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To

Abhijit Pathak,
lecturer
Faulty of Business Studies
Premier University of Chittagong.

Subject: Submission of assignment Report.

Dear Sir,
I am pleased to submit the assignment on “E-COMMERCE”. I have collected as
much information as possible from the internet.

I tried my best to gather relevant information for constructing a complete report as


outlined. The preparation of this report enables me to a great extent to complete my
theoretical knowledge with practical analysis. I would like to express my profound
gratitude for your kind and conscious guidance in preparing my report in the giving time.

Thank you very much for your heartiest co-operation.

Sincerely yours

Md.Abu bakkar
B.B.A, 1st Semester, Roll no- 048110412
Premier University, Chittagong.
ACKNOWLEDGEMENT

At the every outset, I wish to express a deep sense of appreciation and thanks to
my honorable teacher Mr. ABHIJIT PATHAK, the supervisor for his counsel and
guidance, without whom this study could never have been accomplished (My overriding
debts is to him also).

Finally, I wish to extend both my admiration & appreciation to my parents and


friends for their dedication & splendid support in every stage of preparation.

Thanks to all again.

Mohammad Abu bakkar


Roll-048110412
Premier University
19.10.2008

2
CHAPTER -1

* Introduction to E-Commerce

* Definition of E-Commerce

* Evolutions / Historical Development of


E-Commerce

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INTRODUCTION TO E-COMMERCE

This is an age of Information Technology where the computer and communication


technologies together play a vital role in all spheres of human endeavor. The best-known
example that has touched all of us is the computerized Railway Reservation System. Here
the computers located in different towns are interconnected through a special network of
railways and the computers communicate with each other. Similarly airline reservation
system, hotel room reservation system etc. allow us to make suitable reservations from
anywhere in the world.

IT is about to bring a revolution in the way we do shopping and business. It enables


complex business operations to be performed by effectively using the electronic networks
like Internet and computers. When the business is performed on the electronic media, it is
called electronic business (E-Business) or electronic commerce (E-Commerce). It is
assumed that the two terms, E-Business and E-Commerce are synonymous, even though
some authors restrict the use of the term E-Commerce to simple storefront based sales
and purchase operations.

Some of the operations performed in the conventional business are given below as
example, and they are represented in figure

 Advertising the products and services


 Selling products and services
 Procuring raw materials or components for fabricating products
 Collaborating and competing with other stores
 Receiving and making payments
 Communicating with consumers, stores, banks, and other organizations like customs,
excise, transporters etc.

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Procure raw materials Sell products and
services Build supply and maintenance
for production chain

Plan and organize


production Advertise
Business
Communicate with Firm Communicate with employees
customers

Manage finances and


communicate with Communicate with other Collaborate and compete with
banks agencies like customs, other business firms
excise, transporters, power
and water authorities etc

What is E- Commerce
Or
Understanding E-Commerce

E-Commerce is a recent event and is yet evolving. So, different people view it in
different ways. Hence, it is difficult to define E-Commerce precisely. The task is further
complicated by the fact that it is difficult even to define business in an all-inclusive
manner. Under such situations, we may look at the views of a few people and
organizations, and formulate our views on E-Commerce. A comprehensive definition of
E-Commerce, by integrating all views may define the spirit and scope of E-Commerce.

Given below are some explanations and definitions of E-Commerce:

 E-Commerce is doing business electronically, by bringing together buyers and sellers.


It integrates data, electronic communication and security services to facilitate business
applications. It uses computers and telecommunications for several business
transactions that comprise the basic operations of the company including
communication and co-ordination with suppliers, financial institutions, consumers,
banks, insurance agents, distribution channels and other trading partners.

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 Electronic business (E-Business) encompasses the use of technologies, processes and
management practices that enhance organizational competitiveness through strategic
use of electronic information. E-Commerce, which is selling of products on the
Internet, represents only the “front-end” of E-Business. E-Business goes beyond E-
Commerce by integrating it tightly with business operations to improve performance,
create value, and enable new relationships between business and customers.
(MIS Magazine, Page 50,
May1999)

 E-Commerce is a dynamic set of technologies, applications, and business processes


that link enterprises, consumers, and communities through electronic transactions and
the electronic exchange of goods, services and information.
(David Baum, Oracle Magazine, page 38, May/June, 1999)

 The term ‘E-Commerce’ has evolved from its meager notion of Electronic shopping to
mean all aspects of business and market processes enabled by the Internet and the
World Wide Web technologies.
(Page 12, Electronic Commerce Concepts EC 101, Aptech/IBM reading material)

 Electronic Commerce is the carrying out of business activities that lead to exchange
of value across telecommunications networks.
(European Information Technology Observatory, 1997)

 “Electronic Commerce, defined simply, is the commercial transaction of services in an


electronic format”. (Transatlantic Business Dialogue Electronic Commerce White
Paper, 1997)

 “Electronic Commerce refers to all forms of transactions relating to commercial


activities, including both organizations and individuals, that are based upon the
processing and transmission of digitized data, including text, sound and visual
images.”
(OECD, 1997)
 Electronic Commerce is about business electronically. It is based on the electronic
processing and transmission of data, including text, sound and video. It encompasses
many diverse activities including electronic trading of goods and services, online
delivery of digital content, electronic fund transfers, electronic share trading,
electronic bills of lading, commercial auctions, collaborative design and engineering,
online sourcing, public procurement, direct consumer marketing, and after-sales
service. It involves both products (Consumer goods, specialized medical equipment)

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and services (information services, financial and legal services); traditional activities
(healthcare, education) and new activities (virtual malls).”
(European
Commission, 1997)

 E-Commerce can be defined as “the buying and selling of goods and services over
electronic networks, whether between businesses or between businesses and
consumers.”

 e-commerce is the process of buying and selling goods electronically through a


computerized business transaction

 E-Commerce as an effective means to improve a value chain, which is used to link


various functional activities (i.e. production, marketing, finance, etc.) of a company.
(Schneider and Perry [2000] view)

The E-commerce Resource Center defines that


“E-commerce is a broad term describing business activities associated with technical data
that are conducted electronically.”

The Automotive Industry Action Group in North America defines E-


commerce as
“The application of advanced information technology to increase the effectiveness of the
business relationships between trading partners.”

A Brief History of E-commerce

We already know that E-commerce is about using data for commercial purposes by
transmitting the data electronically between computer systems in a standard format. But
what are the key drivers behind the major growth that we are now seeing in E-commerce
systems and applications?
Well over the past 20 years computer hardware has become much cheaper. Operating
Systems and, particularly, the software that runs on them, have become more powerful
and more user-friendly, providing a wider range of solutions to the business market. At
the same time, communication options have diversified and improved.
As a result, various industry sectors began to see the potential of linking their
computer systems either directly or via communication networks. Once such links were

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in place, then it was a natural progression to begin exchanging information between
trading partners. The requirement for some sort of structure and standardization to these
exchanges of business information was recognized, hence the development of Electronic
Data Interchange (EDI).
We then saw the development and tremendous growth of the Internet as business
tool, with few companies not able to identify specific business benefits that it could
deliver. The sorts of questions that organizations were being asked in relation to how they
might benefit from the use of the Internet included:
• Do you have business partners and trading partners overseas?
• Do you make use of faxes and international phone calls?
• Do you need to find market information regularly?
• Do you travel regularly to business meetings by plane or train?
• Do you need to keep in touch with company news?

Positive answers to these types of questions pushed organizations into using the
Internet for e-mail and access to the World Wide Web (WWW). The explosion in the
number of Internet users within the home, providing a vast potential market for the many
business-to-consumer services that are now emerging then mirrored the growth in
business use.

Pioneers:
At this time the terms E-commerce or EDI did not exist, but that is what the
companies were trying to achieve. The most important realization was that common data
formats were needed for such transfers to work between communities of traders. This led
to the creation of standards bodies in Europe and the US, and saw the co-operation of
industry groups in defining message requirements.
A number of pilots set up, not all of which were successful in trading terms, but
which helped to elevate the subject in public awareness. Two of the better known ones
were in the shipping industry was known as DISH & SHIPNET.
During the 1980s, a number of communications companies introduced Value Added
Network Services (VAN) to provide secure communications channels for business usage.
The VANs’ awareness raising activities, alongside work being done by the standards
bodies, helped to start build communities of users in a variety of business sectors, such as
the retail industry.
Specific VANs’ have emerged to cater for the requirements of specific sectors, such
as education. The airline industry, freight forwarding community and shipping
community has all, at some stage, created networks for transmission of EDI and E-mail
data.

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Slower than expected growth:
By the end of the 1980s there were high expectations for EDI, and analysis
repeatedly made predictions of unprecedented growth. It was widely agreed that only one
per cent of potential users had implemented EDI and the number of users was predicted
to double every year. It was said that no one could stay in business without EDI.
For some reason, though, the growth never matched expectations. The new business
revolution was only taking off at a modest pace. There are number of reasons for this—
• The most often cited is that international standards have taken a long time to be
developed to a level where they match business requirements.
• The process was too complicated for many would be users.
Although there were some off-the-shelf EDI packages, integrating them with in-
house systems(such as accounts) could prove very expensive. As a result, those who did
invest in EDI did not always gain benefits
.
By the early 1990s, EDI had reached a respectable level of awareness among
businesses. There were a few newsletters and magazines dedicated to it, conferences and
exhibitions, the odd article in national paper. Then came to the Internet.

Internet:

In February 2000, an Irish consultancy firm, Nua, estimated the number of Internet
users worldwide to be 276 million. Of these, 136 million were in the United States and
Canada, 72 million in Europe, and 55 million in the Asia/ Pacific region.
Internet offers a range of messaging techniques, all of which work rapidly.
An equally significant factor is that, with the existing level of awareness of E-
commerce as a means of exchanging business data. It is a phenomenally well-advertised
medium, which offers access to a range of business applications:
• E-mail
• Voice-mail
• Conference
• Bulletin boards
• Marketing
• Advertising
• Credit card transfer
• EDI
• On-line catalogues

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• Stock broking

Identifying the business potential:


The developments in communications and standardization over the past 20 years will
undoubtedly continue, and will lead to improvements in the ways industry trades. We
now have a range of communications options:

• Telephone networks
• ISDN
• X-400
• The Internet
• Satellite
• Mobile communications
• Digital radio will doubtless become popular.


It is vital from the outset for any organization looking to move into E-commerce,
particularly business-to-consumer, to clearly understand whether the products and
services they offer are suitable for selling online. Some general guidance on the potential
for E-commerce can be gauged by asking the following questions:
• Is the organization looking to sell to the correct demographic group in terms of
geography (where the potential customers are located) and the type of person (is the
potential customer likely to have access to Internet services and the ability to pay for
transactions online)?
• Can the products be delivered digitally (for example, software, music, videos, and
books) or services accessed digitally (e.g. train tickets, airline tickets, and holidays)?
• Can value be added to specific services by making them available online (e.g. online
auctions or Stock broking can significantly change the existing business models)?
• Does the organization have products that can be sold from a Web site, even though
they may need to be delivered and paid for conventionally (e.g. cars, household
electrical goods, and even houses)?
• Are they very specialist products, where the web can increase their exposure to
(perhaps) overseas markets, or standard products that can easily be sold via a
catalogue?

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The decision to proceed with an E-commerce project would probably require a ‘yes’ to
many of these questions.

Organizational Economic Theory & the E-commerce

Because the Internet is such a recent phenomenon, comprises models that predict
specifically the behavior of firms engaged in E-commerce need to be developed.
However, organizational economic theory provides a useful framework for describing the
behavior of firms engaged in E-commerce.
Organizational economic theory states that firms seek strategies that minimize their
costs of negotiating and governing transactions across markets by changing their
structure.
Controlling agency costs, that is, costs associated with monitoring managers and
cooperative partners, is crucial to profitability. Thus, organizational economic theory
posits that the ‘grand strategy’ of profitability in doing business over the Internet will be
to minimize transaction costs associated with ISP(Internet Service Provider) and other
middlemen by expanding a firm’s control over transactions.
A key element in cost control in any business process is limiting assets uses in
performing organizational functions.
Organizational Economic Theory holds that when assets are allocated for a specific
purpose, they can not be used for other purpose. It is assumed that agents waste assets
because the agent will act to increase its own benefits; the agent’s and principal goals
naturally differ.

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CHAPTER-2

*OVERVIEW OF E-COMMERCE COMPONENTS

• COMMUNICATIONS
• STANDARDS
• SOFTWARE

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An overview of E-commerce components:
There are three basic components to every E-commerce solution:
• Communications
• Standards
• Software.
Some may say this is too simplistic and that there are other issues, such as security,
the law, governmental interests. However, for the purpose of understanding who an E-
commerce system is put together it is enough to assume that the communications option
or the software will take care of security, and that legal and governmental issues are
common to any other from of trade.
Communications

Communications offer options for a wide number of E-commerce solutions, whereas


software and standards tend to be application specific:
Communications options include:
• Telephone: dial-up connection or leased line.
• ISDN: basic rate or primary rate.
• Value Added Networks
• X-400 – an International Standards Organization (ISO) standard for secure messaging.
• Networks: local area network (LAN), wide area networks (WAN) or Intranets.
• The Internet: messaging, file transfer, Telnet, the World Wide Web.
Standards

Standards are the means by which data is sent in an agreed format by E-


commerce trading partners.
In Electronic Data Interchange (EDI), standards pertain specifically to the syntax used
to prepare messages for exchange. They enable, for example, one accounts system to
understand an electronic version of an invoice sent out by another accounts system
because the relevant pieces of data (e.g. invoice number) are always located in the same
part of the message.
In the case of EDI, these standards are generally nationally and internationally agreed
by designated standards bodies, but in other applications proprietary standards have been

13
adopted as de facto standards. An example is the ‘. gif’ graphics in web pages. The ‘. Jpg’
format also used in web pages is, however, internationally ratified by International
Standards Organization.
It is preferable in the broader context of E-commerce, therefore, to look at
standardization as ‘ the adoption of any standard way of formatting data adopted by a
community of users’.
For example, in addition to GIFs and JPGs, surfers of the World Wide Web use:
• HTML- accepted as the standard Hyper Text Mark-up Language;
• PERL- accepted as a standard way of running scripts on-line;
• JavaScript- a script language from Netscape;
• Java- a programming language expressly designed by Sun Microsystems for use in the
distributed environment of the Internet.
Standards ensure that all the members of a community can communicate with each
other without needing to adopt individual relationships with any one supplier. To return to
the example of EDI, imagine there are four trading companies each of that does business
with al the others.
There are numerous standards used in the world of E-commerce, most of them
specific t the type of application.
Software
Software means a set of programs documents, procedures, routines associated with
the operation of a computer system.
Software is very important in an E-commerce system. Broadly speaking, there are six
functions of software in the actual E-commerce process:
• Data extractions from relevant applications, or data entry;
• Data encoding to agreed standard format;
• Data transmission to receipts;
• Data receipt by recipients;
• Data decoding for internal applications;
• Data insertion into relevant applications;
Of course, software is used in a variety of other ways, such as for editing,
programming, graphics, etc., but in terms of E-commerce, these are its key functions.
However, as an example, encoded data received from the World Wide Web is decoded
by a web browser for the user to read in a predetermined format. The browsers have been
written to use adopted standards such as GIFs, JPGs, HTML, PERL Java script, Java.
They are also ready to accept ‘plug-in’, programs which use the standard interface of the
browser to literally plug-in to it and add software capability( such as ability to play a type
of sound file).
Particularly significant for the development of E-commerce applications has been the
emergence in 1998 of Extensive Markup Language (XML). This has led to a significant
increase in the power of E-commerce and other types of Internet-based data interchange.

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While XML, was originally designed for the distribution of documentation via the World
Wide Web, it is now widely accepted as a generalized method for interchanging
information between computer programs over the Internet.

CHAPTER -3

* Element of E-Commerce

* Process of E-Commerce

* Structure of E-Commerce

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Elements of e-commerce
Just as it tradition commerce, especially that done by mail order, there are certain
elements required to perform online business. Business man must these things such as
(a) Web Site Promotion:
Businessman needs to advertise and promote his business, so that the customers will
come to his store, read his catalog or view his web site.
(b) Online catalog or store:
E-commerce businessman needs to have a store or catalog where customers can
view and select goods and services. Customers need to be able to easily get around his
catalog to find things.
Finding items:
The web site should be easy for customers to find what they want. The customers
must know what is in the store, and the product must be organized in a logical manner.
The customers must be able to easily search for what he or she wants without the help of
a sales clerk.
Selecting what to buy:
Once the customers find what he is looking for, he can put the selection in a
“shopping cart” and search for other items. These make it easier for other items. Just as a
physical store, people often buy things they just happen to see. For example, store place
some “impulse items” at the checkout stand.
Purchase:
It should be easy for customers to purchase the items they want. You must have a
way to receive online payments, either using credit cards or other means of payments. For
example, business-to-business sales may simply involve a purchase order.
The purchase of the item can be complex, but it should be made as simple as possible
for the customers.
I. The customer must give certain information about himself. Usually this is
name, address and e-mail.
II. A mutually acceptable payment method must be chosen. Credit card or billing
information must be gathered.
III. The merchant must process the customer’s payment information.
IV. Finally the customer must receive confirmation of the sales.
Delivery:
E-commerce businessman must have a good means of fulfilling the order and
delivering the material to customers. Different means of delivery depends on the type of
item purchased.

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Support:

The customer needs a way to voice problems. Businessman also needs a customer
service system, consisting of support to handle complaints returns in the event of
problems.

A Five-phases process Model of E-commerce:


The transaction processes through E-commerce follow a five-steps/phases. Phases are as
follows:

The Pre-contractual Phase


This phase is concerned with the gathering of
intelligence concerning the products or services being
sought, and the discovery of the sources of supply.

The Contractual Phase


This is a phase in which a formal relationship between
buyer and seller is created, including the establishment
of the terms & condition to apply to transaction under
the contract.

The Ordering & logistic Phase


This is a phase in which purchase orders are placed &
processed, the goods transported and/or the services
provided, & post-delivery functions performed.

The Settlement Phase


This is a phase in which invoicing, payment
authorization, payment & remittance advice
transmission take place.

The Post- processing Phase


This is a phase in which management information is
gathered and reported, and storage and analysis of trade
statistics takes place.

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The following figure provides a schematic representation of above mentioned
phases:

Custom- Built Goods & Services


PURCHSER
Sub- Prime
Contractor Contractor Operational
Division

Supplier
Directories Purchasing Accounting Buyer’s
Division Division Financial
Institution

Products &
Services Carriers
Catalogues
Supplier’s
Financial
Institution

Common- Use
Contract- Data

SUPPLIERS

Pre-contractual Ordering Logistic Settlement


& Contractual Document Document Post-Processing Document &
Document Flow Flow Flow Fund Flow

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CHAPTER- 4

* Types of E-Commerce/ Business Model of e-commerce

(a) Business to Business (B2B)

(b)Business to consumer (B2C)

(c) Consumer to Consumer (C2C)

(d) Consumer to Business (C2B)

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Business – to – Business (B2B) E-commerce:
In B2B (Business – to – Business) E-commerce, commercial transaction takes place
between different business organization. It forms a major portion of total E-commerce
volume.
Business -to-Business (B2B) category of electronic commerce involves both
electronic business market places and direct market links between .For example, many
companies offer the business community a variety of marketing and product information
on the world wide Web. Others also rely on electronic data interchange (EDI) via the
Internet or extranets for direct computer-to-computer exchanges of business documents
with their customers and suppliers.
For instance, General electric’s Trading Process Network (TPN) is an internet based
trading network for buyers and sellers to carry out B2B e-commerce on the Internet. It is
buyer driven rather than respective sellers respond to the request. In TPN, a typical
purchase cycle (from the buyer’s perspective) is described as follows based on the
information at www.tpn.geis.com:
• Step1: A buyer determines the requirements, prepares the Request For Quotation
(RFQ), and searches for potential suppliers(sellers).
• Step2: The buyer submits RFQ and invites potential suppliers to respond.
• Step 3: Suppliers obtain the RFQ for processing.
• Step 4: Interested suppliers bid for the request accordingly.
• Step 5: The buyer and suppliers can negotiate the bids online.
• Step 6: Finally, the buyer selects the best bid and completes the purchase.
At the rate of reducing cost of the B2B e-commerce in business:
Materials and vehicles Reducing Cost
Aero plan 11%
Chemistry 10%
Coal 2%
Communication 5-15%
Computing 11-20%
Electronic Items 29-39%
Food Items 3-50%
Forest Items 15-25%
Ship Transport 15-20%
Health Service 5%
Organic Science 12-29%
Machines (Material) 22%
Mass media and Adv. 10-15%
MRO 10%
Oil and Gas 5-15%
Paper 10%

Source: Computer Jagat, March-2000,Page- 44.

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B2B in India- the business organizations, which are in involved in E-commerce, are
• Maruti Udy 09
• Bajaj Auto
• Kinetic & Thermex
According to ICRA in “ The Indian Internet Business Report”, the B2B E-commerce
turnover will increase from Rs. 4.1 billion in 2000 to Rs. 232.8 billion in 2005 financial
year, representing over 90% of the total E-commerce activity in the country.
B2B E-commerce is experiencing massive growth, with US analyst Gartner Group
forecasting a rise from a global spend of $145 billion in 1999 to $ 7.3 trillion by 2004
(accounting for 7% of all sales transactions).
In the UK, analyst Durlacher Research predicts that the B2B E-commerce market is
set to open up in the European Union (EU). Business-to-Business is forecast to be worth
$1.27 trillion in the EU in 2004, up from $76 billion this year. It is expected to account
for 12.7% of the EU’s gross domestic product in 4 years, time.
There are four key areas of Business – to – Business E-commerce:
• Electronic Data Interchange
• Enhanced messaging E-mail, Voice mail, Fax.
• Teleconferencing
• Integrated systems:
• Intranets
• Extranets
• Database publishing
• Workflow

Electronic Data Interchange


As the personal computer became more and more ubiquitous so more and more
information came to be processed and stored by companies electronically on in-house
computer systems. It soon became apparent that about 70% of the data being input into a
company’s computer system had been output from its trading partners, computers.
EDI was developed to eradicate the need for re-keying in data, using agreed
standards to enable computers to exchange electronic versions of standard forms.
Enhanced Messaging:
Not all information falls into the category of EDI messaging where the information
can be taken directly from application to application, but the benefits of rapid delivery of
information in various formats direct to the desktop of an individual within an
organization soon became apparent.
E-mail enabled messages to be sent quickly to one or many business contacts. Voice-
mail could do the same thing with recorded messages. Enhance fax-enabled people to
send and receive faxes from their own computer.

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Teleconferencing:
Teleconferencing became a financially viable business tool and now it became
possible to send and receive video and audio data simultaneously.
Teleconferencing is pre–arranging a telephone meeting between two or more
participants and it requires much more bandwidth than a simple two-way phone
connection (although audio conferencing does not).
The business benefits are obvious for, although it is expensive, it is a lot cheaper than
getting several participants to travel to a single destination for a meeting.
Integrated Systems:
Intranets: An Intranet is the use of Internet technology and standards on internal
corporate networks. Instead of information sitting on various machines around the
organization, a central resource of information can be stored, maintained and updated on
a single server.
Extranets: Where information is too sensitive to be published on the Internet, companies
may choose to extend the use of a controlled part of their intranet (such as a database of
products and prices) to trading partners. This is known as extranets.
Database Publishing: Database publishing is using information within a company in the
most efficient way for all the company’s publishing requirements. For example, a
company’s full list of products might be held on a central catalogue on its Web site; the
same information might then be customized to present a specific view of it for individual
customers depending on their buying patterns.
Workflow: Workflow is a methodology that organizes the tasks, procedural steps, people,
information, and tools for a particular business process. A bank, for example, may use a
workflow application to make sure that an application form for a mortgage is handled in a
structured way, passing through a number of clearly identified stages from the initial
enquiry through to final agreement of the loan.

Business-to-Consumer (B2C) E-commerce:


In B2C (Business-to-Consumer) E-commerce, commercial transaction taking place
between a business & its consumers. In this case, the seller is a business organization
whereas the buyer is a consumer. This emulates the situation of physical retailing and so
it is commonly called electronic retailing. Typically, electronic stores are set up on the
internet to sell goods to the consumers.
In business-to-consumer (B2C) commerce, business must develop attractive
electronic marketplace to sell products and services to consumers. For example,
companies may offer multimedia web sites that provide virtual storefronts and virtual
shopping malls, interactive order processing, and secure electronic payment systems.

22
Examples of B2C e-commerce, AMAZON.Com

Established in 1995 by Jeff Bezos, Amazon.com (www.amazon.com) is one of the


most well-known e-commerce site in general and internet bookseller with particularly. It
is a typical example of B2C e-commerce directly on the internet Furthermore, search
facility is available for searching books according to user input. VBs also provides a
similar function. Amazon.com makes use of data mining techniques to promote the
selling of books. This is done by suggesting books to the customer based on the books in
the shopping cart and the buying pattern of other customers with a similar profile.
Besides books, Amazon.com has now become a superstore (or a horizontal portal) by
selling a variety of other things such a toys, wireless phones, cameras, and video games.
The total worth of B2C E-commerce activities in India is expected to increase from
Rs. 0.5 billion in financial year 2000 to Rs. 18.82 billion in 2005 financial year.

Business-to-Consumer E-commerce applications:


• Database applications
• Kiosks
• Internet store fronts
• Downloadable software and software support
• Internet auctions

Consumer-to-Consumer (C2C) E-commerce:


In Consumer-to-Consumer E-commerce, commercial transactions taking place between
individual customer and buyers. This refers to situations where both the seller and the
buyer are consumers. With the advent of e-commerce, on-line auctions provide an
effective means for supporting C2C e-commerce. Important differentiation is no business
organization is involved.

Examples of C2C e-commerce, eBay:


Established in 1995, eBay (www.eBay.com) provides the world’s largest online
trading service by means of online auctions. Basically, a user places an item on the eBay
Web site for bidding. Other interested members then bid for it before the deadline. Where
the English auctions system is used, the highest bid wins. This is a typical C2C e-
commerce example in which a consumer can sell to other consumers. Currently, eBay has
more than 29 million members. By means of online auctions, they participate music, etc.

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In addition to auctions, eBay creates a virtual community for its users to “talk” at the
eBay Café (a chat room) and to communicate with other users via the bulletin boards.

Consumer to Business (C2B) e-commerce:


This is a new form of commerce in which a consumer specifies the requirements to a
business, which provides a product that meets these requirements. These requirements
could be as simple as an acceptable price, or could involve considerable customization of
an existing standard product, or creation of a new product.

Examples of C2B e-commerce, Price line:


Price line (www.priceline.com) introduces a novel e-commerce application called
the “demand collection system”. It allows consumers to “name the price” and hence it is
consumer driven not seller driven. According to the above definition, this is a C2B e-
commerce application. Suppose that you want to buy an air-ticket. You can provide Price
line with your travel requirements (e.g. how many tickets you want to buy, departure/
return date, departure/ arrival city etc), the desirable price, and your credit card number.
Then Price line will try to find an airline that can meet your requirements. After finding a
match, Price line will buy the ticket(s) for you with your credit card. As you can “name
the price”, the deal is final (i.e. no alteration is allowed). Besides air-tickets, Price line
also handles the purchase of many other products/services such as cars, hotel rooms,
long-distance calls and even mortgage.

Business Consumer (indiviual)


(organization)
Business B2B (e.g. TPN) B2C (e.g. Amazon)
(organization)
Consumer (individual) C2B (e.g. Priceline) C2C (e.g. eBay)
Figure: 4.1 Different types of e-commerce

Supply-chain E-commerce:
Good supply chain management is essential for a successful company. Effective
management of the supply chain keeps costs down. This is primarily achieved by
ensuring that communication can flow freely along the chain. This is where the use of the
Internet and E-commerce comes in.
Supply-chain E-commerce uses various techniques to improve the delivery of goods
between suppliers and their customers. Typically supply chain applications include:
• Stock control
• Just-in-time delivery

24
• Transportation
• Warehouse management
Stock Control
Retail outlets, such as supermarkets, are big users of E-commerce, using it to manage
stock levels and re-order goods from their suppliers. The order will generally be batched
and sent electronically to be automatically processed by the ordering system of the
supplier. Not only does this mean that all goods are kept as fresh as possible, but it means
that stock levels are minimized and warehousing space is optimized.

Just-In-Time (JIT):
Just-In-Time (JIT) ordering is now common in a range of business sectors, such as
the automotive industry. Just as a retail outlet only wants to stock up with new goods as it
needs them, so too a manufacturing concern will only want to have parts delivered as
they are required. E-commerce enables companies to:
• Keep their stock levels down thereby minimizing the amount of capital tied up
on the shelves.
• Minimize the amount of warehousing needed.
• Work to shorter lead times.
• As a result of the above, lower the costs of the manufactured goods.
• Improve the relationship between the supplier and the customer.

Transportation:

When customers order goods from suppliers there is obviously a requirement to


arrange delivery of the goods between the two points in the supply chain. This can also be
organized via E-commerce.
Companies like Fedex can allow customers to view the delivery status of their order
via a password-protected area of their Web Site.

Warehouse management
The same type of benefit is equally applicable to warehouse management. The aim
is to minimize the amount of warehousing needed and to make delivery into and out of
the warehouse as efficient as is possible. Having electronically updated database records
of the stock in a warehouse enables a company to share information on availability of
goods.

25
CHAPTER-5

*Impact of E-commerce on Business and Consumer

♣ E-commerce and sellers

♣ E-commerce and consumer

♣ E-commerce and inhibitors

26
Impact of E-Commerce on Business and Consumers
E-Commerce will be able to change the way business functions and the strategies that
business organizations would be able to adopt in order to face competition. Earlier, only
large business houses could afford the investment and expense that was necessary to
reach out to a large number of consumers. Now even the smallest organization would be
able to access a large number of consumers where the marginal cost of servicing an
additional consumer would be almost negligible.
Once E-Commerce becomes the norm for conducting business, it will cease to
become an option and will become a necessity to counteract competition. It would also
help in streamlining business processes by cutting down on administrative procedures
and the errors that could creep in as a result of these procedures and duplicating the
records. In turn it would facilitate reduction in operating costs and increase in
productivity and profitability.
E-Commerce is likely to provide products and services that are suited to individual
needs and specifications as manufacturers and suppliers are able to gather detailed
information on the needs of each individual consumer and automatically tailor the
products and services to those individual’s needs.
 E-Commerce and Sellers:
The web users are estimated to be around 22 million by the year 2000. This 22
million is a matured population that is responsible to take decisions regarding the
purchases. A large percentage of them spend enough time on Internet and are curious to
explore the web offerings.
So, the prime reason for a seller to be present on the Internet is the presence of
large number of potential consumers. For businesses, such target group provides an
opportunity to be exploited.

Keeping pace with technological Customer New product


developments Satisfaction development and
diversification

Business Pressure from shareholders


Pressures from competition to provide excellent
organization performance

Regulatory changes Internal pressures for cost control

27
Figure 5.1: Pressures on Business Organization

Internet store requires much less expenditure on the establishment of store and
running it and it is this economy that will be of great interest to the sellers. For instance
the expenditures such as rental of a displayable store area, salaries of security and sales
persons are easily saved. The cost of establishing a web presence could vary a lot
depending upon the set up envisaged. The prices indicated in the table on the list of E-
Commerce hosts are indicative prices for a medium sized set up.
Therefore, suppliers will able to offer products at lower prices when they use e-
commerce. If a part of these savings are passed on to the consumer, the web store will
compete very favorably with the real shops.
Specially, the E-Commerce will be able to provide information to the sellers on the
global markets and countries relating to:
 Market surveys
 Market opportunities
 Business framework
 Regulations that are applicable to specific products and services.
 Automatic generation of marketing statistics.
The speed and accurate generation of required information and making it available
to the seller would facilitate the grown and development of the commercial environment
and provide unlimited growth opportunities to the seller.
The faster and reliable communication provided by the Internet will improve the
Inter-organizational interaction and coordination between central office and regional
offices. Manufacturers can provide detailed information on their products and services
such as guidance on use of the product/ service, technical specifications, answers to
frequently asked questions and this could be provided to the consumer by the store. This
works to the advantage of the manufacturer, consumer, and the stores.
E-Commerce enables businesses to function more effectively and productively
through the following means:
 Presence in the Electronic Marketplace.
 Efficient Management of Consumer Response.
 Efficient Supply Chain Management.
 Efficient inventory management at retail seller site.
 Value-added Banking.

 E-Commerce and Consumers


From consumers’ point of view, most businesses have their web presence and so
the consumer can reach every kind of business. Further the consumer has access to the
original firm rather than access to the dealer or middleman.

28
The consumer will have global choice- the facility to select from all potential
suppliers of a required product or service, regardless of their geographical location.
Most consumers will find that shopping on Internet is supported by information
leading to informed buying. The shopping decisions will be much easier as the consumer
can reach several shops, compare the quality and prices in a short time.

Further the consumer is likely to get better quality of service, as the sellers/firms
employ E-Commerce technology to offer pre-and post-sales support. They will able to
provide substantial amount of support through online information:
 About the product.
 Demonstrations, directions, and guidance on the use of product, and
 Rapid response to queries.

Finally, the consumer believes that the materials will be less expensive, as the
stores will pass on the price advantages to the consumer

 E-Commerce and Inhibitors

The E-Commerce is still in its infancy and will take some time before it becomes a
system. Those who browse regularly will know how painful the process is. It takes quite a
few searches to get some useful information. The current state of flooding the consumer
with information leads to disillusionment with the system.
The transactions on the Internet need to be secure. To implement the security
features, the consumer has to be aware of the procedures and their implications. Only
informed users will able to go through all the hassles. There is always the lurking fear
that the transactions are not secure and the consumer may face problems in future.
Most often, stores tend to operate with no backup of real stores. Amazon.com
operated on similar lines and depended upon other booksellers and publishers for
supplying the books to the consumer. This could lead to the elimination of back-end
suppliers, leading to the collapse of e-commerce store.

The money laundering through fictitious business, shipping of unauthorized


materials will be the major problems with which the governments have to grapple.
Not withstanding the hype of Internet automobile sales, very few consumers would
like to purchase a car without really having an experience of sitting in the car or driving
the car. This is equally true with other gadgets that we purchase.
People shop for a variety of reasons such as a social outline, see the people around
etc. This means that the physical shopping would remain a strong force to reckon with by
the e-commerce.

29
CHAPTER - 6

* SEGMENTS OF E-COMMERCE

• Inter-organizational E-mail
• Directories
• Trading support systems
o Products
o Commodities
o Custom-built goods & services
o Customized products & services
• Ordering & logistic Support Systems
• Settlement Support Systems
• Management Information & statistical
Reporting Systems.

30
Inter-organizational E-mail
E-mail, a tool to support the transmission of unstructured messages between
individuals, is complementary to EDI (Electronic Data Interchange). In the area of
international trade, for example, studied have established that about 100 messages are
supported by about 40 kinds of communications between individuals, which are at best
poorly structured and as worst entirely informal.
Directories
Many organizations applying information technology (IT) have concluded that the
greatest difficulties arise not from the preparation or dispatch of purchase orders, but
from the discovery and/or selection of the appropriate party send them to.
Access is needed to database of goods and services, which can be purchased and of
suppliers of classes of goods and productive services. Reflecting the popularity of the ‘
white-page’ and ‘yellow-page’ services provided by telephone suppliers, it has become
conventional to refer to such databases as ‘directories’.
Trading support systems
There are various ways in which sellers and buyers discover one another and several
ways in which the negotiation of price, quantity, delivery, & related terms and conditions
are performed.
Product: The value of external networks for products search increases as geographic,
temporal, or cognitive constraints make product location and selection difficult. Thus use
of information network should lead to more market-like relationships between buyers and
sellers, when there are large numbers of potential suppliers, when suppliers are
geographically separated, when there are many comparable products in the industry,
when prices of product change rapidly.
Commodities: There are sub-classes of products, generally referred to as ‘commodities’,
which are products that exist in identifiably form in considerable quantity, and in
essentially identical form, and are available from a variety of sources. Trading in
commodities requires special form of electronic support.

Goods & services: All the extreme forms of commodities are goods and services, which
are not standardized, but are custom-built to customer specifications. Custom-built goods

31
and services are generally the subject of requests for information (RFIs) or requests for
proposals (RFPs). Various forms of electronic support can be devised for trading in
custom-built goods and services clearly much of the work involves relatively poorly
structured communications, and hence compound-media e-mail is important.

Customized Products & services: The apparently clear distinction between custom-built
goods & services, products and commodities is not sufficient to cope with all forms of
trading. Many circumstances exists in which base products are modified under contract to
suit a particular customer’s requirements, or a standard specification is modified
according to customer need and semi-custom-built goods & services constructed.
Because the acquisition of customized products & services has characteristics of both
products & custom-built trading, it requires a rich combination of Electronic support.
Ordering & Logistic Support System
EDI (Electronic Data Interchange) is well established as an electronic support
mechanism for the ordering of products under previously negotiated contractual
arrangements, & the delivery of the goods & services through the transportation
networks.

Settlement Support Systems


Electronically based settlement systems have been in operation since the 1960s and
have been expanding rapidly as well as growing in complexity. A mixture of different
payment systems has evolved to service the growing requirements of both trade and non-
trade related commerce. In the majority of-cases, these systems operate as closed
proprietary networks creating incompatibilities between different systems.
There is particularly sharp division between the payment & settlement systems,
which are used for large value transfers, and those, which are available to settle smaller
payments, particularly on a cross-border basis. This has led to an inverse relationship
between the volume and the number of transactions. It has also further accentuated the
division between large multi-national corporations and smaller enterprises wishing to
utilize electronic systems or making payments.
However, in most of the major industrialized countries, an inverse relationship exists
between the volume and the number of transactions handled electronically. Typically, of
business payments around 85% to 90% or more of monetary value will be processed
electronically, while less than 5% to 10% of the total number of payments will be handled
in this way.
This has been due to four related factors:
• Proprietary closed networks were developed by banks to handle large and
increasingly internationally based payment system.
• Large value of payments is increasingly associated with foreign exchange and
global securities transaction.

32
• Large values of payment systems were not designed nor are they cost-effective
for small value payments.
• Paper-based non-automated payment systems remain an established part
varying institutional reasons.

CHAPTER-7

 Electronic Payment Mechanisms

♦ Electronic fund transfer (EFI)


♦ Financial Electronic Data Interchange
(F-EDI)
♦ Electronic Cheque
♦ Smart Cards
♦ Electronic Cash

 Electronic Business
 Electronic Service

 Security Issues in Electronic Commerce


♦ E-commerce and security issues
♦ Confidentiality and cryptography

 Electronic signature (E-signature)

33
 Electronic Data Interchange (EDI)
 Electronic governance (E-governance)

Electronic Payment Systems

The E-Commerce systems are expected to become popular over the next 2 or 3 years. At
this point in time, the E-Commerce payment systems are still evolving and so the
situation is quite blurred. Some of the models like Credit card, EFT/POS are already
being used for E-Commerce while some others like E-Cash and Smart Cards are still in
the planning and conceptualization stage. While some of the techniques like E-Cheques
are automation of the existing techniques, other like E-Cash represent radically new
paradigms. The implications of this are many.
There are five broad methods of electronic payment that are available to the
consumers, for the goods or services they receive. They are as under:
 Payment through Electronic Funds Transfer at Point of Sale (EFT/POS) including
credit card transactions.
 Payment through Instructions to the Bank including Financial Electronic Data
Interchange (F-EDI), and telephone and Interactive Voice Response (IVR).
 Payment through Electronic Cheque.
 Payment through smart cards
 Payment through E-Cash
A brief discussion of various options is given below.
Electronic funds transfer at point of sale (EFT/POS)
This is an existing method and as the name suggests, the financial transaction is
completed at the point of sales. It uses special card-readers, located at the merchants’
premises, and the cards of the consumers are inserted in these machines while the
transaction is being processed. These are two variations in this technique and these are
given below.
 Credit Card Transactions
This is a normal credit card transaction. When the purchase transaction is
completed, the data about the transaction is automatically captured against the credit card
account and the card issuer transfers the money to the merchant and raises a monthly bill

34
with the card user. The improvements and automation could result in immediate transfer
of funds to the merchant, with the record of transaction kept with the credit card issuer.
 Debit Card Transactions
This is a new form of value transfer. Here, an account holder of a bank or any other
shopping center has a token in the form of data- bearing card. This card authenticates the
consumer. On completion of the transaction, the consumer enter his/her PIN code and this
facilitates the transfer of money from the consumer’s account to merchant’s account.
Compared to the credit cards, in this case the finance transaction is more direct.

 Bank Network

As the customer base of each bank spreads all over the country or in some cases
over many countries, the branches of the banks are interconnected through computer
networks such that, the bank could provide instant service to the customers, even when
they are away from their home base. Further a number of banks exist and represent
different groups of customers who deal with each other and this needs that the different
banks also must be connected through a network to facilitate transactions between their
customers. In figure, represents the bank network where the work-stations/ servers of
each bank branch are connected to the others through a computer network and each bank
interacts with other only at the level of head office. It is also possible to put all branches
of all banks on a single network.

Branch of Branch of Branch of Head office


Bank A Bank A Bank A of Bank A

Branch of Branch of Branch of Head office


Bank B Bank B Bank B of Bank B

Figure 7.2 : Bank Network

35
 Electronic Cheque
This system is still evolving. The electronic check emulates the real world check
issuance and the transactions take place on the Internet. The consumer issues a digital
cheque to the merchant, which is deposited with the merchant’s bank. The bank gets the
cheque cleared and credits the amount to the account of the merchant. The transaction is
shown in figure 7.5. One could see that in the electronic cheque system a number of
organization such as the banks of the consumer and the merchant, the clearing house and
the certificate authority are involved besides the consumer and the merchant. The web
browsers will have to support the cheque formats.

The consumer’s cheque is authenticated through a digital signature of the


consumer’s bank. This will assure the merchant that the account is a genuine one.
Certificate Authority might certify the user and the merchant. This will prove the identity
of the customer and the merchant. No repudiation is achieved by encoding using the
private key or the digital signature of the consumer. The public keys of the banks are to
be made available to the customers of both the banks.

6. Validate Cheque
Consumer’s 11. Clear Cheque Merchant’s
bank bank
Clearing house

13. Debit money 10. Transmit 12. Inform


to customer’s acknowledgement of crediting
account & send receipt of goods money
debit information 7. Confirm validity of through
through monthly cheque monthly
statement statement
5. Deposit
(E-Cheque)

9. Acknowledge receipt of goods Merchant


Consumer 8. Dispatch goods

3. Send E-Cheque

2. Invoice, shopping information


& payment instructions

36
1. Establish mutual credentials through X 509
certification, and browse & select goods.
CA

Figure 7.5: E-Commerce through E-Cheque

 Payment through Smart Cards:

The technology and applications of smart cards are still evolving. Smart cards
generally have a processor and memory. They are capable of storing cardholder
information, their bank account details, their private and public encryption keys, etc.
Some of the cards are capable of generating passwords, digital signatures etc. Some cards
permit bi-directional transfer of money, and can record a few latest transactions. These
cards can be read by or operated with special card-readers, which can work independently
on telephone or Internet line or through a computer. Alternately, the cards of a certain
value can be purchased like telephone cards and can be used without any reference to the
bank by the recipient of the money. The recipient will get the money transferred to him
from the card-issuing firm. The transactions will the smart card are represented in figure
7.6.
Merchant’s Bank
Customer’s Bank

Seller/ Merchant/
Customer
Vendor/ Individual

Figure 7.6 : Transactions with Smart Card

 Electronic Cash

A parallel development to the conventional money is Electronic Cash. E-Cash


is issued by some organization which is recognized by all the merchants and consumers,

37
and approved by the government. This may be called E-Mint. The consumer purchases e-
cash of some value from e-mint, like prepaid telephone card by instructing his/her bank
to transfer the money equivalent to the E-Cash issuer. The E-Cash certificates will have
unique identification numbers that are assigned by the consumer and recorded by the E-
Mint. E-Cash can be obtained in different denominations like TK. 1000, 500, 100, 50, 50,
20,10, 5, 2, 1, 0.5, 0.25, 0.10, 0.05, 0.01. This E-Cash is nothing but a series of numbers,
each of which has some assigned value in a chosen currency and authenticated by the
bank through some mechanism like E-signature of the bank.

 E-BUSINESS
Concept: A buyer needs to go to a market place to buy goods of his interest, but can do
it sitting in front of his PC. Internet has turned the whole world into a virtual market
place, thus removing the country barriers that have existed so long. We can now log into
the website of our favorite florist, sweet mart, book store, dress outlet, hotels, choose the
item of your liking, place an online order for it, pay over the net through credit card and
have the item couriered to you. To put it in a nutshell, the end customer has got the power
to do online shopping. This concept has got popular as e-commerce.
Let us now analyze the implication of this revolution on the business community.
The members of a business community are shown in figure
Manufacturer/ Importer

Distributors

Wholesalers

Retailers

Showrooms/Shops

38
End Users

Figure: 7.11

Figure7.11 depicts the hierarchy in the business community. The parent member is the
manufacturing industry. It could be yarn manufacturing, automobile, food processing, or
plastics. The manufacturing firm forms the first link in the chain. In some cases, it could
be the importer also, in case the goods are not made indigenously.

Functions of e-business:
The e-business has the following functionalities.
 Business-business commerce: It refers to buying and selling between the business
chain members. For example, when a retailer store or outlet buys his stock from a
distributor, it comes under the category of business-to-business e-commerce.
 Online retailing: The documents involved in making the sale from the distributor to
the retailers are fully online. The retailer first raises the purchase order. The P.O. is
transmitted through the net and the dispatches are made against it on credit.
 Corporate purchases: When companies buy low cost items in bulk, like pins, paper,
compact disc, it is known as corporate purchase. Online buying of such items offer
great discounts. Also, it helps the corporate to save on a lot of time as the Internet has
turned this labor and paperwork intensive work of ordering MRO (Material, repair
and organizational material) into an easy task.
 Reduces inventory-holding cost: The inventory system is no more centralized. B-2-
B is responsible for integrating the inventory information of all the distributors of a
company. Therefore, the dispatch to the demand center is done from the supply center
is done from the supply center, which is the most cost effective in terms of distance,
provided they have the stock. In a cyclic fashion, the supply center gets replenished.
 Helps achieve VCI (Value Chain Integration): In any business-line, each link adds
to some value. For example, consider a manufacturing concern. Distributors, retailers
and outlets form the value chain when, we integrate their inter communication
channel it is VCI. The links with the company are on the same platform, capable of
sharing information.
Unified Customer Channels: The process of integration has also helped in achieving
CRM (Customer Relationship Management).

Types of E-Business sites:


E-business solutions are web based and can come in two flavors namely-

39
♦ Corporate Site: These are sites, which are launched by parent companies. The site
presents insight into the company profile, its products, business, solutions, policies etc.
Also, the sites will offer features of e-commerce, SCM, CRM policies and
implementation techniques of the company. Examples of such sites are: ge.com,
amul.com, hp.com, ariba.com etc.

♦ Portal : The other type of site is a portal, which serves as a common platform for a
number of companies. Let us understand the idea of a Portal by taking the analogy of a
Shopping Mall. A shopping Mall is a huge complex, which houses large number of shops
selling different items. One could be selling electronic household items like refrigerators,
ovens etc, and the other might be selling dresses, and yet another may be a fast food
outlet. Once you walk into a Mall, you can shop or almost everything.

Business Portals can be of two types namely:


 Vertical (Vortal): These portals are primarily corporate portals, which present
information, products and services of one company. For example ibm.com,
Microsoft.com, oracle.com. A Vortal can host information of an industry, that is more
than one company but which have similar products. For example-esteel.com. This is a
steel industry Vortal.
 Horizontal Portal: Those sites, present business intelligent information for a range
of companies, are horizontal Portals. Some horizontal Portals are business week.com.
Characteristics of a Business Portal
A business Portal must be:
 A business portal should be designed to support the needs of causal information
seekers.
 The developing team needs to be intuitive in deciding possible queries that the
visitors to the site may post to search information.
 It should present information in layers. It should not expose the entire information
at he same instant; each level should logically hidden from the other.
 It should be able to support natural language search.
 It should allow sharing of information. The portal should allow the authorized
users to publish information and allocate rights to user groups.
 Similarly to publishing, the portal should offer the individual to specify the format,
delivery channel while subscribing for the object.
 The portal should be able to give connectivity to multiple data stores and different
types of databases. That is, it should be able to give access to heterogeneous data
types. .
 The portal should support an n-tier architecture, in which majority of processing
would occur on the middle tier-application.
.

40
Advantages of e-business:
After having studied e-business concepts, we can list the advantages of e-business as:
 Improves the performance of business to consumer e-business.
 Provides efficient e-based communication between the business community
members
 Speeds up the decision making process.
 Reduces inventory cost at all stock centers.
 Provides implementation to OLAP models to optimize the decisions taken.
Disadvantages of e-business:
 E-business solution is multi fold, so time to see true effects will take time.
 To achieve standardization in range of solutions is tough.
 Security is a major issue to be addressed.
 The solutions should be cost effective to deploy.

 E-Services

Concept:
E-commerce is a phenomenon for the manufacturer and the consumer. E-business is
the phenomenon for the business houses, where their inter communication is becoming e-
based. Integration of decision-making processes is the key issue. This is what is e-
services- a phenomenon where services like banking, insurance, technical consulting for
tax matters, personal finances, billing, procurement, reserving tickets, medical services
are all becoming e-based. What is more, is you can access these services from not only
desktop computer but from our car, house, office, phone, bankcard etc. e-services is a
huge domain, a snapshot is shown in figure7.12.

E-Services for
Billing
E-Services for
procurement

E-Services for Road


Navigation
E-Services for taking
shortest route

E-Services for
personal finance
E-Services for
Buying a house

41
E-Services for paying
tax

E-Services for
E-Services for voice to text physicians
translation
E-Services for medical
research

Figure 7.12: E-Service Domain

Features of e-services:
 Modular: They are modular in nature. It means that e-services is not one big huge
application, but it is a group of modules, with the relevant ones linked together as
shown in the figure. The scope for further expansion also exists with new services
getting linked to the existing ones.
 Ownership: No body needs to own this e-service domain. Different organizations
offer their services to this domain. For example, citi.com offers banking services
over the net, which forms one of the services.
 Rented Services: The consumer of e-services need not buy the service. He can
take it on rent. In fact, this concept is becoming popular, services need no more be
bought, and they can be used without anybody owing them. The user of the service
needs to pay rental charges
 .Plug gable: e-services have slightly modified the definition of e-based
technologies because e-commerce and e-business are available only through the
net. But, for e-services, it is not necessary. They will be delivered through devices
also.
 Do-it-for-me: The consumer need not ask for the service, it comes as an inbuilt
functionality with devices. For example in cars, route navigation is an e-service.
Comparison between e-services, e-commerce, e-business

e-commerce e-business e-service


Need to go to a web site to Need of a web site with and Web access is not always
trigger the service account required
To carry out transactions, You need to have your Whenever the service is
you need to get access using account to get access to the integrated into a device,
your account inventory details etc. access account is not

42
required
Is one unit. Each application Can be a vertical or Each one is complete in
takes care of one utility horizontal portal, still, it is itself, and also forms part of
monolithic another bigger service
These systems can’t speak Similar to e-commerce These systems can speak for
about themselves, except for themselves. For example, a
advertising through the printing e-service can notify
‘About Us’ page the other print service about
the type of documents it can
print
Design of an application Similar to e-commerce Rather than all entities of a
decides the end utility of the system having to be
application determined in advance, they
can be spontaneously
combined to meet specific
need.
 Security Issues in E-Commerce
E-Commerce and Security Issues:
The E-Commerce applications need support on three fronts, given as under:
 Internet and its services notably the communication services, web services, and
database services.
 Application support such as setting up Market/malls and stores, and associated
inventory and financial management.
 Security technologies for identification of persons, valid transactions, secure
communications, and secure web pages, catalogues/databases and other information
stores.

43
Figure 7.14: E-Commerce Requirements
It can be seen that the security support covers almost all the communications that
take place on the insecure Internet and all the information systems that support the E-
Commerce. A review of the activities under E-Commerce will be useful to put the
security aspects in perspective. Analyzing a simple and direct E-Commerce activity of a
consumer purchasing goods from Internet store, we have the following transactions:
1. A web store S offers a product P
2. A consumer looking for the product P is directed by a Market/Mall to store after
browsing at the product information decides to purchase the product.
3. The store and the consumer decide the quantity of purchase, the cost of the product,
delivery period, delivery mode and the payment mode.
4. The consumer pays the amount through credit cart or E-cash.
5. The stores verifies credit card the financial position of the consumer with issuer of the
credit card or with the bank that issued E-cash. The bank confirms the credit card or cash
and freezes the amount.
6. The store confirms the receipt of payment to the consumer.

A possible model for secure Internet transactions in the context of E-Commerce is given
in this figure. Bank server
A
pp S
li B ec Application
ca R ur
tio O i t
n y Security Services
W
S S
C E er Secure
usto R vi Internet
mer ce
Security Services

Web Server

Application

Sote & Mall Market

Figure 7.15: Model for Secure Internet Transactions

44
 Electronic Signature
Signing Process:
 Prepare the message. All the mail and messaging software including messaging
programs like Microsoft exchange have all the needed software for handing digital
signatures.
 Create a message digest for the message using the secret key, which the sender is
sharing with the recipient.
 Encrypt the message and the digest with the private key of the sender. At this stage
the document is signed as the message is authenticated with the private key of the
sender. If required, sent also the digital certificate of the sender, as it contains the
public key of the sender. The sender should not encrypt this digital certificate, so
as to facilitate easy retrieval of the sender’s public key by the recipient.
 Send the cipher text and the digital certificate to the recipient.
 The recipient retrieves the public key of the sender using his/her private key.

 ELECTRONIC DATA INTERCHANGE (EDI)


The conventional transactional consisted of lots of paper work and at the same
time there is repetition of the work also. We can be carried out with the means of EDI
(Electronic Data Interchange):
 All conventional businesses depend upon paper-based transactions for conducting
their business.
 These transactions include events such as preparing, communicating and recording
invoices, purchase orders, market inquires, statements, reports etc.
 When these papers reach the organizations or the customers for whom the are
intended, or when they are transmitted to other departments or sections in turn
generate more paper documents.
 Thus there is an explosion of documents at every point the transaction passes
through.
What is EDI?
Here we will see what does EDI mean.
 EDI deals with doing business and carrying out transactions with the trading partners
electronically using a ‘paperless trading’ system.
 EDI covers most things that are done using paper based communication.
 The business transactions are communicated from computer-to-computer between
companies in a standard format that enables the receiver to perform the transaction
that is intended.
Advantage of EDI:

45
We saw that EDI is used as a medium for carrying out electronic transactions. Big
companies carry out such electronic transactions.

Opportunity Benefits:
 The most significant advantage of EDI will emerge in strategies areas, better
customer service and improved marketing competitiveness.
 As a result of improved efficiency and effectiveness, the company’s image gets
enhanced.
 The company acquires a competitive edge over other companies that may not have
implemented EDI.
 With streamlined procedures, trading relationships improve.

Operational Benefits:

 When businesses adopt EDI, the need to re-enter data from paper documents gets
eliminated and thus prevented clerical errors.
 It has been estimated that almost 70% of the data that is input into a computer
have previously been output from another computer.
 Whenever data is re-entered, it becomes a potential source of error.
 It has also been estimated that the cost of processing a paper transaction is nearly
ten times the cost of handling its electronic equivalent.
 Also, manual tasks such as sorting, matching, filing, reconciling,
and mailing gets eliminated through the use of suitable software.
Strategic Benefits:

 Historical data that is obtained through trading information built-up from EDI
transactions is an 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 comprised of both the implementation of
EDI and the re-engineering of business procedures and system processes.

Application Areas for EDI

Now that you are aware of EDI and its advantages, below you will see some
application areas where it is used.

46
 Banking
 Finance
 National Trade
 International Trade
 Industry
 Manufacturing
 Transport
 Travel
 Tourism
 Warehousing
 Government
 Customer and excise
 Statistical Data.

 E-Governance
In this age, e-governance is a such a term by which a citizen of a country can
know the various information about the government. It plays an vital rule to make speed
of the government activities.
There are three implementations of e-governance:
1) With the help of e-governance, meaningful transaction of information between
governance and people is obviously possible.
2) The government should play a great deal of challenges and responsibilities to make
their nation familiar as a developed nation in the world. Those challenges and
responsibilities can easily be accomplished with the help of e-governance.
3) The government can focus on their important resources of information technology and
information high way through e-governance.

Building Building Building


Institutional Awareness and Leadership and
Infrastructure Commitment Strategic
Thinking

Building Building Building Humans


e-Governance for
Development

47
Technological Infrastucture
Infrastructure

Building Data Building


Systems Legislative
Infrastructure Infrastructure

Figure 7.23: Government and Community Citizen Infrastructure

ADVANTAGES:
1) It is possible to get same type of output with reasonable cost.
2) It is also possible to get more output at a time with reasonable cost.
3) It gives standard and qualitative output.
4) It gives same output in minimum time.

Usefulness of E-Government
]

1. Computerized the Government: Computer density in the government is very low.


Government should take immediate steps towards wider computerization of all
departments of the government.

2. Electronic Payroll: Government agencies should be the pioneers in day-to-day


electronic transactions. As an immediate step, government should introduce electronic
payroll.

3. Computerization of Inventory: The application of IT within the public administration


can improve efficiency and reduce the wastage of resources, enhance planning and raise
the quality of services. In this vein, government agencies should take immediate steps to
computerize their inventories.

4. Electronic Procurement Procedures: The traditional method of any government


procurement for goods and services is to publish the Tender notices in the major national
dailies followed by selling the request for proposal (RFP) documents to the interested
bidders. If any bidder seeks clarification of any aspect of the RFP, the customer is
mandated to notify clarification to all bidders by mail. The overall process is cost and
time inefficient, non-transparent and competition selective. To make public sector
procurement fair and reasonable, all agencies of the government should take steps to
maximize their procurement through the electronic media.

48
5. Government Forms on Websites: All forms, and the relevant instructions, required by
the various entities of the government should be posted on the electronic media for use by
the general public and other segments of the society.
6. Establishment of Government Websites: Some government departments have
established websites that provide useful information. All government departments should
be encouraged to establish websites, which should include, but not limited to; personnel,
functions, posting of government documents and publications, budgetary information,
resource links to relevant sites, forms, etc.
7. Increase Salaries for IT Professionals: IT education up to a level should be mandated
for government employees. To retain the best IT professionals in the government,
competitive salary and benefit scales should be established.

CHAPTER-8

 Opportunities of e-commerce

49
 Challenges of e-commerce

 Prospect of e-commerce

Opportunities of E-commerce

The growth of the Internet has resulted in a critical mass of consumers and firms that
are engaged in commercial activity, as part of the global on-line market place.E-
commerce presents a number of opportunities for all parties involved.
These are briefly discussed below:
For consumers
The opportunities of E-commerce for consumers are multi-fold
• Increased availability of information about products and services.
• Reduced costs from increased competition, which in turn results in improved
quality, quantity and variety of goods and services, through an expanded
market.
For Business
The opportunities of E-commerce for business include
• The enormous potential of the Web as a distribution channel.
• A global medium for marketing communications.
• Lower distribution costs, as the use of middlemen no longer essential.
• Lower marketing costs, as buyers and sellers are able to communicate directly
with each other.
Operational opportunities

50
Operational opportunities such as:
• Reduced errors, time and overhead costs in information processing.
• Easier, faster, and cheaper creation of, and entry into, new markets.
For Governments
The opportunities of E-commerce for government are:
• Show case the country’s products and investments potential on the world
scene.
• Support a new form of commerce that benefits all classes of society.
• Increase foreign export earnings, and increase tax revenue.

Challenges of E-commerce

Apart from multi fold opportunities that E-commerce provides, is also presents
certain challenges to consumers, firms and Government.
The main challenges of E-commerce are to attract potential customer to business
Web Sites.
Therefore, the development of a critical mass of interest users, willing to use the
Web as a commercial medium, is essential for the success of E-commerce. Some of the
main challenges to this development relate to-

Ease of access
The level of convenience in access determines the ultimate success of the adoption
of the Web as a commercial medium. This includes such aspects as the speed of access
(preferably high). The case of finding a suitable table and reliable service providers;
• Ensuring that services are not disrupted by frequent power outages.
• And the diffusion of computer hardware/software/modern packages in homes.
Ease of use
User-friendliness of appropriate software, and the ease of software installation are
important considerations for potential customers unfamiliar with the new IT world.
Prices
Determining an optimum price that would help both buyer and seller to successfully
complete transactions.
Concerns
With respect to privacy and security in conducting on-line commercial transactions this
concern has a direct impact on consumers willingness to buy sell products on-line.
Facilitating policy Environment
The benefits of E-commerce for all parties involve are fully realized in policy
environments are liberalized, transparent, efficient, predictable, and governed according
to the rule of language.

Barriers to E-commerce

51
• High costs of setting up of E-commerce enabled sales platform on Internet and
even higher cost to maintain it.
• Don’t know where to start from, as most of the companies don’t have a full-
fledged IT department.
• Customers/buyers are less sophisticated, lack of trust among trading partners.
• Have only customized products, no ready made products.
• Differentiated pricing - every buyer has to negotiate contract price.
• Lack of standard payment infrastructure.
• Don’t have a catalog.

Private Sector Challenges and Hopes


Market challenges
o  Low domestic demand
o Lack of awareness and trust in consumers and businesses 
Infrastructure challenges 
o  Limitation in online payment systems 
o  Limitation in supportive legal systems 
o Low bandwidth for domestic and international use, especially for image­
intensive sites (e.g. e­catalogs) 
o Inefficient delivery into, out of and within the country 

Prospect of e-commerce in Bangladesh


The potential of e-commerce is no loner a matter of debate. In Bangladesh, it is just
beginning to surface. The place of growth that is being predicted in different seminars
brings in urgency to understand several legal issues that are associated with it.
In twenty first century, Bangladesh yet doing it’s most financial transaction in
traditional way. Although e-commerce is bringing a revolution in the whole world, the
application of e-commerce is not enough in our country. Besides the under develop
telecommunication system, most of the local bank has not the sufficient associative
materials and legal issues. Besides the developed country, many developing countries
also developed their economy with the help of information technology, but Bangladesh is
in first stage at that time. Even Bangladesh yet not connected with the international
network by the submarine fiber optic cable.
If we can expand our internal and external market by the help of e-commerce, then
---
• The production cost will decrease
• Demand will increase
• Investment will increase

52
• The employment opportunity will be created
• Increase national income
• A positive effect on economy

So the internet facility should be available both in urban and rural area. It must be
facilitate that most of the people of the country can easily use the internet and then e-
commerce growth is ensured.
E-commerce can remove the problem of carrying cash money and facilitate the
digital banking. Bangladesh bank now agreed to give permission for internet banking in
the country but they are not agreed to give permission for online transaction outside the
country, for the matter of confidentiality and security.
But it is appreciated to send money by the internet from outside the country by the
Bangladeshi people. If the local bank can increase the internet banking and ensure fast
money transaction, then Hondy business can be decreased.
E-commerce is a prospective side for Bangladesh. Many Bangladeshi companies
situated inside and outside of the country already started e-business. In these side foreign
investors is much more interested for investing money. Overseas Bangladeshis also want
to increase the facility of e-commerce in their country. Then the demand of Bangladeshi
product will increased in the international market and Bangladesh will setup it address in
the e-commerce world. So now we need a guideline and development of a full and perfect
structure of e-commerce sector. As a result, we can face the challenge of twenty first
century and also come a part from the trillion trillion dollars of e-commerce business of
the world. So it is not so far that Bangladesh will also be golden tiger in the world.

CHAPTER-9

 Current Situation of e-commerce In Bangladesh

53
Ecommerce in Bangladesh :
E-Commerce: In e-commerce electronic devices used for transactions.
In Bangladesh, first e-commerce site is www.munshigi.com and it started at 1998. After
that in 2000, www.deshigreetings.com and www.homeviewbangladesh.com opened
ecommerce sites.

Now in Bangladesh, there are thirty sites involved with e-commerce. In these site some
sells special products such as, dhakasharee.com sells only saree and woman wears. In
www.boi-mela.com we can buy bangla books.
In these E-commerce sites some sites delivers their products in Bangladesh. A few
delivers their products other countries.

A good website and online transaction process is needed for e-commerce sites. For online
payment we can use credit card, e-check etc. It is a matter of sorrow that we can’t buy
with credit cards of Bangladesh. Although these sites have limitation, they try their best.
One man can easily buy a product from e-commerce site and pay his bill by credit card.
The credit cards are issued by third party, such as, paypal.com, 2co.com etc. In these

54
paypal is one of the most popular site in Bangladesh. But from Bangladesh we can’t be a
member of paypal. For open a paypal account we must need the help of other countries.
Bangladesh is not under cyber law control. So it is easy to hack the credit card. For this
we must implement the cyber laws at first.

If you want to buy a gift for your overseas friend, it will take enough money.
In Bangladesh e-commerce market is too small. If it is spread all over the world, this will
bring good to us. In this time, e-commerce is only used by the emigrant Bangladeshis
who want to present their friends in Bangladesh. From overseas one can easily present
gift, although its cost is too high. Mainly Bangladesh e-commerce sites are too costly.
Emigrants Bangladeshis mainly use these e-commerce sites. If the sells become higher
the cost of e-commerce product will decrease. E-commerce sites are not spread all over
the country. Most of the sites serve in Dhaka.

Online transaction is necessary for e-commerce sites. Our banks are also back dated from
other banks of the world. If local banks are jointly starting a consortium for online
transaction, we can easily start ecommerce. We must enrich our internet infrastructure In
Bangladesh, data networks are so weak. In E-commerce total process is in automation.
But we are not totally automated.
In technology we are in backward direction. Our net speed is not good so we are not
habituated with e-commerce.
We must remember e-commerce is needed when we haven’t enough time to go to market.
Main advantage of the e-commerce sites is they need not show-room, store room. For
these cost will become low. To run a e-commerce sit is so easy. If you pay 300-400 dollar,
you can easily get a good e-commerce site. If you want to get lower than that
www.2co.com take only 50 dollars for each e-commerce site. A computer, printer,
Internet, Digital camera, scanner, to buy products and give it to the customer, it can
manage only by two or three people. In Bangladesh to start e-commerce site is so easy.
For this in average every month at least one site is added here.
We must remember for business we must insure product quality, service etc.

Situation of E-Commerce in Bangladesh:


As a developing country she badly needs to participate in the world-wide trend and
explosion on E-Commerce that means IT. It is a fact that our country has a very bright
prospect for development and export of software, home-page design, data processing, and
data entry. Realizing this prospect, the government has already announced data
processing and software export as a thrust sector.
The government has deregulated the telecommunication sector and internet
services in a major policy decision to remove obstacles in the way of boosting software
business and opening up the options of high speed data transfer. An inter-ministerial
meeting recently decided that Bangladesh Telegraph and Telephone Board (BTTB) would
select vendors for supplying V-SAT ( Very Small Aperture Terminal ) immediately for

55
connection to the local ISP (Internet Service Provider).
The BTTB would now get only a license fee amounting to US$ 3,500 per year which
means the ISP would have to spend less than US$ 300 as license fee per month.
Therefore the cost would come down to about one-tenth of the present price for data
transfer if the decision is properly implemented. But still the user base of computer is
extremely low because of high cost of computers and peripherals. The existing banking
procedure, absence of domestic industry, absence of source of fund, lack of market
promotion and absence of R&D are the main factors for slow growth.
The international organisations with responsibilities for key areas of rules formation
and economic development in this field should take necessary action to train and develop
required IT professionals. In this connection institutional chain both in the public and
private sector should be developed.
Bangladesh also needs fund for R&D and diversification of areas and creation of
awareness about security of E-Commerce. Bangladesh Parliament in its recent session
has passed the Copy Right Act,2000. But this alone cannot protect the cyber crimes. Our
neighbouring countries including India have made significant progress in this respect. A
comprehensive cyber law is very important for the Internet Service Providers and
upcoming phenomenon in Bangladesh of E-Commerce (Electronic Commerce) and M-
Commerce (Mobile Commerce).
It is heartening to note that the internet accessibility in Bangladesh has been
growing very rapidly since the last few years but it is far below the desired level. An
increasing competition is being observed among the ISPs. The rate of different internet
services is in rapid declining trend after deregulation of V-SAT by BTTB. All these
positive indicators entail that there remains a huge potential in this sector.

Multilateral rules and impact on development of E-Commerce: In the Second Ministerial


Meeting of the World Trade Organisation (WTO), E-Commerce was identified as an area
of duty free access which would continue until a decision is taken otherwise.
The increasing use of internet and other electronic means in international trade in
goods and services led WTO members, at the Geneva Ministerial Conference (held in
May,1998) to adopt a Declaration on Global Electronic Commerce directing the General
Council to establish a ' comprehensive work programme to examine all trade-related
issues relating to global electronic commerce'. In accordance with this mandate, work on
examining whether any modification or improvement are necessary in the rules on trade
in goods, trade in services and in the area of intellectual property is going on in the
relevant WTO forums. In addition, the General Council has asked the Committee on
Trade and Development to examine, inter alias the effects of E-Commerce on the trade of
developing countries and particularly that of small and medium-sized enterprises in these
countries, and the means of maximizing their benefits. The General Council is to submit
its report on the work done along with recommendations for action.

What should be done: The government should take vigorous promotional


activities of its IT talents and IT industry incentives in overseas markets. Foreign

56
investors should be informed of the facts like there are no taxes for import of computer
hardware, software and computer-related equipment.
Local IT companies should be so nurtured that they attain international
standard to put Bangladesh in the IT map.
Participation of the NRBs should be followed up with the full support of the
government so that the efforts in IT development can take an institutional shape.
Telecommunication infrastructure requirements are to be met up as soon as
possible. Telecommunication penetration rate in Bangladesh is still very low with the low
user base of computer. At the moment, just two out of ten calls are successfully
completed on average in Bangladesh compared with nine in EU, eight in China, six in
India, and five in Pakistan. At 2 connections per 1000 residents, Bangladesh Telephone
penetration rate compares very unfavourably with Pakistan's 16, India's 11, and Srilanka's
10.

The exporters do not feel encouraged to explore the potential markets. We have a very
good Optical Fibre Network ( working over 300 Rail stations all over Bangladesh ) which
is owned by the Bangladesh Railway leased by Grameen phone. The present use of
network is only 10-15%. In our country the internet access is very low because of the
poor infrastructure. We will be touching the Submarine Optical Fibre Network within a
very short span of time and that will be owned by the T&T. Access to the Submarine
Cable Network will enable all the railway stations to be connected with the world. This
would be a tremendous opportunity for Bangladesh if it is utilised properly. Optical Fibre
Network will be handled by T&T. A powerful coordination body has to be formed with
close private sector participation. Otherwise the country will be deprived again of
exploiting its resource for its economic benefit.

Bangladesh needs to take special efforts to utilize their expert personnel who mostly
migrated to industrially developed countries. The expatriate technologists and the
entrepreneurs are the main source of our link to modern technology and industry. In order
to make this attempt effective a suitable platform for technology collaboration between
resident and non-resident Bangladeshis with the private sector participation can be
provided.

57
A comprehensive database can be created where all information in relation to
technologists, investors and entrepreneurs worldwide would be incorporated. The
database may be made available through internet. The leading Chambers, particularly
DCCI could take a lead role in this connection and arrange frequent meetings of NRB
and NRB in line with the practices made by the neighboring countries like China, India,
etc.. Important industrial sectors like garments, oil/gas, power should come forward to
computerize their system so that indigenous IT and software markets can be developed. It
will give a big push to the local software entrepreneurs.

The importance of IT in the context of Bangladesh and the role it can play in the socio-
economic development cannot be over emphasized. The world has witnessed phenomenal
growth in this sector over the last few decades. The countries which took timely decision,
made unprecedented growth. We need to invest in both physical, institutional and human
infrastructures, specialized education and training, and provide an appropriate legal
framework for conducting commerce electronically. It should be clearly noted that in the
globalize world, personal business development depends on electronic commerce.

CHAPTER-10

58
Policy Issues for E-Commerce in Bangladesh

E-Commerce in Bangladesh, an overview

Policy Issues for e-Commerce in Bangladesh:


• Deregulation of process of acquisition and use of VSAT has been already made.
Liberalization of telecommunication sector is going on with a plan to introduce new
telecom policy. World Tel is coming in as a computer to public phone operator.
Several private telecommunication service providers have been also working, but
their contribution has been very poor. The reason should be investigated, why it
happened like this.
• All taxes, duties and VAT have been already exempted from import of computer
hardware and software. Export over internet or other electronic media is recognized
under sales contract or agreement without any need for LCs. Simplified tax-free
export earning remittance procedures with 40% retention in foreign currency should
stand. 100% remittance of profit and capital gains for foreign investors should be
approved with easier terms.
• There is no policy guideline regarding electronic payment systems over the net both
for B2C and B2B e-Commerce. The laws related to e-contract, dispute settlement
process for net-based transactions, regulation for foreign exchange remittance is also
absent.
E-commerce in Bangladesh:

59
The Internet has opened up a new horizon for trade and commerce, namely electronic
commerce (e-commerce). E-commerce entails the use of the Internet in the marketing,
identification, payment and delivery of goods and services. This section highlights the
status, statutes, potential and constraints to e-commerce development in Bangladesh.
Both the statutory laws as well as the challenges in implementing them are discussed.
Major legal, regulatory and institutional constraints to e-commerce are identified.
The three dimensions of e-commerce are Business-to-Consumers (B2C), Business-to-
Business (B2B) and Business-to-Government (B2G). B2C e-commerce is unlikely to be
of much use in the near future in Chittagong, Bangladesh because of low per capita
income, a weak infrastructure and legal environment, lack of trust between business and
consumers. B2Cfor cross border trade is also limited by the factors suggested for the
domestic front.
The B2B application already exists in the export sector of Chittagong, especially in
the Ready Made Garments (RMG) industry. The Internet would enable them to seek
information about potential buyers as well as raw material suppliers. Similarly the
practice of posting a web site by individual producers has begun. However, if
Bangladeshi producers are unable to accommodate electronic transfer of payment and
other facets of e-commerce, the business opportunity will move on to countries that have
developed such systems. B2G e-commerce is possible in Chittagong, but on a limited
scale at this stage. The government is a major buyer of goods and services from the
private sector. E-commerce in Bangladesh is in an infant position.

Business-to-Government (B2G) Scenarios:


The government is a major buyer of goods and services from the private sector.
Typically, the government procures goods and services by inviting tenders. This has been
the traditional method of any government procurement for goods and services. Tender
notices are published in the major national dailies followed by selling the Request for
Proposal (RFP) documents to the interested bidders. If any bidder seeks clarification on
any aspect of the RFP, the customer is mandated to notify that clarification to all bidders
by mail. In addition to costing money and taking time, such notification sometimes forces
the customer extending the bid-closing deadline. Bidders also obtain the RFP document
“unofficially” for a comprehensive understanding of the ‘scope of work’ as well as for
assessing their own capability. The availability of the RFP and other relevant documents
on-line provides an alternate choice, thereby reducing the monopoly rent that can be
extracted. In order to prevent such unfair practice, the Bangladesh Telegraph and
Telephone Board (BTTB) initiated publishing the RFP documents of selected projects in
its website. This immediately stopped the illicit practice of unofficially selling the RFP
document, and only competent bidders were able to procure the RFP documents. In
addition to reducing the extra administrative burden of BTTB, it also enabled BTTB to

60
close those bids within a reasonable timeframe. The posting of the RFP documents on the
Web is however an isolated effort being initiated by a few BTTB officials. Introducing
on-line payment or allowing electronic fund transfer for selling the RFP would be a
significant leap towards B2G in Bangladesh. There are numerous instances of deliberate
“unavailability” of the RFP, namely while the bids for civil infrastructure projects are
invited. Syndicated vested groups forbid the other bidders’ participation by forming a
cartel. B2G inherently brings transparency in such cases and ensures a level playing field
for all the bidders. Electronic submission of the RFP followed by presenting the
hardcopies could also be used to promote transparency, accountability and the threat or
coercion that is often evidenced during the bid submission period.

The Web Sites, which are successfully contributed to the E-commerce practices in
Bangladesh, are as follows:

• www.munshigi.com
• www.littlebangla.com
• www.dhakagifts.com
• www.multilink-bd.com
• www.banglabasket.com
• www.saaj.net
• www.cybermallbd.com
• www.bizbangla.com
• www.biztobizbangladesh.com
• www.azzbangla.com
• www.cd-dokan.com
• www.banglanet.com
• www.computerbazar.com
• www.dafodilonline.com
• www.banglacommerce.com
• www.bdyellowpage.com
www.boi-mela.com

Factor Influencing E-Commerce In Bangladesh


Low PC penetration: The entire E-commerce activity depends heavily on the
availability of high-speed data communications network, availability of personal
computer (PC) to a large segment of population. At present, penetration to the PCs in
Bangladesh is extremely poor.
Internet access: The problem of low PC penetration is compounded by the low
telephone connection. At present, there are very few people in Bangladesh who have

61
telephone connection. Number of telephone lines has to be increased further to facilitate
the spread of Internet services. The number of hosts, which provide the facility of Web
pages and Web Site hosting/launching, are very poor in Bangladesh.
The situation will not further improve unless we explore other internet access modes like
through-
• Cable Connection
• Mobile Phone
Cyber and Tax laws: The major legal barriers for E-commerce implementation are the
admissibility of EDI (Electronic Data Interchange) generated documents and their
acceptability as evidence in court.

Credit Mindset and personal information: Most of the people in Bangladesh are very
reluctant in giving Credit Card information over the Internet as they feel that once they
give these informations, can be misused.
Thus every effort should be made by the Government to remove fear psychosis among
the people. Moreover, severe penal action can be initiated against those who are violating
laws in connection with collection, use and dissemination of personal information.

Set-up Cost: Most of the companies other than the big size reluctant to do business
through E-commerce as it involves lot of expenditure in setting up a system to support E-
commerce activity, design and development of Web Pages and its regular maintenance.

Government Regulations

The recently passed Intellectual Property Rights (IPR) bill of Bangladesh concentrates on
software copyright protection. However, e-commerce related copyright protection is not
covered in the new IPR. According to the Evidence Act, 1881, a physical signature is
necessary to make any contract legal. This makes electronic contracts void under
Bangladeshi law. Contract Law in Bangladesh is governed by the Contract Act 1872.
Cross border contracts are legal, but a physical signature is necessary to validate the
contract.
Infrastructure: Status and Issues

By the end of this year, the computer population in Chittagong is expected to reach
100,000. This includes 30000 computers that are estimated to be commissioned in the
current year. The recent withdrawal of import duty and Vat from Computer hardware and
software has helped enhancing the proliferation of computer usage in the country.
Internet services are directly dependent on the telecommunication infrastructure of
the city. The Chittagong telecommunication sector is characterized by poor level of
penetration, high cost to access and a lengthy waiting period. Although Chittagong T & T

62
[which is part of Bangladesh Telegraph and Telephone Board (BTTB)] continues to be a
monopoly in providing basic telephone connections, the private sectors involvement in
cellular phones and as Internet Service Providers (ISP) have been allowed.
To facilitate Internet connections, there are about 9 Internet Service Providers (ISPs)
providing Internet services to about 25000+ customers. Most of these service providers
started with VSAT having 64 Kbps bandwidth. However, with increase in competition for
quality of service, some of them have already upgrades to 2 Mbps bandwidth while the
others are following suit. So long BTTB had enjoyed the monopoly of supplying these
VSAT services at an irrationally high price. In April this year, the Government has taken
a decision to deregulate VSAT allowing an ISP to take VSAT connection from any VSAT
service provider from around the world at competitive prices.
Chittagong T&T, at the moment does not have any surface gateway to the
international communication network. It accesses the international network through four
Satellite Ground Stations. However, Tyco Submarine Systems Ltd, a wholly owned
subsidiary of Tyco International Ltd signed a Memorandum of Understanding on March
20, 2000 with the BTTB to design, manufacture and install an undersea fiber optic cable
system to be known as the Bangladesh-Singapore Submarine Cable System. Scheduled
for completion in 2002, the system will connect Bangladesh and Singapore and will be
approximately 3,200 kilometers in length. This system will enable Bangladesh to link
into some of the major undersea cable systems that land in Singapore and give
Bangladesh worldwide connectivity. The supply contract for the project will have an
approximate value of $150 million U.S. dollars.
Physical signature is necessary to make any contract valid in the eyes of the law.
This makes electronic contracts void under Bangladeshi law. The Evidence Law should
be revised to recognize the validity of a digital signature.

Governing Problems
Chittagong has an intractable problem of poor governance. This has been manifested in
the form of continued active involvement of politicians and public officials, often in
collusion with the private sector, in adopting unfair business practices. As a consequence,
institutions continue to remain weak and legal and regulatory reforms are difficult to
implement. Rent seeking activities galore, discouraging competition and promotion of
efficiency. Poor governance can be both a cause and an indirect effect of ineffective e-
commerce
Major Constraints to E-Commerce
This paper highlights various constraints to commerce and trades in general and e-
commerce in particular.
• Too few telephone connections.
• Absence of a strong independent regulatory body for the telecommunication sector.
• Absence of encryption law that precludes acceptance of digital signature.
• Strong dependence of Letter of Credit to conduct international transactions.
• Restrictive issuance of international credit cards for cross border transactions.

63
E-COMMERCE IN DIFFERENT SECTORS OF BANGLADESH

E-Commerce in the RMG Sector


The RMG sector emerged during the early 1980s in Bangladesh and information has
been the strategic partner in its phenomenal growth. Telex was the only tool of cross
border data communication in those days. International courier services were the means
of receiving the approved designs from the buyers. The Facsimile machine, in the mid
80s, radically replaced both of these orthodox communicating media (i.e. telex and
courier). This “Office Automation Equipment” contributed towards accelerating RMG
exports. Faster and cheaper data communications coupled with real-time design-pattern
development enabled the buyer and manufacturer expediting business negotiations.

E-Commerce in the Oil and Gas Sector


International Oil Companies (IOCs) are the dominant players in the exploration and
production of the oil and gas industry. IOCs use the vendors' web pages extensively in
order to obtain product information. This exercise is also limited to the international
vendors as the Bangladeshi business community has yet to become sufficiently cyber-
centric. The IOCs make all the payments to the international vendors through Telegraphic
Transfer. This is one good example of making cross border payments without following
the complex mechanism of the Letter of Credit (L/C). The local vendors, however,
receive their payments by check.

E-Commerce in the Financial and Trade Sector

Access to finance is one of the most crucial problems in the developing and least
developed countries for businesses. While access to finance is the central issue it is not
less important what channels are to be used for improving access to finance. Definitely,
availability of channels in an economy for financial service delivery depends on size of
businesses, business pattern, technological development, integration of the economy to
the global market etc. E-finance, the e-channel for financial service delivery, which has
emerged from e-business, is an extension of traditional finance.
While there are some initiatives by banks to provide e-finance services only for
valued customers within available infrastructure, some innovative programs are under
process of implementation, which is especially designed for the SMEs.

E-Finance for Self Employment


Grameen Bank, the successful innovator of micro-finance programs for poor is
going to implement its ambitious e-finance program for self-employment. Grameen Bank
has taken an initiative to introduce smart cards for the micro finance and SME clients
throughout the country. Bangladesh is the pioneer in bringing the poor under the network

64
of financial services aiming improving their livelihood. Millions of borrowers are getting
financial services from the MFIs. Grameen Bank plans to introduce initially POS
terminals in different villages of Bangladesh, where Grameen members are located.
These terminals will enable transactions similar to credit cards used in the cities. The user
of these cards will be able to read and record entries enabling cash deposit and
withdrawal. The POS network will gradually expand for other MFI members and SMEs
and other businesses. Grameen Bank plans to set up this network throughout the country
using a combination of network technology and various sources of energy including solar
energy.

Specialized Bank Getting Ready For E-Finance


A specialized bank Bank of Small Industry and Commerce (BASIC Bank) has
started to implement a multi-channel banking project, which is envisaged to provide with
e-finance services to SMEs through high volume credit card, any branch banking, EFT,
and internet banking services. As a specialized bank it is already providing financial
support to more than 100, 000 SMEs.
SMEs are considered as one of the priority sectors of Bangladesh economy since
independence. Economic history conveys that healthy economic structures are usually
based on a complex network of large, medium-size and small enterprises. The intensity
and quality of relationships that exists between different size of companies - the input and
output they give and receive the exchange of experiences and ideas - largely determine
the dynamism and the sustainability of economic development.

E-Finance In Chittagong
The foreign banks are the pioneers in adopting electronic finance in Chittagong.
Most of the foreign banks are using the computerized transaction system and taking
advantage of the superior technology by attracting customers and providing interbranch
and interbank linkage. Foreign banks through successful use of a global network have
increased the timeliness and accuracy of information, benefiting its customers, its
employees and also its management. A broad spectrum of electronic baking services, a
subset of e-finance, is available in Chittagong with various degree of penetration. Credit
card and POS services are provided by 23 percent of banks [PCBs and FCBs].

Table. Electronic Banking Services in Bangladesh [% of Banks]


-----------------------------------------------------------------------------------------------------------
--
EBS 1998 2000 2001
-----------------------------------------------------------------------------------------------------------
--
Tele Banking 14 20 24
Online corporate banking - 8 12

65
Electronic Fund Transfer 15.4 15 18
ATM 14 15.4 28
Credit card 10 23 -
Debit card - 3.8 18
Merchant account service to merchant - 3.8 12
Internet Banking - 7.6 12

Note: “…” denotes service unavailability, “-” denotes data unavailability.

Banking on the Web

Though there are 28 banks in Bangladesh, mostly head quartered in Dhaka. Only a
select few have web pages. Listed below are the names of the few that do have sites.
However, most of these banks do not offer online or electronic service such as Direct
Deposit. There are some ATM machines, though not nearly as concentrated as in the
United States.
The main bank which is involved in Online Banking in Bangladesh are:
 HSBC Bank
 Standard Chartered Bank
 Prime Bank
 One Bank

CHAPTER-11

66
 Advantages E-Commerce

 Disadvantages E-Commerce

Advantages of e-commerce

Ecommerce does have unique advantages for business Imagine a shop, a showroom or an
office that is open 24hrs a day, 7 days a week. You have no staff to pay, no rates or rent,
you don't even have to sweep the floor. This is not a dream, just a few of the business
advantages of using ecommerce. A website can bring your prospect from the point of
advertising and information directly to the point of sale, seamlessly, without involving
any other medium.

New marketing time


opportunities
People are often at their best when sat
relaxed in the evening using their
computer, surfing the net for pleasure
and keen to interact with interesting
business websites.

67
This is a good time, emotionally speaking, to make a sale. Much better than the next
morning when they get up to go to work and find a pile of bills sitting on their doormat
(along with your competitors junk mail!) Let's suppose your client finds an advert you
have placed in a magazine or local paper. He /she notices the website address, connects to
the Internet... you may take an order without even being there - 24hrs a day. One of the
advantages of using ecommerce to do business is that it gives you access to your client
base at times you have never been able to dream of before. It also means that time zones
are not a problem.

Business advantages of using ecommerce:


Ecommerce is conducted solely on computers, which are by default very good at
generating data and recording statistics. This makes market research, measuring statistics
and identifying valuable patterns very easy. Try the metrics calculator to get started with a
scientific approach to doing business.
Ecommerce needs e-business to make it work. E-business is the process of doing market
research, getting qualified traffic, converting hits to business advantages and using
information to generate new ecommerce from existing clients. Without e-business,
ecommerce is like owning a car on an island with no roads.

Getting started with a website business plan:


To take advantage of ecommerce, careful plans need to be drawn up, costed and
researched. Many dot coms are now dot gones because people thought it would be easy to
launch an ecommerce site. It is just another means of doing business, which always
requires sound thinking and hard work.

Electronic bill presentment and payment services:


Services that enable customers to leverage the Internet for bill presentment and payments
in order to reduce cost with bill and statement delivery and payment processing.

Ecommerce Website Development & Design Overview:


India-ecommerce solutionsT is one of the best ecommerce solutions offered in the
industry. Our ecommerce solutions covers all the basic and advanced features with
respect to ecommerce applications, from the easy to surf front end to the user-friendly
content management at the backend Our shopping cart solutions is search engine friendly,
easy to manage and provides a high level experience for your customers. Our ecommerce
solution is more than just a website- it converts site users into buyers thus improving the
ROI.

Ecommerce Shopping Cart Features:


Inventory Management-Order Processing-Security-Order Processing-Site Analytics-
Hosting-Customer Service-System Platform-SEO

Ecommerce Website Features at a Glance:

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Web Based Merchandising & Inventory Control
* Unlimited number of products, categories and subcategory entry
* Advanced search feature for products and categories, where the search can be
categorized by item name, category name or anything that is related to the product
* Customized listings such as new arrivals, featured items, best seller, auction list and
loyalty products listings. All these listings can be configured so they can be generated
dynamically or by backend admin controlled.
* Detail page for each product with features such as wish list, close up image, email page
and print page options are available.
* Related products and cross selling
* Featured product listing
* Coupon codes, gift certificates
* Inventory control
* Backorders allowed
* Quantity discounts
* Wholesale pricing capability
* On Screen shopping list
* Import existing data
* Single or batch picture uploads
* No plug-ins / programming
* Web based administration
* Complete store front system

Search Engine Optimization For Increased Sales:


* Dynamic keyword based title
* Site map generation
* Standards HTML coding.
* Complete CSS based design.
* Optimized ASP or .NET code
* Spider friendly navigation and URLs

Multiple Payment Options:


* Accounting software Integration (QuickBooks, ACCPAC etc.)
* Accept real-time credit cards
* Authorize.net, VeriSign, Papal and more payment integration
* Offline credit card processing
* Automated invoice generation and tracking

Web Based Sales and Activity Reporting:


* Complete sales reporting options
* Product cost vs sales price
* Custom web traffic analytics

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* Total sales by payment type
* Shipping reports
* Best seller reports
* Sales by customer reports

Design & Layout Implementation For Better Customer Experience:


* Fully customized design to fit your site audience
* Browse by price, manufacturer and category
* Multiple image uploading
* Thumbnails and large image views
* Email items to friend
* Rate item

Customer Service Center


* All orders are stored in a database
* Live order tracking
* Order history facility
* Automated order confirmation email
* Repeat customer recognition via Customer Loyalty Program
* Express checkout
* Newsletter broadcasting
* Affiliate programs
* Password protected are for advanced security

Online Transaction Security Setup:


* Full HTTPS/SSL support
* Secure HTTP/SSL admin access
* Double password protected admin access

The advantages of e-commerce are pointed out as under:


Advantages Reasons
Reduce transaction cost Elimination of paperwork and labor savings
Improved cash flow Faster processing and exchange of
information
Reduced inventory levels Shorter order cycle reduced ordering costs
Higher information quality Increased accuracy and accessibility of
information
Increased operational efficiency Improved internal operations owing to time
and cost reducing and better information

70
management
Better customer service Shorter lead times, more timely information
about transactions status
Increased ability to compete Increased ability to reach new markets, and
to provide better service at low cost
Improved trading partner relationships Enhanced trust through increased sharing
of information, increased ability to
participate in just-in-time program.
Reaches a larger market Because faster dealing in business

Eliminates the use of middlemen and Because channel of distributions are


intermediaries reduced

DISADVANTAGES:
One disadvantage of ecommerce at least to the government is the application of tax. As
business can be done in the internet just as easily as clicking a button, paying the
appropriate tax can be easily is evaded. The rules that apply to the provision of tax from
sales across states, let alone across continents, are still not that precise.

Another disadvantage, and perhaps the biggest problem of ecommerce, is the issue on
security. As cash is exchanged on the web across borders and continents, many
unscrupulous individuals are enticed to target this activity to perform illegal means to
earn money. Identity theft and hacking of personal information have become one of the
serious problems in the internet today. People with enough knowledge and time on the
web can find a way to steal money from people doing business on the web. This needs to
be watched out for in ecommerce.

Disadvantages/ drawbacks of e-commerce

E-commerce activities include several pitfalls, some are:

71
• Access, security Risks and privacy problems
• Skill shortage
• Small cash transaction problem
• Stock shortage
• High delivery cost for long distance
• Slow download time owing to poor information infrastructure in many countries
• Very high delivery time for far distance
• Requires Expensive Equipment
• Requires Specialized Labor

Timeline:

• 1990: Tim Berners-Lee writes the first web browser,


WorldWideWeb, using a NeXT computer.
• 1992: J.H. Snider and Terra Ziporyn publish Future Shop: How
New Technologies Will Change the Way We Shop and What We
Buy. St. Martin's Press. ISBN 0312063598.
• 1994: Netscape releases the Navigator browser in October under
the code name Mozilla. Pizza Hut offers pizza ordering on its Web
page. The first online bank opens. Attempts to offer flower
delivery and magazine subscriptions online. Adult materials also
becomes commercially available, as do cars and bikes. Netscape

72
1.0 is introduced in late 1994 SSL encryption that made
transactions secure.
• 1995: Jeff Bezos launches Amazon.com and the first commercial-
free 24 hour, internet-only radio stations, Radio HK and NetRadio
start broadcasting. Dell and Cisco begin to aggressively use
Internet for commercial transactions. eBay is founded by computer
programmer Pierre Omidyar as AuctionWeb.
• 1998: Electronic postal stamps can be purchased and downloaded
for printing from the Web.
• 1999: Business.com sold for US $7.5 million to eCompanies,
which was purchased in 1997 for US $150,000. The peer-to-peer
filesharing software Napster launches.
• 2000: The dot-com bust.

73
CHAPTER-12

Recommendations

Conclusion

RECOMMENDATIONS:

Short term:
1. Bangladesh Telecommunications Regulatory Commission (BTRC) should be
established independent of the government control.
2. Voice over Internet Protocol (VoIP) and private international gateway for voice and
data should be allowed.
3. The provision of obtaining permission from MOPT, prior to leasing the capacity from
Grameen Phone’s optical fiber network should be abolished.
4. The tariff of BTTB’s DDN should be rationalized in order to make it affordable for the
mass market.
5. Unlicensed radio frequencies should be made available on demand.
6. VSAT operating licenses should not limit the bandwidth.
7. The number of pre-shipment agents (PSI) should be increased. The size of fines and
penalties on PSIs should be increased for breach of rules and regulations.

74
Medium term:
1. Basic telephony in private sector should be allowed for nationwide operations.
2. Posting of government documents and publications including budgetary information
on the Web should be instructed.
3. Contracts and other alternates to Letter-of-Credit (L/C) should be allowed as legal
methods for international transactions.
4. Foreign exchange controls on travel and for business should be relaxed.

Long term:
1. BTTB’s monopoly in the nationwide long distance services should be ended.
2. The number of telephone lines should be increased to encourage private providers to
come into this sector.
3. The control of foreign exchange should be liberalized gradually, and easier issuance of
International Credit Cards should be allowed.
4. Government officials are to be oriented on the benefits of e-commerce. For instance
short course can be offered at training centers such as the Public Administration Training
Center (PATC).
5. Business associations and organizations should be made aware of the benefits of e-
commerce. BGMEA can play a significant role in this.
6. Greater competition among the Internet Service Providers (ISPs) should be promoted
and new ISPs should be encouraged to come into business.
7. Revise and update aging laws on trademark, copyrights and evidence.
8. Court procedures should be simplified and expedited. Administrative and institutional
constraints in settling disputes should be removed.

CONCLUSION:
The overview of the legal and regulatory statutes suggests that Bangladesh has made
significant progress in facing the challenge of globalization and concurrently, embracing
e-commerce in due course. Technological and infrastructural constraints to e-commerce
can be overcome if existing laws and regulations are implemented. A better
understanding of the potential benefits of e-commerce by the policy makers and
bureaucrats is essential for speedy implementation and further reforms.

Commerce on Internet is already a reality. The communication facilitates which are


an offer are rapidly become integrated as core business tools. There are currently more
than 25000 companies, which are using Internet to conduct business. The volume of US
electronic “home shopping” retail business already reached US $ 2.6 million in 1995.
Business transactions carried over the Internet are presently estimated to reach US$ 500
million in 1995 rising to between US $ 2.5 billion in the year 2000.

75
New trading opportunities are being established as a result of the growth of the
Internet & other on-line networks. At the same time, there is increasing pressure to move
from existing paper based payment system to EFT (Electronic Fund Transfer).

Microsoft chairman, Bill Gates, is not alone in believing that the convergence of
money, commerce and personal computers represents one of the great new markets of
modern time. New and unfrozen opportunities can be expected to arise once a secure and
cost effective ‘mass’ market electronic system for making low volume payments is
successfully established.

In the New World of Internet, there are no national boarders anywhere; moreover
this world is switched, interactive, broadband, network and standards based. The idea of
E-commerce has just started running through all these useful & valuable channels,
inquest of a new form of trade & commerce which will ultimately design an open world
for small business to large, small producers to big manufacturer, and all consumers will
inhabit between north pole and south pole.

BIBLIOGRAPHY

1. E-Business Concept- Aptech Computer Education (E-Accp Program)


2. Conference on Electronic In Bangladesh: Potential and Policy Priorities
Organized by :
(a) Ministry of Science and Technology
(b) Ministry of planning

3. Modern Banking : R.S. Sayers


4. BCS Computer Show,2001 : Organized by Bangladesh Computer Samity
5. British Council
6. Management Information system – James A. O’Brien, New York.
7. E-commerce an Overview – Subhashish Dath; Page (410 to 413).
8. Strategic Implication of Internet – Albert A. Angehrn.

76
9. E-commerce – Opportunities & Challenges; by Dr. A. K. Sain.
10. Electronic Commerce – NCC Education Limited.
11. Advance Management Journal – volume – 64, number-4, Autumn-1999.
12. Seminar Paper on ‘An overview of E-commerce’ by Md. Iqbal Hassan.
13. Computer Jagat – Magazine – Volume-11, March 2000, Page –44.
14. Ebiz – Magazine – January 2003, Page –46.
15. Computer Tomorrow – Magazine – Volume-8, June 2002, Page –06.
16. Bangladesh Observer, Dhaka.
17. The Independent, Dhaka.
18. Prothom Alo, Dhaka.
19. www.american.edu/carmel.
20. www.icwai.org
21. www.nccedu.com
22. www.itrc.techBangla.org
23. www.sdnbd.org
24. www.asiabusinesstoday.org

Electronic commerce , commonly known as e-commerce or eCommerce,


consists of the buying and selling of products or services over electronic systems
such as the Internet and other computer networks. The amount of trade conducted
electronically has grown extraordinarily since the spread of the Internet.
A wide variety of commerce is conducted in this way, spurring and drawing on
innovations in 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 at least at some point in
the transaction's lifecycle, although it can encompass a wider range of technologies
such as e-mail as well.
A large percentage of electronic commerce is conducted entirely electronically for
virtual items such as access to premium content on a website, but most electronic
commerce involves the transportation of physical items in some way. Online

77
retailers are sometimes known as e-tailers and online retail is sometimes known as
e-tail. Almost all big retailers have electronic commerce presence on the World
Wide Web.
Electronic commerce that is conducted between businesses is referred to as
Business-to-business or B2B. B2B can be open to all interested parties (e.g.
commodity exchange) or limited to specific, pre-qualified participants (private
electronic market).
Electronic commerce is generally considered to be the sales aspect of e-business. It
also consists of the exchange of data to facilitate the financing and payment aspects
of the business transactions.

History
Early development

The meaning of electronic commerce has changed over the last 30 years.
Originally, electronic commerce meant 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.

78
From the 1990s onwards, electronic commerce would additionally include
enterprise resource planning systems (ERP), data mining and data warehousing.
Perhaps it is introduced from the Telephone Exchange Office, or maybe not.The
earliest example of many-to-many electronic commerce in physical goods was the
Boston Computer Exchange, a marketplace for used computers launched in 1982.
The first online information marketplace, including online consulting, was likely
the American Information Exchange, another pre-Internet online system introduced
in 1991.
Although the Internet became popular worldwide in 1994, it took about five years
to introduce security protocols and DSL allowing continual connection to the
Internet.

And by the end of 2000, a lot of European and American business companies
offered their services through the World Wide Web. Since then people began to
associate a word "ecommerce" with the ability of purchasing various goods
through the Internet using secure protocols and electronic payment services.

Timeline:
• 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using
a NeXT computer.
• 1992: J.H. Snider and Terra Ziporyn publish Future Shop: How New
Technologies Will Change the Way We Shop and What We Buy. St. Martin's
Press. ISBN 0312063598.
• 1994: Netscape releases the Navigator browser in October under the code
name Mozilla. Pizza Hut offers pizza ordering on its Web page. The first
online bank opens. Attempts to offer flower delivery and magazine
subscriptions online. Adult materials also becomes commercially available,
as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL encryption
that made transactions secure.

79
• 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24
hour, internet-only radio stations, Radio HK and NetRadio start
broadcasting. Dell and Cisco begin to aggressively use Internet for
commercial transactions. eBay is founded by computer programmer Pierre
Omidyar as AuctionWeb.
• 1998: Electronic postal stamps can be purchased and downloaded for
printing from the Web.
• 1999: Business.com sold for US $7.5 million to eCompanies, which was
purchased in 1997 for US $150,000. The peer-to-peer filesharing software
Napster launches.
• 2000: The dot-com bust.
• 2002: eBay acquires PayPal for $1.5 billion [1]. Niche retail companies CSN
Stores and NetShops are founded with the concept of selling products
through several targeted domains, rather than a central portal.
• 2003: Amazon.com posts first yearly profit.
• 2007: Business.com acquired by R.H. Donnelley for $345 million[2].
• 2008: US eCommerce and Online Retail sales projected to reach $204
billion, an increase of 17 percent over 2007[3].

Business applications
Some common applications related to electronic commerce are the following:
• E-mail and messaging

• Content Management Systems

• Documents, spreadsheets, database

• Accounting and finance systems

• Orders and shipment information

• Enterprise and client information reporting

• Domestic and international payment systems

• Newsgroup

80
• On-line Shopping

• Messaging

• Conferencing
Government regulations
In the United States, some electronic commerce activities are regulated by the
Federal Trade Commission (FTC). These activities include the use of commercial
e-mails, online advertising and consumer privacy. The CAN-SPAM Act of 2003
establishes national standards for direct marketing over e-mail. The Federal Trade
Commission Act regulates all forms of advertising, including online advertising,
and states that advertising must be truthful and non-deceptive.[4] Using its authority
under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the
FTC has brought a number of cases to enforce the promises in corporate privacy
statements, including promises about the security of consumers’ personal
information.[5] As result, any corporate privacy policy related to e-commerce
activity may be subject to enforcement by the FTC.

Forms
Contemporary electronic commerce involves everything from ordering "digital"
content for immediate online consumption, to ordering conventional goods and
services, to "meta" services to facilitate other types of electronic commerce.
On the consumer level, electronic commerce is mostly conducted on the World
Wide Web. An individual can go online to purchase anything from books, grocery
to expensive items like real estate. Another example will be online banking like
online bill payments, buying stocks, transferring funds from one account to
another, and initiating wire payment to another country. All these activities can be
done with a few keystrokes on the keyboard.
On the institutional level, big corporations and financial institutions use the
internet to exchange financial data to facilitate domestic and international business.
Data integrity and security are very hot and pressing issues for electronic
commerce these days.

References
• Chaudhury, Abijit; Jean-Pierre Kuilboer (2002). e-Business and e-Commerce
Infrastructure. McGraw-Hill. ISBN 0-07-247875-6.

81
• Frieden, Jonathan D. & Roche, Sean Patrick (2006-12-19), "E-Commerce:
Legal Issues of the Online Retailer in Virginia", Richmond Journal of Law
& Technology 13(2), <http://law.richmond.edu/jolt/v13i2/article5.pdf>
• Graham, Mark (2008), "Warped Geographies of Development: The Internet
and Theories of Economic Development", Geography Compass 2(3),
<http://geospace.co.uk/files/compass.pdf>
• Kessler, M. (2003). More shoppers proceed to checkout online. Retrieved
January 13, 2004
• Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will
Revolutionize the Way We Buy, Sell and Get the Things We Really Want,
Hardcover, The Penguin Press, 246 pages. ISBN 1-59420-077-7.
• Seybold, Pat (2001). Customers.com. Crown Business Books (Random
House). ISBN 0-609-60772-3.
• Miller, Roger (2002). The Legal and E-Commerce Environment Today,
Hardcover, Thomson Learning, 741 pages. ISBN 0-324-06188-9.

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