According to the Computer Industry, Almanac Report from November 1999, there were 57.5 Internet users per 1000 people on a worldwide average11. In September 1998, John Gantz, senior vice president at IDC (International Data Corporation, Framingham, MA.), announced that the volume of Internet commerce would approach one trillion dollars by 2002. It is also felt that 80 percent of that volume is business-to-business transactions with expectations of that growing to 92 percent by 200312. By 2003, International Data estimates that 159 million people now connected online worldwide will have mushroomed to 510 million. This community is made up of usual mix of surfers and legitimate customers. Regardless of the projection one can make, the reality is that a significant increase of Internet commerce activity is expected within next two or three years. The growth of the Internet has resulted in critical wars between consumers and firms that are engaged in commercial activity as part of global online marketplace13.
- Dimensions of E-Commerce implementation area:
The three dimensions of e-commerce are Business-to-Consumers (B2C), Business-to- Business (B2B) and Business-to-Government (B2G). B2C e-commerce is unlikely to be of much use in the near future in Bangladesh because of low per capita income, a weak infrastructural and legal environment, lack of trust between business and consumers. B2C for cross border trade is also limited by the factors suggested for the domestic front. In addition, non-availability of international credit cards, foreign currency remittance restrictions, delays and informal payments at customs clearance even for small value and quantity items will discourage B2C.
The B2B application already exists in the export sector of Bangladesh, especially in the Ready Made Garments (RMG) industry. RMG has the lion’s share of the export earnings in Bangladesh. The RMG sector has begun to use the Internet, and its dependence on ecommerce is likely to grow in the coming years. The Internet would enable them to seek information about potential buyers as well as raw material suppliers. Similarly the practice of posting a website 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 Bangladesh, but on a limited scale at this stage. The government is a major buyer of goods and services from the private sector. Typically, the government procures goods and services by inviting tenders. The availability of the RFP and other relevant documents on-line provides an alternate choice. Transactions involving information collection, obtaining various governmental forms, registering activities can also be conducted on-line. This will reduce time costs, corruption and the necessity of going through lengthy bureaucratic procedures as well as increasing transparency.
7. Case study of any one of implementation Area
Name of Organization: Bangladesh Export Promotion Bureau
Activities: Bangladesh Export Promotion Bureau Streamlines Textile Trading with the US
Implementation: Integration and EDI Solutions from GXS Speed Up Export VISA Processing in Bangladesh.
a. Corporate Profile: Bangladesh’s Export Promotion Bureau
The United States is the biggest importer of Bangladeshi goods, with imports worth over US $5 billion to the Bangladesh economy. Textiles, both materials and finished garments, comprise over 70 percent of Bangladesh’s exports to the US. As the US operates a strict quota for imported textiles, Bangladesh has to regulate its exports. It has therefore set up the Export Promotion Bureau (EPB) to oversee international trading activities and manage its valuable export business.
The EPB issues export licenses or VISAs from the US-allocated textile quota to Bangladeshi manufacturers and exporters. US Customs Service (USCS) regulates trade between the US and other countries and has implemented a system for monitoring VISAs called Electronic VISA Information System (ELVIS).
b. The Business Challenge
Improving Communications and Eliminating VISA Fraud
In 2000, Bangladesh started to experience problems with the textile quota restraint levels recently negotiated with the US government. Popular categories were filling and the Bangladesh government records showed fewer exports than the related US reported imports. After extensive review, it was found that unauthorized VISAs had been issued to release merchandise. A manual system was implemented to ensure that only authorized VISAs were used to release merchandise. This system required VISAs to go through the Bangladesh Embassy in the US for review before the US could accept the VISA. In turn, this process increased workloads and created delays, often by several days, in clearing consignments of Bangladesh textiles in US ports.
The use of illegitimate VISAs caused several category restraint levels to be embargoed and caused millions of dollars in lost revenue to Bangladesh and their textile exporters. “We knew matters could not continue and we had to look at implementing a system to enable our bureau offices to communicate directly with US Customs,” said GKM Towfique Hassan, Director of the EPB. Today, Bangladesh is a participant in the US ELVIS program that uses EDI to transmit government-to-government VISA information. EDI and the ELVIS program help reduce the instances of VISA fraud and make entry processing more efficient, while reducing the amount of revenue loss for Bangladesh.
c. The Solution:
GXS Solutions for countries exporting to US:
In collaboration with the US Customs Service, GXS implemented the US Customs standard interface that is based on IBM MQ Series (message oriented middleware). It provides an event-driven communication method, integrating GXS’s EDI services and the US Customs’ ELVIS system. This service architecture provides a reliable and fault tolerant application level interface between GXS’s services and US Customs’ applications. With the addition of MQ connectivity into its EDI services, GXS opens the door for exporting countries to take advantage of a real-time transaction capability with US Customs. Thus the exporting countries are now able to use existing connection capabilities to EDI*EXPRESS and benefit from a pro-active delivery and receipt of data with US Customs, eliminating the previous delays with zero impact on their existing technology investments.
Streamline Operations with Real-Time Electronic Information
The EPB needed to be able to communicate more effectively with USCS and its ELVIS system. Other countries exporting textiles to the US, that had experienced similar problems to Bangladesh, had already adopted an EDI solution from GXS to integrate ELVIS with their own internal systems. This solution, based on GXS’s EDI*EXPRESSSM Service, a secure, reliable document exchange service, and Application Integrator™, a powerful, intuitive mapping and application translation tool, has been proven to establish real-time electronic communications between textile exporting countries and USCS.
EDI*EXPRESS is used extensively by enterprises worldwide to reduce administrative costs, streamline operations and provide near real-time information. Specifically designed to support electronic trade, EDI*EXPRESS securely transmits documents to business partners anywhere in the world, removing delays caused by geography and time zones.
Application Integrator provides any-to-any data translation, platform independence and rapid implementation. Using Application Integrator, EPB can send data via the Internet or value-added network (VAN) in a range of formats and automatically translate the data into the format required by the receiving organization.
This GXS solution has enabled EPB to transfer a range of export documents related to VISAs and export documentation from their in-house applications without having to worry about compatibility with USCS’ systems. Application Integrator has seamlessly integrated the Bangladesh Oracle-based VISA processing system in the Dhaka and Chittagong offices, as well as the Exporters Association VISA application system with USCS’s ELVIS system.
8. Investigation report of case study :
a. The Results:
VISA Processing Cycle Cut by 20 Percent
“The GXS EDI system works very efficiently and enables our offices in Dhaka and Chittagong to exchange VISA information with US Customs. We have stopped fraudulent practices and vastly reduced the workload of both the Bureau and our embassy in the US,” said Hassan. “And in addition, we can develop a closer working relationship with our colleagues in US Customs.”
As well as eliminating fraud, EPB has reduced VISA processing cycle time by 20 percent and can track VISAs issued in Bangladesh until they are cleared in the US. Before using Application Integrator, it was impossible for Bangladesh to send VISA information to USCS in advance of the delivery of exported goods. Now, the EPB can pre-register goods with USCS to facilitate easy clearance upon delivery. Consignment clearance time has decreased from four or five days to a matter of just four to eight hours.
US Customs offers the ELVIS EDI program to countries having VISA systems for exporting textiles to the US and that comply with Customs and CITA requirements. During the past several years, the use of EDI for the ELVIS program and related VISA processing has proven to be a highly efficient online method of processing entries with VISA requirements and minimizing VISA fraud. Customs encourages other countries with VISA programs to request participation in the ELVIS program.
Bangladesh has now joined other textile exporting countries in its ability to communicate seamlessly with US Customs, radically improved business opportunities for exporters and reduced paperwork and workload for the VISA processing authorities.
b. Results at a glance:•
- VISA processing cycle time cut by 20 percent
• Consignment clearance reduced from four days to four hours
• Improved trade relations with the US
• Fraudulent VISAs eliminated 100 percent
• Better trade communications
• Enhanced exporter efficiency
Solutions for Countries Exporting to the US:
9. Present status , feature and problem of implementation:
a The Existing Situation and Potential of E-Commerce in Bangladesh:
Internet services are presently available in Bangladesh. Its usage for e-commerce by the Bangladeshi producers to export as well as to access inputs will be dependent on their willingness and ability to use this medium as well as that of the buyers of final products and the sellers of intermediate goods and services. Figure 1: The Three Dimensions of E-Commerce Source: International Telecommunications Union, Millennium, October 1999, Geneva Figure 1 depicts the three dimensions of e-commerce. Business-to-Consumers (B2C) ecommerce is practically non-existent within Bangladesh, while a very limited level of Business-to-Business (B2B) and Business-to-Government (B2G) transactions exists. The potential for use of e-commerce by Bangladeshi consumers and businesses with foreign firms is much brighter, and can play an important role in boosting the country’s exports. A significant volume of B2G is also possible, as the government remains the biggest spender.
b. Business-to-Consumer (B2C) Scenarios
Business-to-Consumer (B2C) e-commerce is unlikely to be of much use in the foreseeable future in Bangladesh. At the domestic level, low per capita income, limited infrustructural facilities (e.g. low teledensity), weak legal environment (inadequate contract laws, poor implementation and enforcement), and lack of trust and confidence between business and consumers are going to hinder B2C. In the backdrop of such limitations, the low wage economy, with high levels of unemployment and underemployment, will continue to rely on the physical presence of buyers and sellers during a transaction in most cases. B2C for cross border trade is inhibited by the factors suggested for the domestic front. In addition, non-availability of international credit cards, foreign currency remittance restrictions, delays and informal payments at customs clearance even for small value and quantity items will discourage B2C. Following the withdrawal of the quota system and the GSP in 2005, the RMG sector will inevitably become more competitive. As expected delivery time decreases, considering alternative payment mechanisms becomes imperative. The effective use of e-commerce
c. Business-to-Business (B2B) Scenarios
As mentioned before, the Business to Business (B2B) scenario prevails in Bangladesh to a very limited extent. The B2B scenario exists mostly in the export sector, especially in the Ready Made Garments (RMG) industry. RMG has the lion’s share of the export earnings in Bangladesh, accounting for 75 percent of total exports. The current value of annual exports of the RMG sector is close to $4.35 billion. The RMG sector has begun to use the Internet, and its dependence on e-commerce is likely to grow significantly in the coming years. E-commerce through the Internet is poised to be an effective business tool for the RMG exporters. The Internet would enable them to seek information about potential buyers as well as raw material suppliers. Similarly the practice of posting a website by individual producers has begun. Opening a website is a step towards the right direction. Also, the adherence of Bangladeshi firms to quality, labor and environmental standards (e.g. ISO 9000, QS 9000) can also be shared and highlighted through the Internet technology.
d. 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. A specific use of internet technology would be to access The Bangladesh Garment Manufacturer Exporter Association’s (BGMEA) website, which provides a list of member companies and key information regarding those firms. In addition, it updates and reports on the United States and Canadian quota used for the year on a given date. Concurrently, through the web site of the North American port authorities, the volume of quota items that have entered their respective countries can be found. A Bangladeshi producer may prefer to stop shipment and wait for the next year (when new quota privileges begin) to avoid the risk of collecting demurrage at a foreign port in case the quota has been exhausted. BGMEA can play a vital role in authentication of buyers and sellers through encryption method. Authentication by BGMEA can ensure the confidence of the importers regarding the genuineness of the manufacturers. This would discourage unscrupulous enterprises from making false claims on their web pages. both for placing orders, purchasing raw materials and for quick and efficient payment would be the necessary ingredients for any country to enhance its ability to deliver early. Necessary infrastructural, legal and regulatory reforms will be essential to avail of the ecommerce technology in dealing with the international market place. Access to the market depends on the buyers and sellers’ willingness and ability to market through mediums that are mutually cost effective, reliable, and replicable. A foreign buyer, say in the readymade garments sector, expresses a preference to use e-commerce for its purchases, thereby circumventing the Letter of Credit (L/C) mechanism to place an order. Since the overseas financial institutions often insist for “Add Confirmation” it increases the cost of L/C. Add Confirmation is basically a matter of payment guarantee depending on the country’s credit rating, asset status etc., where Bangladesh generally lags behind. 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.
E-commerce usage will become attractive when entrepreneurs will be convinced that this medium is capable of obtaining orders as well as increasing profitability by eliminating the role of middlemen. However, confidence and trust between the buyers and sellers is an important determinant. If the local producer fails to ensure adequate quality or timely delivery of products, the benefits of an efficient search and communication process will be undermined. Thus, authentication of both buyer and seller is a prerequisite for successful implementation of this medium. The services of organizations like XMNet, Net ASM, etc. can be utilized in order to obtain information regarding authentic suppliers, manufacturers and buyers. XMNet is an organization that provides the service of verifying the claims of sellers with excess goods. They send inspectors to readymade garment factories world wide to check on merchandise and production lines, and also use independent agencies to check product quality. On the other hand, they also provide the seller with the credit history of the buyer to help them locate genuine buyers. For a reasonable fee, a great deal of information can be found from the Net Asian Sources Media Group (ASM) website. With improvements in infrastructural facilities (e.g. cheaper and better access to Internet service), and greater application of the computer in management and finance by individual firms, export oriented sectors (such as frozen food, sea food, leather) as well as importers would appreciate the ease and benefits of the Internet in promoting their products.
e. E-commerce in the Oil and Gas Sector
International Oil Companies (IOCs) are the dominant players in the exploration and
production of the oil and gas industry. IOCs use the vendors' web pages extensively in order to obtain product information. This exercise is also limited to the international vendors as the Bangladeshi business community has yet to become sufficiently cyber-centric. The IOCs make all the payments to the international vendors through Telegraphic Transfer. This is one good example of making cross border payments without following the complex mechanism of the Letter of Credit (L/C). The local vendors, however, receive their payments by check. IOCs have to abide by the Production Sharing Contract (PSC), signed with Petrobangla, the state oil company. Petrobangla shares the cost of exploration and production with the IOCs after the successful discovery of an oil or gas field. The IOCs are required to justify the procurement of every product and service pertaining to the exploration and production of each well to Petrobangla. If Petrobangla is convinced with the justification, only then does it share the cost with the IOCs. In view of the above scenario, the implementation of ecommerce in the energy sector is yet to kick-off in Bangladesh. Because, the financial discipline of Petrobangla is still being governed by the conventional parameters of Audit and Accounts of the Government of Bangladesh. Therefore, despite having all the logistical capabilities and human resources, the IOCs have yet to use e-commerce. However, akin to BTTB, a limited usage of electronic communications with the vendors does exist in the form of bid invitations and providing bid clarifications.
f. 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. In addition, transactions involving information collection, obtaining various governmental forms, registering activities can be conducted on-line. This will reduce time costs, corruption and the necessity of going through lengthy bureaucratic procedures as well as increasing transparency.
g. Prospects of E-commerce in Bangladesh:
Considerable awareness for ecommerce can be observed in Bangladesh and few companies are trying to apply ecommerce for conducting business. Three important requirements for e-commerce are adequate information infrastructure, appropriate legal framework and skilled manpower. Unfortunately the first and third of these are not sufficient and the second is nonexistent in the country. But currently the government controls almost the whole telecommunication sector. Already the government is trying to prepare the communication technology policy. The first draft of a sort of communication technology policy was prepared and presented in July 2000. The Bangladesh Computer Council prepared the draft under the auspices of the Ministry of Science and Technology. It details clear policy instructions regarding infrastructure, the development of technology, creating an environment for e-commerce and e-governance.
The draft proves that the policy is going to be well planned and well designed21. Now the short term (FY 2001-2005) IT policy has been adopted by the government22. Besides this, The National Telecommunication Policy was also formulated in 1998. In addition, Bangladesh is soon to have a new Telecommunication Act. According to the proposed Act a new telecommunication regime would be created whereby private sector investment would be encouraged. The government’s role as a regulatory body would be transferred to a new independent Telecommunication Regulatory Commission23.
The Government of Bangladesh has taken steps to boost up the IT industry for the development of e-commerce. The steps are as follows:
(a)waiving all taxes and duties from importing the hardware and software;
(b) ending BTTB’s role for the use of VSATs by ISPs who now directly negotiate with foreign carriers;
(c) declaring Tax Holiday for software and IT industry; (d) tax free export of software with 40% foreign;
(e) 100% remittance of profit and capital gains without any approval for the foreign investors;
(f) special funds have been allocated for collateral-free loan;
(g) Intellectual Property Rights Law has been approved by the Parliament.
(h) About 130 license have been issued by the govt. for ISP. 40 to 50 of them are producing Services Usage Charge and that is below Tk. 1.00 per minutes24. Already the government has formed a Telecommunication Regulatory Commission for the development of IT infrastructure as well as e-commerce infrastructure in Bangladesh.
Village Computer and Internet Program (VCIP) started on July 1999. The program is operating at Madhupur in Tangail district, which is about 160 kilometers away from Dhaka. The main objectives of this Program are:
a) Familiarize the village people, particularly the young generation, with the use of computers and the Internet;
b)Provide them computer training at a minimal price, and thus facilitate building up a computer literate generation in the country;
c) Provide free e-mail services to teachers and students for educational purposes and to doctors and journalists for emergency Purposes;
d) Provide e-mail facilities for families having relatives staying abroad and local;
e) Facilitate easier access to relevant market information, e.g. prevalent market prices of specific products in different locations. This would help the village people to have better bargaining capacity in selling their produce;
f) Provide computer compose and printing facilities at a low cost in rural areas;
g) Enable student contact with educational/research institutions and libraries abroad;
h) Organize IT workshop, seminars and exhibition in rural areas;
i) Create IT related job opportunities.
10. Recommendation :
Bangladesh is a country of villagers. All the priority regarding the development of IT infrastructure as well as e-commerce should be given to the villages. To overcome the barriers in the way of the development of e-commerce infrastructure in Bangladesh, we should take the following steps:
• Proper infrastructure development of telephone industry;
• Development consciousness about the benefits of e-commerce to the manufacturer/vendor’s and customers;
• Encourage medium and small firms to prepare Bangladesh based website for sells their product through e-commerce;
• Customer awareness about use of credit/debit card;
• Ensure proper security about customer’s information (e.g. Credit card number) by developing cyber law;
• Establish sufficient number of cyber cafe through private entrepreneurs;
• Encourage nonresident Bangladeshis to purchase country product through business-to-commerce;
• Development of proper educational institution to create efficient IT professional and develop require knowledge and skill by giving computer training and basic education to the villagers;
• Infrastructure development of port, customs and courier service facilities for ecommerce;
• To increase the use of computers and Internet facility Government must withdraw all taxes from computers and its accessories;
• Proper banking infrastructure development for issue Credit/Debit card and online money transaction facilities;
• Proper government support for the development of IT sectors and Internet facilities;
• Government should create an image of e-commerce awareness and leadership and demonstrate to the business community the importance of e-commerce.
• Lastly it can be concluded by saying that the banking infrastructure needed at the local, consumer side of e-commerce may be considerably more difficult to achieve. Just as the majority of the population does not have access to telecommunications services, they also typically lack access to even basic banking services, such as, savings and chequing accounts, credit cards and loans, even simple cash currency in many places. It will require creative and cooperative efforts on the part of banks, governments, businesses, and community leaders to develop innovative means for reaching these unnerved groups with services that are both appropriate and affordable.
Short term Program:
1. Bangladesh Telecommunications Regulatory Commission (BTRC) should be established independent of the government control.
1. Voice over Internet Protocol (VoIP) and private international gateway for voice and data should be allowed
2. The provision of obtaining permission from MOPT, prior to leasing the . Capacity from GrameenPhone’s optical fiber network should be abolished. for the mass market.
3. The tariff of BTTB’s DDN should be rationalized in order to make it affordable
4. Unlicensed radio frequencies should be made available on demand.
5. VSAT operating licenses should not limit the bandwidth.
6. 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 Program:
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 Program :
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 issuance of International Credit Cards should be allowed.
4. Government officials are to be oriented on the benefits of e-commerce. For instance short course can be offered at training centers such as the Public Administration Training Center (PATC).
5. Business associations and organizations should be made aware of the benefits of e-commerce. BGMEA can play a significant role in this.
6. Greater competition among the Internet Service Providers (ISPs) should be promoted and new ISPs should be encouraged to come into business.
7. Revise and update ageing laws on trademark, copyrights and evidence.
8. Court procedures should be simplified and expedited. Administrative and institutional constraints in settling disputes should be removed.
9. Laws that allow encryption should be developed, thereby paving the way for authenticating transactions electronically.
10. Political commitment to improve governance and institutional strengthening are essential for successful application of e-commerce.
11. Conclusion
Despite being a poor country, selected segments of the Bangladeshi business community has embraced technology with reasonable success. The Facsimile in the 1980’s and mobile telephones in the 1990’s popularized modern technology in the mass market. Personal computers and the Internet are also emerging as day-to-day business tools. These positive indicators are favoring the prospects of e-commerce
in Bangladesh.
The focus of this paper was on the current state of the regulatory environment in the financial and technological sectors of Bangladesh. Necessary reforms in order to introduce e-commerce have also been suggested. Lack of awareness among the policymakers has been identified as the major deterrent to introducing e-commerce. Conventional understanding of payment mechanisms raises false alarms against the flight of capital if e-commerce is implemented. Synergy between telecommunications and information technology has the proven capability of monitoring and administering the real-time transactions. Therefore, liberalizing the telecom and IT sectors as well as reforming the country’s financial and commercial procedures is the preconditions of successfully implementing ecommerce in Bangladesh.
In the case of marketing, simply having a website in the vast sea of the Internet is not sufficient. Uniformity is an important factor in the commencing of contracts through the Internet. Therefore, to take advantage of the newer opportunities that IT development presents, the Bangladeshi companies have to attain internationally accepted certification on quality control, competitive price and timely delivery.
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.
12. Advantages of E-Commerce :
Many established companies still think of e-commerce in terms of defense rather than offense. They feel obligated to do business on-line to protect market share, but they doubt the venture will ever turn a profit. They envy the explosive growth and extraordinary stock multiples of the pure Internet players, but they are afraid of cannibalizing their existing businesses and rendering legacy assets obsolete. At the same time, they assume that succeeding at e-commerce is simply a matter of designing a catchy Web site or creating a new channel, moves well within their current skill set. This contradictory mix of skepticism and envy, fear and complacency, slows them down in an arena where the early-mover advantage is substantial and where halfhearted efforts commonly fail.
In fact, established companies are often well positioned to succeed at e-commerce. They possess critical assets that can give them an edge over start-up competitors. But to take advantage of those assets, incumbents need to take the offensive, and quickly. They must carefully assess their strengths and weaknesses, build on the former, and rapidly make up for the latter. They need to take a strongly customer-centric view of their offering. And they need to understand e-commerce not as an end in itself but as the cornerstone of an integrated business system.
Consider three ways that established retailers have leveraged their strengths to create promising on-line businesses.
Brands Matter
In the early days of e-commerce, many observers thought that electronic retailing would pose a threat to traditional brands. The logic was compelling: brands are a substitute for information, a way for consumers to simplify the time-consuming process of search and comparison before deciding what to buy. The Internet, however, makes search and comparison far easier. And independent Web-based navigators that guide consumers to the best deal now threaten to undermine traditional brands, where they do not render them obsolete.
But the logic of the Internet cuts another way as well. On-line shopping requires consumers to provide considerable personal information, names, addresses, credit card numbers, and the like. People don't want to share this confidential information with just anyone. What's more, they are buying goods that in most cases they have never handled or seen (except on-screen). Not surprisingly, trust and security are especially important issues on the Web. As a result, brands may actually matter more on-line than off, giving established brands an edge in building the critical mass so vital to market dominance in e-commerce.
Of course, it is only an edge. On-line retailers need to understand not only that brands matter but also how they matter. A brand today is a total customer experience, encompassing every step from discovery to purchase to fulfillment to service. Companies must learn first how to translate their distinctive customer experience to the Web and then how to use their e-commerce offering as a means to reinforce that experience throughout the entire business system.
One company that has adroitly used its brand power as a wedge to begin building a Web business is Sears. The company organized its e-commerce offering around two of its most powerful brands: Kenmore appliances and Craftsman tools. Both brands are category leaders, allowing Sears to play from a position of strength. And as categories for which consumers do considerable research and investigation before buying, both lend themselves to the Web's ability to provide rich information broadly. What's more, the company already had in place the necessary logistics systems, direct delivery for appliances, centralized distribution for tools, which could easily be adapted to e-commerce. The complete package is the kind of end-to-end brand experience that attracts customers and keeps them loyal. The marketing system draws power from the Web site. The Web site draws credibility and traffic from the brands.
Fulfillment Is the Acid Test
Fulfillment, the nuts and bolts of getting the right order to the right customer on time, is the acid test of e-commerce. If an on-line retailer can't get it right, the most compelling Web site in the world won't make up for it. That's why the best of the pure Internet players are investing heavily in logistics. Witness Amazon.com's recent move to create its own state-of-the-art system (and to hire several specialists away from Wal-Mart to design and build it).
Many established companies have such systems in place already and can use them as the cornerstone of a new Web-based business. Some of the most successful retailers on-line, for instance, have been catalog retailers like L.L. Bean, Lands' End, or J. Crew. Their telephone-based fulfillment systems, originally designed to accommodate individual consumers, have been ideally suited to the demands of e-commerce. Because of these sophisticated fulfillment systems, catalog retailers have the lowest back-order rate among on-line retailers: 6 percent, compared with 9 percent for pure-play retailers and as much as 11 percent for traditional bricks-and-mortar retailers.
Of course, not every existing fulfillment system is so well suited to e-commerce. One big-box retailer, for instance, chose to piggyback direct-to-consumer fulfillment onto its warehouse-to-store stocking system. But the operations for on-line and in-store fulfillment are so different that the two cannot economically be accommodated by the same systems and processes. As a result, individual orders flowing in from the Web site did not receive the attention they deserved, and complaints about poor service skyrocketed. The company has recently begun an expensive recovery by acquiring a state-of-the-art distribution center to serve its on-line channel exclusively.
From Channel Conflict to Channel Synergy
Perhaps the most important asset that established companies possess for e-commerce is their existing channels. At first glance, this seems absurd. Isn't e-commerce a recipe for channel conflict? Not necessarily. A growing body of evidence suggests that there are substantial synergies between physical channels and new electronic ones.
Consider the example of Levi Strauss. The company first developed an e-commerce site in 1995 but delayed launching it for three years because managers worried that the site would cannibalize the company's existing channels. In fact, precisely the opposite has occurred. Many customers use Levi's sites to research products they subsequently purchase in stores. Others (typically men), who have never bought Levi Strauss products in stores, are finding it easy and convenient to shop on-line. Still others are unable to find their size in a store and so shop exclusively on the Web. Without the additional channel, many of those sales would be lost.
The ultimate synergy is to combine multiple channels into a single integrated business system. When Office Depot launched its e-commerce site in January 1998, the company paid special attention to the links between its Web channel and its other channels. The company's catalog refers consumers to Web pages where they can find rich interactive content that the catalog cannot provide. Customers unable to find a particular item in a store can use a computer terminal with a direct link to the Web site and its far wider product range (10,000 SKUs as opposed to some 6,000 in a typical store). They can place an order for home delivery or store pickup at a later date. Items purchased on-line can also be returned to stores or picked up by Office Depot's delivery fleet.
The company hopes eventually to institute integrated customer tracking so that it will be able to collect data on each customer's activ-ity across multiple channels. The data will allow Office Depot to learn more about the needs and behaviors of specific customers and to market to them more effectively.
In each of these examples, e-commerce is about more than merely creating an on-line presence. Rather, it is one component in the delivery of a complete customer experience. Established companies, nonretailers included, can use existing assets not only to extend their distinctive customer experience to the Web but also to fortify and enrich that experience across multiple channels. Those that do will be at the forefront of e-commerce, leaving other companies to play defensive catch-up.
13. Disadvantage
a. Constraints to E-Commerce:
Out of 64 districts, Internet services are available only in 6 major district headquarters. BTTB is planning to gradually roll out an IP network up to the 64 district headquarters. In January 2002, the Internet facilities were extended to 12 districts. The project is running on very fast and today almost 40 plus districts are getting Internet facilities.
Followings are the barriers of e-commerce in Bangladesh:
• Very minimum number of users of web sites;
• Poor telecommunication infrastructure with limited fixed-line access, unreliable connectivity and low bandwidth (9K);
• High price of computer and hardware: The per capita income of our people is less than US$300. But in order to buy a computer it is needed US$500 and for this reason, it is beyond the capacity for a villager to buy it.
• Lack of technically efficient personnel;
• Lack of investment in hardware and software;
• The banking infrastructure in terms of electronic payments and inter-bank connectivity is poor. No local banks issue credit cards and very few companies accept credit card payments. As such, the customers of 5770 branches of the local banks are unable to operate their account with the other branches of the same bank. Inter bank transaction is more cumbersome as the clearing-house of the central bank is not online. An inter-bank transaction may take even 2 weeks if the branches are different cities. Only 27 branches of the eight foreign banks are interconnected with their respective head offices. They are also satisfactorily computerized. This represents only 0.47% of the entire banking sector25.
• Small number of Credit Card users;
• Limitations of supportive legal system. Such as, exchange controls, protection of telecommunication monopolies, restrictive trade practice and prohibitions;
• Absence of cyber law;
• People’s mindset and very slow and expensive Internet services;
• Enterprise managers’ lack of initiative and leadership in taking advantage of ecommerce;
• Bureaucratic complexities; and
• Lack of awareness at government level of e-commerce issues.
Due to these problems, not sufficient on-line users are available until the club of Internet users in the country reaches a critical mass, cyber banking and thus ecommerce is unlikely to take off among customers.
b.Major Constraints to E-Commerce
A list of specific constraints to e-commerce that policy makers can address in the short and medium term is summarized below.
- 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.
- Non-issuance of international credit cards for cross border
- transactions.
- Interest rate ceiling on export loans.
14. Others
Taking Advantage of E-commerce: An Example of India:
The world e-commerce transaction is said to have touched $500 billion this year according to one estimate (including goods sold and purchased over the internet). There are over 2 million people whose jobs are now dependent on it. And this is just the beginning.
India with a substantial presence in the computer software segment, and a large well-trained manpower, has the potential to gain significantly from e-commerce. However, there are serious bottlenecks. With barely one million PCs and 15 million telephones in India, India needs radical policy reforms in many areas if she is to take advantage of this emerging area of e-commerce. On the other hand, e-commerce has the potential of freeing the Indian economy and her people from the restrictive influence of the state.
1. How can India benefit from e-commerce?
A. India has shown itself to be competitive in information technology and in services. E-commerce dealing in intangibles combines these two together. Solving Y2K bugs was an excellent example of e-commerce. India can be confident of doing well in the service side of e-commerce. After software, e-commerce is likely to be the next wave of information technology business. If India is not actively involved, its famed software industry will become a historical relic.
B. By eradicating the disability of geography, e-commerce allows service providers to compete directly on labour costs and other factors like time difference. India's labour prices are extremely competitive against any Western country. And few third world countries have India's lead in information based services. India is also nicely placed between east Asia, Europe and the Americas to tap time zone difference. Already, Indians work on projects for US companies while the latter sleep.
C. E-commerce greatly reduces transaction costs and overcomes infrastructure failures. For Indian companies, especially small companies, who have a hard time with overhead costs and overcoming infrastructural bottlenecks, e-commerce is a cheap way to become a global market player.
D. E-commerce gives India an opportunity to rebuild a large portion of its economy without the red tape and regulation that strangled its manufacturing sector during the past 50 years. India's software industry has shown how well information based industries can do if the government is not involved. E-commerce could expand that lesson to many other sectors of business including retailing.
2. Few will oppose e-commerce at the WTO. But they will propose regulatory mechanisms that could throttle the business before it starts or, worse, provide means for countries to put up barriers to e-commerce across borders.
A) The European Union has proposed an international regulatory body for e-commerce. But this could easily become hostage to politics, parochial national concerns and rivalries. A multilateral body would tend to seek the lowest common denominator among its members and this is likely to be the most restrictive measure.
B) Countries will try to bring in taxes and tariff systems that mimic those in normal physical trading. This would automatically rob e-commerce of much of the speed and flexibility that is its advantage. It would also bring in an enormous amount of national government regulation that would suffocate e-commerce development.
3. What India should support about e-commerce?
A) It should oppose international regulation. Self-regulation is probably the best way. In other words, beyond a basic legal framework establishing the authenticity of electronic signatures, contracts and so on. Let the market generate the credit rating and security measures in the form of private firms. These themselves will be forms of e-commerce which Indian companies can profit from.
B) There are two types of e-commerce. One is the business of intangible services and products. These should be declared tariff and tax-free. This would encourage such business and remove a major government headache on how to regulate this. The other type of e-commerce will result in the movement of a tangible product or good from one hand to another. India should consider at least introducing a tax and tariff holiday in such services for a few years, if not a total ban altogether. Taxes could perhaps be shifted to consumption rather than transaction based means.
C) India should reassure other third world countries about the importance of e-commerce and the fact all countries will benefit greatly from allowing free trade in cyberspace.
However, to take advantage of this new technology, a new mindset is necessary. First, it would be necessary to realise that the industry grew precisely because the state failed to realise the potential of software and therefore, did not place the kind of obstacles that other sectors of the economy had to go through. But now the state is planning to step in. While it talks of promoting the IT sector, it now seeks to impose a 49% ceiling on foreign investment in e-commerce ventures. Clearly the state has failed to understand that e-commerce operates in a borderless world. A cap on foreign investment will severely handicap the Indian operations right at the dawn of this new era.
E-commerce is a very good example of brain drain in the other direction. Foreign companies setting up in India a range of e-services, data communication, backroom activity, ticketing, data processing, call services, has the potential for a lot of employment, and income. Let us not close this window of opportunity on ourselves.
15. References:
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- Ali, Syed Ashraf, 1995. Foreign Exchange and Financing of Foreign Trade, Lita Academics, Dhaka.
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The Asia Foundation, 2000. Bangladesh Export-Apparel Industry: Into the 21st Century the Next Challenges, October, Dhaka.
- Azad Dr. A. K., Dr. M. M. H. Joarder and Md. Iqbal, 1996, Summary of Reports on Uruguay Round Agreements and Related Issues, Ministry of Commerce, Government of the People’s Republic of Bangladesh.
- Bakht, Zaid, 1999. Policy Induced Constraints to SME Development in Bangladesh,
A report prepared for the USAID funded JOBS Project.
- Bangladesh Bank, 1999. Annual Report 1997-98, Dhaka.
- Bangladesh Bank, Foreign Exchange Guidelines, Chapter 20, Bangladesh Bank,
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- Bhattacharya Debapriya and Mostafizur Rahman, 1997, Bangladesh: Trade Related Technical Cooperation Needs Assessment, A Country Position Paper, the Ministry of Commerce, Government of the People’s Republic of Bangladesh.
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- CBI 1990, Electronic Components, The Market in the Netherlands and in other Major Markets of the European Community.
- Chowdhury, Obaidul Huq, 1992. Contract Act (XII of 1872), Dhaka Law Reports, Dhaka.