Efraim Turban • David King

Jae Kyu Lee • Ting-Peng Liang

Deborrah C.Turban

Electronic Commerce

A Managerial and Social Networks

Perspective

Eighth Edition

4^ Springer

Contents

Part I Introduction to E-Commerce and E-Marketplaces

1 Overview of Electronic Commerce 3 Opening Case: How Starbucks Is Changing to a Digital and Social Enterprise 3

The Problem 4 The Solution: Going Digital and Social 4

The Results 6 1.1 Electronic Commerce: Definitions and Concepts 7

Defining Electronic Commerce 7 Defining E-Business 7 Major EC Concepts 7 Electronic Markets and Networks 8

1.2 The Electronic Commerce Field: Growth, Content, Classification, and a Brief HiStöry 8 The Content and Framework of E-Commerce 8 An EC Framework 9 Classification of EC by the Nature of the Transactions and the Relationships Among Participants 10 A Brief History of EC 11

Case 1.1: Net-a-Porter: Dress for Success 13 The Opportunity 14 The Solution 14 The Results 14

1.3 Drivers and Benefits of E-Commerce 15 The Drivers of E-Commerce 15 The Benefits of E-Commerce 15

1.4 E-Commerce 2.0: From Social Commerce to Virtual Worlds 16 Social Computing 16 Web 2.0 17 Social Media 18 Social Networks and Social Network Services 18 Enterprise Social Networks 19 Social Commerce 19 Virtual Worlds and Second Life 20 The Major Tools of Web 2.0 20

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1.5 The Digital and Social Worlds: Economy, Enterprises, and Society 20 The Digital Economy 21 The Digital Enterprise 22 The Social Business (Enterprise) 23 The Digital Revolution and Society 24

1.6 The Changing Business Environment, Organizational Responses, and EC and IT Support 27 The Changing Business Environment 28 Performance, Business Pressures, and Organizational Responses and EC Support 28

1.7 Electronic Commerce Business Models 31 The Structure and Properties of Business Models 31 Typical EC Business Models 33 Classification of Business Models in E-Commerce 34

1.8 The Limitations, Impacts, and the Future of E-Commerce 34 The Limitations and Barriers of EC 34 Why Study E-Commerce? 35 The Future of EC 36

1.9 Overview of This Book 37 Part I: Introduction to E-Commerce and E-Marketplaces 37 Part II: EC Applications 38 Part III: Emerging EC Delivery Platforms 38 Part IV: EC Support Services 38 Part V: EC Strategy and Implementation 38 Part VI: Launching Online Businesses and EC Projects 38 Online Mini Tutorials 38 Online Supplements 38

Managerial Issues 38 Closing Case: E-Commerce at the National Football League (NFL) 43 Glossary 45 References 46

2 E-Commerce: Mechanisms, Platforms, and Tools 51 Opening Case: Pinterest: A New Kid on the E-Commerce Block 51

The Opportunity 52 The Solution 52 Results and Managerial Issues 53 Conclusion 54

2.1 Electronic Commerce Mechanisms: An Overview 54 EC Activities and Support Mechanisms 54 The Online Purchasing Process 55

2.2 E-Marketplaces 55 Electronic Markets 57 Components of and the Participants in E-Marketplaces 58 Disintermediation and Reintermediation 59

Contents xix

Case 2.1: EC Application: How Blue Nile Inc. Is Changing the Jewelry Industry 59

Types of E-Marketplaces 60 2.3 Customer Shopping Mechanisms: Webstores,

Mails, and Portals 61 Webstores 61 Electronic Mails 61 Web (Information) Portals 62 The Roles and Value of Intermediaries in E-Marketplaces 63

2.4 Merchant Solutions: Electronic Catalogs, Search Engines, and Shopping Carts 64 Electronic Catalogs 64 EC Search Activities, Types, and Engines 65 Shopping Carts 66

2.5 Auctions, Bartering, and Negotiating Online 67 Definition and Characteristics 67 Dynamic Pricing 67 Traditional Auctions Versus E-Auctions 68 Types of Auctions 68 Benefits and Limitations of E-auctions 70 Impacts of Auctions 72 Online Bartering 72 Online Negotiating 72

2.6 Virtual Communities and Social Networks 73 Characteristics of Traditional Online Communities and Their Classification 73 Online Social Networks and Social Network Sites 74 Social Network Services 74 Business-Oriented Public Social Networks 75

Case 2.2: EC Application: Craigslist: The Ultimate Online Classified Community 76

Private (or Enterprise) Social Networks 77 Business Models and Services Related to Social Networking 77 Mobile Social Commerce 78 Mobile Social Networking 78 Recent Innovative Tools and Platforms for Social Networking 79

2.7 Virtual Worlds as an Electronic Commerce Platforms 80 Major Features 80 Avatars 80 Business Activities and Value in Virtual Worlds 81

2.8 Emerging EC Platforms: Augmented Reality and Crowdsourcing 83 Augmented Reality 83 Crowdsourcing 83

2.9 The Future: Web 3.0, Web 4.0 and Web 5.0 86 Web 3.0: What Does the Future Hold? 86 The Technological Environment 87

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Managerial Issues 88 Closing Case: Madagascar's Port Modernizes Customs with TradeNet 93 Glossary 95 References 96

Part II E-Commerce Applications

3 Retailing in Electronic Commerce: Products and Services 103 Opening Case: Amazon.com: The King of E-Tailing 104 3.1 Internet Marketing and B2C Electronic Retailing 106

Overview of Electronic Retailing 107 Size and Growth of the B2C Market 107 What Seils Well on the Internet 108 Characteristics and Advantages of Successful E-Tailing 108

3.2 E-Tailing Business Models 110 Classification of Models by Distribution Channel 110 Other B2C Models and Special Retailing 113 B2C Social Shopping 113 Virtual Visual Shopping 114

3.3 Online Travel and Tourism (Hospitality) Services 114 Characteristics of Online Travel 114 Special Online Travel Services 115

Case 3.1: EC Application: WAYN: A Lifestyle and Travel Social Network 116

Benefits, Limitations, and Competition in Online Travel Services 117 Competition in Online Travel 117 Corporate Travel 117

3.4 Employment and the Online Job Market 118 The Internet Job Market 118 Benefits and Limitations of the Electronic Job Market 120

3.5 Online Real Estate, Insurance, and Stock Trading 121 Real Estate Online 121 Insurance Online 122 Online Stock Trading and Investments 123

3.6 Online Banking and Personal Finance 124 E-Banking 125 Online Banking Capabilities 125 Pure Virtual Banks 125 International and Multiple-Currency Banking 126 Online Financial Transaction Implementation Issues 126

Case 3.2: EC Application: Security for Online Bank Transactions 126

Online Billing and Bill Paying 128 3.7 On-Demand Delivery of Products, Digital Items,

Entertainment, and Gaming 129 On-Demand Delivery of Products 129

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Online Delivery of Digital Products, Entertainment, and Media 130 Social Television (TV) 131

3.8 Other B2C Services: From Dating Services to Wedding Flanning 133 Online Dating Services 133 Flanning a Wedding 134 Buying Cars Online 134 Selling-Build-to-Order Cars Online 134 Other Online Services 135

3.9 Online Purchasing-Decision Aids 136 Shopping Portals 136 Helping Communities 136 Price and Quality Comparison by Shopbot Software Agents 136 Ratings, Reviews, and Recommendation Sites 137 Comparison Shopping Websites 138 Trust Verification Sites 138 Other Shopping Assisting Tools 139 Virtual Visual Shopping 140 Mobile Apps 141

3.10 The New Face of Retail Competition: Retailers Versus E-Tailers 141 The Online Versus Offline Competition: An Overview 141 Retailers Versus E-Tailers 142 What Can Traditional Retailers Do? 144

3.11 Issues in E-Tailing and Lessons Learned 145 Disintermediation and Reintermediation 145 Channel Conflict 146 Possibility of a Price Conflict and Determining the Right Price by Seilers 146 Product and Service Customization and Personalization 147 Fraud and Other Illegal Activities 147 Lessons Learned from Failures and Lack of Success of E-Tailers 147

Managerial Issues 148 Closing Case: Etsy - A Social-Oriented B2C Marketplace 154 Glossary 156 References 156

4 Business-to-Business E-Commerce 161 Opening Case: Alibaba.com: The World's Largest B2B Marketplace 161 4.1 Concepts, Characteristics, and Models

of B2B E-Commerce 164 Basic B2B Concepts and Process 164

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The Basic Types of B2B Transactions and Activities 165 The Basic Types of B2B E-Marketplaces and Services 165 Market Size and Content of B2B 166 B2B Components 167 Service Industries Online in B2B 168 Partner and Supplier Relationship Management 170 The Benefits and Limitations of B2B 170

4.2 One-to-Many: Sell-Side E-Marketplaces 171 Sell-Side Models 171 Sales from Catalogs: Webstore 171 Comprehensive Sell-Side Systems 173 Selling via Distributors and Other Intermediaries 173

4.3 Selling via E-Auctions 173 The Benefits of Auctions on the Seil Side 173 Auctioning from the Company's Own Site 174 Using Intermediaries in Auctions 174

Case 4.1: EC Application: How the Commonwealth of Pennsylvania Seils Surplus Equipment 174

Examples of B2B Forward Auctions 175 4.4 One-From-Many: E-Procurement at Buy-Side

E-Marketplaces 175 Inefficiencies in Traditional Procurement Management 175 Procurement Methods 176 E-Procurement Concepts 177 The Benefits and Limitations of E-Procurement 179

4.5 Reverse Auctions at Buy-Side E-Marketplaces (E-Tendering) 180 The Major Benefits of Reverse Auctions 180 Conducting Reverse Auctions 180

Case 4.2: EC Application: Branas Isaf Competes by Using E-Tendering 181 Group Reverse Auctions 182 4.6 Other E-Procurement Methods 183

Desktop Purchasing 183 Group Purchasing 183 Buying from Other Sources 183 Acquisition Via Electronic Bartering 184 Selecting an Appropriate E-Procurement Solution 185

4.7 B2B Exchanges (E-Marketplaces): Definitions and Concepts 185 Ownership of B2B Exchanges 187 Dynamic Pricing in B2B Exchanges 188 Advantages, Limitations, and the Revenue Model of Exchanges 189

4.8 B2B Portals and Directories 190 B2B Portals: An Overview 190

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Corporate (Enterprise) Portals 190 Directory Services and Search Engines 191

4.9 B2B in Web 2.0 and Social Networking 192 E-Communities in B2B 192 The Opportunities of Social Commerce in B2B 192 The Use of Web 2.0 Tools in B2B 193 Virtual Trade Shows and Trade Fairs 193 Social Networking in B2B 194 Examples of Other Activities of B2B Social Networks 194 Strategy for B2B Social Networking 195 The Future of B2B Social Networking 195

4.10 Some B2B Support Mechanisms 195 Organizational Buyer Behavior 195 The Marketing and Advertising Processes in B2B 196 Methods for B2B Online Advertising and Marketing 197 Other B2B Support Mechanisms 197

Managerial Issues 198 Closing Case: The University of Sheffield E-Tendering System 203 Glossary 204 References 206

5 Innovative EC Systems: From E-Goverament to E-Learning, Collaborative Commerce, and C2C Commerce 209 Opening Case: Compass Group Turns Managers into Detectives to Enhance E-Training 209 5.1 E-Government: An Overview 211

Definition and Scope 211 Government-to-Citizens 211 Government-to-Business 214 Government-to-Government 215 Government-to-Employees and Internal Efficiency and Effectiveness 215 Implementing E-Government 216 The Transformation to E-Government 216 E-Government 2.0 and Social Networking 216 M-Govemment 217

5.2 E-Learning, E-Training, and E-Books 218 The Basics of E-Learning: Definitions and Concepts 218 Benefits and Drawbacks of E-Learning 219 Distance Leaming and Online Universities 221 Online Corporate Training 222 Social Networks and E-Learning 224 Leaming in Virtual Worlds and Second Life 224 Visual Interactive Simulation 225 E-Learning Management Systems 226 Electronic Books (E-Books) 226

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5.3 Knowledge Management, Advisory Systems, and Electronic Commerce 229 An Overview of Knowledge Management 229 Knowledge Management Types and Activities 229 Knowledge Sharing 230

Case 5.2: EC Application: Knowledge Management at Infosys Technologies 230

How Is Knowledge Related to E-Commerce? 231 KM and Social Networks 232 Finding Expertise and/or Experts Electronically and the Use of Expert Location Systems 233

5.4 Collaborative Commerce 236 Essentials of Collaborative Commerce 236 The Elements and Processen of C-Commerce 236 Collaboration Hubs 237 Representative Examples of Collaborative Commerce 238 Barriers to C-Commerce 240

5.5 Consumer-to-Consumer Electronic Commerce 241 E-Commerce: C2C Applications 241

Managerial Issues 243 Closing Case: From Local SDI to E-Government 247 Glossary 251 References 252

Part III Emerging EC Delivery Platforms

6 Mobile Commerce and Ubiquitous Computing 257 Opening Case Hertz Goes Mobile All the Way 258 6.1 Mobile Commerce: Concepts, Landscape, Attributes,

Drivers, Applications, and Benefits 259 Basic Concepts, Magnitude, and the Landscape 260 The Attributes of M-Commerce 261 An Overview of the Applications of M-Commerce 262 The Benefits of M-Commerce 264

6.2 The Enabling Infrastructure: Components and Services of Mobile Computing 265 Overview of Mobile Computing 265 Mobile Devices 265 Mobile Computing Software and Services 267 Wireless Telecommunications Networks 268 Putting It All Together 271

6.3 Mobile Financial Applications 271 Mobile Banking 271 Other Mobile Finance Applications 272

6.4 Mobile Enterprise Solutions: From Supporting the Workforce to Improving Internal Operations 273 Defining Mobile Enterprise (Enterprise Mobility) 273

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The Framework and Content of Mobile Enterprise Applications 274 Mobile Workers 274 Other Enterprise Mobile Applications 274

6.5 Mobile Entertainment, Gaming, Consumer Services, and Mobile Shopping 275 Overview of Mobile Entertainment 275 Mobile Streaming Music and Video Providers 276 Entertainment in Cars 276 Mobile Games 276 Mobile Gambling 277 Mobility and Sports 277 Service Industry Consumer Applications 278 Mobile Shopping and Advertising 279

6.6 Location-Based Mobile Commerce and Mobile Social Networks 280 Basic Concepts in L-Commerce 281 L-Commerce Infrastructure 281 B arriers to Location-B ased M-commerce 285

6.7 Ubiquitous (Pervasive) Computing and Sensory Networks 285 Overview of Ubiquitous Computing 286 Smart Application: Grid, Homes, Cars, and More 287 Wireless Sensor Networks 289

Case 6.1: EC Application: Sensors at INRIX Help People Avoid Traffic Jams 290

Implementation Issues in Ubiquitous Computing 291 6.8 Emerging Topics: From Wearables and Google Glass

to Smart Cities 291 Wearable Computing Devices 291 Google Glass 292 Smart Cities 293

6.9 Implementation Issues in Mobile Commerce: From Security and Privacy to Barriers to M-commerce 293 M-commerce Security and Privacy Issues 293 Technological Barriers to M-commerce 294 Failures in Mobile Computing and M-commerce 294 Ethical, Legal, Privacy, and Health Issues in M-commerce 294 Enterprise Mobility Management 295

Managerial Issues 296 Closing Case: Motorola Enterprise: Wireless Solutions for a Hospital and a Manufacturer 301 Glossary 303 References 305

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7 Social Commerce: Foundations, Social Marketing, and Advertising 309 Opening Case: How Sony Uses Social Media for Improving CRM 309

The Problem 309 The Solution: Social Media Projects 310 The Results 310

7.1 Social Commerce: Definitions and Evolution 311 Definitions and Characteristics 311 The Evolution of Social Commerce 312

7.2 The Content of the Social Commerce Field 313 The Landscape and Major Components of the Field 314 Social Media Marketing 314 Enterprise 2.0 317

7.3 The Benefits and Limitations of Social Commerce 318 Benefits to Customers 318 Benefits to Retailers 318 Benefits to Other Types of Enterprises 319 The Social Business: An IBM Approach 319 New or Improved Business Models 320 Concerns and Limitations of Conducting Social Commerce 321

7.4 Social Shopping: Concepts, Benefits, and Models 321 Definitions, and Drivers of Social Shopping 321 Traditional E-Commerce Sites with Social Media Additions 323 The Major Types and Models of Social Shopping 324

Case 7.1: Polyvore: A Trendsetter in Social Shopping 327 Kaboodle: A Unique Social Shopping Community 328 Other Innovative Models 328 Social Shopping Aids: From Recommendations to Reviews, Ratings, and Marketplaces 330 Other Shopping Aids and Services 333 Social Marketplaces and Direct Sales 334 Shopping for Virtual Goods in a Virtual Economy 336 Real-Time Online Shopping 336 Social Shopping in the Near Future 337

7.5 Social Advertising: From Viral Advertising to Location-Based Advertisement/Marketing 338 Social Ads and Social Apps 338 Viral (Word-of-Mouth) Marketing and Social Networking 338 Location-Based Advertisement and Social Networks 339 Using YouTube and Other Social Presentation Sites for Advertising 340 Using Twitter as an Advertising and Marketing Tool 341 Other Innovative Ways to Advertise in Social Media 342

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7.6 Social Customer Service and CRM 343 How Does Social Networking Empower Customers? 343 How to Serve the Social Customers 344 The Benefits of Social CRM 345

Case 7.2: iRobot Uses Social Media for Multichannel CRM 346 Social CRM: Serve the Customers While Leaming from Them 346 The Evolution of Social CRM 347 Cipriani's Multidimensional Presentation 347 Implementation of Social Customer Service and CRM 350 Some Recent Applications 351 Reputation Management System 352

Managerial Issues 353 Closing Case: Groupon: Will the Company Prosper? 357

The Opportunity 357 The Solution 357 The Results 360

Glossary 361 References 361

8 Social Enterprise and Other Social Commerce Topics 367 Opening Case: How a Private Enterprise Network Transformed CEMEX into a Social Business 368 8.1 Social Business and Social Enterprise 369

Definitions: Social Business and Social Enterprise 369 Business Networks 370 The Benefits and Limitations of Enterprise Social Networking 371 How Web 2.0 Tools Are Used by Enterprises 371

8.2 Business-Oriented Public Social Networking 372 Entrepreneur Networks 372

8.3 Enterprise Social Networks 373 Taxonomy of Social Enterprise Applications 373 How Enterprise Social Networking Helps Employees and Organizations 374 Support Services for Enterprise Social Networks 375 How Companies Interface with Social Networking 376

8.4 Social Commerce: Applications in Virtual Worlds 377 The Features of Virtual Worlds 377 The Major Categories of Virtual World Applications 378 The Landscape of Virtual World Commercial Applications... 380 The Major Drivers of Social Commerce in Virtual Worlds 381 Concems and Limitations of Commercial Activities in Virtual Worlds 382

8.5 Social Entertainment 383 Entertainment and Social Networks 383 Multimedia Presentation and Sharing Sites 384

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8.6 Social Games and Gamification 385 Games on Social Networks 385 The Business Aspects of Social Games 386 Educational Social Games 386 Gamification 387

8.7 Crowdsourcing for Problem Solving and Content Creation 387 Crowdsourcing as a Distributed Problem Solving Enabler 387 The Process of Crowdsourcing 388 Successfully Deployed Crowdsourcing Systems: Some Representative Examples 389 Tools for Crowdsourcing 389

8.8 Social Collaboration (Collaboration 2.0) 390 Supporting Social Collaboration 390 The Future of Social Commerce 393

Managerial Issues 394 Closing Case: EC Application: Linkedin: The Premier Public Business-Oriented Social Network 398

Smart Ways to Use Linkedin 399 Mobile Applications 399 Some Resources for Linkedin 400

Glossary 400 References 400

Part IV EC Support Services

9 Marketing and Advertising in E-Commerce 405 Opening Case: Market Research Helps Del Monte Improve Dog Food 406 9.1 Learning About Online Consumer Behavior 407

A Model of Online Consumer Behavior 407 The Major Influential Factors 408

9.2 The Consumer Purchasing Decision Process 409 A Generic Purchasing-Decision Model 410 Players in the Consumer Decision Making Process 411 Shopping Cart Abandonment 411

9.3 Loyalty, Satisfaction, and Trust in E-Commerce 411 Customer Loyalty 412 S atisfaction in EC 413 Trust in EC 413

9.4 Mass Marketing, Market Segmentation, and Relationship Marketing 414 From Mass Marketing to One-to-One Marketing 415 How One-to-One Relationships are Practiced 416

9.5 Personalization and Behavioral Marketing 418 Personalization in E-Commerce 418 Behavioral Marketing and Collaborative Filtering 419

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9.6 Market Research for E-Commerce 420 Objectives and Concepts of Online Market Research 421 Representative Market Research Approaches 421 Limitations of Online Market Research and How to Overcome Them 424 Biometrie and Smartphone Marketing Helps Market Research 425

9.7 Web Advertising 426 Overview of Web Advertising 426 Basic Internet Advertising Terminology 426 Why Internet Advertising? 427

9.8 Online Advertising Methods: From E-Mail to SEO and Video Ads 428 Major Categories of Ads 428 Banners 429 Pop-Up and Similar Type Ads 430 E-Mail Advertising 430 Search Engine Advertisement and Optimization 431 Google: The Online Advertising King 432 Viral Marketing (Advertising) 434 Video Advertising 435 Augmented Reality in Advertising 438 Advertising in Chat Rooms and Forums 438

9.9 Mobile Marketing and Advertising 438 Mobile Marketing and Mobile Commerce 439 Mobile Marketing Implementation Guidelines 441 Tools to Support Mobile Advertisement 441 Mobile Ad Trends 442

9.10 Advertising Strategies and Promotions 442 Permission Advertising 442 Other Advertising Strategies 442 Online Events, Promotions, and Attractions 444 Localization in Advertising 444 Developing an Online Advertising Plan 445 Advertising on Facebook 446

Managerial Issues 446 Closing Case: Johnson & Johnson Uses New Media Marketing 452 Glossary 454 References 456

10 E-Commerce Security and Fraud Issues and Protections 459 Opening Case: How State University of New York College at Old Westbuiy Controls Its Internet Use 460 10.1 The Information Security Problem 461

What Is EC Security? 461 Cyberwars and Cyberespionage Across Borders 463 The Drivers of EC Security Problems 465

XXX Content!

10.2 Basic E-Commerce Security Issues and Landscape 467 Basic Security Terminology 468 The EC Security Battleground 468 The Threats, Attacks, and Attackers 468 The Targets of the Attacks in Vulnerable Areas 470 EC Security Requirements 471 The Defense: Defenders, Strategy, and Methods 472 Recovery 473

10.3 Technical Malware Attack Methods: From Viruses to Denial of Service 473 Technical and Nontechnical Attacks: An Overview 473 The Major Technical Attack Methods 474 Malware (Malicious Code): Viruses, Worms, and Trojan Horses 474

10.4 Nontechnical Methods: From Phishing to Spam and Fraud 478 Social Engineering and Fraud 478 Social Phishing 478 Fraud and Scams on the Internet 480

Case 10.1 Anyone Can Be a Victim (from Students to Lawyers to Textbook Authors) 482

Cyber Bank Robberies 483 Spam Attacks 483

Case 10.2: Internet Stock Fraud Aided by Spam 484 Social Networking Makes Social Engineering Easy 485 Data Breach (Leak) 486

10.5 The Information Assurance Model and Defense Strategy 486 Confidentiality, Integrity, and Availability 486 Authentication, Authorization, and Nonrepudiation 487 E-Commerce Security Strategy 487 The Defense Side EC Systems 489

10.6 The Defense I: Access Control, Encryption, and PKI 490 Access Control 490 Encryption and the One-Key (Symmetrie) System 492 Public Key Infrastructure 492 Other Topics and Methods of Defense 495

10.7 The Defense II: Securing E-Commerce Networks 496 Firewalls 496 Intrusion Detection Systems (IDS) 497 Honeynets and Honeypots 498

10.8 The Defense III: General Controls, Spam, Pop Ups, Fraud, and Social Engineering Controls 499 General, Administrative, and Other Controls 500 Protecting Against Spam 500 Protecting Your Computer from Pop-Up Ads 501 Protecting Against Spyware 501

Contents xxxi

10.9 Implementing Enterprisewide E-Commerce Security 502 The Drivers of EC Security Management 502 Senior Management Commitment and Support 503 EC Security Policies and Training 504 EC Risk Analysis and Ethical Issues 504 Why Is It Difficult to Stop Internet Crime? 505

Managerial Issues 506 Closing Case: How One Bank Stopped Scams, Spams, and Cybercriminals 511 Glossary 513 References 516

11 Electronic Commerce Payment Systems 521 Opening Case: Pay-per-Page: Alternatives to E-Micropayments 522 11.1 The Payment Revolution 524

The PayPal Alternative 525 Digital Currencies 526

11.2 Using Payment Cards Online 527 Processing Cards Online 528 Fraudulent Card Transactions 529

11.3 Smart Cards 531 Types of Smart Cards 532 Stored-Value Cards 532 Applications of Smart Cards 533

11.4 Micropayments 534 11.5 E-Checking 536 11.6 Mobile Payments 538

Mobile Proximity Payments 538 Mobile Remote Payments 539

Case 11.1: EC Application: Crutchfield Goes Mobile 540 Mobile Payment Participants and Issues 541 Mobile POS Payments 542 MasterPass™: Automating the Shopping and Payment Processes 543

11.7 B2B and International Electronic Payments 544 B2B Payment Practices in the Financial Supply Chain 544 Enterprise Invoice Presentment and Payment 544 International Payments 546

11.8 Emerging EC Payment Systems and Issues 547 Bitcoin: Ups and Down but Alive 547 Other Interesting Systems 548

Managerial Issues 550 Closing Case: Innovative Credit Card Micropayments for the Korean Metropolitan Unified Fare System 555 Glossary 557 References 558

12 Order Fulfillment Along the Supply Chain 561 Opening Case: How Amazon.com Fulfills Orders 561 12.1 Order Fulfillment and Logistics: An Overview 563

Basic Concepts of Order Fulfillment and Logistics 563 Overview of Logistics 564 Traditional Versus EC Logistics 564 The EC Order Fulfillment Process 564 The Importance of Order Fulfillment 566

12.2 Problems in Order Fulfillment Along Supply Chains 567 Uncertainties in Demand 567 Inadequate Logistical Infrastructure 568 Inefficient Financial Flows 568 Lack of Information Sharing 568

12.3 Solutions to Order Fulfillment Problems Along the Supply Chain 569 Improvements in the Order-Taking Activity 569 Warehousing and Inventory Management Improvements 569 Changing the Structure and Process of the Supply Chain 570 Speeding Deliveries: From Same Day to a Few Minutes 570 Partnering Efferts and Outsourcing Logistics 572

Case 12.1: UPS Provides Broad EC Services 572 Integrated Global Logistics Program 574 Order Fulfillment in Make-to-Order and Mass Customization 574 Handling Returns (Reverse Logistics) 575 Order Fulfillment in B2B 576 Innovative E-Fulfillment Strategies 577

Case 12.2: Dell's World-Class Supply Chain and Order Fulfillment System 578

Integration and Enterprise Resource Flanning 579 12.4 RFID and CPFR as Key Enablers in Supply

Chain Management 580 The Essentials of RFID 580 RFID Applications in the Supply Chain Around the Globe 581 Collaborative Flanning, Forecasting, and Replenishment 583

Case 12.3: Stanley Black & Decker's Collaborative Success with Lowe's and Home Depot 583 12.5 Other E-Commerce Support Services 585

Consulting Services 585 Directory Services, Newsletters, and Search Engines 585 More EC Support Services 586 Outsourcing EC Support Services 587

Managerial Issues 588

Contents xxxiii

Closing Case: Multichannel Retailers - Experiences of Nordstrom and RET 592 Glossary 594 References 594

Part V E-Commerce Strategy and Implementation

13 EC Strategy, Globalization, and SMEs 599 Opening Case: Procter & Gamble's E-Commerce Strategy 599 13.1 Organizational Strategy: Concepts and Overview 602

Strategy in the Web Environment 602 Porter's Five Forces Model and Strategies as Influenced by the Internet and EC 602 The Impact of the Internet 603 Strategie Flanning for IT and EC 604

13.2 The Strategy and Performance Cycle and Tools 605 Strategy and Performance Cycle and Tools 605 Strategy Initiation 605 Strategy Formulation 606 Strategy Implentation 607 Strategy Assessment 607 Performance Improvement and Innovations 607

Case 13.1: EC Application: Warner Music Group's Digital Strategy 607

The Opportunity 608 The Results 608 Major Tools for Strategie Flanning 608

13.3 E-Commerce Strategy Initiation 608 Representative Issues in E-Strategy Initiation in E-Commerce 609 Strategy in the Web 2.0 Environment and in Social Networking 611

13.4 E-Commerce Strategy Formulation 612 Selecting E-Commerce Opportunities 612 Determining an Appropriate EC Application Portfolio Mix 612 Risk Analysis in Strategy Formulation 613 Collaborative Efferts in Strategy Formulation 614

Case 13.2: EC Application: Red Hat: Collaborative Strategie Flanning 614

Security Issues to Consider Düring Strategy Formulation 615 Other Issues in E-Commerce Strategy Formulation 615

13.5 E-Commerce Strategy Implementation 617 E-Commerce Strategy Implementation Process 617 E-Commerce Strategy Implementation Issues 618 Redesigning Business Processes: BPR and BPM 619

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13.6 E-Commerce Performance Assessment 620 The Objectives of Assessment 620 The Performance Assessment Process 620 Establish Metrics 621 Monitoring Performance 623 Analyzing Performance Data 623 Defining EC Analytics 624 Web Analytics and Its Major Tools 624

13.7 Performance Improvement and Innovation 625 An Overview of Performance Improvement 625 Dashboards in E-Commerce 626 Innovation for Performance Improvement 626 Innovative Strategies: Some Illustrative Examples 627

13.8 A Strategy for Global E-Commerce 628 Benefits and Extent of Global Operations 629 B arriers to Global E-Commerce 629 Breaking Down the Barriers to Global E-Commerce 632

13.9 E-Commerce Strategy for Small and Medium-Sized Enterprises 633 If Judy Can - You Can Tool: The Story of Blissful Tones Webstore 634 Globalization and SMEs 635 Resources to Support SME Activities in EC 635 SMEs and Social Networks 636

Managerial Issues 636 Closing Case: Innovative Web Auction Strategy Nets Higher Productivity for Portland Fish Exchange 641

The Problem 641 The Solution 641 The Results 642

Glossary 642 References 643

14 Implementing EC Systems: From Justification to Successful Performance 647 Opening Case: Telstra Corporation Helps Its Corporate Customers Justify EC Initiatives 648

The Problem 648 The Solution 648 The Results 649

14.1 The Implementation Landscape 649 The Major Implementation Factors 649

14.2 Why Justify E-Commerce Investments? How Can They Be Justified? 650 Increased Pressure for Financial Justification 650 Other Reasons Why EC Justification Is Needed 651 EC Investment Categories and Benefits 651 How Is An EC Investment Justified? 652

Contents xxxv

What Needs to Be Justified? When Should Justification Take Place? 652 Using Metrics in EC Justification 652 Web Analytics 653

14.3 Difficulties in Measuring and Justifying E-Commerce Investments 654 The EC Justification Process 654 Difficulties in Measuring Productivity and Performance Gains 655 Relating EC and Its Expenditures to Organizational Performance 655 Intangible Costs and Benefits 655 The Process of Justifying EC and IT Projects 656 The Use of Gartner's Hype Cycle 656

14.4 Methods and Tools for Evaluating and Justifying E-Commerce Investments 658 Opportunities and Revenue Generated by EC Investments 658 Methodological Aspects of Justifying EC Investments 658 Traditional Methods for Evaluating EC Investments 658 ROI Calculators 659 Advanced Methods for Evaluating IT and EC Investments 660

14.5 Examples of E-Commerce Metrics and Project Justification 661 Justifying E-procurement 661 Justifying Social Networking and the Use of Web 2.0 Tools 662 Justifying an Investment in Mobile Computing and in RFID 662 Justifying Security Projects 662 Justifying Buying Products or Services from Vendors 663

14.6 The Economics of E-Commerce 663 Reducing Production Costs 663 Increased Revenues 665 Facilitating Product Differentiation 666 EC Increases Agility 666 Valuation of EC Companies 666

14.7 A Five-Step Approach to Developing an E-Commerce System 667 The Essentials of the SDLC: An EC Application 668 Managing the Development Process 669

14.8 Development Strategies for E-Commerce Projects 670 In-House Development: Insourcing 671 Buy the Applications (Off-the-Shelf Approach) 671 Outsourcing EC Systems Development and Applications 672

xxxvi Conten

Leasing EC Applications: Cloud Computing and Software as a Service (SAAS) 672 Other Development Options 673 Selecting a Development Option 673

14.9 Organizational Impacts of E-Commerce 674 Improving Direct Marketing and Sales 674 Transforming Organization and Work 674 Redefining Organizations 675 Change Management 677 How to Organize an EC Unit in a Company 677

14.10 Opportunities for Success in E-Commerce and Avoiding Failure 678 Factors that Determine E-Commerce Success 678 E-Commerce Successes 678 Cultural Differences in EC Successes and Failures 680

Managerial Issues 681 Closing Case: Memphis Invest Excels Thanks to E-Commerce.... 686

The Problem 686 The Solution 686 The Results 686

Glossary 687 References 688

15 E-Commerce: Regulatory, Ethical, and Social Environments 691 Opening Case: Why Was Disney Funding Chinese Pirates? 691

The Problem 691 The Solution 692 The Results 692

15.1 Ethical Challenges and Guidelines 693 Ethical Principles and Guidelines 693 Business Ethics 693 EC Ethical and Legal Issues 694

15.2 Intellectual Property Law and Copyright Infringement 696 Intellectual Property in E-Commerce 696 Fan and Hate Sites 699

15.3 Privacy Rights, Protection, and Free Speech 699 Social Networks Changing the Landscape of Privacy and Its Protection 700 Privacy Rights and Protection 700 Free Speech Online Versus Privacy Protection 701 The Price of Protecting an Individual's Privacy 702

Case 15.1: EC Application: School Administrators Used Webcams to Spy on Students at Home 703

How Information About Individuais Is Collected and Used Online 703 Privacy Protection by Information Technologies 706

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Privacy Issues in Web 2.0 Tools and Social Networks 706 Privacy Protection by Ethical Principles 7 07 Privacy Protection in Countries Other than the United States 707

15.4 Other EC Legal Issues 708 Selected Legal and Regulatory Environment: E-Discovery and Cyberbullying 708

15.5 Consumer and Seiler Protection from Online Fraud 709 Consumer (Buyer) Protection 709 Seiler Protection 712 Protecting Both Buyers and Seilers: Using Electronic Signatures and Other Security Features 713

15.6 Public Policy, Taxation, and Political Environments 713 Net Neutrality 713 Taxation of EC Transactions and Digital Content 714 Internet Censorship by Countries 715

15.7 Societal Issues and Green EC 715 The Digital Divide 715 Telecommuting 715 Green EC and IT 716 Other Societal Issues 718

15.8 The Future of E-Commerce 719 Integrating the Marketplace with the Marketspace 720 M-Commerce 720 Social Commerce 720 Future Technological Trends that May Accelerate the Speed of E-Commerce 720 Future Trends That Are Limiting EC Spread 720 Enjoy Some Interesting Videos About the Future of E-Commerce 721

Managerial Issues 721 Closing Case: The Pirate Bay and the Future of File Sharing 726

An Overview 727 The Legal Situation 727 Current Operation 727 Discussion 728

Glossary 729 References 730

16 Launebing a Successfiil Online Business and EC Projects 733 Opening Case: I Am Hungry: Cheap Eats Is Not the Solution 734

The Problem and Opportunity 734 The Solution 734 The Results 735

16.1 Gelting into E-Commerce and Starting a New Online Business 736 Gelting into E-Commerce 736 Starting a New Online Business 736

xxxviii Contents

An E-Startup Is a Startup 736 Creating a New Company or Adding an Online Project 737

Case 16.1 737 Innovation and Creativity at Amazon. Com 737 Flanning Online Businesses 739 Funding a New Online Business 740

16.2 Adding E-Commerce Initiatives or Transforming to an E-Business 742 Adding EC Initiatives to an Existing Business 742 Transformation to an E-Business and Social Business 743

16.3 Building or Acquiring a Website 744 Classification of Websites 744 Building a Website 745

16.4 Website Hosting and Obtaining a Domain Name 747 Web Hosting Options 747 Selecting and Registering a Domain Name 748

Case 16.2 748 Alibaba.Com Open Doors to E-Commerce Entrepreneurs 748

Where Technology Meets Business 748 An Inspiration to SMEs 748

16.5 Web Content Creation and Management 749 Categories and Types of Content 749 Content Management and Maintenance 750 Catalog Content and Its Management 750

16.6 Website Design 751 Information Architecture for a Website 751 Site Navigation 752 Performance (Speed) 753 Colors and Graphics 753 Website Usability 753 Software for Helping Web Designers 754

16.7 Providing E-Commerce Support Services 754 Who Builds the Website? 754 Payments: Accepting Credit Cards 754 Website Promotion 755 An Example: How Does Baidu Succeeds? 755

Case 16.3: EC Application 755 Baidu's Strategies for Success 755 The Business Model 755 Competitiveness and Constraints 756 Customer Relationship Management (CRM) 757

16.8 Opening a Webstore 757 Options For Acquiring Webstores 757 Yahoo! Small Business 759 Using Templates 759

Contents xxxix

Managerial Issues 759 Closing Case: Facebook: A College Project that Took the World by Storm 763

The Startup 763 The Solution 764 Facebook IPO 764 Lessons Learned 764

Glossary 765 References 766

Index 769