Global E-Commerce & E-Business 2

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Changu Kana Thakur Institute Of Management Studies And Research, New Panvel.

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Global E-Commerce & E-Business

Submitted by Ghorpade Bhanudas. & Shaikh Azharoddin. MMS (I YEAR)

Introduction In the emerging global economy, e-commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. The integration of information and communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in business has enhanced productivity, encouraged greater customer participation, and enabled mass customization, besides reducing costs. The Internet has created a new economic ecosystem, the e-commerce marketplace, and it has become the virtual main street of the world. Providing a quick and convenient way of exchanging goods and services both regionally and globally, e-commerce has boomed. Today, ecommerce has grown into a huge industry with US online retail generating $175 Billion in revenues in 2007, with consumer-driven (B2C) online transactions impacting industries from travel services to consumer electronics, from books and media distribution to sports & fitness. With more than 70% of Americans using the Internet on a daily basis for private and/or business use and the rest of the world also beginning to catch on, e-commerce's global growth curve is not likely to taper off anytime soon. Concept and definition Electronic commerce or e-commerce refers to a wide range of online business activities for products and services. It also pertains to “any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact.” E-commerce is usually associated with buying and selling over the Internet, or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network. Though popular, this definition is not comprehensive enough to capture recent developments in this new and revolutionary business phenomenon. A more complete definition is: E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals. Is e-commerce the same as e-business? While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals). In e-business, on the other hand, ICT is used to enhance one‟s business. It includes any process that a business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network. A more comprehensive definition of e-business is: “The transformation of an organization’s processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy.”
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Three primary processes are enhanced in e-business: 1. Production processes, which include procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes, among others; 2. Customer-focused processes, which include promotional and marketing efforts, selling over the Internet, processing of customers‟ purchase orders and payments, and customer support, among others. 3. Internal management processes, which include employee services, training, internal information-sharing, video-conferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of internal business information are likewise made more efficient.

Different types of e-commerce : The major different types of e-commerce are: business-to-business (B2B)B2B e-commerce is simply defined as e-commerce between companies. This is the type of e-commerce that deals with relationships between and among businesses. About 80% of ecommerce is of this type, and most experts predict that B2B ecommerce will continue to grow faster than the B2C segment. The B2B market has two primary components: e-frastructure and e-markets. business-to-consumer (B2C)Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods (i.e., tangibles such as books or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network. business-to-government (B2G)Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations. This kind of e-commerce has two features: first, the public sector assumes a pilot/leading role in establishing e-commerce; and second, it is assumed that the public sector has the greatest need for making its procurement system more effective. consumer-to-consumer (C2C)Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers. This type of e-commerce is characterized by the growth of electronic marketplaces and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers. It perhaps has the greatest potential for developing new markets.
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mobile commerce (m-commerce)M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology-i.e., handheld devices such as cellular telephones and personal digital assistants (PDAs). Japan is seen as a global leader in m-commerce. As content delivery over wireless devices becomes faster, more secure, and scalable, some believe that m-commerce will surpass wire line e-commerce as the method of choice for digital commerce transactions. This may well be true for the Asia-Pacific where there are more mobile phone users than there are Internet users.

Important of an intranet for a business engaging in e-commerce: An intranet aids in the management of internal corporate information that may be interconnected with a company‟s e-commerce transactions (or transactions conducted outside the intranet). Inasmuch as the intranet allows for the instantaneous flow of internal information, vital information is simultaneously processed and matched with data flowing from external ecommerce transactions, allowing for the efficient and effective integration of the corporation‟s organizational processes. In this context, corporate functions, decisions and processes involving e-commerce activities are more coherent and organized. The proliferation of intranets has caused a shift from a hierarchical command-and control Organization to an information-based organization. This shift has implications for managerial responsibilities, communication and information flows, and workgroup structures. The relevant components of an e-business model An e-business model must have, 1. A shared digital business infrastructure, including digital production and distribution technologies (broadband/wireless networks, content creation technologies and information management systems), which will allow business participants to create and utilize network economies of scale and scope. 2. A sophisticated model for operations, including integrated value chains-both supply chains and buy chains. 3. An e-business management model, consisting of business teams and/or partnerships; and 4. Policy, regulatory and social systems-i.e., business policies consistent with e-commerce laws, teleworking/virtual work, distance learning, incentive schemes, among others. E-Commerce Transaction Processing Basics: Ecommerce Transaction Processing Stages: Authorization. Authorization is the process by which the card issuer approves or declines a card transaction. Authentication. Authentication is the process of establishing the validity of the credit or debit card account information provided by the customer. Authentication is done

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by utilizing various fraud prevention tools, including Address Verification Service (AVS) and Card Security Verification Codes. Settlement. When the service has been provided or the product has been shipped, the merchant can deposit the transaction with its acquiring bank and the funds will be transferred into its merchant account. E-commerce Transaction Participants: Every e-Commerce transaction processing is the result of the interactions among several participants.
 Card Issuer. Card issuers are banks members of Visa and MasterCard cards which issue







  



cards on behalf of the two Credit Card Associations and contract with their cardholders for the terms of the repayment of transactions. Acquiring Bank. Acquiring banks (also called Acquirers or Merchant Banks) are inancial institutions, members of Visa and MasterCard, that contract with merchants to enable them to accept debit and credit card payments for their products and services. They can also, and that is the case most of the time, contract with third parties to provide credit and debit card payment processing services. Merchant Processor. Merchant processor is an organization that has contracted with an acquiring bank to provide merchants with card payment processing services on behalf of the Acquirer. Merchant processors must be registered with Visa and MasterCard. Credit Card Networks. The Credit Card Networks of Visa and MasterCard are memberowned associations of banks that govern the issuing of Visa and MasterCard cards and the acquiring of Visa and MasterCard card transactions. Cardholder. Cardholder is an authorized user of a credit or debit card. E-Commerce Merchant. Ecommerce merchant is a merchant who has contracted with an acquiring bank or a merchant processor to accept card payments on its website. E-Commerce Payment Gateway. Ecommerce payment gateway (also called payment gateway or just gateway) is a web-based service that enables e Commerce merchants to transmit card payment information, provided by cardholders at the time of the transaction, to their acquiring banks. Service Provider. A service provider can be any third party that provides a service used in the e-Commerce transaction process: web hosting, SSL certificate, shopping cart, etc. The payment gateway can, too, be provided by a third-party organization.

Start an E-Commerce Business Online The way to go now days is to start your own e-commerce business. The risk involved is nothing and you do not even need a big loan or an investment to start off with it and the best part about is that the returns are terrific! Online stores are really changing the way business is done online and it has become one of the most lucrative ways to earn money. A lot of people are looking at starting these stores themselves and there are so many tools that can help you get started and so many ways in which you can find help on this subject that it just makes it so much easier.

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One of the first things you need to do in order to start with this is to look for a suitable domain name and get it registered. Try and not go for a branded domain name and keep your product in mind while selecting one since you need to attract online customers to your page. This is definitely the most important step when you think of starting your own business. Select your product after deciding on what there is a demand in and what is really selling. You can opt in for something you are interested in or you can also go in for something that is seasonal and sales will peak up for you during that time of the year. The most important part of your website will be the product page since this is your selling page and this is where the customers are going to come and make their purchase. Make sure that it is attractive and pleasing to the eye and provide them with a large choice. There are so many tools available in the market to make this experience for them better like zip dandy and other tools that you should opt in for these while making your e-commerce store. E-COMMERCE IN DEVELOPING COUNTRIES How important is e-commerce to SMEs in developing countries? How big is the SME e-business market? For SMEs in developing countries e-commerce poses the advantages of reduced information search costs and transactions costs (i.e., improving efficiency of operationsreducing time for payment, credit processing, and the like). Surveys show that information on the following is most valuable to SMEs: customers and markets, product design, process technology, and financing source and terms. The Internet and other ICTs facilitate access to this information.In addition, the Internet allows automatic packaging and distribution of information (including customized information) to specific target groups. However, there is doubt regarding whether there is enough information on the Web that is relevant and valuable for the average SME in a developing country that would make investment in Internet access feasible. Underlying this is the fact that most SMEs in developing countries cater to local markets and therefore rely heavily on local content and information. For this reason, there is a need to substantially increase the amount and quality of local content (including local language content) on the Internet to make it useful especially to low-income entrepreneurs. How is e-commerce useful to developing country entrepreneurs? There are at least five ways by which the Internet and e-commerce are useful for developing country entrepreneurs: 1. It facilitates the access of artisans and SMEs to world markets. 2. It facilitates the promotion and development of tourism of developing countries in a global scale. 3. It facilitates the marketing of agricultural and tropical products in the global market. 4. It provides avenues for firms in poorer countries to enter into B2B and B2G supply chains. 5. It assists service-providing enterprises in developing countries by allowing them to operate more efficiently and directly provide specific services to customers globally Developing country SMEs in the services sector have expanded their market with the increased ability to transact
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directly with overseas or international customers and to advertise their services. This is especially true for small operators of tourism related services. Tourism boards lend assistance in compiling lists of service providers by category in their Web sites. In addition, for SMEs in developing countries the Internet is a quick, easy, reliable and inexpensive means for acquiring online technical support and software tools and applications, lodging technical inquiries, requesting repairs, and ordering replacement parts or new tooling. The Internet is also instrumental in enabling SMEs in developing countries to join discussion groups with their peers across the globe who are engaged in the same business, and thereby share information, experiences and even solutions to specific technical problems. This is valuable especially to entrepreneurs who are geographically isolated from peers in the same business, In general, the main issues of concern that act as barriers to the increased uptake of information technology and e-commerce are the following: ● Lack of awareness and understanding of the value of e-commerce. Most SMEs in developing countries have not taken up e-commerce or use the Internet because they fail to see the value of e-commerce to their businesses. Many think e-commerce is suited only to big companies and that it is an additional cost that will not bring any major returns on investment. ● Lack of ICT knowledge and skills. People play a vital role in the development of e-commerce. However, technology literacy is still very limited in most developing countries. There is a shortage of skilled workers among SMEs, a key issue in moving forward with using information technology in business. There are also doubts about whether SMEs can indeed take advantage of the benefits of accessing the global market through the Internet, given their limited capabilities in design, distribution, marketing, and post-sale support. While the Internet can be useful in accessing international design expertise, SMEs are not confident that they can command a premium on the prices for their goods unless they offer product innovations. They can, however, capitalize on returns on the basis that they are the low cost providers. Furthermore, more often than not, the premium in design has already been capturedfor example, in the textile products industry-by the branded fashion houses. SMEs doubt whether Web presence will facilitate their own brand recognition on a global scale. ● Financial costs. Cost is a crucial issue. The initial investment for the adoption of a new technology is proportionately heavier for small than for large firms. The high cost of computers and Internet access is a barrier to the uptake of e-commerce. Faced with budgetary constraints, SMEs consider the additional costs of ICT spending as too big an investment without immediate returns. Many SMEs find marketing on the Internet expensive. Having a Web site is not equivalent to having a well-visited Web site. One reason is that there may be no critical mass of users. Another reason is the challenge of anonymity for SMEs. Because of the presence of numerous entrepreneurs in the Internet, it seems that brand recognition matters in order to be competitive. Moreover, it is not enough that a Web site is informative and user-friendly; it should also be updated frequently. Search engines must direct queries to the Web site, and news about the site must be broadly disseminated. Significantly, the experience of many OECD countries attests to the fact that the best e-marketing strategies are not better substitutes for the conventional form of media. One solution may be to encourage several SMEs to aggregate their information on a common Web site, which in turn would have the responsibility of building recognition/branding by hyper linking or updating, for example. ● Infrastructure. The national network/physical infrastructure of many developing countries
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is characterized by relatively low teledensity, a major barrier to e-commerce. There are also relatively few main phone lines for business use among SMEs. ● Security. Ensuring security of payments and privacy of online transactions is key to the widespread acceptance and adoption of e-commerce. While the appropriate policies are in place to facilitate e-commerce, lack of trust is still a barrier to using the Internet to make online transactions. Moreover, credit card usage in many developing countries is still relatively low. Also, consumers are reluctant to use the Internet for conducting transactions with SMEs due to the uncertainty of the SMEs‟ return policy and use of data. ● Other privacy- and security-related issues.While security is commonly used as the catch-all word for many different reasons why individuals and firms do not engage in extensive ecommerce and use of Internet-based technologies, there are other related reasons and unresolved issues, such as tax evasion, privacy and anonymity, fraud adjudication, and legal liability on credit cards. In many countries, cash is preferred not only for security reasons but also because of a desire for anonymity on the part of those engaged in tax evasion or those who simply do not want others to know where they are spending their money. Others worry that there is lack of legal protection against fraud (i.e., there is no provision for adjudicating fraud and there may be no legal limit on liability, say, for a lost or stolen credit card). It is necessary to distinguish these concerns from the general security concerns (i.e., transaction privacy, protection and security) since they may not be addressed by the employment of an effective encryption method (or other security measure). What is the role of government in the development of e-commerce in developing countries? While it is generally agreed that the private sector should take the lead role in the development and use of e-commerce, the government plays an instrumental role in encouraging e-commerce growth through concrete practicable measures such as: 1. Creating a favorable policy environment for e-commerce; and 2. Becoming a leading-edge user of e-commerce and its applications in its operations, and a provider to citizens of e-government services, to encourage its mass use. What is a favorable policy environment for e-commerce? Among the public policy issues in electronic commerce that governments should take heed of are: ● “bridging the digital divide” or promoting access to inexpensive and easy access to information networks; ● legal recognition of e-commerce transactions; ● consumer protection from fraud; ● protection of consumers‟ right to privacy; ● legal protection against cracking (or unauthorized access to computer systems); ● protection of intellectual property. Measures to address these issues must be included in any country‟s policy and legal framework for e-commerce. It is important that government adopt policies, laws and incentives that focus on promoting trust and confidence among e-commerce participants and developing a national
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framework that is compatible with international norms on e-commerce (covering for instance, contract enforcement, consumer protection, liability assignment, privacy protection, intellectual property rights, cross-border trade, and improvement of delivery infrastructure, among others). How can government use e-commerce? Government can use e-commerce in the following ways: ● E-procurement: Government agencies should be able to trade electronically with all suppliers using open standards-through „agency enablement‟ programs, „supplier enablement‟ programs, and eprocurement information systems. ● Customs clearance: With the computerization of customs processes and operations (i.e., electronic submission, processing and electronic payment; and automated systems for data entry to integrate customs tables, codes), one can expect more predictable and more precise information on clearing time and delivery shipments, and increased legitimate revenues. ● Tax administration: This includes a system for electronic processing and transmission of tax return information, online issuances of tax clearances, permits, and licenses, and an electronic process registration of businesses and new taxpayers, among others. More often than not, the ecommerce initiatives of government are a barometer indicating whether or not the infrastructure supports e-commerce use by private firms. This means that if government is unable to engage in e-procurement, secure records online, or have customs fees remitted electronically, then the private sector will also have difficulties in e-commerce uptake. Virtually, the benefits from ecommerce accrue to the government, as the experiences of some countries reflect. Are existing legal systems sufficient to protect those engaged in e-commerce? Unfortunately, the existing legal systems in most developing countries are not sufficient to protect those engaged in e-commerce. For instance, with respect to contracts, existing laws were conceived at a time when the word “writing,” “document” and “signature” referred to things in paper form. On the other hand, in today‟s electronic business transactions paper is not used for record-keeping or entering into contracts. Another important and common legal issue faced by many developing countries is uncertainty regarding whether the courts will accept electronic contracts or documents and/or electronic signatures as evidence. One view is that the issue of admissibility of electronically generated evidence will not be resolved unless a law specifically referring to it is passed. This gap in existing legal systems has caused the emergence of at least two divergent views: one bordering on the conservative interpretation of the word “document” as to exclude non-paper-based ones; and the other involving a liberal construction, which allows electronic counterparts of documents. In the ASEAN region, only three countries-Singapore (Singapore Electronic Transactions Act), Malaysia (Cyberlaws), and the Philippines (Philippine E-commerce Act)-have a legal framework for e-commerce. These frameworks provide for the legal recognition of electronic documents and signatures and penalize common crimes and offenses committed in cyberspace. What other relevant policy issues should be addressed?
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Other policy issues concern basic prerequisites of infrastructure for successful ecommerce, as follows: 1. Telecoms pricing and performance One of the aims of telecommunications policy and legislation should be to ensure that the public has access to basic telecommunications services at a reasonable cost. The goal should ultimately be universal access or widespread access to reliable information and communication services at a reasonable cost and its availability at a reasonable distance. To enhance the quality of telecommunications services, policies should encourage: ● open access, which refers to the absence of non-competitive practices by network providers; ● open architecture, which pertains to the design of a system that facilitates interconnection among different systems and services currently and as they develop over time; and ● flexible access, which pertains to interconnected and interoperable networks of telecommunications, broadcasting, and electronic publishing, where the format will be digital and the bandwidth will be adjusted according to the demands of the user and the character of communications. 2. Quality and speed of distribution logistics (i.e., roads and bridges) Roads and bridges, especially in developing countries, still form part of the e-commerce infrastructure. Very few goods are delivered over the information infrastructure or the Internet (the exceptions are music and software). Most of the goods purchased over the Internet are still delivered the conventional way (i.e., physical delivery). Hence, poor roads and bridges, inefficient transport systems, coupled with the high cost of international parcel services and bureaucratic customs clearance processes, are major obstacles in the uptake of e-commerce in developing countries. Government should therefore create a policy environment that will: ● encourage investments in the national physical and transport infrastructure; and ● provide for electronic customs clearance processing to streamline the bureaucracy and allow for more transparent, predictable and efficient customs operations. Both of these will contribute to the reduction of distribution and logistics costs. How can government intervene in the promotion and development of e-commerce among SMEs? The following are the more relevant areas for government intervention with respect to SME uptake of e-commerce: E-SME Development. The market ultimately drives e-commerce development, but it is the private sector that fuels it. Government can provide incentives to encourage widespread ecommerce use by SMEs. An “e-SME development program” in which various sectors can provide technical assistance to SMEs to promote ecommerce uptake, can also be developed. Banks, financial lending and training institutions, and corporations should be encouraged to

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develop “SME desks” that will address the specific needs of SMEs. In particular, steps should be taken to: ● provide incentives to individuals to become entrepreneurs by lowering borrowing rates; ● provide incentives to SMEs that intend to use e-commerce in their business operations; ● broaden credit extension facilities to SMEs in order for them to use ICT and ecommerce; and ● offer discounts on business solution software packages and software licenses. Moreover, big businesses and corporations should be encouraged to transfer technology to SMEs by offering them free training in ICT and e-commerce. Awareness Campaign. Evidence suggests that SMEs have insufficient knowledge of information technology and e-commerce. Many SMEs have identified their lack of knowledge of technology as one of the main barriers to using e-commerce. Government and private sector partnerships can engage in a campaign to disseminate information to SMEs about e-commerce policies, best practices, success stories, and opportunities and obstacles relating to the use of ICTs and e-commerce. These awareness campaigns could include free training courses and workshops on e-commerce, security and privacy, awards programs, and information centers to assist SMEs. Ultimately, this information campaign should come in the form of an overall e-commerce development strategy for the economy, focusing on its various innovative applications for SMEs. E-Government: Government should be the lead-user of e-commerce if various business and private-sector related activities are to be prompted to move online. In effect, government becomes a positive influence. E-government can take the form of various online transactions such as company registration, taxation, applications for a variety of employee- and business-related requirements, and the like. Network Infrastructure and Localization of Content. A developed national information infrastructure is a necessary, though not a sufficient, condition for e-commerce uptake of SMEs. Without reliable and inexpensive telecommunications and other information services, SMEs will not be able to go online. An important strategy in this regard is the construction of “telecenters” or electronic community centers that would serve as a community-shared access and connectivity platform especially in the rural areas (e.g., an electronic agri-information center which provides market information to farmers in rural areas). These telecenters can also be a venue for capacity building, skills enhancement, training, communications and content development.Government can also adopt agglomerative approaches to Internet use to reduce costs (e.g., export aggregators, such as B2B or B2C portals/exchanges for SMEs, which will facilitate trading with fellow SMEs and with other companies in the international market). Strengthening Consumer Protection. Among the more common trust-related issues that SMEs take note of in considering whether to engage in e-commerce are: where and how payment takes place (whether real or virtual); when settlement takes place (before, during or after the transaction); who settles; whether the transaction is B2B or B2C; and whether settlement can be traced. Generally, however, among e-commerce users in developing countries, including SMEs, there is very low willingness to provide sensitive financial information over the Internet.On the other hand, consumers have reservations about transacting with SMEs through the Internet due to the lack of a clear policy on returns and use of
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data. To address this concern, government can encourage companies/ SMEs to make their privacy policy explicit in their Web sites. A more comprehensive measure that government can undertake to ensure security in ecommerce transactions is the establishment of a Certification Authority, which verifies seller and buyer identities, examines transactions and security procedures, and issues digital certificates to those who are able to meet the set security standards. A good example of this government effort is Singapore‟s Certification Authority, Netrust. This suggestion does not to discount the importance of private-driven security solutions such as Web sites like Hypermart, which host and build storefronts for SMEs while providing them a common system for secure payments. Government can also provide guidelines for SMEs in the development of a system of collaborative ratings, which these entrepreneurs can display on their Web sites not only to inform but also to assure their consumers of security. For instance, in electronic exchanges, customers should be able to rate suppliers in terms of quality of product or service and speed of delivery, among others. To minimize fraud, certain safeguards should be built into the rating system like imposing the requirement of presenting evidence of purchase before one‟s rating can count, with ratings of regular customers having more weight. Trends in ratings and comments should be made readily available to all users. SMEs should also be encouraged through appropriate government incentive schemes to participate in internationally accredited Web-based online rating schemes. Government can also design and establish a legal and judiciary framework that provides for minimum standards of and requirements for transparency, impartiality and timeliness. While in many developing countries this may be a very ambitious goal, in the medium term SMEs may use self-regulated codes of conduct covering, for example, return policy, data protection, and acceptable forms of content, that are applicable within associations, cooperatives or their respective groups of peers and e-entrepreneurs. It is important to have not only a rating system but also an enforcement regime that people trust. Human Resources Development: The government can initiate pilot projects and programs for capability-building, training and e-commerce support services, such as Web design. In Kenya, for instance, the youth from Nairobi‟s slums are being trained in Web design skills. In general, government initiatives should be in line with current efforts in the foregoing areas of concern. Coordination with development cooperation agencies is important to avoid any duplication of initiatives and efforts.

Reference:E-commerce & E-business article –Zorayda ruth Andam (may 2003) http://spyrestudios.com/ http://www.wikinvest.com/concept/E-Commerce

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