CHAPTER 1 OVERVIEW OF ELECTRONIC COMMERCE

1. EC, Electronic commerce, is the process of buying, selling, or exchanging products, services, and information, via computer networks, mostly the Internet. E-business refers to a broader definition of EC that includes servicing customers, collaborating with business partners, and conducting electronic transactions within an organization. !he ma"or benefits of EC are# $rganizational %sellers&. EC expands the market place with minimum capital outlay. 'ore customers can be reached and there are more suppliers to buy from. EC decreases the cost of creating, storing, retrieving, and distributing information. EC allows low inventories, customized products(services, reduced cycle time, better customer service, and lower communication cost. Consumer. )hop from anywhere anytime. *et a large variety of products from many countries. +sually pay less. Can get customized products(services. Can search ,uickly for detailed information. Can get collector-s items easily and cheaply and interact with other shoppers. Can work and study at home. )ocietal. .ess traffic, pollution, improved public services, improved ,uality of life. /)ee previous I'0 1. !he ma"or technological limitations are# security, reliability, standards and protocols %need to be improved&. Insufficient bandwidth, software development tools are still evolving. )oftware integration problems, a need for a special server, and incompatibility with legacy systems. 2ifficulty "ustifying %intangible benefits&, security enforcement is difficult, lack of trust, resistance to change, legal issues, not enough support services, accessibility and human relations problems are the ma"or non technological limitations 3. 4n intranet is an enterprise internal network which uses Internet technology %!C5(I5 protocol, search engines, browsers, etc&. 4n extranet is a secured network that uses the Internet infrastructure to connect the intranets of business partners, or to allow customers and others to access a corporate intranet. !he ma"or components of EC are# 4pplications %7 7, 7 C, intrabusiness, infrastructure, support, people, public policy, technical standards and organizations. 8ot shown in early printings are advertisement and marketing, and enterprise %E95& connection. :inally management is integrating it all together. 4 corporate portal is a network configuration in which employees, business partners, and the public can access corporate information, communicate, and collaborate. EC makes direct marketing more efficient. It allows sellers to reach more customers with little capital outlay. It permits one=to=one advertisement. It allows customization and it enables the use of multimedia. 'ost importantly, it allows interactive, ,uick feedback from customers and superb customer service.

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!here are several types of virtual corporations. In one type, units from different companies form a temporary independent company. 4nother type is the ?eiretsu, which connects business partners %permanent business alliance&. @irtual corporations are fre,uently found in EC along the supply chain. 4n electronic network that facilitates the exchange of information, products, services, and payments. E E C Exchange=to=exchange C 4 system that connects electronic exchanges to each other. C C C Consumer=to=consumer C 4 category of electronic commerce in which consumers sell directly to other consumers. Examples include online auction sites, such as ebay. * C C *overnment=to=citizens C 4 category of electronic commerce in which a government organization buys or sells goods, services, or information to businesses and citizens. 7 7 C 7usiness=to=business C 4 category of electronic commerce in which all of the participants are businesses or other organizations %e.g., non=profit&. 7 C C 7usiness=to=consumer C 4 category of electronic commerce in which businesses sell goods or services directly to the consumer. Collaborative commerce, also called C=commerce, is a category of electronic commerce in which an interorganizational information system %I$)& is used to facilitate collaboration between business partners and organizational employees. 'obile commerce, also called '=commerce, occurs when electronic commerce is conducted via wireless communications %i.e., cellular phones and personal digital assistants&.

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CHAPTER 2 THE DIGITAL ECONOMY

1. . 1. 4 marketplace refers to a physical market, while a marketspace is an electronic market. Digitized products are those that can be transferred to a binary code. Examples are software, music, and videos. Price discovery is the process of finding either the highest price a buyer is willing to pay or the lowest price a seller is willing to accept. $nline auctions sell to the highest bidder, while 5riceline.com tries to find the lowest price from a seller. Search cost is the time, effort, and expense a consumer incurs to find product, price, and ,uality information about a good or vendor. Disintermediation is the elimination of middlemen in the value chain. Reintermediation refers to brokers who manage electronic intermediation. !he digitization of products and services allows them to be delivered in seconds. !his greatly reduces the time re,uired to obtain them %cycle time&. In addition, e=commerce facilitates greater efficiency along supply chains, leading to cycle time reduction %the time re,uired for a product and its associated paperwork to move through the supply chain&. E=commerce allows manufacturers to customize all their products and services. !his is in contrast to the traditional environment where consumers must choose from standardized products and services. In build-to-order systems the manufacturer only begins assembly after an order has been placed. Micropayments are small payments %usually less than D1& that can be made electronically. !hese payments can be made via mobile phone, smart card, or digital wallet. 'obile commerce, or m-commerce, is e=commerce that is conducted via wireless devices %i.e., mobile phone, personal digital assistant, etc.&.

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CHAPTER 3 RETAILING IN ELECTRONIC COMMERCE (E-TAILING) Describe the nature of !" e-commerce# 7 C e=commerce is concerned with businesses selling products to customers. $hat sells %ell in !"& 4 variety of goods sell well online. !hese goods include# computers and electronics, sporting goods, office supplies, books and music, toys, health and beauty products, entertainment, apparel, services and cars. $hat are the characteristics of high-volume products and services& !he characteristics of high=volume products and services include# high brand recognition, recognized guarantees, digitized formats, relatively inexpensive items, fre,uently purchased items, commodities with standard specifications and well=known, unopenable packaged items. 'ist the !" revenue models# !he 7 C revenue models include# product sales, subscription, transaction=fee, advertising=supported and sponsorship models. 'ist the !" distribution channel models# !he 7 C distribution channel models include# direct marketing, pure=play e=tailers and click=and=mortar retailers. Describe the direct marketing model# !he direct marketing model takes place without intermediaries between manufacturers and buyers. Describe virtual e-tailing# !hese firms sell to customers over the Internet while not maintaining any type of physical sales location. Describe the click-and-mortar approach# Eith this approach the firm sells to customers through the Internet and through physical sales locations. 'ist the benefits of online travel services to travelers and to service providers# $nline travel services provide the benefits of large amounts of free information, 3(< availability and the potential for significant reductions in price. $hat role do intelligent agents have in travel services& Intelligent agents could provide a service to travel customers by providing buyer=seller negotiations. $hat are the driving forces of the electronic (ob market&

!he electronic "ob market is driven by the volatile nature of the employment market itself and the constant change in available positions and applicants. Describe the role of intelligent agents in the electronic (ob market# Intelligent agents can be used to search and retrieve suitable positions for candidates and suitable candidates for employer positions. 'ist the ma(or online real estate applications# !he ma"or online real estate applications include# advice systems for customers who are buying and selling homes, directory and new sites, property listings, commercial property listings, residential property listings, links to realtors, maps, mortgage information, mortgage comparisons, mortgage brokers, online lenders, and sites for home sellers and buyers. $hat are the advantages of online stock trading& !he ma"or advantages of online stock trading are its ease=of=use, access to large amounts of information, convenience, and in many cases reduced costs. E)plain online bill paying# In online bill paying, funds are taken from the userFs accounts by an intermediary who then arranges payments with the userFs debtor. E)plain on-demand delivery service# $n=demand delivery service is express delivery that is made ,uickly after an online order is received. Describe e-grocers and ho% they operate# !hese firms will take orders online and provide deliveries to customers through a regularly scheduled delivery. $ho are the typical e-grocery shoppers& *$ould you shop online for groceries&+ !ypical e=grocery shoppers fall into one or more of the following groups# shopping avoiders, necessity users, new technologists, extremely busy consumers, consumers who en"oy online shopping and older individuals who en"oy shopping in any type of store. Describe digital goods and their delivery# 2igital goods are products that can be completely digitized and delivered over the Internet. E)plain the ,apster business model# !he existing 8apster business model is to provide users with access to music that is not copyright protected in a peer=to=peer environment in addition to offering users the ability to purchase music online. $hat are the benefits and limitations of digital delivery&

!here are several advantages to the use of digital delivery including increased speed of delivery, low product cost and low distribution costs. !he ma"or disadvantage is that not all goods can be digitized. Define shopping portals and provide t%o e)amples# )hopping portals are gateways to storefronts and malls that may be either comprehensive or niche=oriented. Examples would include gomez.com and aol.com(shopping. $hy are escro% services useful for online purchases& !he services are useful for online purchases because they can decrease the amount of contract risk for the customer during an online purchase. $hat motivates a brick-and-mortar company to offer $eb services& !raditional firms offer Eeb services to compete with new e=commerce entrants and to preserve market share. 4dditionally, traditional firms may see e=commerce as a way to expand their existing market share. $hat customer services are provided by "ircuit "ity on its $eb site& !he Circuit City site provides the following customer service tools# product information, explanation of terms, product searches and flexible product comparisons. Describe the logic of the alliance bet%een Amazon.com and ToysRUs.com# !he alliance between these two firms allows 4mazon.com to concentrate on its core competence of effective online logistics and customer relationship management, while !oys9+s.com can concentrate in their area of core competenceCpurchasing and marketing toys. $hy are virtual e-tailers usually not profitable& 'ost of these firms are not profitable because they are unable to ,uickly achieve the scale to make marginal profits on each marginal sale. Relate branding to profitability# *ood branding has historically been tied to profitability in off=line retailers. 7randing is an expensive process that can create financial difficulties for new firms.

Chapte ! C"#$%&e 'eha()" * C%$t"&e +e (),e* a#- A-(e t)$)#. Describe the $eb-based purchasing-decision model# !his model is used to show that each of the five stages in the generic purchasing=decision model can be supported through the Internet. It is called the Consumer 2ecision )upport )ystem %C2))&. Describe one-to-one marketing# $ne=to=one marketing uses special marketing techni,ues that treat each customer in a uni,ue way. Internet technologies greatly facilitate the ease of one=to=one marketing. Define loyalty and describe e-loyalty# Customer loyalty is the degree to which a consumer will stay with a specific vendor or brand. E=loyalty is a measure of a customerFs commitment to an online retailer. Describe the issue of trust in E" and ho% to increase it# !rust is very important in EC because of the lack of direct human interaction between the customer and the merchant. 'erchants are able to increase the amount of trust their customers have through brand recognition, security mechanisms and business transparency. Describe ho% market research is done online# $nline market research is very similar to the research that would be done off=line. $nline marketing research is conducted online, and the Internet can make the process ,uicker and easier. 9esearchers go through the same steps online in determining what needs to be researched and validating results. 9esearchers can gain access to a large variety of secondary research available online. Describe data mining and ho% it is done# 2ata mining is the process of searching a large database to discover previously unknown patterns. It is a way to automate the process of finding predictive information. 2ata mining uses existing information stored in a database that is then searched and correlated to find new information and new patterns of information. Define $eb mining# Eeb mining is the application of data mining technologies to discover meaningful patterns, profiles and trends from both the content and usage of Eeb sites. Describe the limitations of online market research# !he ma"or limitation of online market research is the sample and characteristics of Eeb users. !hese Eeb users may not typify the population at large, so marketers must ensure that they are aware of the demographics of those they are researching. Define customer service and describe its importance#

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Customer service is a series of activities designed to enhance customer satisfaction. Customer service is vital online because it helps businesses secure new customers and retain existing customers. Define e-service# E=service is customer service supplied over the Internet. Define "RM and describe ho% it is practiced in E"# C9' is customer relationship management. !his is a customer service approach that focuses on building long=term and sustainable customer relationships that add value both to the customer and for the company. C98 is practiced online through a variety of different methods that use the advantages of enabling Internet technology to provide the service. Describe help desks and call centers in E"# Call centers and help desks are comprehensive service entities in which EC vendors address customer=service issues communicated through various content channels. Call centers and help desks that are associated with EC vendors typically use more enabling Internet technology than traditional call centers. Define $eb advertising and the ma(or terms associated %ith it# Eeb advertising is the use of the Eorld Eide Eeb to advertise to customers. )ome important terms in Internet advertising include# ad views %the number of times users call= up the page that has a banner on it&, button %a small banner link to a Eeb site&, page %an G!'. document&, click %a tally of each time a visitor clicks on an advertising banner&, C5' %the cost per thousand impressions&, hit %a re,uest for data from a Eeb page or file&, and visit %a series of re,uests during one navigation of the Eeb site&. Describe the reasons for gro%th in $eb advertising# 4dvertisers are looking to the Eeb because it is a viable advertising medium. Individuals may be moving away from other advertising mediums and to the Internet. 4dditionally, the demographics of individuals who use the Internet are generally more affluent then the population as a whole, making an attractive population to advertise to. Eeb ads also have the benefit of lower cost, increased richness of format and the ability to personalize. 'ist the ma(or characteristics of $eb advertising# Eeb advertising can be characterized by its use of Internet technologies to advertise to groups. Eeb advertising can be more complex and personalized then off=line advertising. Define banner ads and describe their benefits and limitations# 7anner ads are graphic advertisements displayed on Eeb pages that link to the advertiser-s Eeb site. 7anner ads are limited by their cost, space for information and customer indifference.

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CHAPTER / ADVERTI+EMENT IN ELECTRONIC COMMERCE

1. Internet advertisement can be done on the company-s Eeb site and on others- sites, usually via links. !he idea is to bring users to see the company-s home page. Internet advertising can be very media rich and can be interactive. Internet advertising can be up=to=the=minute accurate. It can be seen from any place worldwide. It is usually cheaper than that of !@, newspapers, or billboards. It is media rich with possible audio and animation effects. It provides lots of additional information if so desired. Hou can run it for a long time at a relatively low cost. :inally, it can be interactive, so the viewers remember it for a long time. 4 banner ad is a rectangular ad space on the computer screen, about 6I x JI. It may contain static or dynamic information. It can appear only once or periodically, and it usually contains a link to the advertiser when you click on it. ?eyword banners appear when you click on a related word. 9andom banners appear at random. )tatic banners cost the most since they permanently stay on a page. !he advantages of electronic versus paper catalogs are# easy to keep up=to=date, easier and cheaper to customize, contain more information with links to details, potential use of multimedia, and easy=to=find products due to the use of search engines. 4lso, customers can interact with the catalogs e.g., zoom pictures, ask for more details, change colors, and even match clothes or other items. Customers can configure cars, design summer outfits, configure a computer, and much more. 4lso, there is easy integration with corporate ordering and back office systems. :inally, electronic catalogs can easily appear in multiple languages. !he addition of audio and animation is useful in some cases. 5ush technology collects information from several sources and delivers it to the user at designated times, or as a Kscreen saver.I It helps users, since they do not have to monitor databases and compile information constantly. *enerally it is much more efficient than a search engine where information is KpulledI by the user with the help of the search engines. Information is pointcasted to individuals rather than broadcasted to the mass. @iral marketing is word=of=mouth marketing that occurs using Internet technologies, such as e=mail, chat rooms, and virtual communities. In pull technology the user provides keywords and works with the search engine. +sually, the search engine finds hundreds %thousands& of possible links that the user must look at. !he ad must wait until the viewer finds it. !his is in contrast to an ad that is KpushedI to the viewer. E=mail lists are available for sale by many companies that compile them for their own use %such as C2='ax&. )ome companies build e=mail lists by offering rewards %e.g., Cyber*old&, or by running sweepstakes. +sing cookies is a popular approach to collect names. 5ublishers of free magazines ask you to provide information on your areas of interest, then they sell it to vendors.

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Chapte 0 P%12), '2' E3,ha#.e$ Define ! e)changes# 4 7 7 exchange is a many=to=many e=marketplace for business=to=business transactions.
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Describe the o%nership and organization of e)changes# Exchanges are generally owned by industry giants, neutral third parties, or consortia. Exchanges are generally organized around membership, services, site taxes and security. Define ! portals# !hese are information portals for businesses. $hat is a third-party e)change& 4 third=party exchange is an exchange that is owned by a neutral third party. Describe the supplier aggregation e)change# !he supplier aggregation exchange offers catalogs by a variety of suppliers that are placed in the same ordering area. Describe a buyer aggregation e)change# In a buyer aggregation exchange, buyers are grouped together to purchase from a single seller. 'ist the types of market-s most suited for third-party o%nership# !hird=party ownership is most appropriate in fragmented markets, seller=concentrated markets and buyer=concentrated markets. Define ".Es# Consortia trading exchanges are formed and operated by a group of ma"or companies providing industry=wide transaction services. Describe purchasing-oriented consortia and selling-oriented consortia# Consortia that are concerned primarily with the efficient purchasing of goods are purchasing=oriented consortia. !he consortia that are concerned primarily with effectively selling products are selling=oriented consortia. Describe potential legal issues for consortia# !he consortia generally deals with issues of antitrust. 'ist the ma(or critical success factors of consortia# !he ma"or critical success factors of consortia include# the size of the industry, the ability to drive user adoption, elasticity, standardization of products, management of intensive information flow and smoothing inefficiencies in the supply chain. E)plain ho% matches are made in e)changes# 'atches are made by linking goods and their ,uantities between buyers and sellers. !his 1B

is generally a fully computerized process. E)plain ho% private and public auctions are conducted in public e)changes# 5ublic auctions are conducted openly for all to view and participate in. 5rivate auctions are conducted by invitation only in private trading rooms. "ompare fully dedicated and partially dedicated auction e)changes# :ully dedicated auction exchanges focus purely on auctions as their business model. 5artially dedicated exchanges provide auctions as a part of the overall package of services delivered. 'ist the steps in building a vertical e)change# !he steps in building a vertical exchange include thinking ahead, planning, systems analysis and design, building the exchange, testing=installation=operation, and system evaluation and improvement. 'ist the revenue sources *models+ of e)changes# !he revenue models available for exchanges include# transaction fees, fees for service, membership fees and advertisement fees. $hat is an intranet& 4n intranet is a corporate .48 or wide area network that uses Internet technology and is secured behind a companyFs firewall. $hat is an e)tranet& 4n extranet is a network that uses virtual private networks to link intranets in different locations over the Internet. 'ist five benefits of e)tranets# !he benefits of extranets include# enhanced communications, productivity enhancements, business enhancements, cost reduction and information delivery. 'ist the problems of public e)changes# 5ublic exchanges have the following problems# transaction fees keep the users away, companies do not like to share information, cost savings are not as high as expected, recruiting suppliers is difficult, too many exchanges existed and supply chain improvements were not factored in. 'ist the problems of private e)changes# 5rivate exchanges are sometimes distrusted because of the private ownership. 4dditionally, they may face antitrust issues. /o% can e)changes caused disintermediation& Exchanges can create disintermediation by removing traditional 7 7 intermediaries from existing supply chains.

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Chapte 45 I#t a1%$)#e$$* E-G"(e #&e#t* C2C* E-Lea #)#. 'ist the ma(or intrabusiness E" categories# !he ma"or categories include business=to=employee, business unit=to=business unit, and business employee=to=business employee. Describe E" activities among business units# EC activities among business units usually involve strategic business units interfacing with each other. Define intranet# 4n intranet is a corporate .48 or wide area network that uses Internet technology and is secured behind a company-s firewall. It is designed to serve the internal information needs of a company. /o% is an intranet secured& Intranets are commonly secured behind a company-s firewall, blocking access from external networks. Describe some intranet applications# !here are many intranet applications including information sharing, conferencing software and customer service functions. 'ist five intranet functionalities# Intranet functionalities include# Eeb=based database access, search engines(directories, interactive communication tools, document distribution, groupware and computer=based telephones. 'ist five intranet application areas# Intranet application areas include# product catalogs, policies and procedures, purchase orders, document sharing, phone directories and human resource forms. $hat is a corporate portal& 4 corporate portal is a gateway for entering a corporate Eeb site, enabling communication, collaboration and access to company information. 'ist the benefits of corporate portals# Corporate portals can cut costs, create a more efficient workplace and increase profits. 'ist five applications of portals# )ome of the possible applications of corporate portals include# knowledge bases and learning tools, business process support, collaboration and pro"ect support, data access, and security applications. Define e-government# E=government is the use of I! and e=commerce to provide access to government information and delivery of public services to citizens and business partners. 1

$hat are the four categories of e-government& !he four categories are# government=to=citizens, government=to=business, government=to= government and government=to=employees. Describe 0!"# !he government=to=citizens model includes all interactions between a government and its citizens. !his model is meant to increase efficiencies and create greater transparency to citizens. Describe the t%o main areas of 0! activities# !he two main areas of governmentCto=business activities include electronic procurement where the government purchases goods from the private sector, and electronic auctions where the government electronically auctions surplus goods to businesses. 'ist the si) stages of e-government development# !he six stages of e=government development are# information publishing(dissemination, official two=way transactions, multipurpose portals, portal personalization, clustering of common services, and full integration and enterprise transformation. 'ist the ma(or "!" applications# !he ma"or applications include classified ads, personal services and exchanges. Define P!P net%orks and list their ma(or characteristics# 5eer=to=peer networks have an architecture in which workstations have similar capabilities, the network peers share data and processing with each other directly rather than through a central server. !hese networks are characterized by user interfaces that load outside the Eeb browser and user computers that can act as both clients and servers. !he overall system is easy to use and well integratedL and includes tools to support users wishing to create content or add functionalityL and provides connections with other users. Describe P!P applications in "!"# !he most common application is a file sharing utility. !his application allows peers to share files using the Internet as the transmission medium. Define online publishing and list some advantages it offers over traditional media# $nline publishing is the electronic delivery of newspapers, magazines, books, news, music, videos and other digitizable information over the Internet. $nline publishing is generally more flexible than print publishing because it is easier to modify content as well as create personalization. Describe e-books and list their advantages# 4n e=book is a book in digital form that can be read on a computer screen. )ome advantages of this technology include portability, convenience, fre,uent updates, current information and ease of searching.

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