E- Commerce Project

Electronic Commerce 2 009

Prepar PRIYANK SHRIVASTAVA M.B.E. (FINAL) ROLL NO 9016 Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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ed by:-

Electronic Commerce 2 009

This is to certify that Priyank Shrivastava, student of M.B.E (Master of Business Economic) at Institute for excellence in higher education, Bhopal has successfully completed his project on the topic “A REPORT ON BALANCE OF PAYMENT” under our supervision for the paper titled “International Economics” This project report embodies the original work done by the candidate on the data collection during the field work on actual survey basis, by the means of questionnaire, a copy of which is attached at the end of this project.

Mr. Amit Mandla

Honorary Faculty

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(Computer Department)

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Electronic Commerce 2 009

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ords often fail to express one’s inner feelings of gratitude and indebtedness to one’s benefactors, but then it is the only readily available medium through

which the undersigned can express her sincere thanks to all those who are associated with the work in one way or the other. A project can never exist and thrive in solitude. Project work is never the work of an individual. It is more a combination of use, suggestions

and

contributions

and

work

involving

many

individuals. This project also bears the impact of many people. Thus one of the most pleasant parts of writing this report is the opportunity to thank all those who have contributed towards it. First and foremost, I would like to thank Mr. Amit Kumar Mandla for being the guiding and encouraging figures all through the duration of this project. Without their cheering and invaluable insights into this project, the project work would not have been accomplished. My acknowledgement would be incomplete without extending my sincere gratitude to Dr. Pramila Maini, (Director IEHE) for granting us the permission for conducting this project. I would like to express my gratitude to Dr. B.D Gupta (Head of the Dr. Jugesh Ubboveja who provided their invaluable suggestions during this project. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Economic Department) Faculty in-Charge, Ms Kalpana Malik and

Electronic Commerce 2 009 Last but not the least I would also like to thank my family members and my friends for encouraging me all the time.

E

conomic studies are expected to be not only theoretical but also practical to equip the students coming

out

of

any

Managerial

Educational

Institution after having been mounded and shaped with the knowledge of various Managerial Function would be able to efficient to plan, organize, direct and control man, material and money and contributing their respective share in the achievement of both organization and individual

motive.

This

would

enrich

not

only

the

individuals but also the whole humanity at large. Finance is regarded as the lifeblood of a business enterprise. This is because the modern money market economy, finance is one of the basic foundations of all kinds of economic activities. It is the master key, which manufacturing

and

merchandising

activities.

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Hence

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provides access to all the sources being employed in

Electronic Commerce 2 009 effective management of every business enterprises is closely linked with efficient management of its finances. Thus Financial Management is mainly concerned with the proper management of funds. The financial manager must there fore realize that the action have far reaching consequence for the firms because these action will influences the size, profitability, growth, risk, survival of

the

firms.

There

fore

he

must

have

a

clear

understanding and a strong grasp of the nature and scope of finance functions. Working on a relevant and particular project is apart and

parcel

of

any

specialized

courses

of

higher

education. To fulfill this requirement as a student of M.B.E. I have chosen the project on Costing system in BHEL.

Name:Priyank Shrivastava M.B .E (previous) R

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oll No: - 9016

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Electronic Commerce 2 009

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Electronic Commerce 2 009 Chapter 1: What Is Electronic Commerce? Chapter 2: Types of E-Commerce Technology Chapter 3: Types of E-Business Models and Markets Chapter 4: Types of E-Commerce Providers and Vendors Chapter 5: E-Commerce Web Site Creation Chapter 6: Managing E-Commerce Web Site Development Chapter 7: Building Shopping Cart Applications Chapter 8: Mobile Electronic Commerce Chapter 9: Enhancing a Web Server with E-Commerce Application Development Chapter 10: Strategies, Techniques, and Tools Chapter 11: Implementing Merchandising Strategies

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Chapter 12: Implementing E-Commerce Databases

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Electronic Commerce 2 009

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Electronic Commerce 2 009

Chapter 1: What Is Electronic Commerce?

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n a remarkably short time, the Internet has grown from a quirky playground into a vital, sophisticated medium for business, and, as the Web evolves further, the threshold for conducting successful business online will move increasingly higher. Online consumers are flooding to the Internet, and they come with very high expectations and a degree of control that they did not have with traditional brick-and-mortar companies. Businesses, too, are rushing to join the Internet revolution, and new, viable competitors are emerging in all industries. This chapter details introductory strategies and priorities for electronic commerce, which sets the stage for the rest of the book. It also describes how the platform, portal, and partners are critical to solving business problems in the four most common areas of electronic commerce: direct marketing, selling, and service; value chain integration; corporate purchasing; and financial and information services.

Chapter 2: Types of E-Commerce Technology

Next, the chapter outlines the types of trading mechanisms that can be supported by existing punchout protocols and the asynchronous trading Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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n addition to a general discussion of e-commerce technology, this chapter also covers various business-to-business connectivity protocols between procurement systems, private marketplaces, and suppliers. The chapter describes how WCBE-based suppliers and private marketplaces can connect to diverse procurement systems, other suppliers, and external private marketplaces. Specifically, the chapter shows how WCBE-based suppliers and WCS MPE-based marketplaces can connect to buyers at procurement systems that use punchout, such as Ariba, Commerce One, and mySAP. The chapter then describes how a WCS MPE-based supplier or private marketplace could originate a punchout process in order to connect to either an external supplier or another private marketplace.

Electronic Commerce 2 009 mechanisms, such as request for quotations (RFQs), that require extensions to the punchout mechanisms. The chapter also describes B2B/M2M Protocol Exchange, a tool that IBM has implemented that can map between various protocols used by different procurement systems. Although this chapter focuses on the external partner business-to-business (B2B) protocols, a large part of the integration effort for suppliers is the tie-in to internal processes, such as the processes to handle purchase orders. Chapter 3: Types of E-Business Models and Markets

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o be successful, e-businesses must have a continuous optimization business strategy, solid knowledge management practices, and integrated business process domains. No matter what the business, the e-business model processes are the same. This chapter discusses why the e-business market affords organizations of all sizes and types the opportunity to leverage their existing assets, employees, technology infrastructure, and information to gain or maintain marketshare. Finally, the chapter discusses the need for an integrated value chain and challenges e-business to optimize its intellectual assets and its investments in core business systems in order to deliver its products and services to an unpredictable market. Chapter 4: Types of E-Commerce Providers and Vendors

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With the preceding in mind, this chapter examines types of e-commerce service providers (ESPs) and vendors. It addresses three topics: why many early adopters have struggled with the first generation buy/build approach, how the next-generation ESP model delivers complete, one-stop online sales channels, and which major advantages companies gain by outsourcing their e-commerce infrastructure. You will also learn how an ESP model enables Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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elling online has become an imperative for retailers and an increasing number of manufacturers. Recognizing that a 13% loss in customers can completely eliminate the profitability of their offline stores, retailers have raced to drive e-commerce growth to $66 billion in 2003 (5.7% of U.S. retail). By mid-2004, over 94% of the largest U.S. retailers (over $50 billion in annual sales) will be e-commerce enabled. And, for midsized retailers ($800 million to $50 billion in sales), over 74% will be selling online. Yet these adopters face a fundamental challenge: using the first generation buy/build model, many cannot make money at e-commerce, but none can afford to avoid trying. For most of them, owning and operating an e-commerce infrastructure does not make economic or operational sense.

Electronic Commerce 2 009 manufacturers and retailers to achieve profitability at $40 million to $180 million in online sales, focus your organization on real profit drivers—not technology, ensure reliability and scalability in your Web site and order processing, avoid managing numerous integrations and third-party service relationships, and upgrade functionality continuously and seamlessly over time. Chapter 5: E-Commerce Web Site Creation

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his chapter helps you discover new integrated services that make it easier than ever to secure your Web site and accept online credit card payments. You will also learn how to create an e-commerce Web site as well as how to avoid the risks and challenges involved in e-commerce trust, the best way to secure and authenticate your site so your customers feel comfortable providing sensitive information, and how to enable your site to process online payments in seconds—including credit and debit cards. Chapter 6: Managing E-Commerce Web Site Development

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lectronic commerce is quickly shaping up to be the way business will be conducted in the future. This chapter takes a look at how an ecommerce Web site is managed as it is being developed. In other words, this chapter is not necessarily about electronic commerce in general. It is actually an exercise in building and managing a business-to-consumer electronic commerce site. In addition, this chapter does not discuss management concepts or other tools available to implement e-commerce, but focuses exclusively on Web site servers. Chapter 7: Building Shopping Cart Applications

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T

o generate Hyper Text Markup Language (HTML), servlets must supply formatted strings to println() calls. This technique clogs Java™ code with line after line of hard-to-comprehend HTML. Furthermore, when servlets generate HTML, Web page design requires programmers. JavaServer Pages (JSP) pull HTML out of Java code and create a role for HTML designers. Site development can proceed along parallel tracks (Java design and HTML design), thereby delivering a Web site faster. JavaServer Pages also encourage loose coupling between business logic components and presentation components, thereby making reuse of both more likely. The shopping cart application discussed in this chapter examines the role of JSP in Web architectures and offers a practical example of how to get the most out of your e-business applications.

Electronic Commerce 2 009 Chapter 8: Mobile Electronic Commerce

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he demand for and use of mobile technologies is increasing at a phenomenal rate. Simultaneously, the underlying landscape of mobile technologies is changing rapidly, creating the need for solutions to facilitate the long-term growth and success of mobile enterprise initiatives. This chapter discusses how important it is for software vendors to provide comprehensive solutions to manage, secure, and maintain the mobile application’s infrastructure, while fostering development, integration, and access to applications and information over wireless media. Chapter 9: Enhancing a Web Server with E-Commerce Application Development

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oday, businesses take a pragmatic view of investments in information technology (IT). For IT managers, the key to success is to provide the maximum business value for the minimum cost. This chapter shows how IT must align enhanced server-based application development and operations with the needs and priorities of the business. Chapter 10: Strategies, Techniques, and Tools

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he e-business revolutin that began in 1997 is proceeding at a revolutionary pace—which is to say that it is proceeding rapidly, but not uniformly and not always in the ways that were predicted. This chapter discusses how some e-business industries are moving ahead as fast as technologies permit, and some are taking a wait-and-see attitude. Chapter 11: Implementing Merchandising Strategies

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he Internet is changing the basis of competition for companies of all sizes. Although many successful formulas for e-business development now exist, most are based on one of the following merchandising strategies: Web entrepreneurship, virtual build-out, and operations improvement. This chapter explains how each strategy relies not only on a great Web site, but also on high-quality, system-ready information about products and the merchandising programs that drive sales.

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n just over seven years, e-commerce database technology has become the common user interface of choice for many information dissemination systems. Whereas, relational database management systems (RDBMS) Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Chapter 12: Implementing E-Commerce Databases

Electronic Commerce 2 009 have been the cornerstone for information warehousing for years. The integration of the two technologies have made rapid advances over the last few years. This rapid explosion has led to new challenges for IT managers and developers. There are several competing technologies available that often do not address the issues of heterogeneous environments and Webbased application development. This chapter addresses the challenges of designing and implementing e-commerce database-integrated Web sites. Furthermore, it focuses on e-commerce database-Web integration difficulties in heterogeneous database environments. Chapter 13: Applying and Managing E-Business Intelligence Tools for Application Development

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n organization can effectively address business problems, realizing immediate returns on investment in technology. This chapter very briefly shows how a fully Web commerce-integrated, Windows-based development environment for building, testing, and deploying Web applications meets e-business intelligence (e-BI) application development solution criteria very effectively. This chapter also examines the business and technical requirements for applying and managing e-BI tools for application development solutions. Chapter 14: Types of Security Technologies

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oday, more than ever, organizations are challenged with improving security without incurring a corresponding increase in cost or burden to their existing staff. By comparing the benefits that a new product will provide to the total cost of that product, organizations will make better choices that ultimately lead to greater security. Leveraging existing products is quite often the quickest way to improving both security and the bottom line. Finally, in many cases, organizations can address most of their ecommerce application concerns or problems with the products they already own. With the preceding in mind, this part of the chapter very briefly highlights emerging threats specific to e-commerce application security and provides guidance on effective approaches to e-commerce application protection.

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reating a high-security, high-performance e-business infrastructure demands close coordination of both technical and management policies and procedures. This chapter discusses how e-business security is evolving from an old notion of an information fortress that keeps Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Chapter 15: Protocols for the Public Transport of Private Information

Electronic Commerce 2 009 others out, to a new notion of privacy and trust as you give customers, partners, and remote employees access to your business data. Chapter 16: Building an E-Commerce Trust Infrastructure

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usinesses that can manage and process e-commerce transactions can gain a competitive edge by reaching a worldwide audience, at very low cost. This chapter discusses how the Web poses a unique set of trust issues, which businesses must address at the outset to minimize risk. Customers submit information and purchase goods or services via the Web only when they are confident that their personal information, such as credit card numbers and financial data, is secure. Chapter 17: Implementing Security Integration

E-Commerce

Enterprise

Application

T

his chapter explores e-commerce enterprise application security integration and new technology’s support of rapid deployment of secure e-commerce applications. The technology, based on the integration of distributed component computing and information security, represents new power to mount secure, scalable e-commerce services. The chapter also describes how security enables new e-commerce applications that were not previously feasible, and how e-commerce solutions create new security responsibilities. Next, the chapter describes the many challenges of enforcing security in component-based applications. Finally, the chapter formally introduces Enterprise Application Security Integration (EASI), which is used to tie together many different security technologies and, as a result, provides the framework for building secure component architectures. Chapter 18: Strong Environments

Transaction

Security

in

Multiple

Server

F

This chapter provides you with a basic introduction to digital ID technology and SSL certificates. It then lays out the reasons you might consider managed PKI for SSL certificates as an alternative to one-by-one purchasing. Finally, it presents the features you can expect if you decide managed PKI for SSL certificates is right for your organization. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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or the strongest, most reliable protection of your client-browser communications, Secure Sockets Layer (SSL) certificates are widely recognized as the industry standard. SSL certificates allow your Internet site or corporate network to enable SSL encryption, which authenticates your server and guarantees against alteration and interception of data.

Electronic Commerce 2 009 Chapter 19: Securing and Managing Your Storefront for E-Business

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ith its worldwide reach, the Web is a lucrative distribution channel with unprecedented potential. By setting up an online storefront, businesses can reach the millions of people around the world already using the Internet for transactions. In addition, by ensuring the security of online payments, businesses can minimize risk and reach a far larger market: the 89 percent of Internet users who still hesitate to shop online because of security concerns. This chapter is a continuation of Chapter 18, with very detailed explanations of key issues related to online storefront security. It also describes the technologies that are used to address the issues, and provides step-by-step instructions for obtaining and installing an SSL certificate. Chapter 20: Payment Technology Issues

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nline payment processing requires coordinating the flow of transactions among a complex network of financial institutions and processors. Fortunately, technology has simplified this process so that, with the right solution, payment processing is easy, secure, and seamless for both you and your customers. This chapter provides you with what you need to know about online payment processing issues: online payment processing basics, the payment processing network, how payment processing works, what you should know about fraud, and what to look for in a payment processing solution. After you’ve read this chapter, you’ll understand the issues and essential elements of accepting payments online, the most important step in putting your Web site to work for you. Chapter 21: Electronic Payment Methods Through Smart Cards

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he payment card has been in existence for many years. It started in the form of a card embossed with details of the cardholder (account number, name, expiration date), which could be used at a point of sale to purchase goods or services. The magnetic stripe was soon introduced as a means of holding more data than was possible by embossing alone. In the end, the smart card appeared. That’s what this chapter is all about!

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he payment stage of any electronic bill presentment and payment (EBPP) implementation must be able to integrate tightly with accounts receivable (A/R) and accounts payable (A/P) systems, support backend Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Chapter 22: Electronic Payment Systems

Electronic Commerce 2 009 payment-processing workflows and procedures, and provide detailed reporting capabilities. With the preceding in mind, this chapter is about electronic payment systems. Chapter 23: Digital Currencies

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his chapter discusses the market implications of adopting electronic payment systems and digital currencies in electronic commerce. The key to understanding and exploiting electronic commerce is to recognize it as a market mechanism, in which all components of a market interact and must be analyzed collectively. For example, electronic payment systems bring more than lowered transaction costs, affecting product choices, pricing, and competition. This chapter also examines economic implications of electronic payment systems—especially micropayments enabled by digital currencies in terms of size advantage, the lemons problem, digital product pricing, product differentiation—the commoditization of consumer information and advertisements, and copyrights. In short, electronic payment systems are one of the critical factors that allow process innovations via electronic commerce. Finally, these process innovations may either promote competitive and efficient markets or worsen the trend toward the vertical integration and monopolization in the globalized economy. Chapter 24: International E-Commerce Solutions

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he Internet connects potential customers with merchants in many different countries. This chapter discusses how international ecommerce payment solutions provide a channel for money to cross oceans and borders. Chapter 25: Business-to-Business and Business-to-Consumer

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o help companies make informed decisions and capitalize on the right opportunities, this chapter discusses solutions designed to help companies integrate business partners more effectively. Although this notion encompasses a wide range of business challenges and solutions (including supply chain management, procurement, and CRM), this chapter focuses specifically on one concept: supplier enablement. The supplier enablement initiative and technology solutions (whether they be B2B or B2C) are aimed at helping companies of all sizes to sell to their trading partners more effectively by integrating with customers’ procurement systems, emarketplaces, and other electronic sales channels—all from a single ebusiness foundation. No matter how large or small a business is, or how Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Electronic Commerce 2 009 complex or simple its business processes, supplier enablement solutions will make it easier for your company to reach its customers through whatever purchasing method they prefer. Chapter 26: Summary, Conclusions, and Recommendations

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inally, this chapter summarizes and explores some of the implications to both business and business computing of the continuing evolution of e-business. The chapter also discusses decision points and the fundamental importance of something even more critical to e-business success: ease of integration. This part of the chapter pinpoints 15 essential best practices or recommendations for effective e-service.

Chapter 1: What Is Electronic Commerce? “It is impossible for ideas to compete in the marketplace if no forum for their presentation is provided or available.” —Thomas Mann (1875–1955)

Electronic commerce is doing business online. It is about using the power of digital information to understand the needs and preferences of each customer and each partner to customize products and services for them, and then to deliver the products and services as quickly as possible. Personalized, automated services offer businesses the potential to increase revenues, lower costs, and establish and strengthen customer and partner relationships. To achieve these benefits, many companies today engage in electronic commerce for direct marketing, selling, and customer service; online banking and billing; secure distribution of information; value chain trading; and corporate purchasing.

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Overview

Electronic Commerce 2 009 Although the benefits of electronic commerce systems are enticing, developing, deploying, and managing these systems is not always easy. In addition to adopting new technology, many companies will need to reengineer their business processes to maximize the benefits of electronic commerce. An electronic commerce strategy should help deliver a technology platform, a portal for online services, and a professional expertise that companies can leverage to adopt new ways of doing business. Platforms are the foundation of any computer system. An e-commerce platform should be the foundation of technologies and products that enable and support electronic commerce. With it, businesses can develop low-cost, high-value commerce systems that are easy to grow as business grows. An e-commerce platform’s breadth should also be unmatched, ranging from operating systems to application servers, to an application infrastructure and development tools, and to a development system. Portals are the crossroads of the Internet, where consumers gather and where businesses can connect with them. Companies normally provide customers with a wide range of choices for professional implementation services and tightly integrated software for commerce solutions. Independent software vendors (ISVs) have created specialized commerce software components that extend the platform. This chapter details introductory strategies and priorities for electronic commerce, which sets the stage for the rest of the book. It also describes how the platform, portal, and partners are critical to solving business problems in the four most common areas of electronic commerce: direct marketing, selling, and service; value chain integration; corporate purchasing; and financial and information services.

Businesses communicate with customers and partners through channels. The Internet is one of the newest and, for many purposes, best business communications channels. It is fast, reasonably reliable, inexpensive, and universally accessible—it reaches virtually every business and more than 200 million consumers. Doing business online is electronic commerce, and there are four main areas in which companies conduct business online today: direct marketing, selling, and service; online banking and billing; secure distribution of information; and value chain trading and corporate purchasing. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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E-Commerce: Doing Business on the Internet

Electronic Commerce 2 009 Direct Marketing, Selling, and Service Today, more Web sites focus on direct marketing, selling, and service than on any other type of electronic commerce. Direct selling was the earliest type of electronic commerce, and has proven to be a stepping-stone to more complex commerce operations for many companies. Successes such as Amazon.com, Barnes & Noble, Dell Computer, and the introduction of etickets by major airlines, have catalyzed the growth of this segment, proving the reach and customer acceptance of the Internet. Across consumertargeted commerce sites, there are several keys to success: •

• •

•

•

Marketing that creates site visibility and demand, targets customer segments with personalized offers, and generates qualified sales leads through observation and analysis of customer behavior. Sales-enhancing site design that allows personalized content and adaptive selling processes that do more than just list catalog items. Integrated sales-processing capabilities that provide secure credit card authorization and payment, automated tax calculation, flexible fulfillment, and tight integration with existing backend systems, such as inventory, billing, and distribution. Automated customer service features that generate responsive feedback to consumer inquiries, capture and track information about consumer requests, and automatically provide customized services based on personal needs and interests [3]. This business-to-consumer (B2C) electronic commerce increases revenue by reaching the right customers more often. Targeted and automated up-selling and cross-selling are the new fundamentals of online retailing. Sites that most frequently provide the best and most appropriate products and services are rewarded with stronger customer relationships, resulting in improved loyalty and increased value.

A broad range of financial and information services are performed over the Internet today, and sites that offer them are enjoying rapid growth. These sites are popular because they help consumers, businesses of all sizes, and financial institutions distribute some of their most important information over the Internet with greater convenience and richness than is available using other channels. For example, you have: • •

Online banking Online billing Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Financial and Information Services

Electronic Commerce 2 009 •

Secure information distribution

Online Banking Consumers and small businesses can save time and money by doing their banking on the Internet. Paying bills, making transfers between accounts, and trading stocks, bonds, and mutual funds can all be performed electronically by using the Internet to connect consumers and small businesses with their financial institutions. Online Billing Companies that bill can achieve significant cost savings and marketing benefits through the use of Internet-based bill-delivery and receiving systems. Today, consumers receive an average of 23 bills per month by mail from retailers, credit card companies, and utilities. Secure Information Distribution To many businesses, information is their most valuable asset. Although the Internet can enable businesses to reach huge new markets for that information, businesses must also safeguard that information to protect their assets. Digital Rights Management provides protection for intellectual and information property, and is a key technology for secure information distribution.

The Internet also offers tremendous time and cost savings for corporate purchasing of low-cost, high-volume goods for maintenance, repair, and operations (MRO) activities. Typical MRO goods include office supplies (such as pens and paper), office equipment and furniture, computers, and replacement parts. The Internet can transform corporate purchasing from a labor- and paperwork-intensive process into a self-service application. Company employees can order equipment on Web sites, company officials can automatically enforce purchase approval and policies through automated business rules, and suppliers can keep their catalog information centralized and up-to-date. Purchase order applications can then use the Internet to transfer the order to suppliers. In response, suppliers can ship the requested goods and invoice the company over the Internet. In addition to reduced administrative costs, Internet-based corporate purchasing can improve order-tracking accuracy, better enforce purchasing policies, provide better customer and supplier service, reduce inventories, and give Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Maintenance, Repair, and Operations (MRO)

Electronic Commerce 2 009 companies more power in negotiating exclusive or volume-discount contracts. In other words, the Internet and e-business have changed the way enterprises serve customers and compete with each other, and have heightened awareness for competing supply chains (see sidebar, “Supply Chain Management”). Supply Chain Management Supply chain management (SCM) is changing as companies continue to look for ways to respond faster, improve service for customers, and maximize sales while decreasing costs. SCM solutions must support highly configurable products, such as computers and automobiles, global markets with local specifications, and widely dispersed suppliers and partners. Yet most companies’ SCM solutions are linear, sequential, and designed for controlled conditions. They rely on accurate forecasting of demand, but are disconnected from the actual demand. Decisions are made centrally, and changes typically take days, weeks, or even months. However, companies increasingly need to respond to changes in hours and minutes. Supply chains in this century must be adaptive and provide greater visibility, velocity, flexibility, and responsiveness to enable enterprise value networks to adapt to changes in supply and demand in real time. Management Shift

Supply chain management is now the key to increasing and sustaining profitability. In fact, Stamford, Connecticut-based Gartner Group recently predicted that 91 percent of leading companies that fail to leverage supply chain management would forfeit their status as preferred vendors. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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As supply chain networks extend across organizational and geographic boundaries, companies must find ways to manage the unmanageable. The future of supply chain management lies in the ability of the enterprise to respond instantaneously to shifts in global supply and demand, and to major events that occur across extended supply chain processes. The faster a supply network can adapt to these events, the more value that will be created. For example, with Walldorf, Germany-based SAP® mySAP™ Supply Chain Management (mySAP(tm) SCM), enterprise systems supplier SAP is delivering what it believes is the most adaptive supply chain management solution available on the market. In addition, SAP is developing adaptiveagent technology and repair-based optimization that is expected to enable the next generation of adaptive solutions and services.

Electronic Commerce 2 009 According to SAP, mySAP SCM has demonstrated bottom-line benefits for its users. For example, New York, N.Y.-based Colgate-Palmolive increased forecast accuracy to 98 percent, reduced inventory by 13 percent, and improved cash flow by 13 percent. The reason: mySAP SCM enables end-toend integration of supply chain planning, execution, networking, and coordination. The Profits of Adaptive Proponents of adaptive supply chain networks say that by sharing information about customer demand with all partners simultaneously—rather than in the traditional, sequential fashion, with its inherent delays—network partners can act more like a single entity to stay in-sync with customer needs. The adaptive supply chain network puts the customer at the center of all activities in the supply chain, which allows companies to improve overall costs and profits across the network, instead of just shifting costs to other parts of the supply chain. Given the dynamics of today’s markets, manufacturers need to rethink their business model on an almost continuous basis, keep redefining markets and pricing, serve ever-smaller customer niches, and provide increasingly customized products. Internal integration helps enterprises break down functional silos and share actionable information. The adaptive supply chain network relies upon realtime integration of all supply chain systems, including networking, planning, execution, coordination, and performance-management systems. But, it also requires integration across systems that support a variety of functions beyond the traditional supply chain.

In addition, integration between a product life-cycle management (PLM) system and an SCM solution reduces time-to-market for new products and ensures that engineering changes are seamlessly integrated back into Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Customer relationship management (CRM) is about capturing customer requirements, building life-long customer relationships and brand value, and influencing demand through promotions. This information must be fed back into the supply chain network to improve planning. Although this flow of information generally does not occur now, it represents the key to customersegmentation strategies and effective demand management, which will lead to increasing overall profitability. Customer feedback and trends must also drive product development to ensure that products are designed according to customer requirements.

Electronic Commerce 2 009 manufacturing. Last but not least, aligning a company’s business model with operational capability requires engineering and sourcing products differently. To support mass customization and postponement strategies, products tend to be designed in a modular fashion and sourced from fewer strategic suppliers. Close collaboration with these suppliers on product design is essential to reduce time-to-market, increase product quality, and ensure that products are designed for supply. With that kind of integration, a superior understanding of the customer drives everything—CRM, product design, supply chain operations, and even the value proposition of the entire network. In an adaptive supply chain network, SCM, CRM, and PLM must all work together. That is the hallmark of a truly customer-centric organization—and the key to profitability. Competitive Advantage Making adaptive supply chains a reality means fundamental changes in a company’s internal operations, starting with the integration of processes and systems across organizational boundaries. Then, companies can leverage the increased visibility within and across organizations to achieve change in their supply chain processes, including functionality for the following. Adaptive Planning Today, most supply chain planning and scheduling systems rely primarily upon historical data collected from enterprise resource planning (ERP) and legacy systems. However, as companies aim to create virtually “inventoryless” supply chains, they require the ability to realign demand and supply almost continuously to consider the latest demand situation and supply status. Adaptive planning replaces batch-oriented, period planning with an event-driven, real-time response to demand signals and changing supply situations.

Traditional supply chains rely mostly upon inventory and assets, but the adaptive supply chain network is information-based—it uses shared data for planning and execution processes. By incorporating data garnered from collaborative processes (such as vendor-managed inventory [VMI]; collaborative planning, forecasting, and replenishment [CPFR]; collaborative supply management; and collaborative transportation management), these networks replace inventory and capacity buffers (long used to make up for a lack of supply chain visibility) with information. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Dynamic Collaboration

Electronic Commerce 2 009 Distributed Execution Most execution systems are ill-prepared to support the emerging virtual supply network. Distributed execution considers the distributed nature of processes in a world of outsourcing, in which multiple partners in the extended network might manage a single process. Distributed execution allows the management of processes across different ERP systems by supporting cross-system integration and collaboration. Event-Driven Coordination Today, even small disruptions in supply chains initiate a wave of e-mails, faxes, and phone calls just to keep pace with the problem. Adaptive supply chain networks address the challenge of managing the virtual enterprise through up-to-the minute monitoring and control of business processes and the rapid, intelligent resolution of exceptions. Event-driven coordination complements adaptive planning by trying to solve supply chain exceptions locally to support existing, optimized plans. The result? Faster response to market changes and instantaneous adaptation to customer needs across the enterprise and the network. Continuous Performance Management Most executives would agree that consistent performance metrics are the key to steering the behavior of individuals and reconciling conflicting goals across functional areas. However, key performance indicators (KPIs) also play a major role in managing collaborative processes and in providing decision makers with actionable information to increase the quality and speed of decisions.

Combined, these elements enable companies to implement closed-loop learning processes across the supply network. In business, the ability to adapt to change is increasingly important. For those who do it right, the adaptive supply chain network will be an important competitive weapon. Those who don’t may well become the dinosaurs of their industries [4]. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Continuous performance management enables closed-loop learning processes by allowing the company to measure the quality of processes constantly, and by feeding this information back into supply chain planning. Besides addressing the need for consistent performance metrics, companies are increasingly complementing supply chain KPIs with balanced scorecards to get a level view of the state of the organization, and to align operational targets with strategic objectives across functional silos.

Electronic Commerce 2 009

Value Chain Integration No other business model highlights the need for tight integration across suppliers, manufacturers (see sidebar, “The Manufacturing E-Commerce Bottom Line”), and distributors quite like the value chain. Delays in inventory tracking and management can ripple from the cash register all the way back to raw material production, creating inventory shortages at any stage of the value chain. The resulting out-of-stock events can mean lost business. The Internet promises to increase business efficiency by reducing reporting delays and increasing reporting accuracy. Speed is clearly the business imperative for the value chain. The Manufacturing E-Commerce Bottom Line The economic downturn in the United States has played havoc with the country’s manufacturing and engineering sectors for more than three years, leading to the longest continual month-over-month decline in industrial production since World War II. But, if there is a bright spot in what economists are predicting for manufacturers in 2004, it is a trend toward increasing e-commerce revenues and initiatives within the industrial sectors. The Federal Reserve recently reported that production in American factories fell 3.3 percent. The September 11 terrorist attacks created additional uncertainty in all markets, but particularly in manufacturing, where inventory levels among retailers and suppliers were already high. Consumer spending for durable goods took a drop in the wake of the attacks and as a result of the developing war on terrorism. Analysts also say they do not expect an uptick in manufacturing production until consumers begin spending with confidence.

Historically, online revenue figures in manufacturing, engineering, and supply sectors have been difficult to determine, because most companies in those sectors do not separate online revenue from other income. Economic statistics compiled by the U.S. Department of Commerce and others have consistently noted that although e-commerce activities have continued to Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Still, companies like General Electric and General Motors were reporting increases in online sales and predicting gains in e-commerce by the end of 2003. Officials at GE indicate they expect to increase the amount of online revenue calendar-year-over-calendar-year from $9 billion to $24 billion.

Electronic Commerce 2 009 grow despite unfavorable economic conditions, determining the exact portion of the national economy they represent is difficult. A recent study by the National Association of Manufacturers (the leading industry group of industrial producers) saw dramatic increases in the number of companies developing Web-based activities to reach both new customers and suppliers. Despite the intense hype surrounding e-commerce, right now it’s still just a small fraction of most business and manufacturing operations. But, nearly three quarters of the companies surveyed reported they were developing e-commerce initiatives to grow their revenues, a harbinger of dramatic change down the road. As capital spending rebounds, there should be a significant increase in networking and business-to-business software investments. In another recent study of e-business activities within the manufacturing sector (commissioned by Interbiz, a division of Computer Associates International), a significant increase in focus was shown on e-commerce activities in 2002 within manufacturing and related industrial areas. According to the survey, 56 percent of manufacturing concerns indicated they were actively involved in e-commerce, with 89 percent reporting effectiveness within their e-business strategies; 22 percent reported those activities as “highly effective.” Unfortunately, speed can be costly. Today, approximately 60,000 businesses exchange business documents such as orders and invoices with their trading partners through a standard communication and content protocol called Electronic Data Interchange (EDI). Most EDI implementations use leased lines or value added networks (VANs) that require significant integration for each trading partner. Network design, installation, and administration can be costly in terms of hardware, software, and staff. In fact, these costs are the key reason that EDI is most widely deployed only in larger companies.

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Moving forward, all companies will be able to take advantage of value chain integration through the low cost of the Internet. Open standards for electronic document exchange will allow all companies to become Internet trading partners and function as suppliers, consumers, or both in this business-to-business electronic commerce. This integrated trading will tighten relationships between businesses while offering them greater choices in supplier selection.

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Electronic Commerce 2 009 Issues in Implementing Electronic Commerce Although it is simple to describe their benefits, it is not nearly as easy to develop and deploy commerce systems. Companies can face significant implementation issues: • • • • •

Cost Value Security Leveraging existing systems Interoperability

Cost Electronic commerce requires significant investments in new technologies that can touch many of a company’s core business processes. As with all major business systems, electronic commerce systems require significant investments in hardware, software, staffing, and training. Businesses need comprehensive solutions with greater ease-of-use to help foster costeffective deployment. Value Businesses want to know that their investments in electronic commerce systems will produce a return. Business objectives such as lead generation, business-process automation, and cost reduction must be met. Systems used to reach these goals need to be flexible enough to change when the business changes. Security The Internet provides universal access, but companies must protect their assets against accidental or malicious misuse. System security, however, must not create prohibitive complexity or reduce flexibility. Customer information also needs to be protected from internal and external misuse. Privacy systems should safeguard the personal information critical to building sites that satisfy customer and business needs [6].

Most companies already use information technology (IT) to conduct business in non-Internet environments, such as marketing, order management, billing, inventory, distribution, and customer service. The Internet represents an Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Leveraging Existing Systems

Electronic Commerce 2 009 alternative and complementary way to do business, but it is imperative that electronic commerce systems integrate existing systems in a manner that avoids duplicating functionality and maintains usability, performance, and reliability. Interoperability When systems from two or more businesses are able to exchange documents without manual intervention, businesses achieve cost reduction, improved performance, and more dynamic value chains. Failing to address any of these issues can spell failure for a system’s implementation effort. Therefore, your company’s commerce strategy should be designed to address all of these issues to help customers achieve the benefits of electronic commerce. Your company’s vision for electronic commerce should also be to help businesses establish stronger relationships with customers and industry partners. For example, a successful strategy for delivering this vision is described by three workflow elements (platform, portal, and industry partners), each backed by comprehensive technology, product, and service offerings. From self-service portals to transaction processing, a successful workflow strategy can be the underlying engine delivering state-based, processedfocused control services for e-business applications. Human labor is expensive, and workflow technology allows e-businesses to supplement, and in some cases eliminate, reliance on human supervision and intervention. Workflow Technology

Self-service applications are perfect examples of how workflow can be employed to automatically coordinate requests and track fulfillment, thereby allowing corporations to relocate human resources to more difficult tasks. Ebusiness flexibility can be realized through workflow’s logic encapsulation that isolates the logic of the business process from the Web server middleware and associated Web pages. Every Web page click is an opportunity to invoke workflow-based interaction, guidance, and fulfillment. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Creating e-business processes without a vision for workflow is shortsighted and expensive. Workflow addresses business needs, streamlines transactions, and is the glue for process coordination and consistency.

Electronic Commerce 2 009 E-businesses need workflow technology to react rapidly to process changes. For example, an instant change to the workflow process can be accomplished with a simple change to the workflow map by a nonprogrammer, to effect temporary or continuous changes in the business process, thus accommodating short-term business needs or long-term process improvements. A workflow driven e-business will see immediate shifts that allow it to process more efficiently under high volume circumstances. The bottom line? Workflow design tools should be a core requirement for ebusiness applications. A detailed discussion of workflow technology is presented in Chapter 2, “Types of E-Commerce Technology.” Now, let’s take a look at the transformation of the scope of the Internet and the Web. The discussion centers around the Session Initiation Protocol’s (SIP) effect on multimedia-enabled e-commerce. Microsoft Corporation, “Electronic Commerce Explained,” ©2003 Microsoft Corporation. All rights reserved. The Business Forum 9297 Burton Way, Suite 100, Beverly Hills, CA 90212, (August 2002): pp. 1–19. [3]

Runge, Wolfgang and Renz, Alexander, “Adaptive Networks Broaden Relationships,” © Copyright 2003 SAP AG. All rights reserved, SAP America Inc., Strategic Planning & Support Office, 3999 West Chester Pike, Newtown Square, PA 19073,USA, [Advertising supplement in June, 2002 edition of MSI, Reed Business Information, 2500 Clearwater Drive, Oak Brook, IL 60523 (June 2002)]. [4]

Vacca, John R., Net Privacy: A Guide to Developing & Implementing an Ironclad ebusiness Privacy Plan, McGraw-Hill Trade, 2001. [6]

The renaissance of the Internet age launched an entirely new set of communication technologies and methods. As multiple technologies evolve and interoperate, so do complementary standards, such as those for multimedia applications. The advancement of multimedia applications for the Web has resulted in a wave of new technologies to enhance the Internet experience. From voice to video, the latest developments have resulted in the requisite standards to allow for the full maturation of the technology. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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The Scope of the Internet and the Web

Electronic Commerce 2 009 Voice over IP (VoIP) has gained acceptance within the last few years, with older standards enabling the technology. As more advanced standards mature and enhanced capabilities and features become available, the adoption of VoIP has begun to take off. For example, H.323 is currently the dominant standard for initiating a voice session. But, as more multimedia services, such as unified messaging, video conferencing, instant chat, and presence, gain acceptance in an Internet Protocol (IP) environment, more robust standards are needed. Hence, the creation of an HTTP-based protocol —Session Initiation Protocol (SIP). SIP’s main functions are signaling and call control for IP-based communications. It defines the desired service for the user, such as point-topoint calls, multipoint conferencing, text, voice, or video. Using the protocol, SIP servers perform a routing service that puts the caller in contact with the called party, taking into account the desired service and user preferences. Because SIP has its foundation in HTTP, it eases the integration of voice with other Web services. The Benefits of SIP As the new voice-ready IP standard, SIP enables the initiation of an interactive Internet experience involving multimedia elements, such as video, voice, chat, gaming, and virtual reality. The main advantages of SIP for the VoIP market include enhanced scalability, easy implementation, and dramatically reduced call setup time.

By taking advantage of the Internet, SIP technology provides new service capabilities while supporting the use of key services from the circuitswitched telephone network. IP-based communications can use SIP Uniform Resource Locators (URLs) for addressing, similar to the World Wide Web, in which the form of the URL resembles an e-mail address. The support of both telephony and Web-type addressing enables IP communication to seamlessly bridge a telephone network and the Internet. Users on either network can reach any point on the Public Switched Telephone Network (PSTN) or the Internet without giving up the existing devices or advantages of either. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Another key benefit of SIP for VoIP is the easy integration with many other IP services. Through SIP, service providers can easily add services and applications for VoIP customers while minimizing interoperability issues. SIP is flexible and extensible, easily supporting a wide array of endpoint devices and configurations. More importantly, SIP runs over IP networks, regardless of the underlying networking technology—asynchronous transfer mode (ATM).

Electronic Commerce 2 009 Enabling Multimedia E-Commerce with SIP The emergence of SIP has opened up new doors of innovation, enabling the next generation of e-commerce through the use of VoIP and multimedia applications. The simplicity of SIP technology is facilitating the spread of VoIP around the world. SIP’s straightforward approach has encouraged developers of e-commerce applications and telecommunications providers to implement it into their customer relationship management (CRM) systems. Traditional voice call centers for customer support are migrating to Web support centers where the focus is shifting from pure voice (800 numbers) to e-mail support, text chat, voice, and video with click-to-connect service. The integration of these applications brings a fresh dimension of communication to customer-facing Web sites. As customers experience the benefit of multiple touch points, enterprises are compelled to integrate these new communication methods into their CRM systems. As the enabling protocol, SIP is well-suited to bring these capabilities to the user. Because support for instant messaging and presence is built into the SIP, a whole new level of customer communications can take place. Presence lets users know the availability of other parties, and when coupled with instant messaging and conferencing, allows for communications to happen in a spontaneous fashion. With these added functionalities, the online consumer can experience a rich customer support environment.

SIP-based communications can be achieved with any device, fixed or mobile, such as laptops and Internet-ready phones [5]. In addition, because SIP supports name mapping and redirection services, it is possible for users to initiate and receive communications and services from any location, and for networks to identify users regardless of location. This adds an additional level of usability from a CRM perspective. As e-commerce spreads to cell phones and other handheld devices, this functionality will increase in importance. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Because SIP enables real-time voice and video to become viable applications on many e-commerce Web sites, it enhances Internet call center productivity. With the click of a mouse, a customer can talk to or be in face-to-face contact with a service representative. This level of customer service allows an immediate personal connection with customers—one of the most critical aspects in CRM. The adoption of e-commerce will be bolstered further as consumers begin to rely upon this type of online customer service.

Electronic Commerce 2 009 Now, let’s look at how to use the Web to reach customers. Although customer experience includes intangible, nonquantifiable aspects, it also includes a wide range of entirely measurable Web site elements. Vacca, John R., i-mode Crash Course, McGraw-Hill Professional, 2001.

[5]

Using the Web to Reach Customers The rules are the same. To succeed in e-business, just as in brick-and-mortar, you need customers. And, keeping customers is vastly cheaper than getting new ones. High rates of customer retention (and the referrals that accompany happy consumers) can mean the difference between success and going back to the drawing board. The challenges that e-businesses face, however, in earning and retaining customers are different from those confronted by traditional business. A shopper who drives to the bookstore is not likely to put down the book he wants and drive to another location because of a line at the checkout stand. Someone looking for the biggest selection of CDs cannot go to 20 stores in 6 states in half an hour to check their selection. And, once you have received personal attention from someone at a store, helping you find exactly what you need, it isn’t hard to decide where to go next time. The options and flexibility of doing business online put much more control in the hands of the consumer, placing a premium on the performance, effectiveness, and reliability of an organization’s Web site. There is no one to apologize to Internet customers when the service goes down, or when an image is missing, or to explain what an error message means. And, alternatives are just a click away.

The Shift to E-Business There is no free lunch, though, and along with the benefits of doing business in the new economy comes a new kind of customer, one with different Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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For online consumers, the user experience is the most significant factor in customer retention. Customer experience comprises a range of issues, including ease-of-use, dependability, speed, as well as less quantifiable aspects of a Web site. As the Internet matures and evolves into a ubiquitous, if not preeminent, medium for business, those companies best able to monitor their Web sites and ensure a positive, rewarding customer experience will have an unparalleled advantage in the race to create and retain loyal customers.

Electronic Commerce 2 009 expectations and standards by which companies are judged. Web sites must offer a consistently positive customer experience to win over consumers. Inspiring loyalty is the biggest challenge to e-businesses, and e-consumers are a tough group to win. Thus, the attraction of moving an established, traditional business to the Internet (or of starting a new, pure-play Internet business) involves a variety of factors: • • • • •

Global reach Higher profile 24 × 7 availability Targeted focus Cost savings

Global Reach A small organization no longer has to be a local organization. Anyone with Web access (in a living room in Chicago, in a log cabin in Alaska, or in a café in Bordeaux) can spend their time, and their money, at any online business. Higher Profile A company can have a significant Web presence and profile, even with relatively modest depth and breadth to its inventory. On the Internet, a small but very efficient company can have the profile of a much larger, deeppocketed competitor. 24 × 7 Availability E-businesses do not have to close at the end of the day. Information and services can be available any time, any day, allowing revenue to be earned without interruption. Targeted Focus and Cost Savings

New Medium and New Expectations Internet consumers expect e-business to be faster and more extensive, with more options and services, than brick-and-mortar alternatives. They expect Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Companies do not have to be all things to all consumers. Through the Internet, individual customers can get goods and services tailored to their needs. Significant savings from, among other things, streamlining inventory and distribution channels are possible in effective e-businesses.

Electronic Commerce 2 009 their experience online to be easy, as uncomplicated as buying a newspaper or filling the car with gas. And, if they encounter any problems with the site, or have difficulty understanding how it works, or are otherwise frustrated, they know they can go somewhere else, to another Web site, and be there in no time. Speed Wins Speed is crucial for successful e-businesses. Consumers expect Web sites to be fast. A useful starting point is the eight-second rule of thumb. The rule says that a significant number of users are unwilling to wait longer than eight seconds for a page to load or an action to be executed, and as technology improves and speeds increase, the time users will wait before leaving the site is likely to decrease. Many factors, from fundamental site architecture to network traffic at certain times of the day, affect how fast a site will function. Vital for success in any e-business is ongoing monitoring of the performance of its site, identifying cycles of usage and ranges of performance, and making necessary modifications and upgrades to ensure speed. There have been attempts to quantify the economic loss due to unacceptably slow Web page download speeds, which is one aspect of ebusiness customer churn. It is estimated that as much as $473 million is lost per month from customer bailout from impatience. If It Isn’t Broken Key to the user’s experience and level of comfort in e-business is consistency. Whereas a brick-and-mortar business could not redesign the store every month, e-businesses can, and some do. The relative cost for changing the look and feel of an e-business is low, and the appeal of adding new features is a strong temptation. There is a fine line, however, between a “sticky” site, one that attracts new customers and urges old ones to return, and a site that changes so often and in such ways that customers must relearn the site. Instead of spending the extra time to deal with the hassle, they will go to the competition, the one that is fundamentally consistent in its presentation and functionality, and they will stay there.

Many new e-business consumers are novices not only with online transactions, but also with the Internet in general, and this complicates the issue of glitches and raises the ante for Web sites to function smoothly. A Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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No Experience Required

Electronic Commerce 2 009 computer neophyte is less likely to understand, or have patience with, technical difficulties. A recent survey conducted by ICL, an e-business services company, indicates relatively high levels of stress and anxiety caused by computer problems for “typical” users. • • •

Forty-nine percent found computer problems more stressful than being stuck or delayed on public transportation. Seventy-nine percent found computer problems more stressful than having to spend a weekend with a spouse’s parents. Twenty-three percent found computer problems more stressful than being left by a partner or spouse [1].

No Web site runs perfectly 100 percent of the time, but those that are close to 100 percent (Web sites that minimize outages and are able very quickly to detect and correct problems when they do occur) have a significant advantage. Web sites that frustrate users scare them away; Web sites that consistently offer pleasant, easy experiences keep their customers. The Often Missing Piece A less tangible but equally vital aspect to customer loyalty in e-business is trust. For consumers, participation in a typical Internet business model requires divulging personal information for registration purposes, often including sending credit card numbers to the site. Increasingly, customers are cautious when sending such information and wary about sites that they suspect may not adequately guard the privacy of their demographic and financial information. Web sites that have prolonged outages or frequent transaction failures break the chain of trust with their consumers, pushing them to other providers that instill stronger confidence and, therefore, loyalty, in their customers. To be successful, an e-business has to be: 1. Sophisticated and fast 2. Easy and consistent 3. Extremely reliable [1]

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Without these, customers will click away, going to the sites that give consumers the interaction with e-business that they expect and require.

Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

Electronic Commerce 2 009 Acquisition, Retention, and Referrals Customer acquisition costs range wildly from one company to the next, but everyone understands that once a company has acquired customers, the key to maximizing revenue is keeping them. • •

• • • •

It is 7 to 11 times cheaper to keep a current customer than to add a new one. A Xerox study showed that their totally satisfied customers were 7 times more likely to make additional Xerox purchases in the subsequent 29 months than the merely satisfied. Companies can increase profits by almost 100% if 6% more of their customers were retained. Estimates show up to 91–96% of a brand’s profits come from loyal customers. A study by McKinsey & Co. calculates that an 11% increase in repeat customers translates to a 10.6% increase in company value. Bain & Co./Mainspring research shows that online grocers must keep customers for 29 months just to break even [1].

Loyal customers are the best customers. People who are committed to Buick and who will not buy a car from any other manufacturer are the ideal consumers for Buick. They do not require further acquisition expenses, they will buy Buick cars for their children and recommend Buick to their friends, and they are statistically much more likely to buy up, getting newer models loaded with optional equipment. The recent boom in online loyalty reward programs demonstrates that e-business understands the lifetime value of loyal customers and is starting to shift resources to retention efforts. Many of these incentives are financial, offering repeat buyers the opportunity to earn points that can be redeemed for goods or services. Although low prices and points programs are a strong draw initially for consumers, e-consumers will, as in traditional business, grant their loyalties ultimately to those businesses that offer them the best experience, of which price is just one of several considerations. Low prices are the carrot on the stick for acquisition, but user experience and customer service are the tools of retention. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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The preceding are potentially frightening data to e-business, which lives, or dies, in a medium where jumping from one Web site to another, changing brands and loyalties, is easier and faster than ever. In the realm of ebusiness, high rates of retention are imperative for success and even survival.

Electronic Commerce 2 009 Of special interest to e-business are customers gained through referrals from existing customers, as well as customers lost due to negative reactions about a particular Web site. According to a recent Bain & Co./Mainspring survey, online apparel customers referred 4 people after the initial purchase and 8 people after 11 purchases. The global reach of the Internet becomes a handicap when a consumer brings up a list of dozens of online retailers in a given industry. E-business consumers are generally anxious for referrals from people they trust to help guide them through the ever-growing sea of Web sites. Standard barriers to following through on a referral are absent in e-business. If a friend recommends a music store that is 45 minutes away, you might decide not to go because of the distance. Even a local store may not tempt you if you know that the parking is a nightmare or if the skies just dropped two feet of snow outside your window. When a friend recommends a Web site, you get cozy at your desk and go there. Consumer trust, discussed earlier, is a unique challenge facing e-business. Going to a brick-and-mortar store lends a sense of confidence and implicit trust that has to be earned in other ways in the context of the Internet and of doing business through a computer screen. A referral from a trusted friend or colleague is invaluable to establishing a relationship between consumers and e-businesses. Referrals also provide an exception to the high cost of acquiring new customers. Every customer who is referred to a company is “free,” or is at least a significant offset to the marketing and sales budgets for customer acquisition. Though somewhat more difficult to measure, word-of-mouth advertising is extremely important and can have a remarkable impact on a company’s bottom line.

E-businesses tread a thinner line than traditional businesses in efforts to attract and keep consumers. Someone who drives to a store will extend greater latitude to that shop (in terms of what the consumer likes or dislikes about the store, its selection, its layout, its service) than to a Web site. Online consumers expect speed, reliability, and broad selection. When they do not get it, they leave. All it takes to leave is typing a new Web address or following a link. For e-business, there is no dress rehearsal and often no second chance. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Poor Performance and Failure

Electronic Commerce 2 009 Internet users are increasingly barraged by new sites, new services, all competing for their eyes and their dollars. When consumers find a site they like, they add a bookmark and stop hunting. And when a site does not satisfy consumers, they don’t return and they tell their friends not to go. At issue for consumers is the tension between knowing they have more control with e-business and feeling overwhelmed by the choices, and this tension can spell disaster for an e-business that does not adequately mind its store. Often a single negative experience for a consumer means he or she will not return to that site to give that company another chance. If someone tries to buy a puzzle online and the transaction fails, there are enough other online toy retailers that this consumer need never return to the one that failed. A recent study of online shopping by the Boston Consulting Group for a 12-month period reveals unsettling statistics for e-commerce companies battling to attract and keep consumers. •

• •

Consumers who are satisfied with their first-time online purchase spent, on average, $600 in 13 transactions; dissatisfied first-time purchasers spent $250 in 5 transactions. Five out of six e-consumers experienced a failed purchase; 29% of all online purchases failed. Twenty-four percent of online shoppers who experienced a failure stopped shopping at that site; 7% also stopped shopping at that company’s brick-and-mortar store[1].

The new and rapidly expanding business of online securities trading offers a vivid example of the best and the worst for e-businesses. Online trading has offered unprecedented access for thousands of users to securities markets. The reach of brokerage houses has extended into demographic sectors that previously had neither the time for nor the access to securities trading, while securities markets have extended their hours, with talk of 24-hour trading on Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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In e-business, there are no humans to counter a negative experience. A failed transaction or a site crash is extremely difficult to qualify or explain online, leaving the consumer alone at the computer to decide if it makes more sense to try again or go elsewhere. The message is clear for any company that wants to succeed in the Internet economy: make sure the site works extremely well, and when something goes wrong, which it inevitably will, find out about it and fix it fast. When a popular Web service had a nearly-24-hour outage, the company’s CEO recognized that such an event could be disastrous, even fatal, for the company, and she or he effectively lived in the IT operations center during the crisis and the following weeks.

Electronic Commerce 2 009 the horizon. Thousands of consumers place millions of trades at relatively low commission, filling the coffers of online trading firms. Moving the apparatus for trading to the desktop, however, has resulted in a wealth of information passing to the customer, with a corresponding shift in power away from the brokerage company. With the Internet, customers are more aware of stock prices, of transactions, and of failures. When a glitch prevents online traders from selling stock or canceling orders when the price falls, those traders lose money and can very accurately identify how much they have lost. Most of the leading Internet brokerages have suffered outages, ranging from a few minutes to several hours, and the costs to these businesses go far beyond the defection of angry customers. Online brokerages are having to compensate customers for losses suffered when trades could not be executed because of outages, and these payments are stretching into the millions of dollars for each of several leading online brokerages. Not only does an outage scare off otherwise potentially loyal customers, it forces the brokerage to write checks to unhappy customers on their way out the door. A final significant problem facing e-businesses (at least those that are publicly traded) is the response on Wall Street to reports of prolonged service failures or customer dissatisfaction. In a market where a company that reports earnings slightly below projections can see the price of its stock tumble, word of a serious disruption of service can be crushing as investors (many of them trading online) flee and unload their stock in that company.

Ensuring the Customer Experience Given the economic repercussions of a company’s inability to build and retain a base of satisfied, loyal customers, the need for effective sitePrepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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The price paid by e-business (in lost revenue from dissatisfied customers as well as payments made for consumer losses) from inadequate performance and significant site outages is potentially crippling, especially for pure-play Internet companies that have no other customer base or business medium to depend on. No Web site is perfect, however, and glitches are a reality in any online application. The key for e-business is to establish performance benchmarks to attract and keep customers and to minimize technical problems that make sites unavailable or prevent them from meeting necessary standards. No e-business will be successful without adequate and appropriate tools to monitor performance of its Web site and alert site operators immediately about slowdowns and failures of service.

Electronic Commerce 2 009 monitoring applications is paramount, and a site monitor must be sophisticated enough to measure more than uptime. According to Forrester Research, only 27% of site managers look beyond uptime to specific network performance standards, and even fewer monitor transaction success rates. It is these more complex data, however (not simply whether a page is available) that give important insight into the user experience and associated rates of retention and referral. Service-level agreements (SLAs) that provide real value stipulate more than simply what percent of time a site will be up, and monitoring applications gives internal operators and hosting facilities the tools they need to measure other important parameters. Identifying whether a slowdown is from an application failure or from a network bottleneck is advantageous to IT personnel trying to fix the problem. Additionally, effective use of monitoring software can identify not only real-time glitches, but also design shortcomings. Thorough reports from monitors might show, for example, a system weakness that is responsible for transactional failures. The more quickly and accurately a problem and its cause are identified, the faster it can be fixed. Monitoring software also gives companies the data they need to make projections about future site usage and the improvements required to accommodate increased activity. Successful e-businesses can see their usage double in as little as three to six months. Understanding growth and anticipating future needs can mean the difference between recognizing the need and getting that extra server now, or waiting until increased traffic crashes the system.

With the preceding in mind, how do industry-leading executives perceive the use of e-commerce technology in their companies? What are the business benefits provided by transaction management systems? Should your company build and maintain its own transaction management system, or buy electronic trading network services? This next part of the chapter answers these questions and further discusses the costs, benefits, and perceptions of technologies that enable interenterprise information Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Features and services like these (what Forrester Research calls “Transaction Management Services”) are provided through effective, sophisticated monitoring software. It is this integrated Web quality monitoring that Forrester sees as the next step to managing the total quality of Web-based business. If, as they predict, e-commerce reaches global hypergrowth by 2003, it will be those companies with effective monitoring systems already in place that are able to survive and succeed.

Electronic Commerce 2 009 exchange, or what is described as the transaction management market (TMM). “E-Business Customer Retention,” © Copyright 2003 Mercury Interactive Corporation, Mercury Interactive Corporation, Building A, 1325 Borregas Avenue, Sunnyvale, CA 94089, 2003. [1]

Benefits of the E-Commerce Market The letter “e” lost much of its language-domineering swagger with the fall of the dot-com economy. Technology marketers, journalists, and analysts now cringe at “e”-inspired products and concepts. Venture capitalists hide their money-stuffed mattresses when Silicon Valley experts drop by with business plans. Yet, electronic commerce veterans in some of the largest companies in the United States, companies such as Ford, Cisco, Wal-Mart, Procter and Gamble, McKesson, and Compaq, see opportunity in the midst of ecommerce turmoil. Types of E-Commerce Providers and Vendors Overview

For many companies demanding online profitability and reliability, the traditional buy/build approach is no longer the best option. Without ever buying a piece of software or hardware, new business architectures enabled by e-commerce Internet service providers (ECISPs) allow companies to establish fully customized online sales channels. Under guarantees of worldclass service delivery, the ownership, integration, and ongoing management of this infrastructure can be outsourced. By freeing retailers and manufacturers to focus on their brand, merchandise, and customers—not the technology, ECISPs radically improve the attractiveness of e-commerce. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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The Internet has proven to be a disappointment for many retailers and manufacturers, as sales channels are hyped to be both efficient and virtual. First generation e-commerce adopters now find themselves mired in technology bearing little in common with their core businesses, because they invested in an infrastructure often costing hundreds of millions of dollars. Today, industry analysts estimate that one-time e-commerce setup costs, including technology and labor, range from $22 million to $42 million, depending on transaction volume (5,000 to 25,000 transactions/day) for companies building from scratch. Very few companies make money, and even fewer return an attractive ROI at those levels.

Electronic Commerce 2 009 This chapter examines types of ECISPs and vendors. It addresses three topics: how the next generation ECISP architecture delivers complete, onestop online sales channels, which major advantages companies gain by outsourcing their e-commerce infrastructure, and why many early adopters have struggled with the first generation buy/build approach. You will also learn how an ECISP architecture enables manufacturers and retailers to achieve profitability at $50 million to $290 million in online sales, avoid managing numerous integration and third-party service relationships, ensure reliability and scalability in your Web site and order processing, focus your organization on real profit drivers—not technology, and upgrade functionality continuously and seamlessly over time. Traditional Buy/Build Approach Over 93 percent of first generation e-commerce adopters utilized a “buy/build architecture” in establishing their technology platform. This architecture generally begins with a commerce software package from leading vendors such as BroadVision, Blue Martini, ATG, and Microsoft (see Table 4.1)[1]. Bolted upon this are dozens of individual applications to manage the online channel: planning, merchandising, marketing, fulfillment, customer service, business intelligence, and so on. Hardware connects this infrastructure to the Internet, including database, Web, and application servers; routers and firewalls; load balancers; and the secure facility that hosts it all. To customize and integrate the platform, most companies rely on a systems integrator for 3 to 12 months of hard work that is rarely completed on time or within budget. Table 4.1: Sample of e-commerce software vendors Description

Ariba

Ariba provides an open commerce platform to CheMatch, build B2B marketplaces, manage corporate Chevron, purchasing, and electronically enable Covalex, Dow, suppliers and commerce service providers on Merck the Internet.

Commerce One

Commerce One enables buyers and sellers to Duke Energy, trade and creates new business opportunities Eastman, for all trading partners. Commerce One offers Praxair, Shell, solutions for companies who want to establish Schlumberger a portal on the Global Trading Web, those who want to host portals for others, and those

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Sample Customers

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Vendor

Electronic Commerce 2 009 Table 4.1: Sample of e-commerce software vendors Vendor

Description

Sample Customers

Crossworlds Software

CrossWorlds Software is a leading provider of Dow Chemical, e-business infrastructure software to enable DuPont, Royal the integration and automation of business Philips processes within enterprises and among trading partners using the Internet (acquired by IBM).

e-Credit

eCredit.com, Inc. is a leader in the market for Beckman, BP real-time credit, financing, and related Amoco, Cargill, services for e-business through the Chevron, eCredit.com Global Financing Network™. With Commerx, Inc. the Global Financing Network, the company (PlasticsNet.Co intelligently connects businesses to financing m), Conoco, partners and global information sources so Procter & credit and financing decisions can be Gamble, Texaco processed in real time at the point of sale.

HAHT Commerce

HAHT Commerce, Inc. is the leading global Celanese, Dow provider of business-to-business sell-side e- Corning, commerce solutions. HAHT Commerce e- OxyChem, Scenarios™ are the first suite of packaged Montell Internet applications that integrate and Polyplefins, automate marketing, selling, fulfillment, and Sigma-Aldrich service functions across the entire business customer life cycle, allowing companies to increase revenue, improve service levels, and lower costs to their distribution channels and customers.

i2 Technologies

i2 Technologies is the leading provider of OxyChem supply chain optimization solutions. The RHYTHM family of software provides comprehensive decision support across both Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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looking for a comprehensive e-procurement solution and robust return on investment. The company’s products include the Commerce One BuySite e-procurement application and the Commerce One MarketSite Solution, the technology that allows Internet market makers to build open marketplaces and link them to the Global Trading Web.

Electronic Commerce 2 009 Table 4.1: Sample of e-commerce software vendors Vendor

Description

Sample Customers

IBM

IBM e-business technology and solutions help BOC, Degussachemical and petroleum companies compete Hüls, Eastman for market leadership in the following key Chemical, eareas: building efficient and flexible supply Chemicals, value chains, delivering more than price and quality in customer relationships, providing emarket solutions that transform your business architecture, and building business value through ERP extensions.

Moai

Moai is a leading provider of negotiated e- Eastman commerce solutions for online auctions, online procurement, and e-marketplaces. Although Moai’s primary focus is on customers in the business-to-business market, the company also has customers in the business-to-consumer and consumer-toconsumer markets.

mySAP.com

The mySAP.com marketplace is an open Various electronic hub that creates seamless intercompany relationships for buying, selling, and collaborating within and across industries. It provides the infrastructure, security, and applications to transform previously disconnected business transactions into a single collaborative process.

Oracle

Oracle Corp. is the world’s leading supplier of Hoechst Marion software for information management. The Roussel, ICI company offers database, tools, and Chloro application products, along with related Chemicals, IMC consulting, education, and support services, Global Inc, in more than 145 countries around the world. Reichhold Oracle provides an Internet-ready platform for Chemicals building and deploying Web-based applications, a comprehensive suite of Internet-enabled business applications, Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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interenterprise and intraenter-prise supply chains: from suppliers’ suppliers to customers’ customers.

Electronic Commerce 2 009 Table 4.1: Sample of e-commerce software vendors Vendor

Description

Sample Customers

Sapient

Sapient provides Internet strategy consulting, Amoco, sophisticated end-to-end solutions, and ChemConnect, launch support to Global 1000 and start-up Praxair companies. As Architects for the New Economy(r), Sapient helps clients define their Internet strategies and design, architect, develop, and implement solutions to execute those strategies.

webMethods

webMethods is the leading provider of open Ashland solutions for business-to-business (B2B) Chemicals, integration. The webMethods B2B(tm) ChemConnect, solution provides companies with integrated, Eastman direct links to buyers and suppliers, Chemical, FMC connecting them to major B2B marketplaces Corp., The Geon and enabling real-time, interactive Company, communication through the Internet, Optimum regardless of existing technology Logistics, infrastructure. Powered by XML, webMethods OxyChem, B2B can automate critical business processes, Ventro Corp. such as customer relations, procurement and financial services, supply chain management, logistics, and sell-side/buy-side e-commerce.

With this approach, each retailer and manufacturer reluctantly enters the technology management business and replicates an infrastructure that exists at every other company. Bits and pieces might be outsourced to gain scale and expertise, but the core technology platform gets re-created countless times. Drawing a real estate analogy, this would be similar to all mall-based retailers building, owning, and operating the facilities in which their stores reside, rather than renting floor space from specialized mall developers. In an industry that has never invested heavily in IT (under 5% of revenues on average), this technology ownership approach has proven challenging, especially for midsized retailers and manufacturers. Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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professional services for help in formulating ebusiness strategy, as well as in designing, customizing, and implementing e-business solutions.

Electronic Commerce 2 009

Electronic Payment Methods Through Smart Cards

Overview The electronic payment card has been in existence for many years. It started in the form of a card embossed with details of the cardholder (account number, name, expiration date), which could be used at a point of sale to purchase goods or services. The magnetic stripe was soon introduced as a means of holding more data than was possible by embossing alone. The magnetic stripe also allowed cardholder details to be read electronically in a suitable terminal, so that checks could be made with little or no human intervention about the cardholder’s creditworthiness or whether the card had been reported lost or stolen. Card technology has advanced over the years to keep ahead of the worldwide increase in card-related crime. As the criminal fraternity found ways of producing sufficiently good counterfeit cards, the card companies introduced new ways of combating the problem. A succession of antifraud measures have been introduced over the years, such as the hologram, the Card Verification Value (CVV, a value stored on the magnetic stripe that can be used to determine if a card has been produced illicitly), and in some cases, photographs of the cardholder[2].

From the anticrime perspective, there are a number of benefits in adopting the smart card. The card itself (or in conjunction with the terminal) can make decisions about whether or not a transaction can take place. Secret values can be stored on the card that are not accessible to the outside world— allowing, for example, the card to check the cardholder’s PIN without having Prepared By :- PRIYANK SHRIVASTAVA (M.B.E. FINAL) |

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Magnetic stripe cards have now been developed to the point where there is little or no further scope for introducing more anticrime measures. This has caused the card associations to look at new technologies to take the plastic card well into the twenty-first century. One technology that offers many benefits is the smart card—essentially, a small computer chip embedded into a plastic card with the same dimensions as the magnetic stripe card. The only difference the cardholder sees is a small metal area on the face of the card that contains a set of electrical contacts through which the chip can be accessed.

Electronic Commerce 2 009 to go online to the card issuer’s host system. Also, there is the possibility of modifying the way the card works, while it is inserted in a point-of-sale terminal—even to the point of blocking the card from further transactions if it has been reported lost or stolen. As well as these antifraud measures, the smart card is seen as offering a number of other benefits to the card issuer and cardholder. These additional benefits are an integral part of building the business case for introducing smart card technology. Some of the other benefits of introducing smart cards are: •

• •

The ability to have more than one payment application resident on the card. For example, a card could contain an “electronic purse” to provide the equivalent of cash, usually for lower-value transactions, such as parking, tickets, newspapers, and so forth. The ability to have other applications, such as loyalty schemes, and access to information facilities (libraries) coresident on the card. The possibility of reducing online validation costs by allowing the card to operate offline more of the time.

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There are many issues to be resolved before such all-embracing cards become commonplace, the most obvious ones being who owns the card and who controls which applications can be loaded or deleted. Today, the banks are interested mainly in providing payment-related services to their customers and most of the current activity surrounding the provision of smart card-based credit/debit services—sometimes with an additional electronic purse facility.

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Electronic Commerce 2 009

BIBLIOGRAPHY www.google.com www.ecommercepaypal.com www.onlinebook.com

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some part from weckepida

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