Factors affecting the adoptiuon of an E- commerce model developed for small and medium enterprises in Viet Nam

iii This is to certify that the research work / dissertation entitled:"Factors affecting the adoption of e-commerce model developed for small and medium enterprises in Viet nam” orally d

ENTERPRISESIN VIET NAM

_

A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

Submitted in Partial Fulfilment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program offered by Southern Luzon State University,

Republic of the Philippines in collaboration with

Thai Nguyen University, Socialist Republic of Vietnam

has been approved by Oral Examination Committee

WALBERTO A MACARAAN, EdD CONRADO L ABRAHAM, PhD

MELCHOR MELO O PLACINO, PhD TRAN DAI NGHIA, PhD

CECILIA N GASCON, PhD

Chairman

JOANNA PAULA A ELLAGA, DBA APOLONIA A ESPINOSA, PhD

Accepted in Partial Fulfilment of the Requirements for the Degree

Doctor of Business Administration

_ WALBERTO A MACARAAN, EdD

Date Vice President for Academic Affairs

iii

This is to certify that the research work / dissertation entitled:"Factors affecting the adoption of e-commerce model developed for small and medium enterprises in Viet nam” orally defended/ presented under the DBA Program

jointly offered by Southern Luzon State University of the Republic of the Philippines and Thai Nguyen University of the Socialist Republic of Vietnam, embodies the result of original and scholarly work carried out by the undersigned

This dissertation does not contain words or ideas taken from published sources or written works by other persons which have been accepted as basis for the award of any degree from other higher education institutions, except where proper referencing and acknowledgement were made

Researcher/Candidate

iv

I would like to express my gratitude to Assoc Prof.Dr.Tran Chi Thien for being an outstanding adviser and excellent professor Your constant encouragement, support, and invaluable suggestions made this work successful You haveeverything that one could want from an adviser I would like to thank you for providing me ideas on the research methodology and valuable insights on financial management system

I am also deeply indebted to Dr Nguyen ThanhHai and Ms Trinh ThiHieu -International Training Center, Thai Nguyen University of the Socialist Republic of Vietnam, for their enormous pursuit to provide the Vietnamese people an opportunity to grow through education Also, I would like to thank all the lecturers of DBA1 course for helping me to complete this dissertation in which I have been their student in for three years

I am deeply and forever indebted to my family for their love, support, and encouragement throughout my entire life!

NGUYEN TIEN HUNG

v

I wish to dedicate this dissertation to my family and friends

NTH

vi

PAGE

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGMENT ……… … iv

DEDICATION ……… v

TABLE OF CONTENTS ……… vi

LIST OF TABLES ……… viii

LIST OF FIGURES ……… ix

ABSTRACT ……… x

CHAPTER I INTRODUCTION Introduction ……… 1

Background of the Study ……… 2

Objectives of the Study ……… 5

Significance of the Study ……… 6

Scope and Limitation of the Study ……… 7

Definition of Terms ……… 7

II REVIEW OF LITERATURE AND STUDIES Related Literature and Studies………… ……….… 10

Conceptual Framework ……… 29

III METHODOLOGY Research Design ……… 31

Determination of Sample Size ……… 31

Sampling Design and Techniques ……….… 32

Data Gathering Procedure……… 32

Research Instrument ……… 33

Data Processing Method ……… 33

vii

V SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

Summary of Findings ……… 75

Conclusions ……… 77

Recommendations ……… 79

BIBLIOGRAPHY ……… 81

APPENDICES ……… 87

Questionnaire ……… 87

CURRICULUM VITAE ……… 90

viii

1 Success Factorsfor SMEs ……… 15

2 Internet Accessibility in Viet Nam ……… 19

3 Business Areas ……… 52

4 Statistical Tables the Number of Businesses Using the Web ……… 55

5 KMO and Bartlett’s Test ……… …… 56

6 Rotated Component Matrix……… 57

7 Reliability Statistics (H1) ……… 60

8 Item-Total Statistics (H1) ……… 61

9 Reliability Statistics (H2)……… 61

10 Item-Total Statistics (H2) ……… 62

11 Reliability Statistics (H3) ……… 62

12 Item - Total Statistics (H3) ……… 62

13 Reliability Statistics (H4) ……… 63

14 Item - Total Statistics (H4) ……… 63

15 Reliability Statistics (H5) ……… 63

16 Item-Total Statistics (H5)……… 64

17 Omnibus Tests of Model……… 65

18 Model Summary ……… 66

19 Classification Table……… 67

20 Variables in the Equation ……… 68

ix

1 Research Model (Grandon and Pearson, 2004) ……… 14

2 Proposedmodel for assessing e-commercesuccessin SMEs ……… 15

3 Proposed Electronic Commerce Adoption Model for Small- and Medium-sized Enterprises ……… 17

4 Internet Model ……… 18

5 B2B Business Model ……… 24

6 B2C Business Model ……… 27

7 C2C Business Model ……… 28

8 C2B Business Model ……… 29

9 Research Model ……… 30

10 Business Areas ……… 53

11 Business Areas and Firm Utilize E-Commerce ……… 53

12 Number of the Firms Have Internet ……… 54

x

Title of Research : FACTORS AFFECTING THE ADOPTION OF AN

E-COMMERCE MODEL DEVELOPED FOR SMALL AND MEDIUM ENTERPRISES IN VIET NAM

Researcher : NGUYEN TIEN HUNG (FAT)

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

Implications of this research study can be divided into implications for managers and implications for government In this research, the author proposed and validated a predictive model for managers that suggest four determinant factors for e-commerce adoption in Vietnam SMEs These factors, according to the rank order of importance, are: 1 organizational readiness; 2 compatibility; 3 ease; and 4 usefulness

xi these factors in making their decision about adoption and try to improve those factors that are within their control

Chapter I INTRODUCTION

In recent decades, Information Technology (IT) has been changing the world by significantly contributing to fasten the globalization process in which all competitors come to have equal opportunities in a “flattened” world as well

as creating a real revolution in every field of science and life

The application of IT in production and business is not out of this trend either The concept of IT application in commercial activities, also known as e-commerce, came into the world and became a new trend E-commerce has been gradually replacing the old ways of doing business because of its various prominent advantages, such as faster buying/selling procedure, lowered operational costs, more convenience for customers to place orders, increased efficiency with unlimited space and time properties, etc

However, for developing countries in general and for Vietnam in particular, e-commerce is a relatively new thing although the development of this trend has been taking place in both width and depth It has not actually been completed for this area in State management The application in the enterprises as well as in the agencies and organizations is also at explorative level, to support the traditional business form or to combine these two forms with each other

In fact, many enterprises have applied and developed e-commerce and some of them have become good models in this area such as VIETGO, a

pricing joint stock company with e-commerce page www.vatgia.com; and Peaceoft solution company with website www.chodientu.vn, etc…Despite its

increased popularity, the exploitation and application of e-commerce are

always two sides of a problem:

Firstly, we are in a transitional period from traditional business to commerce business method, so it is necessary to always make pragmatic and short-term comparison of the efficiency between these two methods

e-Secondly, there also requires a different and more intellectual way of looking at e-commerce In order to successfully apply and develop e-commerce, it is required that negative aspects such as fraudulence, distrust and sabotage, etc are limited by raising public awareness, developing firms’ policy, executing management of ecommerce These things, however, have been difficult to control because of the fast, powerful and high-tech characteristics of e-commerce

The development of e-commerce has happened in the same manner

as the development of traditional commerce, in which the first step was unprompted as each individual, company, agency or organization realized its internal benefits then it became more advanced and multiform However, to expand and develop it to a high level as well as to create real benefits for

society, it needs an intervention of “State hand” from the angle that these

entities cannot or do not want to do

For the above reasons, there is a question to ponder such as: how do

we develop and manage e-commerce in order to minimize the negativity and make optimal use of the positivity, and to successfully promote high efficiency

to the society, the community, and each individual?

Background of Study

It cannot be denied that benefits achieved by e-commerce have a great impact to the development of a nation’s economy Many developed countries

in the world, among which United States was the first, have created favorable conditions for e-commerce to be developed, leading humans in achieving great business results Although there are many problems needed to be solved in the application of e-commerce, the developed countries, realizing its huge advantages, has quickly employed and developed e-commerce with the expectation of achieving the foundation for digital economy

Internet is changing the lifestyle and the way of working Internet creates good conditions for everyone, from university researchers and students in big cities to people in remote mountainous areas, in which everyone have the opportunity to access the same endless information resources Moreover, Internet also provides means of communication for people or places to carry out transactions at any time Enterprises with different scales all can communicate to their partners and customers via Internet Online activities help them to get necessary information quickly, thereby improving the quality of products and services with low cost

The Government of Vietnam has placed special emphasis on developing e-commerce and assigned the Ministry of Commerce to be the clue agency who is responsible for examining and constructing the projects of e-commerce development in Vietnam On 22/11/2001, the Center of Promoting Software Development, directly under Department of Vietnam Trade and Industry, opened the first training course named “E-commerce for Business” that was held free in Dong Nai with the purpose of helping enterprises step by step approach e-commerce and serve business activities

on Internet

Since an initial application of e-commerce still faces a number of

difficulties, it is essential to create real power, which comes from the infrastructure for e-commerce, strategy to develop e-commerce business in small and medium enterprises, government support, and awareness of business e-commerce applications in business The intelligentsia needs to meet the requirements of specialty, and the cultural standards of the people also need to be gradually improved, especially for young people, one of the main forces helping to deploy e-commerce

According to figures from the Ministry of Industry and Commerce, at present, small and medium enterprises account for more than 85% of enterprises in Vietnam, with registered capital of nearly 2,313,857 billion dongs (equivalent to 121 billion dollars) and 100% having Internet access While more and more customers are looking for new products and trade opportunities with Southeast Asian countries, Vietnamese enterprises are also seeking new opportunities to reach them through e-commerce Along with maintaining domestic operations actively, Vietnam will definitely continue to receive more attention from importers in the near future according to Vincent Wong, Senior Managing Director of Business Development and Customer

Services Department of Group Alibaba.com

In 2012, Vietnam Association of E-commerce (VECOM) constructed the E-business Index in order to support agencies, organizations and enterprises evaluating quickly the application of e-commerce on a national scale as well as in each province and central city E-business Index, abbreviated to EBI, helps agencies, organizations and enterprises to evaluate quickly the degree of ecommerce application and to compare the developments by the years in each locality, concurrently support to an

assessment and comparison between the localities based on a system of index

So in Vietnam today there is only VECOM which constructed the EBI

to assess a degree of e-commerce application in the enterprises and home organizations But this is only statistical and investigative index that reflects a degree of e-commerce application annually It cannot bring out an index that helps enterprises in identifying whether the abilities of their own enterprises can apply e-commerce or not; how to invest and apply e-commerce to business

Therefore, there is a need to have an e-commerce adoption model which can examine the factors that influence e-commerce adoption in Viet Nam SMEs In order to do so Grandon and Pearson e-commerce adoption model is applied in the Vietnam context (Grandon and Pearson, 2004) Grandon and Perason's model factors that influence the adoption of e-commerce in SMEs

Objectives of the Study

This study focused on the analysis of some e-commerce models which are being implemented in the world, especially the e-commerce models for the small and medium enterprises A suitable model for small and medium enterprises in Vietnam to evaluate and test to find out the factors that influence directly the development of electronic commerce in small and medium businesses in Vietnam, to suggest some policy measures to encourage businesses to use e - commerce model, in order to improve business performance of enterprises

This study specifically aimed to:

1 Analyze e-commerce models which is the most successful and choose the best suited model for small and medium enterprises in Vietnam;

2 Determine factors affecting the adoption of ecommerce model for small and medium enterprises in Vietnam in terms of;

Significance of the Study

This study can help small and medium enterprises in Vietnam for this research will support the enterprises in constructing business strategies, strengthen advertising, and improve competitive advantages in the market economy and in the integration of Vietnam today to the world economy

This study can provide necessary information and support to the Government’s programs in formulating policies and laws on e-commerce applied for businesses in Vietnam

Researchers can use this study as a reference for further research related to this issue

Scope and Limitation of the Study

The study shall focus on determining the e-commerce strategy that might help small and medium enterprises improve the production, sales and profit of the company It will mainly focus on the small and medium enterprises (SMES) in Vietnam The forms of ownership and types of enterprises considered in this study are enterprises of all forms of ownership and business types, except for the enterprises with 100% foreign capital

The research focuses on the enterprises in Hanoi The representative samples meet the requirement needed to augment the capacity for applying e-commerce in particular and IT in general at the highest level in Viet Nam

Definition of Terms

The following terms are extensively used in this study and are hereby conceptually and operationally defined:

Electronic commerce (e-commerce) is a much broader term encompassing

not only EDI but also other forms of communication, such as E-mail and Electronic bulletin boards EDI was primarily developed for high volume exchange of commercial documents in standardized electronic format over an electronic public network between the automated business processes of trading partners E-mail, on the other hand, is

the exchange of less structured correspondence in electronic format Electronic Data Interchange (EDI) is simply the means to communicate

between companies from one computer to another For many years companies have been using computers to send business documents instead of mailing paper documents (i.e most of our pay checks are

directly deposited into our bank accounts) This transfer of funds is accomplished by the use of an electronic file being sent form your company to your bank) The problem was that the all efforts employed proprietary or unique formats The absence of a standard format led to the condition where computers could not longer "talk" to one another without a great deal of effort by programmers For example, Supplier X could recognize an electronic Purchase Order from Retailer A but not

from Retailer B

Information Technology (IT) is the application of computers and

telecommunications equipment to store, retrieve, transmit and manipulate data, often in the context of a business or other enterprise The term is commonly used as a synonym for computers and computer networks, but it also encompasses other information distribution technologies such as television and telephones Several industries are associated with information technology, such as computer hardware, software, electronics, semiconductors, internet, telecom equipment, e-

commerce and computer services

Organizational readiness was assessed by including two items about the

financial and technological resources that the company may have available as well as factors dealing with the compatibility and consistency of e-commerce with firm’s culture, values, and preferred work practices (existing technology infrastructure; and top management’s enthusiasm to adopt e-commerce)

Perceived ease of use can be measured by identifying how IT is: easy to

learn, controllable, clear & understandable, flexible, easy to become

skillful in and easy to use

Perceived usefulness can be measured by investigating the impact of IT

on job performance, speed of work, increased productivity, effectiveness, make job easier and useful

Small and medium Enterprises (SMEs)are companies whose personnel

numbers fall below the limits In Vietnam, according to Decree No

56/2009/ND-CP dated 30/6/2009 of the Government, the amount of labor required an annual average of 10 or less are considered micro enterprises, 10 less than 200 employees are considered small

enterprises and from 200 to 300 workers are to be treated as Medium Enterprises

Chapter II REVIEW OF LITERATURE

Through extensive data gathering from different books and internet sites, this chapter serves as informative references of this research study particularly focusing on its objectives Different research studies have also been found which are precisely significant to the development of the study

Mirchandani & Motwani (2001) define electronic Commerce as commercial activities conducted over the World Wide Web At the most basic level, a company can become enabled for electronic commerce simply by adding communication over the Internet e.g., e-mail-to its established forms

of communication such as telephone, fax, or the postal service In increasing levels of sophistication, the company can use the Internet to manage information (including on-line databases) or integrate electronic commerce into re-engineered business processes (e.g., on-line order entry, inventory tracking, and electronic billing) The company can also use electronic commerce to reach current customers, potential customers, suppliers, and other groups (e.g., financial institutions and the media) Nearly half (46%) of all small businesses have yet to adopt electronic commerce (Wall Street

Journal, 1999) This report appears surprising because electronic commerce

intuitively may be the first medium of choice for small businesses given its inherent nature of leveling the playing field between small and large businesses With decreasing cost and availability of powerful user-friendly hardware and software, the benefits of information systems (IS), and hence electronic commerce, are now accessible to even the smallest business

Since small businesses have unique computing needs as well as distinctive technology acceptance patterns, and that small businesses represent a distinct group that can benefit significantly from the adoption of electronic commerce

The study of Mirchandani & Motwani (2001) has sought to identify factors that influence the adoption of electronic commerce in small businesses Enthusiasm of the top manager/CEO of Greater Grand Rapids organizations towards electronic commerce, compatibility of electronic commerce with the work of the company, relative advantage perceived from electronic commerce, and knowledge of the company's employees about computers were found to discriminate between adopters and non-adopters of electronic commerce The interviews conducted with non-adopters of electronic commerce also identified their difficulty in hiring and retaining skilled

IS professionals to implement electronic commerce Clearly the arrival of electronic commerce to the world of business has facilitated a shift from the mass labor paradigm of past decades to a knowledge worker paradigm that is likely to dominate the economy for the future Small businesses that are able

to retain technology-skilled employees will be the beneficiaries of the electronic commerce economy

In addition, the study by Lertwongsatien and Wongpinunwatana (2003) examined small and medium enterprises in Thailand and described the factors that differentiated e-commerce adopters from non-adopters These included organization size, top management support for e-commerce, existence of an

IT department within the organization, perceived benefits and compatibility, and industry competitiveness (Lertwongsatien and Wongpinunwatana, 2003)

In an article entitled “Global and National Factors Affecting Commerce Diffusion in Singapore,” Wong (2003) has attempted to highlight

E-the likely global/regional and national environmental factors affecting commerce adoption in Singapore Our summary assessment is that, in aggregate, Singapore appears to have relatively high readiness for e-commerce development Indeed, preliminary evidence available suggests that e-commerce diffusion in Singapore has been relatively rapid by international standards, and that the broad pattern of diffusion is consistent with our prediction based on the assessment of facilitating and impeding factors Overall, with e-commerce as an innovation still being at an early stage of evolution, even on a global scale, the biggest factor impeding greater adoption

e-in Se-ingapore e-in the near term is likely to be the newness and unproven nature

of commerce applications, rather than any internal national factor Until commerce investment has demonstrated a greater economic impact through a sufficient number of successful role models, and competitive pressures from rival adoption are beginning to hurt, the pace of diffusion is likely to be constrained, notwithstanding various active government policy initiatives to promote their development

e-While still preliminary, the empirical evidence suggests that the earlier investment by Singapore in ICT infrastructure has facilitated the subsequent development of e-commerce In this regard, e-commerce development in Singapore so far appears to primarily build upon, rather than significantly disrupt, the prior infrastructural investments The e-commerce development pattern by sectors also seems to suggest that Singapore’s high dependence

on global MNCs has been a positive facilitating factor, rather than a negative

one The sectors that have been most advanced in adopting e- commerce—notably the electronics manufacturing and logistics industries—have been the most highly dependent on global MNCs and have been the most closely linked to the global production networks In this regard, Singapore’s strength

in physical transportation infrastructures and high reliance on MNCs appear to have been an advantage, rather than a liability, in facilitating e-commerce developments Last, but not least, while some scholars have argued that the role of the state would become counterproductive in the e-commerce era, given the astonishing pace of technological change and the chaotic uncertainties regarding Internet business models that would make it difficult for any state agency to pick winners or even to provide guidance, our analysis

of the experience of Singapore suggests that a continuing active government policy role may have contributed to, or at least not impeded, Singapore’s rapid e-commerce diffusion, just as Singapore’s past high rate of adoption of ICT has been significantly driven by active government policies Indeed, author has highlighted areas where stronger government policies may be needed, including the promotion of technological innovation and entrepreneurship, strengthening network links with entrepreneurial hotspots like the Silicon Valley, and quickening the pace of financial and telecommunications market liberalization In particular, how public policy can contribute to the creation of a critical mass of e-commerce-related entrepreneurs in Singapore will be an important policy research question in the future

Grandon and Pearson (2004) investigated factors that influenced commerce adoption by SMEs in both developed and developing counties, the United States and Chile Using the combination of two theories

e-DIT (Diffusion of Innovation Theory) and TAM (Technology Acceptance Model), through reviewing a substantial amount of researches on other IT adoption models, that some of them will be mentioned in this research, Grandon and Pearson identified organizational readiness, compatibility, external pressure, perceived ease of use and perceived usefulness as the most important factors affecting e-commerce adoption in SMEs

Figure 1 Research Model (Grandon and Pearson, 2004)

Model for Assessing E-commerce Success in SMEs

A comprehensive review of literature in the last 20 years starting from

1991 to 2011 has been done to develop the proposed model of e-commerce adoption in SMEs The proposed model consists of factors from relevant researches that w e r e divided into internal and external factors affecting e-commerce success in SMEs The proposed model is shown in Fig 2 Here, the factors are divided into Independent Factor that is Organizational, Management, Technological, Individual, Implementation, and Trust and

Environmental Under each independent factor consists of variables or dependent (Contributing) factors shown in Table 1

Figure 2 Proposed model for assessing e-commerce success in SMEs.

Table 1

Success Factors for SMEs

(Source: Fatima Ajmal, Norizan Binti Mohd Yasin - 2012)

Model of Factors Influencing Electronic Commerce Adoption and Diffusion in Small- & Medium-sized Enterprises

It is believed that the Internet will eventually be an extremely important vehicle for commercial and consumer transactions To date, however, SMEs have been slow to adopt the technology While most firms now have an Internet presence, in the form of a corporate Web site, few SME’s use Internet

to conduct transactions with customers and suppliers In a recent survey of Electronic Commerce in Australian SMEs, it was found that only 11% of the SMEs place orders and 7% pay over the Internet, confirming that the widespread use of the Internet does not automatically translate into Electronic Commerce Moreover, early adopters of Electronic Commerce have found that customers have been slow to accept the technology and therefore, with few exceptions, the benefits of early adoption have not been realized Even in cases where benefits are generally available to all potential Electronic Commerce adopters, some adopted Electronic Commerce rapidly while others require longer time to adopt

Using theoretical foundations from established information system implementation research, innovation diffusion theories, and Electronic Commerce and small business literature, this research seeks to explain Electronic Commerce implementation success by examining factors that may

be associated with the adoption of Electronic Commerce within organizations and between its business partners The relationships of these factors with the adoption of Electronic Commerce are shown in Figure 3

Figure 3 Proposed Electronic Commerce Adoption Model for Small- and

Medium-sized Enterprises

This study examines five types of factors that are considered to be relevant to the adoption and diffusion of Electronic Commerce The classification of the factors is illustrated in the figure above and further elaborated in the following sections Some of these factors may be more important at the time the organization is deciding whether to adopt Electronic Commerce technology than in influencing the extent to which Electronic Commerce is implemented in the organization On the other hand, some factors may be important both in the adoption decision and in the subsequent implementation Many of the factors identified here are suggested by the literature, which attempts to distinguish adopters from non-adopters; many of these same factors may also impact the adoption decision and the extent to which Electronic Commerce is implemented

This research has identified the factors exerting influence on the adoption of Business-to- Business Electronic Commerce in SMEs Furthermore these factors have been combined into a model to describe and explain the drivers and critical success factors for Electronic Commerce implementations (Ling, 2011)

Theoretical Framework

Internet

The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite (TCP/IP) to serve billions of users worldwide It is a network of networks that consists of millions of private, public, academic, business, and government networks, of local to global scope, that are linked by a broad array of electronic, wireless and optical networking technologies The Internet carries an extensive range of information resources and services, such as the inter-linked hypertext documents of the World Wide Web (WWW) and the infrastructure to support email

Figure 4 Internet Model

Internet in Viet Nam

Number of users in Vietnam up to the end of July 2011 reached over

31 million people, in which there were 4 million people using wide-bandwidth Internet A large number of people using the Internet are considered potential basis in e-commerce development in Vietnam

According to statistics of the General Directorate of Statistics on March

2012, number of people using an Internet in Vietnam reached to 32.1 million

in which a number of subscribers in a country reached to 4.2 million (compared to 134 million telephone subscribers included 15.3 million fixed subscribers and 118.7 million mobile subscribers)

Table 2

Internet Accessibility in Viet Nam

Year1 Number of Users Percent of Population (%) Capacity (Bit/s)

1

calculated to 31 year 12 of study

According to the report of Akamai, a US Internet survey firm, at the end

of 2011, Internet transfer rate in Vietnam reached about 1,7 Mbps, ranked 32/50 countries that to be surveyed and was lower than the average degree

on the world (2,6 Mbps)

Internet Service Providers (ISP) in Vietnam:

• Vietnam Telecommunications Group - VNPT

• General Corporation of Army Telecommunications - Viettel

• FPT Corporation directly under Ministry of Science and Technology

• NetNam directly under Institute of Information Technology - Vietnam Institute of Science and Technology

• Joint-stock Company of Saigon Post and Telecommunications Service

- SPT

• Hanoi Telecommunications Corporation

• General Corporation of Multimedia Communications - VTC

• Join-stock Company of Global Mobile Telecommunications (G-Tel)

• Electricity Telecommunication Corporation - EVNTelecom

• Vietnam Maritime Information Electronics Corporation - Vishiped

• Computing and Data Transfer Corporation - VDC

• Join-stock Company of Telecom Infrastructure CMC - CMC TI

Internet in Vietnam today is managed by Vietnam Internet Center (VNNIC) that is a division directly under Ministry of Information and Communication VNNIC was established in 28th April 2000 performing the following functions:

• Manage, allocate, supervise and impulse the use of domain resource, address and Internet number sign of Vietnam

• Give information, guide and total up on the Internet

• Joint in international activities on the Internet

E-commerce

Electronic commerce relate to commercial transaction of goods and services conducted between parties electronically mainly through open Internet-based systems i.e the parties interact electronically rather than by physical exchange or contact A wide range of communication technologies including e-mail, EDI, Internet, Intranet and Extranet can be used to support electronic commerce

Electronic commerce includes commercial transactions such as electronic trading of goods and services, on line delivery of digital content, electronic fund transfers, electronic share trading, electronic bills of lading, collaborative design and engineering, on line sourcing, public procurement, direct and consumer market E-commerce can be divided into:

• E-tailing or "virtual storefronts" on Web sites with online catalogs, sometimes gathered into a "virtual mall"

• The gathering and use of demographic data through Web contacts

• Electronic Data Interchange (EDI), the business-to-business exchange

of data

• E-mail and fax and their use as media for reaching prospects and established customers (for example, with newsletters)

• Business-to-business buying and selling

• The security of business transactions

Market Research:

In early 1999, it was widely recognized that because of the interactive

nature of the Internet, companies could gather data about prospects and customers in unprecedented amounts - through site registration, questionnaires, and as part of taking orders The issue of whether data was collected with the knowledge and permission of market subjects had been raised (Microsoft referred to its policy of data collection as "profiling" and a proposed standard has been developed that allows Internet users to decide who can have what personal information.)

Electronic Data Interchange (EDI):

EDI (Electronic Data Interchange) is simply the means to communicate between companies from one computer to another For many years companies have been using computers to send business documents instead

of mailing paper documents (i.e most of our pay checks are directly deposited into our bank accounts) This transfer of funds is accomplished by the use of

an electronic file being sent form your company to your bank) The problem was that all efforts employed proprietary or unique formats The absence of a standard format led to the condition where computers could no longer "talk" to one another without a great deal of effort by programmers For example, Supplier X could recognize an electronic Purchase Order from Retailer A but not from Retailer B

Business-to-Business Buying and Selling:

A type of commerce transaction that exists between businesses, such

as those involving a manufacturer and wholesaler, or a wholesaler and a retailer Business to business refers to business that is conducted between companies, rather than between a company and individual consumers This is

in contrast to business to consumer (B2C) and business to government (B2G) A typical supply chain involves multiple business to business transactions, as companies purchase components and other raw materials for use in its manufacturing processes The finished product can then be sold to individuals via business to consumer transactions

The Secure Electronic Transaction:

Secure Electronic Transaction (SET) is a system for ensuring the security of financial transactions on the Internet It was supported initially by Mastercard, Visa, Microsoft, Netscape, and others With SET, a user is given

an electronic wallet (digital certificate) and a transaction is conducted and verified using a combination of digital certificates and digital signatures among the purchaser, a merchant, and the purchaser's bank in a way that ensures privacy and confidentiality SET makes use of Netscape's Secure Sockets Layer (SSL), Microsoft's Secure Transaction Technology (STT), and Terisa System's Secure Hypertext Transfer Protocol (S-HTTP) SET uses some but not all aspects of a public key infrastructure (PKI)

E-Commerce Models

Creating an e-commerce solution mainly involves creating and deploying an e-commerce site The first step in the development of an e-commerce site is to identify the e-commerce model Depending on the parties involved in the transaction, e-commerce can be classified into 4 models These are:

• Business – to – Business (B2B) model

• Business – to – Consumer (B2C) model

• Consumer – to- Consumer (C2C) model

• Consumer – to – Business (C2B) model

Business-to-Business (B2B) Model

The B2B model involves electronic transactions for ordering, purchasing, as well as other administrative tasks between houses It includes trading goods, such as business subscriptions, professional services, manufacturing, and wholesale dealings Sometimes in the B2B model, business may exist between virtual companies, neither of which may have any physical existence In such cases, business is conducted only through the Internet

The advantages of the B2B model are:

• It can efficiently maintain the movement of the supply chain and the manufacturing and procuring processes

• It can automate corporate processes to deliver the right products and services quickly and cost-effectively

Figure 5 B2B Business Model

The B2B model is predicted to become the largest value sector of the industry within a few years This is said to be the fastest growing sector of e-commerce.

Development of model B2B in Vietnam

There were many efforts to develop B2B in Vietnam in which the first website was built in 2005, however it had not any significant success There are many reasons for this, firstly because e-transaction conditions are still not mature, barrier of language and actually there are not practical programs supported enterprises

A success of a B2B website not only is evaluated based on daily number

of access turns, but also is expressed by a number of transactions actually taken place The typical model B2B was the success of website Alibaba - a statue in e-commerce area with thousands of transactions carried out daily and an increase

in exchange quantity up to 50% annually

In a transaction method respect, a model B2B is a choice that holds a upper hand when an enterprise conducts to build e-commerce website While the rate of B2C websites was unchanged through 2 years, the rate of B2B websites increased from 76.4% in 2006 to 84.8% in 2007 A heading of Vietnam enterprises is also suitable for general trend on the world; it uses B2B as a motive power to develop an e-commerce, and from this to improve a competitive ability

of enterprises

At the begin of 2010, the Join-stock Company of Singapore Trading Investment Dovalize co-operated with Limited liability Company Tin Lien to develop www.vigogo.com - the first Vietnam B2B exchange floor attached to international brand name with an ability of translation converting quickly between

English-Chinese-Vietnamese In the next time, administration board of Vigogo.com will continue to concentrate on creating a relationship and associate with Google, Yahoo!, Baidu in order to expand an international market share for Vietnam enterprises

Along with the policies supported to increase an export market share in Vietnam recently, Vigogo.com now also takes part to deploy a program "Impove a brand name of Vietnam" supporting to new enterprises to be registered 2.000 credits (equals to 390.000 dongs) in order to make a good condition for enterprises to be able to advert their own products (http://www.vigogo.com)

With today conditions of e-commerce development, there is a hope that in

a future Vietnam will have an effective B2B website which brings in many

chances for enterprises to be able to co-operate (Source: Baomoi.com)

Business-to-Consumer (B2C) Model

The B2C model involves transactions between business organizations and consumers It applies to any business organization that sells its products or services to consumers over the Internet These sites display product information in an online catalog and store it in a database The B2C model also includes services online banking, travel services, and health information

The B2C model of e-commerce is more prone to the security threats because individual consumers provide their credit card and personal information on the site of a business organization In addition, the consumer might doubt that his information

is secured and used effectively by the business organization This is the main reason why the B2C model is not very widely accepted Therefore, it

becomes very essential for the business organizations to provide robust security mechanisms that can guarantee a consumer for securing his information

- Organization

- Strengths related to SME

- Weaknesses

Figure 6 B2C Business Model

Development of the model B2C in Vietnam

According to the survey of E-commerce and IT Bureau, with 47 transaction floors that were registered to Ministry of Industry and Trade, an estimated overall exchange value performed through these websites in 2012 achieved about 354 million USDs

As the most unobtrusive estimation, an exchange value of these 47 floors gained about 50% of the e-commerce market B2C, the turnover of overall Vietnam B2C in 2012 gained about 700 million USDs

common examples of online auction Web sites that provide a consumer to advertise and sell their products online to another consumer However,

it is essential that both the seller and the buyer must register with the auction site While the seller needs to pay a fixed fee to the online auction house to sell their products, the buyer can bid without paying any fee The site brings the buyer and seller together to conduct deals

Figure 7 C2C Business Model

Let us now look at the previous figure with respect to eBay When a customer plans to sell his products to other customers on the Web site of eBay, he first needs to interact with an eBay site, which in this case acts as a facilitator of the overall transaction Then, the seller can host his product on www.ebay.com, which in turn charges him for this Any buyer can now browse the site of eBay to search for the product he interested

in If the buyer comes across such a product, he places an order for the same

on the Web site of eBay eBay now purchase the product from the seller and then, sells it to the buyer In this way, though the transaction is between two

customers, an organization acts as an interface between the two organizations

Consumer-to-Business (C2B) Model

The C2B model involves a transaction that is conducted between

a consumer and a business organization It is similar to the B2C model, however, the difference is that in this case the consumer is the seller and the business organization is the buyer In this kind of a transaction, the consumers decide the price of a particular product rather than the supplier This category includes individuals who sell products and services to organizations For example, www.monster.com is a Web site on which a consumer can post his bio-data for the services he can offer Any business organization that is interested in deploying the services of the consumer can contact him and then employ him, if suitable

Figure 8 C2B Business Model

Conceptual Framework

To develop e-commerce applications in small and medium enterprises in Vietnam, e-commerce must be approved for use by firms To be accepted, businesses should see the benefits of e-commerce deployment Besides, we