Chapter 1

Overview of Electronic Commerce

Chapter 1 Overview of Electronic Commerce

True-False Questions
1. According to Peter Drucker, e-commerce is profoundly changing markets, industry structures, products and services, consumer segmentation, consumer values and consumer behavior; jobs, and labor markets. Answer: True AACSB: Reflective thinking 2. By purchasing a textbook from Amazon.com and having the merchandise physically delivered, Amazon.com would be considered a click-and-mortar organization because pure EC did not occur. Answer: True AACSB: Reflective thinking 3. In the field, a sales representative writes notes with a mobile handwriting-recognition computer immediately after a sales call. This can be viewed as an EC activity. Answer: False Difficulty: Medium Page Reference: 5 Difficulty: Medium Page Reference: 5 Difficulty: Easy Page Reference: 4

AACSB: Use of information technology 4. In addition to EC being conducted via the Internet, EC can be conducted over local area networks (LANs). Answer: True Difficulty: Medium Page Reference: 5

AACSB: Use of information technology 5. An example of business-to-consumer (B2C) is when Dell provides customer service online by collaborating electronically with its partners. Answer: False AACSB: Reflective thinking Difficulty: Medium Page Reference: 8

Overview of Electronic Commerce

6.

An internal corporate network that uses Internet tools, such as Web browsers, is known as an intranet. Answer: True Difficulty: Medium Page Reference: 6

AACSB: Use of information technology 7. An extranet is a network that uses the Internet to link together multiple intranets. Answer: True Difficulty: Medium Page Reference: 6

AACSB: Use of information technology 8. Purchasing a Dell computer online for use at home is an example of e-tailing. Answer: True Difficulty: Medium Page Reference: 6

AACSB: Use of information technology 9. Networked computing connects multiple computers and other electronic devices that are located in various locations by telecommunications networks, including wireless ones. Answer: True Difficulty: Medium Page Reference: 6

AACSB: Use of information technology 10. When Dell purchases Godiva chocolates as gifts for its employees and has Godiva mail them directly to the recipient Dell is engaged in B2B2C. Answer: True AACSB: Reflective thinking 11. Peer-to-peer (P2P) technology can be used in C2C, B2B, and B2C. Answer: True AACSB: Difficulty: Medium Page Reference: 10 Difficulty: Medium Page Reference: 8

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12.

The final participants in B2B transactions are consumers. Answer: False AACSB: Difficulty: Easy Page Reference: 8

13.

Doing your banking on an Internet-enabled cell phone is an example of m-commerce. Answer: True AACSB: Difficulty: Medium Page Reference: 8

14.

Despite the many e-tailing EC companies that have failed in the past, the dot-com failure rate has recently declined sharply. Answer: True Difficulty: Medium Page Reference: 12

AACSB: Use of information technology 15. Since 2001, no other company has had more of an impact on EC than MySpace. Answer: False Difficulty: Easy Page Reference: 12

AACSB: Use of information technology 16. Wikipedia.com, a Web site that allows people to work together online and share information, is an example of Web 2.0. Answer: True Difficulty: Medium Page Reference: 13

AACSB: Use of information technology 17. The digital economy refers to an economy based on digital communication networks, computers, software, and other related information technologies that provide a global platform over which people and organizations interact, communicate, collaborate, and search for information. Answer: True AACSB: Reflective thinking Difficulty: Medium Page Reference: 14

Overview of Electronic Commerce

18.

Economic, legal, societal, and technological factors have created a highly competitive business environment in which customers are becoming less powerful. Answer: False AACSB: Reflective thinking Difficulty: Medium Page Reference: 16

19.

Strong competition and increased power of consumers are two of the major market pressures in todays business environment. Answer: True Difficulty: Easy Page Reference: 18

AACSB: Use of information technology 20. Business models are a subset of a business plan or business case and refer to methods of doing business by which a company can generate revenue. Answer: True Difficulty: Easy Page Reference: 18, 19

AACSB: Use of information technology 21. A business model outlines how the organization or the EC project will generate revenue through sales, transaction fees, advertising fees, affiliate fees, or other revenue sources. Answer: False AACSB: 22. A value proposition refers to the tangible and intangible benefits that a company can derive from using EC making it an important part of the marketing plan. Answer: True AACSB: Difficulty: Medium Page Reference: 21 Difficulty: Medium Page Reference: 20

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23.

Affiliate marketing is an EC business model of word-of-mouth marketing in which customers promote a product or service to friends or other people. Answer: False Difficulty: Medium Page Reference: 23

AACSB: Use of information technology 24. Social networks, such as Facebook, YouTube, and MySpace, are Web sites that connect people with specific interests by providing free services such as photo sharing, e-mail, and blogging. Answer: True Difficulty: Easy Page Reference: 27

AACSB: Use of information technology 25. Many companies used a corporate portal, which is a gateway for customers, employees, and partners to reach corporate information and communicate with the company. Answer: True Difficulty: Easy Page Reference: 30

AACSB: Use of information technology

Multiple Choice Questions

26. Dells cornerstone business model is based on the concept of: a. b. c. d. rapid business growth and threatening competitors. selling directly to small and medium sized businesses. build-to-order which allows customers to configure their own customized systems. ! e-collaboration with a few select business partners. Difficulty: Medium Page Reference: 2

Answer: C AACSB: Reflective thinking

Overview of Electronic Commerce

27.

_____________ refers to the buying and selling of goods and services; servicing of customers; collaborating with business partners; and conducting electronic transactions within an organization. a. b. c. d. E-commerce E-business Pure EC Partial EC Difficulty: Easy Page Reference: 4

Answer: B

AACSB: Use of information technology 28. EC can take several forms depending on the degree of digitization of the following three dimensions: a. b. c. d. the product or service sold, the process, and the delivery method. the business process, the collaboration, and the transaction. the payment method, the delivery method, and the production method. the marketing channel, the agent, and the collaboration method. Difficulty: Medium Page Reference: 4, 5

Answer: A

AACSB: Use of information technology 29. Purely physical companies are referred to as ____________ companies, whereas companies that are engaged only in EC are considered ________________ companies. a. b. c. d. pure play; virtual brick-and-mortar; virtual click-and-mortar; click-and-brick virtual; pure play Difficulty: Medium Page Reference: 5

Answer: B

AACSB: Use of information technology 30. The ways in which EC is done include: a. b. c. d. the Internet and extranets. the Internet and private networks. the Internet, extranets, and private networks. the Internet, value-added networks, on local area networks using intranets, or on a single computerized machine. Difficulty: Medium Page Reference: 6

Answer: D

AACSB: Use of information technology

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31.

_______________ are systems where only routine transaction processing and information flow take place between two or more organizations using a standard protocol, such as electronic data interchange (EDI). a. b. c. d. E-CRM Interorganizational information systems Intrabusiness EC B2B Difficulty: Medium Page Reference: 6

Answer: B

AACSB: Use of information technology 32. A business such as Apple Computers making online transactions with its trading partners is an example of: a. b. c. d. B2B B2C e-CRM EDI Difficulty: Easy Page Reference: 8

Answer: A

AACSB: Use of information technology 33. EC applications are supported by infrastructure and by each of the following support areas EXCEPT: a. b. c. d. People Public policy Marketing and advertisement Mobile devices Difficulty: Medium Page Reference: 8

Answer: D

AACSB: Use of information technology 34. Intrabusiness EC is usually performed over intranets and/or _______________. a. b. c. d. corporate portals mobile networks exchanges P2P networks Difficulty: Medium Page Reference: 8, 9

Answer: A

AACSB: Use of information technology

Overview of Electronic Commerce

35.

A technology that is used to electronically transfer routine documents, such as invoices and purchase orders, and for financial transactions is ___________. a. b. c. d. Electronic funds transfer Exchange-to-exchange Electronic data interchange Peer-to-peer Difficulty: Medium Page Reference: 10

Answer: C

AACSB: Use of information technology 36. Challenges that Boeing faced with its global collaboration for the design and assembly process of its new Dreamliner passenger plane included each of the following EXCEPT: a. b. c. d. Data management Information security Teams working across various time zones Lag time Difficulty: Medium Page Reference: 11

Answer: D

AACSB: Use of information technology 37. A large number of EC companies, especially e-tailing and B2B ones, failed from 1999 to 2005 for each of the following reasons EXCEPT: a. The companies lacked financial skills. b. The companies failed to register with search engines, such as Google. c. The companies failed to ensure they had sufficient inventory and a distribution setup to meet initial demand. d. The companies had little marketing experience. Answer: B Difficulty: Medium Page Reference: 12

AACSB: Use of information technology 38. ________ refers to the second-generation of Internet-based services that let people collaborate and share information online in new ways, such as social networks and wikis. a. b. c. d. Virtual Web Media Web Web 2.0 Social Web Difficulty: Medium Page Reference: 13

Answer: C

AACSB: Use of information technology

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39.

Which of the following is not a characteristic of the Digital Revolution? a. b. c. d. Many business processes are expedited by up to 50 percent. Intelligent search agents to help manage information overload. A high rate of obsolescence. Fraud and other cybercons carried out via the Internet. Difficulty: Hard Page Reference: 15

Answer: A AACSB: Reflective thinking 40.

Because the rate of change and the level of uncertainty are expected to accelerate, organizations are a. unable to react quickly enough to threats and opportunities. b. operating under increasing pressures to produce more products, faster, and with fewer resources. c. making fewer decisions and/or decisions less frequently. d. considering less information when making decisions. Answer: B Difficulty: Medium Page Reference: 16

AACSB: Use of information technology 41. According to the Business Environment Impact Model, ___________ provide support to organizations activities and to actual performance, countering business pressures. a. b. c. d. EC and IT missions and strategies core competencies and critical response activities markets and government Difficulty: Medium Page Reference: 17

Answer: A AACSB: Reflective thinking 42.

A ____________ is a companys method of doing business to generate revenue to sustain itself. a. b. c. d. marketing strategy business model value chain business plan Difficulty: Easy Page Reference: 18

Answer: B

AACSB: Use of information technology

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43.

According to the __________________ revenue model, companies receive commissions for referring customers to others EC Web sites. a. b. c. d. subscription fees advertising fees affiliate fees transaction fees Difficulty: Medium Page Reference: 20

Answer: C

AACSB: Use of information technology 44. According to the __________________ revenue model, customers page a fixed amount, usually monthly, to receive some type of service. a. b. c. d. subscription fees advertising fees affiliate fees transaction fees Difficulty: Medium Page Reference: 20

Answer: A

AACSB: Use of information technology 45. Large private organizational buyers and government agencies make large-volume or largevalue purchases through ____________________, also known as reverse auctions. a. b. c. d. electronic tendering systems online direct marketing name-your-own-price models viral marketing Difficulty: Medium Page Reference: 22

Answer: A

AACSB: Use of information technology 46. According to the _____________ model, an organization can increase brand awareness or even generate sales by Web-based word-of-mouth marketing or promoting a product or service to other people. a. b. c. d. electronic tendering systems online direct marketing name-your-own-price models viral marketing Difficulty: Medium Page Reference: 23

Answer: D

AACSB: Use of information technology

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47.

Online group purchasing organizations are known as:

a. b. c. d.

SMEs e-co-ops exchanges barters Difficulty: Easy Page Reference: 23

Answer: B

AACSB: Use of information technology 48. Major barriers to EC include all of the following EXCEPT: a. b. c. d. cost lack of potential customers implementation difficulties lack of technology Difficulty: Medium Page Reference: 26

Answer: D

AACSB: Use of information technology 49. Which of the following is a technological limitation of EC? a. b. c. d. Security and privacy concerns that deter customers from buying. Difficulty obtaining venture capital. Order fulfillment requirements of large-scale B2C. Unresolved taxation, public policy, and legal issues. Difficulty: Hard Page Reference: 26

Answer: C

AACSB: Use of information technology 50. A job opening in the Sales Department posted on the company's Intranet by the Human Resources Department is an example of: a. b. c. d. E2C B2S B2B B2E Difficulty: Medium Page Reference: 9

Answer: D

AACSB: Use of information technology

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Overview of Electronic Commerce

51.

Boeing designing a product together with a business partner is this type of interaction: a. b. c. d. Collaborative Commerce Nonbusiness EC B2B2C B2B. Difficulty: Medium Page Reference: 10

Answer: A

AACSB: Use of information technology 52. A corporation uses the Internal Revenue Service's Web site to learn how to pay its estimated quarterly income taxes. This is an example of: a. b. c. d. G2G G2B G2C E2E. Difficulty: Medium Page Reference: 10

Answer: B

AACSB: Use of information technology 53. The second-generation of Internet-based services that lets people collaborate and share information online is known as Web 2.0. An example of this is: a. b. c. d. mp3.com DoubleClick blogging Evite Difficulty: Medium Page Reference: 13

Answer: C

AACSB: Use of information technology 54. The digital enterprise shifts the focus from managing individual information resources such as devices, applications, and data to ________________ that define the business and ultimately deliver value to customers and end users. a. b. c. d. developing models orchestrating the services and workflows organizing supply chains transforming revenue models Difficulty: Hard Page Reference: 30

Answer: B AACSB: Reflective thinking

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55.

Many companies employ a(n) ________________, which is a gateway for customers, employees, and partners to reach corporate information and to communicate with the company.

a. b. c. d.

corporate portal

intranet extranet social network Difficulty: Easy Page Reference: 30

Answer: A

AACSB: Use of information technology

Fill In the Blanks

56. Electronic commerce is the process of buying, selling, or exchanging products, services, or information via computer networks. Difficulty: Easy AACSB: Use of information technology 57. E-business refers to a broad range of business activities that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization. Difficulty: Easy AACSB: Use of information technology 58. Virtual (pure-play) organizations are organizations that conduct their business activities solely online. Difficulty: Medium AACSB: Use of information technology 59. Click-and-mortar (or click-and-brick) organizations are those that conduct some EC activities, usually as an additional marketing channel. Difficulty: Easy AACSB: Use of information technology 60. EC can be conducted in an electronic market (e-marketplace) where buyers and sellers meet online to exchange goods, services, money, or information. Difficulty: Medium AACSB: Use of information technology Page Reference: 6 Page Reference: 5 Page Reference: 5 Page Reference: 4 Page Reference: 4

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61.

A(n) intranet is a corporate or government network that uses Internet tools, such asWeb browsers, and Internet protocols. Difficulty: Medium AACSB: Use of information technology Page Reference: 6

62.

A computer environment called a(n) extranet is a network that uses the Internet to link multiple intranets. Difficulty: Medium AACSB: Use of information technology Page Reference: 6

63.

An EC model in which all of the participants are either businesses or other organizations is business-to-business (B2B) e-commerce. Difficulty: Easy AACSB: Use of information technology Page Reference: 8

64.

Business-to-consumer (B2C) is an EC model in which businesses sell to individual shoppers. Difficulty: Easy AACSB: Use of information technology Page Reference: 8

65.

Business-to-business-to consumer (B2B2C) is an EC model in which a business provides some product or service to a client business that maintains its own customers. Difficulty: Medium AACSB: Use of information technology Page Reference: 8

66.

Mobile commerce (m-commerce) is an EC model in which EC transactions and activities conducted in a wireless environment. Difficulty: Easy AACSB: Use of information technology Page Reference: 8

67.

Location-based commerce (l-commerce) refers to M-commerce transactions targeted to individuals in specific locations, at specific times. Difficulty: Medium AACSB: Use of information technology Page Reference: 8

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68.

Intrabusiness EC is an E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization. Difficulty: Medium AACSB: Use of information technology Page Reference: 8, 9

69.

Peer-to-peer (P2P) technology enables networked peer computers to share or swap data files, music, videos, software, and processing with each other directly. Difficulty: Medium AACSB: Use of information technology Page Reference: 10

70.

A(n) exchange is a public electronic market with many buyers and sellers. Difficulty: Medium AACSB: Use of information technology Page Reference: 10

71.

Since 2001, no other company has had more of an impact on EC than Google. Difficulty: Medium AACSB: Use of information technology Page Reference: 12

72.

The term Web 2.0 was coined by OReilly Media in 2004 to refer to a supposed second generation of Internet-based services that let people collaborate and share information online in new ways, such as social networking and wikis. Difficulty: Medium AACSB: Use of information technology Page Reference: 13

73.

Radio frequency identification (RFID) chips are tiny tags can be implanted into humans or attached to products for tracking and identification purposes. Difficulty: Medium AACSB: Use of information technology Page Reference: 16

74.

A(n) business model is a method of doing business by which a company can generate revenue to sustain itself. Difficulty: Medium AACSB: Use of information technology Page Reference: 18

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75.

Mass customization is the rapid production of customized products or services at a reasonable cost for a large number of customers. Difficulty: Medium AACSB: Use of information technology Page Reference: 19

76.

A(n) revenue model is a description of how a company or an EC project will generate revenue. Difficulty: Easy AACSB: Use of information technology Page Reference: 20

77.

A(n) value proposition refers to the benefits, including the intangible, nonquantitative ones, that a company can derive from using EC. Difficulty: Medium AACSB: Use of information technology Page Reference: 21

78.

A way to create value is through complementarities, which involve bundling some goods and services together to provide more value than from offering them separately. Difficulty: Medium AACSB: Use of information technology Page Reference: 21

79.

Affiliate marketing is an arrangement whereby a marketing partner or individual refers consumers to the selling companys Web site. Difficulty: Medium AACSB: Use of information technology Page Reference: 22

80.

A corporate portal is a gateway through which employees, business partners, and the public can enter a corporate Web site. Difficulty: Medium AACSB: Use of information technology Page Reference: 30