Electronic Commerce

2010
A Managerial Perspective
Global Edition
Efraim Turban
' '

University of Hawaii

David King
JDA Software Group, Inc.

Jae Lee
Korea Advanced Institute of Science and Technology

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

Deborrah C. Turban
Turban Company Inc.

with contributions by

Judy Lang
Lang Associates

Christy Cheung
Hong Kong Baptist University

Linda Lai
Macau Polytechnic Institute of China

Carol Pollard
Appalachian State University

Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Contents

Part 1 Tntroriurtinn to E-Commerre and E-Marketplaces

CHAPTER 1 OVERVIEW OF ELECTRONIC COMMERCE

43
43

Beijing 2008: A Digital Olympics

44

1.1

46
46
47
47

1.2

ELECTRONIC COMMERCE: DEFINITIONS AND CONCEPTS

Defining Electronic Commerce
Defining E-Business
Other EC Concepts
Electronic Markets and Interorganizational
and Intraorganizational Information Systems
THE ELECTRONIC COMMERCE FIELD: CLASSIFICATION, CONTENT,
AND HISTORY
An EC Framework
Classification of EC by the Nature, Direction of the Transactions,
and Interactions

Case 1.1 E C A p p l i c a t i o n : Want to Buy Chocolate Online?

Try Godiva.com
A Brief History of EC
The Future of EC
1.3

48
49
49
50
52
53
54

E-COMMERCE 2.0: FROM WEB 2.0 TO ENTERPRISE SOCIAL

NETWORKING AND VIRTUAL WORLDS
Social Computing
Web 2.0
Social Networks and Social Network Services

55
55
55
56

Case 1.2 EC A p p l i c a t i o n : MySpace: The World's Most Popular

Social Networking Web Site
Enterprise Social Networks
Virtual Worlds and Second Life

58
59
60

1.4

THE DIGITAL WORLD: ECONOMY, ENTERPRISES,

AND SOCIETY
The Digital Economy
The Digital Enterprise
The Digital Society

62
62
62
64

ELECTRONIC COMMERCE DRIVERS AND THE CHANGING

BUSINESS ENVIRONMENT
The Drivers of EC and Its Growth
Performance, Business Pressures, and Organizational Responses

68
68
69

1.6

ELECTRONIC COMMERCE BUSINESS MODELS

The Structure and Properties of Business Models
Typical EC Business Models

72
72
75

1.7

THE BENEFITS, LIMITATIONS, AND IMPACTS OF

ELECTRONIC COMMERCE
The Benefits and Impacts of EC
The Limitations and Barriers of EC
Why Study E-Commerce?

76
76
76
77

OVERVIEW OF THIS BOOK

78

1.5

1.8

Contents
Case 1.3

EC Application: How College Students Become

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

79
80
80
80
81
81
81
81
81
81
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 IMPACTS

OF E-COMMERCE

89

Web 2.0 Tools at Eastern Mountain Sports

90

2.1

ELECTRONIC COMMERCE MECHANISMS: AN OVERVIEW

EC Activities and Mechanisms
Sellers, Buyers, and Transactions

92
92
93

2.2

E-MARKETPLACES
Electronic Markets
E-Marketplace Components and Participants
Types of E-Marketplaces

94
95
95
96

2.3

CUSTOMER INTERACTION MECHANISMS: STOREFRONTS, MALLS,

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

Case 2.1 EC Application: TradeEgypt.com

2.4

2.5

97
97
98
98
99
100
101

ELECTRONIC CATALOGS, SEARCH ENGINES, AND

SHOPPING CARTS
Electronic Catalogs
EC Search Activities, Types, and Engines
Shopping Carts

102
102
104
105

AUCTIONS, BARTERING, AND NEGOTIATING

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

106
106
106
108
109

Contents

2.6

2.7

Online Bartering
Online Negotiating

110
111

WEB 2.0 TOOLS AND SERVICES: FROM BLOGS TO WIKIS

Blogging (Weblogging)
Mechanism Aids for Web 2.0 Tools: Tags, Folksonomy,
and Social Bookmarks
Wikis

Ill
112

VIRTUAL WORLDS AS AN ELECTRONIC COMMERCE

MECHANISM
Business Activities and Value in Virtual Worlds

2.8

116
117

117
118

COMPETITION IN THE DIGITAL ECONOMY AND ITS IMPACT

ON INDUSTRIES
Competition in the Internet Ecosystem

119
119

Case 2.2
t

E C A p p l i c a t i o n : How Blue Nile, Inc., Is Changing

the Jewelry Industry
Impact on Competition

120
122

EC Impact on Whole Industries

123

Case 2.3
2.9

E C A p p l i c a t i o n : Craigslist: The Ultimate

Online Classified Site

124

IMPACTS OF ELECTRONIC COMMERCE ON BUSINESS PROCESSES

AND ORGANIZATIONS
Improving Marketing and Sales

125
125

Transforming Organizations
Redefining Organizations

126
128

MANAGERIAL ISSUES

130

SUMMARY

131

KEY TERMS

132

QUESTIONS FOR DISCUSSION

132

INTERNET EXERCISES

133

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

133

CLOSING CASE: SECOND LIFE

134

ONLINE RESOURCES

135

REFERENCES

136

2A

138

BUILD-TO-ORDER PRODUCTION

Part 2 Internet Consumer Retailing

CHAPTER 3 RETAILING I N ELECTRONIC COMMERCE: PRODUCTS
AND SERVICES

14Q_
140

Amazon.com: E-Tailing Grows Despite t h e Slumping Economy . . . . 1 4 1

3.1

3.2

INTERNET MARKETING AND ELECTRONIC RETAILING

143

Overview of Electronic Retailing

Size and Growth of the B2C Market
What Sells Well on the Internet
Characteristics and Advantages of Successful E-Tailing

143
143
144
144

E-TAILING BUSINESS MODELS

Classification by Distribution Channel

147
147

Insights and Additions 3.1 Selling Cars Online:

Build-to-Order
Other B2C Models and Special Retailing

150

B2C in Social Networks

150

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3.3

TRAVEL AND TOURISM (HOSPITALITY) SERVICES ONLINE

Services Provided
Special Services Online
Benefits and Limitations of Online Travel Services

Case 3.1 EC Application: WAYN: A Social Network

for Travelers
Corporate Travel
Impact of EC on the Travel Industry

151
152
152
153
154
154
154

3.4

EMPLOYMENT PLACEMENT AND THE JOB MARKET ONLINE

The Internet Job Market
Benefits and Limitations of the Electronic Job Market

155
156
158

3.5

REAL ESTATE, INSURANCE, AND STOCK TRADING ONLINE

Real Estate Online
Insurance Online
Online Stock Trading

159
159
160
160

3.6

BANKING AND PERSONAL FINANCE ONLINE

Home Banking Capabilities
Virtual Banks
International and Multiple-Currency Banking
Online Financial Transaction Implementation Issues

162
162
162
163
164

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

Personal Finance Online
165
3.7

ON-DEMAND DELIVERY OF PRODUCTS, DIGITAL ITEMS,

ENTERTAINMENT, AND GAMING
On-Demand Delivery of Products
Fresh Direct
Online Delivery of Digital Products, Entertainment, and Media
Online Entertainment

166
166
167
167
168

3.8

ONLINE PURCHASE-DECISION AIDS

Shopping Portals
Shopbots Software Agents
"Spy" Services
Business Ratings Sites
Trust Verification Sites
Other Shopping Tools

169
170
170
170
171
171
171

3.9

PROBLEMS WITH E-TAILING AND LESSONS LEARNED

172

3.10

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

173
173
174
175
175
175
175

MANAGERIAL ISSUES

176

SUMMARY

176

KEY TERMS

177

QUESTIONS FOR DISCUSSION

178

INTERNET EXERCISES

178

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

179

CLOSING CASE: WAL-MART POWERS ONLINE

179

ONLINE RESOURCES

181

REFERENCES

181

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Contents

CHAPTER 4 CONSUMER BEHAVIOR, INTERNET MARKETING,

AND ADVERTISING
Netflix Increases Sales Using DVD Recommendations
and Advertisements

184
185

4.1

LEARNING ABOUT CONSUMER BEHAVIOR ONLINE

A Model of Consumer Behavior Online

186
186

4.2

THE CONSUMER PURCHASING DECISION-MAKING PROCESS

A Generic Purchasing-Decision Model
Customer Decision Support in Web Purchasing
Players in the Consumer Decision Process

189
189
190
191

4.3

MASS MARKETING, MARKET SEGMENTATION,

AND ONE-TO-ONE MARKETING
From Mass Marketing to One-to-One Marketing
How One-to-One Relationships Are Practiced

191
191
192

PERSONALIZATION AND BEHAVIORAL MARKETING

Personalization in E-Commerce

194
194

Behavioral Marketing and Collaborative Filtering

195

4.5

LOYALTY, SATISFACTION, AND TRUST IN EC

Customer Loyalty
Satisfaction in EC
Trust in EC

196
196
197
198

4.6

MARKET RESEARCH FOR EC

Objectives and Concepts of Market Research Online

200
200

Case 4.1 EC Application: Internet Market Research Expedites

Time-to-Market at Procter & Gamble
Representative Market Research Approaches

201
201

4.4

Insights and Additions 4.2: Market Research

by Comscore, Inc
Limitations of Online Market Research and How
to Overcome Them
Biometric Marketing

206
206

4.7

WEB ADVERTISING
Overview of Web Advertising
Some Internet Advertising Terminology
Why Internet Advertising?
Advertising Networks

207
207
208
208
209

4.8

ONLINE ADVERTISING METHODS

Banners
Pop-Up and Similar Ads
E-Mail Advertising
Newspaper-Like and Classified Ads
Search Engine Advertisement
GoogleThe Online Advertising King
Advertising in Chat Rooms

210
210
211
211
212
212
213
213

Insights and Additions 4.3: Google's Major

Advertisement Methods
4.9

Other Forms of Advertising

215

ADVERTISING STRATEGIES AND PROMOTIONS . . .

Social Network Advertising
Video Ads on the Web and in SociaL Networking
Viral Marketing

217
217
217
218

Contents

4.10

Other Advertising Strategies

219

Online Events, Promotions, and Attractions

Mobile Marketing and Advertising

220
221

SPECIAL ADVERTISING AND IMPLEMENTATION TOPICS

Permission Advertising
Some Implementation Issues
Ad Management
Localization

222
222
223
224
224

Ad Content
Intelligent Agents Applications

225
226

MANAGERIAL ISSUES

227

SUMMARY

228

KEY TERMS

229

QUESTIONS FOR DISCUSSION

229

INTERNET EXERCISES

230

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

230

CLOSING CASE: TOYOTA SCION GOES SOCIAL FOR ADVERTISING AND

MARKET RESEARCH

231

ONLINE RESOURCES

233

REFERENCES

233

Part 3 B i K i n e s s - t o - B u s i n e s s E-Commerce
CHAPTER 5 B2B E-COMMERCE
Auction for Supplies Helps Portsmouth Hospitals
5.1

CONCEPTS, CHARACTERISTICS, AND MODELS

OF B2B E-COMMERCE
Basic B2B Concepts
Market Size and Content of B2B
The Basic Types of B2B Transactions and Activities
The Basic Types of B2B E-Marketplaces and Services
B2B Characteristics
Supply Chain Relationships in B2B

Insights and Additions 5.1: Summary of B2B

Characteristics
Service Industries Online in B2B
The Benefits and Limitations of B2B
The Content of the B2B Field
5.2

235__
235
236
237
237
237
237
238
239
240

241
242
242

ONE-TO-MANY: SELL-SIDE E-MARKETPLACES

Sell-Side Models
Sales from Catalogs

243
243
245

Case 5.1 EC Application: Gregg's Cycles Goes Online

Online Direct Sales: The Example of Cisco Systems

246
246

Case 5.2 EC Application: Whirlpool B2B Trading Portal

247

5.3

247

SELLING VIA DISTRIBUTORS AND OTHER INTERMEDIARIES

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

5.4

SELLING VIA E-AUCTIONS

Using Auctions on the Sell Side
Auctioning from the Company's Own Site
Using Intermediaries in Auctions
Examples of B2B Forward Auctions

249
249
249
249
250

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Contents
Case 5.4 EC Application: How the U.S. State of Pennsylvania Sells Surplus
Equipment
250
5.5

ONE-FROM-MANY: BUY-SIDE E-MARKETPLACES AND

E-PROCUREMENT
Procurement Methods
Inefficiencies in Traditional Procurement Management
The Goals and Benefits of E-Procurement

251
251
252
253

5.6

BUY-SIDE E-MARKETPLACES: REVERSE AUCTIONS

Conducting Reverse Auctions
Group Reverse Auctions

255
255
256

5.7

OTHER E-PROCUREMENT METHODS

An Internal Purchasing Marketplace: Aggregating Suppliers'
Catalogs and Desktop Purchasing
Buying at Sellers' E-Auctions
Group Purchasing
Buying at Sellers' Sites and Collaborative Commerce
Purchasing Direct Goods
Electronic Bartering

257
257
258
258
259
259
259

B2B ELECTRONIC EXCHANGES: DEFINITIONS

AND CONCEPTS

260

5.8

Case 5.5 EC Application: ChemConnect: The World Commodity

Chemical Exchange
Functions of Exchanges
Dynamic Pricing in B2B Exchanges
Advantages, Limitations, and the Revenue Model
of Exchanges
5.9

B2B PORTALS, DIRECTORIES, AND OWNERSHIP OF

B2B MARKETPLACES
B2B Portals

261
262
262
263
265
265

Case 5.6 EC Application: Alibaba.com

Ownership of B2B Marketplaces

266
268

Case 5.7 EC Application: Agentrics: A Giant Retail Exchange

Comparing the Many-to-Many B2B Models

269
270

5.10

271
271
271

PARTNER AND SUPPLIER RELATIONSHIP MANAGEMENT

Partner and Supplier Relationship Management
E-Communities and PRM

5.11 B2B IN THE WEB 2.0 ENVIRONMENT AND SOCIAL

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

272
272
272
272
273
273

5.12 INTERNET MARKETING IN B2B EC

Organizational Buyer Behavior
The Marketing and Advertising Processes in B2B
Methods for B2B Online Marketing
Affiliate Programs, Infomediaries,
and Data Mining

274
274
274
275

MANAGERIAL ISSUES

277

SUMMARY

277

KEY TERMS

279

276

Contents
QUESTIONS FOR DISCUSSION

279

INTERNET EXERCISES

279

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

280

CLOSING CASE: IMARKETKOREA

281

ONLINE RESOURCES

282

REFERENCES

283

CHAPTER 6 E-SUPPLY CHAINS, COLLABORATIVE COMMERCE,

AND CORPORATE PORTALS

285

Boeing's Global Supply Chain for the Dreamliner 787

286

6.1

E-SUPPLY CHAINS
Definitions and Concepts
Supply Chain Parts
Managing Supply Chains

287
287
288
289

6.2

SUPPLY CHAIN PROBLEMS AND SOLUTIONS

Typical Problems Along the Supply Chain
EC Solutions Along the Supply Chain

292
292
293

6.3

RFID AS A KEY ENABLER IN SUPPLY

CHAIN MANAGEMENT
The RFID Revolution
RFID Applications in the Supply Chain
Limitations and Concerns of RFID

295
295
296
298

Case 6.1 EC Application: Airbus Improves Productivity

with RFID
RuBee: An Alternative to RFID?

299
300

6.4

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

301
301
301
301
302
306

6.5

COLLABORATIVE PLANNING, CPFR, APS, AND PLM

Collaborative Planning, Forecasting, and Replenishment
Advanced Planning and Scheduling

306
307
307

Case 6.2 EC Application: West Marine: A CPFR Success Story

Product Lifecycle Management
Supporting Joint Design

308
308
309

6.6

SUPPLY CHAIN INTEGRATION

How Information Systems Are Integrated
Integration Along the Extended Supply Chain

309
309
310

6.7

CORPORATE (ENTERPRISE) PORTALS

Corporate Portals: An Overview
Types of Corporate Portals
Corporate Portal Applications and Issues

310
310
312
313

6.8

COLLABORATION-ENABLING ENVIRONMENTS
AND TOOLS
Workflow Technologies and Applications
Collaboration and Groupware: Some Basic Concepts
Electronic Meeting Systems: Face-to-Face Support
and Virtual Meetings
Real-Time Collaboration Tools for Virtual Meetings

314
314
315
317
318

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Contents

Electronic Teleconferencing
Unified Communication: Integration and
Groupware Suites
Collaboration 2.0
'
Implementation Issues for Online Collaboration
Case 6.3

319
320
323
325

E C A p p l i c a t i o n : Wikis, Blogs, and Chats Support Collaboration

at DrKW

326

MANAGERIAL ISSUES

327

SUMMARY

328

KEY TERMS

328

QUESTIONS FOR DISCUSSION

329

INTERNET EXERCISES

329

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

330

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

331

ONLINE RESOURCES

333

REFERENCES

333

Part 4 Other EC Models and Applications

CHAPTER 7 INNOVATIVE EC SYSTEMS: FROM E-GOVERNMENT
AND E-LEARNING TO CONSUMER-TO-CONSUMER
E-COMMERCE

ai6_

336

Caterpillar Inc. Champions E-Learning

337

7.1

E-GOVERNMENT: AN OVERVIEW
Definition and Scope
Government-to-Citizens
Government-to-Business
Government-to-Govemment
Government-to-Employees and Internal Efficiency
and Effectiveness

338
338
338
342
343

7.2

IMPLEMENTING E-GOVERNMENT
The Transformation to E-Government
E-Government and Social Networking
Implementation Issues of E-Government
M-Government

344
344
346
346
347

7.3

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

347
347

343

Case 7.1 EC Application: E-Learning at Cisco Systems

Benefits and Drawbacks of E-Learning
Preventing E-Learning Failures
Distance Learning and Online Universities
Online Corporate Training
Implementing E-Learning and E-Training
Edutainment
Social Networks and E-Learning
Learning in Virtual Worlds and Second Life
Visual Interactive Simulation
E-Learning Tools and Management

349
350
352
352
353
354
354
354
355
357
357

7.4

359
359
360
363

ONLINE PUBLISHING AND E-BOOKS

Content Providers, Publishers, and Distributors
Electronic Books
Print-on-Demand

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7.5

KNOWLEDGE MANAGEMENT, LEARNING, AND

ELECTRONIC COMMERCE
An Overview of Knowledge Management
KM Types and Activities
-

Case 7.2 A p p l i c a t i o n C a s e : Knowledge Management at

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

363
363
364
365
366
367
367
368

Case 7.3 EC A p p l i c a t i o n : How the U.S. Department of Commerce Uses

an Expert Location System
370
7.6

CONSUMER-TO-CONSUMER ELECTRONIC COMMERCE

E-Commerce: C2C Applications
C2C Activities in Social Networks
Support Services for C2C

371
371
372
373

MANAGERIAL ISSUES

374

SUMMARY

374

KEY TERMS

375

QUESTIONS FOR DISCUSSION

375

INTERNET EXERCISES

376

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

376

CLOSING CASE: A WORLD-CLASS E-GOVERNMENT:

SINGAPORE

377

ONLINE RESOURCES

379

REFERENCES

379

CHAPTER 8 MOBILE COMPUTING AND COMMERCE, AND PERVASIVE

COMPUTING
The Blooming of Food Lion
8.1

8.2

8.3

381
382

MOBILE COMMERCE: ATTRIBUTES, BENEFITS,

AND DRIVERS
Attributes of M-Commerce
Drivers of M-Commerce

383
383
384

COMPONENTS, TECHNICAL INFRASTRUCTURE, AND SERVICES

OF MOBILE COMPUTING
Mobile Devices

385
386

Mobile Computing Software and Services

Wireless Telecommunications Networks

387
388

MOBILE FINANCIAL APPLICATIONS

Mobile Banking
Mobile Payments

391
391
391

Case 8.1 EC A p p l i c a t i o n : Closing the Digital Divide with

Mobile Microfinance

393

8.4

MOBILE MARKETING AND ADVERTISING

Mobile Marketing Campaigns
Mobile Marketing Guidelines

394
394
395

8.5

MOBILE WORKFORCE SOLUTIONS

Needs of the Mobile Workforce

396
396

8.6

MOBILE ENTERTAINMENT
Growth of the Mobile Entertainment Market

399
399

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Mobile Music and Video

Mobile Games
Mobile Gambling

400
400
401

8.7

LOCATION-BASED MOBILE COMMERCE

L-Commerce Infrastructure
Location-Based Services and Applications
Barriers to Location-Based M-Commerce

402
403
404
405

8.8

SECURITY AND OTHER IMPLEMENTATION ISSUES

IN MOBILE COMMERCE
M-Commerce Security Issues
Technological Barriers to M-Commerce
Ethical, Legal, and Health Issues in M-Commerce

406
406
407
408

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8.9

PERVASIVE COMPUTING
Overview of Pervasive Computing
Radio Frequency Identification (RFID)
Sensor Networks and Smart Items
Case 8.2 EC Application: Wi-Fi Sensor Net Aids Winemakers
Privacy and Pervasive Computing

409
409
410
413
415
416

MANAGERIAL ISSUES

417

SUMMARY

418

KEY TERMS

419

QUESTIONS FOR DISCUSSION

420

INTERNET EXERCISES

420

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

421

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

I
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ONLINE RESOURCES

422

REFERENCES

423

CHAPTER 9 THE WEB 2.0 ENVIRONMENT AND

SOCIAL NETWORKS

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Wikipedia and Its Problems of Content, Quality,

and Privacy Protection

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9.1

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9.2

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9.3

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9.4

THE WEB 2.0 REVOLUTION, SOCIAL MEDIA, AND

INDUSTRY DISRUPTORS
What Is Web 2.0?
Representative Characteristics of Web 2.0
Web 2.0 Companies and New Business Models
Social Media
Industry and Market Disruptors

425
426
427
427
427
428
429
429

VIRTUAL COMMUNITIES
Characteristics of Traditional Online Communities
and Their Classification

431
431

ONLINE SOCIAL NETWORKING: BASICS

AND EXAMPLES
A Definition and Basic Information
Representative Social Networks Sites and Services
Mobile Social Networking

434
434
436
437

MAJOR SOCIAL NETWORK SERVICES: FROM FACEBOOK

TO FLICKR
Facebook: The Network Effect
Bebo

438
438
439

Contents

9.5

Orkut: Exploring the Very Nature of Social Networking Sites

Flickr Ticks Off Some of Its Users
.

440
441

BUSINESS AND ENTERPRISE SOCIAL NETWORKS

Definitions, Concepts, Types, and Examples
Business Social Networking: Concepts and Benefits
Enterprise Social Networks
Other Social Networking Structures
Social Marketplaces

441
441
442
443
445
446

9.6

COMMERCIAL ASPECTS OF WEB 2.0 AND SOCIAL NETWORKING

APPLICATIONS
Why Is There an Interest?
Case 9.2 EC Application: Revenue Sources at YouTube
Advertising Using Social Networks, Blogs, and Wikis
Shopping in Social Networks
Feedback from Customers: Conversational Marketing
Commercial Activities in Business and Enterprise
Social Networks
Revenue-Generation Strategies in Social Networks
Risks and Limitations When Interfacing with Social Networks
Justifying Social Media and Networking
9.7

9.8

447
447
447
448
450
450
451
453
454
454

ENTERTAINMENT WEB 2.0 STYLE: FROM SOCIAL NETWORKS TO

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

455
455
456
456
457
457

THE FUTURE: WEB 3.0 AND WEB 4.0

459

Web 3.0: What's Next?

459

MANAGERIAL ISSUES

461

SUMMARY

462

KEY TERMS

462

QUESTIONS FOR DISCUSSION

463

INTERNET EXERCISES

463

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

464

CLOSING CASE: LINKEDIN: THE BUSINESS-ORIENTED

SOCIAL NETWORK

465

ONLINE RESOURCES

466

REFERENCES

467

Part 5 Ff Support Servires

46Q

CHAPTER 10 E-COMMERCE FRAUD AND SECURITY

469

How Seattle's Hospital Survived a Bot Attack

470

10.1 THE INFORMATION SECURITY PROBLEM

What Is EC Security?
The Drivers of EC Security Problems
Why Is E-Commerce Security Strategy Needed?

471
471
473
475

10.2

476
476

BASIC E-COMMERCE SECURITY ISSUES AND LANDSCAPE

The Security Basic Terminology

17

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

476
478
479

10.3 TECHNICAL ATTACK METHODS

Technical and Nontechnical Attacks: An Overview
The Major Technical Attack Methods
Malicious Code: Viruses, Worms, and Trojan Horses

480
480
481
481

10.4 PHISHING, FINANCIAL FRAUD, AND SPAM

Phishing
Fraud on the Internet

484
485
485

Case 10.1 EC Application: Internet Stock Fraud Aided

by Spam

489

Social Networking Makes Social Engineering Easy

489

10.5 THE INFORMATION ASSURANCE MODEL

AND DEFENSE STRATEGY
Confidentiality, Integrity, and Availability
Authentication, Authorization, and Nonrepudiation
E-Commerce Security Strategy
The Defense Strategy

491
491
491
492
492

10.6 THE DEFENSE I : ACCESS CONTROL, ENCRYPTION,

AND PKI
Access Control
Encryption and the One-Key (Symmetric) System
Public Key Infrastructure (PKI)

493
493
495
496

10.7 THE DEFENSE I I : SECURING E-COMMERCE

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

499
499
499
500
500
501

10.8 THE DEFENSE I I I : GENERAL CONTROLS AND OTHER

DEFENSE MECHANISMS
General Controls
Application Controls
Internal Control and Compliance Management
Protecting Against Spam
Protecting Against Pop-Up Ads
Protecting Against Spyware

501
502
503
504
504
505
506

10.9 BUSINESS CONTINUITY, SECURITY AUDITING,

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

506
506
507

Case 10.2 EC Application: Business Continuity and

Disaster Recovery

Risk-Management and Cost-Benefit Analysis

10.10IMPLEMENTING ENTERPRISEWIDE
E-COMMERCE SECURITY
Senior Management Commitment and Support
EC Security Policies and Training
EC Security Procedures and Enforcement
Industry Standards for Credit Card Protection (PCI DSS)
Security Tools: Hardware and Software
Why Is It Difficult to Stop Internet Crime?

508

508
509
509
510
510
511
511
511

Contents
MANAGERIAL ISSUES

513

SUMMARY

514

KEY TERMS

516

QUESTIONS FOR DISCUSSION

516

INTERNET EXERCISES

517

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

518

CLOSING CASE: UBS PAINEWEBBER'S BUSINESS OPERATIONS

DEBILITATED BY MALICIOUS CODE

518

ONLINE RESOURCES

519

REFERENCES

520

CHAPTER 11 ELECTRONIC COMMERCE PAYMENT SYSTEMS

522

Pay-Per-View Pages: The Next iTunes

523

11.1

THE PAYMENT REVOLUTION

524

11.2

USING PAYMENT CARDS ONLINE

Processing Cards Online
Fraudulent Card Transactions

526
526
527

11.3

SMART CARDS
Types of Smart Cards
Applications of Smart Cards

529
530
530

Case 11.1 E C 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 E C A p p l i c a t i o n : To POP or BOC: Digital Checks

in the Offline World
11.7

B2B ELECTRONIC PAYMENTS

Current B2B Payment Practices
Enterprise Invoice Presentment and Payment

537
539
539
540

MANAGERIAL ISSUES

542

SUMMARY

543

KEY TERMS

545

QUESTIONS FOR DISCUSSION

545

INTERNET EXERCISES

545

TEAM ASSIGNMENTS, PROJECTS, AND CLASS

DISCUSSIONS

546

CLOSING CASE: THE CHECK IS IN THE NETWORK

546

ONLINE RESOURCES

547

REFERENCES

548

CHAPTER 12 FULFILLING E-COMMERCE ORDERS

AND OTHER EC SUPPORT SERVICES
How Amazon.com Fulfills Orders
12.1

550
551

ORDER FULFILLMENT AND LOGISTICSAN

OVERVIEW
Acquiring Goods and Services
Basic Concepts of Order Fulfillment and Logistics

552
553
553

19

20

Contents
Overview of Logistics
The EC Order Fulfillment Process

553
553

Insights and Additions 12.1: What Services

Do Customers Need?
12.2 PROBLEMS IN ORDER FULFILLMENT
Typical Supply Chain Problems
Why Supply Chain Problems Exist

557
557
557

12.3 SOLUTIONS TO ORDER FULFILLMENT

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

558
558
558

Case 12.1 EC Application: How WMS Helps Schurman Improve

Its Internal and External Order Fulfillment System
Speeding Deliveries
Partnering Efforts and Outsourcing Logistics
Integrated Global Logistics Systems

559
560
561
561

Insights and Additions 12.2: UPS Provides

Broad EC Services
Order Fulfillment in Mass Customization
Handling Returns (Reverse Logistics)
Order Fulfillment in B2B

562
563
564

Case 12.2 EC Application: How Daisy Brand Fulfills

B2B Orders
Innovative E-Fulfillment Strategies

565
566

Case 12.3 EC Application: How Sundowner Motor Inns Fulfills

Its Online Reservations

566

12.4 INTEGRATION AND ENTERPRISE RESOURCE

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

567
568
568

12.5 INTELLIGENT AGENTS AND THEIR ROLE

IN E-COMMERCE
Definitions and Basic Concepts
Multiagent Systems
Applications of Software and Intelligent Agents in
E-Commerce

570
570
572
573

12.6 OTHER E-COMMERCE SUPPORT SERVICES

Consulting Services
Directory Services, Newsletters, and Search Engines
More EC Support Services
Outsourcing EC Support Services

574
574
574
576
576

MANAGERIAL ISSUES

579

SUMMARY

580

KEY TERMS

580

QUESTIONS FOR DISCUSSION

580

INTERNET EXERCISES

581

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

582

CLOSING CASE: HOW MASS CUSTOMIZATION EC ORDERS

ARE FULFILLEDMULTIBRAS OF BRAZIL

582

ONLINE RESOURCES

583

REFERENCES

584

Contents

Part 6 EC Strategy and Implementation

585

CHAPTER 13 E-COMMERCE STRATEGY AND GLOBAL EC

585

The Success of Travelocity's E-Strategy

586

13.1 ORGANIZATIONAL STRATEGY: CONCEPTS

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

587
587
590
593

Case 13.1 EC Application: Strategic Planning at InternetNZ

593

13.2

BUSINESS PLANNING IN E-COMMERCE

Business Plan Fundamentals
Business Case

594
594
595

13.3

E-COMMERCE STRATEGY: CONCEPTS AND OVERVIEW

596

13.4 E-STRATEGY INITIATION

Representative Issues in E-Strategy Initiation

598
598

Case 13.2 EC Application: Measuring Profit on the Web

Strategy in the Web 2.0 Environment and in Social Networking

600
601

13.5

603
603
603
604
605

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

13.6 E-STRATEGY IMPLEMENTATION

E-Strategy Implementation Process
Strategy Implementation Issues

607
607
608

13.7

611
611
611

E-STRATEGY AND PROJECT ASSESSMENT

The Objectives of Assessment
Measuring Results and Using Metrics

13.8 GLOBAL E-COMMERCE

Benefits and Extent of Operations
Barriers to Global EC
Breaking Down the Barriers to Global EC
13.9

'

E-COMMERCE IN SMALL AND MEDIUM-SIZED

ENTERPRISES
Supporting SMEs

614
614
615
616
617
618

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

619

MANAGERIAL ISSUES

620

SUMMARY

621

KEY TERMS

622

QUESTIONS FOR DISCUSSION

622

INTERNET EXERCISES

622

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

623

CLOSING CASE: PIERRE LANG EXPANDS INTO

EASTERN EUROPE

623

ONLINE RESOURCES

624

REFERENCES

625

22

Contents

CHAPTER 14 ECONOMICS AND JUSTIFICATION OF ELECTRONIC

COMMERCE
Justifying Investment in IT and EC at California
State Automobile Association
14.1 WHY JUSTIFY E-COMMERCE INVESTMENTS? HOW CAN THEY
BE JUSTIFIED?
Increased Pressure for Financial Justification
Other Reasons Why EC Justification Is Needed
EC Investment Categories and Benefits
How Is an EC Investment Justified?
What Needs to Be Justified? When Should Justification
Take Place?
Using Metrics in EC Justification

627
628
629
629
630
630
630
631
631

14.2 DIFFICULTIES IN MEASURING AND JUSTIFYING

E-COMMERCE INVESTMENTS
The EC Justification Process
Difficulties in Measuring Productivity and Performance Gains
Relating IT Expenditures to Organizational Performance
Intangible Costs and Benefits
The Process of Justifying EC and IT Projects

633
633
634
634
635
636

14.3 METHODS AND TOOLS FOR EVALUATING AND JUSTIFYING

E-COMMERCE INVESTMENTS
Opportunities and Revenue Generated by EC Investment
Methodological Aspects of Justifying EC Investments
Traditional Methods for Evaluating EC Investments
Implementing Traditional Methods
ROI Calculators
Advanced Methods for Evaluating IT and EC Investments

637
637
637
638
640
640
640

14.4 EXAMPLES OF E-COMMERCE PROJECT JUSTIFICATION

Justifying E-Procurement

642
642

Insights and Additions 14.1: E-Procurement Metrics

Customer Service and e-CRM
Justifying a Portal
Justifying E-Training Projects
Justifying an Investment in Mobile Computing and in RFID

643
644
645
646

Case 14.1 EC Application: Paesano Restaurant Justifies

Wireless E-Commerce
Justifying Security Projects
Justifying Social Networking and the Use of Web 2.0 Tools

646
648
648

14.5 THE ECONOMICS OF E-COMMERCE

Reducing Production Costs
Increased Revenues
Reducing Transaction Friction or Risk
Facilitating Product Differentiation
EC Increases Agility
Valuation of EC Companies

648
648
651
652
652
652
652

14.6 OPPORTUNITIES FOR SUCCESS IN E-COMMERCE AND

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

653
654
655
656
658
658
658

Contents
MANAGERIAL ISSUES

659

SUMMARY

660

KEY TERMS

661

QUESTIONS FOR DISCUSSION

661

INTERNET EXERCISES

662

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

662

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

OF IOWA

663

ONLINE RESOURCES

664

REFERENCES

664

CHAPTER 15 LAUNCHING A SUCCESSFUL ONLINE BUSINESS

AND EC PROJECTS
OBO Sets Its Goals for Success
15.1 GETTING INTO E-COMMERCE AND STARTING A NEW
ONLINE BUSINESS
Getting into E-Commerce
Starting a New Online Business
An E-Start-up Is a Start-up
Creating a New Company or Adding an Online Project
Case 15.1 EC Application: Innovation and Creativity
at Amazon.com
Planning Online Businesses
Funding a New Online Business
15.2 ADDING E-COMMERCE INITIATIVES OR TRANSFORMING
TO AN E-BUSINESS
Adding EC Initiatives to an Existing Business
Transformation to an E-Business
15.3

BUILDING OR ACQUIRING A WEB SITE

Classification of Web Sites
Building a Web Site

666
667
668
668
668
668
669
669
672
672
674
674
675
677
678
678

15.4 WEB SITE HOSTING AND OBTAINING A DOMAIN

NAME
Web Hosting Options

679
679

Case 15.2 EC Application: How Small Companies Use a

Storebuilder
Registering a Domain Name

680
681

15.5 CONTENT CREATION, DELIVERY, AND MANAGEMENT

682
Categories and Types of Content
683
Creation or Acquisition of Content
684
Content Management and Maintenance
685
Catalog Content and Its Management
686
Case 15.3 EC Application: Anglesea Online Uses Content Management
Software for Success
687
Content Maximization and Streaming Services
687
Case 15.4 EC Application: Akamai Technologies
688
15.6 WEB SITE DESIGN
Information Architecture
Site Navigation
Performance (Speed)
Colors and Graphics
Web Site Usability

690
690
691
692
693
693

24

Contents
15.7

PROVIDING E-COMMERCE SUPPORT SERVICES

Who Builds the Web Site?
Payments: Accepting Credit Cards
Web Site Promotion
Customer Relationship Management

694
694
694
695
696

15.8 OPENING A WEB STOREFRONT

Options for Acquiring Storefronts
Yahoo! Small Business

697
697
699

MANAGERIAL ISSUES

699

SUMMARY

700

KEY TERMS

701

QUESTIONS FOR DISCUSSION

701

INTERNET EXERCISES

702

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

702

CLOSING CASE: HOW TELECOM NEW ZEALAND (TNZ) EXCELS

WITH CONTENT MANAGEMENT

703

ONLINE RESOURCES

704

REFERENCES

704

CHAPTER 16 REGULATORY, ETHICAL, AND COMPLIANCE

ISSUES IN EC
Why Is Disney Funding Chinese Pirates?
16.1 THE COMPLEXITY OF LEGAL AND REGULATORY ISSUES
Laws Are Subject to Interpretation

707
708
709
709

Case 16.1 EC Application: Is eBay a Store or a Bulletin Board?

The Law: A System for Social Control and Protection
Personal and Property Rights
Regulatory Compliance in EC

710
710
710
711

16.2 CIVIL LAW, INTELLECTUAL PROPERTY LAW, COMMON LAW,

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

712
712
713
715
716
717

16.3 ETHICAL CHALLENGES AND GUIDELINES

Ethical Principles and Guidelines
Business Ethics
EC Ethical Issues

718
718
719
720

16.4 PRIVACY RIGHTS, PROTECTION AND FREE SPEECH

Privacy Rights and Protection
Free Speech Online Versus Privacy Protection
The Price of Protecting an Individual's Privacy
How Information About Individuals Is Collected
Privacy Protection by Information Technologies
Privacy Issues in Web 2.0 Tools and Social Networks
Privacy Protection by Ethical Principles

721
721
722
722
723
725
725
725

Case 16.2 EC Application: Property Rights Extended to Domain

Names and Digital Property
The USA PATRIOT Act
Privacy Protection in Countries Other Than the United States

726
727
728

Contents
16.5

16.6

CONSUMER AND SELLER PROTECTION FOR ONLINE FRAUD

Consumer (Buyer) Protection
Seller Protection
Protecting Buyers and Sellers: Electronic and
Digital Signatures

729
729
731

SOCIETAL ISSUES AND GREEN EC

733

The Digital Divide

Electronic Discovery
Operating Greener Businesses and Eco-Friendly Data Centers
How to Operate Greener Businesses, Data Centers,
and Supply Chains
Global Green Regulations
Other Societal Issues

733
733
733

732

734
734
735

MANAGERIAL ISSUES

737

SUMMARY

738

KEY TERMS

739

QUESTIONS FOR DISCUSSION

739

INTERNET EXERCISES

740

TEAM ASSIGNMENTS, PROJECTS, AND CLASS DISCUSSIONS

740

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

741

ONLINE RESOURCES

742

REFERENCES

742

GLOSSARY

746

INDEX

763

25