Master of Business Administration - MBA Semester IV MI0039 eCommerce - 4 Credits Assignment - Set- 1 (60 Marks) 1.

. Warigon is a retail company and they want to automate the payment syste m. Assume that you are the design engineer of that company. What are the factors that you would consider while designing the electronic payment system? Ans : The following factors like non technical in nature, that must be consider while designing the electronic payment system for the retail company to automate the payment system: Privacy. A user expects to trust in a secure system; just as the telephone is a safe and private medium free of wiretaps and hackers, electronic communication m ust merit equal trust. Security. A secure system verifies the identity of two-party transactions throu gh user authentication and reserves flexibility to restrict information/services t hrough access control. Tomorrows bank robbers will need no getaway cars-just a co mputer terminal, the price of a telephone call, and a little ingenuity. Millions of dollars have been embezzled by computer fraud. No systems are yet fool-proof , although designers are concentrating closely on security. Intuitive interfaces. The payment interface must be as easy to use as a telepho ne. Generally speaking, users value convenience more than anything. Database integration. With home banking, for example, a customer wants to play w ith all his accounts. To date, separate accounts have been stored on separate da tabases. The challenge before banks is to tie these databases together and to al low customers access to any of them while keeping the data up-to-date and error free. Brokers. A network banker -someone to broker goods and services, settle conflicts, and facilitate financial transactions electronically-must be in place. Pricing. One fundamental issue is how to price payment system service. For exam ple, should subsidies be used to encourage users to shift from one form of payme nt to another, from cash to bank payments, from paper: based to e-cash. The prob lem with subsidies is the potential waste of resources, as money may be invested in systems that will not be used. Thus investment in systems not only might not be recovered but substantial ongoing operational subsidies will also be necessar y. On the other hand, it must be recognized that without subsidies, it is diffic ult to price all services affordably . Standards. Without standards, the welding of different payment users in differe nt networks and different systems is impossible. Standards en at interoperabilit y, giving users the ability to buy and receive information, regardless of which bank is managing their money. None of these hurdles are insurmountable. Most wil l be jumped within t next few years. These technical problems, experts hope, wil l be solved as technology is improved and experience is gained. The biggest ques tion concern how customers will take to a paperless world.The e? yw?[ ?U mesh of interconnected data highways of many forms: telephone wires, cable TV wires, ra dio-based wireless-cellular and satellite. Far from complete, the I-way is quickly acquiring new on-ramps and even small hi ghway systems. The numerous constructors are either in competition with or in al liance with one another, all in an effort to convince traffic to use their on-ra mps or sections of the highway because, like toll ways, revenues in e-commerce a re based on vehicular traffic, in our case, vehicles transporting information or multimedia content. The myriad transactions among businesses means that the ult imate winner must select the technology for the I-way that best matches future b usiness needs by using todays tools. Building an access road to a ghost town or a highway too narrow to handle the traffic will yield equally little return on in vestment for those who have been less successful at matching needs with the infr astructure. Building the various highways is not enough. Transport vehicles are needed, rout

ing issues must be addressed, and of course, the transportation costs must be pa id. On the I-way, the nature of- vehicular traffic is extremely important. The i nformation and multimedia content determines what type of vehicle is needed. A b reakdown of potential everyday e-commerce vehicles into their technological comp onents shows that they vary widely in complexity and may even need to travel dif ferent routes on the I-way, much the way an eighteen-wheeler may be restricted f rom traveling roads that cannot accommodate it: Final pillar on which the e-commerce framework rests is technical standards wit hout which the impact of this revolution would be minimized. For e.g., returning to our analogy with traditional transportation systems, railroad would not have flourished had each state established a separate track standard (meter gauge ve rsus broad gauge, for example) and goods would have to be constantly moved from one train to another every time the standard changed, as they do today at the bo rder between Russia and Western Europe. Similar differences in standards exist t oday in electricity distribution (110 versus 200 volts) and video distribution(S ony Beta versus VHS), limiting worldwide use of many products. Standards are crucial in the world of global e-commerce, to ensure not only seam less and harmonious integration across the transportation network but access of information on any type of device the consumer chooses-laser disc, PCs, portable hand-held devices or television + set-top boxes (cable converter boxes) and on all types of operating systems. For example, without the adoption of video stand ards, video conferencing will never become widespread, as each manufacturer will attempt to develop equipment that maximizes their short-term profits rather tha n working toward customer goals such as interoperability. While we have strived to limit our initial discussion of the elements of a framework for electronic co mmerce to an understanding of what part they play within this complex network, i t is no accident that we have ended with a convergence of technical, policy, and business concerns. The concept of convergence is essential to the operation of th e Information Superhighway and to the way the business world is gearing up to de al with it. It is only fitting that we preface our discussion of the one element of our framework we have not yet discussed in detail-e-commerce application the m selves with a clarification of the concept of convergence. 2. List the advantages and disadvantages of eCommerce Ans : Advantages Of E-commerce Lower Cost Doing e-business is cost effective; it reduces logistical problems and puts a sm all business on a par with giants such as Amazon.com or General Motors. In a com mercial bank, for example. a basic over-the-counter transaction costs 0.50 to pro cess; over the Internet, the same transaction costs about 0.01. Every financial t ransaction eventually turns into an electronic process. The sooner it makes the conversion, the more cost-effective the transaction becomes. Economy Unlike the brickandmortar environment, in ecommerce there is no physical store spac e, insurance, or infrastructure investment. All you need is an idea, a unique pr oduct, and a welldesigned web storefront to reach your customers, plus a partner to do fulfillment. This makes ecommerce a lot more economical. Higher Margins Ecommerce means higher margins. For example, the cost of processing an airline ti cket is 5. According to one travel agency, processing the same ticket online cost s 1. Along with higher margins, businesses can gain more control and flexibility and are able to save time when manual transactions are done eletronically. Better Customer Service Ecommerce means better and quicker customer service. Online customer service make s customers happier. Instead of calling your company on the phone, the web merch ant gives customers direct to their personal account online. This saves time and money. For companies that do business with other companies, adding customer ser vice online is a competitive advantage. The overnight package delivery service,

where tracking numbers allow customers to check the whereabouts of a package onl ine, is one good example. Quick Comparison Shopping Ecommerce helps consumers to comparison shop. Automated online shopping assistant s called hopbots scour online stores and find deals on everything from apples ro printer ribbons. Productivity Gains Weaving the web throughout an organisation menas improved productivity. For exam ple IBM incorporated the web into every corner of the firm products, marketing, and practices. The company figured it would save $750 million by letting custome rs find answers to technical questions via its website. The total cost savings i n 1999 alone was close to $1 billion. Teamwork Email is one example of how people collaborate to exchange information and work o n solutions. It has transformed the way organisations interact with suppliers, v endors, business partners, and customers. More interactions means better results . Knowledge Markets Ecommerce helps create knowledge markets. Small groups inside big firms can be fu nded with seed money to develop new ideas. For example, DaimlerChrysler has crea ted small teams to look for new trends and products. A Silicon Valley team is do ing consumer research on electric cars and advising car designers. Information Sharing, Convenience, And Control Electronic marketplaces improve information sharing between merchants and custom ers and promote quick, justintime deliveries. Convenience for the consumer is a ma jor driver for changes in various industries. Customers and merchants save money ; are online 24 hours a day, 7 days a week; experience no traffic jams, no crowd s, and do not have to carry heavy shopping bags. Disadvantages Of Ecommerce Security Security continues to be a problem for online businesses. Customers have to feel confident about the integrity of the payment process before they commit to the purchase. System And Data Integrity Data protection and the integrity of the system that handles the data are seriou s concerns. Computer viruses are rampant, with new viruses discovered every day. Viruses cause unnecessary delays, file backups, storage problems, and other sim ilar difficulties. The danger of hackers accessing files and corrupting accounts adds more stress to an already complex operation. System Scalability A business develops an interactive interface with customers via a website. After a while, statistical analysis determines whether visitors to the site are onetim e or recurring customers. If the company expects 2 million customers and 6 milli on show up, website performance is bound to experience degradation, slowdown, an d eventually loss of customers. To stop this problem from happening, a website m ust be scalable, or upgradable on a regular basis. Ecommerce Is Not Free So far, success stories in ecommerce have forced large business with deep pockets and good funding. According to a report, small retailers that go headtohead with ecommerce giants are fighting losing battle. As in the brickandmortar environment, they simply cannot compete on price or product offering. Brand loyalty is relate d to this issue, which is supposed to be less important for online firms. Brands are expected to lower search costs, build trust, and communicate quality. A sea rch engine can come up with the best music deals, for example, yet consumers con tinue to flock to trusted entities such as HMV. Consumer Search Is Not Efficient or Costeffective On the surface, the electronic marketplace seems to be a perfect market, where w orldwide sellers and buyers share and trade without intermediaries. However, a c loser look indicates that new types of intermediaries are essential to ecommerce. They include electronic malls that guarantee legitimacy of transactions. All th

ese intermediaries add to transaction costs. Customer Relations Problems Not many businesses realise that even ebusiness cannot survive over the long term without loyal customers. Products People won t buy online Imagine a website called furniture.com or living.com, where venture capitalists are investing millions in selling home furnishings online. In the case of a sofa , you would want to sit on it, feel the texture of the fabric etc. Beside the so fa test, online furniture sotres face costly returns which makes the product har der to sell online. Corporate Vulnerability The availability of product details, catalogs, and other information about a bus iness through its website makes it vulnerable to access by the competition. The idea of extracting business intelligence from the website is called web framing. High Risk Of Internet Startup Many stories unfolded in 1999 about successful executives in established firms l eaving for Internet startups, only to find out that their getrich dream with a dot .com was just that a dream. 3. Discuss the working concepts of EDI Ans : : Working concepts of EDI discuss the step by step process: 1. Preparation of electronic documents: The first step in any sequence of Electr onic Data Interchange is the collection and organisation of data by ABCs internal application systems. Instea d of printing out purchase orders, ABCs system builds an electronic file of purchase orders. 2. Outbound translation: The electronic file is then translated into a standard format. The result is a data file that contains a series of structured transactions related to the purchase orders. ABC s EDI translation software will produce a separate file for each manufacturer. 3. Communication: ABCs computer automatically makes a connection with its Value Added Network, and transmits all the files that have been prepared. Each file is processed by the V AN and is routed to the appropriate electronic mailbox for each manufacturer. Several manufacturers do not subscribe to the ABCs VAN, so files are automatically routed to the appropriate network service. 4. Inbound translation: The manufacturers retrieve the files from their electron ic mailboxes at their convenience, and reverse the process that ABC went through, translating the file from the sta ndard format into the specific format required by the manufacturer s application software. 5. Processing electronic documents: Each manufacturer will process the purchase orders received in their internal application systems. In the example, we saw the EDI process between a supplier and its vendors. The p rocess will be similar in a wide variety of other business relationships, whether for goods or services. Now let us take a more detailed look at these steps, to get a better idea of the range of possibilities and situations w here EDI can be submitted. 1. Preparation of electronic documents: The most demanding part of implementing EDI in any business is preparing the ele ctronic documents. There are a number of different methods to generate electronic documents as there are many d ifferent numbers of businesses and applications. Some methods of generating electronic documents are: Transcribing data: Data from printed reports is manually entered into a small co mputer based software package by users. Most small businesses need to communicate information electronically to t

heir customers or vendors, but they do not have the computing resources to automatically generate information. A computer might be the only computing resource. In this case, a relatively inexpensive "off-the-shelf" EDI s oftware packages can be used. This requires only a modem and a computer. Most of these products include options to allow users to generate entry forms, permitting them to enter information via the keyboard. Reformatting exist ing computer based data: Data base products or spread sheets are commonly used by small businesses. These data processing tools can be used to export data for EDI transactions. It is also possible with inexpensive commer cially available computer software to read electronic report files from other applications and re-format them into data files that can be used by EDI packages. Updating existing applications: Companies that have active application systems can consider having the applications enhanced to generate output in a format that could be easily transl ated. Custom software development is required for this approach. The enhancement of the existing softw are depends on the extent of the existing software portfolio. Generation of purchase order data is done by ma king use of a program to read existing files from a purchasing system and extracting the necessary information . The existing software can be modified to create new output files. Purchasing software: If a company wants to purchase software that ensures that i t will meet their EDI requirements then it should be predetermined as an evaluation requirement. Many software vendors include such capability in packages of basic software. If the c apabilities are not included, then the vendor can also provide the additional functionality at a cost that will be less expensive than in-house mod ifications. From the above discussion, we can arrive at a conclusion that participation in E DI trading partnerships can be accomplished by any business. It does not require a heavy investment in computin g resources, and a sophisticated portfolio of business applications software to begin using EDI. If a company has already developed its business applications, the capabilities of that existing software can be enhanced to prov ide even more benefits. 2. Outbound translation EDI can be simply defined as electronic exchange of data in a mutually agreed-up on format. There are numerous application software packages creating purchase orders, all constructed for spec ific needs and based on different industry and data requirements. Hence, there arises a need to provide a common d efinition of data formats. However, the difficulty of accomplishing this is evident. Twenty different compa nies will almost certainly yield twenty different definitions of how a part number should be formatted. This issue could be avoided in a simple one-to-one EDI relationship by providing the schematic layout of the data to the receiver, and simply transmitting the data to the receiver without any tr anslation. The receiver can alter and reformat the data to suit their purpose. The sender and the receiver will agree upon a common file definition for their use. Many EDI relationships started out using similar methods. However, if we consider the example, ABC has several hundred suppliers, and the chance of getting them all to

agree upon ABCs definition of a purchase order format is quite small, particular ly if those suppliers are also dealing with hundreds of other customers. There has to be a unique set of rules for each partnership. The resulting confusion would quickly drive customers and suppliers to return to paper forms r egardless of the benefits or savings. The solution to this would be to have a comprehensive set of national and intern ational standards. The standards are developed by specific industry or business groups. The standards provided co mmonly agree upon formats for use in virtually every type of business communication. Using these types of standards, information can be organised in a transaction fo rmat with definitions for the format. An internal system or a separate software package can be used to transla te data into a standard format. Irrespective of the means used for translation, the end result of the process wi ll be an output file generated in a specific format that any subscriber to the standard can understand. 3. Communication Transferring data in a one-to-one EDI relationship can be as easy as connecting a modem and transferring the file. This would become impractical with more number of vendors. If a manufacturer has to send out hundreds of purchase orders each week to hundreds of suppliers, it would require many employ ees and a very tight schedule, to transmit all of their purchase orders. Even if the manufacturer had an extens ive private network available for successful transmission, it is necessary that all vendors be linked into the net work. These problems can be avoided by a connection allowing receivers to access the s enders systems and collect the necessary data, but it poses a serious security issue. With careful control it w ill work on a limited base including separate hardware to isolate the system being accessed by third parties. Some co mpanies might accept these approaches, but this would lead to chaos, and once again most EDI users would qu ickly return to preparing printed documents, so that they could rely on the mail to distribute all their documents . To overcome these issues, EDI users can make use of third-party network services , commonly referred to as "Value Added Networks" or VAN s. The VAN works as a clearing house for electronic trans actions. It serves as a private electronic mail service. A company can send all of their purchase order files to a single destination. Each vendor s data is routed to their own electronic mailbox by the VAN. If the recipient of t he file does not subscribe to the particular VAN used by the sender then the transaction can be routed from one VA N to the other. The security issue is resolved by using a VAN. It allows trading partners to tra de information, but at the same time avoid giving information away. Both the parties cannot access each others system s. However, they can still freely exchange agreed-upon information. The implementation process can be made even ea sier by using a full service VAN, which provide other services, including translation, standards compliance c hecking, and EDI software. 4. Inbound translation The inbound translation process is the reverse of outbound translation. Once the

purchase orders have been transferred to the electronic mailboxes by the VAN, the vendor can retrieve them at their convenience. The files will be translated into a specific format required by the vendor s application. This is called as de-map process. The usage of a standard format makes it easier for the vendor to recognise, which co mpany the transaction is from, and then which type of transaction it is. Once the translation is complete, then it can be made usable in any desired format to the receiver s internal applications. 5. Processing the electronic document The vendor base will range from large corporations with sophisticated applicatio n systems to small shops with only a modem and a computer to a large manufacturer. A vendor with a highly automated process may process the information directly into their applications and act upon it without any interfe rence. The small business may print reports. In both the case, and regardless of the scale, EDI can be successfully implemented. The final step is to close the loop by transmitting an acknowledgment transaction back to the vendor. 4. Give examples for different models of ecommerce and explain what is the benefit of that model in your example. Ans: Business Models Let us now discuss the various business models that have emerged since the birth of ecommerce. Introduction to business models A business model can be defined as the particular way in which a business organi sation ensures that it generates income, one that includes the choice of offerings, strategies, infrastructure, organisational structures, trading practices, and operational processes and poli cies. Developments in computing technology and communication systems have not only cre ated many new business opportunities, but they have also created new ways of doing bu siness. Now, let us discuss the most common business models in e-commerce. The merchant A merchant is a dealer of goods and services. The merchant provides the product information on a website and he also gives an online ordering mechanism. Consumers can select t he products which they want to buy and place an order. The product price is either fixed or negotiable and the customer can either collect the ordered products from the shop or get it del ivered. Infact, the merchant operates in almost the same way as a traditional brick-and-mortar shop-ow ner. This business model is most appropriate for dealing in physical goods and services su ch as books, computers or a pizza delivery service. The only advantage in this model is that the merchant can directly reach the end users and sell to them without engaging wholesalers or re tailers. Click-and-mortar merchants Click-and-mortar shops combine a website with a physical store. The advantage wi th this model is that they have a physical store to promote the website. In this model, consum ers can return unwanted or defective products simply by visiting the stores website instead of m

ailing it to a web site operator. Build to order merchants Under this model, customers have the advantage of buying goods or products that are made to order. Build to order merchants not only offer pre-manufactured or developed pro ducts for sale, but they also offer customisation of products according to the requirements of t he customers. Customers can specify the features and benefits of the products that they requir e and the product is assembled individually and shipped to the customer. This model is best suited for electronic and computer products, which can be customised to requirements. The service provider For some services, like a pizza delivery service, where a pay-per-item type of p ayment is followed, the merchant model is quite appropriate. However, many Internet-based services cannot easily be offered this way. This is because, quite often, it is difficult to define the "product" that is sold, or to set a price for this product, as th ey are information based. For example, a news site offering the service of access to its archive, might find i t difficult to set a proper price for its services. To overcome this problem, e-commerce marketers of fer advertising based access to their service. This way, they do not charge the end customers, but rec over the costs through revenue from the advertisers. However, this strategy does not seem to be very popular, as only very few advertisement-driven sites are able to earn sufficient income. Subscription-based access Under this model, businesses provide subscription-based access to their service. A user usually pays a fixed amount per month or year and in return gets unlimited access to the service. One more option would be to pay a monthly base fee and pay a surcharge for all acces s beyond a certain limit. This model is most suitable for services like databases with arti cles, news, and patents and online games or adult websites. However, this model has not proved t o be profitable, as users find their own ways to access the content without paying the subscripti on. To overcome this problem, certain service providers make only some portions of the articles available for preview. The customers get to read the complete articles only after payment of t he necessary charges. Prepaid access In this scheme, after paying certain amount of money users get access to the ser vice for certain amount of time. After the amount is spent, the user has to renew or prepay again for further access. The best example for this business model is usage of smart cards. The broker Brokers create markets by bringing buyers and sellers together and helping them in transactions. Brokers charge for every transaction, usually as a percentage of the price of th e transaction. Examples are classified ads, group buying and bounties.

The sales representatives Sales representative usually works on a basis of commission that for selling eac h item they take commission from producer. On the web, this model is known as affiliate programs or referral fees. In this someone creates a website on some specific topic and adds links to products on a retailer site which are related to the topic, so that the visitors can buy those products. For example, a music reviewer can add a link in a review to an online music store where the users get an authority to order the CD being reviewed. If the user likes the review then he can follow the link and buy the CD then the r etailer pays a commission to the reviewer for referring the site. Anyone who can build a website can link to a product and if everything goes well , then they can make money. This model describes the popularity and usage of the World-Wide Web. The advertiser Advertising driven sites are one of the key foundations of e-commerce. The princ iple behind this is simple and well known. A site gives free access to some prod ucts and shows advertisements on every page. When the user clicks on advertiseme nt an advertisement page appears. The advertiser has to pay the site operator fo r advertising the product. Free access Let us try to understand this by looking into some examples below: Free web space providers usually provide advertising banners at the top or botto m of the users sites or as a separate, pop-up window. Free Internet access providers show advertisements on the starting page so that the user can have a look at the advertisements when they browse something or whe n they go online. Advertisements and electronic greeting cards are also sent with a personal messa ge. From the above examples it is clear that in this model the users are given acces s to something for free. And with this free access product, shops or sites are a lso advertised. The auction room This model follows the guidelines followed in an auction sale the only differenc e being that the auction is carried on online. There are basically two types of auctions open auction and reverse auction. Open auction: In this, the product is repeatedly bid by the participants. The pa rticipant who places the highest bid is awarded the product. Through networks su ch as the internet, it is possible for many bidders to participate at the same t ime in one auction. The participants of an online auction have to enter an initial bid, an amount wi th which to increase the bid and a maximum amount. Whenever some other participa nt places a higher bid, the system then automatically raises the bid with the in dicated amount until any of the bidders have won the auction. Reverse auctions: In this, the price is initially set at a very high level and t he price is dropped at regular intervals. Participants can bid the price at whic h they want to buy and should also know the fact that there may be chances of bi dding by someone else at a higher price. This model is well known for bidding for high-priced items like automobiles or a irline tickets. 5. a. b. c. d. Write short notes on False and malicious sites Stealing visitors credit card information Stealing customers data from selling agent and internet service providers The use of cookies

Ans : a) False or malicious web sites The basic idea behind building the false or malicious web sites are for stealing

visitors IDs and passwords, stealing credit card information, spying on a visitors hard drive, upl oading files from a visitors hard drive and so on. Users should be careful from these kinds of websites and users should never reve al their personal information like phone numbers, address and so on, to any such kind of websites. Users should never reveal their credit or debit card numbers, login IDs, passwords and other information. b) Stealing visitors credit card information Malicious web sites may also be built and temporarily termed as legal businesses for the purpose of stealing visitors credit card information. We can explain this with an example consider a malicious web site which is built to sell and deliver a gift to anywhere in Indi a on Diwali. However, such sites vanish suddenly, and this is identified only after Diwali, w ith no clue to where to find the site. c) Stealing customer data from selling agents and internet service providers Most of the customers who purchase goods and services on internet pay through th eir credit cards or cyber cash. Such customers also need to take the support of their inter net service providers for accessing the internet. The credit card information is stored by t he internet service provider and selling agents and many times hackers are successful in breaking in to the systems of selling agents and internet service providers and obtain the information on c ustomers credit cards d) The use of cookies The use of cookies to get user information is a threat to the privacy of users. Cookies are pieces of information that a web site collects and transfers to a visitors hard drive fo r record keeping purposes. Java Script programs related with web sites record information reveale d by a visitor on request by the web browser. When a visitor visits any false or malicious webs ites for the first time, many web sites ask visitors to register themselves wit h the web site and when the visitors fill the information, it is recorded in a text (.txt) file along with a registra tion number assigned by the site. This file is stored on the visitors hard drive. The Web site server als o stores the registration number and some other information such as the user ID and password if the user gives all this information. When the user visits the site again and again, the c ookies record the details on the web links examined or clicked on into the server. Based on the web browser used, the cookies may be placed in a single file for di fferent websites. Cookies cannot be used for life long. Depending upon the objectives of the websi te, cookies are assigned the expiration dates which may be of very short period or very long per iod.

6. Define Mcommerce. Describe the areas of potential growth and future of mCommerce Ans : : m-commerce does not have any precise definition. m-Commerce and its defi nition varies from every individual. m-Commerce is called as next generation e-commerce. The process of b uying and selling of goods and services through wireless devices such as cellula r telephone and personal digital assistants (PDAs) is called as m-commerce. The newly appearing technology behind m-commerce is based on the Wireless Applicatio n Protocol(WAP). The traditional e-commerce is replaced by the m-commerce. Anywh ere anytime is the important feature of m-commerce that leads us to implement m-commerce in place of e-commerce. Areas of potential growth and future for m-commerce: New Channels of banking services are emerging and are working on m-commerce tech nologies. These new channels can facilitate deposits, payments, transfers and wi thdrawals. If the operational costs of the banking sector in m-commerce is reduc ed drastically then, efficiency in the transaction processing can be increased. The travel industry is concentrating more on m-commerce. m-Commerce will allow c ustomers to schedule, reschedule, plan trips through their mobile devices instan tly before they give a second thought. Traders in the retail sector focus more o n how to locate customers more easily and will be able to provide secure payment methods through mobile digital certificates or voice recognition.