The Purpose

Dear reader, The work contained in the following pages represents a project that I had to submit as a part of my curriculum in college. The reason why I am uploading this project is that there are whole businesses thriving in the “project business”. Students can, for a nominal sum, purchase prepared project works. Most of the projects are sold by printers. Students who compile a project almost always get it printed by printers. The printers then save these projects and sell them to other students who do not consider it worthwhile to prepare their own projects. Since the project is a very small part of the course, rules are not strictly adhered to and hence pirated projects are common. I am not sure whether this work has already been sold. So, if anyone wants a readymade project, I would not mind them copying contents from this project. If you want this project, please do not pay the printer for it. He has not put in any time or effort into it and hence he does not deserve any payment for it. Besides, this work is far from original to warrant any payment at all. In the time I prepared this project, I gained a lot of knowledge and also realised how much there is to learn. I am a firm believer in open source and open content and I have benefitted immensely from both. Personally, I have enjoyed preparing this work and I hope it is of help to you.


Information Technology And Commerce

R. Kasturika B.Com (H) IIIrd Year

Shaheed Bhagat Singh College Delhi University


This is to certify that the project entitled “Information Technology and Commerce” is based on my understanding of the subject and has not been copied from any published source or web site. Where appropriate, the sources of information including other works and publications have been acknowledged.

R. Kasturika B. Com (H) IIIrd Year Roll Number 65


This is to certify that R. Kasturika of B. Com. (H) 3rd Year Shaheed Bhagat Singh College has completed the project entitled “Information Technology and Commerce” under my guidance and to the fullest satisfaction.

Commerce Department Shaheed Bhagat Singh College Delhi University


I gratefully acknowledge my indebtedness to Dr. T.K. Nagpal, my project mentor for offering guidance as well as my past and present college teachers, from whom I have been able to understand the subject better. I would also like to thank my classmates with whom I have interacted and who have helped me to think harder. My family has supported and encouraged me in ways that cannot be put into words and so I am grateful to my parents and my brother, without whom this project would not have been possible.

R. Kasturika B. Com (H) IIIrd Year Roll Number 65

Table of Contents

Introduction The E-Commerce Environment Electronic Data Interchange (EDI) Electronic Funds Transfer (EFT) E-Enterprise Requirements E-Commerce Business Models Bibliography

Human ingenuity resulted in technology. This technology has been refined and advanced upon over the years and has given birth to a changes in lifestyle like never before. Perhaps one of the biggest contributors to this change can be attributed to information and communication technologies (ICT). And it is this ICT that has made possible the phenomenon we call “E-Commerce”. E-commerce encompasses a wide range of subjects. This project discusses only some aspects of how business has been influenced by Information Technology. This project, in keeping with the theme, draws heavily from on-line sources. These sources have been listed in the bibliography.

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What is e-commerce Evolution of e-commerce

What is E-commerce?
In the book “E-Commerce in the Asian Context: Selected Case Studies”, the authors have discussed about the absence of an internationally agreed upon definition of e-commerce. For some, it can be as narrow a concept as trading over the internet, while for others, it could mean using any electronic device to purchase goods or services.1 The Organisation for Economic Co-operation and Development (OECD) has defined an electronic transaction as “the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organisations, conducted over computer-mediated networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of the good or service may be conducted on or off-line.”2 Yet another definition is provided in “Electronic Commerce : The Strategic Perspective”. Here, the authors define e-commerce as the use of computer networks to improve organizational performance. Thus, the scope of e-commerce has been widened to include all aspects of an organisation's interactions with its stakeholders. These stakeholders include the suppliers, customers, financial institutions, employees, government regulators, managers and the public at large.3

Evolution of E-commerce
E-Commerce began to emerge first with the advent of Electronic Funds Transfer and Electronic Data Interchange. This was followed by e-mail. However, e-commerce as we know it got its boost due to the Internet and World Wide Web. Together, they provided a user friendly interface which rendered e-commerce accessible and affordable. When one talks about e-commerce today, it invariably refers to internet commerce. The web changed the way information was organised and presented. Web pages were created using Hypertext Markup Language (HTML). This allowed the creation of hypertext links within a web page which let one “jump” directly to another web page or some other information source.4 Several e-commerce sites sprang up within a short time to take advantage of the “revolutionary” way of conducting business. But this boom turned out to be a short lived bubble and burst soon. Several companies failed and customers lost money. Within a span of two years, $5 trillion in paper wealth was wiped out on NASDAQ, the exchange on which many of these companies were traded. However, as one businessman pointed out, “There are going to be a lot of flame outs and some spectacular winners, because even in bubbles some enormous companies that have lasting value were created.” 5 One such business was that of an on-line book store. The business did not make profits for several years and it was only in 2003, that reported its first full-year profit since it began operations in 1995.6 Being a part of information technology, the growth of e-commerce is linked to the reach and advancements in technology. Internet connectivity has improved manifold. Slow Dial-

up connections are a thing of the past. Computers as well as internet connections are now affordable. Many airports including the airports in New Delhi, Mumbai and Chennai are wifi enabled. Taking advantage of the growing importance of the internet, Café Coffee Day has wi-fi enabled its outlets. Today, businesses across the world are realising the importance of ICT in their organisations. Even pure brick and mortar businesses (with no on-line presence) are setting up websites as information sources and resorting to on-line advertising. Even the Government of India has begun to implement ICT in its functioning known more commonly as e-governance. In fact, it is mandatory for all Companies from 1st April 2008 to pay taxes (All Direct Taxes e.g. Income Tax, Corporate tax, Fringe Benefit Tax, Tax Deducted at Source, Advance tax, self assessment tax) through e-payment facility using net banking account.7

The E-Commerce Environment
The environment in which e-commerce operates can be described through its advantages and limitations. To better understand the environment, this section includes the common myths surrounding e-commerce.

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Benefits of e-commerce Limitations of e-commerce Common misconceptions surrounding e-commerce

Benefits of E-Commerce
1. Access the global marketplace: The internet can be accessed from anywhere around the globe. Thus, an ecommerce site can enter a global market space. Further, unlike traditional communications methods, users are not charged according to the distance over which they are communicating. 2. Business can be conducted 24 x 7: Unlike physical stores which have opening and closing times, E-commerce systems can operate all day every day. Since the internet can be accessed by anyone from anywhere, time is no longer a barrier to conduct business. When night falls in New Delhi, it is daytime in New York. 3. Speed: Electronic communications enable messages to travel around the world almost instantaneously. 4. Price quotes: Businesses can list prices on-line instead of printing catalogues. With a web site, the business can have the prices listed, and change them by simply editing the web page. In a printed catalogue the business is stuck with the expense of printing a new version if many of the prices have to be changed. Customers too can conduct research on-line and find out the best price at which to purchase. 5. Convenience: This is seen as one of the biggest advantages of e-commerce. Customers have access to a host of services literally at the tip of their fingers. Customers can buy whenever they want, from more locations. This increases choices. When customers have more choices they can decide on a product with better features at a more competitive price. Sometimes products are less expensive on-line. 6. Quicker delivery: E-commerce enables quicker delivery of on-line products such as software, games, music, which can be downloaded. Quick delivery is important for people who want to use the product immediately, as opposed to waiting longer. If they have to wait long, they may pick a competitor's product. 7. Supply chain efficiencies: The use of internet can lead to a reduction in the inefficiencies relating to supply chain. Some of the benefits are reduced inventories, reduced delivery delays and efficient e-procurement. E-commerce also helps in building more collaborative and stronger relationships with suppliers. This includes streamlining and automating the underlying business processes, enabling areas such as direct marketing, selling, customer services, (call centres), fulfilment, procurement, replenishment and information management. 8. Customer satisfaction: Via the internet, customers can receive more information about the product and make a more informed decision. Greater information leads to more confidence to

make a purchase decision. More information also leads to enhanced customer satisfaction because the customer has a better idea about how to use the product. Further, e-commerce enables customization of products so that customers can have a product that suits their exact needs. 9. Innovative business models: Due to the significant difference in conducting business electronically as against conducting business physically, as well as the its relatively recent birth, ecommerce allows for innovative business models. 10. Opportunity to reduce costs: E-commerce provides a business to cut costs. Some of the costs that can be cut include a) cost of creating the product b) costs of processing orders from the customers c) costs of handling customer phone calls d) cost of promotional material e) costs of distribution f) costs of sending out bill payment info g) costs of handling sales inquiries h) costs of determining product availability (inventory management) i) cost of marketing j) human Resource costs k) costs of storing information l) telecommunication costs8 11. Computer platform-independent: Globally, computers are not run on the same platform. A computer, for instance, may run on Microsoft Windows, Mac OS, Linux or Solaris operating system. However, the internet is independent of operating systems and hardware. Customers are not limited by existing hardware systems. 12. Allowing customer self service and “customer outsourcing”: People can interact with businesses at any hour of the day that it is convenient to them, and because these interactions are initiated by customers, the customers also provide a lot of the data for the transaction that may otherwise need to be entered by business staff. This means that some of the work and costs are effectively shifted to customers; this is referred to as “customer outsourcing”. 13. Stepping beyond borders to a global view: Using aspects of e-commerce technology can mean business can source and use products and services provided by other businesses in other countries. For example, a business based in Europe can take advantage of lower labour costs in Asia by outsourcing manufacturing work to China and outsourcing knowledge based work to India. 14. A new marketing channel: The internet provides an important new channel to sell to consumers. As a marketing channel, the internet exhibits the following characteristics a) the ability to inexpensively store vast amounts of information at different virtual

locations b) the availability of powerful and inexpensive means of searching, organising, and disseminating such information c) interactivity and the ability to provide information on demand d) the ability to provide perceptual experiences that are far superior to a printed catalogue, although not as rich as personal inspection e) the capability to serve as a transaction medium f) the ability to serve as a physical distribution medium for certain goods (e.g., software) g) relatively low entry and establishment costs for sellers No other existing marketing channel possesses all of these characteristics.9 15. Niche Markets: Traditionally, entering a narrow or a specialised market segment was not easy, especially for a new or small business, since customers were few and geographically displaced. The internet solves this exact problem as it cuts the cost of accessing a geographically as well as culturally wide market. 16. High degree of specialisation: Due the particular nature of e-commerce, there is potential of very high level of competition. In such fierce competition, only that organisation which offers the best product at the best price will survive. This requires heavy cost cutting as well as high quality. This can only be achieved by outsourcing business processes to specialised agencies. Thus, e-commerce promotes specialisation. 17. Overall business profitability: If an organisation truly takes advantage of the internet, it can reduce costs, increase productivity, improve quality and thus achieve a higher sales leading to increased profitability. 18. Social benefits: Although it is an unlikely and distant possibility, e-commerce can potentially benefit the society. For instance, if more people work from home, there will be less traffic congestion. Use of paperless processes is environment-friendly. Public services can also be delivered electronically. For instance, better and cheaper products can improve standards of living. Stiff competition and the need to improve quality at lower costs will lead to more investment in research and development and more efficient utilisation of scarce resources. A situation similar to what economists call perfect competition may arise. Education can be spread free of cost or at reduced cost. There are already very vast information sites available for free use. There are also several not-for-profit organisations which provide education on-line. Several leading universities offer online courses -paid as well as free. The OpenCourseWare initiative of the Massachusetts Institute of Technology is one of the more popular sites of this kind. Other sites in this league include Managing the Digital Enterprise and Open Courseware Lab, both of which were created by Michael Rappa in the late nineties. The internet can be used as a common platform for persons from every corner of the globe to share knowledge with the rest of the world. Wikipedia is an example of such an initiative.

Not only information, even products such as software are becoming available for free circulation. Open source is today a reality. “Open source is a development method for software that harnesses the power of distributed peer review and transparency of process. The promise of open source is better quality, higher reliability, more flexibility, lower cost, and an end to predatory vendor lock-in.”10 Under open source, software is circulated for free without any fee or royalty. The source code of the software is circulated along with the software. Any and every user is free to modify the code and redistribute the improved/modified software under the same terms as the license of the original software.

Limitations of E-Commerce
1. Time for delivery of physical products: When purchases are made in physical stores, the customer gains possession of the product immediately on purchase. This is not possible over the internet. There are ways to get around the problem by substituting products such as books and CDs into downloadable e-books and files. However this cannot be done with every product. 2. Physical product, supplier & delivery uncertainty: In some respects e-commerce purchases are made on trust. This is because, firstly, not having had physical access to the product, a purchase is made on an expectation of what that product is and its condition. Secondly, because supplying businesses can be conducted across the world, it can be uncertain whether or not they are legitimate businesses and are not just going to take your money. Laws across countries differ and it is pretty hard to seek legal recourse since who is guilty is not always clear. Another problem is which country's laws have to be applied. Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever arrive. 3. Perishable goods: E-commerce cannot be used for trading perishable goods. One cannot order authentic cuisine from a restaurant in Portugal! To circumvent this problem, specialised or refrigerated transport can, theoretically, be used. However, it would not be practical as it would cost much more and the food would be stale by the time it arrives, not to mention that the customer would have in any case satisfied his hunger by purchasing food locally! E-commerce is most suited to durable and nonperishable goods. 4. Limited and selected sensory information: The internet is an effective medium for visual and auditory information - seeing pictures, hearing sounds and reading text. However it does not allow full scope for our senses. We can see pictures of the flowers, but not smell their fragrance. We can see pictures of a hammer, but not feel its weight or balance. Further, when we pick up and inspect something, we choose what we look at and how we look at it. This is not the case on the internet. If we were looking at buying a car on the internet, we would see the pictures the seller had chosen for us to see but not the things we might look for if we were able to see it personally. And, taking into account our other senses, we can't test the car to hear the sound of the engine as it changes gears or sense the smell and feel of the leather seats. There are many

ways in which the world. This lack of comfortable buying experienced before complex things. 5. Returning goods:

internet does not convey the richness of experiences of the sensory information means that people are often much more via the internet generic goods - things that they have seen or and about which there is little ambiguity, rather than unique or

Returning goods on-line can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods get back to their source? Who pays for the return postage? Will the refund be paid? How long will it take? 6. Privacy, security, payment, identity, contract: This is by far the biggest limitation of conducting business on-line. Privacy of information, security of that information and payment details, whether or not payment details such as credit card details will be misused, identity theft, contract, and what laws and legal jurisdiction apply, are some of the more serious issues of on-line trading. The fact that credit card fraud and identity theft are a reality makes this issue more prominent. 7. Defined services & the unexpected: E-commerce is an effective means for managing the transaction of known and established services, that is, things that are everyday. It is not suitable for dealing with the new or unexpected. For example, a transport company used to dealing with simple packages being asked if it can transport a hippopotamus, or a customer asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such requests need human intervention to investigate and resolve. 8. Personal service: Although some human interaction can be facilitated via the web, e-commerce can not provide the richness of interaction provided by personal service. For most businesses, e-commerce methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This also means that feedback about how people react to product and service offerings also tends to be more granular or perhaps lost using e-commerce approaches. If your only feedback is that people are (or are not) buying your products or services on-line, this is inadequate for evaluating how to change or improve your e-commerce strategies and/or product and service offerings. Successful business use of e-commerce typically involves strategies for gaining and applying customer feedback. This helps businesses to understand, anticipate and meet changing on-line customer needs and preferences, which is critical because of the comparatively rapid rate of ongoing internet-based change. 9. Size and number of transactions: E-commerce is most often conducted using credit card facilities for payments, and as a result very small and very large transactions tend not to be conducted on-line. The size of transactions is also impacted by the economics of transporting physical goods. For example, any benefits or conveniences of buying a box of pens on-line from a US-based business tend to be eclipsed by the cost of having to pay for them to be delivered in Australia. The delivery costs also mean that buying individual items from a range of different overseas businesses is significantly more expensive than buying all of the goods from one overseas business because the goods can be packaged and shipped together.9

10. Higher cost: The cost of technology and infrastructure is a huge disadvantage to organisations which aim to exploit the on-line opportunities. Another cost is that of training employees in the technical fields. These higher costs may equal or even exceed the cost savings mentioned above. A business should carefully weigh the costs against the potential benefits before making an on-line presence. 11. Cultural and linguistic obstacles: Internet was born in the United States of America. There was for several years an American monopoly over the internet. The so-called dot-com boom and burst affected the Americans. The language of the internet is mainly English and most of the sites promote American culture. While several people have expressed concern over the death of national cultures, there have been doubts on the actual reach of e-commerce. In a country such as India, where English is spoken only in urban/semi urban areas, it is hard for internet to be comprehended across the majority of the population. Another problem associated with languages is that most of the technically trained professionals are trained in the English medium as programming is possible only in English. Thus, technical support in foreign languages is difficult to obtain. 12. People's resistance to change: It is human nature to resist change. On-line trading is no exception. However, over time, this form of trading will gain popularity. On-line travel services such as and; career services such as those provided by and; and matrimonial sites such as have already become very popular. 13. Technical limitations: There are several technical issues surrounding e-commerce which have to be solved for e-commerce to become successful. Some of these limitations are as follows. a) some protocols are not standardized around the world b) reliability for certain processes c) insufficient telecommunications bandwidth d) software tools are not fixed but constantly evolving e) integrating digital and non-digital sales and production f) some vendors require certain software to show features on their pages, which is not common in the standard browser used by the majority g) Difficulty in integrating e-Commerce infrastructure with current organizational IT systems8

Common Misconceptions Surrounding E-Commerce11
The advantages of e-commerce outlined above are true, but not completely practical. The limitations pointed out are very real and it is important not to ignore them. There are several misconceptions surrounding e-commerce. It is important to understand the

difference between realities and possibilities. It was these myths which led several businesses to spring up in the mid-nineties and invest mind boggling amounts of money. However, by the turn of the century, several of these companies either went bankrupt, or had to be shut down. Heavyweight Disney had to write off $790 million when it's portal was shut down in January 2001. Following are common myths surrounding ecommerce.12 Myth #1: E-commerce is easy Putting up a website is easy. However, it is only the tip of the iceberg. Conducting business via the site requires maintenance of huge databases, accurate data, acceptable response time, customer and supplier relationships, payment procedures, data access, data ownership, data security and marketing. Building a site is just one piece of the puzzle. Myth #2: Everyone is doing e-commerce Practically every company has a web site. But the sites merely list catalogues, information, contact lists, and store addresses. They do not necessarily engage in commerce on-line. Myth #3: E-commerce means the end of mass marketing The web offers cost effective one-to-one marketing on a huge scale. However, it does not mean the end of mass marketing. To survive, businesses have to first acquire customers. It can do so only by mass marketing through media such as television advertisements (for example, and With millions of web sites, it becomes essential to grab the attention of potential customers via mass marketing. In fact, there are many enterprises using the medium of the world wide web as a mass marketing channel. Many web pages rent out spaces for advertisements to advertisers, much like the way newspapers do. They are usually at the top of the web pages as banners, or somewhere in the middle as sponsored links. Myth #4: E-commerce is inexpensive Setting up e-commerce site involves costs of infrastructure both relating to, as well as not relating to IT and costs of marketing. Setting up a web site is the cheapest part of starting e-commerce. Myth #5: E-commerce is lucrative Only a few e-commerce firms have tasted success. But a majority of businesses on-line do not sell volumes that a physical store sells. Myth #6: E-commerce eliminates middlemen Via the internet, a manufacturer can directly sell to the customer (for example, Dell). However, most successful e-commerce players use the web to enhance their existing distribution channels, not to circumvent them. Travel sites are an example of middlemen on-line. Myth #7: E-commerce provides a level playing field

Except for Amazon and Blue Mountain Arts, the biggest firms on-line are Dell, Cisco, Microsoft, Disney – all established companies. In theory, anyone can enter any market in e-commerce. However, brand power, trust and customer confidence will always attract more customers. All the internet provides is instant access to global markets. There is a low barrier to doing e-commerce, but a very high barrier to becoming one of the leading choices. Myth #8: Price is the guiding force in e-commerce On-line auction sites such as have been successful in selling low price articles. However, customers also want brands and service they can trust. Price information alone does not convey anything about reliability, availability etc. Quality is given priority over the price. Amazon and Dell do not always offer the lowest prices. Myth #9: E-commerce relies on the same business model for everything If was successful because of the format of its web page, it does nor imply that all other businesses will succeed using similar pages. One cannot sell refrigerators as well garments based on the same business model. Myth #10: E-commerce is revolutionary With the advent of e-commerce, nothing has changed. The essence of commerce is buying and selling. E-commerce is essentially only commerce. The only difference in conducting business before internet came and e-commerce, is the medium of exchange. Earlier, there were physical markets, now there are virtual markets. Myth #11: Customers can be fooled On the internet, customers can be lured to sites via Hyperlinks and freebies. However, customer retention is much more difficult as compared to customer acquisition. A customer may be fooled once, but that customer will never visit the web site again. Moreover, the customer has the power to spread the word around. The internet provides a platform for people to communicate with others easily. There are sites dedicated to customer feedback. For example, if you want to purchase a particular product, all you would have to do is search for the product reviews and get first hand accounts of other customers' experiences. On one can get reviews of technological products by experts. Before downloading a software, one can read reviews by other users. So in the case of the internet, the customer has significant power. Although this power can potentially be misused, this is not seen often.Thus, building brand loyalty is that much more difficult in ecommerce. However, once that brand has been built, customers can help make the brand stronger as well. A customer is likely to return to a vendor if s/he has had a positive experience.

Electronic Data Interchange (EDI)
Electronic Data Interchange has revolutionised the way business information travels. This section discusses how EDI has resulted in faster communications between businesses.

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Meaning EDI Architecture Standards Implementing EDI Value Added services

Roger Clarke has defined EDI as: “the exchange of documents in standardised electronic form, between organisations, in an automated manner, directly from a computer application in one organisation to an application in another”13 An examination of the above definition brings out the following points: 1. The exchange of documents: The exchange of documents here refer to formal communication. Pre-EDI, such exchange would have been via formal letters typed on official letter-heads and sent via mail or courier. These methods take a longer time and there is a tendency for errors to creep in. 2. Standardised: The communication is standardised. Documents such as purchase orders, invoices etc. are traditionally sent on pre-printed forms. Since each organisation has its own format of presenting information, different organisations may interpret a given set of information in their own way. This can potentially lead to confusion and misinterpretation. Through the use of agreed standards, messages can be translated, interpreted and checked for compliance with an explicit set of rules. 3. Electronic form: Since messages are sent electronically, information travels fast with receipt of document within a few hours or even a few minutes. There is no paper work involved and so the organisation saves on stationary. The organisation also need not worry about the amount of information as there is no physical transmission. 4. Directly from a computer application to another application: When using e-mail, messages are transmitted from one person to another person. However, in EDI, messages are transferred from a computer application to another computer application. This is the biggest difference between e-mail and EDI.

EDI Architecture
EDI depends on a moderately sophisticated information technology infrastructure. This must include data processing, data management and networking capabilities, to enable the efficient capture of data into electronic form, the processing and retention of data, controlled access to it, and efficient and reliable data transmission between remote sites. A common connection point is needed for all participants, together with a set of electronic mailboxes (so that the organisations' computers are not interrupted by one another), and security and communications management features. It is entirely feasible for organisations to implement EDI directly with one another, but it generally proves advantageous to use a third-party network services provider.

Source: EDI transmission typically involves the following process. The sender uses its internal computer files to assemble the data needed for the transaction, i.e., order processing, invoicing, etc. This data file then becomes the input for a software module that generates the transaction into the EDI message standard format. The resulting data file is then transmitted to the receiver, over a Value-Added Network, or VAN. The VAN is like an electronic clearing house that ensures information is securely sent and received. At the receiving end, this data file becomes the input for a software module that translates the data from EDI format into a file that can be entered into the receiver's computer application systems. The above process includes a number of control and security procedures. Data security is maintained through the use of user identification numbers and passwords. EDI generation/ translation software that is available from commercial suppliers typically includes extensive data editing and error-checking routines. This facility ensures that the data is valid at the time of transmission, and that it is also valid when it is received. EDI standards also allow the receiver to acknowledge successful receipt of the transmission by sending an acknowledgement message back to the sender. EDI, then, is at least as secure and accurate as the present method of exchanging paper documents.14

As mentioned above, one of the features of EDI is that documents are standardised. There are four major sets of EDI standards: 1. The UN-recommended UN/EDIFACT is the only international standard and is predominant outside of North America. 2. The US standard ANSI ASC X12 (X12) is predominant in North America. 3. The TRADACOMS standard developed by the ANA (Article Numbering Association) is predominant in the UK retail industry. 4. The ODETTE standard used within the European automotive industry EDIFACT stands for Electronic Data Interchange For Administration, Commerce and Transport. UN/EDIFACT (United Nations rules for Electronic Data Interchange for Administration, Commerce and Transport) comprises a set of standards, directories and guidelines for the electronic interchange of structured data, and in particular that related to trade in goods or services, between independent computerized information

systems. Recommended within the framework of the United Nations, the rules are approved and published by the UN/ECE (United Nations/Economic Commission for Europe) in the United Nations Trade Data Interchange Directory (UNTDID) and are maintained under agreed procedures.15 American National Standards Institute (ANSI) is the national standards body for the United States. ANSI, through its accredited standards committees, keeps the standards for all applications of technology and mechanics for U.S. Industry. Business documents in the U.S are often referred to by their ANSI code such as 850 (Purchase Order), 810 (Invoice) and 856 (Advance Ship Notice ). ANSI ASC X12 refers to the American National Standards Institute, Accredited Standards Committee X12, which comprises government and industry members who create EDI standards for submission to ANSI for approval and dissemination.16 Developed by the ANA (Article Numbering Association) in 1982 for the UK retail industry TRADACOMS is currently the most widely used standard in the UK within this market. It defines standards for 30+ trading documents. ODETTE stands for Organisation for Data Exchange Through Teletransmission in Europe. It refers to both the European automotive industry body and the EDIFACT EDI standard subset for that industry. The ODETTE standard consists of over thirty messages for deployment in the automotive industry and reflects the industry's use of JIT ("Just in Time") methods. The messages can use either EDIFACT or TRADACOMS service segments. ODETTE International currently has 6 European members including ODETTE UK, which is managed in association with SMMT (Society of Motor Manufacturers and Traders).17

Implementing EDI18
Before implementing EDI, an organisation should carefully weigh the costs against benefits it offers. Implementing EDI means a heavy expenditure on technologies such as Value Added Networks and the software required to convert data into the EDI format and from EDI format back to the defined file format. This requires full support of the top management. Further, such expenditure must be accompanied by changes in the organisational structure. A full time EDI coordinator will have to be appointed. Large organisations may even require teams to manage the systems. EDI affects almost all aspects of a business. Managers have to be explained the purpose as well as the consequences of implementing EDI. Employees may not appreciate EDI and fear that they may become redundant and lose their jobs. Thus, they have to be taken into confidence before installing EDI. Costs relating to training will also have to be incurred. The extent to which an organisation requires EDI must be studied. For instance, if a small company is only interested in implementing EDI within the purchasing department, then the system will have to be designed accordingly. The management should compare the benefits, costs and savings resulting from implementing EDI solutions with those of the existing framework. The benefits from implementing EDI include faster, more accurate and economical transaction processing. This is especially helpful in managing optimum inventory levels. By collaborating with

suppliers, the company can procure resources and avoid stock-out situations. EDI is thus ideal for implementing Just-in-Time (JIT) purchasing and production strategies. JIT is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. This method requires that producers are able to accurately forecast demand.19

Value Added Services
With the advent of Internet, several organisations are now providing Value Added Services. Such services allow an organisation to reap the benefit of EDI without requiring to make substantial investments. The company outsources EDI solutions to specialised organisations for a fee. To illustrate, let's consider the following: Company A [CA] has a long term contract with Company B [CB] to supply raw materials. In the traditional method to order for the raw materials, the Purchasing department of CB prepares a Purchase Order signed by the purchase manager. The Purchase Order is mailed to CA which in turn processes the Order and despatches the raw material. This process would take several days. In case the two companies have implemented EDI and agreed on a set of standards, then the same transaction would take place thus: CB will prepare an order in its purchasing system and have it approved. Next, the EDI order will be translated into an EDI document format called an 850 purchase order (ANSI code). The EDI 850 purchase order will then be securely transmitted to CA through a VAN (Value Added Network). CB's VAN is a like an electronic post office that interconnects with CA's VAN. The VANs make sure that EDI transactions are sent and received. CA's VAN ensures that the order reaches CA. CA's computer system then processes the order. 20 This method will lower transaction costs as well as the lead time in procuring the materials. In the case the two companies have agreed to utilise the services of a third-party network services provider the above process will not change but the service provider will provide VAN transportation as well as servers with all of the software and hardware required to process EDI documents. Thus the service provider takes care of all of the software, VAN transmission, hardware, communications, mapping, labour and EDI expertise. The clients only require internet and email facilities. Most companies opt for such third party services. Some of the service providers include GXS International, CovalentWorks, and Softshare. Some organisations insist on conducting business via EDI. One example is that of retail giant Wal-Mart. In order to become a supplier an organisation must meet Wal-Mart's requirements, one of which states: “EDI has proven to be the most efficient way of conducting business with our product suppliers. This system of exchanging information-purchase orders, invoices, allows us to improve customer service, lower expenses and increase productivity. Wal-Mart/Sam's Club expects its merchandise suppliers to be able to participate in EDI transactions as soon.

If you become a Wal-Mart/Sam's Club supplier and do not currently have EDI capability, Wal-Mart will work with you to determine the EDI package that best meets your business needs, while also meeting our EDI requirements. If you already have an EDI system in place when you become a Wal-Mart supplier, Wal-Mart will perform tracking tests to make sure your current system is compatible with Wal-Mart's EDI.”21

Electronic Funds Transfer (EFT)
This section discusses how the payment system has been influenced by technology. Along with Electronic Data Interchange, Electronic Funds Transfer, introduced the concept of ecommerce even before the internet and world wide web made it popular.

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Meaning National Electronic Funds Transfer System (NEFT) Telephone Bill Payment (TBP) Wire Transfer Payments via ATM or Magnetic Tape

As the name suggests, EFT is the transfer of funds electronically. It does not require the presence of physical money, or even paper for that matter. Money is transferred from one bank account to another. A formal definition may given as follows: EFT is any transfer of funds that is initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.22

National Electronic Funds Transfer System (NEFT)
The Reserve Bank of India has introduced an electronic funds transfer system called "National Electronic Funds Transfer System" (NEFT). As per the Procedural Guidelines, “the objects of the NEFT System are: (1) to establish an Electronic Funds Transfer System to facilitate an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in the banking sector throughout India, and (2) to relieve the stress on the existing paper based funds transfer and clearing system.”23 The procedure to transfer funds is as follows: The bank customer (i.e. sender or originator) desirous of remitting funds under the system must submit an "NEFT Application Form" (to be designed by the participating bank) authorising the sending bank to debit the sender's account and transfer funds to the beneficiary (the person to whose account the payment is directed to be made in the payment instruction) as specified in the NEFT Application Form. The application could be submitted either in physical form or electronically. A transaction within the NEFT system will be said to have been initiated when the sending bank accepts a payment instruction issued by the sender. One of the requirements of RBI is that the sending bank must display prominently at its premises the cut-off timings up to which it shall receive the NEFT Application Forms from its customers for different settlements and the likely timings of the settlements by the NEFT centre. Next, the sending bank branch will prepare the Structured Financial Messaging System (SFMS) message as and when the application for the funds transfer is received and arrange to send the message to NEFT Service Centre till the cut off time for the batch. The National Electronic Funds Transfer System Procedural Guidelines issued by Reserve Bank of India, Department of Payment & Settlement Systems (henceforth referred to as 'The Guidelines') defines “SFMS message" as an electronic SFMS message of a batch of payment instructions for funds transfers, processed and consolidated in the manner specified for transmission of consolidated payment instructions and communications concerning payment instructions. NEFT Service Centre is defined as “an office or branch of a bank in a centre designated by that bank to be responsible for processing, sending or receiving NEFT SFMS message

of that bank in that Centre and to do all other functions entrusted to an NEFT Service Centre by or under these Regulations. NEFT Service Centre is referred to as "Sending NEFT Service Centre" when it originates an NEFT SFMS message for Funds Transfer. NEFT Service Centre is referred to as "Receiving NEFT Service Centre" when it receives NEFT SFMS message from NEFT Centre.” The sending NEFT Service Centre will then accept/reject the messages received from the branches/ from internet banking customer through net banking platform. The sending Service Centre transmits the NEFT SFMS message to the NEFT Clearing Centre by using the communication network designated by Reserve Bank of India. The Guidelines define NEFT Clearing Centre as “any office designated by the Nodal Department in each of the centres to which NEFT system is extended, for receiving, processing and sending the NEFT SFMS message and the debiting and crediting of accounts of the participating banks and institutions for settlement of payment obligations or one or more of these functions. National Clearing Cell, Nariman Point, Mumbai is being designed as the NEFT Clearing Centre (NCC) for purposes of the NEFT System.” Nodal Department here refers to The Department of Payment and Settlement Systems of Reserve Bank of India which is responsible for implementation, administration and supervision of the NEFT System. After consolidating all NEFT messages received from originating banks, the NCC will process the data and generate the settlement of each beneficiary bank which has at least one inward remittance transaction in a given batch. NEFT messages generated for destination banks will then be transmitted to the service centre of each receiving banks using SFMS. On receipt of the NCC NEFT message, the receiving NEFT Service Centre shall process these files and forward them to the destination branches using SFMS. The beneficiary branches will then make payment to the beneficiaries instantly on the same day by crediting the specified account of the beneficiary or otherwise placing funds at the disposal of the beneficiary. The entire Procedure has been summarised in the flow chart on the next page.

Procedure of National Electronic Funds Transfer System Sender Submits "NEFT Application Form" Bank prepares SFMS Sending Bank

Sends Structured Financial Messaging System (SFMS) message NEFT Service Centre accepts/rejects the messages Sending NEFT Service Centre

Transmits the NEFT SFMS message NCC processes the data and generates the settlement of each beneficiary bank NEFT Clearing Centre

Sends the settlement NEFT messages using SFMS Receiving NEFT Service Centre processes files Receiving NEFT Service Centre Forwards messages Beneficiary Bank Final Payment Beneficiary

Telephone Bill Payment (TBP)24 Telephone Bill Payment systems allow customers to pay bills using a home telephone to instruct a bank computer to transfer money from their account to that of a creditor. Some systems record the customer's verbal instructions on a tape or through the intervention of a human operator. A major drawback of TBP service is that the customer has no proof that instructions for payment have been given until a monthly statement is received. This provides the customer's only proof of payment. In case of a dispute, the customer may find it difficult to substantiate claims.

Wire Transfer24
Wire transfer is the earliest form of EFT, since funds have been sent by wire since the first telegraph lines were strung over a century ago. The transfer of funds by telegraph is chiefly used to move large sums for commercial customers.

Payments via ATM or Magnetic Tape25
The National Electronic Funds Transfer System outlined above requires the customer to fill out a form and submit at the Bank. Such a process is most suitable for large payments. However, in case of payments involving small amounts or in case the customer wishes to avoid going to the Bank, s/he can use Credit cards, Debit cards and ATM cards. A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches in size, that contains identification information such as a signature or picture, and authorizes the person named on it to charge purchases or services to his account. According to encyclopaedia Britannica, the use of credit cards originated in the United States during the 1920s, when individual companies, such as hotel chains and oil companies, began issuing them to customers for purchases made at those businesses. This use increased significantly after World War II. Later came the bank credit-card system (which is what is followed today). Under this plan, the bank credits the account of the merchant as sales slips are received (this means merchants are paid quickly) and assembles charges to be billed to the card holder at the end of the billing period. The card holder, in turn, pays the bank either the entire balance or in monthly instalments with interest (sometimes called carrying charges). The back of the credit card contains a stripe called a magnetic stripe or a magstripe. The magstripe is made up of tiny iron-based magnetic particles in a plastic-like film. Each particle is really a tiny bar magnet about 20-millionths of an inch long. The magstripe can be "written" because the tiny bar magnets can be magnetized in either a north or south pole direction. The magstripe on the back of the card is very similar to a piece of cassette tape. This is where data such as an encrypted PIN, country code, currency units and the amount authorized are stored. A magstripe reader can understand the information on the stripe.

A typical credit card transaction works thus: After the cashier swipes the credit card through a reader, a software called Electronic Data Capture software at the point-of-sale (POS) terminal dials a stored telephone number using a modem to call an acquirer. An acquirer is an organization that collects creditauthentication requests from merchants and provides the merchants with a payment guarantee. When the acquirer company gets the credit-card authentication request, it checks the transaction for validity and the record on the magstripe for: 1. Merchant ID 2. Valid card number 3. Expiration date 4. Credit-card limit 5. Card usage A major disadvantage of using credit cards is that it is very easy to overdraw and end up paying very high rates of interest on the amount unpaid (sometimes as high as 49%) leading to a debt trap. It has been reported that India’s outstanding credit card debt had touched Rs. 26,500 crore in May 2008, up by 87% from May 2007. It has also been estimated that the default rates may increase to 9.5% over the next two years from 7.5% currently.26 Another issue is that of security of sensitive data. There have been several instances of credit card fraud in the past. However, with improving encryption and network security, these thefts are now fewer than before. One common question that bothers customers is what happens if the credit card gets stolen. To tackle this, banks require that the customer report the loss to the bank immediately so that the bank can block all transactions. HDFC bank for instance, gives the following answer on its site: “Don't panic if you happen to lose your card. The first thing to do is:
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Call our 24-Hour Customer Call Centre and report the loss. Make sure you file a FIR for the lost/stolen card and send us a copy, along with a written confirmation, to the Manager - Customer Services, HDFC Bank Credit Cards Division, P.O. Box number-399 Anna Salai, H.P.O, Chennai - 600 002.

This will help us to immediately block all transactions on your card and initiate the process to deliver a new card to you within the next 3 business days. Any fraudulent transactions after reporting the loss will be borne by us. If you happen to recover the card after having reported it lost, please do not use it. Cut it into 4 pieces, cut it especially through the magnetic strip at least once, and return it to us.”27 Debit cards look much like the standard credit card and have similar magstripes. However, unlike credit cards, the amount paid is deducted directly from the account of the card holder. When the debit card is used to make payments, it is swiped against the scanner that enables the financial institution to verify electronically that adequate funds are available and approve the transaction. Most debit cards also can be used to withdraw cash at ATMs (automated teller machines).28 An ATM (automated teller machine) consists of a card reader, a keypad, a speaker, a display screen, a receipt printer and a cash dispenser. To withdraw money from an ATM, the Debit/ATM card is inserted in the card reader. The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The

host processor uses this information to route the transaction to the card holder's bank. The keypad lets the card holder tell the bank what kind of transaction is required (cash withdrawal, balance inquiry, etc.) and for what amount. Also, the bank requires the card holder's personal identification number (PIN) for verification. The speaker provides the card holder with auditory feedback when a key is pressed. The display screen prompts the card holder through each step of the transaction process. The receipt printer provides the card holder with a paper receipt of the transaction. The heart of an ATM is the safe and cash-dispensing mechanism. The entire bottom portion of most small ATMs is a safe that contains the cash.29 Transactions on-line are most commonly paid for via credit /debit cards. For example, if the customer wants to purchase an airline ticket, then she first visits a travel site such as Here, she can fill out a form with details such as the date of arrival and departure, origin and destination and number of tickets required. The site will then generate the results for availability of sites and arrange them according to airline, fare type, prices or any other option which the consumer opts for. Then the customer can choose the preferred flight and click “Book”. The site then asks for details such as address, telephone number and e-mail address. Then the traveller is taken to the “make payment option”. Here the mode of payment is selected, that is, via Debit Card or Credit Card. The customer has to give the details such as credit card number, PIN or password. Finally the customer completes the transaction. The site then processes the transaction and mails the e-ticket on the e-mail address provided. All the customer now has to so is print the e-ticket and she is on her way. An e-commerce site has the option to include on-line payment within its site or outsource its payment solutions. PayPal is one such provider of payment solutions. The client has to sign up for a business account and provide details such as account/business owner's name, address, and email, business name and address and customer service information. After the account is created, PayPal verifies the email address and bank account details including bank name, account and routing numbers and name associated with bank account. The verification process takes up to 3-5 business days, after which the business can begin to implement the payment solution. As far as the consumer goes, he browses through the e-commerce site and selects the products to purchase within the site. On clicking the payment button, he is directed to secure PayPal pages. After the payment, the customer returns to the main site.30

E-Enterprise Requirements
E-commerce, as observed earlier, is not only about the internet and internet based enterprises. Technology can and should be incorporated into a normal “brick and mortar” enterprise as well. If implemented properly, technology can reduce operating costs as well as time. This can translate into lower prices, or higher profits at existing rates. While the latter sounds tempting, it is a short-run solution. In the long-run, a competitor is bound to offer a product at a lower price. Thus, by passing on the savings to the customer, the firm can take the advantage of acting first and securing a larger market share. Further, it can help build goodwill as the customer will appreciate that the firm has passed on its savings to the customer and thus it will increase loyalty towards the enterprise. Since the growth of ICT, several new terms and “solutions” have sprung up. The following section deals with some of these terms which affect all businesses – not just internet based ones.

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What are Information Systems? Meaning of Management Information System (MIS) What is Supply Chain? Meaning of Supply Chain Management (SCM) Customer Relationship Management (CRM) Enterprise Resource Planning (ERP) Database Management Systems (DBMS)

What are Information Systems?
Information is the most important asset a firm can have. If the firm has knowledge of what is going to happen in future, it can act appropriately to take advantage of the situation. By acting swiftly, a firm can outwit its competition. However, in the real world, the future cannot be predicted – at least not accurately. What can be done is anticipate and predict what could potentially happen. Such estimation requires information like what happened in the past, what was the consequence of the actions taken, how did competitors react, what were the circumstances in which actions were taken, how have the circumstances changed now and so on. Information begins its journey as raw data. Such data can be procured via surveys conducted by the firm itself or by an external organisation such as a research agency or government records. This data has to be processed to be made meaningful. For instance, if the firm has access to the demographic information of a locality, it is not enough in itself. The firm will have to analyse how many persons belong to a particular age group, what percentage of the population does this age group represent, what is their combined income etc. For all types of information, such analysis will be required. After analysis, this information must be used. There is no point in undertaking the entire exercise of analysis if it is not used. Such use is in decision making. For example, in case of a firm producing child care products, the decision to market its product in an area will depend on whether the market is large enough, whether the majority of the population can afford the products and so on. Such decisions can be taken with the help of the demographic information processed from raw data. After decisions are taken, they have to be communicated across the entire organisation. After communicating, the decision has to be translated into actions. After implementing the decision, the outcome of the action has to be measured. This is again in the form of raw material. Thus the entire process begins all over again. This process, if performed manually would not only involve a lot of labour and consequently increase costs, it would lose its value because of the time taken. In this information age, information loses its value very fast and using information at the correct time is critical to every business. This is where information systems come into the picture. “Information systems” has been defined by Prof. Anatoly Sachenko as a system that uses the resources of hardware, software, and people to perform input, processing, output, storage, and control activities that transform data resources into information products.31 Information Systems are of various types. The broadest classification puts information systems into five categories viz. Office Information Systems (OIS), Transaction Processing Systems (TPS), Management Information Systems (MIS), Executive Information Systems (EIS) and Expert Systems (ES). While OIS uses computer based systems to enhance and support work flow and facilitate day-to-day operations among employees, TPS captures and processes the data generated during the day-to-day transactions. Thus, OIS provides the raw data for TPS to process and convert into information. MIS generates accurate, timely and organised information so that managers can make decisions, solve problems, supervise activities and track progress. EIS is designed to support the information needs of the executive managers. It uses information provided by the MIS and essentially

condenses it to enable the top management to take a larger view of the organisation's activities. ES is an information system that captures and stores the knowledge of human experts and then imitates human reasoning and decision making processes for those who have less expertise. Artificial Intelligence is an example of Expert Systems.32

Meaning of Management Information System (MIS)
Management Information System (MIS) is basically concerned with processing data into information which is then communicated to the various Departments in an organization for appropriate decision-making.33 As discussed above, MIS is just one of the several types of Information Systems. However, it has gained immense popularity especially since it enables managers to take decisions. Several educational Institutions across the globe are now offering courses on just MIS. This reflects a growing need felt by organisations all over the world for MIS professionals. Perhaps one of the reasons for its popularity is that it has an impact on all aspects of a business. MIS is usually classified according to the various functions of the organisation viz. Marketing, Personnel, Manufacturing, Accounting and Finance. These are in fact sub-systems of MIS. And these sub-systems include systems within themselves. If a business decides to implement MIS, it should ensure that the system is suited to the organisation's structure, objectives and operations. Since technology keeps evolving, MIS professionals have to stay in touch with the current trends and accordingly implement changes in the organisation's system. Further, when implementing MIS, the costs related to the installation and the benefits accruing to the business from its installation have to be compared. Only if the benefits are greater than the costs, should the business adopt MIS. The financial implications of introducing changes in the system should also be considered. Some of the costs associated with the installation of such a system and implementing changes include the costs of infrastructure and training to the existing staff. Thus, for MIS requires sound knowledge of business as well as information technology.34

What is Supply Chain?
The authors of “Supply Chain Management”35 have discussed the meaning of the term Supply Chain in detail. They have defined Supply Chain as a set of three or more companies directly linked by one or more of the upstream and downstream flows of products, services, finances and information from a source to a customer. A supply chain thus consists of both supply (upstream) and distribution (downstream). The three parties to this chain are the organisation, its immediate supplier and its immediate customer. The concept of supply chain can be extended to more than three players. That is, the chain can include the supplier of the immediate supplier, and the customer of the immediate customer. A supply chain orientation is the recognition by a company of the systematic and strategic implications of the activities and processes involved in managing the various flows in a supply chain.

Meaning of Supply Chain Management (SCM)
Simply put, SCM means the management of the supply chain. An accurate definition of Supply chain management (SCM) is “the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.”36 The goal of supply chain management is to coordinate activities among suppliers, production facilities, distribution centres and customers so that the right product is made and distributed, at the right time to the right location at a minimum cost while maintaining the desired level of service.37 Traditionally, Supply Chain Management includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer. However, when applied to e-commerce, supply chain management mainly focusses on inventory and order management, distribution and delivery to the customer. Although supply chain management is not a new term, its importance has grown in recent years because of businesses conducted over the internet. In e-commerce, it is extremely important to ensure low costs, high quality and timely delivery. If goods and services are not delivered properly, it could be disastrous as the customer will visit the competitor's site the next time. In the traditional supply chain, the raw material suppliers are at one end of the supply chain. They are connected to manufacturers and distributors, which are in turn connected to a retailer and the end customer. Although the customer is the source of the profits, they are only a part of this "push" model. Driven by e-commerce’s capabilities to empower clients, many companies are moving from the traditional "push" business model, where manufacturers, suppliers, distributors and marketers have most of the power, to a customer-driven "pull" model. In the pull model, customers use electronic connections to pull whatever they need out of the system. E-commerce has had a deep impact on supply chain management. Firstly, e-commerce allows transportation companies of all sizes to exchange cargo documents electronically over the Internet. E-commerce enables shippers, freight forwarders and trucking firms to streamline document handling without the monetary and time investment required by the traditional document delivery systems. Thus, by using e-commerce, companies can reduce costs, improve data accuracy, streamline business processes, accelerate business cycles, and enhance customer service. Secondly, the supply chain is no longer a straight forward line. E-commerce has facilitated changes in the distribution system by making it more flexible and enabling customers to manage the increasingly complex movement of products and information through the supply chain. Thirdly, e-commerce makes it easier for customers to do business with companies. Anything that simplifies the process of arranging transportation services will help build companies' business and enhance shareholder value. By making more information available about the commercial side of companies, businesses will make their web site a place where customers will not only get detailed information about the services the

company offers, but also where they can actually conduct business with the company. Ultimately, web sites can provide a universal, self-service system for customers. Shippers can order any service and access the information they need to conduct business with transportation companies exclusively on-line. E-commerce functions are taking companies a substantial step forward by providing customers with a faster and easier way to do business with them. Fourthly, through e-commerce, businesses can allow users to establish an account and obtain real-time information about cargo shipments. Fifthly, the amount of paperwork is reduced significantly as standard business documents can be generated automatically. This reduces the time and cost involved in executing transactions and at the same time removes any possibility of errors. Lastly, the internet can be used to give instant shipping information access to anyone in the company, from any location. Parcel shipments can be tracked and proof of delivery quickly confirmed. A customer's transportation costs and performance can be analysed, thus helping the customer negotiate rates and improve service.38 In the traditional approach, everyone was treated as a competitor – even the supplier. The customer was treated as a group to which products had to be sold. The new approach involves making allies of suppliers and customers alike, embracing them in value nets instead of coercing them into precarious supply chains. While traditionally the supply chain would push out a fixed line of one-size-fits-all items, hoping that customers would buy them, the new approach allows unique customers to choose product or service attributes that they value the most; in effect, to design their own product. In this new situation, it is important that an organization and its suppliers, manufacturers, customers, and other third-party providers engage in joint strategic planning and operational execution with an eye to minimizing cost and maximizing value across the entire supply chain. The underlying enabler of supply chain integration is the fast and timely exchange of information between supply chain partners. The ubiquity of Internetbased communication tools now makes it possible for organizations of all sizes to exchange information. Applications like vendor-managed inventory (VMI), collaborative planning, e-procurement, shipment tracking and tracing, electronic order management, and bill presentment and payment can be built upon a core data exchange platform, enabling companies to reap true cost reduction and service improvement within their organization.39 An effective SCM can reduce transportation management time and costs and increase profit margins and overall profitability. It can improve on-time deliveries and customer service, strengthen relationships with suppliers and carriers, thus enable global supply visibility and maximum efficiency for competitive advantage.40

Customer Relationship Management (CRM)
Marketing in today's environment of globalisation and high competition, requires that the customer be treated like a king (or queen). It is not enough for a business to attract customers and sell products. The business has to retain the customer and ensure that the customer makes repeat purchases. The business has to make sure that the buyer is satisfied. A dissatisfied customer will not only shift to the competitor's product, but will also spread the word about the seller's inability to deliver on promises. This is where customer

relationship management (CRM) comes in. CRM is a process or methodology used to learn more about customers' needs and behaviours in order to develop stronger relationships with them. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends. CRM helps businesses use technology and human resources to gain insight into the behaviour of customers and the value of those customers. Understanding customers is important for the business because eighty percent of a business' revenue comes from twenty percent of its customers.41 Using CRM, a business can provide better customer service and discover new customers, thus increasing customer revenues. An effective CRM can help sales staff close deals faster and make call centres more efficient, besides simplifying marketing and sales processes.42 CRM is not just after-sales service. It in fact begins even before the customer has viewed the web site. Often, attracting a potential customer to a site is easy. A business can register with a search engine and get a prominent placement in searches. To attract customers, the business can also request complimentary business sites to include their links. However, to ensure that the customer stays on the site is the key. This depends on the quality of the web site. If the web site takes a very long time to load, or requires the viewer to install special software, the customer will be long gone. The site should be easy to navigate and use. It should not put all the information on one page as the information overload will confuse the viewer. But the excessive use of Hyperlinks is also likely to irritate the customer. The design of the site should consider these points to incorporate the correct number of Hyperlinks into the home page. The site should also anticipate what kind of problems and confusions the customer might have regarding the site, the business, the product on offer, the payment, delivery and the legal aspects of the transactions involved. These should be answered on the FAQ page. E-mail addresses and helpline numbers should also be provided, preferably toll-free. Emails should be answered within one or two business days. The customer should be informed of the time frame within which their mail will answered. Such a commitment must be honoured. Calls should be answered promptly and the customer should not be required to hold. The logistics company DHL emphasised this point through its ad-campaign in which it stated "Speak to a real person within three rings, every time."43 Once a customer is found, the business must establish a relationship with the customer. This the business can do by adding value to the products it offers. One way to add value is to produce newsletters that can be delivered on-line or by mail. Newsletters can be related to product or service announcements and contain general industry information. Enewsletters are simple and inexpensive to produce and deliver. As the business builds relationship with its on-line customer, it will be able to solicit and build more profile information. Information about product preferences allows the business to offer complimentary products or give specials on items of interest to a specific set of customers. With time, long lasting relations can be formed through more sophisticated means. Customised products and personalised sites will provide additional services to the customers and at the same time give customers a reason to return regularly to the ebusiness site.

The business should, however, obtain the customer's permission before sending any type of promotional material. If such permission is not sought, the mail will only annoy the customer and create a negative impression. Taking care of the customer is one of the foremost functions of the organisation. Effective CRM is thus critical to the success of the business. Without the customer, the business cannot exist. There are many software modules that assist enterprises in CRM. Oracle, Microsoft and SAP are the most popular software vendors.

Enterprise Resource Planning (ERP)
As the name suggests, ERP encompasses the entire organisation. ERP Systems provide strategic planning capabilities to organisations. It is a comprehensive tool for integrating accounting, strategic planning, sales order management, quality control, manufacturing, logistics and warehousing.32 ERP (enterprise resource planning) is an industry term for the broad set of activities supported by multi-module application software that help a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resource aspects of a business. Typically, an ERP system uses, or is integrated with a relational database system.44 ERP is a type of management information system that integrates and automates many of the business practices associated with the operations or production aspects of an enterprise. ERP and SCM are related in the sense that both are back office systems. While SCM is a business to business system, ERP is concerned more with the firm's internal resources. The internal resource requirements determine the relationships of the firm with suppliers. That is why many SCM applications rely on the kind of information that is stored in the most quantity inside ERP software. It is easier for information to flow into SCM systems if all information is stored in one place. Now, most ERP vendors have SCM modules built into them, so doing an ERP project may be a way to kill two birds with one stone.45 SAP, Oracle, The Sage Group and Ramco Systems are some of the ERP vendors.

Database Management Systems (DBMS)
Since information is the key to success of an enterprise and all the systems discussed above utilise information, the important question that arises is how this information has to be stored. Database management systems offer the solution to this problem. Since it is based on technology, it has the same advantages over manual methods of storing information, as other technology based systems, viz. Time savings, accuracy and ease, translating into lowered costs and increased efficiency. Database systems, like other enterprise systems, are expensive and so the organisation should undertake a cost-benefit analysis before implementing the system. Some of the advantages that DBMS include ease of updating, ease of retrieval and no

duplication. After data is entered into the system, retrieving it does not take much time as usually only keywords have to be typed to retrieve relevant information. Being in the electronic form, the data can be arranged and rearranged as per the requirements of the management. DBMS systems require data to be entered only once. The same information can then be accessed by all the concerned departments of the business. This ensures that up-to-date information can be shared throughout the organisation without having to maintain different sets of files. Dispensing with the different sets of files also ensures data accuracy. Sybase and Microsoft SQL are examples of DBMS.

As mentioned in the beginning of this section, various “systems” and “solutions” have emerged in the recent past. However, even before the spread of technology, data was recorded and translated into information which was used to take decisions. Strategic alliances with suppliers and maintaining good relations with customers are essentially concepts which can be implemented without the use of heavy infrastructure. Hence, it is important to note that technological advancements are neither indispensable, nor some magical tools to make a business successful. The technology only makes business processes simpler and faster. At the end of the day, it is not the technology that matters, but how it is used. An enterprise cannot invest in these systems and then expect them to run the business. Decisions at all levels have to be taken by managers. Technology cannot replace good management and is there only as a tool to aid such decision making.

E-Commerce Business Models
Several authors have debated on whether the business conducted over the internet is any different than business conducted off-line. While there are models which are based on offline models, there are some models which are peculiar to the environment offered in the electronic medium. Various business models for e-commerce as given by Michael Rappa have been included in this section.46 A business may adopt any model, or a combination of models.

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Brokerage Model Advertising Model Infomediary Model Merchant Model Manufacturer (Direct) Model Affiliate Model Community Model Subscription Model Utility Model

Brokerage model
A broker is a middleman or an intermediary between a buyer and seller. Brokers connect the buyer and seller. In exchange for providing this link, they usually charge a commission. Some examples of brokerage models include: 1. Demand Collection System: In traditional methods of conducting business, the customer approaches the seller and purchases the product at the price settled after negotiations between them. However, the price is set mostly by the seller. The patented "name-your-price" model pioneered by works in the exact opposite manner. It is sometimes referred to as reverse auction. The prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfilment. This model could possibly work off-line, but customization would be very costly. 2. Auction Broker: This model is based on usual off-line methods of conducts auctions. Sites such as provide a platform for sellers (individuals or merchants) to list items online. The broker charges the seller a listing fee and commission scaled with the value of the transaction. However, unlike traditional methods, the on-line version enables everyday items of small value to be traded. 3. Transaction Broker: This system is possible only in e-commerce. Ordinary businesses have no problem in settling transactions. There is no need for third-party intervention. However, payment systems over the internet are tricky to implement due to security issues. Businesses often prefer to outsource payment systems. This is where sites like PayPal come into the picture. 4. Search Agent: A search agent is a software agent or "robot" used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information. This is again suitable for the internet as there are vast amounts of information available but to find the exact information required by the customer might require extensive searching which might take a long time. 5. Virtual Marketplace: This business model is the concept of malls adapted to the internet. A virtual marketplace or a virtual mall is a hosting service for on-line merchants that charges set-up, monthly listing, and/or transaction fees. Such a service provider may also provide automated transaction and relationship marketing services. An example is that of

Advertising Model
The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for

free) and services (like email, Instant Messaging, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized. This is the most common form of site. Practically every site on the internet has some kind of advertisement on the page. However, this is often combined with some other form of revenue stream. While the concept of the advertising model is not new, some of the applications, as discussed below, are unique to the internet. 1. Portal: A portal is usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. This type of business model, followed by MSN and Rediff, is unique to the medium of internet. 2. Classifieds: Like newspaper classifieds, on-line classifieds sites allow people to list items for sale or wanted for purchase. Portals like Yahoo! also offer classifieds services. Listing fees on sites are common, but there also may be a membership fee. Info Edge (India) Ltd is an example of a business which specialises in classifieds. The Company provides on-line recruitment, matrimonial & real estate classifieds and related services in India. The business is managed primarily through four divisions, which comprise on-line recruitment classified division ( , on-line matrimonial classified division ( , on-line real estate classified division ( and off-line executive search division (operating through their Quadrangle division). 3. User Registration: User registration sites are content-based sites that are free to access but require users to register. Usually the site provides a preview of services offered and allows the user to use a part of the service for free. To continue using the service, the site requires that the users register and provide demographic data. The registration may be free or paid. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns. For example, allows users across the globe to view documents uploaded on the internet by others for free. However, to download or upload documents, it requires the user to register, which is free. 4. Query-based Paid Placement: This model is used by search engines like Google. The site sells favourable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query. 5. Content-Targeted Advertising: Pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page. 6. Intromercials: The word intromercial is a combination of the words introduction and commercial. An intromercial is an animated full-screen advertisement placed at the entry of a

site before a user reaches the actual site. These intromercials can usually be skipped by clicking a link provided to go directly to the home page.

Infomediary Model
This model exploits the information requirements of businesses as well as consumers. While data about consumers and their consumption habits is carefully analysed and used by organisations to target marketing campaigns, independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market. Some of the types of agencies include: 1. Advertising Networks: This type of agency feeds banner ads to a network of member sites, thereby enabling advertisers to deploy large marketing campaigns. Advertisement networks collect data about web users that can be used to analyse marketing effectiveness. 2. Audience Measurement Services: Extending the concept of research organisations, audience measurement services are essentially market research agencies functioning on-line. An example is that of Nielsen. 3. Incentive Marketing: Some sites offer customer loyalty programs that provide incentives to customers such as redeemable points or coupons for making purchases from associated retailers. Data collected about users is sold for targeted advertising. is an example of this type of business. 4. Metamediary: Similar to an intermediary, a metamediary facilitates transactions between buyer and sellers by providing comprehensive information and ancillary services, without being involved in the actual exchange of goods or services between the parties.

Merchant Model
The term e-commerce is most commonly associated with this kind of business and some consider this as the pure internet based commerce. This model follows the traditional distribution method involving wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction. 1. Virtual Merchant: The virtual merchant or e-tailer, is a retail merchant that operates solely over the web. The leading example is that of Amazon. 2. Catalogue Merchant: This model is sometimes also referred to as “clicks and flips”. It is mail-order business with a web-based catalogue. The business combines mail, telephone and on-line ordering. The major advantage that the on-line version offers is that the

merchant can update prices in real time. This saves the cost of printing new catelogues every time prices change. 3. Click and Mortar: Also known as “brick and click”, click and mortar firms operate through a physical as well as on-line store. This is usually adopted by already established retail stores. It solves some of the problems associated with pure on-line stores. For example, the customer can order for merchandise from the convenience of his house. The firm will deliver the goods to his house from the nearest physical store. It provides flexibility in terms of payment as well as delivery. The customer can pay on-line via credit card, or pay cash on delivery. The customer can also pick it up from the store directly, thus avoiding shipping costs as well searching the store for the product manually. Even sales returns are facilitated through this model. Barnes & Noble has such a model. 4. Bit Vendor This is the purest form of electronic commerce. The merchant deals strictly in digital products and services and, in its purest form, conducts both sales and distribution over the web. There is no physical store at all.

Manufacturer (Direct) Model
The manufacturer or "direct model", is designed to utilise the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. This model is followed by Dell. The various kinds of direct models are as follows: 1. Purchase: The sale of a product in which the right of ownership is transferred to the buyer. 2. Lease: In exchange for a rental fee, the buyer receives the right to use the product under a “terms of use” agreement. The product is returned to the seller upon expiration or default of the lease agreement. One type of agreement may include a right of purchase upon expiration of the lease (also called hire purchase system). 3. License: The sale of a product that involves only the transfer of usage rights to the buyer, in accordance with a “terms of use” agreement. Ownership rights remain with the manufacturer (software licensing).

Affiliate Model
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing.

It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model - if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently well-suited to the web, which explains its popularity. Variations include, banner exchange, pay-per-click, and revenue sharing programs. 1. Banner Exchange: In this, the site trades banner placement among a network of affiliated sites. 2. Pay-Per-Click: The site that places the advertisement on its site is paid by the advertiser on the basis of the number of users that are attracted towards the site advertised through the site on which the advertisement is placed. 3. Revenue Sharing: In this case the advertiser offers a percent-of-sale commission to the site on which the advertisement is placed, based on a user click-through in which the user subsequently purchases a product.

Community Model
The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking. 1. Open Source: As explained earlier, open source refers to software developed collaboratively by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. Red Hat (for enterprise solutions) and Ubuntu (for operating systems) are examples of open source software distributors. 2. Open Content: Open content is openly accessible content developed collaboratively by a global community of contributors who work voluntarily. Wikipedia is synonymous with open content and operates through donations. It has several sister sites based on open content such as Wikibooks, Wikiversity and Wikimedia Commons. 3. Public Broadcasting: It is a user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations. 4. Social Networking Services: Social Networking sites have been growing rapidly over the past few years. These

sites provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. There are several such sites like FaceBook, Orkut and Hi5.

Subscription Model
In this model, users are charged a periodic (daily, monthly or annual) fee to subscribe to a service. It is not uncommon for sites to combine free content with "premium" (i.e., subscriber or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined. Some forms of subscription model include: 1. Content Services: Such businesses provide text, audio, or video content to users who subscribe for a fee to gain access to the service. Recently, Reliance launched its BIGFlix [similar to Netflix in the US] which has this type of a business model. 2. Person-to-Person Networking Services: These are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. 3. Trust Services: These sites come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. 4. Internet Services Providers: America Online is an example of an Internet service provider offering network connectivity and related services on a monthly subscription.

Utility Model
The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, longdistance telephone services). Some Internet service providers operate as utilities, charging customers for connection minutes, as opposed to the subscriber model.

The project contains content drawn from the following sources. The date on which the sites were last accessed is mentioned below the link locations. The same may be referred for detailed discussions on the relevant topics. 1. E-Commerce In The Asian Context: Selected Case Studies By Renald Lafond, Chaitali Sinha, Institute of Southeast Asian Studies, International Development Research Centre (Canada) Preview of the book available at id=xFgzltsAdJQC&printsec=frontcover&dq=e+commerce+in+asian+context&sig=A CfU3U1_0_8FRorvcVeupEM4kn700QYR8A#PPP1,M1 [Accessed on 19 August 2008] 2. Measuring the information economy 2002, Annex 4. The OECD definitions of internet and e-commerce transactions p.89 Available at [Accessed on 20 August 2008] 3. Electronic Commerce : The Strategic Perspective By Richard T. Watson, Pierre Berthon, Leyland F. Pitt, and George M. Zinkhan Book available at [Accessed on 20 August 2008] 4. History and evolution [Accessed on 22 August 2008] 5. Will dotcom bubble burst again? 604273.txt [Accessed on 31 August 2008] 6. Amazon Reports First Full-Year Profit res=9C06E2DA1238F93BA15752C0A9629C8B63 [Accessed on 31 August 2008] 7. e-payment of Direct Taxes Concept and procedure [Accessed on 2 September 2008] 8. Benefits and Limitations of E-commerce [Accessed on 2 September 2008] 9. Advantages and Disadvantages of E-commerce [Accessed on 2 September 2008] 10. The Open Source Definition [Accessed on 3 September 2008] 11. Myths and Realities [Accessed on 5 September 2008] 12. Top 10 dot-com flops [Accessed on 5 September 2008] 13. Electronic data interchange [Accessed on 4 September 2008] 14. EDI: All you ever wanted to know, but were afraid to ask hat_is_EDI.htm [Accessed on 4 September 2008] 15. UN/EDIFACT draft directory Glossary [Accessed on 6 September 2008] 16. EDI basics Glossary [Accessed on 6 September 2008] 17. EDI resources - EDI Standards [Accessed on 6 September 2008] 18. EDI Basics [Accessed on 6 September 2008]

19. Just In Time – JIT [Accessed on 8 September 2008] 20. EDI Learning Center [Accessed on 11 September 2008] 21. Wal-Mart [Accessed on 12 September 2008] 22. Electronic Funds Transfer Definition [Accessed on 7 September 2008] 23. National Electronic Funds Transfer System Procedural Guidelines - Reserve Bank of India, Department of Payment & Settlement Systems [Accessed on 9 September 2008] 24. Selected electronic funds transfer issues: privacy, security, and equity e-book available at hl=en&id=z8fN34mB8JcC&dq=electronic+funds+transfer&printsec=frontcover&sour ce=web&ots=wdCI_GrpE&sig=ajS7jcP7uyJHy_xHVg_EL2dNoI4&sa=X&oi=book_result&resnum=9&ct=res ult#PPA14,M1 [Accessed on 9 September 2008] 25. How Stuff Works [Accessed on 9 September 2008] 26. Cap credit card interest rates?,flstry-1.cms [Accessed on 10 September 2008]

27. HDFC Bank Site – FAQs [Accessed on 10 September 2008] 28. The Debit Card Debate [Accessed on 20 September 2008] 29. How Stuff Works [Accessed on 20 September 2008] 30. PayPal [Accessed on 20 September 2008] 31. Foundations Of Information Systems In Business [Accessed on 19 September 2008] 32. Information Systems And Technology [Accessed on 19 September 2008] 33. Management Information Systems [Accessed on 20 September 2008] 34. Management Information Systems [Accessed on 21 September 2008] 35. Supply Chain Management By John T. Mentzer Preview of the book available at +Management&printsec=frontcover&source=web&ots=LvagCUvxv&sig=KSdZciNlWBDjZuvXyH69lzVEPWM&sa=X&oi=book_result&resnum=5 &ct=result#PPA2,M1 [Accessed on 15 September 2008] 36. Supply Chain management [Accessed on 16 September 2008] 37. Goal of Supply Chain Management [Accessed on 16 September 2008] 38. B2B Supply Chain E-Basics cid=1184870283999&pagename=CBSC_AB%2FCBSC_WebPage %2FCBSC_WebPage_Temp&c=CBSC_WebPage [Accessed on 22 September 2008] 39. Supply Chain Management cid=1184870284023&pagename=CBSC_AB%2FCBSC_WebPage %2FCBSC_WebPage_Temp&c=CBSC_WebPage [Accessed on 22 September 2008] 40. Supply Chain Management p [Accessed on 16 September 2008] 41. Customer Relationship Management [Accessed on 17 September 2008] 42. Customer Relationship Management (CRM) Tutorial [Accessed on 18 September 2008]

43. DHL goes `all the way' By Ravikumar, The Hindu Business Line Thursday, Mar 08, 2007 Article available at 00.htm [Accessed on 18 September 2008] 44. ERP-Enterprise Resource Planning [Accessed on 18 September 2008] 45. An Introduction to Supply Chain Management ment?contentId=40940&slug=&page=2&#scm_software [Accessed on 22 September 2008] 46. Business Models On The Web [Accessed on 26 September 2008]

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