Economic Impact of E-Commerce in Developing Country

Category: E-commerce, Internet, Retail
Last Updated: 16 May 2021
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Electronic commerce over the Internet is a new way of conducting business. Though only three years old, it has the potentials to radically alter the economic activities and the social environment. Already, it affects such large sectors as communications, finance and retail trade (altogether, about 30 per cent of GAP). It holds promise in areas such as education, health and government (about 20 per cent of GAP).

The largest effects may be associated not with many of the impacts that command the cost attention (e. G. Customized products, the elimination of middlemen) but with less visible, but potentially more pervasive, effects on routine business activities (e. G. Ordering office supplies, paying bills, and estimating demand), that is, on the way businesses interact. I feel very interesting to make report on such a nice topic is the partial fulfillment of ABA program as assigned by my honorable supervisor and my report is titled "The economic impact of e-commerce in developing country like Bangladesh".  To know the drivers of e-commerce in developing countries 0 To know the significance of e-commerce in the global business To know the social impact Off- commerce in developing countries 0 To know the economic impact of e-commerce in developing countries 0 To finding out the problems faced with e-commerce in developing countries.

E-commerce includes online credit card transactions, e-cash, e-billing, e-cherubs, electronic invoices, purchase order and financial statements. These factors nowadays used in the developing countries which can significantly impact the economy and so studying such matters provide me idea to analyze at the contributing factors of the economy. E-commerce is the process of managing online financial transactions by individuals and companies. This includes business-to-business (BIB), business-to- consumer (BBC) and business-to-government (BAG) transactions. The focus of e- commerce is on the systems & procedures whereby financial documents and information of all types are exchanged.

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This report is fully based on secondary sources. The study we are intended to conduct may undergo some certain limitations. Lack of experience to do analysis with such a macroeconomic factor. Time constraint is one of the major limitations. Lack of research studies related to the current study topic may also compound the problem. I had to depend on fully secondary sources information.

Theoretical Aspects

Electronic commerce is the process of doing business electronically or over the Internet. A type of business model, or segment of a larger business model, that enables a firm or individual to induct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business. It can be thought of as a more advanced form of mail-order purchasing through a catalog. Almost any product or service can be offered via commerce, from books and music to financial services and plane tickets.

So E-commerce is Marketing, buying, selling and supporting goods and services by using Web based technologies, such as the Internet and other computer networks. The term e-commerce was originally conceived to describe the process of conducting business transactions electronically using technology from the Electronic Data Interchange (DE') and Electronic Funds Transfer (OFT). These technologies, which first appeared in the late sass's, allowed tort the exchange to intimation and t execution of electronic transactions between businesses, typically in the form of electronic purchase orders and invoices.

EDI and OFT were the enabling technologies that laid the groundwork for what we now know as e-commerce. The Boston Computer Exchange, a marketplace for used computer equipment started in 1982, as one of the first known examples of e-commerce. Throughout the sass's, the proliferation of credit cards, ATM machines and telephone banking was the next step in the evolution of electronic commerce. Starting in the early ass's, e-commerce would also include things such as enterprise resource planning (ERP), data warehousing and data mining.

In response to these expert opinions, between 1998 and 2000, a substantial number of businesses in Western Europe and the United States built out their first rudimentary e-commerce websites. The definition of e-commerce began to change in 2000 though, the year of the dot. Mom collapse when thousands of internet businesses folded. Despite the epic collapse, many of the worlds' most established traditional brick-and-mortar businesses were emboldened with the promise of e- commerce and the prospect of serving a global customer base electronically.

The very next year, business to business transactions online became one of the largest forms of e-commerce with over $700 billion dollars in sales. Many of the dot. Com collapses "first-mover" failures served their offline competitors very well, providing evidence of what not to do in building a viable online business. For example, Waveband, which was one of the more infamous dot. Com failures, trail blazed the path for Albertson and Safely, two of the largest national supermarket chains, who each have developed their own successful online grocery delivery businesses.

E-commerce pioneer The birth of companies such as eBay and Amazon (launched in 1994) really began to lead the way in e-commerce. Both eBay and Amazon were among the first to establish prominent e-commerce brands. The most prominent e-commerce categories today are computers, books, office supplies, music, and a variety of electronics.

E-commerce Business Models

E-commerce or Electronics Commerce business models can generally categorized in following categories. Ђ Business - to- Business (BIB) Business - to - Consumer (BBC) Consumer - to - Consumer (ICC) Consumer - to- Business (CB) Business - to - Government (826) Government - to - Business (BIB) Government - to - Citizen (GAG) Business - to- Business (BIB) Website following BIB business model sells its product to an intermediate buyer who then sells the product to the final customer. As an example, a wholesaler places an order from a company's website and after receiving the consignment, sells the end reduce to Tindal customer who comes to buy the product at wholesaler's retail outlet.

Business - to - Consumer (BBC) Website following BBC business model sells its product directly to a customer. A customer can view products shown on the website of business organization. The customer can choose a product and order the same. Website will send a notification to the business organization via email and organization will dispatch the product/ goods to the customer. Website following ICC business model helps consumer to sell their assets like residential property, cars, motorcycles etc. Or rent a room by publishing their information on the website. Website may or may not charge the consumer for its services.

Another consumer may opt to buy the product of the first customer by viewing the post/advertisement on the website. Consumer - to - Business (CB) In this model, a consumer approaches website showing multiple business organizations for a particular service. Consumer places an estimate of amount he/ she wants to spend for a particular service. For example, comparison of interest rates of personal loan/ car loan provided by various banks via website. Business organization who fulfills the consumer's requirement within specified budget approaches the customer and provides its services.

Business - to - Government (BAG) BAG model is a variant of BIB model. Such websites are used by government to trade and exchange information with various business organizations. Such websites are accredited by the government and provide a medium to businesses to submit application forms to the government. Government uses BAG model website to approach business organizations. Such websites support auctions, tenders and application submission functionalities. Government uses GAG model website to approach citizen in general. Such websites purport auctions of vehicles, machinery or any other material.

Such website also provides services like registration for birth, marriage or death certificates. Main objectives of GAG website are to reduce average time for fulfilling people requests for various government services. This picture provides with a detailed overview of E-commerce capabilities Custom Shopping Cart: Based on specific products and sales process, e-commerce can be customize the Shopping Cart methodology and experience so that shoppers follow through and buy what they put in their carts.

Can be develop custom online catalogs that accommodate multilevel product categories, customizable product layouts, advanced product options (choices of colors, sizes, etc. ) and option-based pricing, together with control systems that keep everything working smoothly. Order Management & Payment: Can be create a flexible e-commerce platform that allows customers to view orders securely online. Business or you can set order status, view order history, generate an invoice or even complete pending transactions. ERP Integration: Can be integrate your online store with popular Order.

Management Systems including MASS 200, Microsoft Nava, Stone Edge Order Manager and other similar packages. The store can synchronize Inventory from Warehouse Management Systems, and send customer and order information back to your Order Management Systems. Shipping & Tracking information can be integrated for customer order tracking.

Technical and Operational Factors of E-commerce

I-protocol (Standards) Making Process A well-established telecommunications and Internet infrastructure provides many of the necessary building blocks for development of a successful and vibrant e- amerce marketplace. Delivery Infrastructure Successful e-commerce requires a reliable system to deliver goods to the business or private customer. Availability of Payment Mechanisms Secure forms of payment in e-commerce transactions include credit cards, checks, debit cards, wire transfer and cash on delivery. General Business Laws The application of general business laws to the Internet will serve to promote consumer protection by insuring the average consumer that the Internet is not a place where the consumer is a helpless victim. Public Attitude to E-commerce

The public attitude toward using e-commerce in daily life is a significant factor in the success of commerce. 6- Business Attitude to E-commerce The willingness of companies to move away from traditional ways of doing business and develop methods and models that include e-commerce is essential. E-commerce worldwide Growth of the internet and e-commerce There is no question that e-commerce has grown rapidly since the first users started to browse the worldwide web in search of goods and services.

Today, sales realized ever the internet represent a significant proportion of overall commercial sales. In 1991, the internet and less than 3 million users around the world and its application to e-commerce was non-existent. In 1999, an estimated 300 million users accessed the internet and approximately nonstarter of them made purchases online from electronic commerce sites, worth approximately IIS$ 110 billion. According to the World Trade Commerce (WET) report, this year, global business to consumer e- commerce sales are set to pass the IIS$ 1. 25 trillion mark.

The commerce department also said last week that e-commerce grew 17. % in the 3rd quarter of 2013 compared to the same period in 2012. Red- not adjusted Blue-AdJusted During their otherwise drab conference calls Target, Walter, and Best Buy (BY) all spent a great deal of time discussing their online initiatives. Sears (SOLD) seems determined to become an online retailer by default; focusing its attention on its online "Shop Your Way" offering while all but ignoring physical stores. "If we have a shirt in the store in four colors, we might have that shirt in ten additional colors online.

To have 14 colors in the store may be too risky because what you don't sell, oh end up losing money on, (compared with) having a group of it online that serves all the stores so that if people want more variety, they can get more variety," said Sears Holdings' chairman and CEO Eddie Lambert, sounding almost astonished at the value proposition of marrying on and offline retail.  China leads emerging markets China comes out on top of emerging markets in an e-commerce ranking established by the consulting firm AT Carney, beating out Brazil, Russia, Chile and Mexico.

The study also shows that brands are focusing on the Internet more than ever to test such markets before opening stores. China's top position comes as no surprise - 23 billion dollars in sales and 29% growth expected within five years. Still, the study does reveal the Chinese enthusiasm for online purchasing of electronics and clothing in particular. Nevertheless, certain elements are restraining market growth. "The infrastructure of China hinders the full development of potential e-commerce in the country," said Mike Mortality, co-author of the report. The delivery infrastructures vary outside of metropolitan areas and inhibit the effectiveness of the last-mile delivery of products purchased online. Brazil ranked second, boasting 10. 6 billion dollars in sales and an expected growth of 12% within five years. However, much remains to be accomplished when it comes to clothing, since Brazilian still largely favor a real-time shopping experience for clothes buying. With $ 9. 1 billion, Russia took third place on the podium.

The market shows an expected growth of 12% in the next five years that will likely largely happen via m- commerce or mobile commerce, given the fact that Russians have an average of 1. 8 mobile phones per person. The trend of global growth rate of e-commerce is in upward trend over the years.

E-commerce in Bangladesh

Internet services are presently available in Bangladesh. Its usage for e-commerce by the Bangladesh 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 to intermediate goods and services.

Business-to-consumers (BBC) commerce is practically non-existent within Bangladesh, while a very limited level of Business-to-Business (BIB) and Business-to-Government (826) transactions exists. The Potential for use of e-commerce by Bangladesh consumers and genuineness with foreign firms are much brighter, and can play an important role in boosting the country's exports. A significant volume of BAG is also possible, as the government remains the biggest spender. Business-to-consumer (BBC) Scenarios Business-to-consumer (BBC) e-commerce is unlikely to be of much use in the foreseeable future in Bangladesh.

At the domestic level, low per capita income, limited infrastructural facilities (e. G. Low density), weak legal environment (inadequate contract laws, poor implementation and enforcement), and lack of trust and confidence between business and consumers are going to hinder BBC. In the cockade 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. BBC for cross border trade is inhibited by the factors suggested for the domestic front.

In addition, on- 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 BBC. Business-to-Business (BIB) Scenarios As mentioned before, the Business to Business (BIB) scenario prevails in Bangladesh o a very limited extent. The BIB scenario exists mostly in the export sector, especially in the Ready Made Garments (ARM) industry. ARM 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 ARM sector is close to $4. 35 billion. The ARM 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 ARM exporters. The Internet would enable them to eek 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 Bangladesh firms to quality, labor and environmental standards (e. G. SISSIES, SQ 9000) can also be shared and highlighted through the Internet technology. 0 E-commerce in the ARM Sector The ARM sector emerged during the early sass 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 ass, radically replaced both of these orthodox communicating media (I. . Telex and courier). This "Office Automation Equipment" contributed towards accelerating ARM exports. Faster and cheaper data communications coupled with real-time design-pattern development enabled the buyer and manufacturer expediting business negotiations. A specific use to internet technology would be to access The Bangladesh Garment Manufacturer Exporter Association's (BAGGAGE) website, which provides a list of ember 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 Bangladesh 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. BAGGAGE can play a vital role in authentication of buyers and sellers through encryption method. Authentication by BAGGAGE 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. Following the withdrawal of the quota system and the SSP in 2005, the ARM sector will Inevitably become more competitive. As expected delivery time decreases, considering alternative payment mechanisms becomes imperative. The effective use of e-commerce 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 commerce 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 readmes 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 Bangladesh 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 Met, Net SAM, etc. Can be utilized in order to obtain information regarding authentic suppliers, manufacturers and buyers.

XML Net is an organization that provides the service to verifying the claims to sellers Witt excess odds. They send inspectors to readmes garment factories worldwide 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 (SAM) website. With improvements in infrastructural facilities (e. . Cheaper and better access to Internet service), and greater application of the computer in management and enhance 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. 0 E-commerce in the Oil and Gas Sector International Oil Companies (Socio) are the dominant players in the exploration and Production of the oil and gas industry. Socio use the vendors' web pages extensively in Order to obtain product information.

This exercise is also limited to the international vendors as the Bangladesh business community has yet to become sufficiently cyber-centric. The Socio make all the payments to the international endorse 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. Socio have to abide by the Production Sharing Contract (SC), signed with Patronage, the state oil company.

Patronage shares the cost of exploration and production with the Socio after the successful discovery of an oil or gas field. The Socio are required to Justify the procurement of every product and service pertaining to the exploration and production of each well to Patronage. If Patronage is convinced with the Justification, only then does it share the cost with the Socio. In view of the above scenario, the implementation of commerce in the energy sector is yet to kick- off in Bangladesh.

Because, the financial discipline of Patronage 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 Socio have yet to use e-commerce. However, akin tots, a limited usage of electronic communications with the vendors does exist in the form of bid invitations and providing bid clarifications. Business-to-Government (826) 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 (RFC) documents to the interested bidders. If any bidder seeks clarification on any aspect of the RFC, 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 RFC document "unofficially' for a comprehensive understanding of the 'scope of work as well as for assessing their own capability. The availability of the RFC 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 (BAT) initiated publishing the RFC documents of selected projects in its website. This immediately stopped the illicit practice of unofficially selling the RFC document, and only competent bidders were able to procure the RFC documents.

In addition to reducing the extra administrative burden of BAT, it also enabled BAT to close those bids within a reasonable timeshare. The posting of the RFC documents on the Web is however an isolated effort being initiated by a few BAT officials. Introducing on-line payment or allowing electronic fund transfer for selling the RFC would be a significant leap towards BAG in Bangladesh. There are numerous instances of liberate "unavailability' of the RFC, namely while the bids for civil infrastructure projects are invited.

Syndicated vested groups forbid the other bidders' participation by forming a cartel. Bicentennial brings transparency in such cases and ensures a level playing field for all the bidders. Electronic submission of the RFC followed by presenting the hardcore's 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 overpayment 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. The impact of the e-commerce on industry structure in developing countries. Growth rate of E-commerce in Developing countries Bangladesh is in the growing state in the e-commerce over the years but still far away as the performer of the developing countries.  Economic impact of e- commerce in Bangladesh Stimulating product innovation.

The greatest future economic impact due to electronic commerce is likely to come from the creation of new products or the radical transformation of existing ones (effectively making them new) and the consequent creation of new demand. Historically, these new, frequently unforeseen, products have been the engines of growth and the source of new employment (e. G. Home electronics, the television/film industry, software). While extraordinarily difficult to identify or quantify with any precision, five characteristics of e-commerce are likely to be a springboard for the demand for new products.

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Economic Impact of E-Commerce in Developing Country. (2018, Mar 06). Retrieved from

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