Electronic Commerce - GBV

Electronic Commerce2010

A Managerial PerspectiveGlobal Edition

Efraim Turban' ' University of Hawaii

David KingJDA Software Group, Inc.

Jae LeeKorea Advanced Institute of Science and Technology

Ting-Peng LiangCity University of Hong Kong and National Sun Yat-Sen University (Taiwan)

Deborrah C. Turban

Turban Company Inc.

with contributions by

Judy LangLang Associates

Christy CheungHong Kong Baptist University

Linda LaiMacau Polytechnic Institute of China

Carol PollardAppalachian State University

Boston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto

Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Contents

T Part 1 Tntroriurtinn to E-Commerre and E-Marketplaces 43

CHAPTER 1 OVERVIEW OF ELECTRONIC COMMERCE 43Beijing 2008: A Digital Olympics 44

1.1 ELECTRONIC COMMERCE: DEFINITIONS AND CONCEPTS 46Defining Electronic Commerce 46Defining E-Business 47Other EC Concepts 47Electronic Markets and Interorganizational

and Intraorganizational Information Systems 48

1.2 THE ELECTRONIC COMMERCE FIELD: CLASSIFICATION, CONTENT,AND HISTORY 49

An EC Framework 49Classification of EC by the Nature, Direction of the Transactions,

and Interactions 50

Case 1.1 EC Appl ica t ion: Want to Buy Chocolate Online?Try Godiva.com 52

A Brief History of EC 53The Future of EC 54

1.3 E-COMMERCE 2.0: FROM WEB 2.0 TO ENTERPRISE SOCIALNETWORKING AND VIRTUAL WORLDS 55

Social Computing 55Web 2.0 55Social Networks and Social Network Services 56

Case 1.2 EC Appl icat ion: MySpace: The World's Most PopularSocial Networking Web Site 58

Enterprise Social Networks 59Virtual Worlds and Second Life 60

1.4 THE DIGITAL WORLD: ECONOMY, ENTERPRISES,

AND SOCIETY 62The Digital Economy 62The Digital Enterprise 62The Digital Society 64

1.5 ELECTRONIC COMMERCE DRIVERS AND THE CHANGINGBUSINESS ENVIRONMENT 68

The Drivers of EC and Its Growth 68Performance, Business Pressures, and Organizational Responses 69

1.6 ELECTRONIC COMMERCE BUSINESS MODELS 72The Structure and Properties of Business Models 72Typical EC Business Models 75

1.7 THE BENEFITS, LIMITATIONS, AND IMPACTS OFELECTRONIC COMMERCE 76

The Benefits and Impacts of EC 76The Limitations and Barriers of EC 76Why Study E-Commerce? 77

1.8 OVERVIEW OF THIS BOOK 78

Contents

I

Case 1.3 EC Application: How College Students BecomeEntrepreneurs 79

Part 1: Introduction to E-Commerce and E-Marketplaces 80Part 2: Internet Consumer Retailing 80Part 3: Business-to-Business E-Commerce 80Part 4: Other EC Models and Applications 81Part 5: EC Support Services 81Part 6: EC Strategy and Implementation 81Online Part 7: Auctions and Application Development 81Online Tutorials 81Online Appendix 81Online Supplements 81

MANAGERIAL ISSUES 81

SUMMARY 82

KEY TERMS 83

QUESTIONS FOR DISCUSSION 83

INTERNET EXERCISES 84

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS 84

CLOSING CASE: MARY KAY'S EC SYSTEMS 85

ONLINE RESOURCES 86

REFERENCES 87

CHAPTER 2 E-MARKETPLACES: MECHANISMS, TOOLS, AND IMPACTSOF E-COMMERCE 89Web 2.0 Tools at Eastern Mountain Sports 90

2.1 ELECTRONIC COMMERCE MECHANISMS: AN OVERVIEW 92EC Activities and Mechanisms 92Sellers, Buyers, and Transactions 93

2.2 E-MARKETPLACES 94Electronic Markets 95E-Marketplace Components and Participants 95Types of E-Marketplaces 96

2.3 CUSTOMER INTERACTION MECHANISMS: STOREFRONTS, MALLS,

AND PORTALS 97Electronic Storefronts 97Electronic Malls 98Types of Stores and Malls 98Web (Information) Portals 99The Roles and Value of Intermediaries in E-Marketplaces 100

Case 2.1 EC Application: TradeEgypt.com 101

2.4 ELECTRONIC CATALOGS, SEARCH ENGINES, AND

SHOPPING CARTS 102Electronic Catalogs 102EC Search Act iv i t ies, Types, and Engines 104Shopping Carts 105

2.5 AUCTIONS, BARTERING, AND NEGOTIATINGONLINE 106

Definition and Characteristics 106Traditional Auctions Versus E-Auctions 106Dynamic Pricing and Types of Auctions 108Benefits, Limitations, and Impacts of E-Auctions 109

Contents

Online Bartering 110

Online Negotiating 111

2.6 WEB 2.0 TOOLS AND SERVICES: FROM BLOGS TO WIKIS I l l

Blogging (Weblogging) 112

Mechanism Aids for Web 2.0 Tools: Tags, Folksonomy,

and Social Bookmarks 116

Wikis 117

2.7 VIRTUAL WORLDS AS AN ELECTRONIC COMMERCE

MECHANISM 117

Business Activities and Value in Virtual Worlds 118

2.8 COMPETITION IN THE DIGITAL ECONOMY AND ITS IMPACT

ON INDUSTRIES 119

Competition in the Internet Ecosystem 119

Case 2.2 EC A p p l i c a t i o n : How Blue Nile, Inc., Is Changingt the Jewelry Industry 120

Impact on Competition 122

EC Impact on Whole Industries 123

Case 2.3 EC A p p l i c a t i o n : Craigslist: The UltimateOnline Classified Site 124

2.9 IMPACTS OF ELECTRONIC COMMERCE ON BUSINESS PROCESSES

AND ORGANIZATIONS 125

Improving Marketing and Sales 125

Transforming Organizations 126

Redefining Organizations 128


SUMMARY 131

KEY TERMS 132




CLOSING CASE: SECOND LIFE 134

ONLINE RESOURCES 135

REFERENCES 136

2A BUILD-TO-ORDER PRODUCTION 138

Part 2 Internet Consumer Retailing 14Q_

CHAPTER 3 RETAILING IN ELECTRONIC COMMERCE: PRODUCTSAND SERVICES 140Amazon.com: E-Tailing Grows Despite the Slumping Economy . . . . 141

3.1 INTERNET MARKETING AND ELECTRONIC RETAILING 143

Overview of Electronic Retailing 143

Size and Growth of the B2C Market 143

What Sells Well on the Internet 144

Characteristics and Advantages of Successful E-Tailing 144

3.2 E-TAILING BUSINESS MODELS 147

Classification by Distribution Channel 147

Insights and Additions 3.1 Selling Cars Online:Build-to-Order

Other B2C Models and Special Retailing 150

B2C in Social Networks 150

Contents

3.3 TRAVEL AND TOURISM (HOSPITALITY) SERVICES ONLINE 151Services Provided 152Special Services Online 152Benefits and Limitations of Online Travel Services 153

Case 3.1 EC Application: WAYN: A Social Networkfor Travelers 154

Corporate Travel 154Impact of EC on the Travel Industry 154

3.4 EMPLOYMENT PLACEMENT AND THE JOB MARKET ONLINE 155The Internet Job Market 156Benefits and Limitations of the Electronic Job Market 158

3.5 REAL ESTATE, INSURANCE, AND STOCK TRADING ONLINE 159Real Estate Online 159Insurance Online 160Online Stock Trading 160

3.6 BANKING AND PERSONAL FINANCE ONLINE 162Home Banking Capabilities 162Virtual Banks 162International and Multiple-Currency Banking 163Online Financial Transaction Implementation Issues 164

Case 3.2 EC Application: Security for Online Bank Transactions . . . . 164Personal Finance Online 165

3.7 ON-DEMAND DELIVERY OF PRODUCTS, DIGITAL ITEMS,ENTERTAINMENT, AND GAMING 166

On-Demand Delivery of Products 166Fresh Direct 167Online Delivery of Digital Products, Entertainment, and Media 167Online Entertainment 168

3.8 ONLINE PURCHASE-DECISION AIDS 169Shopping Portals 170Shopbots Software Agents 170"Spy" Services 170Business Ratings Sites 171Trust Verification Sites 171Other Shopping Tools 171

3.9 PROBLEMS WITH E-TAILING AND LESSONS LEARNED 172

3.10 ISSUES IN E-TAILING 173Disintermediation and Reintermediation 173Channel Conflict 174Determining the Right Price 175Product and Service Customization and Personalization 175Fraud and Other Illegal Activities 175How to Make Customers Happy 175


SUMMARY 176

KEY TERMS 177




CLOSING CASE: WAL-MART POWERS ONLINE 179


REFERENCES 181

10 Contents

CHAPTER 4 CONSUMER BEHAVIOR, INTERNET MARKETING,AND ADVERTISING 184Netflix Increases Sales Using DVD Recommendations

and Advertisements 185

4.1 LEARNING ABOUT CONSUMER BEHAVIOR ONLINE 186A Model of Consumer Behavior Online 186

4.2 THE CONSUMER PURCHASING DECISION-MAKING PROCESS 189A Generic Purchasing-Decision Model 189Customer Decision Support in Web Purchasing 190Players in the Consumer Decision Process 191

4.3 MASS MARKETING, MARKET SEGMENTATION,AND ONE-TO-ONE MARKETING 191

From Mass Marketing to One-to-One Marketing 191How One-to-One Relationships Are Practiced 192

4.4 PERSONALIZATION AND BEHAVIORAL MARKETING 194Personalization in E-Commerce 194

Behavioral Marketing and Collaborative Filtering 195

4.5 LOYALTY, SATISFACTION, AND TRUST IN EC 196Customer Loyalty 196Satisfaction in EC 197Trust in EC 198

4.6 MARKET RESEARCH FOR EC 200Objectives and Concepts of Market Research Online 200

Case 4.1 EC Application: Internet Market Research ExpeditesTime-to-Market at Procter & Gamble 201

Representative Market Research Approaches 201

Insights and Additions 4.2: Market Researchby Comscore, Inc

Limitations of Online Market Research and Howto Overcome Them

Biometric Marketing

4.7 WEB ADVERTISINGOverview of Web AdvertisingSome Internet Advertising TerminologyWhy Internet Advertising?Advertising Networks

4.8 ONLINE ADVERTISING METHODSBannersPop-Up and Similar AdsE-Mail AdvertisingNewspaper-Like and Classified AdsSearch Engine AdvertisementGoogle—The Online Advertising KingAdvertising in Chat Rooms

Insights and Additions 4.3: Google's MajorAdvertisement Methods

Other Forms of Advertising

4.9 ADVERTISING STRATEGIES AND PROMOTIONS . . .Social Network AdvertisingVideo Ads on the Web and in SociaL NetworkingViral Marketing

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Contents 11

Other Advertising Strategies 219

Online Events, Promotions, and Attractions 220

Mobile Marketing and Advertising 221

4.10 SPECIAL ADVERTISING AND IMPLEMENTATION TOPICS 222

Permission Advertising 222

Some Implementation Issues 223

Ad Management 224

Localization 224

Ad Content 225

Intel l igent Agents Applications 226


SUMMARY 228

KEY TERMS 229




CLOSING CASE: TOYOTA SCION GOES SOCIAL FOR ADVERTISING AND

MARKET RESEARCH 231


REFERENCES 233

Part 3 BiKiness-to-Business E-Commerce 235__

CHAPTER 5 B2B E-COMMERCE 235

Auction for Supplies Helps Portsmouth Hospitals 236

5.1 CONCEPTS, CHARACTERISTICS, AND MODELSOF B2B E-COMMERCE 237

Basic B2B Concepts 237Market Size and Content of B2B 237The Basic Types of B2B Transactions and Activities 237The Basic Types of B2B E-Marketplaces and Services 238B2B Characteristics 239Supply Chain Relationships in B2B 240

Insights and Additions 5.1: Summary of B2BCharacteristics

Service Industries Online in B2B 241The Benefits and Limitations of B2B 242The Content of the B2B Field 242

5.2 ONE-TO-MANY: SELL-SIDE E-MARKETPLACES 243Sell-Side Models 243Sales from Catalogs 245

Case 5.1 EC Application: Gregg's Cycles Goes Online 246Online Direct Sales: The Example of Cisco Systems 246

Case 5.2 EC Application: Whirlpool B2B Trading Portal 247

5.3 SELLING VIA DISTRIBUTORS AND OTHER INTERMEDIARIES 247

Case 5.3 EC Application: W. W. Grainger and Goodrich Corporation . . 248

5.4 SELLING VIA E-AUCTIONS 249Using Auctions on the Sell Side 249Auctioning from the Company's Own Site 249Using Intermediaries in Auctions 249Examples of B2B Forward Auctions 250

12 Contents

Case 5.4 EC Application: How the U.S. State of Pennsylvania Sells SurplusEquipment 250

5.5 ONE-FROM-MANY: BUY-SIDE E-MARKETPLACES ANDE-PROCUREMENT 251

Procurement Methods 251Inefficiencies in Traditional Procurement Management 252The Goals and Benefits of E-Procurement 253

5.6 BUY-SIDE E-MARKETPLACES: REVERSE AUCTIONS 255Conducting Reverse Auctions 255Group Reverse Auctions 256

5.7 OTHER E-PROCUREMENT METHODS 257An Internal Purchasing Marketplace: Aggregating Suppliers'

Catalogs and Desktop Purchasing 257Buying at Sellers' E-Auctions 258Group Purchasing 258Buying at Sellers' Sites and Collaborative Commerce 259Purchasing Direct Goods 259Electronic Bartering 259

5.8 B2B ELECTRONIC EXCHANGES: DEFINITIONS

AND CONCEPTS 260

Case 5.5 EC Applicat ion: ChemConnect: The World CommodityChemical Exchange 261

Functions of Exchanges 262Dynamic Pricing in B2B Exchanges 262Advantages, Limitations, and the Revenue Model

of Exchanges 263

5.9 B2B PORTALS, DIRECTORIES, AND OWNERSHIP OF

B2B MARKETPLACES 265B2B Portals 265

Case 5.6 EC Applicat ion: Alibaba.com 266Ownership of B2B Marketplaces 268

Case 5.7 EC Applicat ion: Agentrics: A Giant Retail Exchange 269Comparing the Many-to-Many B2B Models 270

5.10 PARTNER AND SUPPLIER RELATIONSHIP MANAGEMENT 271Partner and Supplier Relationship Management 271E-Communities and PRM 271

5.11 B2B IN THE WEB 2.0 ENVIRONMENT AND SOCIAL

NETWORKING 272The Opportunities 272The Use of Web 2.0 Tools in B2B 272Social Networks in the B2B Marketplace 272Examples of Other Activities of B2B Social Networks 273Strategy for B2B Social Networking 273

5.12 INTERNET MARKETING IN B2B EC 274Organizational Buyer Behavior 274The Marketing and Advertising Processes in B2B 274Methods for B2B Online Marketing 275Affiliate Programs, Infomediaries,

and Data Mining 276


SUMMARY 277

KEY TERMS 279

Contents 13




CLOSING CASE: IMARKETKOREA 281


REFERENCES 283

CHAPTER 6 E-SUPPLY CHAINS, COLLABORATIVE COMMERCE,AND CORPORATE PORTALS 285Boeing's Global Supply Chain for the Dreamliner 787 286

6.1 E-SUPPLY CHAINS 287Definitions and Concepts 287Supply Chain Parts 288Managing Supply Chains 289

6.2 SUPPLY CHAIN PROBLEMS AND SOLUTIONS 292Typical Problems Along the Supply Chain 292EC Solutions Along the Supply Chain 293

6.3 RFID AS A KEY ENABLER IN SUPPLYCHAIN MANAGEMENT 295

The RFID Revolution 295RFID Applications in the Supply Chain 296Limitations and Concerns of RFID 298

Case 6.1 EC Application: Airbus Improves Productivitywith RFID 299

RuBee: An Alternative to RFID? 300

6.4 COLLABORATIVE COMMERCE 301Essentials of Collaborative Commerce 301Collaboration Hubs 301Collaborative Networks 301Representative Examples of E-Collaboration 302Barriers to C-Commerce 306

6.5 COLLABORATIVE PLANNING, CPFR, APS, AND PLM 306Collaborative Planning, Forecasting, and Replenishment 307Advanced Planning and Scheduling 307

Case 6.2 EC Application: West Marine: A CPFR Success Story 308Product Lifecycle Management 308Supporting Joint Design 309

6.6 SUPPLY CHAIN INTEGRATION 309How Information Systems Are Integrated 309Integration Along the Extended Supply Chain 310

6.7 CORPORATE (ENTERPRISE) PORTALS 310Corporate Portals: An Overview 310Types of Corporate Portals 312Corporate Portal Applications and Issues 313

6.8 COLLABORATION-ENABLING ENVIRONMENTSAND TOOLS 314

Workflow Technologies and Applications 314Collaboration and Groupware: Some Basic Concepts 315Electronic Meeting Systems: Face-to-Face Support

and Virtual Meetings 317Real-Time Collaboration Tools for Virtual Meetings 318

14 Contents

Electronic Teleconferencing 319Unified Communication: Integration and

Groupware Suites 320Collaboration 2.0 ' 323Implementation Issues for Online Collaboration 325

Case 6.3 EC A p p l i c a t i o n : Wikis, Blogs, and Chats Support Collaboration

at DrKW 326


SUMMARY 328

KEY TERMS 328




CLOSING CASE: HOW WAL-MART USES EC IN ITS SUPPLY CHAIN 331


REFERENCES 333

Part 4 Other EC Models and Applications ai6_

CHAPTER 7 INNOVATIVE EC SYSTEMS: FROM E-GOVERNMENTAND E-LEARNING TO CONSUMER-TO-CONSUMERE-COMMERCE 336Caterpillar Inc. Champions E-Learning 337

7.1 E-GOVERNMENT: AN OVERVIEW 338Definition and Scope 338Government-to-Citizens 338Government-to-Business 342Government-to-Govemment 343Government-to-Employees and Internal Efficiency

and Effectiveness 343

7.2 IMPLEMENTING E-GOVERNMENT 344The Transformation to E-Government 344E-Government and Social Networking 346Implementation Issues of E-Government 346M-Government 347

7.3 E-LEARNING 347The Basics of E-Learning: Definitions and Concepts 347

Case 7.1 EC Application: E-Learning at Cisco Systems 349Benefits and Drawbacks of E-Learning 350Preventing E-Learning Failures 352Distance Learning and Online Universities 352Online Corporate Training 353Implementing E-Learning and E-Training 354Edutainment 354Social Networks and E-Learning 354Learning in Virtual Worlds and Second Life 355Visual Interactive Simulation 357E-Learning Tools and Management 357

7.4 ONLINE PUBLISHING AND E-BOOKS 359Content Providers, Publishers, and Distributors 359Electronic Books 360Print-on-Demand 363

Contents 15

7.5 KNOWLEDGE MANAGEMENT, LEARNING, ANDELECTRONIC COMMERCE 363

An Overview of Knowledge Management 363KM Types and Activities - 364

Case 7.2 Appl icat ion Case : Knowledge Management atInfosys Technologies 365

How Is Knowledge Management Related to E-Commerce? 366Knowledge Portals 367Online Advice and Consulting 367Employee Knowledge Networks and Expert Location Systems 368

Case 7.3 EC Appl icat ion: How the U.S. Department of Commerce Usesan Expert Location System 370

7.6 CONSUMER-TO-CONSUMER ELECTRONIC COMMERCE 371E-Commerce: C2C Applications 371C2C Activities in Social Networks 372Support Services for C2C 373


SUMMARY 374

KEY TERMS 375




CLOSING CASE: A WORLD-CLASS E-GOVERNMENT:

SINGAPORE 377


REFERENCES 379

CHAPTER 8 MOBILE COMPUTING AND COMMERCE, AND PERVASIVECOMPUTING 381The Blooming of Food Lion 382

8.1 MOBILE COMMERCE: ATTRIBUTES, BENEFITS,AND DRIVERS 383

Attributes of M-Commerce 383Drivers of M-Commerce 384

8.2 COMPONENTS, TECHNICAL INFRASTRUCTURE, AND SERVICESOF MOBILE COMPUTING 385

Mobile Devices 386Mobile Computing Software and Services 387Wireless Telecommunications Networks 388

8.3 MOBILE FINANCIAL APPLICATIONS 391Mobile Banking 391Mobile Payments 391

Case 8.1 EC Appl icat ion: Closing the Digital Divide withMobile Microfinance 393

8.4 MOBILE MARKETING AND ADVERTISING 394Mobile Marketing Campaigns 394Mobile Marketing Guidelines 395

8.5 MOBILE WORKFORCE SOLUTIONS 396Needs of the Mobile Workforce 396

8.6 MOBILE ENTERTAINMENT 399Growth of the Mobile Entertainment Market 399

Contents

Mobile Music and Video 400Mobile Games 400Mobile Gambling 401

8.7 LOCATION-BASED MOBILE COMMERCE 402L-Commerce Infrastructure 403Location-Based Services and Applications 404Barriers to Location-Based M-Commerce 405

8.8 SECURITY AND OTHER IMPLEMENTATION ISSUESIN MOBILE COMMERCE 406

M-Commerce Security Issues 406Technological Barriers to M-Commerce 407Ethical, Legal, and Health Issues in M-Commerce 408

I 8.9 PERVASIVE COMPUTING 409I Overview of Pervasive Computing 409I Radio Frequency Identification (RFID) 410I Sensor Networks and Smart Items 413| Case 8.2 EC Application: Wi-Fi Sensor Net Aids Winemakers 415| Privacy and Pervasive Computing 416

j MANAGERIAL ISSUES 417

| SUMMARY 418

1 KEY TERMS 419

| QUESTIONS FOR DISCUSSION 420

j INTERNET EXERCISES 420

| TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS 421

| CLOSING CASE: WAL-MART TURNS TO MOBILE FOR WEATHER ALERTS . . . 421

I . ONLINE RESOURCES 422

I REFERENCES 423

1 CHAPTER 9 THE WEB 2.0 ENVIRONMENT ANDj SOCIAL NETWORKS 4251 Wikipedia and Its Problems of Content, Quality,| and Privacy Protection 426

! 9.1 THE WEB 2.0 REVOLUTION, SOCIAL MEDIA, AND| INDUSTRY DISRUPTORS 427I What Is Web 2.0? 427| Representative Characteristics of Web 2.0 427j Web 2.0 Companies and New Business Models 4281 Social Media 429| Industry and Market Disruptors 429

I 9.2 VIRTUAL COMMUNITIES 431| Characteristics of Traditional Online Communities| and Their Classification 431

I 9.3 ONLINE SOCIAL NETWORKING: BASICSj AND EXAMPLES 434I A Definition and Basic Information 434| Representative Social Networks Sites and Services 436I Mobile Social Networking 437

I 9.4 MAJOR SOCIAL NETWORK SERVICES: FROM FACEBOOK| TO FLICKR 438| Facebook: The Network Effect 438| Bebo 439

Contents 17

Orkut: Exploring the Very Nature of Social Networking Sites 440Flickr Ticks Off Some of Its Users . 441

9.5 BUSINESS AND ENTERPRISE SOCIAL NETWORKS 441Definitions, Concepts, Types, and Examples 441Business Social Networking: Concepts and Benefits 442Enterprise Social Networks 443Other Social Networking Structures 445Social Marketplaces 446

9.6 COMMERCIAL ASPECTS OF WEB 2.0 AND SOCIAL NETWORKINGAPPLICATIONS 447

Why Is There an Interest? 447Case 9.2 EC Appl icat ion: Revenue Sources at YouTube 447

Advertising Using Social Networks, Blogs, and Wikis 448Shopping in Social Networks 450Feedback from Customers: Conversational Marketing 450Commercial Activities in Business and Enterprise

Social Networks 451Revenue-Generation Strategies in Social Networks 453Risks and Limitations When Interfacing with Social Networks 454Justifying Social Media and Networking 454

9.7 ENTERTAINMENT WEB 2.0 STYLE: FROM SOCIAL NETWORKS TOMARKETPLACES 455

Entertainment and Social Networks 455Advertising Movies and Events in Communities 456Online Marketplace for Movies 456Mobile Web 2.0 Devices for Entertainment and Work 457Yahoo! Go 457

9.8 THE FUTURE: WEB 3.0 AND WEB 4.0 459

Web 3.0: What's Next? 459


SUMMARY 462

KEY TERMS 462




CLOSING CASE: LINKEDIN: THE BUSINESS-ORIENTED

SOCIAL NETWORK 465


REFERENCES 467

Part 5 Ff Support Servires 46Q

CHAPTER 10 E-COMMERCE FRAUD AND SECURITY 469How Seattle's Hospital Survived a Bot Attack 470

10.1 THE INFORMATION SECURITY PROBLEM 471What Is EC Security? 471The Drivers of EC Security Problems 473Why Is E-Commerce Security Strategy Needed? 475

10.2 BASIC E-COMMERCE SECURITY ISSUES AND LANDSCAPE 476The Security Basic Terminology 476

Contents

The EC Security Battleground 476Security Scenarios and Requirements in E-Commerce 478The Defense: Defenders and Their Strategy 479

10.3 TECHNICAL ATTACK METHODS 480Technical and Nontechnical Attacks: An Overview 480The Major Technical Attack Methods 481Malicious Code: Viruses, Worms, and Trojan Horses 481

10.4 PHISHING, FINANCIAL FRAUD, AND SPAM 484Phishing 485Fraud on the Internet 485

Case 10.1 EC Application: Internet Stock Fraud Aidedby Spam 489

Social Networking Makes Social Engineering Easy 489

10.5 THE INFORMATION ASSURANCE MODELAND DEFENSE STRATEGY 491

Confidentiality, Integrity, and Availability 491Authentication, Authorization, and Nonrepudiation 491E-Commerce Security Strategy 492The Defense Strategy 492

10.6 THE DEFENSE I : ACCESS CONTROL, ENCRYPTION,AND PKI 493

Access Control 493Encryption and the One-Key (Symmetric) System 495Public Key Infrastructure (PKI) 496

10.7 THE DEFENSE I I : SECURING E-COMMERCE

NETWORKS 499Firewalls 499Demilitarized Zone 499VPNs 500Intrusion Detection Systems (IDSs) 500Honeynets and Honeypots 501

10.8 THE DEFENSE I I I : GENERAL CONTROLS AND OTHER

DEFENSE MECHANISMS 501General Controls 502Application Controls 503Internal Control and Compliance Management 504Protecting Against Spam . 504Protecting Against Pop-Up Ads 505Protecting Against Spyware 506

10.9 BUSINESS CONTINUITY, SECURITY AUDITING,

AND RISK MANAGEMENT 506Business Continuity and Disaster Recovery Planning 506Auditing Information Systems 507

Case 10.2 EC Application: Business Continuity andDisaster Recovery 508

Risk-Management and Cost-Benefit Analysis 508

10.10IMPLEMENTING ENTERPRISEWIDEE-COMMERCE SECURITY 509

Senior Management Commitment and Support 509EC Security Policies and Training 510EC Security Procedures and Enforcement 510Industry Standards for Credit Card Protection (PCI DSS) 511Security Tools: Hardware and Software 511Why Is I t Difficult to Stop Internet Crime? 511

Contents 19


SUMMARY 514

KEY TERMS 516




CLOSING CASE: UBS PAINEWEBBER'S BUSINESS OPERATIONS

DEBILITATED BY MALICIOUS CODE 518


REFERENCES 520

CHAPTER 11 ELECTRONIC COMMERCE PAYMENT SYSTEMS 522Pay-Per-View Pages: The Next iTunes 523

11.1 THE PAYMENT REVOLUTION 524

11.2 USING PAYMENT CARDS ONLINE 526

Processing Cards Online 526

Fraudulent Card Transactions 527

11.3 SMART CARDS 529

Types of Smart Cards 530

Applications of Smart Cards 530

Case 11.1 EC A p p l i c a t i o n : TaiwanMoney Card 533

11.4 STORED-VALUE CARDS 533

11.5 E-MICROPAYMENTS 534

11.6 E-CHECKING 536

Case 11.2 EC A p p l i c a t i o n : To POP or BOC: Digital Checksin the Offline World 537

11.7 B2B ELECTRONIC PAYMENTS 539

Current B2B Payment Practices 539

Enterprise Invoice Presentment and Payment 540


SUMMARY 543

KEY TERMS 545



TEAM ASSIGNMENTS, PROJECTS, AND CLASS

DISCUSSIONS 546

CLOSING CASE: THE CHECK IS IN THE NETWORK 546


REFERENCES 548

CHAPTER 12 FULFILLING E-COMMERCE ORDERSAND OTHER EC SUPPORT SERVICES 550How Amazon.com Fulfills Orders 551

12.1 ORDER FULFILLMENT AND LOGISTICS—AN

OVERVIEW 552

Acquiring Goods and Services 553

Basic Concepts of Order Fulfillment and Logistics 553

20 Contents

Overview of LogisticsThe EC Order Fulfillment Process

Insights and Additions 12.1: What ServicesDo Customers Need?

553553

12.2 PROBLEMS IN ORDER FULFILLMENT 557Typical Supply Chain Problems 557Why Supply Chain Problems Exist 557

12.3 SOLUTIONS TO ORDER FULFILLMENT

PROBLEMS ' 558Improvements in the Order-Taking Activity 558Warehousing and Inventory Management Improvements 558

Case 12.1 EC Application: How WMS Helps Schurman ImproveIts Internal and External Order Fulfillment System 559

Speeding Deliveries 560Partnering Efforts and Outsourcing Logistics 561Integrated Global Logistics Systems 561

Insights and Additions 12.2: UPS ProvidesBroad EC Services

Order Fulfillment in Mass Customization 562Handling Returns (Reverse Logistics) 563Order Fulfillment in B2B 564

Case 12.2 EC Application: How Daisy Brand FulfillsB2B Orders 565

Innovative E-Fulfillment Strategies 566

Case 12.3 EC Application: How Sundowner Motor Inns FulfillsIts Online Reservations 566

12.4 INTEGRATION AND ENTERPRISE RESOURCE

PLANNING 567Enterprise Resource Planning: An Overview 568Advantages and Benefits of ERP Systems 568

12.5 INTELLIGENT AGENTS AND THEIR ROLEIN E-COMMERCE 570

Definitions and Basic Concepts 570Multiagent Systems 572Applications of Software and Intelligent Agents in

E-Commerce 573

12.6 OTHER E-COMMERCE SUPPORT SERVICES 574Consulting Services 574Directory Services, Newsletters, and Search Engines 574More EC Support Services - 576Outsourcing EC Support Services 576


SUMMARY 580

KEY TERMS 580




CLOSING CASE: HOW MASS CUSTOMIZATION EC ORDERSARE FULFILLED—MULTIBRAS OF BRAZIL 582


REFERENCES 584

Contents

Part 6 EC Strategy and Implementation 585

CHAPTER 13 E-COMMERCE STRATEGY AND GLOBAL EC 585The Success of Travelocity's E-Strategy 586

13.1 ORGANIZATIONAL STRATEGY: CONCEPTS

AND OVERVIEW 587Strategy and the Web Environment 587The Strategic Planning Process 590Strategic Planning Tools 593

Case 13.1 EC Application: Strategic Planning at InternetNZ 593

13.2 BUSINESS PLANNING IN E-COMMERCE 594Business Plan Fundamentals 594Business Case 595

13.3 E-COMMERCE STRATEGY: CONCEPTS AND OVERVIEW 596

13.4 E-STRATEGY INITIATION 598Representative Issues in E-Strategy Initiation 598

Case 13.2 EC Application: Measuring Profit on the Web 600Strategy in the Web 2.0 Environment and in Social Networking 601

13.5 E-STRATEGY FORMULATION 603Selecting EC Opportunities 603Determining an Appropriate EC Application Portfolio Mix 603Risk Analysis and Management 604Issues in Strategy Formulation 605

13.6 E-STRATEGY IMPLEMENTATION 607E-Strategy Implementation Process 607Strategy Implementation Issues 608

13.7 E-STRATEGY AND PROJECT ASSESSMENT 611The Objectives of Assessment 611Measuring Results and Using Metrics 611

13.8 GLOBAL E-COMMERCE 614Benefits and Extent of Operations 614Barriers to Global EC 615Breaking Down the Barriers to Global EC ' 616

13.9 E-COMMERCE IN SMALL AND MEDIUM-SIZED

ENTERPRISES 617Supporting SMEs 618

Case 13.3 EC A p p l i c a t i o n : Networx Events Uses E-Commerce 619


SUMMARY 621

KEY TERMS 622




CLOSING CASE: PIERRE LANG EXPANDS INTO

EASTERN EUROPE 623


REFERENCES : 625

22 Contents

CHAPTER 14 ECONOMICS AND JUSTIFICATION OF ELECTRONICCOMMERCE 627Justifying Investment in IT and EC at California

State Automobile Association 628

14.1 WHY JUSTIFY E-COMMERCE INVESTMENTS? HOW CAN THEYBE JUSTIFIED? 629

Increased Pressure for Financial Justification 629Other Reasons Why EC Justification Is Needed 630EC Investment Categories and Benefits 630How Is an EC Investment Justified? 630What Needs to Be Justified? When Should Justification

Take Place? 631Using Metrics in EC Justification 631

14.2 DIFFICULTIES IN MEASURING AND JUSTIFYINGE-COMMERCE INVESTMENTS 633

The EC Justification Process 633Difficulties in Measuring Productivity and Performance Gains 634Relating IT Expenditures to Organizational Performance 634Intangible Costs and Benefits 635The Process of Justifying EC and IT Projects 636

14.3 METHODS AND TOOLS FOR EVALUATING AND JUSTIFYINGE-COMMERCE INVESTMENTS 637

Opportunities and Revenue Generated by EC Investment 637Methodological Aspects of Justifying EC Investments 637Traditional Methods for Evaluating EC Investments 638Implementing Traditional Methods 640ROI Calculators 640Advanced Methods for Evaluating IT and EC Investments 640

14.4 EXAMPLES OF E-COMMERCE PROJECT JUSTIFICATION 642Justifying E-Procurement 642

Insights and Additions 14.1: E-Procurement MetricsCustomer Service and e-CRM 643Justifying a Portal 644Justifying E-Training Projects 645Justifying an Investment in Mobile Computing and in RFID 646

Case 14.1 EC Application: Paesano Restaurant JustifiesWireless E-Commerce 646

Justifying Security Projects 648Justifying Social Networking and the Use of Web 2.0 Tools 648

14.5 THE ECONOMICS OF E-COMMERCE 648Reducing Production Costs 648Increased Revenues 651Reducing Transaction Friction or Risk 652Facilitating Product Differentiation 652EC Increases Agility 652Valuation of EC Companies 652

14.6 OPPORTUNITIES FOR SUCCESS IN E-COMMERCE AND

AVOIDING FAILURE 653Factors That Determine E-Commerce Success 654E-Commerce Failures 655E-Commerce Successes 656Opportunities for Success: Creating Digital Options 658Cultural Differences in EC Successes and Failures 658Can EC Succeed in Developing Economies? 658

Contents


SUMMARY 660

KEY TERMS 661




CLOSING CASE: JUSTIFYING EC AND IT INVESTMENT IN THE U.S. STATE

OF IOWA 663


REFERENCES 664

CHAPTER 15 LAUNCHING A SUCCESSFUL ONLINE BUSINESSAND EC PROJECTS 666OBO Sets Its Goals for Success 667

15.1 GETTING INTO E-COMMERCE AND STARTING A NEWONLINE BUSINESS 668

Getting into E-Commerce 668Starting a New Online Business 668An E-Start-up Is a Start-up 668Creating a New Company or Adding an Online Project 669

Case 15.1 EC Application: Innovation and Creativityat Amazon.com 669

Planning Online Businesses 672Funding a New Online Business 672

15.2 ADDING E-COMMERCE INITIATIVES OR TRANSFORMING

TO AN E-BUSINESS 674Adding EC Initiatives to an Existing Business 674Transformation to an E-Business 675

15.3 BUILDING OR ACQUIRING A WEB SITE 677Classification of Web Sites 678Building a Web Site 678

15.4 WEB SITE HOSTING AND OBTAINING A DOMAINNAME 679

Web Hosting Options 679

Case 15.2 EC Application: How Small Companies Use aStorebuilder 680

Registering a Domain Name 681

15.5 CONTENT CREATION, DELIVERY, AND MANAGEMENT 682Categories and Types of Content 683Creation or Acquisition of Content 684Content Management and Maintenance 685Catalog Content and Its Management 686

Case 15.3 EC Application: Anglesea Online Uses Content ManagementSoftware for Success 687

Content Maximization and Streaming Services 687Case 15.4 EC Application: Akamai Technologies 688

15.6 WEB SITE DESIGN 690Information Architecture 690Site Navigation 691Performance (Speed) 692Colors and Graphics 693Web Site Usability 693

24 Contents

15.7 PROVIDING E-COMMERCE SUPPORT SERVICES 694Who Builds the Web Site? 694Payments: Accepting Credit Cards 694Web Site Promotion 695Customer Relationship Management 696

15.8 OPENING A WEB STOREFRONT 697Options for Acquiring Storefronts 697Yahoo! Small Business 699


SUMMARY 700

KEY TERMS 701




CLOSING CASE: HOW TELECOM NEW ZEALAND (TNZ) EXCELS

WITH CONTENT MANAGEMENT 703


REFERENCES 704

CHAPTER 16 REGULATORY, ETHICAL, AND COMPLIANCEISSUES IN EC 707Why Is Disney Funding Chinese Pirates? 708

16.1 THE COMPLEXITY OF LEGAL AND REGULATORY ISSUES 709Laws Are Subject to Interpretation 709

Case 16.1 EC Application: Is eBay a Store or a Bulletin Board? 710The Law: A System for Social Control and Protection 710Personal and Property Rights 710Regulatory Compliance in EC 711

16.2 CIVIL LAW, INTELLECTUAL PROPERTY LAW, COMMON LAW,

AND EC LEGAL ISSUES 712Criminal Law and Civil Law 712Intellectual Property Law 713Common Law in E-Commerce 715Fan and Hate Sites 716Other E-Commerce Legal Issues 717

16.3 ETHICAL CHALLENGES AND GUIDELINES 718Ethical Principles and Guidelines 718Business Ethics 719EC Ethical Issues 720

16.4 PRIVACY RIGHTS, PROTECTION AND FREE SPEECH 721Privacy Rights and Protection 721Free Speech Online Versus Privacy Protection 722The Price of Protecting an Individual's Privacy 722How Information About Individuals Is Collected 723Privacy Protection by Information Technologies 725Privacy Issues in Web 2.0 Tools and Social Networks 725Privacy Protection by Ethical Principles 725

Case 16.2 EC Application: Property Rights Extended to DomainNames and Digital Property 726

The USA PATRIOT Act 727Privacy Protection in Countries Other Than the United States 728

Contents 25

16.5 CONSUMER AND SELLER PROTECTION FOR ONLINE FRAUD 729

Consumer (Buyer) Protection 729

Seller Protection 731

Protecting Buyers and Sellers: Electronic and

Digital Signatures 732

16.6 SOCIETAL ISSUES AND GREEN EC 733

The Digital Divide 733

Electronic Discovery 733

Operating Greener Businesses and Eco-Friendly Data Centers 733

How to Operate Greener Businesses, Data Centers,

and Supply Chains 734

Global Green Regulations 734

Other Societal Issues 735


SUMMARY 738

KEY TERMS 739




CLOSING CASE: NET NEUTRALITY: GOOD FOR E-BUSINESS? 741


REFERENCES 742

GLOSSARY 746

INDEX 763

Documents

Electronic Commerce - GBV