E - BUSINESS AND ACCOUNTING.

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E-BUSINESS AND ACCOUNTING.
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ABHISHEK D K, COMMERCE LECTURER.
CHAPTER – 1:
INTRODUCTION TO E – BUSINESS:
E – Business:
Introduction:
 E – Business is changing the way of doing business.
 Electronic Commerce is generally considered to be the sales aspect of e – business.
 The objective of this chapter is to get the students acquainted with the basic concept
of e – business.
 The chapter consolidates the major themes that have arisen from the new area of
electronic business and to provide an understanding of its application and importance
to management.
Meaning:
 The use of Internet and Web technologies in business is commonly known as E –
Business.
 Electronic Business, commonly referred to as “E – Business” or an internet business
is generally referred as buying and selling of goods or services through internet.
Definition:
 E – Business is the conduct of business on the Internet, not only buying and selling
buy also servicing customers and collaborating with business partners.
 E – Business includes customer service (E – Service) and intra – business tasks.
 E – Business is everything to do with back – end systems in an organization.
E – Commerce:
Introduction:
 This depends on technologies such as Mobile Commerce, Electronic Fund Transfer,
Supply Chain Management, Internet Marketing, Online Transaction Processing,
Electronic Data Interchange, Inventory Management Systems and Automated Data
collection Systems.
 Through E – Commerce, there is an effective and efficient way of communicating
within an organization and it is one of the most effective and efficient way of

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communicating within an organization and it is one of the most effective ways of
conducting business.
Meaning:
 E – Commerce is the buying and selling of products or services using electronic
systems such as internet and other computer networks.
 It is a term for any type of business, or commercial transaction that involves the
transfer of information across the Internet.
 Electronic Commerce refers to economic activity that occurs online.
 It includes all types of business activity, such as retail shopping, banking, investing
and rentals.
 It allows consumers to electronically exchange goods and services with no barriers of
time or distance.
Definition:
 Any form of business transaction in which the parties interact electronically rather
than by physical exchanges or direct physical contact is known as E – Commerce.
 E – Commerce is usually associated with buying and selling over the internet or
conducting any transaction involving the transfer of ownership or rights to use goods
or services through a computer – mediated network.
 E – Commerce describes the buying and selling of products, services, and information
via computer networks including the Internet.
History of E – Commerce:
 The history of E – Commerce seems rather short but its journey started over 40 years
and has revolutionized the way we live our lives today.
 In the 1960’s, very early on in the history of E – Commerce, its purpose was to
exchanging data long distance. In these early days of E – Commerce, users consisted
of only very large companies, such as banks and military departments, who used it for
command control communication purposes. This was called EDI, and was used for
Electronic Data Interchange.
 In the late 1970’s, a new protocol was developed known as ASC X 12 which was
used for the exchange of business documents and information electronically.

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 Another system was being developed at the same time by the Military known as
ARPAnet, and was the first to use the “dial up” method of sending information via
telephone networks. It was considered the grandfather of the modern Internet.
 In 1982, Transmission Control Protocol and Internet Protocol known as TCP and IP
were developed. This was the first system to send information in small packets along
different routes using packet switching technology, like today’s Internet.
 These were amongst the largest developments in the history of E – Commerce that set
the stage for a revolution in the exchange of electronic data.
 In 1995, with the introduction of online payment methods, two companies that we all
know of today took their first steps into the world of E – Commerce. Today Amazon
and eBay are both amongst the most successful companies on the Internet. Today
virtually anything can be purchased online.
Characteristics of E – Commerce Technology:
1. Effectiveness and Efficiency.
2. Ubiquity.
3. Global Reach.
4. Universal Standards.
5. Richness.
6. Interactivity.
7. Information Density.
8. Personalization / Customization.
Advantages of E – Commerce:
The greatest and the most important advantages of E – Commerce are:
1. Demands of both the national and international market can easily be met, as our
business activities are no longer restricted by geographical boundaries.
2. Even small enterprises can access the global market for selling and purchasing
products and services.
3. E – Commerce empowers (authorized / allow) everyone to execute business
transactions 24 hours a day and even on holidays and weekends. This in turn
significantly increases sales and profit.

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4. Electronic Commerce gives the customers the opportunity to look for cheaper and
quality products.
5. With the help of e – commerce, consumers can easily research on a specific product
and sometimes, even find out the original manufacturer to purchase a product at a
much cheaper price than that is charged by the wholesaler.
6. Shopping online is usually more convenient and time saving than conventional
shopping.
7. Buyers also come across reviews posted by other customers about the products
purchased from a particular e – commerce site. This can help prospective consumer
to make good products purchasing decisions.
8. E – Commerce significantly cuts down the cost associated with marketing, customer
care, processing, information storage and inventory management.
9. It reduces the transaction time for both customers and the business organization.
10. Electronic Commerce reduces the huge amount of investment on infrastructure to
conduct businesses.
Disadvantages of E - Commerce:
1. Technological and fundamental limitations which has restricted the number of people
using this revolutionary system.
2. Internet has still not yet touched the lives of a great number of people, either due to
the lack of knowledge or trust.
3. A large number of people do not want to use the Internet for any kind of financial
transaction for security reasons.
4. Some people simply refuse to trust the authenticity of completely impersonal business
transactions.
5. Many people have fear to disclose personal and private information for security
concerns.
6. The legitimacy and authenticity of different e – commerce sites have also been
questioned.
7. It is not suitable for perishable commodities like food items.
8. A lot of phone calls and e – mails may be required till you get your desired products.

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Difference between E – Commerce and E – Business:
Basis of Comparison E – Commerce E – Business
1. Meaning
2. What is it?
3. Is it limited to
monetary
transactions?
4. What they carry
out?
5. Approach
6. Requires
7. Which network is
used?
Trading of merchandise, over
the internet is known as E –
Commerce.
Subset.
Yes.
Commercial transactions.
Extroverted.
Website.
Internet.
Running business using the
internet is known as E –
Business.
Superset.
No.
Business transactions.
Ambiverted.
Website, CRM, ERP, etc.
Internet, Intranet and
Extranet.
Difference between Traditional Commerce and E – Commerce:
The following table shows the difference between traditional commerce and e – commerce:
Action Traditional Commerce E - Commerce
1. Acquire product
information
2. Request item
3. Check catalogs,
prices
4. Check product
availability and
confirm price
5. Generate order
6. Send / Receive
Order
Magazines, flyers, online
catalogs.
Printed forms, letters.
Catalogs.
Phone, Fax.
Printed form.
Fax, mail.
Manual.
Web pages.
E – Mail.
Online catalogs.
E – Mail.
E – Mail, web pages.
E – Mail, EDI.
Online database.

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7. Prioritize order
8. Check inventory at
warehouse
9. Schedule delivery
10. Generate invoice
11. Receive product
12. Confirm receipt
13. Send / Receive
Invoice
14. Schedule payment
15. Send / Receive
Payment
16. Personal Touch
17. Products suited
18. Physical location
19. Ease of convenience
customers
20. Popularity
Phone, Fax.
Printed form.
Printed form.
Shipper.
Printed form.
Mail.
Printed form.
Mail
Present
Any products.
Customer should visit the
premises of the seller to
purchase his requirements.
It is best for convincing
customers.
More common and leading
method of business.
Online database, web pages.
E – Mail, online database.
Online database.
Shipper (unless it is
electronic).
E – Mail.
E – Mail, EDI.
EDI, On-line database.
EDI.
Absent.
Standard products, low-value
products, digital products.
No need to meet seller.
Information can be obtained
online and goods can be
collected at doorsteps.
It can appeal to educated and
well informed customers.
Still in its developing stage.
Functions of E – Commerce:
1. Communication.
2. Process Management.
3. Service Management.
4. Transaction Capability.
Parties to E – Commerce Transactions:
1. The User.

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2. The Merchant.
3. The Issuer.
4. The Acquirer.
5. The Certificate Authority.
E – Commerce Business Models / Types / Classification of E – Commerce:
A company’s business model is the way in which it conducts business in order to generate
revenue. In the new economy, companies are creating new business models to create new
company base and serve the existing customers better. Although, there are many ways to
categorize e – business models. They can be broadly categorized as under:
Model Description
1. B2C
2. B2B
3. B2G
4. C2C
5. C2B
Business – to-Consumer: Sells products or
services directly to consumers. Examples:
selfcare.sdc.bsnl.co.in / is portal offered by
BSNL for customer care.
Business – to-Business: Sells products or
services to other businesses or brings
multiple buyers and sellers together in a
central market place. Examples: Professional
Couriers – Track N’ Trace for dealers.
Business – to-Government: Businesses
selling to local state, and federal agencies.
Examples: Companies offering services to
government.
Consumer – to-Consumer: Consumers sell
directly to other consumers. Examples:
Sulekha.com, 99acres,com, Shaadi.com,
Quickr.com.
Consumer – to-Business: Consumers name
own price, which businesses accept or
decline.

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1. B2C (Business - to - Consumer) Model:
 In this model, transactions take place between the business houses and
consumers directly. Here, individuals are also involved in the online business
transactions.
 The basic concept of this model is to sell the products online to the consumers.
 The B2C refers to the online selling of products or e – tailing in which
manufacturers or retailers sell their products to consumers over the internet.
 Consumers are increasingly going online to shop for and purchase products,
arrange financing, arrange shipments or take delivery of digital products such
as software, and get service after sale.
 B2C e – business includes retail sales, often called e – retail (or e – tail), and
other online purchases such as airline tickets, entertainment venue tickets,
hotel rooms, and shares of stock.
 B2C e – business models include virtual malls, which are websites that host
many online merchants. Virtual malls typically change online merchants
setup, listing or transaction fees and many include transaction handling
services and marketing options.
 E – tailers that offer traditional or web specific products or services only over
the internet or sometimes called virtual merchants, and provide another
variations on the B2C model. Examples of virtual merchants include
Amazon.com (books, electronics, toys and music), eToys.com (children’s
books and toys), customer care service provided online by BSNL.
 Some business supplement a successful traditional mail order business with an
online shopping site or move completely to web based ordering. These
businesses are sometimes called catalogue merchants.
 The example of the www.flipkart.com site also involves the B2C model in
which the consumer searches for a book on their site and places an order, if
required. This implies that a complete business solution might be an
integration solution of more than one business model. For example,
www.flipkart.com includes the B2B model in which the publishers transact

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with flipkart and the B2C model in which an individual consumer transact
with the business organization.
 Examples of B2C Websites:
a. Fashion & Lifestyle:Sunglassesindia.com, Brandsndeals.com,
Shoppersstop.com.
b. Custom designed T – shirt, mug, calendar, etc.:
Myntra.com, Zoomin.com.
c. Gifts, cakes, etc.:
Infibeam.com, IndianGiftsPortal.com, Gifsandlifestyle.com.
d. Books:
Flipkart.com, Landmarkonthenet.com,
e. Movie ticket booking:
Bookmyshow.com, PVRCinemas.com.
f. Online travel ticketing and hotel booking:
Irctc.co.in, Redbus.in, MakeMyTrip.com, Yatra.com.
g. Airlines portals:
Goindigo.in, Flykingfisher.com, Goair.in, Spicejet.com.
2. B2B (Business – to – Business) Model:
 It is one of the major forms of e – commerce model and represents business
transactions between businesses. Here, the transaction takes place between a
producer, distributor, wholesaler and retailer.
 The transaction that occurs between two companies is called as B2B business
model. Example: Professional Couriers.
 Although B2C is the most familiar form of e – business, transaction between
and within business account for a large share of commercial activity.
 Business activities within a company are increasingly transacted online via the
Company Internet.
 An Internet uses Internet technology to allow employees to use internal
websites that are not accessible to the outside world.

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 Like B2C model, B2B model take a variety of forms. There are basic B2B
Internet storefronts that provide business customers which purchase, order
fulfilment and value added services.
 Another B2B model is a business trading community, also called a “Vertical
Web Community”, that acts as a central source of information for a vertical
market is a specific industry in which similar products or services are
developed and sold using similar methods.
 Examples of broad vertical markets include insurance, real estate, banking,
heavy manufacturing and transportation.
 The information available at a vertical Web community can include buyer’s
guides, supplier and product dictionaries, industry news and articles, schedules
for industry trade shows and events, and classified ads.
 B2B exchanges are web sites that bring multiple buyers and sellers together in
a virtual centralized market space. In this market space, buyers and sellers can
buy from and sell to each other at dynamic prices determined by the exchange
rules.
 Let us take an example of www.amazon.com. As we know,
www.flipkart.com is an online store that sells various products from various
companies. Assume that the Skyward Publishers want to sell the books online.
In this case, the publishers have the option of either developing their own site
or display their books on www.flipkart.com as it gives them a larger audience.
Now, to do this, the publishers need to transact with flipkart, involving
business houses on both the ends, is the B2B model.
 Examplesof B2B Websites:www.Getresponse.com, www.Incorporate.com,
www.agriwatch.com, www.foodtrader.com, www.global.i-textile.com.
 Following are the leading items in B2B E – Commerce:
a. Electronics.
b. Shipping and Warehousing.
c. Motor Vehicles.
d. Petrochemicals.
e. Paper.

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f. Office products.
g. Food.
h. Agriculture.
3. B2G (Business – to – Government) Model:
 This is a model where in businesses sells their products or services to the local,
state and federal agencies.
 Example: Companies offering the varieties of services to the government.
 B2G refers to business conducted between private sector firms and
government.
 An example of B2G service would be a small business providing IT consulting
to a local government agency.
 The B2G category covers contracts of all sorts for goods, services and
information between businesses of all sizes and government at all levels (state,
local and federal).
 Governments generally solicit business from the private sector through
Request for Proposal (RFP).
4. C2C (Consumer – to – Consumer) Model:
 This is a model where in the consumers sells directly to other consumers via
online classifieds and auctions or by selling personal services or expertise
online.
 In this model, business transactions are carried between two individuals using
a platform (website) in the form of intermediary. It helps the online dealing of
goods and services among consumers. This facilitates the transaction of
products or services between customers. Examples: Quickr.com, newspapers,
auctions, etc.
 C2C means that online visitors increasingly create produce information, not
just consume it. They join Internet Interest Groups to share information, so
that “word of mouth” – through web – acts as an important buying influence.
 Words about good companies travel fast’ and words about bad companies
travel even faster.

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 Let us take an example of eBay. When a customer plans to sell his products to
other customers on the website of eBay, he first needs to interact with an eBay
site, which in this case acts as a facilitator of the overall transaction. Then, the
seller can host his product on wwww.eBay.in, which in turn charges him for
this. Any buyer can now browse the site of eBay to search for the product he
is interested in. If the buyer comes across such a produce, he places an order
for the same on the website of eBay. eBay now purchase the product from the
seller and then, sells it to the buyer. In this way, though the transaction is
between two customers, an organization acts as an interface between the two
organizations.
 Examples of C2C Websites: Craigslist, eBay, www.olx.in,
www.carwale.com, www.gaadi.com.
5. C2B (Consumer – to – Business) Model:
 This is also called as a “reverse auction” or “demand collection model”.
 In this model, consumers name own price, which businesses accept or decline.
 This model enables buyers to name their own price, often bidding, for a
specific good or service generating demand.
 The website collects “demand bits” and then offers the bits to participating
sellers.
 ReverseAuction.com (travel, autos, and consumer electronics) and
priceline.com (travel, telephone, and mortgages) are the examples of C2B
business models.
 Online advertising sites like Google Adsense, affiliation platforms like
Commission Junction and affiliation programs like Amazon are the best
examples of C2B schemes. Individuals can display advertising banners,
contextual text ads or any other promotional items on their personal websites.
Individuals are directly commissioned to provide an advertising / selling
service to companies.
 Online surveys (GozingSurveys, Surverscout, and Survey Monkey) are also
typical C2B models. Individuals offer the service to reply to the company’s
survey and companies pay individual for this service.

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6. P2P (Peer – to – Peer) Model:
 This technology enables internet users to share files and computer resources
directly without going to central web server. Therefore, P2P works without an
intermediary. Examples: iMesh, Rapidshare.
 For example, Gnutella is a Peer – to – Peer freeware software application that
permits users to directly exchange musical tracks, typically without any charge.
 For example, Napster.com, which was established to aid internet users in
finding and sharing online music files known as MP3 files, is perhaps the most
well-known example of Peer – to – Peer e- commerce. It should be noted that
Napster is partial Peer – to – Peer because, it relies on a central database to
show which users are sharing music files.
 Another example of P2P model is The Pirate Bay and CloudMark (P2P anti-
spam solution to protect email).
Other E – Commerce Models:
The various models in the e – governance scenario are:
1. Government – to – Government (G2G) Model:
This model involves transactions between two governments. For example, if the
American Government wants to buy oil from the Arabian Government, the transaction
involved is categorized in the G2G model.
2. Government – to - Consumer (G2C) Model:
In this model, the government transacts with an individual consumer. For example, a
government can enforce laws pertaining to tax payments on individual consumers
over the Internet by using the G2C model.
3. Consumer – to – Government (C2G) Model:
In this model, an individual consumer interacts with the government. For example, a
consumer can pay his Income Tax or House Tax online. The transaction involved in
this case is C2G transactions.
Benefits / Advantages of E – Commerce:
1. To Sellers / Businesses / Organizations:
a. Increased sales opportunities.
b. Decreased transaction costs.

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c. Operate 24 hours a day, 7 days a week from one virtual market place.
d. Reach narrow market segments that may be widely distributed
geographically.
e. Access to global market.Increased speed and accuracy of information
exchange.
f. Bring multiple buyers and sellers together at one virtual market place.
2. To Buyers / Consumers / Customers:
a. Wider product availability.
b. Customized and personalized information and buying options.
c. Shop 24 hours a day, 7 days a week.
d. Easy comparison shopping and one – stop shopping for business buyers.
e. Access to global markets.
f. Quick delivery of digital products: quicker delivery of information.
g. Participate in auctions, reverse auctions, in knowledge exchange.
3. To Society:
a. Enables more flexible working practices which enhance the quality of the
people.
b. Connects people.
c. Facilitates delivery of public services. Example: Health services available
over the internet.
Limitations / Disadvantages of E – Commerce:
1. To Sellers / Businesses / Organizations:
a. Lack of sufficient system security, reliability, standards and communication
protocols.
b. Rapidly evolving and changing technology.
c. Problems with compatibility of ‘older’ and ‘newer’ technology.
2. To Buyers / Consumers / Customers:
a. Computing equipment is needed for individuals to participate in the new
“digital” economy, which means an initial capital cost to customers.
b. Basic technical knowledge is required.
c. Cost of access to the Internet.

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d. Cost of computing equipment (technology is updated regularly to be
compatible with the changing requirement of the internet, websites and
applications).
e. Lack of security and privacy of personal data.
f. Physical contact and relationships are replaced by electronic processes.
g. Lack of trust.
3. To Society:
a. Breakdown in human interaction.
b. Social division.
c. Relying on telecommunications infrastructure, power and IT skills for the
success of e – commerce but the above factors are absent in developing
countries.
d. Wasted resources.
e. Facilitates Just – In – Time manufacturing.
f. Difficulty in policing the Internet.
E – Commerce Domain:
Some form of electronic commerce is at work in almost all business functions today.
 Purchasing departments are using e – commerce to increase the speed and efficiency
of acquiring products and services.
 Customer Service departments are using the power of the web provide customers with
round – the – clock service.
 Technology Companies such as Dell Computers are using the web to push
information out to customers – and potential customers – faster and more efficiently
than even before.
 Therefore, e – commerce can be applied in many areas of human activities.
Most important areas of e – commerce applications are listed below:
1. EDI (Electronic Data Interchange):
 It is defined as “the transfer of structured data for processing from computer to
computer using agreed formats and protocol”.
 The term simply means electronic interchange of data between computer
systems of the various participants.

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 It is actually a way of replacing manual data entry with the electronic data
entry.
2. EFT (Electronic Fund Transfer):
 It can be defined as “any transfer of funds initiated through an electronic
terminal, telephonic instrument of computer or magnetic tape so as to order,
instruct or authorize an institution to debit or credit an account”.
 Transfer of money by electronic means is known as EFT. ATM is one type of
EFT situation, usually connected to financial computers.
3. RTGS (Real Time Gross Settlement):
 RTGS systems are specialist funds transfer systems where the transfer of
money or securities takes place from one bank to any other bank on a “Real
Time” and on a “Gross” Basis.
 Settlement in “Real Time” means a payment transaction is not subjected to
any waiting period, with transactions being settled as soon as they are
processed.
 “Gross Settlement” means the transaction is settled on one – to – one basis
without bundling or netting with any other transaction.
 “Settlement” means that once processed, payments are final and irrevocable.
4. SET (Simple Endpoint Types).
5. Purchases.
6. Marketing and Promotions.
7. Brand Management and Awareness.
8. Advertising E – Mail.
9. Customer Service and Billing.
10. Inventory Management for global and multi – location entities.
11. Organizational Communication.
12. Supply Chain Management.
13. Customer Relationship Management.
14. Online Help Desks.
Promises and Challenges of E – Commerce:

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Sellers are finding tremendous advantages in doing new pattern of business (e – commerce).
They can increase sales and operations from local to worldwide, improve internal efficiency
and productivity, enhave customer service, and increase communication with both suppliers
and customers. Buyers are enjoying greater access to markets.
Following are the key strengths of e – commerce:
1. Round the Clock Business:
 With this distinct mechanism of commerce, the merchant can sell round the
clock, everyday of the week, 24 hours a day and 365 days a year.
 There is no need to hire a clerk to run the store. This makes potential
business for the merchants and organizations.
2. Cost Effective:
 As a new medium of business, the Net affords the lowest transaction costs
among all other methods of doing business.
 The World Wide Web (WWW) helps to promote services and ideas for a
fraction of the cost of traditional advertising and marketing.
 There is no printing cost and no postage cost.
 It is cost effective because, there is no maintenance cost, stationery cost and
other costs.
3. Lower transaction cost:
 If an e – commerce site is developed well, the web can significantly lower
both order – taking cost and customer service costs.
4. Access to all markets:
 With the web marketing, a marketer located in any part of the globe can
compete in the market of the whole world.
 A web marketer can attract customers located all over the world, compete for
the global market, build global supply chain and operate with global strategies.
 Opening website is the equivalent of opening branches everywhere in the
world.
5. Many products and services from a single shop:

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 A web marketer can offer a variety of services and products to the customer
from a single website, a single shop on the net. He is able to do this because,
the web provides direct and interactive access to the customer.
6. Quick Service:
 In modern times, speed has become a major ingredient of successful marketing.
 The marketing process can be completed within a shortest possible time. This
helps the marketer to enhance customer value.
7. Enhanced productivity of sales people:
 Web marketing also helps sales people to be more productive.
 Since, basic transactions are taken care of by the computer programme, sales
people are free to devote their time for more meaningful tasks.
8. Enables the marketer adjust to market conditions quickly:
 Marketing on the web enables the marketers to adjust fast to changing market
conditions. They can quickly know what the market wants and offer it.
 For example, they can add products to their basket, alter prices, enlarge
services and fine – tune their offerings with greater speed.
9. Consumer can ‘get more for less’:
 With the web marketing, consumers can get more value for their money.
 Web marketers make competitive offers to the customers. Because, of the
exhaustive information, wide range of goods, interactive communication and
more has helped customers to get more than what they pay for the goods or
services.
10. Transparency:
 Web marketing provides for very high degree of transparency about business
transaction, which was unknown in business transactions hitherto.
 There is no suppression of information.
 By browsing through the web, buyers can become aware of just about all
sellers selling the particular product and their prices and terms.
11. Accuracy of information:

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 Accuracy of information regarding schemes, discounts, etc., are all available
accurately. This actually makes him want to buy more. This is one of the
reasons as to why web marketing is so popular today.
12. Customer loyalty:
 Trading on the Internet with security promotes customer loyalty.
 Online buyers tend to return to sites once they have visited before.
 Sales are increasing on websites which have been increasing several times
during the last three years.
13. Creating new business models:
 With e – commerce, one can create completely new business models.
 In mail order companies, there is a high cost of printing and mailing
catalogues. There is also high cost of staffing including the order – taking
department that answers the phone.
 In e – commerce, both the catalogue cost and office cost are nil. That means,
it is possible to offer products at a lower price.
14. Security and Privacy:
 Today, secure encryption technology is available to provide high security to
the data.
 Protocol securities are now available which assures the customers that their
personal sensitive data is protected by most sophisticated systems.
15. Instant Payment:
 In recent years, markets do not like to accept cash or cheques.
 The problem with a cheque is that it may get bounced sometimes.
 In a credit card (smart card) and Automated Teller Machine (ATM), the
merchants can get nearly instant approval and goods can be sent out
immediately.
 In the instant payment technology in this new media of business, both the
merchant and the customers are benefited.
 Today, credit cards are commerce currency and help to do business over the
Internet.
16. Consumer Convenience.

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17. Level Playing Field.
18. Simplicity.
19. Improved Customer Service.
20. Reduction in Setup Cost.
21. Building Relationship.
22. Increase Market Share.
Challenges of E – Commerce:
Following are some of the important challenges of e – commerce:
1. Lack of Infrastructure.
2. Lack of Confidence.
3. Credit Card Frauds.
4. Absence of Tax Laws.
5. Cyber Laws.
6. Stock Dilemma.
7. Lack of Strength.
8. Lack of Skills and Expertise.
9. Internet Outrage (Unreliable).
10. Absence of Cyber Brand Image.
11. No encouragement from Business Community.
12. Preferring Foreign Sites.
13. Cyber Competition.
14. Difficulty of Reengineering.
15. Internet for Small Business.
16. Lack of awareness.
17. Skeptic Attitude (Fear of sending the personal information and online financial
transactions dealing).
18. Inadequate Government Role.
19. No Emphasis on Commercial Exploration.
20. Inactive Indian Software Houses.
21. Skepticism.
22. Blocking and Censorship.

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23. Infant Stages.
24. Barriers – Survey Findings.
Emerging Trends in E – Commerce:
Online businesses have picked up momentum lately, and now people are more sceptical about
shopping online.
E – Commerce sites have given the users the access to the immeasurable market.
Following are the rising trends relating to e – commerce technology:
1. Real – time Shopping Experience at Online Shopping:
 Most online retailers have facilities to chat online, get suggestions and answer
all customer queries as that of real time shopping.
 This enables the prospective customers to get their doubts clarified before they
buy products.
2. Using Mobiles and Android Apps for Transactions:
 The use of these devices for buying will increase in the near future.
 Additionally, the websites must act like any app and must be very responsive
in terms of design.
 There are also apps that will help the consumers to compare the prices of the
same product at different outlets.
3. Customization and Personalization:
 Maintaining long term relationship with each individual customer is a
challenging and an important job of any organization. In this direction, the
companies are offering products and services as per the requirement of
consumers.
4. Valuing Customer Engagements than Conversion Ratio:
 Gathering new customers will be very tough. Therefore, naturally retailers
will depend on holding on to the existing customers.
 Customers engagement will ensure people develop a liking for the site
launched by the company and follow it regularly.
5. Social Networking Sites:

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 As the social networking sites are gaining tremendous popularity, retailers
must be suing this platform for marketing and selling their products.
 Facebook, Twitter, LinkedIn will be the platforms where consumers will get
data about the latest discounts and offers.
6. Mobile POS:
 The idea of Mobile Point Of Sale (POS) is to make each and every employee
work and allow the customer transact without visiting the billing counter.
7. Retailers Support to Omni – Channel Consumers:
 Mobile apps are available in the market that lets customers to compare prices,
check the reviews online and share the product with friends, retailers will be
integrating their separate channels into one for offering support to the
consumers.
8. Push Notifications:
 It is a short text message sent to a Smartphone and tied to an installed app.
 Push notifications are used to update sport scores, news or promotions.
 Push notifications makes a sound and are displayed in various ways according
to Smartphone models.
9. Multi – Channel:
 It is a variety of channels in a customer’s shopping experience including
research before a purchase.
 Consumers will expect a seamless shopping experience.
 The channels include: retail stores, online stores, mobile stores, mobile app
stores, telephone sales and any other method of transacting with a customer.
10. Big Data:
 The biggest challenge for most E – Commerce businesses is to collect, store
and organize data from multiple data sources.
 Big Data paves the way for more organized data and enables business owners
or marketing managers to track and better understand a variety of information
from many different sources (i.e., inventory management system, CRM, e mail
service provider statistics, etc.,).
Conducting E – Commerce / E – Commerce Procedure:

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1. Filling Form Online:
 When a customer visits an e – commerce site, he has to fill out an online form
to enquire about products or services.
 The supplier has to read the data of enquiry about products and services
including name, address, credit card number, instructions and so on. They
should get them encrypted, compressed, encoded and sent to by e – mail.
 The response is effected quickly.
2. Selecting Product / Service:
 The customer browses the merchant’s websites, decides and selects products /
service item. In this connection, the shopping cart software package is to be
used.
 The shopping cart helps to add, delete and accumulate the total regards to the
product / service.
3. Web Server:
 As soon as the items are selected by viewing the shopping cart, they are linked
to a secure form on the merchant’s web server.
4. Encryption:
 Cryptography provides effective security for e – commerce super structure.
 Cryptography provides a tool of e – commerce security.
 As there is no formal exchange of signed document or legitimacy of trading
partner, proper security should be provided.
5. Forwarding:
 The encrypted data is then forwarded to the online processor which provides
payment services.
6. Leased Lines:
 The banks have been receiving thousands of transactions everyday.
 The online processor maintains a leased line connection to the banks or
institutions.
 The arrangement facilities to process any number of transactions received
everyday.
7. E – Mail Receipt:

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 This facility is available for e – commerce over the internet. This helps the
merchant and the customer to notify by e – mail of the purchase approval and
purchase details.
8. Merchant Account:
 It is necessary for accepting credit cards.
 The bank process merchant account transactions besides contacting the
customer credit card company.
 When the merchant has opened an account, he specifies the name of the bank
and account number to which funds are to be transferred.
9. Credit Card Processing:
 Payment Processing System plays a critical role in e – commerce.
 The whole concept of frauds related to credit card is bigger risk to merchants
than customers.
 Credit cards are the most popular way for paying for goods and services on the
Net.
10. Verification:
 The transaction information is sent via leased lines to the credit card network
where the validity of the card is checked and the availability of frauds on the
account is verified.
 An authorization code is written via leased lines to a secure server.
11. Merchant Getting Money:
 The banker of the merchant will collect money from the merchant account.
12. Shipment of Goods:
 Dispatching the goods is the final step in the process of online shopping.
 The goods are finally shipped which is done outside the Internet facility.
E – Business Revenue Models:
A company’s revenue model describes how the company will earn revenue, generate profits
and produce a better return on invested capital.
For a publisher or other media site owner, the following seven types of revenue models are
possible online:

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1. Revenue from subscription access to content:
 This model applies to companies that charge subscribers a fee, normally to
view text or graphical information.
 A range of documents can be accessed for a period of month or a year.
2. Revenue from Pay per View access to document:
 Under this method, the user will have to pay money for single access to a
document, video or music clip which can be downloaded.
 It may or may not be protected with a password or Digital Rights
Management.
3. Revenue from CPM display advertising on site:
 This model relies on advertising to make money. CPM stands for “cost per
mile”.
 The site owner charges advertisers a rate card price according to the number of
its ads shown to site visitors.
4. Revenue from CPC advertising on site (pay per click text ads):
 CPC stands for “cost per click”.
 Advertisers are charged not simply for the number of times their ads are
displayed but according to the number of times they are clicked.
5. Revenue from Sponsorship of site sections or content types:
 A company can pay to advertise a site channel or section.
 For example, HDFC Bank could sponsor the money section on a media site.
This type of deal is often struck for a fixed amount per year.
6. Affiliate Revenue:
 Affiliate Revenue is commission based.
 For example, if anybody advertises someone else’s product or the idea, the
person for whom advertisement is made should pay certain percentage of
revenue to the advertiser.
7. Subscriber data access for e – mail marketing:

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 The data, a site owner has about its customers, is also potentially valuable
since, it can send different forms of e – mail to its customers if they have
given their permission that they are happy to receive e – mail either the
publisher or third parties.
 The site owner can charge per message sent to customers.
Changing business environment and E – Commerce OR Pressure
influencing business to opt for E – Commerce:
1. Competitive pressures.
2. Pressure from stakeholders for improved financial performance.
3. Pressure to reduce inventories and production costs.
4. Demanding customer requirements.
5. Global regularity changes.
6. Reduced Product Life Cycles making new product development and introduction of a
priority.
7. Problems of keeping up with changing information and communication technology.
Virtual / Online Community:
 It is a social network of individuals who interact through specific social media,
potentially crossing geographical and political boundaries in order to pursue mutual
interest or goals.
 Virtual Community is a community of people sharing common interest, ideas and
feelings over the internet or collaborative networks.
 Examples: Texans Talk, Gamers’ Voice, Barista Exchange, etc.
Types of Virtual Community:
1. Internet Message Boards:
 An online message board is a forum where people can discuss thoughts or
ideas on various topics.
 Online message centers allow users to choose which thread, or board of
discussion, users would like to read or contribute to.
2. Online Chat Rooms:

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 After the emergence of internet, people wanted and started to communicate
with their community.
3. Virtual World:
 They are the most interactive of all virtual community forms.
 In this type of virtual community, people are connected by living as an avatar
in a computer based world.
 User’s create their own avatar character and control their character’s life and
interaction with other characters in the 3 – D virtual world. It is similar to a
computer game.
4. Social Network Service:
 They are the most prominent type of virtual community.
 They are either a website or software platform that focuses on creating and
maintaining relationship.
 Examples: Facebook, Twitter.
Advantages of Virtual Community:
1. It gives our business, a worldwide exposure.
2. We can gain knowledge from other online community members.
3. We can get the chance to form a formidable partnership with other members.
4. Maximize our presence in our online community.
5. Be wise in choosing our online community.
6. Builds relationship.
Disadvantages of Virtual Communities:
1. Vulnerability (Weak protection).
2. Information posted is not reviewed for correction.
3. It is difficult and unreliable.
Web Portals:
A web portal is specially designed web page at a website which brings information together
from diverse sources in a uniform way.
A Web Portal refers to a Website or service that offers a broad array of resources and services,
such as e – mail, forums, search engines, links to other sites, and online shopping malls.

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Examples: AOL, Excite, Netvibes, iGoogle, MSN, Naver, India Times, Rediff, Sify and
Yahoo.
Types of Web Portals:
1. Vertical Portals:
 These are the web portals which focus only on one specific industry.
 Vertical portals provide tools, information, articles, research and statistics on
the specific industry.
2. Horizontal Portals:
 These are the web portals which focus on a wide array of interests and topics.
 They focus on the general audience and try to present something for
everybody.
3. Enterprise Portals:
 In today’s demanding business enterprise, the key to productivity of the
employees depends on access to timely information and resources.
 The most common implementation of enterprise portals focus on proving
employees with this information on a regularly updated manner along with
document management system, online training course, etc.
4. Knowledge Portals:
 It increases the effectiveness of knowledge of the workers by providing easy
access to information that is necessary or helpful to them in one or more
specific roles.
5. Corporate Portals:
 It provides personalized access to an appropriate range of information about a
particular company.
 This has become one of the hottest new technologies of the internet.
 This is also called as intranet portals.
6. Market Space Portals:
 It provides support to the B2B and B2C.
 With this portal, one can find and access rich information about the products
on sale, also ability to participate in discussion groups with other vendors /
buyers.

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7. Search Portals:
 Search Portals aggregates results from several search engines into one page.
Web / Online Auction:
 It is a simple auction designed for organizations or individuals who want to
hold an auction.
 It is an auction which is held over the internet.
 Products can have pictures, price, minimum bids, bid increments and more.
 In case of Web Auctions, the seller sells the products or service to the person
who bids the highest price.
 Examples: www.auctionwarehouse.com, www.ebay.com, www.ubid.com.
Types of Web / Online Auctions:
1. English Auctions:
 This is the type of auction where the bids are announced by either an
Auctioneer or by the bidder and winners pay what they bid to receive the
object.
 English Auctions are claimed to be the most common form of third party
online auction format used and is deemed to appear the most simpler of the
forms.
2. Dutch Auctions:
 This is the reverse of English Auctions whereby the price begins high and it
methodically lowered until a buyer accepts the price.
3. First – Price Sealed Bid:
 This is a type of auction where a single bid is made by all bidding parties and
the single highest bidder wins and pays what they bid.
 The main difference between this and English Auctions is that bids are not
openly viewable or announced or against to the competitive nature which is
created by public bids.
4. Vickery Auction:
 This is also known as “second – price related bid auction”.

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 The highest bidder and winner will only pay what the second highest bidder
had bid.
5. Reverse Auction:
 Here, the roles of buyer and seller are reversed.
 Multiple sellers compete to obtain the buyer’s business and prices typically
decrease over time as new offers are made.
6. Shill Bidding:
 Placing fake bids that benefits the seller of the item is known as “Shill
Bidding”.
 This is the method often used in online auctions. This is seen as an unlawful
act as it unethically raises the final price of the auction.
WWW (World Wide Web):
 The World Wide Web is known as WWW or W3 or Web.
 The World Wide Web is an architectural framework for accessing linked documents
and repository of information spread all over the Internet.
 The WWW has a unique combination of flexibility, portability and user – friendly
features that distinguish it for other services provided by the Internet.
 The main reason for its popularity is the use of a concept called Hypertext.
 Hyper Text is a new way of information storage and retrieval, which enables authors
to structure information in novel ways.
 An effectively designed hypertext document can help users rapidly locate the desired
type of information from the vast amount of information on the Internet.
 Hyper Text documents enable this by using a series of links.
 A link is a special type of item in a hypertext document, which connects the
document to another document that provides more information about the linked item.
 Hyper Text documents on the Internet are known as Web Pages.
 Web Pages are created by using a special language called Hyper Text Markup
Language (HTML).
 HTML is becoming a de – facto industrial standard for creating Web Pages.
 The WWW uses the client – server model, and an Internet Protocol called Hyper
Text Transfer Protocol (HTTP) for interaction between the computers on the Internet.

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 Any computer on the Internet, which uses the HTTP Protocol, is called a Web Server
and any computer, which can access that server is called a Web Client.
Intranet:
 An Intranet is a private computer network that uses Internet Protocol technologies to
securely share any part of an organization’s information or operational systems within
that organization.
 The term is used in contrast to internet, a network between organizations, and instead
refers to a network within an organization.
 Sometimes, the term refers only to the organization’s internal website, buy may be a
more extensive part of the organization’s information technology infrastructure.
 It may host multiple private websites and constitute an important component and
focal point of internal communication and collaboration.
Protocol:
 It is a digital language through which we communicate with others on the Internet.
 It is a set of mutually accepted and implemented rules at both ends of the
communications channel for the proper exchange of information.
 By adopting these rules, two devices can communicate with each other and can
interchange information.
 Message travel from sender to receiver via a medium (the medium is the physical path
over which a message travels) using a protocol.
Types of Protocols:
1. TCP / IP (Transmission Control Protocol / Internet Protocol).
2. ARP (Address Resolution Protocol).
3. DHCP (Dynamic Host Configuration Protocol).
4. DNS (Domain Name System).
5. FTP (File Transfer Protocol).
Telnet Utility:

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 Telnet is a user command and an underlying TCP / IP Protocol for accessing remote
computers.
 Through Telnet, an administrator o another user can access someone else’s computer
remotely.
 On the Web, HTTP and FTP Protocols allow us to request specific files from remote
computers, but not to actually be logged on as a user of that computer.
 With Telnet, we log an as a regular user with granted to the specific application and
data on that computer.

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E – Commerce Business Models:
1. B2B (Business to Business) Model:
 A website following the B2B business model sells its products to an intermediate buyer who then
sells the product to the final customer.
 As an example, a wholesaler places an order from a company’s website and after receiving the
consignment, sells the end product to the final customer who comes to buy the product at one of
its retail outlets.

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2. B2C (Business to Consumer) Model:
 A website following the B2c business model sells its products directly to a customer.
 A customer can view the products shown on the website.
 The customer can choose a product and order the same.
 The website will then send a notification to the business organization via e mail and the
organization will dispatch the product / goods to the customer.

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3. C2C (Consumer to Consumer) Model:
 A website following the C2C business model helps consumers to sell their assets like residential
property, cars, motorcycles, etc, or rent a room by publishing their information on the website.
 Website may or may not change the consumer for its services.
 Another consumer may opt to buy the product of the first customer by viewing the post /
advertisement on the website.

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4. C2B (Consumer to Business) Model:
 In this model, a consumer approaches a website showing multiple business
organizations for a particular service.
 The consumer places an estimate of amount he / she wants to spend for a particular
service.
 For example, the comparison of interest rates of personal loan / car loan provided by
various banks via websites.
 A business organization that fulfils the consumer’s requirement within the specified
budget approaches the customer and provides its services.

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5. B2G (Business to Government) Model:
 B2G Model is a variant of B2B model.
 Such websites are used by governments to trade and exchange information with
various business organizations.
 Such websites are accredited by the government and provide a medium to businesses
to submit application forms to the government.

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6. G2B (Government to Business) Model:
 Government uses B2G model websites to approach business organizations.
 Such websites support auctions, tenders, and application submission functionalities.

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7. G2C (Government to Citizen) Model:
 Government use G2C model websites to approach citizen in general.
 Such websites support auctions of vehicles, machinery, or any other material.
 Such website are provides services like registration for birth, marriage or death
certificates.
 The main objective of G2C websites is to reduce the average time for fulfilling
citizen’s requests for various government services.
________________________________________________________________________

E - BUSINESS AND ACCOUNTING.

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