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1. INTRODUCTION

Networks and Commercial Transactions – Internet and Other novelties

– Electronic Transactions Today – Commercial Transactions –
Establishing Trust – Internet Environment – Internet Advantage –
World Wide Web

Internet

No world wide organization running the Internet.

Rules have to be followed which is defined by standard bodies.

Network

Network is an Interconnection of Computers

Commerce

Commerce is a division of trade or production which deals with the

exchange of goods and services from producer to final consumer . It
comprises the trading of something of economic value such as goods ,
services , information or money between two or more entities.

E- Commerce

The marketing buying and selling of products and services over electronic
systems such as the Internet and other computer networks .

"Electronic commerce" or "e-commerce" refers to all commercial

transactions in which one or more of the following stages are processed
electronically:

 advertising and product promotion

 selection
 ordering
 payment
 delivery
 use
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Dangers associated with electronic commerce

One of the distinguishing features of e-commerce is use of the internet.

The main problems can be broken down into three areas:

Communication:

In open networks communications can pass through many nodal points.

The user does not know how well messages are protected by other systems
or network operators and there is a wide range of opportunities to read
and/or tamper with the communication.

Component security:

All the components which are connected to the internet - whether a

user PC or a retailer's server - must be adequately protected against
possible attacks, including against local attacks. The insiders also cause
greatest danger to the company’s data for the reason of the personal gain.

Establishment of identity :

Another security aspect of e-commerce systems is the unequivocal

establishment of the identity of the persons one is communicating with.
Similarly, it is easy to falsify the name that appears as the sender of an
e-mail.
Therefore additional measures must be taken for mutual identification and
authentication.

Benefits of e-commerce

E-commerce offers following benefits to the companies:

 Reduction in cost due to
1. Cheaper Internet prices.
2. Less paper work involved due to digitization of information.
3. Reusing the digitized information in many different ways.
E.g. catalog data stored in database can be presented
electronically via web and also it can be printed in
customized catalogs targeted at specific market niches.
4. Reduction in support staff. E.g. compiling and publishing
Frequently Ask Questions (FAQ) can help user to get the
answer to these questions at their finger tips 24 hrs a day, 7
days a week.
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5. Outsourcing of products and services globally.

 Improving the quality of goods
Direct contact with customers can help tracking
customer satisfaction, requesting more customer
feedback and presenting custom solutions.
 Increase in the speed of services
Because all the information is available right at
fingertips, and because only one medium is involved,
everything right form advertising, marketing,
purchasing to customer support can be done at the
fastest rate.
 Increase in the market share
It opens avenues for new markets and new customers.
E.g. by expanding the business globally.

Electronic commerce on different Perspectives (viewpoint)

From a Communication Perspective : E-Commerce is the ability to

deliver products , services, information or payments via networks such as
the Internet and World Wide Web

From an Interface Perspective: E-Commerce involves various

information and transaction exchanges Business to Business, business to
consumer, consumer to consumer

From a Business process Perspective : E-commerce includes activities

that directly support commerce electronically by means of networked
connections

From an Online Perspective : E-commerce is an electronic environment

that makes it possible to buy and sell products, services and information
on the Internet. The products may be physical such as cars or services
such as news or consulting.

From a Structural Perspective : E-commerce involves various media

data text, web pages, Internet telephony or IP telephony or voice over the
Internet.

VOI Products (Voice over the Internet)

Telephony applications:
 IP connections available
 Cool talk
 NetMeeting

From a Market Perspective : E-commerce is a world wide network for

doing business.
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INTERNET AND OTHER NOVELTIES

Customer can gain access to an Internet merchant’s system across the

Internet without having to know anything about the intervening Networks

Customer

The
Internet
Merchant

A worldwide system of interconnected computer networks. The origins

of the Internet can be traced to the creation of ARPANET (Advanced
Research Projects Agency Network) as a network of computers under
the auspices of the U.S. Department of Defense in 1969. Today, the
Internet connects millions of computers around the world in a
nonhierarchical manner unprecedented in the history of
communications. The Internet is a product of the convergence of
media, computers, and telecommunications. It is not merely a
technological development but the product of social and political
processes, involving both the academic world and the government (the
Department of Defense). From its origins in a nonindustrial,
noncorporate environment and in a purely scientific culture, it has
quickly diffused into the world of commerce.

The Internet is a combination of several media technologies and an

electronic version of newspapers, magazines, books, catalogs, bulletin
boards, and much more. This versatility gives the Internet its power.

Earlier Days

 Broadcasting network, particularly television was used to market

products (but orders cannot be placed using television) one way
approach.
 Telephone lines were used for many by consumers and merchants
for business transactions(placing orders,etc)
 Payments have been made using credit cards and cheques, etc.
 Highly sensitive business transactions have been processed through
ATM network.

Present Days

Buying and selling of products in electronic market place will be as

simple and trusted as buying by phone or in person.
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A MODEL FOR COMMERCIAL TRANSACTIONS

There will be differences between different types of transactions. Large

corporation buys raw material from its supplier is different from a child
getting a candy from corner store.

Some issues involved in E- Commerce:

Establishing Trust

Retail Store

 Before purchase can be made from a retail store, a customer must

enter it.
 Most shops are open to public and customer can walk in.
 Merchant may control access to the goods it offers in several ways
 It can sell to all comers through an open store front
 Selling to a certain client (wholesalers selling to resellers only)
 Doing business only with referred customers.
 Degree of restrictions a merchant make on his product will
depend upon his business.
o An automobile ask for license before a test drive
o Book store don’t mind strangers browsing through their
books.

 Customer choice of doing a transaction (buying a product)

 Whether the establishment carries the product being sought.
 Is it reliable establishment?
 Payment method displayed on the stickers of the door(one
criteria)

Both customer and merchant each establish a level of trust with each
other.

Merchant Customer
Customer is a potential Merchant is a reliable seller
purchaser.
Capable of selecting and Capable of delivering and
paying products in time. serving the product if
necessary.

After confinement from both parties a higher level of trust is required.

Issues Concerned By Both Buyer And Seller

Many products have distribution limits (to whom It can be given and
whom not)
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e.g.
 Prescription drugs may not be dispensed to anyone without a
legitimate prescription.
 Alcoholic beverages may not be sold to minors and may be
subject to other sales restrictions.(National holiday not to be
sold)
 Firearms and Ammunition are subject to a wide range of
restrictions
 Tobacco-not to minors.

Establishing trust between partners in a commercial transaction taking

placing in public network is very difficult.

Merchant

 Merchant can judge in person during transaction.

 Online transaction offers no opportunity for judgement.
 Correlating identities on the Internet with actual individuals is
difficult.
 E-Merchants cannot afford to trust everyone or even anyone.

Customer

 How long a webpage of a company will exist?

 Constructing a counterfeit webpage representing itself as a part
of large corporation

Trust is required between buyers and sellers.

Negotiating A Deal (Try To Reach An Agreement By Discussion)

Trivial matters in retail stores

1. Determining the item to be purchased.
2. Price to be charged.

Common method adopted:

1. Selects the desired item.

2. Price clearly marked in the product.
3. Desired product not available (color, size, flavor version is not in
stock)
4. Retailer may have to order the product or offer an alternative deal.
5. Special price is also applied for products that are special but out of
stock.

Retail store E-Com

Validity of the merchant Required special mechanism
offering price to ensure that buyer placed
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an order.
Identity of the item desired Seller offered the same
by the customer. product for the specified
price.

Ordering products over the Internet does not offer

a. An explicit method to reference the offering price
b. Nor an explicit method to reference the original order.

Payment & Settlement

Heart of any transaction is the exchange of values(Money).

Normal Procedure
1. Purchase item in person.
2. Buyers give a cash or cheques or credit card.
3. Receives the product in return and a receipt.

Translating these actions into electronic form takes some procedures.

There are mechanisms which allow payment information to be kept private

by encrypting it by keeping it entirely offline or by using third parties to
settle transactions.

In Internet transactions

1. Unless product available digitally, the buyer has to trust the seller until
goods are delivered.
2. Customer can avoid problems by patronizing trusted Internet vendors
(a person giving financial or other support to a person or organization)
3. To use a major credit card company that will back up the consumer in
the event of a problem with the vendor.

Vendor takes smaller risk. When selling online since credit cards are
authenticated through automated connections.

Payment vehicles and currencies:

A great deal of attention is focused on the online transaction.

The offline buyer has many options for transaction exchanges.

1. Common are cash
2. Providing an audit trial and a paper record of the
transaction( Personal check)(Claim of petrol allowance)
3. Credit cards

E-Com
1. Digital currencies are developed.
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2. Digital signature technologies permit the authentication and

certification of digital transmitted documents.

Products of delivery:

1. Any products, food football or even a computer can be delivered

physically to the customer.
2. Greater level of trust is required between merchant and
customer.
3. Customer must wait until the product is delivered.
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Digital products:

Digital products that can be delivered electronically are being sold

electronically.

New s paper Digitised Photo Book (no Photo) music CD Full Movie S/W

1000
Full Movie, 750,
900
900
800 S/W, 1000, 800
music CD, 375,
700
700
Book (no Photo),
600
400, 600
500
`
400 Digitised Photo,
300 300, 350

200
News paper, 100,
100
100
0
0 200 400 600 800 1000 1200

Online Accessibility and Sale of Various Digital Products

Information products such as news articles information from databases

and other traditional text or data and all can be delivered immediately
after purchase over a network connection.

S/W Example of Digital Product

Some vendors want to ensure that a third party cannot eaves drop on the
product transaction and gain use of the material being sold without paying
for it

THE INTERNET ENVIRONMENTS

On the personal side, Internet is growing power they had never before.
Email, Message goes quickly and cost is almost zero.
On the business side, the rise of the Internet as the enabler of
E- Commerce is changing how companies manage their business.
The Internet is the
1. Fastest growing
2. Most user Friendly
3. Most commercially popular technology.

Advantages of Internet
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1. Marketing and selling products and services:

1. Advertisement reaching customers quickly and cheaply.

2. Reaching any one anywhere without paying extra for distance or
duration.
3. The Internet is host thousands of electronic publications that
provide promotional opportunities for any business.
4. Website attracts millions of readers on a daily basis.
5. Company use Internet to send email mass mailing to customer
surveys are send to selected customers, notices about special
cases.
6. Electronic media are also much easier to update.

2. Internet is open

1. All the Internet protocols are open and public and any one can
use them to write s/w implementations that can interoperate with
other computers and network.
2. A wide range of implementation available from free ware and
share ware versions of the Internet.

3. Doing business fast

1. E-Selling is conducted in minutes rather than hours/days.

2. Waiting on phone to place order is reduced.
3. This speed compresses business processes and promotes the
growth of a customer base.

4. Gathering opinions and trying out new ideas:

1. Internet is the ideal place for trying out new ideas at low cost.
2. Opinions can be gathered from anywhere.

5. Promoting a paper free environment:

1. Company memos, handbook, catalogs, promotional material,

employee handbook, report can be placed on the company
intranet and retrieved or circulated electronically anytime by
authorized personnel.

6. Providing a superior customer service and support resource

1. Most websites generate customer feed back in the way of

comments, suggestions and complaints.
2. A common support resource is FAQ (Frequently Asked
Question).
3. A FAQ eliminates having staff answer the same questions over
and over again.
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4. If a new question comes the answer is added to the list.

5. Using email, customer support also frees company personnel
from being tied to a telephone.

7. Efficiency and unequaled cost effectiveness

1. Major corporation are spending hundreds of million of dollars on

sales promotion.
2. Cost of establishing and maintaining even sophisticated website
for that purpose is affordable.

8. Supporting Managerial functions, spreading ideas, Ease of

Technical support
The traditional managerial function of
1. Planning
2. Organizing
3. Directing
4. Controlling
All the above requires managers to
 Collect
 Evaluate
 Distribute management information

In organization with branches worldwide,

1. Internet sends business information through a company’s

network and across network around the globe.
2. Email is convenient tool for managers to reach employees,
bosses, customers and supplies quickly and at no charge.
3. The Internet has spawned discussion groups chat rooms, and
online interactive session in which technical and managerial
staff evaluates products and processes and arrives at value added
decisions.
4. Better technical support is one of the key benefits of linking to
the Internet.

Example

IBM offers customers and technical support fixes bugs and handles
software upgrades on the Internet.
1000 of free software programs available for anyone to download.
 Internet continues to deliver thousand of database of research data
from medicine, vehicles, and food preparation to hundreds of R&D
discussion group.
 For thousands of research journals, automated searches through
current and back issues are available in minutes.
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 Company research, they uses Internet to seek information about

customer tastes and preferences to profile a customer base for a new
product or test a new concept to see if it is worth developing.

9. Triggering New Businesses

Given the world wide networking of business and commerce, mere

presence is bound to trigger one type of business activity or another.
Eg.
 Tiny commercial filter makes in Lynchburg Virginia landed $6
million contract with government of Saudi arabia from the Internet.
 A startup company owned by students generated $11 million in
revenues in 1999 from selling used books nationwide.
Internet is truly moving from novelty to necessity.

Limitations

1. Security & privacy

2. Fakes & forgeries
3. Other threats (Hackers, worms, viruses, Trojan horse)

WORLD WIDE WEB

World wide web is the fastest

1. growing market place.
2. Research facility
3. Communication tools in the world.

Internet:

It is an infrastructure that links hundreds and thousands of network

to one another.

World Wide Web:

It is the whole constellation of resources that can be accessed using

tools such as FTP,HTTP and TELNET.
An organization of files designed around a group of servers on the
Internet, programmed to handle requests from browser software that
resides on user pc’s.
1. World wide web is not limited to text & graphics, listening of Audio&
video files is also possible.
2. Users must first download the file and then use a s/w application to
play the file.

TCP/IP- A set of protocols that provide the basis for operating the
Internet.
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TCP/IP does not include any ability to control the speed or consultancy at
which information is transferred. Some packets may more quickly while
other are slowed down because of congestion at a particular network site.

Streaming Technology has provided an adequate but far from ideal

solution to the audio and video streaming application begin playing the
file as it is being downloaded rather than waiting until the entire file is
received. This means that the user does not have to wait for the file to the
completely downloaded.

WORLD WIDE WEB STANDARDS

1. The www is defined by handful of protocol specifications.

2. Software developers use these specifications to implements the
web browser & web server programs.
3. browser  HTTP  Server. Interaction between server and
browser are made through HTTP. www is a client server system.
Content is held by web servers and requested by clients of web
browsers.
4. URL(Uniform Resource Locator) protocol specifies how
individual resources( files, documents or even a specific location
of a document) are to be identified with www.
5. Web browsers use these URL in HTTP requests to remote
servers.
6. Web documents stored on the server that have been specially
tagged using HTML tags.
7. Tags allows different parts of a document to behave differently.
Most important are the abilities of text & graphics to behave as
pointers to other parts of a document.

Web Page:

A document on the web is called a webpage.

Home Page:

The first page in a series of related documents or a site is called a

homepage.

Browser:

A browser is a software program loaded on a pc that allows the user

to read or access information stored on the Internet.
It is a vehicle that enables the user to interface with the Internet.
The browser takes the user instructions and converts them into a
language and a format that can be sent to remote site and executed.

Web server:
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A web server is the destination point on the Internet to offer web

services, a computer must be connected to the Internet, be running a
webserver program and have web documents available.