Electronic Commerce 2012, 7e (Turban)
Chapter 13 Implementing EC Systems: From Justification to Successful Performance
13.1 True/False
Question: From 1995 through 2000, many EC projects and start-up companies were
funded with little analysis of their business viability or finances.
Answer:
Question: The result of the rush to invest in EC projects and start-up companies was the
2001 to 2003 “dot-com bust,” when hundreds of EC startups went out of business and the
stock market crashed.
Answer:
Question: After the dot-com bust, most IT executives acquired the knowledge and tools to
do ROI calculations on proposed EC investments.
Answer:
Question: One reason why EC justification is needed is that companies now realize that
EC is not necessarily the solution to all problems.
Answer:
Question: According to a CIO Insight report, EC justification decreases the credibility of
EC projects.
Answer:
Question: One basic way to categorize different EC investments is to distinguish between
investment in infrastructure and investment in specific EC applications.
Answer:
Question: Infrastructure investments are made for the short-term because of frequent
technological changes.
Answer:
Question: Cost-benefit analysis is frequently assessed by return on investment (ROI),
which is also the name of a specific method for evaluating investments.
Answer:
Question: All EC investments need to be formally justified to insure that they align with
the companys competitive strategy.
Answer:
Question: Metrics are used to describe costs, benefits, or the ratio between them and need
to be defined properly with a clear way to measure them.
Answer:
Question: Key performance indicators (KPI) are used to qualitatively track critical metrics
or success factors.
Answer:
Question: Cannibalization occurs when a new EC initiative produces substantial online
sales, but traditional sales fall such that no increase in total revenue occurs.
Answer:
Question: A major difficulty in justifying EC projects is that many costs and benefits are
intangible and therefore very difficult to measure.
Answer:
Question: Creating a competitive advantage, providing a benefit to society, and improving
the companys image are examples of tangible benefits that might be realized from an EC
project.
Answer:
Question: In preparing the business case for EC investment, managers should examine the
potential additional revenues, such as increased revenues via products or services from a
larger global market because of more effective product marketing on the Web.
Answer:
Question: The ROI method uses a formula that divides the total net benefit by the initial
cost. The result is a ratio that measures the ROI for each year or for an entire period.
Answer:
Question: In an NPV analysis, analysts convert future values of benefits to their
present-value equivalents by discounting future cash flows at the risk-free rate set by the
Federal Reserve Bank.
Answer:
Question: Given the diversity of activities involved in e-procurement, the metrics used to
measure the value of e-procurement must reflect how well each process is accomplished
and take into consideration whether the company is a buyer or seller.
Answer:
Question: The average cost curve of regular products is U-shaped and has an optimal
lowest point, but with digital products the average cost per unit declines as quantity
increases.
Answer:
Question: Usability testing refers to testing application software modules one at a time.
Answer:
Question: Unit testing refers to testing the combination of application modules acting in
concert.
Answer:
Question: Interoperability refers to connecting people, data, and diverse systems.
Answer:
Question: Performance value is the likelihood a segment of source code can be used again
to add new functionalities with slight or no modification.
Answer:
Question: The higher purchase price is a disadvantage of purchasing an EC system.
Answer:
Question: Vendors dropping a product or going out of business is a disadvantage to
purchasing an EC system.
Answer:
Question: Turnkey computing is the provision of computational resources on demand via a
computer network.
Answer:
Question: Reduced time-to-market is a cloud computing advantage.
Answer:
Question: New technologies require new organizational structures and procedures.
Answer:
Question: Reengineering eliminates the intermediaries between sellers and buyers.
Answer:
Question: Business process reengineering is the analysis and design of workflows and
processes within an organization.
Answer:
Question: Structured management is a holistic management approach focused on aligning
all aspects of an organization with the wants and needs of clients.
Answer:
Question: Mass customization enables manufacturers to create specific products for each
customer based on the customers exact needs.
Answer:
Question: Leveraging intangible assets, capabilities, relationships, and unleashing dormant
assets is a critical success factor for EC.
Answer:
Question: Critical elements that can affect the value of EC across cultures are perceived
trust, consumer loyalty, regulation, political influences, and even the content of online ads.
Answer:
Question: Developing economies often face power blackouts, unreliable
telecommunications infrastructure, undependable delivery mechanisms, and a relatively
few customers who own computers and credit cards. These limitations can be overcome
when predicting EC investment payoffs by using a combination of break-even analysis and
NPV.
Answer:
Question: CIOs need to effectively communicate the value of proposed EC projects in
order to gain approval for each of the following reasons except
A) companies now realize that EC is not necessarily the solution to all problems.
B) some large companies, and many public organizations, mandate a formal evaluation of
requests for funding.
C) the success of EC projects may be assessed in order to pay bonuses to those involved
with the project.
D) demand for expanding or initiating e-business projects is no longer strong so there are
fewer requests for funding.
Answer:
Question: One basic way to categorize different EC investments is to distinguish between
investments in infrastructure and investments in specific EC applications because benefits
from infrastructure investments
A) are made for the long-term.
B) depend on the EC applications.
C) are very complex.
D) have a low return.
Answer:
Question: Basic reasons companies invest in IT and EC include each of the following
except
A) improve business processes.
B) increase customer satisfaction and retention.
C) reduce time-to-market.
D) justify new marketing campaigns.
Answer:
Question: Not all EC investments need to be formally justified. Each of the following is a
case where formal evaluation may not be needed except
A) when the value of the investment is relatively small for the organization.
B) when competitors have made that type of investment.
C) when the relevant data are not available, are inaccurate, or are too volatile.
D) when the EC project is mandated and must be done regardless of the costs and benefits.
Answer:
Question: A comparison of the costs of a project against the benefits best defines
A) IRR.
B) benefits metric.
C) cost-benefit analysis.
D) feasibility justification.
Answer:
Question: Metrics can
A) be the basis for specific goals and plans.
B) define the value proposition of business models.
C) assess the health of companies by using tools such as balanced scorecards and
performance dashboards.
D) do all of the above.
Answer:
Question: Metrics are used to describe each of the following except
A) standards.
B) costs.
C) benefits.
D) the ratio of costs to benefits.
Answer:
Question: In B2C, an example of a tangible EC metric from the buyers perspective is
A) ease of use of EC.
B) convenience in purchasing.
C) profit per customer.
D) cost/price of the product.
Answer:
Question: Tangible metrics include
A) lower tax rates.
B) ease of use of EC.
C) reelection of candidates.
D) flexibility in changing a purchase.
Answer:
Question: For governments, an example of an intangible EC metric is
A) reelection of candidates.
B) lower tax rates.
C) increase in participation in government programs.
D) risk reduction.
Answer:
Question: Productivity benefits from using EC are difficult to measure because
A) the payoffs are too short.
B) there is no time lag in EC gains.
C) EC gains in certain areas of the company may be offset by losses in other areas.
D) qualitative benefits do not count.
Answer:
Question: The relationship between EC investment and organizational performance is
A) direct.
B) indirect.
C) shared with other investments.
D) not measurable.
Answer:
Question: EC costs and benefits can be classified into two broad categories
A) direct and routine.
B) short-term and capital.
C) tangible and intangible.
D) operational and strategic.
Answer:
Question: The major steps in the process of justifying large-scale EC and IT projects
include each of the following except
A) lay an appropriate foundation for analysis with your vendor, and then conduct your
ROI.
B) document and verify all figures used in the calculation. Clarify all assumptions.
C) do not leave out strategic benefits, including long-term ones.
D) be careful not to overestimate cost and underestimate benefits (a tendency of many
managers).
Answer:
Question: A graphic representation of the maturity, adoption, and social application of
specific IT tools best defines
A) Gantt chart.
B) hype cycle.
C) network diagram.
D) logic model.
Answer:
Question: Gartners hype cycle includes each of the following stages except
A) plateau of productivity.
B) technology trigger.
C) simplicity of method.
D) trough of disillusionment.
Answer:
Question: According to Gartners hype cycle, which of the following is the stage of
overenthusiasm and unrealistic projections during which a flurry of publicized activity by
technology leaders may result in some successes but more failures as the technology is
pushed to its limits?
A) plateau of productivity
B) slope of enlightenment
C) trough of disillusionment
D) peak of inflated expectations
Answer:
Question: According to Gartners hype cycle, which of the following stages is the point at
which the technology becomes unfashionable and the media abandons the topic, because
the topic did not live up to its inflated expectations?
A) trough of disillusionment
B) slope of enlightenment
C) plateau of productivity
D) peak of inflated expectations
Answer:
Question: Traditional methods for evaluating EC investments include each of the following
except
A) ROI.
B) payback period.
C) discount rate.
D) NPV.
Answer:
Question: Which of the following is the discount rate that makes the NPV of cash flows
produced over time equal to zero?
A) CPR
B) IRR
C) ROI
D) TCO
Answer:
Question: A formula for calculating the cost of owning, operating, and controlling an IT
system best defines
A) payback period.
B) return on investment.
C) total cost of ownership.
D) total benefits of ownership.
Answer:
Question: Benefits of ownership that include both tangible and intangible costs best
defines
A) economic value of ownership.
B) NPV analysis.
C) benefit-to-cost analysis.
D) total benefits of ownership.
Answer:
Question: The return on invested capital generated by a company minus the cost of the
capital used in recreating the cash flow best describes
A) economic value added.
B) return on investment.
C) break-even analysis.
D) NPV analysis.
Answer:
Question: Maximizing the value for unconstrained project selection is an advantage of
A) economic value added.
B) net present value.
C) payback period.
D) total cost of ownership.
Answer:
Question: The disadvantage of the NPV method for evaluating EC and IT is
A) the true benefits are difficult to measure.
B) it is difficult to compare projects of unequal lives or sizes.
C) it assumes reinvestment at the same rate.
D) it may be difficult to classify outlays as expenses or investments.
Answer:
Question: Types of appraisal and justification methods for IT investments include each of
the following except
A) ratio approaches.
B) portfolio approaches.
C) real-time investment approaches.
D) financial approaches.
Answer:
Question: Which of the following advanced methods for EC justification and evaluation
uses the idea of critical success factors and focuses on key organizational objectives and
the potential impacts of the proposed EC project on each of them?
A) benchmarks
B) management by maxim
C) performance dashboard
D) information economics
Answer:
Question: Which of the following advanced methods for EC justification and evaluation
uses a combination of brainstorming and consensus-reaching methodologies to determine
how much a company should invest in large EC infrastructures?
A) management by maxim
B) balanced scorecard
C) benchmarks
D) scoring methodologies
Answer:
Question: Each of the following metrics indicates excellence in e-procurement except
A) increased order fulfillment rate.
B) decreased number of rejects received from suppliers.
C) increased production costs.
D) increased on-time deliveries.
Answer:
Question: Justifying information security projects
A) is not needed because it is well-known that preventing network security problems is
less labor intensive than cleaning up virus infections.
B) is not done because ROI calculators are not available.
C) should focus on defending against external threats such as hackers and malware.
D) should be done because employee security training is usually poorly done.
Answer:
Question: Antivirus investments are easily justified because more than ________ percent
of viruses enter business networks via e-mail.
A) 25
B) 33
C) 50
D) 85
Answer:
Question: The average-cost curves (AVC) of physical products and digital products
A) are different because the AVC of digital products declines as quantity increases forming
an L-shape, while the AVC of physical products is U-shaped.
B) are both U-shaped.
C) are both L-shaped.
D) are different because the AVC of physical products declines as quantity increases
forming an L-shape, while the AVC of digital products is U-shaped.
Answer:
Question: An equation indicating that for the same quantity of production, Q, companies
either can use a certain amount of labor or invest in more automation best describes
A) Q-model.
B) production function.
C) unit testing.
D) product valuation.
Answer:
Question: Transaction costs include each of the following except
A) production costs.
B) search costs.
C) negotiation costs.
D) monitoring costs.
Answer:
Question: Costs incurred in ensuring that the agent performs tasks as expected best defines
A) opportunity costs.
B) agency costs.
C) time-on-task costs.
D) production costs.
Answer:
Question: McAfee allows users of its VirusScan virus-detection software to automatically
update the latest security patches online. This is an example of ________ to attract
customers who value this automatic update.
A) competitive advantage
B) core competency
C) product or service differentiation
D) agility
Answer:
Question: The fair market value of a business or the price at which a property would
change hands between a willing buyer and a willing seller who are both informed and
under no compulsion to act best describes
A) feasibility.
B) reusability.
C) agility.
D) valuation.
Answer:
Question: A Web-based seller of CDs carefully monitors the prices charged by its
competitors for identical products. This company has the ability to change a given price
within three minutes in response to changes by competitors. This is an example of EC
A) competitive advantage.
B) core competency.
C) product or service differentiation.
D) agility.
Answer:
Question: Referencing the capabilities needed by Webstore users, buyers need the ability
to
A) provide Web-based postsale support.
B) create the capability for cross-selling and up-selling.
C) track orders once they are shipped.
D) analyze purchases in order to customize buyers experiences.
Answer:
Question: Referencing capabilities needed by Webstore users, sellers need the ability to do
each of the following except
A) arrange product delivery.
B) provide an electronic shopping cart in which buyers can assemble their purchases.
C) track shipments to ensure that they are delivered.
D) select products to purchase and negotiate or determine their total price.
Answer:
Question: Determining whether a website meets the original business objectives and vision
best defines
A) acceptance testing.
B) feasibility testing.
C) usability testing.
D) unit testing.
Answer:
Question: A structured approach to shifting/transitioning individuals, teams, and
organizations from a current state to a desired future state. It is an organizational process
aimed at empowering employees to accept and embrace changes in their current business
environment. This best describes
A) employee empowerment.
B) change management.
C) usability testing.
D) acceptance testing.
Answer:
Question: Each of the following is a critical success factor (CSF) of the Old Economy
except
A) deliver high-value products.
B) compete to sell product.
C) build market share to get economies of scale.
D) create new partnerships, stay with core competency.
Answer:
Question: One of the strengths of EC is the ease with which its adopters can reach a global
population of consumers. However, EC-driven businesses must consider the critical
elements affecting the value of EC across cultures. These elements include each of the
following except
A) delivery delays.
B) perceived trust.
C) consumer loyalty.
D) political influences.
Answer:
Question: Each of the following apply to EC in developing economies except
A) developing economies often face power blackouts and unreliable infrastructure and
delivery mechanisms creating limitations that make it difficult for firms to predict whether
EC investments will pay off, and when.
B) developing economies, such as China and India, represent a significant opportunity for
EC to connect businesses to customers, as well as other businesses.
C) developing economies struggle with various issues that create too many business and
technology risks to justify investment in those economies at this time.
D) the potential volume of transactions in developed countries can make EC investments
more attractive for established firms than new firms because established firms have
already recovered the costs of their IT infrastructures.
Answer:
Question: List and briefly describe three reasons why EC justification is needed.
Answer:
Question: List and briefly discuss the difficulties in measuring productivity and
performance gains from EC investments.
Answer:
Question: Explain tangible costs and benefits. Explain intangible costs and benefits.
Answer:
Question: List and explain five methods for evaluating IT investments.
Answer:
Question: Define cloud computing. Identify five advantages of cloud computing.
Answer: