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.


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



* Introduction to E-Commerce * Definition of E-Commerce * Evolutions / Historical Development of 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.


Procure raw materials for production

Sell products and services

Build supply and maintenance chain

Plan and organize production Communicate with customers Manage finances and communicate with banks

Business Firm

Advertise Communicate with employees

Communicate with other agencies like customs, excise, transporters, power and water authorities etc

Collaborate and compete with other business firms

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.


 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 ECommerce 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)


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 Ecommerce 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

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.

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.


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 inhouse 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.

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 Ecommerce 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

• 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?


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.





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 Ecommerce 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 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 Ecommerce 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

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 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.

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.


* Element of E-Commerce * Process of E-Commerce * Structure of E-Commerce


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.


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. 17

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

Custom- Built Goods & Services
SubContractor Prime Contractor

Operational Division

Supplier Directories

Purchasing Division

Accounting Division

Buyer’s Financial Institution

Products & Services Catalogues

Carriers Supplier’s Financial Institution

Common- Use Contract- Data


Pre-contractual & Contractual Document Flow

Ordering Document Flow

Logistic Document Flow

Settlement Post-Processing Document & Fund Flow



* 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)


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 • 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
Aero plan Chemistry Coal Communication Computing Electronic Items Food Items Forest Items Ship Transport Health Service Organic Science Machines (Material) Mass media and Adv. MRO Oil and Gas Paper

Reducing Cost
11% 10% 2% 5-15% 11-20% 29-39% 3-50% 15-25% 15-20% 5% 12-29% 22% 10-15% 10% 5-15% 10%

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

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. Voicemail could do the same thing with recorded messages. Enhance fax-enabled people to send and receive faxes from their own computer.


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.

Examples of B2C e-commerce, AMAZON.Com Established in 1995 by Jeff Bezos, ( 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. 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, 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 ( 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 ecommerce 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.


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

Consumer (indiviual)
B2C (e.g. Amazon) C2C (e.g. eBay)

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

• 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.



*Impact of E-commerce on Business and Consumer ♣ E-commerce and sellers ♣ E-commerce and consumer ♣ E-commerce and inhibitors


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 developments Customer Satisfaction New product development and diversification Pressure from shareholders to provide excellent performance

Pressures from competition

Business organization

Regulatory changes

Internal pressures for cost control


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 ECommerce hosts are indicative prices for a medium sized set up. Therefore, suppliers will able to offer products at lower prices when they use ecommerce. 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.


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. 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.


* 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.


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


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 nontrade 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.

• 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.


 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)


 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


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 Bank A

Branch of Bank A

Branch of Bank A

Head office of Bank A

Branch of Bank B

Branch of Bank B

Branch of Bank B

Head office of Bank B

Figure 7.2 : Bank Network


 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.

Consumer’s bank

6. Validate Cheque 11. Clear Cheque
Clearing house

Merchant’s bank

13. Debit money to customer’s account & send debit information through monthly statement

10. Transmit acknowledgement of receipt of goods 7. Confirm validity of cheque 5. Deposit (E-Cheque)

12. Inform crediting money through monthly statement


9. Acknowledge receipt of goods 8. Dispatch goods 3. Send E-Cheque 2. Invoice, shopping information & payment instructions



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

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.
Customer’s Bank Merchant’s Bank


Seller/ Merchant/ 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,

and approved by the government. This may be called E-Mint. The consumer purchases ecash 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 EMint. 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.

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






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-2B 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-


♦ 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:,,, 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,, A Vortal can host information of an industry, that is more than one company but which have similar products. For 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

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. .


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-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 ebased. Integration of decision-making processes is the key issue. This is what is eservices- 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


E-Services for paying tax

E-Services for medical research

E-Services for voice to text translation

E-Services for physicians

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


Is one unit. Each application Can be a vertical or takes care of one utility horizontal portal, still, it is monolithic These systems can’t speak Similar to e-commerce about themselves, except for advertising through the ‘About Us’ page Design of an application Similar to e-commerce decides the end utility of the application

required Each one is complete in itself, and also forms part of another bigger service These systems can speak for themselves. For example, a printing e-service can notify the other print service about the type of documents it can print Rather than all entities of a system having to be 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.


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 ECommerce. 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 li ca tio n

C usto mer


S ec ur i t y S er vi ce


Security Services

Secure Internet
Security Services

Web Server Application

Sote & Mall Market

Figure 7.15: Model for Secure Internet Transactions


 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.

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:


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.


            

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 Institutional Infrastructure Building Awareness and Commitment Building Leadership and Strategic Thinking


Building e-Governance for Development

Building Humans


Technological Infrastructure


Building Data Systems Infrastructure

Building Legislative 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.


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.


 Opportunities of e-commerce


 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.Ecommerce 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

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 toEase 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

• 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 fullfledged 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

• 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 ecommerce 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.


 Current Situation of e-commerce In Bangladesh

Ecommerce in Bangladesh :
E-Commerce: In e-commerce electronic devices used for transactions. In Bangladesh, first e-commerce site is and it started at 1998. After that in 2000, and opened ecommerce sites. Now in Bangladesh, there are thirty sites involved with e-commerce. In these site some sells special products such as, sells only saree and woman wears. In 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,, etc. In these


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 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

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 MCommerce (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

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.


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 socioeconomic 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.



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:


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-toBusiness (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


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:
• • • • • • • • • • • • • • • •

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

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 Ecommerce 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


[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 ecommerce Major Constraints to E-Commerce This paper highlights various constraints to commerce and trades in general and ecommerce 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.

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 cybercentric. 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

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

Electronic Fund Transfer ATM Credit card Debit card Merchant account service to merchant Internet Banking

15.4 14 10 -

15 15.4 23 3.8 3.8 7.6

18 28 18 12 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



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.


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 AnalyticsHosting-Customer Service-System Platform-SEO

Ecommerce Website Features at a Glance:

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 *, 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

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

Better customer service Increased ability to compete Improved trading partner relationships Reaches a larger market Eliminates the use of middlemen and intermediaries

management Shorter lead times, more timely information about transactions status Increased ability to reach new markets, and to provide better service at low cost Enhanced trust through increased sharing of information, increased ability to participate in just-in-time program. Because faster dealing in business Because channel of distributions are reduced

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:


• • • • • • • • •

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


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.

1995: Jeff Bezos launches and the first commercialfree 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: 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.



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.


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 ecommerce. 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.

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.


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.


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.

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. 20. 21. 22. 23. 24.

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

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.


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.


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.


1995: Jeff Bezos launches 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: 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: posts first yearly profit. 2007: 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.


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

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), <> Graham, Mark (2008), "Warped Geographies of Development: The Internet and Theories of Economic Development", Geography Compass 2(3), <> 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). 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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