LECTURE NOTES ON

E-COMMERCE COURSE
CODE: CIT 4204

By
Dr. Kelvin K. Omieno
 Lecture-1
1.1 Electronic Commerce:
Electronic commerce, commonly known as E-commerce is trading in products or services
using computer networks, such as the Internet. [ Infranet, Intranet (LAN), Extranet,
Internet)
Electronic commerce draws on technologies such as mobile commerce, electronic funds
transfer, supply chain management, Internet marketing, online transaction processing,
electronic data interchange (EDI), inventory management systems, and automated data
collection systems.
Modern electronic commerce typically uses the World Wide Web for at least one part of
the transaction's life cycle, although it may also use other technologies such as e-mail.

Definition of E-commerce:

Sharing business information, maintaining business relationships and conducting business

transactions using computers connected to telecommunication network is called E-Commerce.

History of E-Commerce
• The history of Ecommerce seems rather short but its journey started over 40 years ago in
hushed science labs
• In the 1960s, very early on in the history of Ecommerce, its purpose was to exchange
long distance electronic data. In these early days of Ecommerce, 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.
• Originally, electronic commerce was identified as the facilitation of commercial
transactions electronically, using technology such as Electronic Data Interchange (EDI)
and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s,
allowing businesses to send commercial documents like purchase orders or invoices
electronically.
• The growth and acceptance of credit cards, automated teller machines (ATM) and
telephone banking in the 1980s were also forms of electronic commerce
• In 1982 Transmission Control Protocol and Internet Protocol known as TCP & IP was
developed. This was the first system to send information in small packets along different
routes using packet switching technology, like today's Internet! As opposed to sending
the information streaming down one route
• Beginning in the 1990s, electronic commerce would include enterprise resource
planning systems (ERP), data mining and data warehousing
• 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 Ecommerce. Today Amazon and
ebay are both amongst the most successful companies on the Internet
1.2 E-Commerce Categories:
1. Electronic Markets
Present a range of offerings available in a market segment so that the purchaser can
compare the prices of the offerings and make a purchase decision.
Example: Airline Booking System
2. Electronic Data Interchange (EDI)
• It provides a standardized system
• Coding trade transactions
• Communicated from one computer to another without the need for printed orders and
invoices & delays & errors in paper handling
• It is used by organizations that a make a large no. of regular transactions Example:
EDI is used in the large market chains for transactions with their suppliers
3. Internet Commerce
• It is use to advertise & make sales of wide range of goods & services.
• This application is for both business to business & business to consumer transactions.
 Example: The purchase of goods that are then delivered by post or the booking of
tickets that can be picked up by the clients when they arrive at the event.

1.3 Advantages of E-commerce:

Buying/selling a variety of goods and services from one's home or business
Anywhere, anytime transaction
Can look for lowest cost for specific goods or service
Businesses can reach out to worldwide clients - can establish business partnerships
Order processing cost reduced
Electronic funds transfer faster
Supply chain management is simpler, faster, and cheaper using ecommerce
- Can order from several vendors and monitor supplies.
- Production schedule and inventory of an organization can be inspected by
cooperating supplier who can in-turn schedule their work

1.4 Disadvantages of E-commerce:

Electronic data interchange using EDI is expensive for small businesses

Security of internet is not very good - viruses, hacker attacks can

paralyze e-commerce
Privacy of e-transactions is not guaranteed

E-commerce de-personalizes shopping

1.5 Threats of E-commerce: [ Confidentiality, Integrity, Availability, Non-

Repudiation)
Hackers attempting to steal customer information or disrupt the
site A server containing customer information is stolen.
Imposters can mirror your ecommerce site to steal customer money
 • Authorised administrators/users of an ecommerce website downloading hidden active
content that attacks the ecommerce system.
A disaffected employee disrupting the ecommerce system.
It is also worth considering where potential threats to your ecommerce site might come
from, as identifying potential threats will help you to protect your site. Consider:
Who may want to access your ecommerce site to cause disruption or steal data; for example
competitors, ex-employees, etc.
What level of expertise a potential hacker may possess; if you are a small company that
would not be likely to be considered a target for hackers then expensive, complex security
may not be needed.

1.6 Features of E-Commerce:

Ubiquity
The marketplace is extended beyond traditional available everywhere: at work, at home,
and boundaries and is removed from a temporal and elsewhere via mobile devices,
anytime. geographic location. ―Marketspace‖ is created; shopping can take place
anywhere. Customer convenience is enhanced, and shopping costs are reduced.

Global reach
Commerce is enabled across cultural and across national boundaries, around the earth.
national boundaries seamlessly and without modification. ―Marketspace‖ includes
potentially billions of consumers and millions of businesses worldwide.

Universal standards
There is one set of technical media standards technology standards, namely Internet across
the globe.[IEEE]

Richness
Video, audio, and text messages .
Video, audio, and text marketing messages are are possible. integrated into a single
marketing message and consuming experience.

Interactivity
Consumers are engaged in a dialog that through interaction with the user. dynamically
adjusts the experience to the individual, and makes the consumer a co-participant in the
process of delivering goods to the market.
 Information density
Information processing, storage, and reduces information costs and raises quality.
communication costs drop dramatically, while currency, accuracy, and timeliness improve
greatly. Information becomes plentiful, cheap, and accurate.

Personalization/Customization
The Personalization of marketing messages and technology allows personalized messages
to customization of products and services are be delivered to individuals as well as groups.
based on individual characteristics.
1.7 Business models of e-commerce:
There are mainly 4 types of business models based on transaction party.

A. Business-to-Consumer (B2C)

In a Business-to-Consumer environment, companies sell their online goods to consumers who

are the end users of their products or services. Usually, B2C E-commerce web shops have an
open access for any visitor, meaning that there is no need for a person to login in order to make
any product related inquiry.
 B. Business-to-Business (B2B)

In a Business-to-Business environment, companies sell their online goods to other companies

without being engaged in sales to consumers. In most B2B E-commerce environments entering
the web shop will require a log in. B2B web shop usually contains customer-specific pricing,
customer-specific assortments and customer-specific discounts.

C. Consumer-to-Business (C2B)

In a Consumer-to-Business environment, consumers usually post their products or services

online on which companies can post their bids. A consumer reviews the bids and selects the
company that meets his price expectations.
 D. Consumer-to-Consumer (C2C)

In a Consumer-to-Consumer E-commerce environment consumers sell their online goods

to other consumers. A well-known example is eBay.

1.8 E-Governance:
E-governance is the application of information and communication technology (ICT) for
delivering government services, exchange of information communication transactions,
integration of various stand-alone systems and services between government-to-customer (G2C),
government-to-business (G2B), government-to-government (G2G) as well as back office
processes and interactions within the entire government framework.

Through e-governance, government services will be made available to citizens in a convenient,

efficient and transparent manner. The three main target groups that can be distinguished in
governance concepts are government, citizens and businesses/interest groups. In e-governance
there are no distinct boundaries.

A. Business - to - Government (B2G)

B2G model is a variant of B2B model. Such websites are used by government 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.

B. Government - to - Business (G2B)

Government uses B2G model website to approach business organizations. Such websites support
auctions, tenders and application submission functionalities.
 C. Government - to - Citizen (G2C)

Government uses G2C model website to approach citizen in general. Such websites support
auctions of vehicles, machinery or any other material. Such website also provides services
like registration for birth, marriage or death certificates. Main objectives of G2C website are
to reduce average time for fulfilling people requests for various government services.

Functions of E-Commerce
• Marketing:- One of the areas it impacts particularly is direct marketing. In the past this was
mainly door-to-door, home parties (like the Tupperware parties) and mail orders using
catalogues or leaflets. This moved to telemarketing and TV selling with the advance in
television technology and finally developed into e-marketing.
• Human Resource Management:- Issues of on-line recruiting, home working and
‘entrepreneurs’ working on a project by project basis replacing permanent employees.
• Business law and ethics:- The different legal and ethical issues that have arisen as a result of
a global ‘virtual’ market. Issues such as copyright laws, privacy of customer information etc.
• Management Information System:- Analysis, design and implementation of e-business
systems within an organization ; issues of integration of front-end and back-end systems.
• Product Operations and Management:- The impact of on-line processing has led to reduced
cycle time. It takes seconds to deliver digitized products and services electronically; similarly
the time for processing orders can be reduced by more than 90 percent from days to minutes.
• Finance and Accounting:- On-line banking ; issues of transaction costs ; accounting and
auditing implications where ‘intangible’ assets and human capital must be tangibly valued in an
increasing knowledge based economy.
• Economy:- The impact of E-commerce on local and global economies; understanding the
concepts of a digital and knowledge based economy and how this fits into economic theory.

E-Commerce Applications
• E-Marketing
• E-Advertising
• E-Banking
• E-Learning
• Mobile Commerce
• Online Shopping
• Entertainment

E-Marketing:-
• E-Marketing also known as Internet Marketing, Online Marketing, Web Marketing.
• It is the marketing of products or services over the internet.
• It is consider to be broad in scope because not refers to marketing on the internet but also
done in Email and wireless media.
• E-Marketing ties together the creative and technical aspects of the internet, including design
development, advertising and sales.
 • Internet marketing is associated with several business models i.e., B2C, B2B, C2C.
• Internet marketing is inexpensive when examine the ratio of cost to the reach of the target.

E-Advertising:-
• It is also known as online advertising it is a form of promotion that uses internet and World
Wide Web to deliver marketing messages to attracts customers.
Example: Banner ads, Social network advertising, online classified advertising etc.
• The growth of these particular media attracts the attention of advertisers as a more productive
source to bring in consumers.

E-Banking:-
• Means any user with a personal computer and browser can get connected to his banks,
website to perform any of the banking functions. In internet banking system the bank has a
centralized data base i.e., web-enabled.
• Best example for E-Banking is ATM.
• An ATM is an electronic fund transfer terminal capable of handling cash deposits, transfer,
Balance enquiries, cash withdrawals, and pay bills.

SERVICES THROUGH E-BANKING:

Ø Bill Payment Service
Ø Fund Transfer
Ø Investing through Internet Banking
Ø Shopping

E-Learning:-
• E-Learning comprises all forms of electronically supported learning and teaching.
• E-Learning applications and processes include web-based learning, computer-based learning.
• Content is delivered via. The internet, intranet/extranet, audio, or video tape, satellite TV.
• E-Learning is naturally suited to distance and flexible learning, but can also be used
conjunction with face-to-face teaching.
• E-Learning can also refer to the educational website such as those offering learning scenarios
worst and interactive exercises for children.
• A learning management system (LMS) is software used for delivering, tracking, and
managing training /education.
Mobile Commerce:-
• Mobile Commerce also known as M-Commerce, is the ability to conduct, commerce as a
mobile device, such as mobile phone.
• Banks and other financial institutions use mobile commerce to allow their customers to
access account information and make transactions, such as purchasing, withdrawals etc.,
• Using a mobile browser customers can shop online without having to be at their personal
computer.
SERVICES ARE:
1. Mobile ticketing
2. Mobile contract purchase and delivery mainly consumes of the sale of ring tones, wallpapers
and games of mobile phones.
3. Local base services
• Local discount offers
• Local weather
4. Information services
• News
• Sports, Scores

Online Shopping:-
• Online shopping is the process whereby consumers directly buy goods or services from a sell
in real time, without intermediary services over the internet.
• An online shop, e-shop, e-store, internet shop web shop, web store, online store, or virtual
shop evokes the physical analogy of buying products or services in a shopping center.
• In order to shop online, one must be able to have access to a computer, a bank account and
debit card.
• Online shoppers commonly use credit card to make payments , however some systems enable
users to create accounts and pay by alternative means ,such as
• Cheque.
• Debit cards.
• Gift cards
• Online stores are usually available 24 hours a day
Entertainment:-
• The conventional media that have been used for entertainment are
1. Books/magazines.
2. Radio.
3. Television/films.
4. Video games.
Online books /newspapers, online radio, online television, online firms, and online games are
common place in internet where we can entertain.
• Online social networking websites are one of the biggest sources of E-entertainment for
today’s tech-savvy generation.

The Limitations of EC and Factors Affecting Adoption in Kenya

The limitations of EC can be grouped into technical and nontechnical categories.

• Technical Limitations of EC
The technical limitations of EC are as follows:
✓ There is a lack of system security, reliability, standards, and some
communication protocols.
✓ There is insufficient telecommunication bandwidth.
✓ The software development tools are still evolving and changing rapidly.
✓ It is difficult to integrate the Internet and EC software with some existing
applications and databases.
✓ Vendors may need special Web servers and other infrastructures, in addition to
the network servers.
✓ Some EC software might not fit with some hardware, or may be incompatible
with some operating systems or other components.

• NonTechnical Limitations
Of the many nontechnical limitations that slow the spread of EC, the following are the
major ones.
✓ Cost and justification The cost of developing EC in-house can be very high, and
mistakes due to lack of experience may result in delays. There are many
opportunities for outsourcing, but where and how to do it is not a simple issue.
 Furthermore, to justify the system one must deal with some intangible benefits
(such as improved customer service and the value of advertisement), which are
difficult to quantify.
✓ Security and privacy These issues are especially important in the B2C area,
especially security issues which are perceived to be more serious than they really are
when appropriate encryption is used. Privacy measures are constantly
improved. Yet, the customers perceive these issues as very important, and, the
EC industry has a very long and difficult task of convincing customers that online
transactions and privacy are, in fact, very secure.
✓ Lack of trust and user resistance Customers do not trust an unknown faceless
seller (sometimes they do not trust even known ones), paperless transactions,
and electronic money. So switching from physical to virtual stores may be
difficult.
• Other limiting factors.
✓ Lack of touch and feel online. Some customers like to touch items such as clothes and
like to know exactly what they are buying.
✓ Many legal issues are as yet unresolved, and government regulations and standards are
not refined enough for many circumstances.
✓ Electronic commerce, as a discipline, is still evolving and changing rapidly. Many people
are looking for a stable area before they enter into it.
✓ There are not enough support services. For example, copyright clearance centers for EC
transactions do not exist, and high-quality evaluators, or qualified EC tax experts, are
rare.
✓ In most applications there are not yet enough sellers and buyers for profitable EC
operations.
✓ Electronic commerce could result in a breakdown of human relationships.
✓ Accessibility to the Internet is still expensive and/or inconvenient for many
potential customers. (With Web TV, cell telephone access, kiosks, and constant
media attention, the critical mass will eventually develop.) Despite these
limitations, rapid progress in EC is taking place. For example, the number of
people in the United States who buy and sell stocks electronically increased from
300,000 at the beginning of 1996 to about 10 million in fall 1999. As experience
accumulates and technology improves, the ratio of EC benefits to costs will
increase, resulting in a greater rate of EC adoption. The potential benefits may
not be convincing enough reasons to start EC activities
1.9 Different Types of Networking For E-Commerce:
Internet:
The Internet is a global network of computers that allows people to send email, view web sites,
download files such as mp3 and images, chat, post messages on newsgroups and forums and
much more.

The Internet was created by the Advanced Research Projects Agency (ARPA) of the U.S.
government in 1960's and was first known as the ARPANet. At this stage the Internet's first
computers were at academic and government institutions and were mainly used for accessing
files and to send emails. From 1983 onwards the Internet as we know it today started to form
with the introduction of the communication protocol TCP/IP to ARPANet. Since 1983 the
Internet has accommodated a lot of changes and continues to keep developing.

The last two decades has seen the Internet accommodate such things as network LANs and ATM
and frame switched services. The Internet continues to evolve with it becoming available on
mobile phones and pagers and possibly on televisions in the future.

Advantages of internet:
There many advantages to using the internet such as:
E-mail
Email is now an essential communication tool in business. It is also excellent for keeping in touch
with family and friends. The advantage to email is that it is free ( no charge per use) when compared
to telephone, fax and postal services.
Information
There is a huge amount of information available on the internet for just about every subject
known to man, ranging from government law and services, trade fairs and conferences, market
information, new ideas and technical support.
Services
Many services are now provided on the internet such as online banking, job seeking and
applications, and hotel reservations. Often these services are not available off-line or cost more.
Buy or sell products.
The internet is a very effective way to buy and sell products all over the world.

Communities communities of all types have sprung up on the internet. Its a great way to meet
up with people of similar interest and discuss common issues.
A Leading-Edge Image
Presenting your company or organization as leading-edge shows your customers and prospective
customers that you are financially strong, technologically savvy, and ready for the 21st century.
And that you care enough about your customers to take advantage of new technologies for their
benefit. And finally that you have the resources to support your clients in the most beneficial
manner possible.
More and more advertisers on television, radio, magazines, and newspapers are including a Web
address. Now is the time to avoid playing catch-up later.
Improved Customer Service
The companies are available to their customers 24 hours a day, 7 days a week. The Internet never
sleeps. Whenever customer needs information about any company, products or services, they can
access the company‘s Web Page.
Market Expansion
The Internet is a global system. Latest estimates are that there are about 40 million people with
access to the Internet, and this number is growing every day. By simply posting a Web Page you
are also addressing International markets.
Low Cost Marketing
Imagine developing a full color brochure without having to incur the costs of proofs, printers,
wasted paper, long lead times between revisions, and more. Then imagine a full color product or
services brochure that is interactive and which incorporates text, graphics, audio, and/or video.
One that can be immediately updated without incurring the usual costs of product material
updates.
Low Cost Selling
Without the cost of direct selling potential customers can get detailed information about your
products or services at any time. And they can easily order your products over the Internet, or
request additional information be sent to them via a request form on your Web page.
Lower Communication Costs
Your time, and your employees time, is valuable. Most businesses and organizations spend time
answering the same questions over and over again. With a Web page you can make the answers
available to everyone immediately. You can also update your Wed page with new information
quickly and easily.
Intranet:
An intranet is a computer network that uses Internet Protocol technology to share
information, operational systems, or computing services within an organization. This term
is used in contrast to extranet, a network between organizations, and instead refers to a
network within an organization.
The objective is to organize each individual's desktop with minimal cost, time and effort to
be more productive, cost efficient, timely, and competitive.
 An intranet may host multiple private websites and constitute an important component and
focal point of internal communication and collaboration.
Any of the well-known Internet protocols may be found in an intranet, such as HTTP (web
services), SMTP (e-mail), and FTP (file transfer protocol). Internet technologies are often
deployed to provide modern interfaces to legacy information systems hosting corporate
data.

Uses of Intranet:

Increasingly, intranets are being used to deliver tools, e.g. collaboration (to facilitate working
in groups and teleconferencing) or sophisticated corporate directories, sales and customer
relationship management tools, project management etc., to advance productivity.
Intranets are also being used as corporate culture-change platforms. For example, large
numbers of employees discussing key issues in an intranet forum application could lead to
new ideas in management, productivity, quality, and other corporate issues.
In large intranets, website traffic is often similar to public website traffic and can be better
understood by using web metrics software to track overall activity. User surveys also
improve intranet website effectiveness. Larger businesses allow users within their intranet to
access public internet through firewall servers. They have the ability to screen messages
coming and going keeping security intact.
When part of an intranet is made accessible to customers and others outside the business, that
part becomes part of an extranet. Businesses can send private messages through the public
network, using special encryption/decryption and other security safeguards to connect one
part of their intranet to another.
Intranet user-experience, editorial, and technology teams work together to produce in-house
sites. Most commonly, intranets are managed by the communications, HR or CIO
departments of large organizations, or some combination of these.
Because of the scope and variety of content and the number of system interfaces, intranets of
many organizations are much more complex than their respective public websites. Intranets
and their use are growing rapidly.

Advantages:

Workforce productivity: Intranets can help users to locate and view information faster and
use applications relevant to their roles and responsibilities. With the help of a web browser
interface, users can access data held in any database the organization wants to make
available, anytime and — subject to security provisions — from anywhere within the
company workstations, increasing employees' ability to perform their jobs faster, more
accurately, and with confidence that they have the right information.
Time: Intranets allow organizations to distribute information to employees on an as-needed
basis; Employees may link to relevant information at their convenience, rather than being
distracted indiscriminately by email.
Communication: Intranets can serve as powerful tools for communication within an
organization, vertically strategic initiatives that have a global reach throughout the
organization. By providing this information on the intranet, staff have the opportunity to keep
up-to-date with the strategic focus of the organization. Some examples of communication
would be chat, email, and/or blogs. A great real world example of where an intranet helped a
company communicate is when Nestle had a number of food processing plants in
Scandinavia. Their central support system had to deal with a number of queries every day.
Web publishing: allows cumbersome corporate knowledge to be maintained and easily
accessed throughout the company using hypermedia and Web technologies. Examples
include: employee manuals, benefits documents, company policies, business standards, news
feeds, and even training, can be accessed using common Internet standards (Acrobat files,
Flash files, CGI applications). Because each business unit can update the online copy of a
document, the most recent version is usually available to employees using the intranet.
Business operations and management: Intranets are also being used as a platform for
developing and deploying applications to support business operations and decisions across
the internetworked enterprise.
Cost-effective: Users can view information and data via web-browser rather than maintaining
physical documents such as procedure manuals, internal phone list and requisition forms.
This can potentially save the business money on printing, duplicating documents, and the
environment as well as document maintenance overhead.
Enhance collaboration: Information is easily accessible by all authorised users, which
enables teamwork.
Cross-platform capability: Standards-compliant web browsers are available for Windows,
Mac, and UNIX.
Built for one audience: Many companies dictate computer specifications which, in turn, may
allow Intranet developers to write applications that only have to work on one browser (no
cross-browser compatibility issues).
Promote common corporate culture: Every user has the ability to view the same
information within the Intranet.
Immediate updates: When dealing with the public in any capacity, laws, specifications, and
parameters can change. Intranets make it possible to provide your audience with "live"
changes so they are kept up-to-date, which can limit a company's liability.
Supports a distributed computing architecture: The intranet can also be linked to a
company‘s management information system, for example a time keeping system.
1.10 Wireless Application Protocol:
WAP is a technical standard for accessing information over a mobile wireless network. A
WAP browser is a web browser for mobile devices such as mobile phones that uses the
protocol.
WAP is a specification for a set of communication protocols to standardize the way that
wireless devices, such as cellular telephones and radio transceivers, can be used for Internet
access, including e-mail, the World Wide Web, newsgroups, and instant messaging.

The WAP layers are:

Wireless Application Environment (WAE)
Wireless Session Layer (WSL)
Wireless Transport Layer Security(WTLS)
Wireless Transport Layer (WTP)

Web security:
It is a branch of Information Security that deals specifically with security of websites, web
applications and web services.
At a high level, Web application security draws on the principles of application security but
applies them specifically to Internet and Web systems. Typically web applications are
developed using programming languages such as PHP, Java EE, Java, Python, Ruby,
ASP.NET, C#, VB.NET or Classic ASP.