Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)

Chapter 1 Overview of Electronic Commerce

1.1 True/False

1) Radio frequency identification (RFID) chips were used to prevent counterfeit tickets and to
ensure the safety of the athletes' food at the 2008 Olympics in Beijing.
Answer: TRUE
Diff: 2 Page Ref: 2
AACSB Standard: Use of Information Technology

2) Electronic commerce (EC) is the process of buying, selling, transferring, or exchanging

products, services, and/or information via the Internet only.
Answer: FALSE
Diff: 2 Page Ref: 4
AACSB Standard: Use of Information Technology

3) EC can be conducted over the public Internet or privately-owned intranets.

Answer: TRUE
Diff: 1 Page Ref: 4

4) 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 business-to-business EC
activity.
Answer: FALSE
Diff: 2 Page Ref: 5
AACSB Standard: Reflective Thinking

5) From a service perspective, EC allow governments, firms, consumers, and management to

both cut service costs and improve the quality and speed of customer service.
Answer: TRUE
Diff: 2 Page Ref: 5
AACSB Standard: Use of Information Technology

6) An extranet is a network that uses private corporate networks to link together multiple
intranets.
Answer: FALSE
Diff: 2 Page Ref: 7

7) An example of business-to-consumer (B2C) is when Dell provides customer service online by

collaborating electronically with its partners.
Answer: FALSE
Diff: 2 Page Ref: 7

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8) eMarketer estimated that retail e-commerce sales would decrease approximately 1.6 percent in
2009.
Answer: FALSE
Diff: 2 Page Ref: 7

9) Network infrastructures include cell phones and other electronic devices that are located in
various locations by telecommunications networks, including wireless ones.
Answer: TRUE
Diff: 2 Page Ref: 8
AACSB Standard: Use of Information Technology

10) The final participants in B2B transactions are consumers.

Answer: FALSE
Diff: 1 Page Ref: 9

11) When RetroMedia Inc. purchases Godiva chocolates as gifts for its employees and has
Godiva mail them directly to the recipient, RetroMedia is engaged in B2B2C.
Answer: TRUE
Diff: 2 Page Ref: 9, 10

12) Doing your banking on an iPhone is an example of m-commerce.

Answer: TRUE
Diff: 2 Page Ref: 11
AACSB Standard: Use of Information Technology

13) EC's future is now being shaped largely by the worldwide oil and financial crises.
Answer: FALSE
Diff: 3 Page Ref: 13
AACSB Standard: Reflective Thinking

14) Despite the failures of individual companies, the total volume of EC has been growing by 5
to 7 percent every year.
Answer: FALSE
Diff: 2 Page Ref: 13

15) E-commerce 2.0 is based primarily on blogs and corporate-sponsored collaboration.

Answer: FALSE
Diff: 1 Page Ref: 13

16) In effect, in a social network there are online and offline communities of people with similar
interests.
Answer: FALSE
Diff: 2 Page Ref: 17

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17) Enterprise-oriented networks are social networks whose primary objective is to facilitate
business.
Answer: TRUE
Diff: 1 Page Ref: 17

18) Economic, legal, societal, and technological factors have created a highly competitive
business environment in which customers are becoming less powerful.
Answer: FALSE
Diff: 2 Page Ref: 27

19) The financial/economic crisis of 2008-2009 has resulted in many companies going out of
business or being acquired by other companies.
Answer: TRUE
Diff: 1 Page Ref: 27

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
Diff: 2 Page Ref: 30

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
Diff: 2 Page Ref: 30

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
Diff: 2 Page Ref: 33

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
Diff: 2 Page Ref: 34

24) The Web site http://chemconnect.com for the chemical industry is an example of special
interest vertical marketplaces that concentrate on one industry.
Answer: TRUE
Diff: 1 Page Ref: 34

25) The branch of philosophy that deals with what is considered to be right and wrong is known
as corporate governance.
Answer: FALSE
Diff: 1 Page Ref: 34

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1.2 Multiple Choice

1) The 2008 Olympics in Beijing was the most digital Olympics to date for each of the following
reasons except:
A) Many of the tickets were purchased online by people worldwide, using Beijing Gehue
Ticketmaster, in what is called business-to-business (B2B) e-commerce.
B) The International Olympic Committee launched a YouTube channel to broadcast clips that
were accessible in many developing countries.
C) Millions watched the Olympics through online videos and Internet-enabled cell phones and
other mobile devices.
D) Global Positioning Systems (GPS) were used to track the position of sailing and rowing
boats.
Answer: A
Diff: 3 Page Ref: 2
AACSB Standard: Use of Information Technology

2) RFID technology was used to support each of the following activities at the 2008 Beijing
Olympics except:
A) ensuring safety of athletes' food
B) blogging on social networks
C) preventing the sale of counterfeit tickets
D) tracking marathon runners
Answer: B
Diff: 2 Page Ref: 2,3
AACSB Standard: Use of Information Technology

3) ________ 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) E-commerce
B) E-business
C) Pure e-commerce
D) Partial e-commerce
Answer: B
Diff: 1 Page Ref: 5

4) EC can take several forms depending on the degree of digitization of the following three
dimensions:
A) the product or service sold, the process, and the delivery method.
B) the business process, the collaboration, and the transaction.
C) the payment method, the delivery method, and the production method.
D) the marketing channel, the agent, and the collaboration method.
Answer: A
Diff: 2 Page Ref: 5

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5) Purely physical companies are referred to as ________ companies, whereas companies that
are engaged only in EC are considered ________ companies.
A) pure play; virtual
B) brick-and-mortar; virtual
C) click-and-mortar; click-and-brick
D) virtual; pure play
Answer: B
Diff: 2 Page Ref: 5

6) What is a corporate or government network that uses Internet tools, such as Web browsers,
and Internet protocols?
A) social network
B) extranet
C) intranet
D) e-market
Answer: C
Diff: 2 Page Ref: 7

7) The ways in which EC is done include:

A) the Internet and extranets.
B) the Internet and private networks.
C) the Internet, extranets, and private networks.
D) the Internet, intranets, extranets, and via cell phones.
Answer: D
Diff: 2 Page Ref: 8
AACSB Standard: Use of Information Technology

8) EC applications are supported by infrastructures and by each of the following support areas
except:
A) people
B) public policy
C) marketing and advertisement
D) mobile devices
Answer: D
Diff: 2 Page Ref: 8

9) A business, such as Apple, doing online transactions with its trading partners is an example of
________.
A) B2B
B) B2C
C) e-CRM
D) EDI
Answer: A
Diff: 1 Page Ref: 9
AACSB Standard: Use of Information Technology

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10) Intrabusiness EC is usually performed over intranets and/or ________.
A) corporate portals
B) mobile networks
C) exchanges
D) P2P networks
Answer: A
Diff: 2 Page Ref: 9

11) A job opening in the Sales Department is posted on the company's intranet by the Human
Resources Department. This is an example of ________.
A) E2C
B) B2S
C) B2B
D) B2E
Answer: D
Diff: 2 Page Ref: 9

12) Boeing designing a product together with one of its business partners is an example of this
type of interaction.
A) collaborative commerce
B) nonbusiness EC
C) B2B2C
D) B2B2C
Answer: A
Diff: 2 Page Ref: 10

13) ________ 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) E-CRM
B) Interorganizational information systems
C) Intrabusiness EC
D) B2B
Answer: B
Diff: 3 Page Ref: 11

14) 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) G2G
B) G2B
C) G2C
D) E2E
Answer: B
Diff: 2 Page Ref: 11

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15) A technology that is used to electronically transfer routine documents, such as invoices and
purchase orders, and for financial transactions is ________.
A) electronic funds transfer (EFT)
B) exchange-to-exchange
C) electronic data interchange (EDI)
D) peer-to-peer
Answer: C
Diff: 2 Page Ref: 11

16) 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
Diff: 2 Page Ref: 12

17) ________ refers to the second-generation of Internet services that let people collaborate and
share information online in new ways, such as social networks and wikis.
A) Virtual Web
B) Media Web
C) Web 2.0
D) Social Web
Answer: C
Diff: 2 Page Ref: 13

18) Which of the following is not a characteristic of the Digital Revolution?

A) many business processes expedited by up to 50 percent
B) intelligent search agents to help manage information overload
C) a high rate of obsolescence
D) fraud and other cybercons carried out via the Internet
Answer: A
Diff: 3 Page Ref: 21

19) 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) corporate portal
B) intranet
C) extranet
D) social network
Answer: A
Diff: 1 Page Ref: 21

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20) 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) developing models
B) orchestrating the services and workflows
C) organizing supply chains
D) transforming revenue models
Answer: B
Diff: 3 Page Ref: 21

21) Because the rate of change and the level of uncertainty in the marketplace 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
Diff: 2 Page Ref: 27

22) According to the Business Environment and Performance Impact Model, ________ provide
support to organizations' activities and to actual performance, countering business pressures.
A) EC and IT
B) missions and strategies
C) core competencies and critical response activities
D) markets and government
Answer: A
Diff: 2 Page Ref: 28
AACSB Standard: Reflective Thinking

23) A ________ is a series of activities that a company performs to achieve its goals, such as
making a profit, at various stages of the production process.
A) marketing strategy
B) business model
C) value chain
D) business plan
Answer: B
Diff: 1 Page Ref: 30

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24) According to the ________ revenue model, customers pay a fixed amount, usually monthly,
to receive some type of service.
A) subscription fees
B) transaction fees
C) advertising fees
D) affiliate fees
Answer: A
Diff: 2 Page Ref: 31

25) According to the ________ revenue model, companies receive commissions for referring
customers to others' EC Web sites.
A) advertising fees
B) subscription fees
C) affiliate fees
D) transaction fees
Answer: C
Diff: 2 Page Ref: 31

26) Large private organizational buyers and government agencies make large-volume or large-
value purchases through ________, also known as reverse auctions.
A) electronic tendering systems
B) online direct marketing
C) name-your-own-price models
D) viral marketing
Answer: A
Diff: 2 Page Ref: 33

27) 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) electronic tendering systems
B) online direct marketing
C) name-your-own-price
D) viral marketing
Answer: D
Diff: 2 Page Ref: 34

28) Major barriers to EC include all of the following except:

A) cost
B) lack of potential customers
C) implementation difficulties
D) lack of technology
Answer: D
Diff: 2 Page Ref: 34

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29) Benefits of EC to organizations include each of the following except:
A) cost reduction
B) information security
C) supply chain improvements
D) efficient procurement
Answer: B
Diff: 2 Page Ref: 35

30) All of the following are benefits of EC to society except:

A) more public services
B) closing the digital divide
C) fewer permits and less tax
D) improve homeland security
Answer: C
Diff: 3 Page Ref: 35
AACSB Standard: Reflective Thinking

31) Which of the following is not one of the benefits that EC provides to consumers?
A) global reach
B) instant delivery
C) enable telecommuting
D) ubiquity
Answer: A
Diff: 2 Page Ref: 35

32) Which of the following is a technological limitation of EC?

A) security and privacy concerns that deter customers from buying
B) difficulty obtaining venture capital
C) order fulfillment requirements of large-scale B2C
D) unresolved taxation, public policy, and legal issues
Answer: C
Diff: 3 Page Ref: 36

33) All of the following are non-technological limitations of EC except:

A) Software development tools are still evolving.
B) Lack of trust in EC and in unknown sellers hinders buying.
C) People do not yet sufficiently trust paperless, faceless transactions.
D) Online fraud is increasing.
Answer: A
Diff: 3 Page Ref: 36

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34) Which is not one of the EC trends?
A) EC topics have been integrated into all functional fields.
B) EC is penetrating more and more business areas, services, and governments.
C) EC applications frequently cross departmental and organizational boundaries.
D) National and international government regulations of EC have been resolved.
Answer: D
Diff: 2 Page Ref: 36

35) The success of the entrepreneurial company JetPens was due to keeping costs low by each of
the following methods except:
A) using open source free software
B) advertising via e-mail
C) giving away free samples via social networks
D) using smart key words to rank high with search engines
Answer: C
Diff: 3 Page Ref: 37
AACSB Standard: Use of Information Technology

1.3 Fill in the Blank

1) ________ is the process of buying, selling, or exchanging products, services, or information

via computer networks.
Answer: Electronic commerce
Diff: 1 Page Ref: 4

2) ________ 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.
Answer: E-business
Diff: 1 Page Ref: 5

3) ________ are organizations that conduct their business activities solely online.
Answer: Virtual (pure-play) organizations
Diff: 2 Page Ref: 6

4) ________ are organizations that conduct some EC activities, usually as an additional

marketing channel.
Answer: Click-and-mortar (or click-and-brick) organizations
Diff: 1 Page Ref: 6

5) EC can be conducted in a(n) ________ where buyers and sellers meet online to exchange
goods, services, money, or information.
Answer: electronic market (e-marketplace)
Diff: 2 Page Ref: 6

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6) A(n) ________ is a corporate or government network that uses Internet tools, such as Web
browsers, and Internet protocols.
Answer: intranet
Diff: 2 Page Ref: 7

7) A(n) ________ is a network that uses the Internet to link multiple intranets.
Answer: extranet
Diff: 2 Page Ref: 7

8) An EC model in which all of the participants are either businesses or other organizations is
________ e-commerce.
Answer: business-to-business (B2B)
Diff: 1 Page Ref: 8

9) ________ is an EC model in which businesses sell to individual shoppers.

Answer: Business-to-consumer (B2C)
Diff: 1 Page Ref: 9

10) ________ is an EC model in which a business provides some product or service to a client
business that maintains its own customers.
Answer: Business-to-business-to-consumer (B2B2C)
Diff: 2 Page Ref: 9

11) ________ 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.
Answer: Intrabusiness EC
Diff: 2 Page Ref: 9

12) ________ is an EC model in which individuals or groups communicate online.

Answer: Collaborative commerce (C-commerce)
Diff: 2 Page Ref: 10

13) With ________, funds are routed electronically from one organization to another.
Answer: EFT (electronic funds transfer)
Diff: 2 Page Ref: 11

14) ________ is an EC model in which EC transactions and activities are conducted in a wireless
environment.
Answer: Mobile commerce (M-commerce)
Diff: 1 Page Ref: 11

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15) Since 2001, no other company has had more of an impact on EC than ________.
Answer: Google
Diff: 2 Page Ref: 12

16) The term ________ was coined by O'Reilly 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.
Answer: Web 2.0
Diff: 2 Page Ref: 13

17) A ________ is a gateway through which employees, business partners, and the public can
enter a corporate Web site.
Answer: corporate portal
Diff: 2 Page Ref: 21

18) ________ chips are tiny tags that can be implanted into humans or attached to products for
tracking and identification purposes.
Answer: Radio frequency identification (RFID)
Diff: 3 Page Ref: 24

19) ________ is the rapid production of customized products or services at a reasonable cost for
a large number of customers.
Answer: Mass customization
Diff: 2 Page Ref: 29

20) A(n) ________ is a method of doing business by which a company can generate revenue to
sustain itself.
Answer: business model
Diff: 2 Page Ref: 30

21) A(n) ________ is a description of how a company or an EC project will generate revenue.
Answer: revenue model
Diff: 1 Page Ref: 31

22) A(n) ________ refers to the benefits, including the intangible, nonquantitative ones, that a
company can derive from using EC.
Answer: value proposition
Diff: 3 Page Ref: 31

23) Companies receive commissions called ________ for referring customers to others' Web
sites.
Answer: affiliate fees
Diff: 3 Page Ref: 31

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24) A way to create value is through ________, which involve bundling some goods and services
together to provide more value than from offering them separately.
Answer: complementarities
Diff: 3 Page Ref: 33

25) The branch of philosophy that deals with what is considered to be right and wrong is called
________.
Answer: Ethics
Diff: 1 Page Ref: 34

1.4 Essay

1) List and briefly explain three of the five ES support EC areas.

Answer:
People. Sellers, buyers, intermediaries, information systems specialists, other employees, and
any other participants comprise an important support area.
Public policy. Legal and other policy and regulatory issues, such as privacy protection and
taxation, technical standards, and compliance with the regulations.
Marketing and advertisement. These are important in B2C online transactions because the buyers
and sellers usually do not know each other.
Support services. Many services are needed including content creation, payment methods,
customer service, and order fulfillment.
Business partnerships. Joint ventures, exchanges, and business partnerships of various types are
needed for success in EC.
Diff: 3 Page Ref: 7

2) List and briefly discuss three of the five common classifications of EC by the nature of the
transaction.
Answer:
Business-to-Business (B2B). All of the participants in B2B are either businesses or other
organizations.
Business-to-Consumer (B2C). B2C includes retail transactions of products or services from
businesses to individual shoppers.
Business-to-Business-to-Consumer (B2B2C). In B2B2C, a business provides some product or
service to a client business. The client business maintains its own customers.
Consumer-to-Business (C2B). In C2B, individuals use the Internet to sell products or services to
organizations and individuals who seek sellers to bid on products or services.
Intrabusiness EC. All internal EC organizational activities that involve the exchange of goods,
services, or information among various units and individuals in that organization.
Diff: 2 Page Ref: 9

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3) Define enterprise social networks. How can companies use Web 2.0 tools to offer customers
more ways to engage and interact on their Web sites?
Answer: Enterprise social networks are social networks that facilitate business.
Using Web 2.0 tools, a company can:
- Encourage consumers to rate and comment on products.
- Allow consumers to create their own topic areas and build communities (forums) around shared
interests possibly related to company's products.
- Hire bloggers or staff editors who can lead more company-formatted essays and discussions
that allow, but are not driven by, customer comments.
- Provide incentives such as sweepstakes and contests for customers to get involved in new
product (service) design and marketing campaigns.
- Encourage user-made videos about products/services and offer prizes for video ads.
Provide interesting stories in e-newsletters.
Diff: 3 Page Ref: 18

4) Identify two of the three categories of major business pressures and two main type of business
pressures in each category.
Answer:
Market and economic pressures: Strong competition, global economy, regional trade
agreements, very low labor costs in other countries, increased power of consumers.
Societal pressures: Changing nature of the workforce; government deregulation, compliance,
shrinking government subsidiaries; increased ethical, social, and legal responsibilities.
Technological pressures: Emerging innovations and new technologies; rapid technological
obsolescence; information overload; rapid decline in technology costs to labor costs.
Diff: 2 Page Ref: 29

5) Define revenue model and identify four major revenue models.

Answer: A revenue model describes how the organization or the EC project will generate
revenue.
Major revenue models are:
- Sales. Companies generate revenue from selling merchandise or services over their Web sites.
- Transaction fees. A company receives a commission based on the volume of transactions made,
or transaction fees can be levied per transaction.
- Subscription fees. Customers pay a fixed amount, usually monthly, to get some type of service.
- Advertising fees. Companies charge others for allowing them to place a banner on their sites.
- Affiliate fees. Companies receive commissions for referring customers to others' Web sites.
Diff: 3 Page Ref: 31

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