Review Questions - Electronic Commerce, 12th Edition Chapter 1 Sol...

Electronic Commerce, 12th Edition Solutions 1-1 Electronic Commerce, 12th Edition Chapter 1 Solutions Review Questions 1.What are the two main categories of electronic commerce?Answer: The two main categories or electronic commerce are: • Consumer shopping on the Web, often called business-to-consumer (or B2C) • Transactions conducted between businesses on the Web, often called business-to-business (or B2B) 2.List several activities that might be considered business processes.Answer: Answers may vary. Transferring funds, placing orders, sending invoices, and shipping goods to customers are all examples of business processes.

3.List several activities that might be considered a part of business-to- government electronic commerce.Answer: Answers may vary. Paying taxes, filing required reports and selling goods to a government agency through a state’s Web site are all examples of business-to- government electronic commerce activities.

4.Name the technology that businesses have used since the 1960s to exchange transaction information electronically.

Answer: Since the 1960s, businesses have used electronic data interchange to

exchange transaction information electronically. Electronic data interchange (EDI) occurs when one business transmits computer-readable data in a standard format to another business.

5.What is a value-added network?Answer: A value-added network (VAN) is an independent firm that offers connection and transaction-forwarding services to buyers and sellers engaged in EDI. Before the Internet came into existence as we know it today, VANs provided the connections between most trading partners and were responsible for ensuring the security of the data transmitted.(Solution Manual all Chapter) 1 / 4

Electronic Commerce, 12th Edition Solutions 1-2

• What drove the burst of enthusiasm that led to a rapid growth of investment

in online business during the first wave of electronic commerce?

Answer: In the first wave of electronic commerce, many companies and investors

believed that being the first Web site to offer a particular type of product or service would give them an opportunity to be successful. This strategy is called the first- mover advantage.

• What are some of the drawbacks to a strategy that attempts to capitalize on

the first-mover advantage?

Answer: First movers must invest large amounts of money in new technologies and

make guesses about what customers will want when those technologies are functioning. The combination of high uncertainty and the need for large investments makes being a first mover very risky. As many business strategists have noted, “It is the second mouse that gets the cheese.”

• What specific Internet technologies led to a growth in electronic commerce in

developing countries during the third wave of electronic commerce?

Answer: The increases in global online business, especially in less developed

countries, are due in part to the growing numbers of people using inexpensive devices such as mobile phones and tablet devices to access the Internet.

• In what specific ways can businesses use online social interactions?

Answer: Businesses can use online social interactions to advertise, promote, or

suggest specific products or services.

• What is crowdsourcing?

Answer: Gathering multiple small investors together for specific business funding activities is called crowdsourcing.

• How can online businesses use data analytics to increase sales?

Answer: Companies that store large amounts of data about their customers’ behavior on their Web sites can combine that information with their existing data about customers’ past purchases to predict the kinds of products, services, or special offers in which each customer might be interested.

• Briefly explain the difference between a business model and a revenue model.

Answer: A business model is a set of processes that combine to achieve a company’s primary goal, which is typically to yield a profit. A revenue model is a specific collection of business processes used to identify customers, market to those 2 / 4

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customers, and generate sales to those customers.

• What is a shipping profile?

Answer: A product’s shipping profile is the collection of attributes, including weight and size, that affect how easily a product can be packaged and delivered.

• Briefly explain why many industry observers believe that describing the

history of electronic commerce as a series of “booms and busts” is incorrect.

Answer: Looking back from today’s perspective, we can see that as the general

economy has expanded and contracted, electronic commerce has consistently expanded more in the good times and contracted less in the bad times than other economic sectors.

• Why is most business activity conducted today in hierarchical organizations

rather than in markets?

Answer: The late Nobel laureate Ronald Coase wrote an essay in 1937 in which he

questioned why individuals who engaged in commerce often created firms to organize their activities. He was particularly interested in the hierarchical structure of these business organizations. Coase concluded that transaction costs were the main motivation for moving economic activity from markets to hierarchically structured firms.

• What is a network economic structure?

Answer: A network economic structure is a business structure wherein firms

coordinate their strategies, resources, and skill sets by forming a long-term, stable relationship based on a shared purpose.

• List four primary activities that might be conducted in a particular business

value chain.

Answer: Answers can include any four of the following: design, produce, promote, market, deliver, and support.

• Briefly explain why an online business can find it difficult to establish trust

with its customers.

Answer: Online businesses face a difficult challenge because a kind of anonymity exists for companies trying to establish a Web presence. Because Web site visitors will not become customers unless they trust the company behind the site, a plan for establishing credibility is essential. Sellers on the Web cannot assume that visitors will know that the site is operated by a trustworthy business.

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Electronic Commerce, 12th Edition Solutions 1-4

Customers’ inherent lack of trust in “strangers” on the Web is logical and to be expected; after all, people have been doing business with their neighbors—not strangers—for thousands of years. Businesses on the Web must find ways to overcome the well-founded tradition of distrusting strangers.

• In what ways does localization differ from language translation?

Answer: The translation services and software manufacturers that work with

electronic commerce sites do not generally use the term “translation” to describe what they do. They prefer the term localization, which means a translation that considers multiple elements of the local environment, such as business and cultural practices, in addition to local dialect variations in the language. The cultural element is very important because it can affect—and sometimes completely change—the user’s interpretation of text.

• Briefly describe the functions performed by a freight forwarder in

international electronic commerce.

Answer: A freight forwarder is a company that arranges shipping and insurance for international transactions.

Exercises

• In two or three paragraphs, distinguish between the terms “business

activity,” “business process,” and “transaction.”

Answer: A business activity is a task performed by a worker in the course of doing his or her job while a transaction is an exchange of value, such as a purchase, a sale, or the conversion of raw materials into a finished product.

The group of logical, related, and sequential activities and transactions in which businesses engage are often collectively referred to as business processes.

• Some writers have called the emergence of electronic commerce to be a

“revolution.” Others have described it as a series of waves. In about 100 words, briefly discuss the merits of each point of view.

Answer: Answers will vary. Students could mention that using the term “revolution” directly compares this emergence of electronic commerce to other historic changes in economic organization, such as the Industrial Revolution. On the other hand, referring to this emergence as a series of waves implies that these major changes do not occur as a single event but rather a series of developments over an extended period of time.

• In about 100 words, outline the changes in Internet technology that drove
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