BBA-6

Semester
 Traditional Commerce
: Commerce is simply the process of buying, selling and
exchanging products and services between and among
organizations and individuals.
Every commercial transaction involves following three main
components or dimensions.
 Product or Service
 Process
 Delivery agent (or intermediary)

The commerce in which all the above components are physical is

called traditional commerce.
For example, if we go to super market, we purchase some fruits,
vegetables and other physical products, pay bill at counter.
 Traditional Commerce
 Traditional commerce normally buys, sells or
exchange products and services within a single
industry and in some cases within a specific
geographical area.
 It relies on operating business hours during a

specific period of time and requires housing

inventory or occupying retail store..
The traditional commerce is based on the
following facts:
 It needs to hire sales executives, sales managers,
accountants and other staffs.
 It operates at business hours within a certain period of

time.
 It does not share your information with the

competitors.
 It often relies on face-to-face interaction with

consumers and its success is based on word of mouth,

networking and customer referral
 E-Commerce Terminology and
Fundamental
The terminology of e-commerce is defined so as to
explain how the people name and classify transactions
and activities being referred to by this area.
Ecommerce is the process of buying and selling
products and services online. It involves more than one
party along with the exchange of data or currency to
process a transaction
Electronic commerce operates in four major market
segments: business to business (B2B), business to
consumer (B2C), consumer to consumer (C2C) and
consumer to business (C2B)
 E-Commerce Terminology and
Fundamental
The digital enterprise: digital enterprise refers to
an enterprise or organization that completely
integrates digital tools and technology into all
aspects of its operations in order to increase
productivity, create a better customer experience,
and improve the efficiency and effectiveness of
business processes. such as Amazon, Google,
facebook, which uses computers and information
system to automate most of the business process.
 A digital enterprises has following feature:
 All business partners are
reached via the internet
 All business communication is
done via an internet
 Many company use a corporate
portal to communicate with
customers, employee and
partners.
A key concern of
many companies today is how
to change themselves into
digital enterprises.
 E-Commerce Terminology and
Fundamental
E-Product and E-Services:
E-Product allow you to sale; product such as MP3,e-
Book,pdf and just about any type of digital file. Unlike
traditional products, links to e-products are typically
emailed to the customer upon purchase and can be
downloaded by.
E-Service is also known as an online service refers to any
information and service over the internet. these service
not only allow subscribe to communicate to each other,
but also provide unlimited access information. these
services may be free or paid
In the context of Nepal esewa is very popular to
give e-services like utility payment and other
financial transactions. Some banks are providing
different types of e-services like online
registrations, ebanking, SMS banking, online
transactions etc. Some websites are offering the e-
products also. Music Nepal and other websites are
selling the music video, songs and eBooks as the e-
product in Nepal.
 E-Commerce Terminology and
Fundamental
Digital economy is defined as an economy that
focuses on digital technologies, i.e. it is based on
digital and computing technologies. It essentially
covers all business, economic, social, cultural etc.
activities that are supported by the web and other
digital communication technologies.
E-Commerce Terminology and
Fundamental
Digital divide in business: digital divide is the concept
of this digital age. it describe the gap between the
people having access to the digital system and not.
digital divide in business describe the gap of using it as
tools for business process
 E-Commerce Terminology and
Fundamental
Brick and click modal: The bricks and clicks business
model refers to the combination of a physical retail location
(the brick) and an ecommerce sales channel, or online store
(the click). This business model is also sometimes called
“brick and click,” “click and mortar,” and “clicks and bricks.”
With the growth of ecommerce, most large retailers have
implemented the bricks and clicks business model—running
retail stores as well as selling their products online.
E-Commerce Terminology and
Fundamental
E-Tailing: also known as electronic tailing, is the
activity of selling of retail goods on the Internet.
Customers use e tailing to directly
buy goods or services from a seller over the
internet using a web browser. Customers can find
products online by visiting a number of websites and
compare prices, product details and other features.
E-Commerce Terminology and
Fundamental
Procurement involves every activity involved in
obtaining the goods and services a company
needs to support its daily operations, including
sourcing, negotiating terms, purchasing items,
receiving and inspecting goods as necessary and
keeping records of all the steps in the process.
In simple word you can say procurement is the
process of purchasing goods in documented form
E-Commerce Terminology and
Fundamental
Spam is a different term for junk mail, this is basically
unwanted mail that you didn't ask for that can be sent
from many different sources. A way to avoid this is that
when you use your email to sign up for a something
online make sure you don't tick the option to receive
more e-mails from the website as it will be most likely
just spam. It is often written in very small text and
most people fail to see the option or ignore it and
because of this people end up with spam getting sent to
their email. This is a negative example of promoting
business' online and is disliked by most people.
E-Commerce Terminology and
Fundamental
Search engine and the internet: A search engine is a
web-based tool that enables users to locate information
on the World Wide Web. Popular examples of search
engines are Google, Yahoo!, and MSN Search. These
are web sites which offer customers a facility for
storing their files at a safe location .this guards against
anything disastrous happening to the customer’s
computer and their loosing valuable data. often the
files will be create at a number of computer in different
location in order to guard against the failure
 E-Commerce Vs Traditional Commerce,
Traditional Commerce : Traditional commerce refers to the
commercial transactions or exchange of information, buying or
selling product/services from person to person without use
of internet which is a older method of business style and comes
under traditional business. Now a days people are not
preferring this as it is time taking and needs physical way of
doing business.
 E-Commerce Vs Traditional Commerce,
E-commerce : refers to the commercial transactions or exchange
of information, buying or selling product/services electronically
with the help of internet which is a newer concept of business
style and comes under e-business. Now a days people are
preferring this as it is less time taking and does not need physical
way of doing business everything can be done with laptop or
Smartphone and internet.
 E-Commerce Vs Traditional Commerce,
1. Selling in physical store 1. Selling online
2. Selling tangible goods 2. Selling digital goods
3. Physical market place 3. Electronic market place
4. Large amount of capital 4. Less capital needed
required for mass 5. Small fixed cost required
production for plant operation
5. Large fixed cost required
for plant operation 6. System is based on global
6. System is dependent on the reach and totally depends
local market and local on online networking
people system
Benefits of E-commerce
to organizations:
Expands a company‘s Marketplace to national and
international Markets. With minimal capital outlay, a
company can quickly locate more customers, the best
suppliers, and the most suitable business partners
worldwide,
Enables companies to procure material and services
from other companies, rapidly and at less cost.
Helps small businesses compete against large
businesses.
Benefits of E-commerce to customers:
Provides products at reduced cost as well as services
by allowing consumers to conduct quick online
comparisons.
Enables customers to shop or make transactions 24X7
from any location.
Delivers relevant and detailed information
Benefits of E-commerce to society at large:
Enables individuals to work from home and to do less
travelling, resulting In increased productivity.
Enables people in developing countries and rural areas
to enjoy products and services that are otherwise
difficult to buy. This includes opportunities to learn
and earn college degrees, or to receive better medical
care.
Limitation of e-commerce
1. Security
The biggest drawback of e-commerce is the
issue of security. People fear to provide personal and
financial information, even though several improvements
have been made in relation to data encryption.

2. Product suitability
People have to rely on electronic images
to purchase products. Sometimes, when the products are
delivered, the product may not match with electronic images.
Finally, it may not suit the needs of the buyers. Lack of 'touch
and feel' deters people from shopping online.
Limitation of e-commerce
3. Cultural obstacles
E-commerce attracts customers from all
over the world. Habits and culture of the people differ from
nation to nation. They also pose linguistic problems. Thus,
differences in culture create obstacles to both the business and
the consumers.
4 No possibility of tried and tested product
One of the major disadvantages of e-
commerce portal is that a customer is unable to try and test the
product for his own satisfaction. We are habituated to buy at
physical stores after trying a product several times and suddenly
it takes a lot of guts to change this lifetime habit where you
cannot touch, try and test beforehand.
 M-commerce

M-commerce : stands for Mobile Commerce. Sometimes, it

is also referred to as Mobile E-commerce as its transactions
are basically Electronic transactions Conducted using a
mobile terminal and a wireless network. Mobile terminals
include all portable devices such as mobile phones, PDAs,
as well as devices mounted on the vehicles that are capable
of accessing Wireless networks and perform m-commerce
Transactions. One Definition of m-commerce Describes it
as any transaction with a monetary value that is conducted
via a mobile telecommunications network.
Type of E-commerce
B2B
B2C
C2C
e-commerce Framework
Only those organizations can survive which have strong
fundamental framework based on sound knoweldge of
business and market understanding.
Framework tells about the detail of how e-commerce take
place. It defines actually how e-commerce can be
implemented, how online trading or business can be done.
It defines important components that should be present to
do some transaction.
Ecommerce is measured by two pillar framework
applications which deal with the legal issue and
application policy and the other one is Technical standards
Ecommerce framework
Two pillars supporting all e-commerce applications &
infrastructure
 Public Policy legal and privacy issue: to govern such
issues as universal access, privacy and information
pricing
 Technical standards: dictate the nature of information
publishing, user interfaces, and transport in the interest
of compatibility across the entire network
Building blocks of the infrastructure consist
of following components:
Common Business Service
Messaging and Information Distribution
Multi-media Content and Network Publishing
Information Superhighway Infrastructures
Common Business Service:
This infrastructure includes the different methods for
facilitating online buying and selling processes.
In online commerce, the buyers send an electronic
payment as well as some remittance Information to the
seller.
Settlement occurs when the payment and remittance
Information are authenticated by the seller and accepted as
valid.
In order to enable online payment for information and
ensure its sale delivery, the payment services Infrastructure
needs to develop encryption and authentication methods
that ensure security of contents traveling on the network.
 Messaging and Information Distribution:
The Information content transferred over the network
consists of text, numbers, pictures, audio and video.
Once contents have been created and stored on a server,
messaging and Information distribution methods carry that
content across the network.
Messaging vehicle is called middleware software. Messaging
and information distribution include translators that interpret
and transforms data formats.
•Different applications used for this purpose includes EDI,
email, P2P file transfer etc.
 Multi-media Content and Network
Publishing:
The Information Superhighway is the transportation
foundation that enables the transmission of content.
The most prevalent architecture that enables
networking publishing is the World Wide Web.
The web allows small businesses and Individuals to
develop content in the form of Hypertext Markup
Language (HTML) and publish it on a web server.
 Information Superhighway
Infrastructures
It is the path through which actual Information flows and
moves between sender and receiver.
Information Superhighway consists of telecommunication
companies that provide telephone lines, Cable TV systems that
provide coaxial cables and direct broadcast satellite
networks,Wireless companies that provide mobile radio and
satellite networks, Computer networks Include private
networks and public data networks like the Internet.
All these modes of communication are interconnected. They
are connected with routers, switches, bridges, gateways etc.
 Elements of e-commerce
All E-Commerce applications basically follows client
server model. Clients are the machines requesting
services and servers are machines providing services to
the client.
•Basically, every E-Commerce application has four basic
elements:
o Consumer Access Devices
o Multimedia Content
o Network Service Provider and
o Information Delivery Servers
Multimedia Content:

Multimedia content can be considered both fuel and

traffic for electronic commerce applications.
The technical definition of multimedia is the use of
digital data in more than one format, such as the
combination of text, audio, video, images, graphics,
numerical data, holograms, and animations in a
computer file/document.
Multimedia is associated with Hardware components
different networks.
The Accessing of multimedia content depends on the
hardware capabilities of the customer.
Consumer Access Devices:
 Consumer access devices are client machines used for accessing
the ecommerce applications.
 Some examples of consumer access devices are personal
computers, mobile phones, PDAs(personal digital assistances),
two-way televisions.
 Such televisions are equipped with devices called set-top boxes.
Out of these access devices interactive TV is considered as
information access device of the future.
 The reason behind this is that almost all has a TV and everyone
is far more comfortable with using a TV than a PC.
 Consumer access devices are used for entertainment on demand
including video, games, news on-demand, electronic retailing via
catalogs etc.
Network Service Providers:

Network is backbone of E-Commerce. It needs a

network infrastructure to transport the contents.
Such network infrastructure is provided by
combination of telecom networks, cable TV
networks,wireless networks such as satellites, and
microwaves, private networks etc.
Basically, E-Commerce needs high capacity
(broadband) interactive (two way) electronic pipeline
for simultaneously supporting large number of E-
Commerce applications.
Information Delivery Servers
E-Commerce needs different servers to store and
distribute large amount of digital content to consumers.
Theses servers captures, processes, manages, and delivers
text, images, audio and video.
There may be different server for providing services like
game server, multimedia server, government server, etc.
Theses servers must be able to handle thousands of
simultaneous users and are made up of high-end
symmetric multiprocessors, clustered architecture and
massive parallel systems.
Unit:2 The Network Infrastructure for E-
Commerce
 Information Superhighway
Information Superhighway is a large-scale provides a variety of
interactive services using text databases, email, audio and
materials accessed through computers, television sets etc. The
name "Information Superhighway" refers to a suite of advanced
communications technology. Most of the business activities,
entertainment, digital transmission and communications are
based on the broadband communication.
Electronic commerce needs a network infrastructure to
transport the content-text, audio, video, graphics etc.
The network infrastructure that provides such a data
transmission facility is called I-Way or information super
highway.
Thus, information super highways can be defined as the high
capacity, electronic and interactive pipeline to the consumer
or business premise that is capable of supporting large
number of ecommerce applications simultaneously.
It is called interactive because it provides two-way
communication between users and service providers or
between one user and another user.
It is called high-capacity electronic pipeline because it must
provide broadband link.
Component of I-Way
Three major components make up the i-way
infrastructure these are
1. Consumer’s access equipment
2. Local On-Ramps
3. Global information distribution Network
Local or access road, or on-ramps
This segment of I-way simplify linkages between
businesses, universities, and homes to the global
information distribution network. There are four
different types of provider of access ramps: - telecom-
based - cable TV-based - wireless-based and -
computer-based online information services. These
providers link users and e-commerce application
providers.
“Main function of access roads is to connect
consumers with e-commerce applications”.
Consumer’s access equipment
Consumer access equipment are the devices and
system used by the users to access the digital network
system. This segment of the I-way includes hardware
and software vendors, who provide physical devices
such as routers and switches, access devices such as
computers and set-top boxes, and software platforms
such as browsers and operating systems.
Global information distribution Network
 The global information distribution networks consist of the
infrastructure crossing the countries and continents
 It addresses to the frameworks that are connected to several
nations. A large portion of the foundation for the I-way as of now
exists in the limitless system of fiber optic, coaxial links, radio
waves, satellites, and copper wires. Satellite networks play a vital
role in the communication industry. They have advantages over the
terrestrial networks in that:
 They are accessible from any point of the globe.
 They can provide broad band digital services to many points
without the cost of acquiring wire/cable installation.
 They can add receiving and sending sites without significant
additional costs.
 Internet as Network Infrastructure
The Internet is currently one of the most significant infrastructures in business.
For businesses, the Internet offers an excellent means to compete globally with
other businesses of differing sizes. Now businesses in Nepal have the ability to
market themselves in the global marketplace. For many reasons, the Internet and
Web is becoming a main arena for the business community worldwide. The
Internet is an enabling tool for business and the new business environment that is
transforming the economy. The Internet is the most global, borderless, cost-
effective and open business application and communication infrastructure. The
Internet is a network of networks, linking computers to computers sharing the
TCP/IP protocols. The Internet is the transport vehicle for the information stored
in files or documents from database to another user's terminals.
Internet as Network Infrastructure
Internet provides the following services for the
business process and data management
Electronic mail(e-mail):permits you to send and
receive mail.
Telnet or remote login: permit your computer to log
into another computer and use it as if you were there
FTP: allows your computer to rapidly retrieve complex
file intact from a remote computer and view or save
them on your computer.
 What is extranet ?
An extranet is an organization’s private network and its
available only for selected users. It’s a way to connect to
third parties like vendors, customers, and partners in a
secure and controlled way. The users typically have a login
mechanism such as username and password to access the
network. Extranet in simple terms provides a secure
network for an organization to share information with
relevant people outside the organization. It is part of an
organization’s intranet divided via a firewall.
Types of extranets
1. Company-to-Consumer Extranet This extranet is
like a client portal, where customers can login to check
the status of their orders. If they have any queries, they
can contact the support staff on the extranet.
 2. Company/Business Partner Extranet Here, the
extranet acts as the collaboration space where all
stakeholders of the company come together to operate
together. Information is shared, and access to tools is
provided based on permission.
Types of extranets
3. Industry-Wide Extranet One company creates this
type of extranet, but access to the tools and resources
is provided to all companies in the industry. The
objective of this extranet is to facilitate industry-wide
sharing of ideas in order to develop better products &
services.
 What is intranet ?
Intranet is the system in which multiple PCs are connected
to each other. PCs in intranet are not available to the world
outside the intranet. Usually each organization has its own
Intranet network and members/employees of that
organization can access the computers in their intranet.
Asymmetric Digital Subscriber Line
DSL stands for Digital Subscriber Line. The term DSL
refers to a group of technologies, the most common
being ADSL or Asymmetric Digital Subscriber Line.
DSL uses your existing telephone lines to deliver high-
speed Internet access. It allows voice communication
and high-speed data transmission on the same line at
the same time, by transmitting the two on different
frequencies.
 Advantages of ADSL
There is no need for extra access infrastructure - ADSL uses
the existing phone line.
 ADSL does not tie up your phone line while you are on the
Internet.
There is no need to 'dial-up' the Internet.
Disadvantages of ADSL
 ADSL is not available everywhere your local
telephone exchange must be ADSL enabled.
 If your premises are more than 3.5km away from your
exchange, ADSL may not be available. Check with
your potential service provider.
 In addition, ADSL may be unavailable where it has
used a technology called pair-gain on a phone line
(common in older apartment blocks).
Wireless networking
Wireless networking enables devices with wireless
capabilities to use information resources without being
physically connected to a Network. wireless network
are classified into major two types.
Wireless local area network
Wireless WAN(wide are network)
 Wireless local area network

A WLAN provides wireless network communication over

short distances using radio signals instead of traditional
network cabling. Wireless Local Area Networks (WLANs)
have data transfer speeds ranging from 1 to 54Mbps. In
addition, some manufacturers offer proprietary 108Mbps
solutions. The 802.11n wireless networking standard can
reach 300 to 600Mbps.
 Wi-Fi(wireless fidelity)or 802.11
Wi-Fi is designed for communication between devices such
as computers, printers and scanners. It is typically used to
set up private wireless networks in a home or office.
allowing you to move your PC or laptop while still having
access to the Internet and to your printer and other devices.
Wi-Fi is also being used to provide public high speed
Internet access in locations such as cafes, hotels and airport
lounges, providing Internet access to users who are away
from their normal place of work.
 Advantage of Wi-Fi
1. Convenience :Wireless networks allows multiple users to
connect through the same network. In a fraction of seconds
without any configurations, connections can be made through
the router or a hotspot technology. This ease of use and
convenience is not present in the wired networks.
2. Mobility As long as you are in the range of a Wifi Access
Point, with Wifi you can carry out your regular works from
anywhere you want especially with the mobile devices. You
don't have to always sit right in front of the computer to get
internet access. Such works include, bank transactions, email
sending and checking work reports.
 Advantage of Wi-Fi
3. Productivity :Regardless of their location, staffs of a company
can accomplish their assigned tasks with a Wi-fi network. Users
who connect to a Wi-fi network can experience different ranges
of speed as they move from one location to another. As a result
staffs can be more engaged and be able to deliver their timely
targets and works, enhancing the overall productivity of the
company
4. Expandability: Adding new users to a Wi-fi network is an easy
task. With the proper Wireless LAN credentials, more users can
access the Wi-fi network. Additionally there is no need to install
any new type of equipment, all can be done with the existing.
This significantly saves time and effort of the clients.
5. Cost: These are cheaper than wired communication system
 Disadvantage of Wi-Fi
1. Security: Even though many encryption techniques are taken by the
wireless networks, still the Wifi is vulnerable to hacking. Due to its
wireless nature it has high chances of being hacked especially the
Public Wifi networks. Since the Public Wifi networks are open for
anyone, hackers can impose their fake networking ID. Without
consent users may connect to this fake ID and fall into the category of
cyber attack victims.
2. Range: Range offered by a Wifi network is limited, typically around
100-150 feet. While it is sufficient for a normal home, it can actually
be a problem for building structures. The strength of a Wifi network
will be reducing as you move away from the access point. Since the
building are multi-storeyed, the strength of the Wifi network can be
varying at different floors. This cloud weaken the company's
workflow. The only way to overcome this is by purchasing additional
access points.
 Disadvantage of Wi-Fi
3. Reliability :A Wifi network works in the frequency of
2.4Ghz. This frequency has high chances of getting blocked
due to the electro magnetic waves and other forms of
obstacles. As a result you may frequently experience
connectivity issues and weak signal strengths. Especially
during large file transfers the signal can get interfered.
4. Speed: the speed on most wireless network is far slower than
even the slowest common wired network
Bluetooth
BLUETOOTH IS A WIRELESS TECHNOLOGY THAT
ALLOWS DATA TRANSMISSION BETWEEN 2
DEVICES. IT IS USED TO CONNECT DIFFERENT
DEVICES SUCH AS THE HEADPHONES, SPEAKERS,
PRINTERS, LAPTOPS AND SMARTPHONES.
Advantages of Bluetooth
It avoids interference from other wireless devices.
It has lower power consumption.
 It is easily upgradeable.
 It has range better than Infrared communication.
The Bluetooth is used for voice and data transfer.
Bluetooth devices are available at very cheap cost.
No line of sight hence can connect through any obstacles.
 Free to use if the device is installed with Bluetooth.
Disadvantages of Bluetooth
It can lose connection in certain conditions.
 It has low bandwidth as compared to Wi-Fi.
 It allows only short-range communication between
devices.
Security is a key aspect as it can be hacked.
Wireless Wide Area Network
Wireless Wide Area Network (WWAN) Wireless Wide
Area Network (WWAN) use cellular mobile station
towers to transmit a radio signal within a range of
several miles to a moving or stationary device.
WWANS are created with mobile phone signals
typically provided and maintained by specific mobile
phone (cellular) service providers. WWANS can
provide a way to stay connected even when away from
other forms of network access.
 Advantages of Wireless
1. Some wireless technology allows users the flexibility to
physically move while using device such as a computer.
2. New nodes can be added to a wireless network.
3. Wireless can be used in places where it is not possible to
run cables or drill holes, such as within historic
buildings.
4. Wireless technology can give users broadband access
even when they are away from their home or office.
5. Wireless is sometimes available where ADSL and cable
are not.
Disadvantages of Wireless
Wireless has a relatively high initial outlay, compared
to ADSL or cable.
Some wireless technology may require line-of-sight
between the transmitting and receiving points.
Wireless suffers from potential security risks.
Bandwidth can be limited in a congested network.
 Types of Wireless Wide Area Network
(WWAN)
Popular WWAN technologies are:
 3G (Third Generation) Universal Mobile
Telecommunications System (UMTS)
 4G (Fourth Generation) LTE (Long Term Evolution)
Universal Mobile Telecommunications
Service
UMTS (Universal Mobile Telecommunications
Service) is a third-generation (3G) broadband, packet-
based transmission of text, digitized voice, video, and
multimedia at data rates up to 2 megabits per second
(Mbps). UMTS offers a consistent set of services to
mobile computer and phone users, no matter where
they are located in the world. UMTS is based on the
Global System for Mobile (GSM) communication
standard.
Advantage of UMTS
High speed compared to 2G
Good voice transmission
On or off facility
Broadaband
Secure network
Use the best quality image available
Disadvantage OF UMTS
The cost of the structure is high costs .
Not available in all locations, as there are areas
The devices that generally use this network system are
a bit expensive.
As technology has evolved, it is not compatible with
new devices on the market.
 4G (Fourth Generation) LTE (Long Term
Evolution)
 The fourth generation of mobile networks -4G was enabled by a
new technology called LTE which stands for Long Term
Evolution (of mobile networks).
 4G is the fourth generation of mobile phone technology. It
follows on from 3G (third generation) and 2G (second
generation) mobile technology.
 2G technology launched in the 1990s and made it possible to
make digital phone calls and send texts. Then 3G came along in
2003 and made it possible to browse web pages, make video
calls and download music and video on the move.
 4G technology builds upon what 3G offers but does everything
at a much faster speed.
Advantage of LTE
Provide low latency
Increased data transfer speed
Fdd and tdd within single radio access techonology
More cost effeciveness
Disadvantage
This service is not currently available in all cities.
 More towers and fresh technologies need to be
developed for better signals.
 LTE being complex needs only skilled people to
manage the system. They even need to be paid a higher
salary.
 This technology cannot be used in old versions of
smartphones.
 Buying new smartphones for LTE is a costly.
software agent
A software agent is an piece of software that functions
as an agent for a user or another program, working
autonomously and continuously in a particular
environment. It is inhibited by other processes and
agents, but is also able to learn from its experience in
functioning in an environment over a long period of
time.
Electronic Date Interchange
Electronic Data Interchange
 Basic Concept of EDI :On traditional commerce, the
conventional transaction consisted of lots of paper work and
at the same time there is repetition of the work also. In this
session you will see how this can be overcome and paperless
trading can be carried out with the means of EDI (Electronic
Data Interchange): Electronic Data Interchange (EDI) is the
computer-to-computer exchange of business documents in a
standard electronic format between business partners. By
moving from a paper-based exchange of business document
to one that is electronic, businesses enjoy major benefits
such as reduced cost, increased processing speed, reduced
errors and improved relationships with business partners.
EDI
Types of data to be interchange
Electronic data means information, facts or computer
programs stored as or on, created or used on, or
transmitted to or from computer software (including
systems and applications software), on hard or floppy
disks, CD-ROMS, tapes, drives, cells, data processing
devices or any other repositories of computer software
which are used with electronically controlled
equipment.
Traditional way to exchange of business
documents
 Types of data to be interchange
 An interchange is the transfer of digital information from
one computer to another. In business, this typically refers
to an electronic data interchange, a system used to
communicate strictly formatted messages that represent
documents. Electronic Data Interchange is the virtual
exchange of data or business documents in electronic
format between trading partners. This exchange of
documents is generally between buyer and supplier and
consists of transferring purchase orders, invoices, payments,
shipping notices and various other documents and by nature
eliminates paper trails, improves operational efficiency and
enhances virtual exchanges with new trading partners.
 EDI V/S EMAIL
EDI EMAIL
This system is automated system . There is Email ( Electronic Mail ) This is not automated
human
typically no . involvement in the system and need the user interventions .
processing of electronic information . This Transmission is on the human - to- software
application uses the communion software to- interface . Limited data can transfer by using
software orientation interface . The data and the email .
EDI application structured is on the software
understandable form
The interchange is composed by one software The message is composed by a human and / or
for interpretations by software . If a reply is interpreted by a human and / or a reply is
involved it is composed by a software to be composed by a human and / or interpreted by a
interpreted by another software . human .

Use the VAN or can use Internet as the network Use the internet as the network structure and
structure . It needs additional standard needs the email software like outlook express ,
translator software with standard applications . Eudora , internet browser etc.
Benefits of EDI
As We know that EDI is used as a medium for
carrying out electronics . Big companies carry out such
electronic transactions . When electronic trade is
established between a company and its trading partners
, it has several benefits like
Opportunity Benefits
Operational Benefits
Strategic benefit
Opportunity Benefits

The most significant advantage of EDI will provide

better customer service and improved marketing
competitiveness
The company gains competitive advantage over
companies that may not have implemented EDI
Operational Benefits

When a business adopts EDI, the need to re-enter data

from paperwork is eliminated and thus prevents
clerical errors.
It is estimated that about 70 percent of the data that is
input to a computer was previously output from
another computer.
It is estimated that the paper transaction processing
cost is approximately ten times its electronic
equivalent handle cost.
Strategic Benefits
 Historical data that is obtained through trading information built-
up from EDI transaction is a valuable source of information that is
very useful for market research and strategic planning. The
motivation for the implementation of EDI comes from indirect
benefits.
 These benefits are potentially much larger.
 They are basically long term and are the result of a combination
of initiatives include of both the implementation of EDI and the
re-engineering of business procedures and system processes.
 However, these benefits directly depend on the successful
reworking of the organization's computer programs, the
elimination of manual tasks and manual decision-making, and the
drastic reduction in internally generated errors.
How EDI Work
All business documents can be digitalised using EDI,
such as order forms, purchase orders, invoices,
payment documentation, shipping notices, customs
documents and inventory analyses. However, these
documents must follow a standard format so that
computers can process this flow of information
automatically. Several standards are available to ensure
standardisation, each of which come in several
versions. Before sending any documents, business
partners must agree on the format (standard and
version) they wish to use.
How EDI Work
 Once a format is decided upon, the process follows three main steps:
 1. Prepare the documents
 First, the information required to create the document needs to be
gathered and organised.
 2. Translate the documents into the correct format
 Next, the internal document must be converted into the defined format. To
do this, you can either purchase and use your own EDI translation
software or utilise a service provider.
 3. Connect and send the documents
 Your business documents are ready to go! There are multiple ways to send
them to your business partner:
 Direct connection using a secure protocol, also known as Point-to-Point
EDI
 Connection via an EDI network provider
Application area of EDI
Banking
Finance
National Trade
International Trade
Industry
Manufacturing
Transport
Travel
Government
Business Sector
EDI is developed to improve the transportation and
trade but now a days people use EDI in different
industries. International or cross boarder trade,
electronic funds transfer EFT). health care, insurance
claims, and manufacturing and retail procurement.
EDI Application on Automobile
EDI Application on Financial
Automobile Sector
In automobile sector EDI is used to keep customers
updated with the current product and pricing
information during the purchase cycle. An advance
shipping notice is transmitted through EDI to the
customers to prepare a loading schedule and to ensure
proper receipt of the product. The customer may also
make payment on receipt of goods via EDI to speed up
the payment process.
 Financial Sector
In the financial sector EDI replaces the labour intensive
activities of collecting, processing and dispersing payments
with an electronic system. It facilitates the flow of payment
between the bank accounts of trading partners without
requiring any human intervention. A payee`s bank account
is electronically credited and the payer`s account is
electronically credited on the scheduled day of payment;
such kind of exchange is known as electronic fund transfer
(EFT).
Security Issues in EDI
Any transaction whether traditional or online has some
security issues involved in it. Here are some security
issues in EDI which you have to take into account.
 There is no hard Copy of a document that can be filed
or distributed.
There is no provision for signatures authorizing the
transaction .
There is a need to verify that data was received exactly
as it was sent.
The data needs to be protected from intruders.
The activity needs to be tracked.
Legal issue of EDI
Unauthorized access or reuse of their personal
information, as well as the illegal sale of their personal
information to third parties, is one of their main
concerns.
Contractual responsibility for incomplete or corrupted
telecommunication
Questionable validity of digital contract
Protection against the ease of collaborative pricing and
other activities that may violate antitrust law
EDI in E-Commerce
EDI was developed to simplify supply chain
management. By automating the exchange of
information, greater visibility, improved efficiency,
and symmetric workflow can all be achieved.
Fundamentally, effective EDI implementation is one of
the most efficient ways for ecommerce businesses to
reduce and overcome many of the challenges the
industry faces traditionally and those which have
emerged more recently.
 The advantages of EDI implementation
within Ecommerce include:
Increased speed: Business cycles can benefit hugely from
EDI, as waiting times and reliance on postal services is
severely reduced/eliminated.
Cost savings: As manual processes are scaled back post-EDI
implementation there is a reduced reliance on paper
documents, and as a result opportunities to reduce costs.
Greater accuracy: By removing the need for paper
documents, electronic data interchange significantly reduces
the room for human error in supply chain management.
Time-saving for staff: A reduction in manual processes also
creates additional capacity for staff to focus on higher-value
tasks within the business.
Network security
 Security
Security, in information technology (IT), is the defense
of digital information and IT assets against internal and
external, malicious and accidental threats. This defense
includes detection, prevention and response to threats
through the use of security policies, software tools and
IT services.
 What is network security
It is any activity designed to protect the usability and
integrity of your network and data. It includes both
hardware and software technologies. Network security is
the process of creating secure platform, so unauthorized
user and program cannot perform any kind of action that do
not allowed to do
 Level of network security
Network security typically consists of three different
level:

physical level.

 technical level.

 administrative level.
 Physical network security
Physical security is defined as protecting physical
access to your network and all network components,
such as computers, servers, and routers.Physical security
controls are designed to prevent unauthorized personnel
from gaining physical access to network components such as
routers, cabling cupboards and so on.
 Technical security
It is a massive layer to protecting valuable
information. It’s responsible for protecting stored data
within a network and detecting malicious activity that
can occur if a browser is misused.
Administrative Network Security
Administrative network security :consist of security
policies and processes that control user behavior,
including how users are authenticated, their level of
access and also how IT staff members implement
changes to the infrastructure.
 Data security
Electronic data security is important at a time when people
are considering banking and other financial transaction by
PCs. One major threat to data security is unauthorized
network monitoring also called packet sniffing. It involves
capturing, decoding, inspecting and interpreting the
information inside a network packet. The purpose is to steal
information, usually user IDs, passwords, network details,
credit card numbers, etc. Sniffing is generally referred to as a
passive type of attack, wherein the attackers can be
silent/invisible on the network. This makes it difficult to
detect, and hence it is a serious type of attack.
 Messaging Security
Messaging Security is a program that provides
protection for companies messaging infrastructure.
It protects all the personal message of the company
which are related to company’s vision and mission

Types of Message security

1. Message Confidentiality
2. Message and System Integrity
3. Message Authentication
 Message confidentiality
Two or more hosts communicate securely, typically using
encryption. The communication cannot be monitored
(sniffed) by untrusted hosts. The communication between
trusted parties is confidential.
Confidentiality is maintaining the secrecy or privacy of
message. Cryptography can be the better choice for
maintaining the privacy of information, which traditionally
is used to protect the secret messages. Confidentiality is
important for users involving sensitive data such as credit
card numbers.
 Message integrity
Message integrity means that the
data must arrive at the receiver exactly as they were
sent. There must be no changes during the
transmission, neither accidentally nor maliciously
“The message transported has not
been tampered with or altered. “
 Message authentication
Message authentication ensures that the message has
been sent by a genuine identity and not by an imposter.
 Reasons for Data and Message security
Data is at the heart of every business, but is your
company’s data secure? The implications of data loss
can be significant: from lost business to damage to your
reputation.
 five key principles that you must remember when it
comes to protecting your data:
1. Privacy
2. Integrity
3. Accessibility
4. Responsibility
5. Assessment Capacity
Privacy
 The aspect of information
technology (IT) that deals with the
ability an organization or
individual has to determine what
data in a computer system can be
shared with third parties.
You can enforce data privacy by
using encryption or by combining
data fragmentation with
encryption.
 integrity
Data integrity is a term used to refer to the accuracy
and reliability of data. To be considered reliable and
accurate, data must be complete – with no variations or
compromises from the original. You can protect data
integrity by using storage consolidation.
 Responsibility
Employees, whether intentionally or not, may
release confidential information to persons
outside the organization. Therefore,
protecting the company’s data is everyone’s
responsibility. It is important to educate
employees about what is considered
confidential information, whether that
information can or cannot be transmitted by
email and how, such as by instituting policies
to review the content of outgoing email and
attachments and/or using encryption to
transmit the data.
 Assessment Capacity
IT staff in can experience the benefits of virtualization
through:
Cost reduction
Simplification and automation of administration and
management
Efficient use of resources
Load balancing and fault tolerance
Agility for testing, development and application
rollouts
Isolation for security
 Firewall
 A firewall can be defined as a special type of network
security device or a software program that monitors and
filters incoming and outgoing network traffic based on a
defined set of security rules. It acts as a barrier between
internal private networks and external sources (such as the
public Internet).
 The primary purpose of a firewall is to allow non-
threatening traffic and prevent malicious or unwanted data
traffic for protecting the computer from viruses and
attacks. A firewall is a cyber security tool that filters
network traffic and helps users block malicious software
from accessing the Internet in infected computers.
firewall
 Packet Filtering Firewall
A packet filtering firewall controls data flow to and
from a network. It allows or blocks the data transfer
based on the packet's source address, the destination
address of the packet, the application protocols to
transfer the data, and so on.
 Application Gateway
An application gateway or application level gateway (ALG) is a
firewall proxy which provides network security. It filters
incoming node traffic to certain specifications which mean that
only transmitted network application data is filtered. Such
network applications include File Transfer Protocol (FTP),
Telnet, Real Time Streaming Protocol (RTSP) and BitTorrent.
 Hybrid firewall
A Hybrid firewall "combine the elements of other
types of firewalls that is, the elements of packet
filtering and proxy services, or of packet filtering and
circuit gateways
 Antivirus
An antivirus is a utility software that helps to keep the
computer virus-free. Moreover, it notifies when any
malicious file is detected and removes such files. In
addition, it scans any new device attached to the
computer and discards any virus if there. Moreover, it
also scans the system from time to time for any threats
and disposes of them. Examples of antivirus are
McAfee Antivirus, Quickheal Antivirus, Windows
Defender, etc.
 Cryptography
 Cryptography is the science of writing information in a ‘hidden’ or
‘secret’ form and is an ancient art. It is necessary when communicating
data over any network, particularly the Internet. It protects the data in
transit and also the data stored on the disk. Cryptography is technique of
securing information and communications through use of codes so that
only those people for whom the information is intended can understand it
and process it. In Cryptography the techniques which are used to protect
information are obtained from mathematical concepts and a set of rule
based calculations known as algorithms to
convert messages in ways that make it hard to decode it. Cryptography is
often associated with the process where an ordinary plain text is
converted to cipher text which is the text
made such that intended receiver of the text can only decode it and hence
this process is known as encryption. The process of conversion of cipher
text to plain text this is known as decryption.
 Secret Key Cryptography
It is defined as the technique that uses a single shared key
(secret key) to encrypt and decrypt the message.
It is also called as symmetric key encryption. It is because
the same secret key is used in bidirectional communication
It is faster as it uses a single key for encryption and
decryption.
There is a possibility of losing the key that renders the
system void.
 Public key Cryptography
It is defined as the technique that uses two different
keys for encryption and decryption.
It is also called as Asymmetric key encryption.
It is slower as it uses two different keys; both keys are
related to each other through the complicated
mathematical process.
There is a less possibility of key loss, as the key held
publicly.
 DIGITAL SIGNATURE
A digital signature is an electronic, encrypted, stamp of
authentication on digital information such as email
messages, macros, or electronic documents. A
signature confirms that the information originated
from the signer and has not been altered
 digital certificate
Digital certificates are a proof of an endpoint’s authenticity,
like a server or a user. For example, if a browser requests a
website, how do we know that the page that’s returned to us is
the genuine one? Digital certificates provide the stamp of
genuineness by binding the public key with the entity (server
or client) that owns it, provided the entity possesses the
corresponding private key. Digital certificates are issued by a
Certificate Authority (CA).
digital certificate
A digital certificate contains the name of the certificate
holder, a serial number, expiration dates, a copy of the
certificate holder’s public key (used for encrypting
messages and digital signatures) and the digital
signature of the certificate-issuing authority (CA) so
that a recipient can verify that the certificate is real.
certificate authority
A certificate authority (CA), also sometimes referred
to as a certification authority, is a company or
organization that acts to validate the identities of
entities (such as websites, email addresses, companies,
or individual persons) and bind them to cryptographic
keys through the issuance of electronic documents
known as digital certificates.
certificate authority
A digital certificate provides:
Authentication, by serving as a credential to validate
the identity of the entity that it is issued to.
Encryption, for secure communication over insecure
networks such as the Internet.
Integrity of documents signed with the certificate so
that they cannot be altered by a third party in transit.
Secure electronic transaction
Secure electronic transaction protocols were supported
by most of the major providers of electronic
transactions, such as Visa and MasterCard. These
protocols allowed merchants to verify their customers'
card information without actually seeing it, thus
protecting the customer. The information on the cards
was transferred directly to the credit card company for
verification.
 SSL is short for secure socket layer - a technology that
encrypts communication between users and a website. This
encryption ensures that important data such as usernames,
passwords, and credit card information is sent from the user to
the site without the risk of interception.
 An SSL certificate is a certified piece of code on a website that
binds this encryption to the organization responsible for the
website.
 An SSL-certified website runs on https protocol. This activates
the browser padlock or a prominent green browser bar to show
visitors it is safe to browse. Reputable websites use SSL to
protect their customer’s data and their online transactions; their
reputation depends on it.
Virtual Private Network
VPN stands for "Virtual Private Network" and
describes the opportunity to establish a protected
network connection when using public networks.
VPNs encrypt your internet traffic and disguise your
online identity. This makes it more difficult for third
parties to track your activities online and steal data.
The encryption takes place in real time.
How does a VPN work?

A VPN hides your IP address by letting the network

redirect it through a specially configured remote server
run by a VPN host. This means that if you surf online
with a VPN, the VPN server becomes the source of
your data. This means your Internet Service Provider
(ISP) and other third parties cannot see which websites
you visit or what data you send and receive online. A
VPN works like a filter that turns all your data into
"gibberish". Even if someone were to get their hands
on your data, it would be useless.
Electronic Payment System
 Electronic Payment System
An electronic payment system is a way of making
transactions or paying for goods and services through
an electronic medium, without the use of checks or
cash. It's also called an e-payment system or online
payment system.
E-PAYEMNT REQUIREMENT
There are many reasons to choose e-payment system
but I have listed some of them which are the most
common requirement for e-payment system.
Reduced Costs
Safe, More Convenient Transactions
Strengthened Supplier Relationships
Enhanced Visibility:
E-PAYEMNT REQUIREMENT
 1. Technological Requirements
When designing an electronic payment system, the system’s ability of the
effectiveness and the security of each transaction and the degree of
compatibility with the online shop must be taken into consideration.
 A payment system requires the greatest level of security in electronic
commerce transactions .
 It must have confidentiality, authenticity, integrity and non-repudiation of
transactions.
 2. Legal Requirements
Electronic payment system must abide by governmental regulations and
the law and guaranty all necessary proofs (digital signature, contracts,...)to
protect users performing domestic/international transactions.
 E-PAYEMNT REQUIREMENT
 3. Economic Requirements
 These deal with the cost of transaction which refers to the amount paid by the
client.
 Economic assessments include also atomic exchange which means that the
consumer will pay money or something equivalent in value.
 An electronic payment system must also be accessible in all countries of the
world, to all ages (user range) or currency in equal value and must not be
restricted to the company that created the value.
 Economic needs also deal with financial risks ,because consumers and merchants
are very concerned about the degree of security involved in online transactions.
 Return On Investment(ROI) is a economic parameter and a performance measure
used to evaluate the efficiency of an investment.
 4. Social Requirements
 Payment system must prevent companies or financial institutions from tracing
user information and must be simple and user-friendly.As social needs, electronic
payment methods should also be accessible anywhere.
Risk in Electronic Payment System
Electronic payments allow you to transfer cash from
your own bank account to the bank account of the
recipient almost instantaneously. This payment system
relies heavily on the internet and is quite popular due
to the convenience it affords the user. It would be hard
to overstate the advantages of electronic payment
systems, but what about the risks? Certainly they exist,
both for financial institutions and consumers.
TYPES IF RISK
The Risk of Fraud
The Risk of Impulse Buying
The Risk of Payment Conflicts
The Risk of Tax Evasion
 The Risk of Fraud

Electronic payment systems are not immune to the risk of fraud.

The system uses a particularly vulnerable protocol to establish
the identity of the person authorizing a payment. Passwords and
security questions aren’t foolproof in determining the identity of
a person. So long as the password and the answers to the security
questions are correct, the system doesn’t care who’s on the other
side. If someone gains access to your password or the answers to
your security question, they will have gained access to your
money and can steal it from you.
The Risk of Impulse Buying

Impulse buying is already a risk that you face when

you use non-electronic payment systems. It is
magnified, however, when you’re able to buy things
online at the click of a mouse. Impulse buying can
become habitual and makes sticking to a budget almost
impossible.
The Risk of Payment Conflicts

One of the idiosyncrasies of electronic payment

systems is that the payments aren’t handled by humans
but by an automated electronic system. The system is
prone to errors, particularly when it has to handle large
amounts of payments on a frequent basis with many
recipients involved. It’s important to constantly check
your pay slip after every pay period ends in order to
ensure everything makes sense. Failure to do this may
result in payment conflicts caused by technical glitches
and anomalies.
The Risk of Tax Evasion

The law requires that businesses declare their financial

transactions and provide paper records of them so that
tax compliance can be verified. The problem with
electronic systems is that they don’t fit very cleanly
into this paradigm and so they can make the process of
tax collection very frustrating for the Internal Revenue
Service. It is at the business’s discretion to disclose
payments received or made via electronic payment
systems in a fiscal period, and the IRS has no way of
knowing if it’s telling the truth or not. That makes it
pretty easy to evade taxation.
 CREDIT CARD
A credit card is a card issued to consumers that is used
to make purchases, with the agreement that the
cardholder will ultimately pay back the card issuer for
the cost of the items purchased, along with any agreed
upon fees and interest, should they be assessed.
Essentially, a credit card acts as a loan that allows you
to make purchases now and pay them back (often with
interest) later.
Working process of E-card
 In some ways, online credit card processing is similar to brick-and-
mortar credit card processing. But to understand online credit card
processing, it’s helpful to define a few key concepts:
 Merchant account — a type of bank account you need to handle
credit card transactions
 Issuing bank — your customer’s bank that issued their credit card
 Acquiring bank — your bank
 Card network — an organization like Visa or Mastercard
 Payment gateway — software that collects the necessary
payment information
 Payment processor — the entity that takes the information from
the payment gateway and routes it to the banks and card network
Bank issues and activates a credit card to the customer on his/her

request.
The customer presents the credit card information to the

merchant site or to the merchant from whom he/she wants to

purchase a product/service.
Merchant validates the customer's identity by asking for approval

from the card brand company.

 Card brand company authenticates the credit card and pays the

transaction by credit. Merchant keeps the sales slip.

 Merchant submits the sales slip to acquirer banks and gets the service

charges paid to him/her.

 Acquirer bank requests the card brand company to clear the credit

amount and gets the payment.

 Now the card brand company asks to clear the amount from the issuer

bank and the amount gets transferred to the card brand company.
 Benefit of E-Credit card
E-Credit card is more secure than the conventional

cards as the credit card data of the consumer is not

available to the merchant unlike the traditional,
system.
The Credit Card payment to the merchant can be
almost instant, as the credit card receipt can be
provided by the merchant to the bank immediately
LIMITATION OF ONLINE CREDIT CARD
PAYMENT SYSTEMS
 Established credit-worthiness needed before getting a credit

card
 Encouraging impulsive and unnecessary “wanted”

purchases
 High-interest rates if not paid in full by the due date

 Annual fees for some credit cards – can become

expensive over the years

 Fee charged for late payments
 Digital Wallet
A digital wallet refers to a software, electronic device, or online

service that allows individuals or businesses to make electronic

transactions.
A digital wallet stores all the payment information of users in a

secure and compact form, reducing the need for physical wallets.
A digital wallet requires users to download the digital wallet app

on their smartphones or other physical devices.

 Features of digital-wallet
All id information is one location
 Current balance can be stored and read.
 Universal access
Cannot be duplicate.
 Works with all scan types (Barcode, RFID, strip)
More than 40 years of data retention
 Firewall encrypted security logic
 No separate card reader is required to access E wallet
 More useful for online merchants,
 It makes online shopping easier,
 It can overcome this phenomenon by automating the
completion process,
 Immediate payment and no required signature
 More flexible Pay person to person
 Multi-currency capability
 Safety and control
 Ease of uses and easy to read balance
 Available 24 hours/7 days
 Accessibility and convenience
Problem of money laundering arises
Anyone can edit so this may be too open for some applications
Use provider no audit trial
Susceptible to forgery
Does no work with certain browser
An attack on an e-wallet device failure or software crash in
mobile phones e- wallet prove inefficient
Information for e-wallets are stores on the cloud of business
server there for the risk of a system shut down is always
present
Internet marketing, also known as online
marketing, digital marketing, or website
marketing, is the promotion of a company and its
products or services through online tools via social
media, search, email, and other digital channels.
 Unit-7
E-environment
 E-environment
 E-environment is a communications environment in which digital
devices communicate and manage content and activities. The
concept is built on integrated and implemented digital electronics
systems for a worldwide community. Websites, cloud servers, search
engines, social media outlets, mobile apps, audio and video, and
other web-based services are all common components of a digital
world.
 The E business environment is a simulated "environment" generated
by the use of one or more computers and networking for the purpose
of conducting business. The digital environment is the modern
setting for corporate activities involving a wide range of computer
and networking technology. It has been observed that modern
business strategies are geared toward utilizing the E-environment,
and as a result, their use of it is increasing. It is also important to
What is a PESTEL Analysis?

PESTEL Analysis is a strategic framework used to

evaluate the external environment of a business by
breaking down the opportunities and risks
into Political, Economic, Social, Technological, Environ
mental, and Legal factors.
PESTEL Analysis can be an effective framework to use
in Corporate Strategy Planning and for identifying the
pros and cons of a Business Strategy. The PESTEL
framework is an extension of the
PEST strategic framework, one that includes additional
assessment of the Environmental and Legal factors that
can impact a business.
Political Factors

 When looking at political factors, you are looking at how government policy
and actions intervene in the economy and other factors that can affect a
business. These include the following:
 Tax Policy
 Trade Restrictions
 Tariffs
 Bureaucracy
 One of the reasons that elections tend to be a period of uncertainty for a
country is that different political parties have diverging views and strategies
for policy on the items above.

 Political Factor Example: A company decides to move its operations to a
different state after a new government is elected on a campaign to implement
policies that would adversely impact the company’s core operations.
 Economic Factors
 Economic Factors take into account the various aspects of the economy, and how
the outlook on each area could impact your business. These economic indicators
are usually measured and reported by Central Banks and other Government
Agencies. They include the following:
 Economic Growth Rates
 Interest Rates
 Exchange Rates
 Inflation
 Unemployment Rates
 Often these are the focus of external environment analysis. The economic outlook
is of extreme importance for a business, but the importance of the other PESTEL
factors should not be overlooked.

 Economic Factor Example: A company decides to refinance its debt after an
interest rate decrease is announced.
 Social Factors
 PESTEL analysis also takes into consideration social factors, which are
related to the cultural and demographic trends of society. Social norms
and pressures are key to determining consumer behavior. Factors to be
considered are the following:
 Cultural Aspects & Perceptions
 Health Consciousness
 Populations Growth Rates
 Age Distribution
 Career Attitudes

 Social Factors Example: The percentage of the American population
that smokes has decreased since the 1970s, due to changes in society’s
perception of health and wellness.
 Technological Factors
 Technological factors are linked to innovation in the industry, as well
as innovation in the overall economy. Not being up to date with the
latest trends of a particular industry can be extremely harmful to
operations. Technological factors include the following:
 R&D Activity
 Automation
 Technological Incentives
 The Rate of change in technology

 Technological Factors Example: A company decides to digitize
their physical data files to allow for quicker access to company
information.
 Legal Factors
 There is often uncertainty regarding the difference between political and legal
factors in the context of a PESTEL analysis. Legal factors pertain to any legal
forces that define what a business can or cannot do. Political factors involve
the relationship between business and the government. Political and legal
factors can intersect when governmental bodies introduce legislature and
policies that affect how businesses operate.
 Legal factors include the following:
 Industry Regulation
 Licenses & Permits
 Labor Laws
 Intellectual Property

 Legal Factors Example: A restaurant is forced to shut down after not meeting
food safety standards set out in state law.