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Electronic Commerce Environment and Opportunities (The Electronic Commerce Environment)

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The Electronic Commerce Environment


The briefly electronic commerce environment?

1. The virtual corporation:-

Electronic commerce goes hand in hand with changes that are occurring in corporations. The 1990s have seen the rise of a new form of industrial organization- the networked firm, sometimes known as the virtual organization.

Electronic commerce is the essence of the virtual corporation, it allows the organization to leverage information and communication resources with all its constituencies, including employees, customers, bankers, government agencies, suppliers, advertisement agencies and the public. When an organization does business electronically, it can do business from anywhere and go anywhere, 24 hours a day, 7 days a week. This transforms a company into a virtual organization because, electronically, it is located wherever employees, suppliers, and customers need to conduct business and without time boundaries.

2. The electronic marketers:-

Electronic marketers are defined as companies that market their products and services to other businesses or consumers through the private online network, commercial on-line services such American Online (AOL); the Internet, CD-ROMs, telecommunications-enhanced CD-ROMs, interactive television and WebTV, and floppy disk media. These marketers are faced with the challenge of creating a critical mass of customers for their CD-ROM, Internet, or online electronic marketplace.

3. The catalyst of electronic and web commerce:-

The Internet is an aggregation of networks connecting computers which are seen as one network by the user. There have really been no breakthroughs on the Internet of late. It relies on many protocols that are more than a decade old. What is new is the ability of the ensemble of a customer’s browsers, local networks, backbone networks, and web servers to interwork harmoniously. This enables information to flow freely and easily, at the click of a mouse. The WWW is one of the more well-known applications of the Internet to appear of late.

4. Available communication apparatus:-

There are five relevant elements:

  • Organization’s own enterprise network which houses appropriate information, usually beyond the organization’s firewall apparatuses.
  • The public-switched telephone network. This is generally constituted of Located Exchange Carriers (LECs) and Competitive LECs (CLECs) at the local level and a multitude of Interexchange Carriers (IXCs) at the national backbone level.
  • The Internet. This consist of ISPs and NSPs and provides a large inter-enterprise infrastructure.
  • On-line networks such as America Online, which utilize the own communication and information facilities. They can be accessed by dial-up or private lines and now have access to the Internet.
  • Specialized industry networks, such as those to support EDI.

Advantages of E-Commerce:-

1. 24×7 Operation:-

Round the clock operation is an expensive proposition 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 24×7 operations and it’s global reach. Through innovative tools of push technology, it is also possible to retain customer’s loyalty with minimal investments.

4. 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.

5. Improved customer service to year clients:-

It results in higher satisfaction and more scales.

6. Power to provide the ‘best of both the worlds’:-

It benefits the traditional business side-by-side with the Internet tools.

7. A technology-based customer interface:-

Customers conduct transactions either face to face over the phone with store clerks, account managers or another individual. The customer interface in the electronic environment is a ‘screen-to-face’ interaction. This includes PC based monitors, ATMs, PDAs or other electronic devices.

8. The customer controls the 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.

9. Network economics:-

A key characteristic of networks 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 because of rising switching costs.

Disadvantages of E-Commerce:-

The disadvantage/limitations of e-commerce can be divided into two categories.

1. Technical Limitations.

2. Non-Technical Limitations.

1. Technical Limitations:-

  • Lack of Security:- The initial cost to develop e-commerce website in-house is very high. This may need a high cost or be hiring qualified staff to maintain and update the e-commerce website.
  • Low Bandwidth:- In many countries, the network might cause an issue because of low bandwidth.
  • Difficulty in Integrating E-Commerce:- It is difficult to integrate e-commerce software or website with some existing applications and databases. Vendors need special web servers to deal with integration problem in addition to network servers.
  • Not All Customers have Access to Internet:- Internet access is not universally available so much of the effort made does not actually reach the consumer. Many potential customers that are living in the remote village have not Internet access facility.

2. Non-Technical Limitations:-

  • Initial Cost:- The initial cost to develop e-commerce website in-house is very high. This may need a high cost or be hiring qualified staff to maintain and update the e-commerce website.
  • Security and privacy:- The major issues in online businesses are security and privacy. Customers feel hesitant to disclose credit card numbers over the Internet because of security problems such as theft of credit card number.
  • Customer Relations Problems:- Organization needs loyal customers to run their online business for a long time. Online businesses cannot continue without loyal customers in today’s competition.
  • Lack of Trust and User Resistance:- Face-to-face contact and paper transactions are important in business deals and transactions since it is related to trust. So for any consumer switching from physical to online stores is difficult.
  • Lack of Touch and Feel:- consumers may want to touch and feel a product before purchasing online. Online businesses do not provide the touch and feel experience to the consumer on items such as clothes, shoes etc.
  • Corporate Vulnerability:- Online businesses have high availability of information related to product, price, catalogs, and others. This information makes websites vulnerable to access by competition. This process of extracting business intelligence from competitor’s web pages is called Web farming.
  • Legal Issues:- When buyers and sellers do not know each other, there is a chance of fraud over the Internet. Hence there are may legal problems related to e-commerce. Se common legal issues encountered in e-commerce are:

a) Software and Copyright Violations.

b) Credit Card Fraud and Stolen Identities.

c) Illegal Bargains and Criminal Law.

Applications of E-Commerce:-

1. Online Banking:-

Online banking allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society. To access a financial institution’s online banking facility, a customer having personal Internet access must register with the institution for the service, and set up some password for customer Verification. The customer would go to the financial customers’ number and password. Then the customer can perform non-transactional tasks as well as transactional tasks through online banking.

2. Online Shopping:-

Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser. Alternative web-store, online store, online storefront and virtual store.

3. Online Marketing:-

Online marketing uses the Internet to deliver promotional marketing messages to consumers. It includes email marketing, search engine marketing, social media marketing, many types of display advertising and mobile advertising.

4. Online Auctions:-

It offers the general public the opportunity to bid electronically on a wide of the asset. The auctions are completely web-enabled, allowing all registered participants to bid on a single item or multiple items within specified time frames. Online auctions remove the physical limitations of traditional auctions such as geography, presence, time, space and a small target audience.

5. Instant Messaging:-

Instant messaging is a set of communication technologies used for text-based communication between two of participants over the internet or other types of networks, this type of communication services enables you to create a kind of private chat room with another individual in order to communicate in real time over the Internet using text-based communication.

6. Newsgroups:-

A newsgroup is a type of online discussion forum. This is a continuous public discussion about a particular topic. You can join a newsgroup at any time to become part of a huge conversation between hundreds or even thousands of people. This is a source of both information and communication.

7. Online Publishing:-

Online publishing includes the publication of an online newsletter, online magazines and databases, electronic journal, brochures and other promotional materials such as ebooks.

8. Online office suites:-

An online office suite is a type of office suite offered by websites in the form of software as a service. They can be accessed online from any internet-enabled device running any operating system.

9. Teleconferencing:-

A teleconference is a telephone meeting among two or more participants involving technology more sophisticated than a simple two-way phone connection. It can be referred to as audio conferencing, telephone conferencing and phone conferencing. At its simplest, a teleconference can be the audio conference with one or both ends of the conference sharing a speakerphone.

10. Electronic Tickets:-

An electronic ticket is an electronic version of a regular paper ticket. However, an electronic ticket differs from a paper ticket, in that an e-ticket automatically is recorded in several computer databases when a reservation is confirmed. Airlines and ticketing systems have access to these databases.

The different security issues and approaches related to web commerce or e-commerce:-

Many of the concerns about electronic commerce developments, particularly over open.networks (e.g., the Internet), deal with the risks of possible fraud, security infractions, counterfeiting, and with consumer privacy issues.

Issues relate to:-

(1) Secure payments via electronic cash (e-cash).

(2) Confidentiality (encryption) and authentication of financial transactions; and

(3) General confidentiality in the transfer of any document.

1. Secure payments:-

E-cash can be thought of as the minting of electronic money or tokens. In electronic cash schemes, buyers and sellers trade electronic value tokens which are issued or backed by some third party, be it an establishes bank or a new (Internet-based) institution. The effects of a system failure in an electronic case scheme are much harder to anticipate; system failure could also occur through many means, not the least of which is insufficient funds (or paper money) to back up the new electronic money.

2. Secure transactions:-

Agreements on standard Internet payment systems were getting closer at press time. During 1996, IBM/MasterCard and Microsoft/Visa respectively agreed on a single industry standard for conducting credit card transactions over the Internet. The agreement was aimed at removing that had been the major obstacle in the emergence of large-scale electronic commerce applications for the Web. Such agreement resolves a long-standing struggle on standardized security technology. The issue has been which technology to use Microsoft’s Secure Transaction Technology (STT) or IBM’S SEPP; (Secure Electronic Transfer); based on earlier SEPP work.

The solution for achieving secure, cost-effective online transactions that will satisfy market demand is the development of a single, open industry specification.

3. Message transfer confidentiality and authentication:-

Two different protocols have been developed for enhanced Web security: Secure Hyper Text Transfer Protocol (S-HTTP) and the Secure Sockets Layer (SSL).

  • Besides confidentiality there are also issues of authentication not only could a buyer masquerade for another buyer (in order to steal the payment instrument), but a fake Web-store merchant could put up a fraudulent storefront to steal payments (but never skip any goods).
  • Companies such as VeriSign provide an authentication function by acting as a certificate authority. They provide two types of certificate: ID Class 1 and ID Class 2.
  • S-HTTP is an extension of HTTP that provides a variety of security enhancements for the Web. Message protection is provided in three ways: signature, authentication, and encryption.
  • S-HTTP is flexible in that it allows each application to configure the level of security required. A transmission from client-to-server or server-to-client can be signed, encrypted, both or neither.
  • A secure HTTP message consists of a request or status line followed by an encapsulated content. Once the content has been decoded. It should either be another S-HTTP message, an HTTP message, or simple data.
  • Secure Sockets Layer (SSL) is a transport layer security technique that can be applied to HTTP as well as to other TCP/IP-based protocols. The SSL protocol is designed to provide privacy between two communicating applications, for example, a client and a server. SSL provides authentication, encryption, and data verification.
  • The SSL protocol is actually composed of two protocols. Layered on top of some reliable transport protocol, is the SSL record protocol. The SSL record protocol is used for encapsulation of all transmitted and received data, including the SSL handshake protocol, which is used to establish security parameters.

The advantage of the SSL protocol is that it is application-protocol-independent. A higher-level application protocol ( for example HTTP, FTP, and Talent) can run transparently on top of the SSL protocol.

The SSL protocol can negotiate an encryption algorithm and session key, as well as authenticate a server before the application protocol transmits or receives its first byte of data. all of the application protocol data is transmitted encrypted, ensuring privacy.

S-HTTP is more flexible than SSL in that an application can configure the level of security it needs.

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