Introduction to E commerce e-commerce e-commerce e-commerce

Introduction to E commerce
The purpose of this note is to give a brief idea about the basics of E
Commerce & the Internet in terms of terms used , security aspects and future
outlook. The internet is like a tidal wave sweeping the world and it is changing
the world in a way not done in any such way before.
Before we actually get into the subject it would be a good idea to demystify
various jargon and break them down to into simple and easily understandable
definitions of these complicated subjects.
Definitions
1. Web site or URL
2. Domain name
3. Cybersquatting
4. Internet
5. E Commerce v/s E Business
6. Site visit
7. Page view
8. Hit
9. Click through
10. Encryption
11. Digital signature
12. Protocol or standard

13. Payment gateway
14. Cookies
15. SSL
16. SET
17. Public Key Infrastructure
18. Hash
19. Virtual Private network
20. TCP/ IP
21. FTP
22. Firewall
23. Modems Routers and gateways
24. Packet switching
25. Circuit switching
26. ISDN
27. WAP
28. Internet telephony
29. Cable modem
30. Cable set top box

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Simple definitions
1. Web site or URL : - A web site is virtual location where the data pertaining
to a site on the internet is located. URL stands for Universal Resource
locator and is based on a standard naming convention followed the world
over using world wide web ( WWW) , the respective domain names (
.com , .org, . edu) etc. It is like a postal address given in a capsule
2. Domain names : - These are given to countries or to organizations which
intend to collate their offerings in a systematic way on the internet. It is like
having an easy reference mechanism to search for books in library
3. Cybersquatting:This reveals the ugly face of the internet where
individuals secure famous domain names on a first come first served basis
and then offer the sites at a price to genuine corporations who wish to use
this domain name.
4. Internet : - The internet is a collection of computers ( actually servers )
which contain data about individual sites which can be accessed by anyone
connected to the network in an open and free environment . Thus there is
no restriction on the content ( read information ) available on the net. There
is no source controlling the creation of this content, its access and
dissemination across the network. The servers ( read users ) are connected

thro’ the internet gateways provided by each country for its users . In India ,
Videsh Sanchar Nigam Ltd ( VSNL ) provides the only gateway in India.
5. E Commerce relates to the simple exercise of buying and selling goods
over the internet. It involves setting up software , connectivity issues,
payment gateways etc. .
E Business is
a much wider and
comprehensive term which covers the entire process of doing business on
the net in a safer , secure, manner.
6. Site visit : - Every time a visitor enters the URL of a site and enters the
site, he is logged in as a visitor. In case he logs out or his connections gets
terminated , a fresh log in would normally be counted as a fresh visit. All
sites have log files which record visits. Usually repetitive visits within a
short time duration are ignored while computing visit statistics
7. Page view : - Every time a visitor visits a site , he encounters a home page
which is something like the window of a shopping mall . Once he clicks on
an icon or a picture a fresh page is served to him . Each such page which is
served to him as per his request is called a page view.
8. Hit : - A site is posted on the internet containing information about the
company ‘s products, shopping opportunities, and other interactive

activities. These involve, text data, spreadsheets, pictures, graphs, images
and so on These are stored in a special form called HTML form which
enables them to unfold when a visitor clicks an icon/picture. Thus when a
visitor requests for a page, he may be requesting for say 20 such HTML files

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which together constitute that page view. Each of these files when
downloaded represents a hit.
9. Click through : - This is extremely important for advertisers. An advertiser
puts a banner in a site which gives an opportunity to a visitor to the site to
click thro' the banner and thereby see the advert shown by the advertiser.
This represents a click through and the site is paid a fixed amount for each
click through.
10. Encryption : - When data is sent across the internet, it is open to
abuse , misuse, and tampering of the information while it is in transit.
Encryption masks the message into a mass of unrecognizable characters
during the transit so that data integrity is maintained while in transit. It is

important that both users use the same encryption software so the receiver
is able to decrypt the encrypted message and read it. This is a standard
feature in private networks but is not available on the internet. This is
explained in further detail later .
11. Digital signature: - This is not a signature either by hand or by
computer. It is method to authenticate the sender of the message and to
ensure the complete and total transmission of the message. This is done by
using various methodologies like single key, double key etc.
12. Protocol or standard : These two words are used interchangeably very
often in the IT world. A protocol is like language or a common set of
instructions which enable different networks to talk to each other. This is
stored in each PC ‘s networking area which enables it to talk to other PC’s.
There are proprietary protocols like IPX belonging to Novell and public
protocols like SS7 for telecom systems which is extensively used in
implementing 1-800 type requirements ( receiving pays for the call ) and
TCP – IP , the protocol which drives the internet.
13. Payment Gateway : - This is a mechanism to enable e commerce
transactions in a way that would replace/ supplement existing payment
mechanism’s like cash, cheque and credit card. A payment gateway can be
established by bank, or a software company or a combinations of both. It

enables customers to approach vendors and settle transactions without
resorting to the above mentioned three modes of payment.
14. Cookies : - These are not biscuits , believe me these are small bits of
information about the site visitor who is visits the site which are recorded in
file in his PC. The same data is extracted when he next visits the site using
the same PC. It is used for storing common information about the customer
and is a prime enabler of personalization of the web.
15. SSL : - This is known as Secure Sockets layer which has been in palace
for many years and provides for single key encryption and is one the
methods for secure use of the net by using your credit/ debit card. This is
slowly being replaced by SET in various parts of the world

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16. SET : This stands for Secure Electronic Transaction and is the new
standard in secure transactions on the Web . It involves double/ triple key
encryption, use of hash digests, and certification authorities
17. Public key infrastructure : - This involves the entire structure for doing

secure business transactions in the Web in the future. The comprises of the
public and private key, the hash digests, certifying authorities, etc. This is
expected to be the way to go for most countries which intend to replace the
conventional business models with e business models
18. Hash digest: This is a number which is generated out of an electronic
message by an encryption software. It is used to ensure that a message has
been received in the same manner in which it was sent. It is like a check
digit used in computers.
19.
Virtual Private Network: - A private network is one which is not open
to the public world. Once a network is open to the world it is open to
hackers , tricksters, fraudsters and others with malicious intent. A purpose
of a Virtual Private Network is to avail the easy set up and install features of
Internet technology along with the safety of a private network by creating
an encrypted tunnel around the network . Every user has cryptography
software installed in his/ her machine, so that data can be safely sent thro’
Internet. This will be increasingly used by companies with vendors,
customers and by banks which intend to offer internet banking.
20. TCP/ IP : This is a short form for Transmission Control Protocol / Internet
Protocol. This is what rules the Internet. This is publicly available network

which was initially developed by US Defence Academy. It’s advantages are
easy of use and installing, and scalability. But since it is an open system it is
also open to abuse and lacks security. In order to make TCP/ IP a truly
secure platform, one needs very good encryption software like PGP , a
public key infrastructure, and a robust firewall solution.
21. FTP : - This is called File transfer Protocol and is the medium offered by
TCP /IP for files used by one server can be accessed and extracted by
another remote ( in a distant location) server. It is now a commonly used
method of transmitting software deliverables rather than thro' floppies,
tapes and where a dedicated link is not required between the two users. It
is subject to various passwords/access controls which are provided but does
not come with any standard encryption software.
22. Firewall : - This is simply the most important security device available to
a company which is open to world thro’ a public network. It is expected to
filter out who is accessing the network ( known or unknown source ) an
what kind of data ( harmless or malicious ) is being brought into the
network. They primarily work by tracking IP Addresses ( this is like a code
of your PC known only to TCP/ IP ) .
There are various complex firewall
solutions giving various levels of security.

23. Modem’s , routers, and gateways. These are devices what perform
communication functions in a network. A modem is the device which helps
a PC to talk to another PC. This is done by conversion of digital data in the
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senders PC to analog data ( thro' telephone ) back into digital data in the
receiver’s PC . Routers perform the complicated job of directing network
traffic. It is like the virtual cousin of the Hag Ali Traffic signal which we are
familiar with. It has manage all the traffic going thro' the network assigning
priorities and deciding the path for the data to travel . A gateway is a
server which enables systems using different platforms to talk to other
systems . Thus you can have fax gateways , internet gateways etc.
24. Circuit switching: - This is followed in the conventional telephone lines
. The circuit between the two telephone lines is activated once any of them
dials the number and is terminated once the connection is cut. This has
traditionally been used for all voice traffic.
25. Packet switching : - This is the method for transmitting data packets
between two PC’s. In this case the data is packed into packets which are

transmitted thro' the medium ( copper, fibre, glass) at varying speeds
depending on modem speed . The telephone line is used only for the time
of actual transmission thereby reducing the cost of transmission. This has
traditionally been used for all data traffic.
26. ISDN : - This is a digital telephone line which avoids the use of modem
for converting the data from digital to analog and vice versa. Thus an ISDN
line can carry data, voice, images ( for video conferencing), internet
browsing etc in the same line thereby using the line effectively .
27. Internet Telephony : - This is a technology by which voice messages
can be transmitted using TCP IP protocol and not conventional telephone
protocol by which due to use of packet switching the cost of an international
phone call would become comparable to the cost of sending/receiving e
mail messages. This technology is under development and is presently
banned in India. The reason is that the use of this technology will distort the
present arrangement of sharing revenues among telecom carriers of each
country. As a result, this needs to reworked by various countries under the
aegis of the International Telecom Union ( ITU).
28. WAP : - Wireless Application Protocol : - This is a new emerging
technology which involves convergence of radiowave communication ( used
in mobile phones ) and TCP IP used in Internet, It is meant to allow users to

receive and send e mails from their cell phones and browse the internet
suing their cell phones.
29. Cable modems : - These devices are alternate devices to regular data
modems which connect thro’ a land line to the internet. A cable modem
connects you to your cable operator who broadcasts a cable transmission
( with which I am sure all of us are familiar) . This cable modem eliminates
the need to have a phone line and PC connected to the Net. One would
still need an external hard disk to download information and keyboard to
type it in .
30. Cable set top Box. This is an improvised device by which one can use
the Internet and watch the television and surf the internet alternatively
and not both at the same time.
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The World of E Business
The internet has enabled a whole era in our times and has made possible what
was considered impossible in the past. It has truly converted the world into
a global village. It has resulted in what is popularly now called as the
death of distance. It has broken down a number of existing business
models and has given rise to a number of new business models which are
the opposite of conventional business thinking.
It is therefore said that e Business has re written the rules of Business and
very soon there will be no Business except E business . Thus every
individual, small business, large corporate, institution, government body
must realise the potential power of this medium and put himself or herself
in the centre of this medium to address the needs of his clientele. If he
refuses to do this, he runs the risk of having some upstart beginner take
away his entire customer base which he has assiduously cultivated over
many years .
Below is an introduction to the subject of e business beginning with business
models, main players, benefits, tools and techniques and pitfalls.
Part A : - What are the major Business Models / Profiles on the Web : To understand e business one needs to have a helicopter view of various
participants and various consumers on the web.
◊ Business to Business
This is supposed to be a huge opportunity area in the web. Companies have by
and large computerized all the operations worldwide and now they need to go
into the next stage by linking their customers and vendors. This is done by
supply chain software which is an integral part of your ERP application .
Companies need to set up a backbone of B2B applications which will support
the final customer requirements at the web . Many B2B sites are company and
industry specific catering to a community of users or a combination of forward
and backward integration. Companies
have achieved huge savings in
distribution related costs due to their B2B applications. The example which
comes to mind immediately is that of CISCO Systems, who sell the networking
equipment which powers the Internet.
◊ Business to Consumer
This is a direct application from a seller of products to an end consumer of
those products particularly the retail products.Amazon.com is a typical
example.
◊ Consumer to Business
These refer to the applications emanating from a consumer to a business which
are actually consumer items but need a business intermediary. Most of the
search engines are operating C to B models. Priceline.com offers named price
product offerings in travel, tickets, holidays etc is another example. The site
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asks for a price from the customer and goes and finds out the best match for
that given price.
◊ Consumer to Consumer
C to C applications are the ones involving consumers who deal with each other
on the web. They need a site like an online auction site for example to
transact with each other.
E Bay is an example . Message boards,
community sites, chat forums are also C to C applications .
It doesn’t mean that the Internet is all about buying and selling goods
or services or information. The internet works because of a whole
industry works painstakingly to make it happen .
Part B : - Who are the main players in this industry and what are their
roles.
1. Internet Service Providers
This is like the telephone company which gives you gives you the phone
connection. An ISP has linkages to an International gateway and has further
linkages to a local service provider ( say telephone or cable service provider). It
provides internet access for a fee based on the hours logged in by the user and
the time of day or night . The Govt. of India has committed to allow private
international gateways ( as against VSNL at present) and has fixed a nominal
fee of Rs 1 for an ISP license. The charge paid to the local service provider
needs to reviewed in respect of internet access. Most ISP’s need to set up
content based portals and search engines to augment revenue because an ISP
as a standalone proposition is not viable. It is felt that ultimately one day the
phone lines , the power cables and the internet traffic will all travel using the
same medium. This is very broadly referred to as a broadband network.
2. Search Engines & Portals
Search Engines are a basic necessity on the net as there are no known
directories of sites. It is also humanly impossible for one agency to compile the
same. The major search engines such as Yahoo, Hotbot, Altavista, Infoseek,
Askjeeves maintain a directory of sites which visitors can get by giving
appropriate search criterions. The sites also have links with thousands of other
sites giving instant access. Every site wishing to do e business needs to be
registered on these sites because 70-75 % of all site traffic arises out of search
engines. There is huge amount of research being done in the West on designing
focussed searches and configuring sites to attract visitors thro search engines.
Search engines usually get good Adv. revenues.
Portals are like virtual libraries giving information on subjects which are of
interest to its visitors. Since all ISP’s and search engines get lots of visitors they
usually set general purpose portals for everyday information like travel,
weather, news, sport, investing etc. There are also vertical portals which cater
to a particular class of people. Most of the information in these portals is free
and the future of a portal is getting a no of loyal subscribers thereby getting
some revenue streams along with advertising.
3. E Commerce service providers
E commerce shopping sites are very hot, they provide for anything from books ,
cassettes, CD’s, gifts, toys etc on the web. These sites usually have a back end
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sourcing centre which takes care of order fulfillment and negotiate with
manufacturers for huge discounts on catalogue prices. These companies can
also provide third party services for small companies which do not want to
spend a huge amount on setting up a site and maintain it.
4. Application Service Providers
This has been explained earlier. It is believed that almost all software
companies will have a working ASP model in future and this will be way to go in
the future.
5. Payment Gateways
These are financial intermediaries similar to VISA & MasterCard which take care
of settlement of e commerce transactions. A payment gateway can be
set up by a bank but it need not necessary be bank. It needs software
which is linked to customers and suppliers and which is used to set up
all other validations and checks. A typical e commerce transaction
consists of bill presentment, bill payment and settlement. The payment
gateway software needs to provide all these and more. Their revenue
model is based on % of transaction values/ numbers and it is paid by the
e commerce service providers. There is also a small fee paid by the
consumer. Check free is the one of the well known gateways in USA.
6. E solutions providers
These are companies providing end to end solutions to clients wanting to use
the web in a significant way. This involves designing a web site, setting up
performance parameters, setting up security and redundancy back ups.
7. Security solution providers : They specialise in making the web a safe place to do business. This involves
cryptography solutions for credit card security, firewall based solutions etc
8. Content providers
There are various participants which generate valuable content information
which when posted on the net at popular sites has huge reference value. This is
a very lucrative area because all ISP ‘s and e Comm sites want to depth in
content so as keep the subscriber hooked to their site.
9. Web hosting services
Every company which sets up its web site is not able maintain and update the
same on a regular basis. This is more because web site development and
updation is a highly technical and creative activity. The activity involves
conversion of content matter to HTML/ XML form, site design, server
upgradation. The biggest test of web hosting comes when there is huge
increase no of visitors and the server is not able to take the load. Thus visitors
have to wait for connections and many times only some of them are able to get
through.
10. Server farms
There are companies which provide the entire back office job of providing
server space for various web sites which generate huge traffic and do a great
job of managing hardware and disk space needs of the these sites. They have
huge server capacities which are pressed into use when needed.

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Part F : - What benefits do I get out of e business : 1. Direct Interaction with customers : - This is the greatest advantage of e
business. The unknown and faceless customer buying the products of a
large MNC like say HLL or Procter & Gamble thro distributors, channels,
shops etc ; now he has a name , face, and a profile . Large MNC’s pay a
fortune for this information on customer buying patterns .
2. Focussed sales promotion : - This information gives authentic data about
client likes , dislikes and preferences and thus help the company bring out
focussed sales promotion drives which are aimed at the right audience
3. Building customer loyalty: - It has been observed that on line customers
can be more loyal than other customers if they are made to feel special
and their distinct identity is recognised and concerns about privacy are
respected. It has also been seen that once customers develop a binding
relationship with a site/ product on the web they don’t like to shift loyalties
to another site/ product and re enter their profile information all over again
4. Scalability : - The web is open 24 hours a day and seven days a week.
Thus provides an access never known before to the customer. This access is
across locations and time zones. Thus a company is able to handle much
more customers on much wider geographical spread if it uses an e business
model. The company can set up a generic parent site for all locations and
make regional domains to suit such requirements. This model is being used
by Microsoft very successfully. The additional cost of servicing additional
customers comes down drastically once a critical mass is reached.
5. Savings in distribution costs : - A company can huge savings in
distribution, logistical and after sales support costs by sing e business
models. Typical examples are of computer companies , airlines, and
telecom companies. This is because the e business models involve the
customer in the business interaction to such a level that they are able to
avoid setting up the huge backbone of sales and support force which
ordinarily would have to set up.
Part G : - What are the tools and techniques at my disposal
It is important to know the right marketing strategies which would be required
to sell successfully and profitably over the web . The web as a medium
provides to you with a unique platform to enable various strategies which
would not have been possible to execute in a conventional scenario. Some of
these are : ◊ Use of Pricing as a tool
There is wealth of research on pricing used as a tool to generate sales on the
net. The biggest e tailer of them all , Amazon.com made it big by giving
substantial discounts. Part of these discounts are attributable to the distributor
level commissions which are being passed on to the customer. Apart from
this , companies have started giving things free on the net in order to get a
critical mass of subscribers which helps in getting Adv. revenues. The best
example is that that Apple IMac’s being given free in case the buyer agrees to
buy a certain minimum value of purchases using Apple’s e commerce web site.
◊ Use of Application Service Provider model
This is an old model of the Seventies which was used among mainframes and
Dumb Terminals which is being revisited with a vengeance. Software companies
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are offering their packages not in CD’s and boxes but thro’ the web. The
customer can log in over the net and access the software from the web server
of the company and need not download it into his PC. This goes one step
further in the age of the Network PC where on need not use even a hard disk
and all critical application data is kept on the web and can be accessed
anywhere in the world. These services ( they are not products ) are being
offered at say 5 Dollars an hour.
◊ Use of generic models which are known for efficiency as well as
personalised attention to individual customers
The web has given rise to a new partnership between brick and mortar
manufacturers, e tailers ,and express delivery companies like Fed Ex. These
take care of the individual elements of the customer , the order fulfillment and
the post sale complaints if any.
◊ Target key influencers to a purchase so they act as catalysts
◊ Web based auctions
An auction is a new concept which has sprung up on the web. It enables people
to sell and buy used items which the seller wants to dispose and dos’ent know
who to contact. Here the seller posts items for sale in a web site and buyers
bid for it. The best price gets the deal. The auction site gets a commission.
◊ Use of smart cards , cyber wallets
The web has spawned a totally new generation of monetary instruments
( Alvin Toffler calls it para money ) . These threaten to make the conventional
instruments like cash, cheques, and credit cards obsolete over the long term .
The smart card is a plastic card with an embedded chip which contains
financial details . It will help you buy gas( we call it petrol ) , make telephone
calls, and use virtually any retail product or service using Internet kiosks . And
this will not be tied with any one product, supplier or location. A similar
application is the cyber wallet which is actually an amount of cyber cash
stored in the hard disk of your PC and which enables you to do internet
shopping without using your debit / credit cards.
◊ Use of comparison shopping
The internet has brought in a whole new concept of price matching and
comparison shopping. Today there are sites which will go thro hundred’s of
sites for you to find the cheapest product fitting your specifications. This
would never have been possible without the internet. Junglee. Com is said
to perfected price and comparison software.
Part J : - What are some common myths about the internet and e
business in general
1. When I throw open my site to the world I will get a lot of visitors
This is toughest lesson one learns at the net . It is true that there is no entry
barrier on net., Anybody has access to a any information , anybody can set up
a site, anybody with some amount of initial funding can set up reasonably
good site. But is precisely these issues which go against the new upstarts.
There is a certain limit on the number of sites that any one person would surf
say in a week . This no can go up to 5 , 10 or 20 but not much more than that.
In this way the Internet can become a Winner takes it all game with about the
top 2 or three sites in any category being viable and the others getting
consigned to the dust heap. The use of search engines has also become a
major conduit to locating web sites.
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2. Advertising is a good source of revenue for e commerce service
providers
This has not been substantiated with any level of credibility. What is actually
being observed is the dot com companies are splashing pages and pages of
advertising in newspapers to get attention and awareness. It will take years for
portals to get significant ad revenues .What is also seen that a most the Ad
revenues are monopolized by a few sites like Yahoo etc.
3. If I set up a jazzy site , I will get more visitors
This is a painful story that most site owners learn mid way thro their journey.
Most consumers have dial up connections which use the existing phone
network which was never meant to take such data , pictures, images. The
networking equipment ( modem speeds ) may be the latest , but if your phone
is not able to take it, the download speed will not improve. The result is slow
downloads , frequent connections getting cut, and resultant frustration. It is
advisable for all sites to give text options where downloads are faster. And site
developers need to keep quick downloads and easy navigability as most critical
elements of web site design.
4. The internet is a bubble , it will collapse one day
The is the most life and death type of question which hangs over the Internet.
The net being is such a an open medium which cuts across all known barriers
of time and space is open to a lot of abuse and governments are not geared to
understanding the nuances of this technology and cutting the abuse and acting
promptly against the abusers. There is also great deal of confusion and soul
searching about the line to be drawn between restricting creative license of
persons, and freedom of expression and protecting public interest . The
internet is a young medium and there is still a lot to learn about its weaknesses
and failures.
There is a certain amount of skepticism about the net being a viable place for
conducting business transactions. It is felt that the net can collapse anytime.
While this partly true , looking at the recent instances of sites like Yahoo,
Amazon and E bay but one must note that the Internet is set up using mesh
topology where all users are connected to everybody due to which collapse of
one server does not affect other users. This theory needs to taken with a pinch
of salt because if Yahoo’s site goes down then people who use its message
boards to communicate are not able to do so. As a result , they are affected.
The more the dependence on the net for business transactions, the more it will
have to be made failsafe.
5. A ISP giving me free access to the Net is a great deal
This is biggest myth of the net. A provider who gives you a jerky connection
which keeps going down is not giving you a free connection. The cost of
Internet access is a combination of local line access charges and internet
access charges. The cost of local call access can be as high as Rs 20-25 per
hour .

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Customer strategies on the Web

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The question arises as to how a company should weave a strategy to win the
loyalties of its customers on the web. The book “ Customers. Com “ by
Patricia Seybold addresses this very immediate issue. It talks of broad
generic strategies on the road to e transformations and gives practical
examples as diverse as airlines, e tailers , universities.
I have below encapsulated the concepts explained in the book along with
valuable nuggets of wisdom given in the book.
Part A : - There are five stages in the route to e transformation
1. Supply product information or brochureware
Every company begins the process by putting its product details or its service
offerings on the net. This is meant to enable potential customers,
investors, suppliers, general public etc to get some information about the
company. It has now become extremely common for a potential customer
to ask a company about their web site . It is often said that just like the
airports of a nation are the first thing seen by a traveller, a company’s web
site is usually the first form of interaction between a company and a lay
person . So if you get the first impression right, the rest of the going is
easy.
2. Support basic customer requirements and enable interactions with
the company.
At this stage the company starts getting responses and feedback from site
visitors about what they expect from the company. At this stage, post
sales service, warranty claims, problem identification are typical areas one
can do using the web. This helps the customer know more about the
company’s product offering, use it for his requirements and help himself
wherever required. A company which did this right and was able to scale
up its web presence dramatically was Dell Computers.
3. Enable on line transaction processing thro all stages
At this stage , the company needs to represent the entire process of buying
and selling and map this process on the web . These processes must be
customer friendly at the same time not be too intrusive. It should bring
pleasurable experience giving him a reason to visit again. It should cater
to all kinds of visitors, like the first time visitor, the regular visitor, the
sporadic visitor. Amazon has actually done this. They have a walk thro
process for the first customer, FAQ’s on safe shopping for the doubting
Thomas and 1 Click processing for frequent user.
4. Personalize interactions with the customer

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This is a stage where the customer identifies himself with a site and treats it
like an extended family. His views need to be listened , his concerns need
to be addressed. The entire process of accessing the site for information ,
doing transactions, checking up on past transactions , choosing
preferences would be done with rapid efficiency but the method of
interaction would be personalized so as to reflect the distinct identity of a
customer. It’s like a person entering his own store with all the items
arranged the way he would like it to be for easy access and quick retrieval.
Amazon . com has really succeeded in doing these things.
5. Foster a community feeling among groups of customers
People don’t like to shop alone . They like to be identified with a cause ( say the
Clean Air Group) , a passion ( the golf players club or fans club of a soccer
team ) , a location or a community or an educational institution ( say a
Harvard alumni ). When such groups get together on the net , they really
stick together. They are fiercely loyal to their beliefs , likes and feelings. A
site which brings such people together is
likely to get very loyal
customers .It creates special “ Members only “ areas , creates Message
Boards, and chat forums.
Part B : - The building blocks used in implementing any e business
strategy will involve the following : 1. Customer profiles.
Customer profiles are at the very heart of personalization of the web. They are
used in sending e mail alerts about new products , in judging your taste in
books, in giving you your preferred seat in an airplane.
2. Business rules
These are the rules or the business logic which the site uses in its interactions
with customers. It is based on customer profiles, study of consumer
behavior and psychology and on the company’s objectives. This can lead
to giving loyalty programs, free offers, discounts etc.
3. Business events
These are the various activities that a customer does when he visits a web site.
These need to be studied to make the interaction easier, and the problem
quick and hassle free. For example I check my bank balance, checking
order status. This helps flow of data between systems to enable smooth
execution.
4. Business objects
These are the all important items which will identified and will have to be
defined. Typical examples are an account, a customer, an order, a product
or a service etc.
Part C :- What should be your broad customer strategy on the web : 1. Target the right customers

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You need to be extremely about the target audience that you are expecting to
visit your site. Now, surprise this may not actually be your customer. For
example , National Semiconductor has targeted Design Engineers of user
companies in Technology sector as its target audience. The design
engineer
needs quick access and fast
download of drawings,
specifications and samples of semiconductors for the applications that the
company offers. It is important to note here that the design engineer does
not make the purchase but he is one of the key influencers of the same.
2. Own the experience
3. 360 Degree view of the customer
4. Streamline customer facing processes
Most companies don’t realize that the physical world has a lot of support
processes which ensure that the customer is serviced in a satisfactory
manner. These are essentially manual backups which understand
consumer psychology and thereby act as a physical safety net . But the
net is shorn of all such backups and thereby the customer is left all alone.
It’s imperative that the process facing the customer work smoothly and
efficiently at the same time not seeming too remote or distant.
5. Help the customers do their jobs
Customers actually want to know more about the products and services of a
company, often as much as information as the company has about itself.
They would also do tings themselves. This actually helps the company
because it does not have to keep a large back office team for the purpose.
A typical example is the courier company which gives
tracking
information on packages on its web site. For every visitor who obtains any
useful information / data from the web site there is a corresponding
reduction in phone calls to the sales/service staff of the company.
6. Personalize contact and foster community
Part D : - What are the tips for success in the e business world
◊ Customer Loyalty v/s profitability per customer ( individual or a
class/ grouping )
This is a very profound example which goes to the heart of customer
philosophy. A company needs to assess profitability of its customers and
not just products. Thus it can find which customers are adding to the
bottom line and those which are eroding the bottomline. This helps the
company to evolve strategies to retain these profitable customers and
prevent their defection to the competition. The more loyal a customer is
the more profitable he will be to the company .
The various stages that customers generally go thro are something like this :  The base revenue that each customer gives . This is what he buys from you
irrespective of brand loyalty at a base price.
 The add on revenue which accrues as a result of a customer buying other
products offered by the company.
 The referrals given by him to other customers who bring in more revenue

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 The price premium a loyal customer pays for the product for which he
would not defect to a competitor’s product even if available at a lower price
◊
◊
◊
◊
◊
◊
◊

Foster community and loyalty
Generate referrals
Allow the customer to help himself
Give him the choice to lead or be led
Reduce cost of new customer acquisition
Create stickiness by personalising interactions
Eventually the most loyal customer are the most profitable customer as
they are willing to pay a premium price
◊ Ultimately the basic value proposition should remain intact.
Otherwise the customer will defect over a period of time.

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Conclusion : - What are the issues/pitfalls I need to be aware
:1. Privacy
Abroad , this has become the single most sensitive issue covering the net. The
use of customer personalization and cookies has put personal information
about every individual in the hands of a group of people.
All the well known sites have privacy policies posted in their site and also have
certifications by WEBTRUST or VEISIGN to reassure users about privacy
concerns.
But the actual implementation of these policies and accountability issues
relating to the same by site owners remains a gray area.
2. E Phobia
A whole generation of people have grown up in the world without direct
exposure to computers . They have been exposed to the printed word thro
newspapers, to the news by radio, and to visual medium by TV only.
This large proportion of our population , especially senior citizens remain wary
of this interactive phenomenon called the internet . The use of the mouse,
the remembering of passwords , the navigation of the site seems a
dreadful thing to them. It is likely that the present generation may remain
outside this net revolution and as a result would be deprived of its benefits.
3. First mover advantage
The first mover advantage has given huge benefits to companies like Amazon,
Dell, Cisco, Yahoo etc. This has lead to feverish activity among net
companies to capture mindspace of consumers and has also lead to
ridiculous prices being paid for companies having an ostensible first mover
advantage. The Satyam Infoway deal with India World is an example. Some
of these based on a pyramid which has to collapse some time.
4. Cyber laws
The rapid acceptance of the internet in everyday life would largely depend on
the enactment of cyber laws in each country. Apart from this , countries
would have to reach agreements with each other on minimum standards of
internet usage and cooperation in case of cyber crimes .
5. Taxes
There are two issues about taxes on the internet : the first issue is whether
transactions over the net should be taxed at all and if so who should get
the right to tax a transaction and based on what principles.
There are certain states in the US which don’t tax a company for on line sales
in case the seller does not have a situs ( physical presence in terms of
property, office, phone listing )
in the state where the goods are
delivered. This is treated like a mail order operation. Logically a company
could operate in all such states but not have a situs in USA but instead base
it in say Jamaica and thus not pay any taxes on its products.
There are similar issues in Europe over on line sales in EU countries without
using a physical base in those countries.

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Various countries of the world need to work together to sort out these issues.
Once abroad agreement is reached , one needs to write good software
which will track transactions and enforce payments of the taxes.

6. Role of Intermediaries : A great deal has been said about the Internet heralding the death of distance
as it were. This means that anybody can sell a product to anybody else
anywhere in the world . This ordinarily would spell doom for local wholesalers,
retailers and a whole set of intermediaries. While this may be technically true,
issues like after sales service, a need to look and feel the product, and local
personal equations will ensure that intermediaries will remain for along time to
come.
But nevertheless , it must be said that every intermediary in the sales cycle
needs to add value to the chain or he/ she will find survival very difficult .
This has already been proved correct in respect of floor traders of
traditional stock exchanges who are in the danger of being swamped by
internet based online trading which practically eliminates all human
intervention in equity trades thro’ stock exchanges. The story of
how
Charles Schwab & Co brought down brokerage rates and captured a large
chunk of
share broking business is now well known. Merrill Lynch was
reluctant to enter on line trading in a big way because it was fearful that its
brokers might lose their incomes.
There are also instances where intermediaries can actually add value to e
business. One example is that of PC Service which manages warranty
service and maintenance of PC’s for a no of branded PC makers. It keeps
the customer database, manages the customer interaction , warehouses
the components, and executes orders for service.

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Security on the net
Security on the net is a much hyped and talked about issue and has exercised
the mind of most people who would like to make the cyberworld a secure place
to do business .
When business is done over the internet
important

the following issues become very

◊

Identification of the persons doing business i.e. the customer and the
vendor or the sender and the receiver
◊ Protection of the sent message from unauthorized additions, deletions, and
other modifications
◊ Confidentiality of the participants and information contents
◊ Non repudiation of transaction by both parties at a later date
In a normal paper transaction a letter is written probably on a company
letterhead giving specific instructions and is physically signed at the end of it
by an authorized signer. The document is hand delivered or faxed to the
counterparty. This party assumes that the document has been read before it
has been signed, it has been signed by the authorized person. This type of
transaction in today’s context has a high degree of confidence among the
general public.
Any e business transaction will have to meet all the above tests conclusively in
order to able to replace the conventional paper transaction. Unless this
happens. People will not gain confidence over this “ new “ way of transacting.
We therefore need to understand as how we deal with the twin issues of
identification and encryption on the net.
Introduction to Identification : Identification is the very tenet of transaction integrity. At present the physical
signature is the sole evidence of a physical transaction. In the electronic age
efforts have been made to overcome the obvious limitations of a physical
signature which by itself at best a mediocre security device. The newer
identification devices rely on any of the following: ◊
◊
◊

What you know : - Password etc
What you have : - Your credit/ debit / smart card/ PIN no
What you are : - Biometric identification like voice, retina image, dental
image

Different levels of these devices are used at different places depending on the
sensitivity of the location/ application and the possible risks arising out of a
break in.
In an electronic transaction it becomes very important to be sure that the
person who purports to be say Mr. X is actually Mr. X and not a masquerader or
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impersonator. This can be achieved by a process called a digital signature
where an independent third party confirms the identity of both the parties so
that the identity of both parties is established beyond doubt.
Introduction to Encryption : Encryption : - This is the only way to ensure that the message conveyed by a
sender is not intercepted by an unauthorized persons. In order to do this we
need to ensure that :
◊
◊
◊
◊
◊

An unauthorized person should not be able to intercept the message ( This
is the biggest challenge to ensure on a public network like the internet ) .
Even if somebody intercepts the message there must be a mechanism to
make the message unintelligible.
Only the authorized receiver of this message should be able to read its
contents.
In case the message is added, deleted, modified or changed in any manner
it should be detected and thrown out.
Sensitive information about the sender or receiver which does not affect
the integrity of the transaction should not be divulged.

Encryption is a mathematical algorithm written by academics in USA to create
a combination of numbers by which it would be virtually impossible for an
impostor to crack a message purely by applying various permutations and
combinations. This generally uses combinations of prime numbers and is
expressed in the order of say 56K or 128K or 448K. It actually means that ones
needs to work out 2 raised to the power of 56 combinations to arrive at the
repeat combination. There is a software at the customer’s end ( sender) which
encrypts a message and the same software is to be used by the merchant
( receiver) to decrypt the message.
Methods of Encryption : Encryption via SSL : This is a secure network layer which provides end to end security and privacy
of data from the client ( user) say Mr. A to the server( merchant ) say Mr.
B when a transaction is initiated thro the Internet using well known
browsers like Netscape and Internet Explorer. It does this by ensuring
privacy, authenticity, integrity, and non repudiation. It is explained below
how the same is done.
Privacy : - A set of two keys, public and private ( actually nothing but very
large number combinations ) is used for transacting over the web. Every
browser gives a set of keys for each individual which comprises of public
and private keys. The arrangement is that in order to open a message
which has been encrypted using the public key , it can be decrypted using
only the private key or the other way around. Usually the public key of an
individual is available freely over the net and the private key of an
individual remains in his browser and does not travel over the Net.
Usually the keys are available in the web browser of the client’s PC.

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As a practical example, B gives A his public key and then sends an
encrypted message which has been locked with his private key. A
can open the message with B’s public key.
Authenticity : - This is meant to ensure that the person ( say A ) who
receives the public key is actually and not an imposter. This is done by
certification. This is done by a third party certification agency which has
the public keys of both A & B.
As a practical example A’s public key is used by the certification
agency to decrypt the message which has been encrypted b