Chapter 09 – e-Commerce Systems
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9 e-Commerce Systems
CHAPTER OVERVIEW
Chapter 9: e-Commerce Systems introduces the basic process components of e-commerce systems, and discusses
important trends, applications, and issues in e-commerce.
LEARNING OBJECTIVES
After reading and studying this chapter, you should be able to:
1. Identify the major categories and trends of e-commerce applications.
SUMMARY
• e-Commerce. E-commerce encompasses the entire online process of developing, marketing, selling, delivering,
servicing, and paying for products and services. The Internet and related technologies and e-commerce Web sites on
• e-Commerce Issues. Many e-business enterprises are moving toward offering full-service B2C and B2B e-
commerce portals supported by integrated customer-focused processes and inter-networked supply chains, as
• B2C e-Commerce. Businesses typically sell products and services to consumers at e-commerce Web sites that
provide attractive Web pages, multimedia catalogs, interactive order processing, secure electronic payment systems,
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• B2B e-Commerce. Business-to-business applications of e-commerce involve electronic catalog, exchange, and
auction marketplaces that use Internet, intranet, and extranet Web sites and portals to unite buyers and sellers, as
KEY TERMS AND CONCEPTS
1. Clicks and Bricks Strategy (376):
2. E-commerce Channel (379):
3. E-Commerce Marketplaces (374):
e-Commerce comprises high speed electronic trading platforms.
a. Auction (375):
A website in which sellers place items up for sale to the highest bidder.
4. e-commerce Processes (355):
The workflow governing access control and security, profiling and personalizing, search management, content
management, catalog management, payment, workflow management, event notification, and collaboration and
trading activities.
a. Access Control and Security (356):
e-commerce processes must establish mutual trust and secure access between the parties in an e-commerce
transaction by authenticating users, authorizing access, and enforcing security features.
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e. Event Notification (359):
A workflow management feature which notifies stakeholders of any change in a transaction’s status. Such
changes might include an order, pickup, delivery, payment, or following a lapsed time interval.
5. Electronic Commerce (350):
The online process of developing, marketing, selling, delivering, servicing, and paying for products and services
transacted on internetworked, global marketplaces of customers, with the support of a worldwide network of
business partners.
a. Business-to-Business (354):
This category of electronic commerce involves both electronic business marketplaces and directs market
links between businesses.
6. Electronic Funds Transfer (360):
The capture and processing of money and credit transfers between banks, businesses, and their customers.
7. Infomediaries (375):
8. Search engine optimization (370)
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ANSWERS TO REVIEW QUIZ
Q.
A.
Key Term
Q.
A.
Key Term
1
5
Electronic commerce
13
8
Search engine optimization
2
5b
Business-to-consumer
14
3d
Portal
3
5a
Business-to-business
15
3a
Auction
4
5c
Consumer-to-consumer
16
3c
Exchange
5
4
e-commerce processes
17
3b
Catalog
6
4a
Access control and security
18
2
E-commerce channel
7
4f
Profiling and personalizing
19
6
Electronic funds transfer
8
4c
Content and catalog management
20
4d
Electronic payment systems
9
4h
Workflow management
21
1
Clicks-and-bricks strategy
10
4e
Event notification
22
3
E-commerce marketplaces
11
4b
Collaboration and trading
23
4g
Search management
12
7
Infomediaries
Chapter 09 – e-Commerce Systems
ANSWERS TO DISCUSSION QUESTIONS
1. Most businesses should engage in e-commerce on the Internet. Do you agree or disagree with this
statement? Explain your position.
Agree:
The Internet is the driving force in the new economy. Businesses are engaging in e-commerce to develop,
Disagree:
E-commerce can be an expensive, time consuming distraction from vital business activities. Websites do not
2. Are you interested in investing in, owning, managing, or working for a business that is primarily engaged
in e-commerce on the Internet? Explain your position.
E-commerce remains a growing field of interest. Certainly, this field is opening new career opportunities for
3. Refer to the Real World Case on social networks, mobile commerce, and online shopping in the chapter.
Do you think that mobile devices (not just phones anymore) are becoming the major platform for shopping,
communication, everything? What are the implications for companies?
Yes
Mobile devices have caught on with the world’s youth and with gadget inclined knowledge workers, a pattern
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4. Why do you think there have been so many business failures among dot-com companies that were
devoted only to retail e-commerce?
Causes of failure
• Lack of business experience or judgment
5. Do the e-commerce success factors listed in Figure 9.11 guarantee success for an e-commerce business
venture? Give a few examples of what else could go wrong and how you would confront such challenges.
6. If personalizing a customer’s Web site experience is a key success factor, then electronic profiling
processes to track visitor Web site behavior are necessary. Do you agree or disagree with this statement?
Explain your position.
Yes.
Personalization means knowing about the person. This requires figuring out what the visitor wants via their
7. All corporate procurement should be accomplished in e-commerce auction marketplaces, instead of using
B2B Web sites that feature fixed-price catalogs or negotiated prices. Explain your position on this proposal.
Pro:
Auction websites allow customers to solicit the lowest bid for their supplies. These savings flow directly to the
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8. Refer to the Real World Case on Linkedln, Umbria, Mattel, and Others in the chapter. What is your take
on the debate as to whether these “influential” individuals do really have an effect on others, or they are
representative of an underlying cultural trend? How would a company react based on their position on the
issue?
It is interesting to note that this debate is over a century old. In his epic novel, War and Peace, Tolstoy wrote
9. If you were starting an e-commerce Web store, which of the business requirements summarized in Figure
9.13 would you primarily do yourself, and which would you outsource to a Web development or hosting
company? Why?
A business manager is expected to know his or her business and customers. Therefore, students should select
items that are core to the business itself rather than a supporting technology or utility.
Do yourself:
• Create the catalog with its products, descriptions, and prices – these are fundamental marketing activities
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ANSWERS TO ANALYSIS EXERCISES
1. Small Business e-Commerce Portals
a. Check out Small Business Center and the other e-commerce portals mentioned. Identify several benefits
and limitations for a business using these Web sites.
services. For example:
Small Business Center
Small Business Center’s website offers assistance in starting a Web site, marketing businesses online, and
helping manage them more effectively. The website is free but the services such as marketing or web hosting
b. Which Web site is your favorite? Why?
Students should select the site that they believe will give them the easiest options to set their small businesses
c. Which site would you recommend or use to help a small business wanting to get into e-commerce? Why?
Answers should focus on value, fit, and price. Microsoft’s site offers far more features and far more free
information than the other two.
Chapter 09 – e-Commerce Systems
2. e-Commerce Websites for Car Buying
a. Check out several of the Web sites shown in Figure 9.19. Evaluate them based on ease of use, relevance of
information provided, and other criteria you feel are important. Don’t forget the classic: “Did they make you
want to buy?”
b. Which sites would you use or recommend if you or a friend actually wanted to buy a car? Why?
For visitors interested in a foreign model, the Edmunds website includes BMW, Lexus, and other foreign built
c. Check out the Consumer Federation of America’s study on anticompetitive new car-buying state laws or
similar studies online. How much does it estimate consumers would save if they could purchase cars directly
from manufacturers online?
3. Comparing e-Commerce Sites
a. Using a spreadsheet, record a set of information similar to that shown for each product. (Categories
describing the product will vary depending on the type of product you select—CDs might require the title of
the CD and the performer[s], whereas toys or similar products would require the name of the product and its
description.) See Figure 9.20 .
b. For each product, rank each company on the basis of the price charged. Give a rating of 1 for the lowest
price and 3 for the highest, and split the ratings for ties—two sites tying for the lowest price would each
receive a 1.5. If a site does not have one of the products available for sale, give that site a rating of 4 for that
product. Add the ratings across your products to produce an overall price/availability rating for each site.
c. Based on your experience with these sites, rate them on their ease of use, completeness of information,
and order-filling and shipping options. As in Part (b), give a rating of 1 to the site you feel is best in each
category, a 2 to the second best, and a 3 to the poorest site.
d. Prepare a set of PowerPoint slides or similar presentation materials summarizing the key results and
including an overall assessment of the sites you compared.
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4. eCommerce: The Dark Side
a. Search using the terms “Ponzi Scheme” or “Pyramid Scheme.” To find current examples in action, try
searching for “plasma TV $50,” “cash matrix,” “e–books” and “matrix,” or “gifting” through a search engine
or action site.
A Ponzi Scheme, also known as a pyramid scheme, promises large, guaranteed payoffs to “investors” (victims).
As more investors participate, the scheme uses the new funds to pay off the early participants. Naturally, the
b. Search using the terms “phishing” and “identity.” If possible, include a printout of a real-world example
that you or an acquaintance may have received via e-mail.
Phishing is simply a slang term for tricking people via e-mail to give up account information by masquerading
as a legitimate company such as eBay, AOL, or PayPal.
Such e-mails continue to become increasingly convincing. They appear to be sent by a legitimate organization,
and they typically claim that you must renew, verify, reset, validate, etc. your account. These e-mails may
c. Search using the term “third-party escrow.” What legitimate function does this serve? Provide an
example of a legitimate third-party escrow service for Internet transactions. How has the third-party escrow
system been used to commit fraud on the Internet?
An escrow service holds a buyer’s money and assures the seller a payment has been received. Once received,
the seller can then ship the product. The escrow service will hold the buyer’s money until the buyer indicates
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It isn’t possible to simply visit a third party escrow service’s website to confirm its legitimacy. Anyone can
d. Prepare a one-page paper describing a type of online fraud not covered in the previous questions.
Prepare presentation materials and present your findings to the class. Be sure to include a description of the
fraud, how to detect it, and how to avoid it. Use real-world illustrations if possible.
Sadly, there’s a huge range of possible responses. They include key logging, the “Nigerian” letter, cashier’s
ANSWERS TO REAL WORLD CASES
RWC 1: Sony, 1-800-Flowers, Starbucks, and Others:
Case Study Questions
1. How do the companies involved benefit from the innovations discussed in the case? Is it about more
efficient transaction processing, better reaching out to customers, or both?
Benefits
• Saves time (handling paper tickets)
2. Use examples from the case to illustrate your answer.
Examples
• E-commerce coupons texted to mobile phone users
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3. “Shopping online can be social again, as it was in person,” says Wade Gerten, CEO of Alvenda. Do you
think this is a stretch, or are we in the midst of a turning point in online shopping? Explain your answer.
True, shopping online can be social. Social networks have the potential to greatly enhance shopping. For
4. Many of the applications discussed in the case are mostly used by the younger demographic, who grew up
around technology. How do online behavior patterns change as they become older, with more responsibilities,
and more challenging jobs? Do applications like those discussed in the case become less important? More
important?
The case suggests a significant behavioral difference between age groups. With increasing time pressures
Real World Activities
1. Consider the examples discussed in the case. Go online and research what other companies or industries
are doing in terms of the use of social networking sites and mobile commerce. What other examples can you
find? Prepare a report that compares those in your research with the ones described here, highlighting
similarities and differences. Can you spot any new trends?
Students can see for themselves how marketers are using Twitter, Facebook, MySpace, and so on. Mobile
commerce, however, is just beginning to take root. However, the advent of both 3G/4G networks and GPS
3
Imagine taking a long road trip and indicating an interest in restaurants with play areas for small children during
the lunch hour (or an interest in antiques, classic cars, rare coins, public parks, etc.). At the appropriate time, offers
and directions would begin appearing on your mobile device. Mom and Pop stores would be able to compete with
the big restaurant chains without investing in highway frontage or billboards. Small towns bypassed by an interstate
highway might once again flourish.
4
Take your party pictures with your mobile device, select your favorites, select a convenient pick–up location based
on your current location, and pick them up on your way to the next party spot.
5
Is your child (employee) exceeding the speed limit in your vehicle, ranging out of bounds, loitering where they
don’t belong?
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Search terms
mobile e-commerce, mobile commerce, or “m-commerce”
2. How often, if ever, do you shop with your mobile phone? What do you think are some of the roadblocks
that prevent the widespread adoption of mobile shopping?
Roadblocks
• Texting charges
3. What would you suggest companies do to overcome those? Break into small groups with your classmates
to develop a few recommendations.
Recommendations
• Invest in security
RWC 2: LinkedIn, Umbria, Mattel, and Others
Case Study Questions
1. How can companies benefit from the “cultural assessments” regularly performed by Mattel? How could
the information obtained be used to create business value for those organizations? Provide multiple examples.
Benefits:
• Learn about what the market wants
2. The case notes that, in spite of disconfirming evidence as to the effectiveness of targeting online opinion
leaders, companies are nonetheless increasing their efforts to identify and contact them. Why do you think
this is the case?
Why?
Marketing people are keen to latch on to popular trends; it’s part of their job. It should come as no surprise that
3. One of the participants in the case states that “you want to ride the wave rather than trying to start one
of your own.” What does she mean by that? If companies are not starting these “waves,” where are they
coming from?
Chapter 09 – e-Commerce Systems
Real World Activities
1. A number of technological and cultural developments in recent years have resulted in the emergence of
extensive social networks and a large number of avidly followed blogs. Go online to research how companies
are tapping into these trends and what new marketing practices have arisen as a result. Prepare a report to
summarize your findings.
2. Reflect on your own purchasing behavior. How much do you rely on blogs, feedbacks, and
recommendations from past customers to make your own purchase decisions? Why do you (or not) rely on
these sources of information? Do you believe they are largely unbiased? Break into small groups to discuss
these issues with your classmates and compare perspectives on them.
It might be interesting to survey the class and have them rate the following information sources for reliability,
ease of use, and frequency of use:
• Customer reviews
RWC 3: Entellium, Digg, Peerflix, Zappos, and Jigsaw
Case Study Questions
1. Is the second-mover advantage always a good business strategy? Defend your answer with examples of
the companies in this case.
“Always” is rarely the correct answer to any question. Running in the second position has some advantages.
Organizations have the opportunity to learn from the front-runners before investing their time and capital.
2. What can a front-runner business do to foil the assaults of second movers? Defend your answer using the
examples of the front-runner companies in the case.
Second movers busy themselves trying to learn from the front runners. However, there’s no reason the
frontrunners can’t learn these lessons as well. Front runners can work to improve their product’s quality or add
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3. Do second movers always have the advantage in Web-based business success? Why or why not? Evaluate
the five strategies given in the case and the companies that used them to help defend your answer.
Just using the information provided in the case, it would appear that second movers always compete
successfully. See Activity #1 for a more useful analysis. Aside from the remarkable success provided in the
case, one must remember that second movers do not always interpret or implement their lessons learned; they
will not always have the advantage. A frontrunner who pays attention to its customers and continually adapts to
their needs will likely remain in front. The short answer thus remains “it depends on the players.” In the
examples provided by this case, second runners have been able to compete successfully. However, they remain
second runners.
#1 Better, faster, cheaper
#2 Borrow tactics
Jay Adelson saw the value in customer ratings and referral systems used in social network sites and Amazon,
#3 Copy the business model
Peerflix took the peer-to-peer file sharing model and merged it with eBay’s commission-based transaction
#4 Follow the biggest leader
Zappos chose not to follow other online shoe sellers at all. Instead, it targeted big shoe store customers. It did
#5 Aim for the weak spot
Jigsaw took advantage of D&B and Hoover’s weak spots: useful contact information. Sales people use these
Real World Activities
1. Use the Internet to research the current business status of all of the many companies in this case. Are the
second movers still successfully using their strategies, or have the first movers foiled their attempts? Have
new strong players entered the markets of the first and second movers, or have business, economic, or
societal developments occurred to change the nature of competition in these markets?
Resources:
• Lowe’s
6
– Starting at the end of 2009 Home Depot has assumed a significant lead over Lowe’s on the web
7
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2. Assume you will start an Internet-based business similar to one of those mentioned in this case or another
one of your choice. Would you be a first, second, or later mover in the market you select? How would you
differentiate yourself from other competitors or prospective new entrants? Break into small groups to
share your ideas and attempt to agree on the best Web-based business opportunity of the group.
First movers should might come up with a novel product idea by merging several new technologies.
Second mover:
These answers should build improvements into existing businesses. By copying a proven strategy, a businesses reduces the
risk that the idea itself lacks a market. However, these businesses must fight an uphill battle for name recognition.
RWC 4: KitchenAid and the Royal Bank of Canada
Case Study Questions
1. Consider your own online shopping patterns. How much weight do you place on the presence of a name
or logo or other trademark (such as the KitchenAid silhouette) on a Web site when purchasing goods or
services? Do you ever stop to consider whether you may have been misled? How could you tell the difference?
2. Brian Maynard of KitchenAid notes that the development of the Internet changed the problem of brand
policing. What are some of these changes? What new challenges can you think of that did not exist in the pre–
online world? Provide several examples.
Changes:
3. The companies mentioned in the case (e.g., KitchenAid, RBC, Disney, and Coke) were well established
and enjoyed strong brand recognition well before the advent of the Internet. Do you think online-only
companies face the same problems as they do? Why or why not? Justify the rationale for your answer.
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No. Online companies are strongly associated with their domain name (Google, eBay, Amazon, etc.). As a
Real World Activities
information collection and use, sharing and disclosure, and security, and then certify Web sites as meeting
their standards. Companies that achieve this can then display a logo to that effect. Search the Internet to
discover how these providers prevent unauthorized lifting and use of their certification logos by Web sites
that have not gone through the process. Prepare a report to summarize your findings. Have you ever noticed
these logos? Does it make any difference to you as a consumer whether a Web site displays them or not?
Unauthorized use: trust providers give users a way to authenticate a logo via the trust provider‘s website. It
sites to compare and contrast their offerings. Then break into small groups to compare your findings and
discuss new features that you believe are lacking, as well as why you think these vendors should include these
features.
Brandprotect