as Intuits Quicken cannot be modified unless the vendor distributes a new version of its software. Banks need to be familiar with both these models when offering prod-ucts and services online. With the high level of customer interest in PC banking and the emergence of the Internet as a vehicle for doing business, many banks have announced plans to offer Internet banking services. A handful of banks have already set up home pages on the Internet to provide existing and potential customers with information about upcoming ser-vices. However, with the exception of SFNB, few banks are offering any ac-tual banking transaction services, as they do not yet have the necessary technology or expertise. Internet banking differs from traditional PC banking in several ways. Typically, the bank provides the customer with an application software pro-gram that operates on the customers Pc. The customer then dials into the bank via modem, downloads data, and operates the programs that are resident on his Pc. The customer is able to send the bank a batch of requests,such as transfers between accounts. Any software upgrade has to be incor-
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poratedinto new releases and redistributed to the customer, and as more functionality is added to the software, more and more space and speed are required from the customers computer. MANAGEMENT ISSUES IN ONLINE BANKING The challenge facing the banking industry is whether management has the creativity and vision to harness the technology and provide customers with new financial products necessary to satisfy their continually changing fi-nancial needs. Banks must deliver high quality products at the customers convenience with high-tech, high-touch personal and affordable service. In order to achieve this, management has to balance the five key values that increasingly drive customers banking decisions: simplicity, customized ser-vice, convenience, quality, and price. Online banking will realize its full potential when the following key elements fall into place: The development of an interesting portfolio of products and services that are attractive to customers and sufficiently differentiated from competitors. The creation of online financial supply chains to manage the shift from banks as gatekeeper models to banks as gateways. The emergence of low-cost interactive access terminals for the home as well as affordable interactive home information services. The identification of new market segments with untapped needs such as the willingness to pay for the convenience of remote banking. The establishment of good customer service on the part of banks. The fact that technology increases the ease of switching from one bank to an-other means that banks that do not offer superior customer service may see low levels of customer loyalty. The development of effective back-office systems that can support so-phisticated retail interfaces. Marketing Issues: Attracting Customers Marketing Issues: Keeping Customers
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provided by Peapod. In contrast, there is a growing segment of the population for whom time constraints are less of a problem. The demographic outlook in the United States is for an increasing share of older shoppers (age 50 and above) who prefer shopping at stores rather than online. However, the product mix of-fered by many department stores and malls is increasingly out of touch with the aging population and does not reflect the shift in purchasing power. Also, with the aging of the population, there is evidence to indicate a shift in consumer interest away from material goods and toward experi-ences, such as travel and recreation. In addition, as people get older, they tend to become more frugal. Retailers will need to concentrate on value by offering new product mixes. By this we mean a product mix that includes not only merchandise but also bundles in entertainment and recreational shopping with movie theaters, restaurants, bookstores, libraries, and community meeting facili-ties. This sort of change is already occurring in bookstore design (such as Borders Bookstores and Barnes and Noble), which include a variety of facil-ities such as coffee shops. However, building shopping malls based on these new business models is a risky venture and requires huge investments. Consumer Behavior Consumer behavior is more volatile than ever before, and companies need new ways of responding to consumer needs and satisfying demand. According to one survey, the typical consumer spent only four hours a month in a shopping mall in 1990 versus ten hours in 1985, and sales per square foot dropped. Specialty retailing-power centers, discount malls, discount stores, and catalog shopping-has become one solution for closely monitoring consumer trends and reacting to them quickly. All of these alter-natives have one thing in common: they provide consumers with a very large selection of producers priced with deep discounts. Consumers are no longer as influenced by brand names as they used to be. The emergence of the value shopper is changing retailing. Today, the shopper is less willing to pay the premium for the brand name and much more attentive to quality and value. The decline in gross margins is the first evidence of the impact of that change, reflecting lower initial markups and more discriminating shoppers in that segment. Clearly, retailers that are fo-cused on providing value-the best price, service, and selection-regardless of the brand name will be successful. The real differentiating characteristic for retailers will be in their ability to define what the broad or niche con-sumer segment is looking for, identifying characteristics of customers in each target segment, and learning how to bundle products and package brands so that they become the preferred choice for online customers Technology Improvements in Electronic Retailing Today, electronic retailing is still far from being a competitive threat to more traditional store retailing (see Table), but it is becoming increas-ingly attractive as technology and applications improve, and retailers gain experience.
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Three dominant forms of electronic retailing channels are: television re-tailing, CD-ROM retailing, and online servicebased retailing, in which we include Web-based retailing. Now we can discuss about the most prominent one: the television retailing. Management Challenges in Online Retailing While changes in retailing may be driven by technology, managerial vision is required for successful implementation. Traditionally, retailing has been a low-tech environment in which retailing executives often relegated technology issues to back-room operators. These managers are most at risk, as they do not have a clue that a major revolution has begun. Most of them have never used a computer (or had to), never been on an online service, and do not know what the Internet is or what it can do. The winners will be the players who understand how to leverage the unique capabilities of the on-line medium to effectively meet the changing needs of the consumer. While the technology required to implement online retailing is matur-ing, many management issues remain unanswered. No one really knows yet how to build and run a successful, mass market online mall. The sales Medium is new, the technology is new , and retailers have a lot to learn about tricky technology, customer behaviour , and management issue . But one thing is clear: For online retailing to succeed, online technology must complement management and operational strategy. E-Retailing E-retailing essentially consists of the sale of goods and services. Sometimes we refer to this as the sale of tangible and intangible goods, as shown in Figure 2.1.2(a) We can divide tangible goods into two categories: physical goods and digital goods.
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Examples of physical goods would be a book, a television set, a video recorder, a washing machine, etc. Examples of digital goods are software and music, which may be downloaded from the internet. The sale of intangible goods is sometimes called E-servicing
Features of E-Retailing
1. The provision of an on-line catalogue, which allows one to browse through different categories of goods. Thus, it is dynamic and linked with order process. 2. The provision of a search engine, which is a very important feature that does not exist in traditional retailing. 3. The provision of a shopping cart, which allows convenient goods selection. An ability to provide an automatic price update. 4. Personalization of store layouts, promotions, deals, and marketing. 5. The ability to distribute digital goods directly. Thus, these goods can be downloaded instantly. 6. An on-line customer salesperson, who can help customers to navigate through the site. 7. An order status checking facility, which is a useful feature before submission. 8. The use of Forums (collaborative purchasing circles) to create a customer community and thus increase stickiness. What is an Intranet? The Internet has captured world attention in recent years. In reality, growth of internal networks based on Internet technologies known as the Intranet is outpacing the growth of the global Internet itself. Extranet: An extranet is a private network that uses Internet protocols, network connectivity, and possibly the public telecommunication system to securely share part of an organizations information or operations with suppliers, vendors, partners, customers or other businesses.
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Digital Libraries
Digital libraries represent a powerful new set of tools for preserving, disseminating, and reusing technology on a large scale within distributed corporate organizations. Drawing from disciplines including information retrieval, the Web and library science, digital libraries provide a means for capturing and preserving design, manufacturing and quality information for complex products and systems during their lifecycles.
Types of Digital Documents Document Imaging (JPEG, TIFF) Scanning documents for storage and faxing Structured documents (SGML,ODA, RTF) Structuring and encoding information using document-encoding standards Distributed hypertext (HTTP) Structuring interlinked textual and multimedia information for distributed network access Active or compound Structuring applications around a document interface
Issues behind document infrastructure Variance in end users needs Diversity in hardware performance Information distribution Architecture for corporate digital libraries Document constituencies End users Developers Document librarians Document oriented processes Document creation Document media conversion Document production and distribution Document storage and retrieval Document based work flows
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Corporate data warehouses An information based approach to decision making Involvement in highly competitive, rapidly changing markets with a large, diverse customer base for a variety of products Data stored in many systems and represented differently Data stored in complex, technical, difficult-to-decipher formats, making conversion for analysis difficult FunctionsCorporate data warehouses Allows existing transaction and legacy systems to continue operation Consolidates data from various transaction systems into coherent set Allows analysis of vital information about current operations for decision support
Types of Data Warehouses Physical data warehouses Logical data warehouses Data library Decision support systems
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Components of the agent computing environment User preferences Knowledge of what is where Cost, resources and time constraints Task, process or domain knowledge Telescript Agent Language SAFE-TCL (Tool Command Language)
E-Choupal
E-Choupal is an initiative of ITC Limited (a large multi business conglomerate in India) to link directly with rural farmers for procurement of agricultural / aquaculture produce like soybeans, wheat, coffee, and prawns. eChoupal was conceived to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries.
The echoupal Infrastructure An ICT kiosk with Internet Access In the house of a trained farmer Sanchalak Within walking distance of target farmers Additional investments in Solar Power & VSATs toovercome weak infrastructure.
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y y y y y y
eEducati C ARACTERSTICS OF ITC e- C OUPAL Cust er centric Used for many commodities and multi le transactions Uses local talent and local people and develops local leaders Extended to local as well as global procures Nurtures local entrepreneurs Uni ue CRM programme in commodity exports
ITC e- CHOUP
SANCHALAK
FARMERS
CHOUPAL SAGAR
ITC
PC and INTERN
SAMYOJAK
GE ERAL PRODUCTS OFITC e- C OUPAL Processed Frui s (Mango, Guava, Papaya etc.) Food Grai s (Rice, Wheat and Pulses) Feed Ingredients (Soya bean ) Edi le Nut (Groundnut) Coffee & Spices Marine Products (Shrimps and Prawns )
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