The application of e commerce in vietnam

A general view of the operations on these networks is given inFigure 1.1.1 are rch ths of s.n Business 1 Business 2 Busines Figure 1.1.1 Interactions In The Reservation Systems Concepts

MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGES

AND INFORMATION TECHNOLOGY

SCHOOL OF FOREIGN LANGUAGES

1.1 INTRODUCTION TO E-COMMERCE

OBJECTIVES

-8-1.1.1 INTRODUCTION

interconnected through a special network of Railways and the computerscommunicate with each other Similarly airline and hotel room reservationsystem etc allow us to make suitable reservation from anywhere in theworld A general view of the operations on these networks is given inFigure 1.1.1

are rch ths

of s.n

Business 1 Business 2 Busines

Figure 1.1.1 Interactions In The Reservation Systems

(Concepts of e-commerce, Aptech reading material, page 2)

In the banking sector, we could withdraw money at anytime, from any of

influence of IT is also felt in hospital, homes, factories and educationalinstitutions IT takes education to every doorstep and every person in acost effective manner through online universities Internet has made thedramatic impact on the society by bringing people from all over the world

-,9-shopping and business, it enables complex business operations to beperformed by effectively using the electronic networks like Internet andcomputers When the business is performed on the electronic media, it is

Collaborate compete with other business firms

Communicate with customers

1.1.2 CONCEPTS IN E- COMMERCE

-

~()-Manage finances &

communicate with banks

Communicate with employees

Plan &

organize production

Procure raw material for production

Sell products

&

services

Figure 1.1.2 Some Typical Business Operations

(Concepts of e-commerce, Aptech reading material, page 3)

All the players will not be in one location, computer networks connect all

of them and facilitate the business transactions between them

"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."

(Page 4, Concepts of e-commerce, Aptech reading material)

"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)

"Electronic commerce, defined simply, is the commercial transaction of services in an electronic format."

(Transatlantic Business Dialogue Electronic Commerce White Paper,

1997)

"Electronic Commerce is about doing 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)

transacting business using Internet technologies, with automation of the

business transactions as the core or essence The new paradigm of commerce permits carrying out the business and commerce in an integrated manner, with minimal costs, and with fast response to various players participating in the E-commerce activity E-commerce deals with transactions of the front-end shops catering to the needs of the consumers and also with the supportive transactions related to advertisement, providing information to the consumer, consumer support, manufacturing, procurement of materials, supply chain management, negotiations, collaborations and competitions with the others stores, legal and regulatory frameworks, financial settlements, excise and taxation, imports and exports".

e-In conclusion, E-commerce means these following activities using the Internet based communications

other channels of transaction

graphics, visual images, sound, video clips and animation

offered

Selling products or providing services, stores carry out these operationsunder the name e-commerce by using the Internet technologies

1.1.3 E-COMMERCE ON BUSINESS AND CONSUMERS

Earlier, only the large business could afford the investment and expenses

in order to reach out to a large number of consumers So now, thanks toInternet, even the smallest business could access a large number of

-

of.:?-consumers E-commerce conducts business, it would help to streamline

suppliers; improve accounts receivables and increase in productivity andprofitability

E-commerce is likely to provide products and services that are suited to

able to gather detailed information of each individual consumer and tailorthe products and services to those needs

1.1.3.1 E-commerce And Sellers

Internet store requires less expenditure on the establishment of store andrunning it The use of Internet for communication is expected to reduce in

services The suppliers will be able to offer the goods at lower prices

with the real shops

Moreover, the automation of the business process will lead to reduction inerrors because the data is done through EDI (Electronic Data Interchange)

An appropriate location for a real shop has been the major problem for

convenient place for every consumer can visit with a few mouse clicks.The globalization of trade and industry provides an opportunity to reachglobal base of consumers without setting up store or/and advertising inevery country

The Internet based store can easily provide services such as: deliveryschedules, tracking the material during the delivery, locating a particulartype of product, after-sales support etc

The information about the store, new products introduced, reduced pricesales, product reviews can be quickly update and made available to the

email and the preparation of letters and the services are almostinstantaneous Internet communication is inexpensive way.

information on their products and services such as guidance on use of theproduct service, technical specifications

1.1.3.2 E-commerce And Consumers

Consumers access the original firm (rather than dealer or middleman)

suppliers of their needs, regardless their geographical location, can easilyreach several shops, compare the quality and prices in a short time

the shop or bank

stores

1.1.3.3 E-commerce And Inhibitors

have the lurking fear that they will be cheated

The Internet store is global trade, so it is very important to the store and consumer know the restrictions of each country: foreign exchange, importand export policies

There are also the money laundering through fictitious business, shipping

of unauthorized materials

The intentional and unintentional regional biases could be disadvantageous

businesses from developed countries (they don't accept credit cards fromdeveloping countries )

-

~4-In ~4-Internet automobile sales, few consumer like to purchase a car withoutreally having an experience of sitting in the car or driving the car This istrue in purchasing houses

People shop for a variety reasons: social outing, see the people around,

consumer

1.1.4 ENTITIES IN E-COMMERCE TRANSACTIONS

organizations and individuals The transaction can be broken down into a

certificate authority, consumer's bank, store's bank, credit card issuer, cash issuer, credit card number, digital cash, invoice, purchase order,catalogue, etc

e-1.1.5 SCOPE AND BASIC MODELS OF E-COMMERCE

manufacturing and business firms except those that are physically carriedout, such as manufacturing, packing and shipping

There are 2 types of basic business models

-

~5-1.2 ELECTRONIC DATA INTERCHANGE (EDI)

OBJECTIVES

business

-Ni-1.2.1 INTRODUCTION

What is EDI?

according to predefined message standards between computer systems,

by electronic means."

(Page 22, Concepts of e-commerce, Aptech reading material)

trading partners electronically using a "paperless trading" system

EDI covers most things that are done using paper based transactions.EDI makes the pre-defined forms like invoices, purchase orders, supplyinformation etc

The exchange of the electronic information is based on the basic unitscalled messages These messages relate to business documents such asinvoices, purchase orders etc

1.2.2 DIFFERENCES IN PAPER-BASED BUSINESS AND EDI BASED BUSINESS

Paper-Based Business EDI-Based Business

There is human intervention that is There is no human intervention, the

documents contain errors, it will send to a person for correction

re ~7re

~7-1.2.3 EDI METHODOLOGY IN BUSINESS

The six steps which typical business deal are handled by the EDI

by a confirmation

computer-buyer

transport arrangements

of the transportation to the computer-seller

computer-seller who then sends back an invoice for the sale

• The computer-buyer sends the payment to the computer-seller

1.2.4 ADVANTAGES OF EDI

strategies

1.2.4.1 Opportunity Benefits

of this will get enhanced in the company's image

1.2.4.2 Operational Benefits

The documents for business will not have errors compare with manual

matching, filling, reconciling and mailing Moreover, the cost of processing

a paper transaction is nearly 10 times the cost of handling its electronic

-

~8-other storage systems; the cost of personnel to maintain all these systems; the costs for paper, envelopes and mailing materials, telephone

ordering data is accompanied by scheduling information, companies canplan production more accurately and thus reduce stock inventories lead tosubstantial savings

Historical data that is obtained through trading information built-up fromEDI transactions is a valuable source of information that is very useful formarket research and strategic planning

1.2.5 EDI APPLICATION

Excise, Statistical Data

1.2.6 ACTIONS PLAN FOR IMPLEMENTING EDI

A stepwise plan for implementing EDI

of and into the organization

generated automatically

organization has dealings

-

-/,9-/lJpIJdJ':~J'. /lI.1'hr.en 2>4#151

trial basis

additional business functions

1.2.7 COSTS IN EDIIMPLEMENTATION

When a business is considering the implementation of EDI, it is important

to be aware of the costs involved

• Consultancy charges: the fees for consultants who are appointed to

design and implement the EDI systems

• Cost of Hardware: depends on the type of hardware you choose

• Cost of Software: base on the number of users and the cost oflicensing the software

• Software Development costs: include the costs associated withmodifying the existing in-house systems to be adapted to the EDIimplementation

• Training costs: fees is required for adapting to the new procedures as well.

• Software Maintenance: After the period of warranty is over, theorganizations specialize in hardware maintenance

-

2tJ-• Cost of Networking: additional equipment and infrastructure requiredfor communication like telephone lines, additional networking hardware.

• Legal costs

1.2.8 SECURITY ISSUES IN EDI

There is a need to verify that the data was received exactly as it was sent.The activity needs to be tracked

The data needs to be protected from intruders

There is no provision for signatures authorizing the transaction

There is no hard copy of a document that can be filed or distributed

-.2'/-1.3 ELECTRONIC PAYMENT SYSTEMS

OBJECTIVES

financial transactions in retail selling

-22-1.3.1 CONVENTIONAL PAYMENT MECHANISMS

the early days, man used the barter system in trading This couldn't makethe society grow well because the traders didn't satisfy the customers'needs The earlier forms of money were seashell, gold Then came the

banking system came into existence in trading world People deposited

needed And then bankers lend these money to businesses

With the existence of the banks, it is very convenient and secure aboutmoney transfers Bills of exchange, money orders, cheques, drafts, letters

of credits and telegraphic transfers are the forms of payment that used to

customers operate their accounts from any location and at anytime of theday, transfer money from account to the other and from one bank to theother And the following is the credit cards, often called plastic money, areused for people for the purchase of goods and services This innovationhas reduced the dependence of the consumer and the retailer on the realmoney The earlier revolutions of banking have created paper currencies,

The success of e-commerce is likely to bring in a radical change in themonetary systems and also in the market systems In fact, e-commerce

systems

1.3.2 ELECTRONICS PAYMENT MECHANISMS

There are five broad methods of electronic payment that are available tothe consumers, for the goods/services they receive

.23

-• Payment through Electronic Funds Transfer at Point Of Sale(EFTPOS) including credit card transactions.

Voice Response (IVR)

1.3.2.1 Electronic Funds Transfer at Point Of Sale (EFTPOS)

are inserted in the machines while the transactions happening There are

2 type of this techniques:

transfers the money to the merchant and raises a monthly bill with thecard user

An account holder of a bank or any shopping center has a token in the

the customers purchase goods, she/he must enters his/her PIN code and

merchant's account

-24-1.3.2.2 Bank Network

Head office of Bank A Head office of Bank B

Branch of Branch of Branch of

Branch of Bank B

Branch of Bank B

Branch of Bank B

Figure 1.3.1 Bank Network

(Concepts of e-commerce, Aptech reading material, page 41)

transactions between their customers Furthermore, the banking networkexpanded the Automatic Teller Machines (ATMs), which facilitated 24-hrbanking

(Concepts of e-commerce, Aptech reading material, page 41)

Instructions to the Bank including Financial Electronic Data Interchange(F-EDI), and telephone and Interactive Voice Response (IVR)

• Direct Data Entry Transactions.

This is direct payment through instructions to the bank

Figure 1.3.3 E-commerce purchase transaction through conventional Bank

(Concepts of e-commerce, Aptech reading material, page 42)

response on the Internet are not reliable The system does not link the transaction with the payments This can be achieved by using the EDI

amount to be transferred are incorporated

Figure 1.3.4 E-commerce through E-Cheque

(Concepts of e-commerce, Aptech reading material, page 43)

monthly statement

Benefits

and so the consequ~~l1fial.tiirl~CieL~~.rd wasted efforts are minimized

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27-• The theft of E-cheques are small Even if lost, payment can bestopped and a new cheque can be issued.

1.3.2.3 Payment through Smart Cards

Smart cards have a processor and memory They can store cardholderinformation, the bank account details, the private and public encryption

signatures etc and some permit bi-directional transfer of money, and can

card-readers, which can work independently on telephone, Internet lines

or computer The banks or other financial institutions issue these cards tothe customers for all their financial transactions

Customer'sBank

Merchant'sBank

Seller / Merchant /Vendor / Individual

Figure 1.3.5 Transactions with Smart Card

(Concepts of e-commerce, Aptech reading material, page 46)

issuer Thus the e-cash stop to exist and none can reuse it The e-cash is deleted from the user's storage after the user receives a confirmation

-28-from the merchant about the receipt of e-cash E-cash based systemdivides the activity of purchase into distinct, simple individual steps.

4 A kid c now e ge recelp 0 - as goo s

~

3 Send E-Cash

1 Select & order goods, reco~Jnize both parties

(b) Transaction between Consumer & Merchant

3 Inform crediting E-Cash

2 Credit E-Cash

(c) Redeem E-Cash Figure 1.3.6 Three stages of E-commerce Transactions using E-Cash

(Concepts of e-commerce, Aptech reading material, page 48)

-

2.9-Benefits and risks in using the Electronic cash

E-cash and verifies the serial number, it deletes the number and takes itout of circulation forever You can not copy the number and use itagain

by the customer or lack of funs in a customer's accounts In the case

of a credit card or check payment, the customer can refuse or stoppayment

can not be traced after the transaction is over The merchant requiresthe customer's name and addresses to deliver the goods

guarantee the money taken by issuers? Who will control the nationaleconomy? Can national economy be sabotaged?

Several banks and financial systems have collapsed

-

~(J-1.3.2.5 Electronic Credit Cards

1 Order goods & give invoice

2 Send credit card number

3 Request credit authorization

4 Credit verification

5 Give credit authorization

6 Supply good & obtain receipts of goods

7 Give receipts of goods

8 Transfer credit authorization & receipts

Benefits and Concerns

card data of the consumer is not available to the merchant unlike theconventional systems

merchant to the bank immediately

1.3.3 FUTURE OF E-COMMERCE

Whose responsibility is the protection?

Traditionally, the currencies are controlled by governments

• Can we trade freely with national restrictions? Restrictions are in terms

exchange availability Even US has a large number of restrictions

handle e-commerce transaction?

the range of common people?

disputes?

consequences

';2

-1.4 SECURITY

OBJECTIVES

1.4.1 SECURITY ISSUES IN E-COMMERCE

transaction needs that take place between the firms, consumers, banks However Internet is a network of networks and that is accessed by a largenumber of people and is used for a variety of purposes

The information that is exchanged between business partners can easily

through Internet cause considerable damage to the business systems As

a result, the network security has become a major concern to the networkadministrator, users, network owners or firms

The requirements of e-commerce applications are

catalogues information stores

Figure 4.1 E-commerce Requirements

(Concepts of e-commerce, Aptech reading material, page 64)

purchasing goods from Internet store:

-~4-• A consumer is looking for the product A After browsing at the productinformation he/she decides to purchase the product.

payment mode of the product

issuer of credit card or the bank The bank then confirms the credit orcash and freezes the amount

the consumer receives the product

informs the consumer

1.4.2 REASONS FOR BREAKING SECURITY

Publicity The hackers would like to show their skill by breaking into

them are harmless The firms offer the hackers the challenge to breaktheir security systems

Finance The hackers breaks the system for the purpose of financial

information transfer on the network

Industries and Military The other purpose of hackers is aim to the

competitive environments, so the protection of information is very important

as well as in the military because it is the security of each country

Viruses With a large number of transaction taking place on Internet, one

of the major threats to the information stored on the Internet servers areviruses The attacks by viruses may lead to shutting down the system,destruction to the resources, slaving down the systems

,gff

-Most of the attackers make use of the weaknesses or gaps in the securitysystem and gain their purposes.

1.4.3 CONFIDENTIALITY

users, stores, banks on Internet All the information such as user IDs,

being sent over the network

Figure 1.4.2 Others intercepting information meant for Receiver

(Concepts of e-commerce, Aptech reading material, page 71)

The security requirements for network-based transaction are

Receiver

Decrypt

Sender's public key Receiver's private key

Figure 1.4.3 Confidential and Authentic message using Public and Private key system

In order to reach the above, both sender and receiver must have theprivate and public key The public key is placed with either the CertificateAuthority (CA), in the case of Internet or in the public key server of theprivate network The private key are private and known to the parties concemed.

(Concepts of e-commerce, Aptech reading material, page 78)

1.4.4 FIREWALLS

safeguarding the Intranet from the attacks originating on the Internet The

resources are to be safe guarded against the attacks from Internet users

allowed to go out of the Intranet Sometimes the firewalls are installedbetween various sections of the organizations to protect the data of eachsection from the persons of other sections

As long as computer systems are connected to network (Intranet), and

breaches as the systems are accessed by many people

network So a careful monitoring of the network system is very important

in the detection of breach

A firewall is very important in an e-commerce transaction to secure thesensitive information

-37-PART II

THE APPLICATION OF E-COMMERCE IN VIETNAM

OBJECTIVES

viewpoints from consumers and businesses

Vietnam

-38- 2-38-.1-38- WHY VIETNAM SHOULD APPLY E-COMMERCE

E-commerce applications focus on the consumer share an important goal:

community features

J

On the Internet, the barriers of time, distance, and form are broken down, and businesses are able to transact the sale of goods and services 24 hours a day, 7 days a week, 365 days a year with consumers all over the world.

(Introduction to Information Systems, James A O'Brien, pp 270)

abroad for marketing its products, it will cost at least 10,000 Usd for each time Moreover, small firms can not go to any foreign countries because

of lacking money and relations If a business markets through Internet, it will spend less cost and the barriers of time and distance are broken down Furthermore, when applying e-commerce, a business will access the new knowledge, modern technology and as a result the quality of products will be improved With these advantages, e-commerce is considered the most indispensable trend of the world economy".

(Linh Phuong, VNPT Website May 3,2000)

2.1.1 WHY INFORMATION SYSTEMS ARE IMPORTANT

The blending of Internet technologies and traditional business concerns is impacting all industries and is really the latest phase in the on going

technologies and systems are fast becoming a necessary ingredient for

-

3.9-business success in today's dynamic global environment In fact, many developed - countries have used e-commerce because of its advantages.

2.1.2 FROM THE CONSUMER'S VIEWPOINT

reach every kind of business Further the consumer has access to the

consumer will have global choice - the facility to select from all potentialsuppliers of a required product or seNice, regardless of their geographicallocation

much easier as the consumer can reach several shops, compare the quality and prices in a short time

through on line information

Another motivating factor is the saving of time and inconvenience in going

to the shop, bank and waiting in the queues for a variety of seNices

Finally, the consumer believes that the materials will be less expensive,

as the stores will pass on the price advantage to the consumer

2.1.3 FROM THE BUSINESS'S VIEWPOINT

store and running it and it is this economy that will be of great interest to

-40-the seller For instance -40-the expenditures such as rental of a displayablestore area, salaries of security and sales persons are easily saved Thesmallest set up requires a web page and this could be at a very low price.

thus leading to reduced prices for products and services

Therefore, suppliers will be able to offer products at lower prices when

consumer, the web store will compete very favorably with the real shops.Internet store will operate with less number of errors as the need to

every place is eliminated through ED! The automation of the businessprocess will also lead to substantial reduction of errors

Finding an appropriate location for a real store has been a major problem

convenient place can easily be addressed through web - store approach.The Internet store, will always be located at an accessible place for everyone living in any city and in any country, as every consumer can visit itwith a few mouse clicks

advertising in every country and every city

E-commerce improves customer service The Web lets customers serve

Besides benefiting customers, companies save money from self-service.Internet offers an integrated marketing, service and sales facility Internetmarketing or advertising has global reach and is a part of establishing thestore meant for sales In addition, the Internet based store can easily

provided are delivery schedules, tracking the material during the delivery,locating a particular type of product, after-sales support, etc

-

4~-The information about the store, new products introduced, reduced pricesales, product reviews can easily be updated and made available to the

effort required is the preparation of one letter and the service is almost

compared to all the other modes

Specially the e-commerce will be able to provide information to the sellers

on the global markets and countries relating to

The speedy and accurate generation of required information and making

it available to the seller would facilitate the growth and development of the

the seller Of course, countries that are technologically prepared will gainmore from this feature

can provide detailed information on their products and services such as

answers to frequently asked questions and this could be provided to theconsumer by the store This works to the advantage of the manufacturer,consumer, and the stores Normally the store will not be in a position toprovide technical and service information and the consumer is not in aposition to get this information from the manufacturer

market

-42-2.2.S0ME WEBSITES IN FOREIGN COUNTRIES AND

IN VIETNAM

2.2.1 SOME COMPANIES IN VIETNAM USE E-COMMERCE

1 Vietnam Shop Supermarket

Address: 308A Dien Bien Phu St District 3 Tel: 8322412

Website: http://www.vnshop.com

clothing, gifts, watches, shoes to electronic equipment

2 Sony Company

Address: 248A No Trang Long, Binh Thanh District Tel: 516111

This website shows all kind of machines: televisions, cameras, projectors,

CD Walkman, Video - cassette player

3 ThienKy Company Ltd

gifts through online web-store

-43-2.2.2 SOME TOP RETAIL WEBSITES IN FOREIGN COUNTRIES

1 Amazon.com

"real world" retailers online The mother of all shopping sites, Amazon

items, electronics and even home and garden goods sold to millions ofloyal customers This is an excellent example of e-commerce

2 eBay

dispensers and baseball cards This site boasts billions of page views permonth, and millions of items for sales in thousand of categories supported by thousands of special - interest groups

Shoppers A customer service rep will help you make your selections andanswer question by phone or via a live chat

5 Orvis com