Manish, you might want to proceed by reading documentation and doing some research yourself. Since you're new in the forum, I'll give you some pointers, but in general you'll get better response on SDN if you at least try doing something yourself and then ask more specific questions. E.g. "I tried ABC but it didn't work because XYZ" would get more and better quality replies than "How do I do the same".
My guess is that no inventory requirement is because it's a software. Most likely it will be just distributed electronically, hence the notification requirement. The parts that "expand to other parts" is a classic BOM scenario or could also be cross-selling - read the documentation on that.
The notification may be achieved by creating a new output type, which would send an email notification if certain material # is present in the order (output requirement). Output with email has been discussed many times in the forum, please use Search.
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