e-commerce development in agricultural trade promotion in vietnam

v

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i
ABSTRACT iii
TÓM TẮT iv
TABLE OF CONTENTS v
LIST OF ABBREVIATIONS vii
LIST OF TABLES, FIGURES, CHARTS, DRAWINGS viii
INTRODUCTION 1
1. The imperative of subject 1
2. Establish the main research subject 3
3. Research’s objectives 3
4. Research scope 3
5. Delimitation of the research’s contents 4
5.1. The basic elements of E-commerce model 4
5.2. Assign content to develop E-commerce model for Agritrade 5
6. Research methods 5
6.1. Data collection methods 5
6.2. Data analysis methods 7
CHAPTER 1: THEORETICAL FRAMEWORK 8
1.1. E-commerce 8
1.1.1. The concept of E-commerce 8
1.1.2. Characteristics of E-commerce 10
1.2. The formation of E-commerce 10
1.2.1. The reasons of E-commerce 10
1.2.2. The formation of E-commerce 11
1.3. The situation of E-commerce development in Vietnam 12
1.4. The operation forms and E-commerce transactions 14
1.4.1. The forms of E-commerce activities 14

1.4.2 Transaction forms of E-commerce 17
1.5. Benefits of E-commerce for businesses 22
1.5.1. E-commerce reduces costs 22
1.5.2. Impact on enterprise architecture 24
1.6. The E-commerce requirements 25
1.6.1. Technological Infrastructure. 25
1.6.2. Human Infrastructure. 26
1.6.3. Security and safety. 26
1.6.4. Automatic Financial payment system. 27
1.6.5. Consumer Protection. 28
1.6.6. Economic and legal infrastructure. 28
1.7. Definition and content of Trade promotion 29
1.7.1. Definition: 29
1.7.2. The purposes of trade promotion 30
1.7.3. Types of Trade Promotions 31
1.8. Trade Promotion in E-commerce 32
vi

1.9. The difference of E-commerce applications in agricultural trade promotion 33
CHAPTER 2: BACKGROUND AND REAL SITUATION OF AGRICULTURAL
PRODUCTS PROMOTION OF AGRITRADE 34
2.1. Overall assessment of domestic market for Agricultural product 34
2.2. Overall assessment of agricultural trade promotion activity of Agritrade. 38
2.2.1. Overview of Trade Promotion Center for Agriculture (Agritrade) 38
2.2.2. Agritrade’s main missions: 40
2.2.3. Recent years’ Main Activities: 42
2.2.4. Overview of agricultural trade promotion activities of Agritrade 43
2.3. Assessing the impact of external environmental factors to E-commerce
application at Agritrade 46
2.3.1. Impact of economic environment 46

2.3.2. Impact of political legal environment 50
2.3.3. Impact of socio-cultural environment 51
2.3.4. Infrastructure and Internet services for E-commerce 52
2.3.5. Competitors 55
2.3.6. Customers 57
2.3.7. Human resources for E-commerce 59
2.4. Assessing the impact of internal environmental factors to the E-Commerce
applications in trade promotion activities of Agritrade 61
2.4.1. Impact of human resources 61
2.4.2. Impact of financial resources 62
2.4.3. Impact of technology infrastructure 63
2.5. Analysis the results of survey and discussions 63
2.5.1. The results of survey 63
2.5.2. Results of expert interviews 75
CHAPTER 3: CONCLUSIONS AND THE PROPOSAL SOLUTION OF E-COMMERCE
DEVELOPMENT FOR AGRITRADE. 77
3.1. The conclusions and findings through the research process 77
3.1.1. The achievements and limitations of Agritrade 77
3.1.2. The findings of the research process 79
3.2. Orientation and perspective of development of Agritrade in the future 80
3.2.1. Development orientation of Agritrade 80
3.2.2. Agritrade’s views on the E-commerce application 81
3.3. Proposal solutions of deploying E-commerce application in Agritrade 81
3.3.1. Group of Human Resource solutions 81
3.3.2. Solutions related to infrastructure and technology 82
3.3.3. Solutions related to business processes 85
3.3.4. Solutions related to electronic marketing promotion 87
3.3.5. The other solutions: 89
CONCLUSION 91
LIST OF REFERENCES 94

vii

LIST OF ABBREVIATIONS

ARPANET
Advanced Research Projects Agency Network
Agritrade
Trade Promotion Center for Agriculture
APEC
Asia-Pacific Economic Cooperation
B2B
Business – to – Business
B2C
Business – to – Consumer
C2C
Consumer – to – Consumer
E – commerce
Electronic Commerce
ECM
Enterprise content management
EDI
Electronic Data Interchange
GSO
General Statistics Office Of Vietnam
IT
Information Technology
MARD

Ministry of Agriculture and Rural Development
MoIT
Ministry of Industry and Trade
MRO
Maintenance, repair and operation.
UNCITRAL
United Nations Commission on International Trade Law
VAN
Value Added Network
VECITA
Vietnam E-Commerce and Information Technology Agency
WTO
World trade Organization

viii

LIST OF TABLES, FIGURES, CHARTS, DRAWINGS

Tables
Table 0.1
The basic elements of E-commerce model for agricultural
trade promotion
Page 4
Table 2.1
Vietnam Rice production and exporting (2000 – 2009)
Page 34
Table 2.2
Domestic consumption of cashew nut (1995-2010)
Page 35
Table 2.3

East Asia and the pacific: GDP growth projections
Page 47
Table 2.4
The reason for not participating in online purchases of
households in Hanoi in 2010
Page 58
Table 2.5
Survey summarizing
Page 64
Table 2.6
Summary of survey results (Part 1):
Page 64
Table 2.7
Summary of survey results (Part 2)
Page 66
Table 2.8
Evaluation of Agritrade’s employees about necessary
level of contents of E-commerce application
Page 69
Table 2.9
Summary of survey results (Consumers)
Page 70
Table 2.10
Summary of survey results (Suppliers)
Page 72
Table 2.11
Evaluation of Agritrade’s customers (consumers and
suppliers) about necessary level of E-commerce
application
Page 73

Table 2.12
Evaluation of Agritrade’s customers (consumers and
suppliers) about necessary level of contents of E-
commerce application
Page 74

Charts
Chart 2.1
Organization structure of Agritrade
Page 40


ix

Figures
Figure 1.1
Models of E-commerce transactions
Page 18
Figure 2.1
GDP quarterly growth from 2008 – 2010
Page 47
Figure 2.2
Monthly CPI development in 2010
Page 48
Figure 2.3
Evaluation of enterprises of obstacles to e-commerce
application
Page 52
Figure 2.4
Number of computers in enterprises through recent years

Page 53
Figure 2.5
Computer usage in enterprises in different localities
Page 53
Figure 2.6
Means of Internet access of households in Hanoi in 2010
Page 54
Figure 2.7
Households with computers per 100 households
Page 54
Figure 2.8
Methods of Internet access of enterprises in 2009
Page 55
Figure 2.9
Number of E-commerce training schools between 2008
and 2010
Page 59
Figure 2.10
The proportion of E-Commerce schools by level
Page 60
Figure 2.11
Enterprises’ IT and e-commerce training methods for
employees through recent years
Page 60
Figure 2.12
Ability to achieve the target set for trade promotion
activities of traditional methods.
Page 68
Figure 2.13
Evaluation of Agritrade’s employees on whether to apply

E-commerce in agricultural trade promotion.
Page 68
Figure 2.14
The E-commerce model to apply
Page 69
Figure 2.15
The most important factor when apply E-commerce
Page 69
Figure 2.16
Evaluation of Agritrade’s consumers on whether to apply
E-commerce in agricultural trade promotion
Page 71
Figure 2.17
Evaluation willing level of Agritrade’s consumers to
participate in E-commerce website
Page 73
1

INTRODUCTION
1. The imperative of subject
Internet was born as a turning point in communications history of mankind and
plays more important role in all activities of man. Experienced two boom in 1986,
1991 to date, the Internet has brought humanity to overcome many limitations of
space and time. Also, dependent on preeminent and universal primacy of Internet, it
has quickly applied in many fields, especially economic activities and trade. Since
then, the term Electric Commerce (E-commerce) was born. And today, the E-
commerce has become a global trend, the rapid development, the motivation to help
the world economy forward.
In developed countries, E-commerce transactions through other forms of B2B, B2C,
or C2C has become very popular, becoming the new consumption habits, the

proportion of E-commerce transactions compared to traditional trading constantly
increasing. With agricultural and food products manufacturing and trading sectors,
the application of E-commerce in the distribution of products to help customers
access to product quickly, and gives the company huge revenue such as
alibaba.com, japonshop.com
In Vietnam, the E-commerce is in the process of formation and has taken huge
strides in recent years. According to the E-commerce report 2009 of the Ministry of
Industry and Trade (MoIT): “Along with the recent rapid development of Internet
and e-commerce, forms of trading via the Internet gradually developed and became
popular to a segment of consumers, especially office workers and students in big
cities.
The most popular form of trading via the Internet was the sale and purchase of
goods and services on e-commerce websites. So far, many enterprises have sold
their goods and services via e-commerce websites, especially enterprises in sectors
of aviation, tourism, general supermarket ”
1

With the situation as on the development, sale and purchase of goods and services
online has become a real trend, and certainly there will be strong growth in the


1
Viet Nam E-Commerce Report 2009, Page vi.
2

coming period as electronic payments become more popular and are familiar with
both individual consumers and businesses.
Trade Promotion Center for Agriculture (Agritrade) is a department under the
Ministry of Agriculture and Rural Development (MARD). Agritrade has the
functions to act as the implementation of trade promotion activities of Vietnam

agriculture and rural development. They also manage “the Exhibition Fair and
Commerce Transaction Area” at No. 2 Hoang Quoc Viet Street, Cau Giay District,
Hanoi. Every year Agritrade organizes tens of domestic and abroad trade promotion
events in the agricultural sector. The typical events are the International
Agricultural Trade Fair (Agroviet), workshop and training in the provinces, Trade
Fair and market research at foreign markets.
Besides trade promotion programs, Agritrade also developed an important
promotion activity that is agricultural products displaying. Start this activity,
Agritrade deploy a permanent display area at “the Exhibition Fair and Commerce
Transaction Area” with the main objectives are displaying, introducing and selling
agricultural products and local specialties to markets of Hanoi and neighboring
provinces. Through this area, many agricultural products find a foothold in market
and gradually built a stable brands such as Gao tam Dien Bien, Seng Cu rice, Da
Dui rice, Son La mushrooms On the rise of this area, Agritrade orient to develop
it into a great agricultural showroom for agricultural products and local specialties.
Thereby, showroom will become a frequent destination for both seller and buyer to
come, exchange product information, and deal with each other. The deployment of
both display area and organizing trade promotion events, Agritrade will perform
well as connections between producers and consumers.
However, the effective of the current display area and traditional trade promotion
programs are not really high and it also faces some restrictions. Therefore, it is
necessary to develop new models to improve the effective of trade promotion to the
Agricultural products in particular and Vietnam Agriculture in general. According
to the general trend of the times, E-commerce application seems to be the good
solution for Agritrade.
3

Due to these factors, along with experience on E-commerce application, using E-
commerce model is extremely necessary, feasible in the present time; contribution
help to Agritrade to accomplish its functions and duties of promoting and marketing

of regional agricultural products; realize the strategic expansion of business toward
e-commerce applications.
2. Establish the main research subject
Through the learning process, survey and investigation, the authors found that the
required objectivity and subjectivity are imposed Agritrade in the short term (1-3
years) and long term are:
- AGRITRADE will become a focal point for trade promotion activities in
Vietnam Agriculture.
- Approach E-commerce development trend and apply IT into operation on
promoting agricultural products and local specialties.
- Develop E-commerce model to provide a link between producers, traders and
consumer of agricultural products.
So I would propose the subject of my graduate thesis is “E-Commerce development
in agricultural trade promotion in Vietnam”.
3. Research’s objectives
- To systematize basic concepts relating to E-commerce model and trade
promotion.
- Survey and research the activities of trade promotion activities of agricultural
products and local specialties at Agritrade.
- To propose solutions to develop E-commerce for agricultural trade
promotion.
4. Research scope
- The scope of research in space: this is graduated subject so the scope of the
research only for micro and limited to Agritrade. Specifically, the scope of the
research is to study the basic concepts related to a review topic, agribusiness
situation and propose solutions to develop E-commerce model for agricultural trade
promotion activities of Agritrade.
4

- The scope of research on time: The time for studying the subject and collecting

survey data from January to March 2010 at Agritrade. This data combined with
secondary outside data in last three years.
5. Delimitation of the research’s contents
5.1. The basic elements of E-commerce model
Table 0.1: The basic elements of E-commerce model for agricultural trade
promotion
Basic elements
Basic content
Value targets
Developing a useful channel for both providers and
consumers, ensuring that the process of resource management
is done strictly, comprehensively and effectively.
Revenue models
Products trading are agricultural products and local specialties
provided by the providers, producers and other source.
Market
opportunities
Trend of internet shopping in Vietnam created a potential
market for trade agricultural products online.
Competitive
environment
Sum of all factors in the business scope of enterprises. It
includes numbers, revenue and profits of the competitors.
In addition, the increasing number and quality of suppliers is
the basis for evaluating market potential.
Competitive
Advantage
That is main task of Agritrade, so it should have the
consistency in the direction and creating good conditions of
infrastructure, finance and personnel to deploy this model. It

also receives support of functional departments and one more
important factor that are support and assistance of MARD.
Market strategy
Researching and developing a convenience and simple E-
commerce website for providers and customers.
Planning for implementation of activities to promote website.
Providing marketing campaign to show about the website and
organizing training courses to help sellers know how to sell
their products online.
5

Organizational
structure
The company wanted to sustainable development needs a well
organized system to ensure effective implementation of plans
and business strategy.
Management
Team
Management Team responsible for making management
strategy of enterprises. Good team governance can make
decisions to change or restructure business models when
needed, contribute to build customers confidence.

5.2. Assign content to develop E-commerce model for Agritrade
In this research, to develop E-commerce model for Agritrade, I will develop
research methods to conduct surveys on the actual situation of Agritrade’s activities.
Overall assessment of the impact factors inside and outside the organization. It also
combined with analysis of results compiled from surveys, interviews with staffs and
customers of Agritrade and agricultural expert. Since then, I will assess the
application ability and plans to develop an E-commerce model for Agritrade.

Based on survey results, analysis of primary data and secondary sources, I will
develop E-commerce model based on market factors, human resources, finance, and
infrastructure for deploying this model. Moreover, I will also improve sales process,
handle orders, and deliver the product and other support services.
6. Research methods
In the process of collecting data for the study and implementation of the thesis, the
author has used the method of data collection as follows:
6.1. Data collection methods
6.1.1. Method of investigation of primary data
- Survey:
+ Candidates of survey: The main Candidates of survey are Agritrade’s staffs
and customers (suppliers, producers and buyers).
+ Contents of survey:
 For Agritrade’s staff: promotion situation of agricultural products, needs,
capabilities and methods of application E-commerce model.
6

 For customers of Agritrade: The need of the applying E-commerce model
on promoting agricultural products.
+ How to proceed:
 For Agritrade’s staff: issue and collect directly at the Agritrade’s office.
 For customers of Agritrade: I focus on providers (in Northwest provinces),
producers and consumers. Most of questionnaires issued and collected
directly when they visit and display in Agritrade’s trade fairs. The others
sent by email (to the customers who are officers and students)
The survey note will be collected, updated to the database of the Microsoft excel for
processing and analysis. The aim to apply this method is gathering information most
quickly, most economical and precise handling in order to best assess and make the
most accurate results.
+ Advantages and disadvantages of this method

 Advantages: Fast, convenient and efficient.
 Disadvantages: customers have little time to study carefully the
questionnaire and they may feedback with incorrect answers.
+ Sample of survey: I issue 45 questionnaires to Agritrade’s staffs and 30
copies to the Agritrade’s customers.
- expert questionnaire
+ Content of Interview: Comments on the agricultural products and foodstuffs
market in the future, the company's business strategic related to agricultural
products, local specialties and food. The needed of a suitable E-commerce
model applying to current trade promotion activities of Agritrade; the
difficulties and advantages of deploying E-commerce model in agricultural
promotion at Agritrade. (content expert interviewed is attached in Appendix)
+ Method of Investigation: Organizing Interview at Agritrade’s office.
+ Objects of interview: Director and head of Business Department.
+ Advantages and disadvantages of this method:
7

 Advantages: Observed visual attitude and the way to answer the questions,
then we will assess the accuracy of the information and get the subjective
comments of Agritrade on the agriculture.
 Disadvantages: Difficult to get an overview and objective assessment of
the market, the business model of Agritrade.
6.1.2. Methodology of Survey with secondary data
Through documents, reports and statistical relevance of reputable sources such as E-
commerce report of Ministry of Industry and Trade, the relevant documents on the
website of Agritrade
6.2. Data analysis methods
6.2.1. Quantitative Methods
The method of synthesis and analysis data is based on the average value. After all
survey forms have been collected, results will be synthesized and analyzed by

Microsoft Excel on the average value and statistical models. The statistics from the
performance of the company are handled by two methods: detailed analytical
illustrations and diagrams.
6.2.2. Qualitative methods
Analyzing and evaluating information through interview questions. The interview
questions are built from the whole industry to the intensive companies. Meta-
analysis method in the form of induction assess various issues, collect and release
common identify and characteristics.









8

CHAPTER 1: THEORETICAL FRAMEWORK
1.1. E-commerce
1.1.1. The concept of E-commerce
1

Electric commerce (E-commerce) is a relatively new field. In the development
process it has many different names: “Online trade”, “Cyber trade”, “Electronic
Business”, “paperless trade or commerce” etc. Recently the name “E-commerce”
has become familiar and became the general convention, which appears in the
international legal documents. Besides, another name is still used and understood
with the same content.

- The concept of e-commerce in the narrow sense
In narrow sense, E-commerce merely restricted in sale and purchase of goods and
services through electronic facilities, especially Internet and other communication
networks.
According to the World Trade Organization (WTO), “E-commerce, a new area of
trade involves goods crossing borders electronically. Broadly speaking, this is the
production, advertising, sale and distribution of products via telecommunications
networks. The most obvious examples of products distributed electronically are
books, music and videos transmitted down telephone lines or through the Internet.”
2

According to the E-commerce Commission of the Asia - Pacific Economic
Cooperation (APEC), “E-commerce is business that conducted through the data
transferring and digital information technology.”
- Broadly defined concept of e-commerce
In broad sense, E-commerce is financial and commerce transactions by electronic
means such as electronic data interchange, electronic funds transfer, sending or
withdrawals by credit card and other activities.
According to this view, there are two definitions generalize the most complete range
of E-commerce activities:


1
Source : “Thƣơng mại điện tử”, www.wikipedia.org
2
Understanding WTO: Electronic Commerce, www.wto.org
9

According to the definition in Model law of UNCITRAL, the scope of E-commerce
is wide and covering almost fields of economic activity, among them the sale and

purchase of goods and services is only a small range in E-commerce. Model Law
defines “The term “commercial” should be given a wide interpretation so as to
cover matters arising from all relationships of a commercial nature, whether
contractual or not. Relationships of a commercial nature include, but are not
limited to, the following transactions: any trade transaction for the supply or
exchange of goods or services; distribution agreement; commercial representation
or agency; factoring; leasing; construction of works; consulting; engineering;
licensing; investment; financing; banking; insurance; exploitation agreement or
concession; joint venture and other forms of industrial or business cooperation;
carriage of goods or passengers by air, sea, rail or road”
1

According to the definition of European Commission, “E-commerce refers to
conducting business via electronic means. It is based on the processing and
transmission of electronic data in the form of text, sound and images.” Therefore
the term “Commerce” in “E-commerce” is not only normal trade in goods and
services, but also covering a wider range. The application of E-commerce will
change the activity forms of most economies.
Nowadays people usually understand the concept of E-commerce that is all business
approaches and management processes through electronic channels in which the
Internet or at least the techniques and protocols used in Internet plays a fundamental
role and IT is considered as a prerequisite. One other important aspect, E-commerce
is not to change the media, a feature of conducting traditional business. To do this
E-commerce requires extensive integration of the business features.
If the system link from the fields of applications have different features or links
through the boundaries of the enterprise for this purpose, this is a traditional
application areas of enterprise application integration. Enterprise content
management (ECM) is considered one of the basic technologies for e-business.

1
UNCITRAL Model Law on Electronic Commerce with Guide to Enactment 1996, Page 3.
10

1.1.2. Characteristics of E-commerce
E-commerce and traditional commerce, including the steps:
1. Consumers and providers find each other, consumers want to find a reliable
supplier, while suppliers are conducting promotional activities, marketing,
consulting and customer support, create trust and entice consumers to own.
2. Evaluation, negotiations and discussions;
3. Organization coordination and delivery of goods;
4. Payment;
5. Confirm the correctness of every step in the purchasing process.
However, the E-commerce still contains its own characteristics compared with
traditional trade. It is the ability to create a “virtual store” on the Internet. The
virtual store open 24 hours a day, 7 days a week, 365 days a year, and no days off
(Death of time). It is potentially everywhere and not bound by geographical distance
(Death of Distance). In the virtual store, it no needs to conduct transactions through
intermediaries (Death of Intermediary). It can create an online marketing channels
(Online Marketing) and can do online survey. E-commerce is particularly suitable
for providing online some materials (especially goods) or services such as movies,
music, electronic books, software, consulting The successful factor in the
network economy does not belong to large companies, rich in economic potential, it
depends on the ability of companies to change flexibly and quickly adapt to changes
in the economy whether virtual or otherwise companies must have high sensitivity.
1.2. The formation of E-commerce
1.2.1. The reasons of E-commerce
E-commerce was born as an inevitable development in the harsh competitive
environment. To survive, Businesses must apply technological advances in effective

way. IT brings the magic of transformation itself and affects most sectors including
the economy. It changes the world. The development of mature tools such as
Internet, Email, and World Wide Web is the reason to release a new trading
method: E-commerce.
11

Traditional transaction that includes document is more expensive and takes a long
time. This method has greatly hindered with the international trade, especially when
the trading volume is increasing. Moreover, traditional transactions reveal many
weaknesses. Therefore, this is the best time to launch new trading methods with
more advantages.
1.2.2. The formation of E-commerce
In 1969, the US Department of Defense established the Advanced Research Projects
Agency Network (ARPANET). ARPANET was the world's first operational packet
switching network and the core network of a set that came to compose the global
Internet. Along this time, the automation in the financial services industry began to
take shape and develop, such as processing of checks, followed by processing credit
cards and Electronic Funds Transfer (EFT) that allows online payment and taken to
the escrow account and direct debit. Early 80's, the E-commerce activities become
expansion between businesses with the form of electronic data interchange (EDI)
and electronic mail (E-mail). EDI allows companies to send and receive online
business papers such as the command order. Late 80's, E-commerce has become an
important part in business activities, although it still did not make through the
public Internet. Around the same time, E-commerce technology came out in the
healthy development of the global Internet. However, it was new to the user and the
majority of procedures are not convenient and automatic.
In 1992 marked the advent of the global network (World Wide Web). It makes the
Internet easier to use, interface and graphics are also better compared with the
technical skills needed in the past.
E-commerce is developing rapidly on the global scale based on the industrial

development of information technology (IT). IT industry is gradually occupied the
leading position in the national economy of many countries. Especially the organic
combination of three components: industrial computers (networks, computers,
electronics, software and other services), communications (landline telephone and
satellite) and internal information (databases, audio-visual products, entertainment,
12

publishing and providing information ). This combination is creating a new nature
and role of the IT industry.
1.3. The situation of E-commerce development in Vietnam
Although not a measure of the level of E-commerce application, the number and
quality of the website is also an important criterion to evaluate the development of
E-commerce. When the connection between the systems of strategic partners to
exchange directly electronic data in Vietnam is still developing, the website is the
most popular channel for enterprises to advertise products, promote services and
conduct E-commerce transactions both B2B and B2C form.
According to E-commerce report in 2005 of MoIT, among 504 surveyed
enterprises, 46.2% of businesses already have website. However, most of the
surveyed enterprises located in cities or the key industrial zones of provinces where
the infrastructure of IT and communications are relatively well. In 2008, with a
survey of 1,600 companies across the country, the result showed that most
businesses have implemented E-commerce applications in different levels.
Investment in E-commerce has been focused and it brings back effective to
businesses. Percentage of enterprises having website reached 45%, increases 7%
over 2007. Rate of website that is updated regularly and has online ordering
functions are increasing rapidly. In 2010, almost 100% of businesses surveyed were
implementing E-commerce applications in many sizes and different levels.
According to survey results, 100% of surveyed businesses were equipped with
computers and each enterprise has 25.8 computers on average. There are 98% of
businesses have Internet connections in many different forms, in which 89% are

connected by broadband (ADSL) and leased line. Businesses have also focused on
exploiting Email, the basic applications of E-commerce. There are more than 81%
of enterprises use email for business purposes, in which, the rate of using of large
enterprises is 96%, small and medium enterprises is 80%.
After four years of implementing the overall Plan for E-commerce development
from 2006 to 2010, E-commerce is not only located on two major cities, Hanoi and
Ho Chi Minh City, it has grown at most provinces of the country. In the survey in
13

2009 of MoIT, there are 53% of the total surveyed enterprises located at other
locations outside of Ho Chi Minh City and Hanoi. The results show that, 100%
Local businesses were equipped with computers. Each enterprise, on average, has
21.5 computers (10.3 employees have one computer). Most local businesses are
connected to the Internet, mainly using ADSL; only about 2% are connected to
Internet by dial up line.
Based on the report, in recent years, with the strong development of Internet and E-
commerce, online sales has gradually developed and become more familiar with
officers, students and housewives in large urban areas. Nowadays, the most popular
online sales form is trading goods and services through E-commerce website. Until
late in 2009, the purchase through e-commerce website has become quite popular
for some kinds of goods and services such as airline tickets, electronics, cell phones,
computers, books, tour travel, hotel rooms, perfume, flowers, etc… Payment
methods and delivery is also done very flexible by businesses to meet most
requirements of buyers. The most popular payment methods applied by sellers are
online payment, bank transfer and pay by cash. Besides the specialized E-commerce
website, in recent years, there are many multiple social networks has appeared with
thousands of members. With a large number of members, the social networking is
becoming real market for businesses. Many businesses and individuals have the
appropriate form of investment to capture this potential market segments such as
setting topic and hiring permanent position in website to sale or advertising

services. The sellers exchange directly information and dealing with customers on
the topic and the sale goods and services through flexible and multiple modes and
acceptance by consumer. With the development as above, the online trading of
goods and services has become a real trend, and certainly it will be strong growth in
the coming years when electronic payments become more popular and familiarity
with consumer.
According to survey of E-commerce website owners, 87.6% of businesses aim to
the other businesses and organizations, while 65.7% of businesses focused on
14

consumer. Thus, the method of B2B transactions will be the first choice for
companies to deploy E-commerce applications in the future.
One of the factors that help evaluate the quality and professional of a website is rate
of information updated. In other words, it is the effort and time investment of the
businesses to maintain their website. More than half of businesses surveyed said
that they only update the website once a month or less. Less than 30% of businesses
review daily the website. Because there are only about 30% of these websites
having E-commerce function. Therefore, the statistics show that Vietnam businesses
do not proper recognized the role of the website as a channel of communication and
permanent interaction with customers. Thus, they do not invest appropriately the
time and resources to build, maintain and exploit efficiently their website.
Further analysis of the website management model of businesses showed that
56.2% of the businesses managing their website and 43.8% using the service of
other providers. This is one of the reasons why the information and communication
features of the website are poor.
About investment, the survey showed that the density investment of E-commerce
application is fairly low in total annual operating expenses. Over 80% of businesses
said they invested maximum 5% the operational costs for deploying E-commerce,
including purchase of E-commerce software, website maintenance and human
resource for these activities. Only about 14% of businesses invest 5-15% of total

operating expenses and a very small percentage (3.6%) of total businesses surveyed
invest more than 15% for E-commerce application.
1.4. The operation forms and E-commerce transactions
1.4.1. The forms of E-commerce activities
a. E-mail
Like ordinary correspondence, partners (consumers, businesses, government
agencies) use email to send information to each other "online" through the network,
called E-mail (Electronic mail). E-mail has faster transfer speed and it can be sent
simultaneously a same content to multiple receivers at anytime, anywhere in the
15

world. Moreover, the cost of E-mail is much lower than mailing by mail and
telephone.
b. Electronic payment
Electronic payment is payment via electronic messages instead of cash handing.
With the development of E-commerce, electronic payment has expanded into new
areas should be addressed:
 Financial Electronic Data Interchange (FEDI) specializes in serving the
electronic payments between companies trading electronically with each
other.
 Internet cash is money to buy from a place of issuance (bank or credit
institution), then freely convertible into other currencies through Internet.
Internet cash is widely use within a country and between countries, and all
done with digitalizing technology, so internet cash is also called “digital
cash”. The buyers purchase internet cash by local currency then they use the
Internet to transfer to the sellers. Payment by internet cash is on the rise
quickly, because a series of advantages:
o Can be used for payment of small value items, even paid subscription
(due to transaction costs and purchase money is very low);
o Do not require a regulation to be agreed upon in advance, can take

between two people or any two companies, the payment is unknown;
o Cash is guaranteed to receive real money, avoid the risk of counterfeit
money.
c. Electronic purse
Electronic purse, known as electronic wallets, is a place for internet cash, mainly
the Internet smart card. The money is paid to anyone who read that card and the
techniques applied to this purse similar to Internet cash.
d. Smart card
It looks like a credit card, but in the back of the card, instead of the magnetic strip, it
contains an electronic chip with a small memory for storing digital money, money
16

that is paid only when used and the message (e.g. confirmation of payment of
invoices) be authenticated to be true.
e. Digital banking and digital securities trading
Electronic payment system of banks is a great system, which includes many sub-
systems: (1) Payments between banks and customers via telephone and Internet
transactions, electronic funds transfer, credit cards… (2) Payments between banks
and settlement agents (restaurants, supermarkets ); (3) a payment within the
banking system; (4) payment between two banking systems.
f. Electronic Data Interchange
Electronic Data Interchange (EDI) is the transfer of information from this computer
to other computers, among other companies or organizations have agreed to trade
automatically with each other without human intervention (called structured data,
because the parties of transaction have prescribed format of the information
structure before). This is the form most commonly used. According to UNCITRAL,
“EDI means the electronic transfer from computer to computer of information using
an agreed standard to structure the information”.
1
EDI is widely used on the global

scale, mainly for the purchase and distribution of goods (sending orders, the
confirmation, shipping documents, invoices ). It is also used for other purposes,
such as payment for medical examination and exchange of test results ate EDI
mainly done through the external network (extranet) and often referred to
“commercial networks” (net commerce). EDI came out into society before Internet.
At this time they use “Value Added Network” (VAN) to link EDI partners together.
The core of VAN is an electronic system that allows electronic computers
communicated with each other, and act as a means of storing and searching. When
connected to the VAN, a business can communicate with computers located in
many cities around the world.
g. Digital Delivery of Content
Content data is the goods that people need its content (in other words, the content is
a commodity) not themselves carrying content such as news, books newspapers,


1
UNCITRAL Model Law on Electronic Commerce with Guide to Enactment 1996, Page 4.
17

music, movies, radio programs, television and software programs. The advisory
opinion, plane tickets, movie tickets, theater, the insurance policy now included
in the list of content data.
Previously, Content data assigned in physical form by introducing disk, tape,
printed books, packaging and handling to users or to distribution points (such as
shops and stalls newspapers, etc.). The buyer will come to this point and purchase,
receive contents directly. Today, the content data is digitized and transmitted by the
network (digitalizing delivery). So now all kinds of economic and business
information on the Internet are very rich, and an important task of the
communication today is Web exploitation and comprehensive analysis of
information received.

h. Retail of tangible goods
Take advantage of multimedia of Web and Java, the sellers build online the “virtual
store” to make the sale. Users of Internet/Web search Website of the store; see the
goods displayed on the screen; send the confirmation message to buy and pay by
electronic payment. Originally, purchasing is in such a primitive form, the buyers
choose goods then order through the form that is placed on the Website.
1.4.2 Transaction forms of E-commerce
The E-commerce transaction takes place between three main groups involved:
business, government and customers. These transactions took place by using active
forms of E-commerce and are conducted at many different levels:
 Business to Consumer – B2C
 Business to Business – B2B
 Business to Government – B2G
 Government to Consumer – G2C
 Government to Government – G2G
 Government to Business – G2B
 Consumer to Consumer – C2C
 Consumer to Government – C2G
18

 Consumer to Business – C2B
Figure 1.1: Models of E-commerce transactions

In these types of transactions mentioned above, these are three types will be
common applied in Vietnam.
a. Business to Business transaction (B2B)
“B2B describes commerce transactions between businesses, such as between a
manufacturer and a wholesaler or between a wholesaler and a retailer”
1
.

Basically, electronic transactions between businesses is not new, they have existed
for many decades. Businesses sent and received orders, invoices and notice of
receipt by the EDI from the late 1970s. But at the time, only large enterprises
participated because the cost of data transfer and training are very expensive.
Currently E-commerce Business to Business development with rapid growth,
because it brings many benefits to businesses, for example, businesses can shorten
production cycle by combining with other businesses, each specializing in a field, or


1
Business-to-business: www.wikipedia.org
19

business can save time and cost to find and purchase materials for their production
process by the business of buying raw materials providing the online sales network.

About payment, in a form of B2B, payment is made on the basis of the clearing at
the end of the period and it can implement following the traditional methods but
still does not reduce its significance. Meanwhile, in the B2C model, payment will
be attended specially, because the buyers will pay immediately for the goods that
they order in the website. This is radically different between B2B and B2C models.
There are several B2B models for different business types, in which the most
typical models as following:
 Sales model through agents system
 Purchase model through a set of suppliers
 Mix model (Extended site)
 Auction modes
 Tender models
b. Business to Consumer transaction (B2C)
B2C is transaction between businesses and consumers in which consumer purchases

goods and services through the Website.
Although the B2B method accounts for a large proportion of business transaction,
but today there are many prospects for B2C method, because many families want to
save shopping time and just sitting at home by clicking on the screen then they can
ask the seller delivered to their door or consumers can use the service of provider,
20

typically, the fun activities and entertainment services such as music, reading,
reading newspapers, watching movies etc.

Nowadays, the goods that exchanged on the Internet are not only tangible goods but
also intangible goods. The traditional trading transaction lost their advantage over
electronic transactions.
+ Intangible Goods:
Most of the electronic transactions of intangible goods are brought directly to
personal computers of consumer through network. The merchandise consists of four
areas: entertainment, travel, magazines and newspapers, financial services and
email.
+ Tangible Goods:
The goods that sold mainly by means of electronic are books, clothing, food and
beverage. It is expanding the online transaction of goods including household
items
We can draw some comments as follow:
 The key factor to the success of a B2C E-commerce website is its ability to
attract and maintain the interest of consumers.
 The B2C E-commerce model is more suited to the traders and service
providers.
 The success of companies using B2C model is based on the advantages of
buying products that they offer to customers. This process is slightly similar
to traditional customer service. Companies like Amazon.com, ebay.com, etc.