Master of Business Administration MBA Semester IV MI0039-eCommerce

Q.1 Warigon is a retail company and they want to automate the payment system. 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. Designing Electronic Payment Systems 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 must merit equal trust.

Security. A secure system verifies the identity of two-party transactions through "user authentication" and reserves flexibility to restrict information/services through access control. Tomorrow's bank robbers will need no getaway cars-just a computer 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 telephone. Generally speaking, users value convenience more than anything.

Database integration. With home banking, for example, a customer wants to play with all his accounts. To date, separate accounts have been stored on separate databases. The challenge before banks is to tie these databases together and to allow 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 example, should subsidies be used to encourage users to shift from one form of payment to another, from cash to bank payments, from paper: based to e-cash. The problem 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 necessary. On the other hand, it must be recognized that without subsidies, it is difficult to price all services affordably.

Standards. Without standards, the welding of different payment users in different networks and different systems is impossible. Standards en at interoperability, giving users the ability to buy and receive information, regardless of which bank is managing their money. None of these hurdles are insurmountable. Most will be jumped within t next few years. Thesetechnical problems, experts hope, will be solved as technology is improved and experience is gained. The biggest question concern how customers will take to a paperless world

Q.2 List the advantages and disadvantages of eCommerce ? Ans. Advantages and Disadvantage of E-commerce :

Advantage of E-Commerce Some of the key strengths of using the Internet for businesses include the following: 1. 24 x 7 operation. Round-the-clock operation is an expensive proposition Web Client TCP/IP Web Server In the 'brick-and-mortar' world, while it is natural in the 'click-and conquer' world.

2. Global reach. The net being inherently global, reaching global customers is relatively easy on the net compared to the world of bricks.

3. Cost of acquiring, serving and retaining customers. It is relatively cheaper to acquire new customers over the net; thanks to 24 x 7 operation and its global reach. Through innovative tools of 'push' technology, it is also possible to retain customers' loyalty with minimal investments.

4. An extended enterprise is easy to build. In today's world every enterprise is part of the 'connected economy'; as such, you need to extend your enterprise all the way to your suppliers and business partners like distributors, retailers and ultimately your endcustomers. The Internet provides an effective (often less expensive) way to extend your enterprise beyond the narrow confines of your own organization. Tools like ERP, SCM and CRM easily deployed over internet, permitting amazing efficiency in time needed to market, customer loyalty, on-time delivery and eventually profitability. 5. Disintermediation. Using the Internet, one can directly approach the customers and suppliers, cutting down on the number of levels and in the process, cutting down the costs.

6. Improved customer service to your clients. It results in higher satisfaction and more sales.

7. Power to provide the 'best of both the worlds'. It benefits the traditional business sideby-side with the Internet tools.

8. A technology-based customer interface. In a brick- and-mortar business, customers conduct transactions either face-to-face or over the phone with store clerks, account managers, or other individuals. In contrast, the customer interface in the electronic environment is a 'screen-to-face' interaction. This includes PC based monitors, ATM machines, PDAs, or other electronic devices such as the DoCopMo iMode in Japan and the Nokia 7100 in Europe. Operationally, these types of interfaces place an enormous responsibility on the organization to capture and represent the customer experience because there is often no opportunity for direct human intervention during the encounter. If the interface is designed correctly, the customer will have no need for a simultaneous or follow-up phone conversation. Thus, the 'screen-to- - customer' interface has the potential to both increase sales and decrease costs. When the interface does not work, not only is the revenue lost but the organization also incurs the technology costs. Thus, a poorly designed customer interface has both negative revenue and cost implications.

9. The customer controls the interaction. At most websites, the customer is in control during screen-to-face interaction, in that the Web largely employs a 'self-service' model for managing commerce or community based interaction. The customer controls the search process, the time spent on various sites, the degree of price/product comparison, the people with whom he or she comes in contact, and the decision to buy. In a face-to-face interchange, the control can rest with either the buyer/seller or the community member. At a minimum, the seller attempts to influence the buying process by directing the potential buyer to different products or locations in the store, overcoming price objections and reacting in real item to competitive offering. The virtual store can attempt to shape the customer experience with uniquely targeted promotions, reconfiguration of storefronts to reflect past search behaviour, recommendations based on previous behaviour of other similar users, and access to proprietary information.

10. Knowledge of customer behaviour. While the customer controls the interaction, the firm has unprecedented access to observe and track individual consumer behaviour. Companies, through a third-party measurement firm such as Vividence and Accrue, can track a host of behaviors on web sites visited, length of stays on a site, page views on a site, contents of wish lists and shopping carts, purchases, dollar amounts of purchases, repeat purchases behaviour, conversion rates of visitors who have completed transactions and other metrics. This level of customer behaviour tracking, in contrast with tracking consumer attitudes, knowledge or behavioral intentions, is not possible in the brick-and-mortar world. Armed with this information, companies can provide one-toone customization of their offerings. In addition, companies can dynamically publish their storefronts on the Web to configure offerings to individual customers. In a tactical embellishment, electronic retailers can welcome a user back by name. In more strategic terms, an online business can actually position offers and merchandise in ways that uniquely appeal to specific customers. 11. Network economics. In information intensive industries, a key competitive battleground centres on the emergence of industry standard products, services, components, and or architecture. Network effects, as described by Metcalfe's law, can best be expressed as the situation where the value of a product or service rises as a function of the number of other users who are using the product. A classic example is the fax machine of other people who adopt the technology.

A key characteristic of network's economic is positive feedback, that is, as the installed base grows, more and more users are likely to adopt the technology because of the installed base. Many commercial wares in the digital economy revolve around setting a standard, growing the installed base and attempting to 'lock-in' customers to the standard because of rising switching costs. This applies to both hardware (e.g. cable modems versus DSL lines) and software (e.g. MP3 versus streaming audio). A key result of network effects and positive feedback is 'increasing return' economies as compared to the traditional decreasing-returns model often associated with the brickand-mortar world. It also means that the traditional realities of marketing such as the importance of word-of-mouth (WOM) among potential customers, become greatly magnified in this new environment. It is this turbo charged WOM phenomenon that makes viral marketing a reality for consumer-oriented e-commerce business such as ICQ in instant messaging system.

Disadvantages of E-commerce Some business processes may never lend themselves to electronic commerce. For example, perishable foods, and high-cost items (such as jewelry, antiques, and the like), may be difficult to inspect from a remote location. Most of disadvantages are from the newness and rapid pace of underlying technologies, which would disappear as ecommerce matures and becomes more and more available to and gets accepted by the general population. Many products and services require a critical mass of potential buyers who are well-equipped and willing to buy through the Internet.

Businesses often calculate the return-on-investment before committing to any new technology. This has been difficult to do with e-commerce, since the costs and benefits have been hard to quantify. Costs, which are a function of technology, can change dramatically even during short-lived ecommerce implementation projects, because the underlying technologies are changing rapidly. Many firms have had trouble in recruiting and retaining employees with technological, design, and business process skills needed to create an effective e-commerce atmosphere. Another problem facing firms that want to do business on the Internet is the difficulty of integrating existing databases and transaction-processing software designed for traditional commerce into a software that enables e-commerce. In addition to technology and software issues, many businesses face cultural and legal obstacles in conducting e-commerce. Some consumers are still somewhat fearful of sending their credit card numbers over the Internet. Other consumers are simply resistant to change and are uncomfortable viewing merchandise on a computer screen rather than in person. The legal environment in which ecommerce is conducted is full of unclear and conflicting laws. In many cases, government regulators have not kept up with the trends in technologies

Q3. Explain the framework of eCommerce in detail?

Ans. Electronic Commerce Framework From the business activity already taking place, it is clear that e-commerce applications will be built on the existing technology infrastructure-a myriad of computers, communications networks, and communication software forming the nascent Information Superhighway.

See the both inter-organizational and consumer-oriented examples. None of these uses would be possible without each of the building blocks in the infrastructure: Common business services, for facilitating the buying and selling process Messaging and information distribution, as a means of sending and retrieving information Multimedia content and network publishing, for creating a product and a means to communicate about it The Information Superhighway-the very foundation-for providing the highway system along which all e-commerce must travel. The two pillars supporting all e-commerce--applications and infrastructure are just as indispensable: Public policy, to govern such issues as universal access, privacy, and information pricing. Technical standards, to dictate the nature of information publishing, user interfaces, and transport in the interest of compatibility across the entire network. To better understand the integration of the various infrastructure components in our framework, let us use the analogy of a traditional transportation business. Any successful e-commerce application will require the I-way infrastructure in the same way that regular commerce needs the interstate highway network to carry goods from point

to point. You must travel across this highway, whether you are an organization purchasing supplies or a consumer ordering a movie on demand. Understand, however, that the I-way is not one monolithic data highway designed according to long-standing, well defined rules and regulations based on well-known needs: Rather, still under construction, the I-way will be a mesh of interconnected data highways of many forms: telephone wires, cable TV wires, radio-based wireless-cellular and satellite. Far from complete, the I-way is quickly acquiring new on-ramps and even small highway systems. The numerous constructors are either in competition with or in alliance with one another, all in an effort to convince traffic to use their on-ramps or sections of the highway because, like toll ways, revenues in e-commerce are based on vehicular traffic, in our case, vehicles transporting information or multimedia content. The myriad transactions among businesses means that the ultimate winner must select the technology for the I-way that best matches future business needs by using today's tools. Building an access road to a ghost town or a highway too narrow to handle the traffic will yield equally little return on investment for those who have been less successful at matching needs with the infrastructure.

Building the various highways is not enough. Transport vehicles are needed, routing issues must be addressed, and of course, the transportation costs must be paid. On the I-way, the nature of- vehicular traffic is extremely important. The information and multimedia content determines what type of vehicle is needed. A breakdown of potential everyday e-commerce vehicles into their technological components shows that they vary widely in complexity and may even need to travel different routes on the I-way, much the way an eighteen-wheeler may be restricted from traveling roads that cannot accommodate it: Movies = video + audio Digital games = music + video + software Electronic books = text + data + graphics + music + photographs + video. Final pillar on which the e-commerce framework rests is technical standards without 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 versus 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 border between Russia and

Western Europe. Similar differences in standards exist today in electricity distribution (110 versus 200 volts) and video distribution (Sony Beta versus VHS), limiting worldwide use of many products.

Standards are crucial in the world of global e-commerce, to ensure not only seamless 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 standards, video conferencing will never become widespread, as each manufacturer will attempt to develop equipment that maximizes their short-term profits rather than working toward customer goals such as interoperability. While we have strived to limit our initial discussion of the elements of a framework for electronic commerce to an understanding of what part they play within this complex network, it 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 the Information Superhighway and to the way the business world is gearing up to deal 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-ecommerce application themselves with a clarification of the concept of convergence.