Lecture Notes: An Introduction to Electronic

Commerce
Overview of Electronic Commerce
• Definition: Electronic commerce (e-commerce) involves conducting business activities
electronically over computer networks, including distribution, buying, selling, marketing,
and servicing of products and services.
• Types of Transactions:
o Business-to-Business (B2B): Transactions between businesses.
o Consumer-to-Consumer (C2C): Transactions between consumers.
o Government-to-Business (G2B): Transactions between public sector and
businesses.
o Government-to-Citizen (G2C): Transactions between public sector and citizens.
o Government-to-Government (G2G): Transactions between governmental
entities.
Business-to-Business E-Commerce (B2B)
• Definition: A subset of e-commerce where all participants are organizations.
• Benefits:
o Connects business partners in a virtual supply chain.
o Reduces resupply times and costs.
• Market Size: B2B e-commerce is larger and growing faster than B2C e-commerce.
Business-to-Consumer E-Commerce (B2C)
• Definition: E-commerce where customers deal directly with an organization, bypassing
intermediaries.
• Advantages:
o Disintermediation: Reducing costs and inefficiencies in the supply chain.
o Price Comparison: Customers can easily compare prices and features online.
• Market Growth:
o B2C sales reached $1.9 trillion in 2014.
o Significant growth in Asia-Pacific, particularly in China.

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 • Consumer Benefits:
o Lower prices for goods and services.
o Ability to design personalized products (e.g., Nike’s customization options).
Consumer-to-Consumer E-Commerce (C2C)
• Definition: E-commerce that facilitates transactions between consumers.
• Examples: eBay, Craigslist, Etsy, and other auction sites.
• Market Impact:
o Growth of C2C has reduced traditional classified advertising.
o Opportunity for individuals to earn income through online sales (e.g., eBay’s $82
billion gross merchandise volume in 2015).
E-Government
• Definition: The use of technology to improve the relationship between citizens and
government.
• Types:
o Government-to-Citizen (G2C): Services like online tax filing and license
renewals.
o Government-to-Business (G2B): Applications for procurement and bidding on
government contracts.
o Government-to-Government (G2G): Transactions and information sharing
between government entities.
Mobile Commerce (M-Commerce)
• Definition: E-commerce conducted via mobile devices such as smartphones and tablets.
• Market Trends: Rapid growth in countries like Japan, the UK, and South Korea, with
significant adoption in North America.
• Mobile Infrastructure:
o Collaboration between manufacturers and carriers to enhance mobile services.
o Growth of mobile websites and applications due to advancements in technology.
• Market Share: M-commerce accounted for 35% of retail e-commerce sales in Q4 2015,
with a 15% growth in the U.S.
Advantages of Electronic and Mobile Commerce
1. Reach New Customers: E-commerce websites enable access to new markets.

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 2. Reduce Costs: Streamlining processes reduces labor-intensive steps and inventory costs.
3. Speed Information Flow: Electronic connections accelerate communication between
buyers and sellers.
4. Increase Accuracy: Direct input by buyers minimizes data entry errors.
5. Improve Customer Service: Enhanced information availability increases customer
satisfaction and loyalty.
Challenges of E-Commerce
1. Customer Privacy Concerns:
o Many consumers hesitate to shop online due to privacy fears.
o Companies must invest in security measures to protect customer data.
2. Lack of Trust:
o Consumers may doubt the legitimacy of online sellers.
o Trust-building strategies include loyalty programs, strong online presence, and
regulatory compliance.
3. Global Issues:
o Cultural Challenges: Websites must be culturally appropriate and user-friendly
for diverse audiences.
o Language Barriers: Language differences can hinder understanding.
o Time Zone Differences: Customer service availability can be impacted by global
time zones.
o Infrastructure Issues: Websites must support various hardware and software.
o Currency Variability: Pricing and payment must accommodate multiple
currencies.
o Legal Compliance: E-commerce operations must adhere to diverse laws
regarding data protection, taxes, and more

Lecture Notes: Electronic and Mobile

Commerce Applications

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Overview of E-Commerce Applications
E-commerce is being utilized in various innovative ways across different sectors. This section
covers applications in key areas, including B2B, B2C, C2C, and m-commerce, focusing on retail,
manufacturing, marketing, and finance. Companies involved in e-commerce must ensure their
strategies meet customer needs effectively.
1. Manufacturing Applications
• Supply Chain Operations: Many manufacturers are moving supply chain functions online to
enhance profitability and customer service.
o Electronic Exchanges: Platforms where manufacturers, suppliers, and competitors
engage in buying/selling, trading market information, and managing inventory.
▪ Types of Exchanges:
▪ Private Exchanges: Owned by a single company for exclusive trading
with partners (e.g., Walmart’s Retail Link).
▪ Consortium Exchanges: Operated by a group of companies with shared
procurement needs (e.g., Covisint for auto manufacturers).
▪ Independent Exchanges: Open to any buyers and sellers in a market,
often for a fee (e.g., Tinypass, which supports various payment models
for content).
2. Marketing Applications
• Customer Behavior Analysis: E-commerce allows companies to gather insights on consumer
behavior, enabling targeted marketing strategies.
o Market Segmentation: Dividing potential customers into subgroups based on
demographics and preferences.
o Data Services: Companies like eXelate provide access to vast databases for B2B
marketers to identify and segment markets effectively.
3. Advertising Applications
• Mobile Advertising: Includes various payment models like CPM (cost per mille), CPC (cost per
click), and CPA (cost per action).
o Success Metrics: Advertisers track reach, click-through rates (CTR), and user actions
(e.g., downloads).
o Targeting Techniques: Companies like InMobi utilize "appographic targeting" to
connect users with relevant ads based on app usage rather than demographics.

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4. Bartering Applications
• Bartering Platforms: As a response to economic challenges, many businesses and individuals
turn to bartering to exchange goods and services without cash.
o Tax Considerations: Bartering transactions are subject to tax reporting and record-
keeping, overseen by the IRS.
5. Retargeting Applications
• Technique Overview: Retargeting aims to recover abandoned shopping carts by displaying
personalized ads to users who visited a retailer's site but did not complete a purchase.
o Effectiveness: By showing ads for products the user expressed interest in, retargeting
increases the likelihood of conversion.
6. Price Comparison Applications
• Mobile Apps: Tools like RedLaser allow users to compare prices by scanning barcodes, while
Amazon's app lets users search for pricing by taking pictures of products.
• Consumer Empowerment: These applications enable shoppers to make informed decisions by
comparing prices and reading reviews.
7. Couponing Applications
• Digital Coupons: More effective than traditional coupons, digital versions can be loaded onto
loyalty cards or sent via SMS.
o Proximity Marketing: Retailers use beacons to deliver coupons to customers in-store,
with projections of 1.5 billion mobile coupons to be delivered by 2020.
o Marketplace Innovations: Platforms like Groupon and LivingSocial offer unique
couponing strategies that require a minimum number of participants for discounts.
8. Investment and Finance Applications
• Online Trading: The brokerage industry has adapted rapidly to the Internet, allowing investors to
conduct trades at lower costs.
o Mobile Trading Apps: Companies like Fidelity provide apps for secure portfolio
management and trading.
9. Banking Applications
• Online Banking Services: Customers can check balances, transfer funds, and pay bills online,
providing convenience and reducing paper usage.
o Mobile Banking Adoption: Banks encourage online bill payment due to its benefits for
customer retention and increased service usage.

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 o M-Pesa: A leading mobile payment system in East Africa, allowing users to perform
various financial transactions via mobile devices, significantly impacting Kenya's
economy.

Lecture Notes: Technology Infrastructure for

E-Commerce and M-Commerce
Overview
The successful implementation of e-business requires significant changes to existing business
processes and substantial investments in information systems (IS) technology. It is essential to
choose and integrate technology components carefully to support high transaction volumes with
customers, suppliers, and business partners globally.
1. Key Components of E-Commerce Infrastructure
A. Web Server Hardware and Software
• Web Server Hardware: Essential for hosting the website and depends on:
o The software running on the server.
o The volume of e-commerce transactions.
• Scalability: Successful e-commerce solutions should be highly scalable to handle unexpected
user traffic.
• Performance Metrics:
o Response Time: Target less than 1 second.
o Transaction Success Rate: Aim for 99% or better.
o System Availability: Minimize unscheduled downtime.
B. Hosting Options
• Self-Hosting vs. Third-Party Providers:
o Many companies opt for third-party web service providers to minimize initial costs and
leverage expert management of web servers.
C. Web Server Software
• Essential services include:
o Security and identification.
o Retrieval and transmission of web pages.
o Web site tracking and development.

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 • Common software packages: Apache HTTP Server and Microsoft Internet Information
Services (IIS).
D. E-Commerce Software
• Core functions include:
o Catalog Management: Create and update product listings.
o Product Configuration: Assist customers in selecting options.
o Shopping Cart Facilities: Track selected items for purchase.
o Transaction Processing: Manage payment and order fulfillment.
o Web Traffic Analysis: Provide insights for operational adjustments.
2. Mobile Commerce (M-Commerce) Infrastructure
A. Hardware and Software Requirements
• User Interface: Must be user-friendly for mobile devices, making purchases as easy as on PCs.
• Network Speed: Continuous improvements are necessary to prevent user frustration.
• Security Concerns:
o Protecting data transmission and ensuring trust in transactions.
o Use of encryption and digital certificates for secure communications.
B. Limitations of Mobile Devices
• Small screens and tedious data entry.
• Lower processing power and bandwidth compared to desktop computers.
• Battery life constraints.
3. Electronic Payment Systems
• Importance: A key component of e-commerce infrastructure.
• Payment Methods: Include electronic cash, wallets, smart cards, and credit/debit cards. Offering
multiple payment options increases customer conversion rates.
A. Authentication Technologies
• Digital Certificates: Verify the identity of users and websites.
• Certificate Authorities (CAs): Trusted entities that issue digital certificates, ensuring transaction
trustworthiness.
B. Security Standards
• Payment Card Industry (PCI) Standards: Set measures to protect cardholders and merchants.
• Fraud Prevention Techniques:
o Address verification and card verification numbers.

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 o Visa's advanced authorization system assesses transaction risk in real time.
C. Transport Layer Security (TLS)
• Purpose: Ensures privacy and security of data transmitted over the Internet.
• Functionality:
o TLS establishes a secure connection through an automated "handshake" process.
o Encrypts data during transmission, providing assurance to users.
4. Electronic Cash and Payment Cards
• Electronic Cash: Computerized money for e-commerce transactions, requiring user verification.
• Payment Card Types:
o Credit Cards: Allow borrowing up to a limit, with interest on unpaid balances.
o Charge Cards: Require full payment each month, with no spending limit.
o Debit Cards: Withdraw funds directly from bank accounts.
o Smart Cards: Equipped with microchips for enhanced security and storage of various
data types.
5. Transaction Processing Systems (TPS)
• Purpose: Capture and process data for organizational operations (e.g., order entry, inventory
control).
• Key Objectives:
o Accurate and complete data processing.
o Prevention of fraudulent transactions.
o Timely reporting and user responses.
o Reduction of clerical labor.
A. Types of Transaction Processing Systems
1. Order Processing Systems:
o Manage customer orders, inventory checks, and shipment planning.
o Generate invoices for customer shipments.
2. Accounting Systems:
o Track cash flows and update accounts receivable/payable.
o Ensure financial transactions reflect the organization’s status.
3. Purchase Systems:
o Support purchasing functions, including inventory control and accounts payable.
o Manage purchase orders and supplier interactions.

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Lecture Notes: Transaction Processing
Systems for Small and Medium-Sized
Enterprises (SMEs)
Overview
Transaction Processing Systems (TPS) are essential for small and medium-sized enterprises
(SMEs), which are defined as independent businesses with no more than 500 employees. These
systems offer integrated solutions that are easy to install, operate, and maintain at a low total cost
of ownership, making them attractive to firms transitioning from outdated software.
1. Characteristics of Integrated TPS for SMEs
• Affordability: Initial costs range from a few hundred to a few thousand dollars.
• Ease of Use: Designed for straightforward installation and operation.
• Scalability: Suitable for firms that have outgrown their existing systems but cannot invest in
complex, high-end solutions.
2. Core Activities of Transaction Processing Systems
TPSs perform a set of basic data-processing activities essential for business operations. These
activities include:
A. Data Collection
• Definition: Capturing all necessary data for transaction processing.
• Methods:
o Manual collection (e.g., handwritten orders).
o Automated collection using devices like scanners and point-of-sale (POS) systems.
• Source Data Automation: Recording data at its source in electronic form to minimize manual
effort.
o Example: Scanning UPC codes or using RFID technology for efficient checkout.
B. Data Editing
• Purpose: Ensuring data validity and completeness.
• Process:
o Check if data meets expected formats (e.g., numeric for quantities).
o Codes are validated against a database; invalid entries are rejected.

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C. Data Correction
• Importance: Addressing errors in data entry or scanning.
• Process:
o The system provides error messages to notify users of issues.
o Corrections involve reentering or rescanning data to match valid codes.
D. Data Processing
• Function: Performing calculations and transformations on transaction data.
• Tasks:
o Classifying, sorting, and summarizing data.
o Example: In payroll systems, calculating employee wages, taxes, and deductions.
E. Data Storage
• Definition: Updating databases with new transaction data.
• Impact: This data is crucial for management reporting and decision-making, influencing other
information systems within the organization.
F. Document Production
• Purpose: Generating output records and reports.
• Types:
o Hardcopy documents (e.g., printed paychecks).
o Softcopy displays (e.g., electronic reports).
• Examples of Outputs:
o Inventory reports, invoices, and regulatory documents.
• Utility: Provides management with vital information for operational activities and compliance.
3. The Transaction Processing Cycle
The transaction processing cycle includes the following stages:
1. Data Collection: Initiating with a transaction (e.g., customer order).
2. Data Editing: Validating and checking data for errors.
3. Data Correction: Correcting any identified errors.
4. Data Processing: Performing necessary calculations and transformations.
5. Data Storage: Updating databases with processed data.
6. Document Production: Generating reports and records for users.

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