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
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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
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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
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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
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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
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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
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AACSB Standard: Use of Information Technology
10) The final participants in B2B transactions are consumers.
Answer: FALSE
Diff: 1
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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
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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
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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
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15) E-commerce 2.0 is based primarily on blogs and corporate-sponsored collaboration.
Answer: FALSE
Diff: 1
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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26) Large private organizational buyers and government agencies make large-volume or largevalue 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
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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
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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
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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
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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
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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
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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
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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
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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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Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 2 E-Marketplaces: Mechanisms, Tools, and Impacts of E-Commerce
2.1 True/False
1) Eastern Mountain Sports used a successful multistep sales technique that included
recommending special socks using the RSS feed.
Answer: TRUE
Diff: 2
Page Ref: 49
AACSB Standard: Use of Information Technology
2) E-procurement is the process of distributing materials and supplies.
Answer: FALSE
Diff: 1
Page Ref: 51
3) E-marketplaces have resulted in lower purchasing and transactions costs
Answer: TRUE
Diff: 1
Page Ref: 52
AACSB Standard: Reflective Thinking
4) Private, public, and consortia are three types of e-marketplaces.
Answer: TRUE
Diff: 1
Page Ref: 53
AACSB Standard: Use of Information Technology
5) Front end refers to the activities that support online order fulfillment, inventory management,
purchasing from suppliers, payment processing, packaging, and delivery.
Answer: FALSE
Diff: 2
Page Ref: 54
6) In marketing, an intermediary is a third party that operates between sellers and buyers.
Intermediaries of all kinds offer their services on the Web.
Answer: TRUE
Diff: 2
Page Ref: 54
7) Electronic storefronts, Internet malls, and exchanges are major B2B e-marketplaces.
Answer: FALSE
Diff: 1
Page Ref: 55
AACSB Standard: Reflective Thinking
8) A portal is an information gateway that attempts to address information overload by enabling
people to search and access relevant information from disparate IT systems and the Internet,
using advanced search and indexing techniques, such as Google's desktop.
Answer: TRUE
Diff: 2
Page Ref: 55
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9) Intermediaries play an important role in EC by providing value-added services such as making
payment arrangements to buyers and sellers.
Answer: TRUE
Diff: 2
Page Ref: 58
10) WebMD, which is the largest U.S. medical services company, is known mainly for its
webmd.com consumer portal, but its core business is being an e-intermediary.
Answer: TRUE
Diff: 2
Page Ref: 59
AACSB Standard: Reflective Thinking
11) An electronic shopping cart is an order-processing technology that allows customers to
accumulate items they wish to buy while they continue to shop.
Answer: TRUE
Diff: 1
Page Ref: 63
12) Search engines not only "search and match," but also have capabilities that can be used to
perform routine tasks that require intelligence.
Answer: FALSE
Diff: 1
Page Ref: 63
AACSB Standard: Use of Information Technology
13) Shopping carts for B2B are fairly simple, but a shopping cart for B2C may be more complex.
Answer: FALSE
Diff: 2
Page Ref: 63
14) An auction is a market mechanism that uses a competitive process by which a seller solicits
consecutive bids from buyers or a buyer solicits bids from sellers.
Answer: TRUE
Diff: 1
Page Ref: 64
15) Negotiation and bargaining are two types of auctions where prices are not fixed, but rather
are allowed to fluctuate as market supply and demand change.
Answer: FALSE
Diff: 2
Page Ref: 66
16) Reverse auctions are bidding or tendering systems in which the buyer places an item for bid
on a request for quote (RFQ) system; then potential suppliers bid on the job, with the price
reducing sequentially, and the lowest bid wins.
Answer: TRUE
Diff: 3
Page Ref: 66
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17) E-auctions are becoming less important selling and buying channels for companies and
individuals.
Answer: FALSE
Diff: 1
Page Ref: 67
AACSB Standard: Reflective Thinking
18) The major limitations of e-auctions are insufficient security, risk of fraud, and a limited pool
of participants.
Answer: TRUE
Diff: 2
Page Ref: 68
AACSB Standard: Reflective Thinking
19) A limitation of e-bartering for businesses is that excess capacity items such as office space,
storage, factory space, idle facilities, and labor cannot be bartered.
Answer: FALSE
Diff: 2
Page Ref: 69
AACSB Standard: Reflective Thinking
20) Online negotiation can be facilitated by computer technology for the negotiation process and
software agents for searches and comparisons.
Answer: TRUE
Diff: 1
Page Ref: 69
21) E-marketplaces, shopping carts, e-catalogs, and auctions are the major Web 2.0 mechanisms.
Answer: FALSE
Diff: 3
Page Ref: 70
22) Features that distinguish a blog from a regular Web page are trackbacks, blogrolls, pings, and
RSS feeds.
Answer: TRUE
Diff: 1
Page Ref: 71
AACSB Standard: Reflective Thinking
23) Twitter is a free micro-blogging service that allows its users to send tweets up to 140
characters in length.
Answer: TRUE
Diff: 3
Page Ref: 72
AACSB Standard: Use of Information Technology
24) A new service known as Pownce integrates micro-blogging with file sharing and event
invitations.
Answer: TRUE
Diff: 2
Page Ref: 72
AACSB Standard: Reflective Thinking
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25) Travelers using airline Web sites to book their flights directly without the use of travel agents
is resulting in the reintermediation of travel agents.
Answer: FALSE
Diff: 3
Page Ref: 85
AACSB Standard: Reflective Thinking
2.2 Multiple Choice
1) Eastern Mountain Sports introduced ________ tools in order to increase collaboration,
information sharing, and communication among stores and their employees, suppliers, and
customers.
A) business intelligence
B) B2B
C) B2C
D) Web 2.0
Answer: D
Diff: 2
Page Ref: 48
AACSB Standard: Use of Information Technology
2) Traditional and electronic markets have three main functions, which include each of the
following except:
A) matching buyers and sellers
B) facilitating the exchange, purchase or transfer of information, goods, services, and payments
associated with transactions
C) financing the transformation of raw materials into finished products
D) providing an institutional infrastructure, such as a legal and regulatory framework that
enables the efficient functioning of the market
Answer: C
Diff: 1
Page Ref: 51
AACSB Standard: Reflective Thinking
3) The cost curves of digital products differ from the cost curves of physical products because in
digitization:
A) most costs are variable and fixed costs are low.
B) most costs are fixed and variable costs are very low.
C) most costs are fixed, but variable costs are high.
D) all costs are variable.
Answer: B
Diff: 3
Page Ref: 52
AACSB Standard: Analytic Skills
19
Copyright © 2010 Pearson Education, Inc.
4) Because of their cost curve, digital products profits will:
A) remain constant regardless of volume, once the variable costs are paid.
B) decrease as volume increases, once labor costs are paid.
C) increase very rapidly as volume increases, once the fixed costs are paid.
D) increase rapidly as volume increases, once the fixed costs are paid.
Answer: C
Diff: 3
Page Ref: 52
AACSB Standard: Analytic Skills
5) The portion of an e-seller's business through which customers interact, including the seller's
portal, electronic catalogs, shopping cart, and payment gateway, is referred to as the ________ of
the business.
A) front end
B) back end
C) infrastructure
D) intermediary
Answer: A
Diff: 2
Page Ref: 54
6) Activities related to order fulfillment, inventory management, purchasing from suppliers,
accounting and finance, packaging, and delivery are done in what is termed the ________ of the
business.
A) front end
B) back end
C) infrastructure
D) intermediary
Answer: B
Diff: 2
Page Ref: 54
7) The major ________ e-marketplaces are storefronts and Internet malls.
A) B2B
B) C2B
C) B2B2C
D) B2C
Answer: D
Diff: 1
Page Ref: 55
8) An electronic storefront includes several mechanisms to help sales and sales transactions. The
most common mechanisms include all of the following except:
A) electronic catalog
B) search engine
C) supply chain
D) payment gateway
Answer: C
Diff: 1
Page Ref: 55
20
Copyright © 2010 Pearson Education, Inc.
9) Online markets that are owned and operated by a single company and that are either sell-side
or buy-side are known as ________.
A) private e-marketplaces
B) commercial portals
C) e-malls
D) B2B marketplaces
Answer: A
Diff: 2
Page Ref: 55
10) Insurance companies and hotels sell services through storefronts called ________.
A) RSS
B) browsers
C) portals
D) wikis
Answer: C
Diff: 2
Page Ref: 55
11) Employees may waste time trying to find relevant and accurate information if they have to
access multiple information systems. The best solution to this problem is the use of ________.
A) Web portals
B) intermediaries
C) browsers
D) intranets
Answer: A
Diff: 2
Page Ref: 57
12) A type of broker that helps consumers compare different stores is a ________.
A) remediator
B) search engine
C) shopping facilitator
D) virtual mall
Answer: C
Diff: 1
Page Ref: 58
AACSB Standard: Use of Information Technology
13) Human or electronic intermediaries attempt to reduce each of the following limitations of
direct interaction except:
A) search costs
B) lack of privacy
C) contract risk
D) product distribution
Answer: D
Diff: 3
Page Ref: 58
21
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14) Customized catalogs are especially useful in B2B e-commerce for each of the following
reasons except:
A) E-catalogs can be designed to show only the items that the employees in a specific
organization are allowed to purchase.
B) Intranets, in particular, can deliver customized catalogs to different business customers.
C) E-catalogs can show the buyer's ID number for the item, model, or SKU number rather than
the seller's ID numbers.
D) E-catalogs can be customized to show the same item to different customers at different prices,
reflecting discounts or purchase-contract agreements.
Answer: B
Diff: 3
Page Ref: 61
15) E-catalogs have several common characteristics. Which of the following is not a
characteristic of e-catalogs?
A) easy to create without advanced information technology
B) easy to update product information
C) easy to customize
D) good search and comparison capabilities
Answer: A
Diff: 2
Page Ref: 62
AACSB Standard: Reflective Thinking
16) The major challenge faced by ________ is the need to index documents from a variety of
sources, such as file systems, intranets, document management systems, e-mail, and databases,
and then present a consolidated list of relevance-ranked documents.
A) mobile portals
B) intelligent engines
C) enterprise searches
D) knowledge portals
Answer: C
Diff: 3
Page Ref: 62
17) Which is not a popular search engine?
A) Google
B) Linux
C) AltaVista
D) Lycos
Answer: B
Diff: 1
Page Ref: 63
22
Copyright © 2010 Pearson Education, Inc.
18) A(n) ________ is an order-processing technology that allows customers to accumulate items
they wish to buy while they continue to shop
A) intelligent agent
B) e-fulfillment agent
C) electronic shopping cart
D) mobile portal
Answer: C
Diff: 2
Page Ref: 63
19) When prices are negotiated or discounted, as in auctions or stock markets, that pricing mode
is called ________.
A) dynamic pricing
B) commodity pricing
C) pre-shopping
D) negotiation
Answer: A
Diff: 2
Page Ref: 66
20) The most common and traditional form of auctions in which one seller entertains bids from
many buyers is referred to as ________.
A) forward auctions
B) reverse auctions
C) bidding auction system
D) tendering system
Answer: A
Diff: 2
Page Ref: 66
21) An auction in which there is one buyer and many potential sellers or in which a buyer places
an item for bid on an RFQ system and the lowest bid wins is referred to as all of the following
except:
A) forward auctions
B) reverse auctions
C) bidding auction system
D) tendering system
Answer: B
Diff: 3
Page Ref: 66
22) What is a benefit of e-auctions to the sellers?
A) anonymity
B) convenience of bidding anywhere and any time
C) lack of differentiation
D) optimal price determined by the market
Answer: D
Diff: 2
Page Ref: 67
AACSB Standard: Reflective Thinking
23
Copyright © 2010 Pearson Education, Inc.
23) All of the following are benefits of e-auctions to buyers except:
A) can liquidate large quantities quickly
B) convenience of bidding anywhere and any time
C) opportunity to bargain
D) opportunities to find unique items
Answer: A
Diff: 2
Page Ref: 67
24) Which of the following statements does not describe bartering?
A) It is the oldest method of trade.
B) It is primarily done between private parties.
C) The problem with bartering is that it is difficult to find trading partners.
D) Intermediaries can be helpful, but they are expensive and very slow.
Answer: B
Diff: 3
Page Ref: 68
25) Which of the following is a Web 2.0 application?
A) auctions
B) blogs
C) shopping carts
D) e-catalogs
Answer: B
Diff: 2
Page Ref: 70
26) Which is not one of the seven principles for building effective blogs?
A) Set up the blog so that each post gets its own permanent URL.
B) Blog frequently and create at least half a dozen posts every weekday.
C) Focus on a broad topic to appeal to a large audience.
D) Make friends with other bloggers, online and off.
Answer: C
Diff: 2
Page Ref: 71
27) ________ are audio files that enable companies to deliver audio-specific content, including
music, speeches, radio-style presentations, and more.
A) Blogs
B) Mashups
C) Podcasts
D) Wikis
Answer: C
Diff: 2
Page Ref: 71
24
Copyright © 2010 Pearson Education, Inc.
28) Commercial uses of blogs include all of the following except:
A) to allow everyone to participate as a peer
B) to communicate with customers and other third parties
C) to enhance employee communication with one another
D) to supplement corporate public relations and press releases with personal from the heart talk
Answer: A
Diff: 3
Page Ref: 72
29) The elimination of various types of agents that mediate between buyers and sellers, such as
travel and insurance agents, is referred to as ________.
A) automation
B) disintermediation
C) remediation
D) e-distribution
Answer: B
Diff: 2
Page Ref: 86
30) ________ provides customers with exactly what they want, when and where they want it.
Effective communication between the supply chain and the factory floor is needed to make it
happen.
A) Build-to-order manufacturing
B) Demand-driven manufacturing
C) Real-time manufacturing
D) Virtual manufacturing
Answer: B
Diff: 3
Page Ref: 87
AACSB Standard: Use of Information Technology
2.3 Fill in the Blank
1) A(n)________ is a virtual marketplace in which sellers and buyers meet and conduct different
types of transactions.
Answer: e-marketplace
Diff: 1
Page Ref: 53
2) All of the activities related to order fulfillment, inventory management, payment processing,
packaging, and delivery are done in what is called the ________ of the business.
Answer: back end
Diff: 2
Page Ref: 54
3) In a(n) ________ e-marketplace, a company purchases from many suppliers. This type of
purchasing arrangement is considered to be many-to-one.
Answer: buy-side
Diff: 3
Page Ref: 55
25
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4) An online shopping center where many online stores are located is called a(n) ________.
Answer: e-mall (online mall)
Diff: 1
Page Ref: 56
5) A(n) ________ is a single point of access through a Web browser to critical business
information located inside and outside of an organization.
Answer: information portal
Diff: 2
Page Ref: 57
6) ________ are electronic intermediaries that provide and/or control information flow in
cyberspace, often bundling information and then selling it to others.
Answer: Infomediaries
Diff: 2
Page Ref: 58
7) In a(n) ________ catalog, information is presented in motion pictures or animation and
information can be presented or changed in real-time, as with stock prices.
Answer: dynamic
Diff: 2
Page Ref: 61
8) The major challenge faced by enterprise search is the need to ________ documents from a
variety of sources, such as file systems, intranets, document management systems, and e-mail.
Answer: index
Diff: 1
Page Ref: 57
AACSB Standard: Use of Information Technology
9) WebMD is the largest medical information services company in the United States. Although
the company is known mainly for its consumer portal, webmd.com, its core business is being an
electronic ________.
Answer: intermediary
Diff: 2
Page Ref: 59
AACSB Standard: Use of Information Technology
10) ________ refers to prices that are not fixed, but that are allowed to fluctuate as supply and
demand in a market exchange.
Answer: Dynamic pricing
Diff: 3
Page Ref: 66
11) An auction in which a seller takes bids from buyers is called a(n) ________ auction.
Answer: forward
Diff: 2
Page Ref: 66
12) Priceline.com pioneered the ________ model. In this model, a potential buyer specifies the
price that he or she is willing to pay to any seller who will sell at that price.
Answer: name-your-own price
Diff: 2
Page Ref: 67
26
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13) ________ tools are social networking tools used by organizations.
Answer: Enterprise 2.0
Diff: 2
Page Ref: 70
14) Trackbacks, pings, and RSS feeds are some of the features that distinguish ________ from
regular Web pages.
Answer: blogs
Diff: 2
Page Ref: 71
15) ________ is a free micro-blogging service that allows its users to send and read other users'
short text messages, which are up to 140 characters in length.
Answer: Twitter
Diff: 2
Page Ref: 72
16) Blogs and wikis are ________ applications.
Answer: Web 2.0
Diff: 1
Page Ref: 72
17) ________ have become more and more active in politics.
Answer: Bloggers
Diff: 3
Page Ref: 73
18) A(n) ________ is a type of social network that allows everyone to participate as a peer
enabling anyone to add, delete, or change content.
Answer: wiki
Diff: 2
Page Ref: 75
AACSB Standard: Use of Information Technology
19) ________ are animated computer representations of humanlike movements and behaviors in
a
computer-generated 3-dimensional world.
Answer: Avatars
Diff: 2
Page Ref: 75
AACSB Standard: Use of Information Technology
20) Companies are using Second Life, which is an example of a(n) ________, to bolster their
physical businesses.
Answer: virtual world
Diff: 2
Page Ref: 76
AACSB Standard: Use of Information Technology
21) The Internet economy has ________ barriers to entry.
Answer: low
Diff: 2
Page Ref: 77
AACSB Standard: Reflective Thinking
27
Copyright © 2010 Pearson Education, Inc.
22) ________ tools are used to tailor a product, service, or Web content to specific user
preferences.
Answer: Personalization
Diff: 2
Page Ref: 79
AACSB Standard: Use of Information Technology
23) Porter divided the impacts of the Internet into either positive or negative impacts for the
industry. According to his model, most of the impacts are ________.
Answer: negative
Diff: 2
Page Ref: 80
24) ________ is a method that enables manufacturers to create specific products for each
customer based on the customer's exact needs.
Answer: Mass customization
Diff: 3
Page Ref: 86
AACSB Standard: Use of Information Technology
25) One of the major changes in the supply chain of e-markets is to transfer some activities to
customers and/or employees through ________.
Answer: self-service
Diff: 2
Page Ref: 87
2.4 Essay
1) List and briefly describe three ways in which electronic marketplaces have changed the
processes used in trading and supply chains.
Answer:
Greater information richness of the transactional and relational environment.
Lower information search costs for buyers.
Diminished information asymmetry between sellers and buyers.
Less time between purchase and time of possession of physical products purchased in the emarketplace.
Greater temporal proximity between time of purchase and time of possession of digital products
purchased in the e-marketplace.
The ability of buyers, sellers, and virtual markets to be in different locations.
The ability for EC to leverage capabilities with increased effectiveness and lower transaction and
distribution costs, leading to more efficient friction-free markets.
Diff: 2
Page Ref: 53
AACSB Standard: Use of Information Technology
28
Copyright © 2010 Pearson Education, Inc.
2) Identify and briefly discuss the roles and value of intermediaries in e-marketplaces.
Answer: Intermediaries (brokers) play an important role in commerce by providing value-added
activities and services to buyers and sellers. Web sites that gather and organize large amounts of
data and act as intermediaries between those who want the information and those who supply the
information are one type of infomediary. One type offers consumers a place to gather
information about specific products and companies before they make purchasing decisions. It is a
third-party provider of unbiased information; it does not promote or try to sell specific products
in preference over other products or act on behalf of any vendors
There are many types of intermediaries. In cyberspace, there are intermediaries that provide
and/or control information flow. These electronic intermediaries are known as infomediaries.
The information flows to and from buyers and sellers via infomediaries. Frequently,
intermediaries aggregate information and sell it to others. Online intermediaries are companies
that facilitate transactions between buyers and sellers and receive a percentage of the
transaction's value.
Diff: 3
Page Ref: 58
3) Describe the major characteristic of dynamic pricing in electronic auctions (e-auctions).
Identify a benefit and a limitation of e-auctions to sellers involved in B2B.
Answer: With dynamic pricing, prices change based on the supply and demand relationships at
any given time.
Benefits of e-auctions to B2B sellers are:
- Sellers can liquidate large quantities of products quickly.
- Can improve customer relationship and loyalty.
- Can sell globally.
- Can gain more customer dollars by offering items directly to business customers.
Limitation of e-auctions to B2B sellers are:
- Minimal security
- Possibility of fraud.
Diff: 2
Page Ref: 67
29
Copyright © 2010 Pearson Education, Inc.
4) Describe the commercial uses of blogs. Identify the potential risks of blogs. Describe blog
management methods to reduce those risks.
Answer: Many organizations have deployed blogs to promote collaboration, advertise products
and services, and obtain feedback from customers. External, or facing out, blogs are used to
communicate with customers and other third parties, build trust-based relationships, polish
corporate reputations, promote social causes, and support CRM.
Blogs can supplement corporate public relations, press releases, and brochures with more
personal communication.
Two potential risks are revealing trade secrets (in corporate-related blogs) and making statements
that are or that could be construed as libel or defamation.
Blog management methods to reduce risk are:
- Establish comprehensive, written rules and policies -- and make sure that employees understand
that they apply regardless of whether employees are blogging at the office or from home.
- Educate employees about blog-related risks, rules, and regulations.
- Enforce blog policy with disciplinary action and technology.
- Have corporate lawyers review the contents of blogs to verify that they don't put the company
at risk.
Diff: 3
Page Ref: 71, 74
AACSB Standard: Ethical Reasoning
5) Explain competition in the Internet ecosystems. Explain how lower search costs for buyers has
intensified EC competition.
Answer: The Internet economy has low barriers to entry and a worldwide market, which has
significantly increased competition.
E-markets reduce the cost of searching for product information (e.g., sellers, models, prices),
frequently close to zero. This can significantly impact competition, enabling customers to find
less expensive (or better) products and forcing sellers, in turn, to reduce prices or improve
customer service. Sellers who provide information to buyers can exploit the Internet to gain a
larger market share.
Diff: 3
Page Ref: 77
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 3 Retailing in Electronic Commerce: Products and Services
3.1 True/False
1) Amazon is recognized as an online leader in creating sales through customer intimacy and
customer relationship management (CRM).
Answer: TRUE
Diff: 1
Page Ref: 99
2) Sales of goods on the Internet are no longer increasing rapidly because of the bankruptcy of
numerous dot-coms.
Answer: FALSE
Diff: 2
Page Ref: 101
AACSB Standard: Reflective Thinking
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Copyright © 2010 Pearson Education, Inc.
3) According to Internet Retailer, in 2007, approximately 80 percent of adult U.S. Internet users
shopped online and/or research offline sales online.
Answer: FALSE
Diff: 2
Page Ref: 101
4) As the number of Internet users reaches saturation, the challenge for e-retailers to increase the
amount that shoppers spend online because the rate of increase in online shoppers will slow.
Answer: TRUE
Diff: 3
Page Ref: 101
AACSB Standard: Analytic Skills
5) A retailer is a sales intermediary, a seller that operates between manufacturers and customers.
Answer: FALSE
Diff: 1
Page Ref: 101
6) On average, e-tailing sales are expected to grow at an annual rate of 2.6 percent from 2010 to
2012, compared to 14 percent for brick-and-mortar stores.
Answer: FALSE
Diff: 1
Page Ref: 102
AACSB Standard: Reflective Thinking
7) When new capabilities are required to conduct EC, for example capabilities in logistics and
distribution, one method is to obtain them through external strategic alliances.
Answer: TRUE
Diff: 1
Page Ref: 102
AACSB Standard: Use of Information Technology
31
Copyright © 2010 Pearson Education, Inc.
8) With all else being equal in the online environment, goods that are relatively expensive or
frequently purchased are expected to have higher sales volumes then goods that are inexpensive
or infrequently purchased.
Answer: FALSE
Diff: 3
Page Ref: 103
AACSB Standard: Reflective Thinking
9) A business model is a description of how an organization intends to generate revenue through
its business operations.
Answer: TRUE
Diff: 2
Page Ref: 105
10) Direct marketing describes marketing that takes place over the Internet involving wholesalers
and retailers.
Answer: FALSE
Diff: 2
Page Ref: 106
AACSB Standard: Use of Information Technology
11) A click-and-mortar retailer is a combination of both the brick-and-mortar retailer and an
online transactional Web site.
Answer: TRUE
Diff: 1
Page Ref: 106
12) Being a virtual seller has several benefits, such as lower overhead costs, but it also has many
drawbacks and barriers.
Answer: TRUE
Diff: 2
Page Ref: 106
13) Online travel bookings and associated travel services are not yet profitable e-commerce
implementations.
Answer: FALSE
Diff: 1
Page Ref: 109
14) Competition among online travel e-tailers is fierce, with low margins, little customer loyalty,
and increasing commoditization of products and services
Answer: TRUE
Diff: 3
Page Ref: 110
15) Airlines and hotel chains encourage travelers to book directly from their Web sites,
bypassing travel agents. This is an example of the Internet's indirect impact on the role of travel
agents.
Answer: TRUE
Diff: 2
Page Ref: 112
AACSB Standard: Reflective Thinking
32
Copyright © 2010 Pearson Education, Inc.
16) WAYN is a social networking Web site with a goal of uniting college student travelers from
North America.
Answer: FALSE
Diff: 3
Page Ref: 112
17) The electronic job market can create high turnover costs for employers by accelerating
employees' movement to other jobs.
Answer: TRUE
Diff: 2
Page Ref: 113
18) Online banking and other financial services are growing slowly on the Internet because many
customers are not yet embracing it.
Answer: FALSE
Diff: 2
Page Ref: 118
19) Many insurance companies use a dual strategy, keeping human agents, but also selling
online.
Answer: TRUE
Diff: 2
Page Ref: 118
AACSB Standard: Use of Information Technology
20) The major risk of online trading is security.
Answer: TRUE
Diff: 1
Page Ref: 119
AACSB Standard: Reflective Thinking
21) Only a few pure-play virtual banks failed by 2003 due to lack of financial viability.
Answer: FALSE
Diff: 2
Page Ref: 121
22) Customers accessing the bank system from the outside should verify that the Web site uses
encryption provided by SSL (Secure Socket Layer) and digital certificates.
Answer: TRUE
Diff: 3
Page Ref: 122
AACSB Standard: Use of Information Technology
23) Both online banks and click-and-mortar banks carry some risks and problems, especially in
international banking, including hackers and liquidity risk.
Answer: TRUE
Diff: 2
Page Ref: 123
AACSB Standard: Reflective Thinking
33
Copyright © 2010 Pearson Education, Inc.
24) The direct sale of digital content through download allows a producer of digital content to
bypass the traditional retail channel, thereby reducing overall costs and capturing greater profits.
Answer: TRUE
Diff: 2
Page Ref: 125
AACSB Standard: Analytic Skills
25) Channel conflict occurs when adding an online distribution channel causes problems with
existing distribution channels.
Answer: FALSE
Diff: 2
Page Ref: 132
AACSB Standard: Reflective Thinking
3.2 Multiple Choice
1) Amazon.com experienced all of the following except:
A) It maintained its position as the number one e-tailer in 2006.
B) Growth was driven largely by product diversification and its international presence.
C) It assured its financial success and profitability by 2005.
D) Profitability dropped in 2006 because of huge investments in IT infrastructure and their new
Prime discount shipping program.
Answer: C
Diff: 3
Page Ref: 99
2) According to Internet Retailer (2007), approximately ________ percent of adult U.S. Internet
users shop online or research offline sales online.
A) 25
B) 45
C) 65
D) 85
Answer: B
Diff: 2
Page Ref: 101
3) All of the following describe retailing except:
A) A retailer is a sales intermediary.
B) Many manufacturers sell directly to consumers and through wholesalers and retailers.
C) E-tailing makes it easier for a manufacturer to sell directly to customers by cutting out the
intermediary.
D) Companies that produce a large number of products, such as Procter & Gamble, do not need
retailers for efficient distribution.
Answer: D
Diff: 3
Page Ref: 101
34
Copyright © 2010 Pearson Education, Inc.
4) What is the primary advantage of catalog sales?
A) It eliminates the constraints of space and time.
B) Customers prefer catalog shopping to e-tailing.
C) Catalogs increase interest in products that are then bought online.
D) Products and services can both be sold via catalogs.
Answer: A
Diff: 2
Page Ref: 101
AACSB Standard: Reflective Thinking
5) All of the following categories have been selling well online except:
A) groceries
B) travel
C) cars
D) health and beauty
Answer: A
Diff: 1
Page Ref: 103
AACSB Standard: Reflective Thinking
6) With all else being equal in the online environment, goods with any of the following product
characteristics are expected to facilitate greater online sales except:
A) relatively expensive items
B) high brand recognition
C) digitized format
D) frequently purchased items
Answer: A
Diff: 2
Page Ref: 103
AACSB Standard: Reflective Thinking
7) Which of the following is a characteristic of e-tailing?
A) Competition is local.
B) Customer relations are less stable due to anonymous contacts.
C) Price changes are expensive, but can be done at anytime.
D) Fewer resources are needed to increase customer loyalty.
Answer: B
Diff: 3
Page Ref: 104
AACSB Standard: Reflective Thinking
8) A key difference in competition between retailing and e-tailing is that ________.
A) retailers face greater global competition
B) e-tailers face fewer competitors
C) retailers face fewer competitors
D) e-tailers face greater local competition
Answer: C
Diff: 2
Page Ref: 104
AACSB Standard: Reflective Thinking
35
Copyright © 2010 Pearson Education, Inc.
9) Direct marketers ________.
A) use one or more distribution channels
B) do not operate physical stores
C) are pure-play e-tailers
D) are manufacturers
Answer: A
Diff: 2
Page Ref: 105
10) Dell's distribution strategy is best described as ________.
A) a brick-and-mortar strategy
B) a shared service mall strategy
C) a click-and-mortar strategy
D) direct marketing from a manufacturer
Answer: D
Diff: 3
Page Ref: 106
AACSB Standard: Use of Information Technology
11) Sears' marketing strategy would best be described as ________.
A) a brick-and-mortar strategy
B) a shared service mall strategy
C) a click-and-mortar strategy
D) direct marketing from a manufacturer
Answer: C
Diff: 2
Page Ref: 106
AACSB Standard: Use of Information Technology
12) An online seller of travel services that generates revenue by charging fees for its services is
an example of a ________.
A) market maker
B) transaction broker
C) content disseminator
D) viral marketer
Answer: B
Diff: 3
Page Ref: 109
AACSB Standard: Use of Information Technology
13) A marketer that uses e-mail to advertise to potential customers is called a ________.
A) market maker
B) transaction broker
C) content disseminator
D) viral marketer
Answer: D
Diff: 2
Page Ref: 109
AACSB Standard: Use of Information Technology
36
Copyright © 2010 Pearson Education, Inc.
14) A company that creates and manages many-to-many markets is called a ________.
A) market maker
B) transaction broker
C) content disseminator
D) viral marketer
Answer: A
Diff: 2
Page Ref: 109
AACSB Standard: Use of Information Technology
15) In an e-market, Federal Express and PayPal are examples of ________.
A) intermediaries
B) service providers
C) content disseminators
D) viral marketers
Answer: B
Diff: 2
Page Ref: 109
AACSB Standard: Use of Information Technology
16) All of the following are revenue models for online independent travel agents except:
A) direct marketing revenues
B) direct revenues from commissions
C) subscription or membership fees
D) revenue sharing fees
Answer: A
Diff: 3
Page Ref: 110
17) Which is not a characteristic of social computing technologies?
A) Social computing is increasingly playing a larger role in corporate online strategy.
B) Social computing has shifted online travel from passive selling to active customer
engagement.
C) Companies that implement social computing technologies on their own Web sites should
view it primarily as a sales tool and less as supporting business goals.
D) Social computing plays an important role by providing more correct and relevant information.
Answer: C
Diff: 3
Page Ref: 111
18) One of the characteristics of Web 2.0 in the travel industry is ________.
A) standardization
B) segmentation
C) personalization.
D) intermediation
Answer: C
Diff: 3
Page Ref: 111
37
Copyright © 2010 Pearson Education, Inc.
19) All of the following are characteristics of WAYN except:
A) It is a popular social networking Web site.
B) When it introduced fees for its premier travel membership service, it lost most of its new
subscriptions.
C) It is not aimed at any particular age group.
D) It enables its users to create a personal profile and upload and store photos.
Answer: B
Diff: 3
Page Ref: 112
20) Characteristics of the job market and employment placement include all of the following
except:
A) They are very stable.
B) There is an unbalanced supply and demand.
C) Career portals on corporate Web sites reduce recruitment costs.
D) The job market has essentially moved online.
Answer: A
Diff: 3
Page Ref: 113
21) Compared to the traditional job market, the online job market ________.
A) has a shorter life cycle
B) is usually specialized and local in scope
C) tends to be less reliable
D) tends to be much less expensive
Answer: D
Diff: 2
Page Ref: 113
22) Characteristics of JobCentral.com include all of the following except:
A) It is a career portal created by a number of leading companies to reduce recruitment costs.
B) It provides people at all education levels with timely information about careers and
employment opportunities nationwide.
C) It is used primarily to catalog business and accounting job postings.
D) It makes it easy for job searchers to explore available openings.
Answer: C
Diff: 3
Page Ref: 115
23) A disadvantage of online job advertising and recruitment for employers is ________.
A) an overload of applicants, both qualified and unqualified
B) a huge increase in employee turnover
C) an increase in the costs of finding candidates
D) a significant decrease in the number of qualified applicants
Answer: A
Diff: 2
Page Ref: 116
AACSB Standard: Use of Information Technology
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24) Changes in the real estate industry driven by real estate online include all of the following
except:
A) use of live chat
B) offering 3D video tours
C) stabilizing the industry and reducing credit fraud by borrowers
D) disintermediation of real estate agents
Answer: C
Diff: 3
Page Ref: 117
AACSB Standard: Use of Information Technology
25) Which of the following is not a characteristic of e-banking?
A) saves users time and money
B) is more expensive for banks
C) is becoming an enabling feature of business growth in the developing world
D) is increasing peer-to-peer (P2P) online lending
Answer: B
Diff: 2
Page Ref: 120
AACSB Standard: Use of Information Technology
26) Security for online bank transactions include all of the following except:
A) firewalls
B) SSL encryption
C) virtual biometrics
D) digital certificates
Answer: C
Diff: 2
Page Ref: 122
AACSB Standard: Use of Information Technology
27) Gateways to storefronts and e-malls are referred to as ________.
A) shopping portals
B) shopbots
C) shopping browsers
D) intelligent search engines
Answer: A
Diff: 2
Page Ref: 128
AACSB Standard: Use of Information Technology
28) Software tools that scout the Web for stores that sell similar items at low prices are called
________.
A) shopping portals
B) shopbots
C) shopping browsers
D) intelligent search engines
Answer: B
Diff: 2
Page Ref: 128
AACSB Standard: Use of Information Technology
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29) The TRUSTe seal is an example of ________.
A) a business rating
B) an intermediary
C) a B2B exchange
D) a trustmark
Answer: D
Diff: 1
Page Ref: 129
AACSB Standard: Use of Information Technology
30) Charles wants to buy a John Lennon lithograph over the Internet, but he is unwilling to pay
for it until he inspects it to ascertain authenticity. The auction site through which he purchases
the painting agrees to hold his money until he tells them to release it to the seller. This is an
example of ________.
A) an escrow service
B) a trustmark
C) a warranty
D) a verification
Answer: A
Diff: 2
Page Ref: 129
AACSB Standard: Reflective Thinking
3.3 Fill in the Blank
1) Retailing conducted over the Internet is called ________.
Answer: electronic retailing
Diff: 1
Page Ref: 101
2) ________ are firms that conduct retail business online.
Answer: E-tailers
Diff: 1
Page Ref: 101
3) Amazon.com is an example of a(n) ________ because it sells directly to consumers over the
Internet without maintaining a physical sales channel.
Answer: pure-play e-tailer
Diff: 2
Page Ref: 106
AACSB Standard: Reflective Thinking
4) ________ refers to marketing that takes place without intermediaries between manufacturers
and buyers; or marketing done online between any seller and buyer.
Answer: Direct marketing
Diff: 2
Page Ref: 106
AACSB Standard: Reflective Thinking
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Copyright © 2010 Pearson Education, Inc.
5) A(n) ________ is a combination of both the brick-and-mortar retailer and an online
transactional Web site.
Answer: click-and-mortar retailer
Diff: 2
Page Ref: 106
6) ________ are retailers who conduct business in the physical world, in traditional stores.
Answer: Brick-and-mortar retailers
Diff: 2
Page Ref: 107
7) A firm that operates both physical stores and an online e-tail site is said to be a click-andmortar business selling in a(n) ________ model.
Answer: multichannel business
Diff: 3
Page Ref: 107
8) ________ are meta-search engines that search a range of related sites or search engines,
seeking the best product or service for a particular consume.
Answer: Travel bots
Diff: 3
Page Ref: 110
9) In today's age of Web 2.0, the wide reach of ________ sites such as MySpace and LinkedIn
can get people hired faster.
Answer: social networking
Diff: 3
Page Ref: 115
AACSB Standard: Use of Information Technology
10) The two major limitations of the electronic job market are privacy and ________ because
resumes are typically not encrypted.
Answer: security
Diff: 2
Page Ref: 116
11) ________ services enable users to receive information on their bank account balances via
SMS and to settle payments for bills and purchase stocks.
Answer: Mobile banking
Diff: 2
Page Ref: 119
12) In addition to regular banks adding online services, ________ have emerged; these have no
physical location, but conduct only online transactions.
Answer: virtual banks
Diff: 3
Page Ref: 120
13) ________ are gateways to storefronts and e-malls that may be comprehensive or niche
oriented.
Answer: Shopping portals
Diff: 2
Page Ref: 128
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14) ________ are tools that scout the Web for consumers who specify search criteria.
Answer: Shopping robots (shopbots)
Diff: 2
Page Ref: 128
15) Members of ________ hope that consumers will use their trustmark seal as an assurance and
as a proxy for actual research into their conduct of business, privacy policy, and personal
information protection.
Answer: TRUSTe
Diff: 2
Page Ref: 129
16) A shopping tool referred to as a(n) ________ is a program that contains the shopper's
information.
Answer: electronic wallet
Diff: 2
Page Ref: 130
17) ________ refers to the removal of organizations or business process layers responsible for
certain intermediary steps in a given supply chain.
Answer: Disintermediation
Diff: 2
Page Ref: 131
18) ________ is the process whereby intermediaries, either new ones or those that had been
disintermediated, take on new intermediary roles.
Answer: Reintermediation
Diff: 2
Page Ref: 132
19) ________ is the use of software (intelligent) agents to facilitate intermediation.
Answer: Cybermediation
Diff: 3
Page Ref: 132
20) ________ refers to any situation in which direct competition and/or damage caused by
bypassing a former existing channel partner is perceived to have resulted from the introduction
of a new, often online, channel.
Answer: Channel conflict
Diff: 2
Page Ref: 132
21) EC offers companies new opportunities to test prices and make prices more precise, which
are referred to as ________ prices.
Answer: optimal
Diff: 3
Page Ref: 133
22) A major problem in B2C is the increasing rate of online ________.
Answer: fraud
Diff: 2
Page Ref: 133
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23) The Internet has created a large demand for personalized products and services.
Manufacturers can meet that demand by using a ________ strategy.
Answer: mass customization
Diff: 2
Page Ref: 133
24) An e-tailer can use cookie files and other technologies to track the specific browsing and
buying behavior of each consumer. With that information, the e-tailer can create a marketing
plan tailored to that consumer's pattern by showing items of interest or offering incentives that
appeal to that consumer's sense of value, which is referred to as ________.
Answer: personalization
Diff: 2
Page Ref: 133
25) Merchants can study and find out what customers want through ________.
Answer: market research
Diff: 2
Page Ref: 120
AACSB Standard: Use of Information Technology
3.4 Essay
1) Describe the characteristics of successful e-tailing. How do the principles of offline retail
success apply to e-tail success?
Answer: Many of the same basic principles that apply to retail success also apply to e-tail
success. Sound business thinking, visionary leadership, thorough competitive analysis and
financial analysis, and the articulation of a well-thought-out EC strategy are essential.
Ensuring appropriate infrastructure, particularly a stable and scalable technology infrastructure to
support the online and physical aspects of EC business operations, is important. Newly required
capabilities (e.g., capabilities in logistics and distribution) might need to be obtained through
external strategic alliances.
Offering quality merchandise at good prices, coupled with excellent service, and cross-channel
coordination and integration in which customers can almost seamlessly operate between the
online and physical environments of a business are also important elements in successful etailing.
Diff: 3
Page Ref: 102
AACSB Standard: Reflective Thinking
2) What are virtual (pure play) e-tailers? Give an example. List one advantage and one
disadvantage of this business model.
Answer: Virtual (pure-play) e-tailers are firms that sell directly to consumers over the Internet
without maintaining a physical sales channel. Amazon.com is a prime example of this type of etailer. Virtual e-tailers have the advantage of low overhead costs and streamlined processes. One
disadvantage is a lack of established infrastructure or back office to support the online frontoffice activities.
Diff: 2
Page Ref: 106
AACSB Standard: Reflective Thinking
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Copyright © 2010 Pearson Education, Inc.
3) Compare the advantages of online job markets over traditional job markets on five
characteristics.
Answer: See Exhibit 3.6 on page 113.
Diff: 2
Page Ref: 113
4) Why are trust verification sites important to e-tailers and other online sellers? List two
verification sites. What is their function?
Answer: With so many sellers online, many consumers are not sure whom they can trust.
Several companies evaluate and verify the trustworthiness of various e-tailers. One such
company is TRUSTe. The TRUSTe seal appears at the bottom of each TRUSTe-approved etailer's Web site. E-tailers pay TRUSTe for use of the seal, or trustmark. Two trust verification
sites are VeriSign and BBBOnline. TRUSTe's members hope that consumers will see the seal as
an assurance of their ethical conduct, privacy policy, and personal information protection.
Diff: 2
Page Ref: 129
5) List and briefly describe three B2C e-tailing business models classified by the distribution
channel used.
Answer: Mail-order retailers that go online. Most traditional mail-order retailers, such as QVC
and Sharper Image, simply added another distribution channel–the Internet.
Direct marketing from manufacturers. Manufacturers, such as Dell and Nike, market directly
online from company sites to individual customers.
Pure-play e-tailers. These e-tailers do not have physical stores, only an online sales presence..
Click-and-mortar retailers. These are either traditional businesses that developed Web sites to
support their business activities in some way; or e-tailers who introduced physical storefronts.
Internet (online) malls. These malls include large numbers of independent storefronts. Ideally,
the customer would like to go to different stores in the same mall, use one shopping cart, and pay
only once.
Also see Exhibit 3.5 on page 109.
Diff: 3
Page Ref: 105-109
AACSB Standard: Use of Information Technology
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 4 Consumer Behavior, Internet Marketing, and Advertising
4.1 True/False
1) The world's largest online movie rental subscription company, Netflix, implemented
intelligent agents in its movie recommendation service called CineMatch to help customers
select movies they would like to watch and to better manage its inventory.
Answer: TRUE
Diff: 2
Page Ref: 143
2) Finding and retaining customers is a major critical success factor for offline and online
businesses operating in an increasingly competitive environment.
Answer: TRUE
Diff: 1
Page Ref: 144
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3) One of the keys to building effective customer relationships is to understand intelligent agents.
Answer: FALSE
Diff: 2
Page Ref: 144
4) The purpose of an EC customer behavior model is to help firms understand how a consumer
makes a purchasing decision to be able to influence that decision through advertising or other
marketing method.
Answer: TRUE
Diff: 3
Page Ref: 145
AACSB Standard: Reflective Thinking
5) Personal characteristics of customers, such as age and income, are independent variables,
which are uncontrollable variables for EC companies.
Answer: TRUE
Diff: 3
Page Ref: 145
AACSB Standard: Reflective Thinking
6) The first step in the buying decision process is product evaluation and comparison.
Answer: FALSE
Diff: 2
Page Ref: 146
7) Consumer processing of an advertising message includes four stages: interest, desire,
attention, and action.
Answer: FALSE
Diff: 2
Page Ref: 146
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8) When Chaplin's auto lease is about to expire, he decides it is time to buy a new car. This
imbalance between a desired state and an actual state is called need identification.
Answer: TRUE
Diff: 3
Page Ref: 147
AACSB Standard: Reflective Thinking
9) In the consumer purchasing-decision process, virtual catalogs and links to external sources
support the evaluation and selection phase of that process.
Answer: FALSE
Diff: 2
Page Ref: 147
10) In the consumer decision-making process, the buyer is the person who ultimately makes the
buying decision.
Answer: FALSE
Diff: 3
Page Ref: 149
AACSB Standard: Reflective Thinking
11) Mass marketing is an approach to marketing that treats each customer in a unique way such
as fitting advertising to the customer's profile and needs.
Answer: FALSE
Diff: 2
Page Ref: 149
AACSB Standard: Reflective Thinking
12) Segmentation refers to the matching of services, products, and advertising content to
individuals and their preferences.
Answer: FALSE
Diff: 2
Page Ref: 150
13) Personalization is the matching of services or products with large groups of customer
segments.
Answer: FALSE
Diff: 2
Page Ref: 152
14) A user profile defines a customer's preferences, behaviors, and demographics and can be
generated by observing what the user does online.
Answer: TRUE
Diff: 3
Page Ref: 152
15) Behavioral targeting helps marketers by providing information about an individual's actual
Internet purchases to select the most effective advertisements to display to that individual.
Answer: FALSE
Diff: 3
Page Ref: 153
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16) Customer loyalty is important because it is a customer's deep commitment to rebuy a product
or service consistently in the future, thereby causing repetitive same-brand or same brand-set
purchasing.
Answer: TRUE
Diff: 2
Page Ref: 154
17) One of the major objectives of universal services is to increase customer loyalty through
individual personalization.
Answer: FALSE
Diff: 2
Page Ref: 154
18) Customer loyalty can lead to enhanced resistance to competitors, a decrease in price
sensitivity, and an increase in favorable word-of-mouth.
Answer: TRUE
Diff: 2
Page Ref: 154
19) Attracting and retaining loyal customers is the most important issue for e-tailers because
customer loyalty can lower marketing and advertising costs, transaction costs, customer turnover
expenses, and failure costs such as warranty claims.
Answer: TRUE
Diff: 3
Page Ref: 154
AACSB Standard: Reflective Thinking
20) Satisfaction is one of the most important consumer reactions in the B2C online environment.
Answer: TRUE
Diff: 2
Page Ref: 155
21) Spyware are tiny graphics files embedded in e-mail messages and in Web sites that transmit
information about users and their movements to a Web server.
Answer: FALSE
Diff: 1
Page Ref: 163
22) A cookie is a data file that is placed on a user's hard drive by a remote Web server only when
the users gives full consent to collect information about the user's activities at a site.
Answer: FALSE
Diff: 1
Page Ref: 163
23) One problem with Web analytics, Web mining, clickstream data, and so on is that we
observe and follow a computer, not knowing who is actually moving the mouse, which can be
solved with biometric marketing.
Answer: TRUE
Diff: 2
Page Ref: 163
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24) Banner exchanges are markets where companies can trade or exchange placement of banner
ads on each other's Web sites.
Answer: TRUE
Diff: 2
Page Ref: 169
25) Social factors such as word-of-mouth play an influential role in EC shopping or online
gaming.
Answer: TRUE
Diff: 2
Page Ref: 174
4.2 Multiple Choice
1) The number of organizational buyers is much smaller than the number of individual
consumers, and their transaction volumes are:
A) a little larger, and the terms of negotiations and purchasing are more complex.
B) far smaller, and the terms of negotiations and purchasing are less complex.
C) about the same and the terms of negotiations and purchasing are simpler.
D) far larger, and the terms of negotiations and purchasing are more complex.
Answer: D
Diff: 3
Page Ref: 144
AACSB Standard: Reflective Thinking
2) Paws 'n Tails is an online pet shop that wants to influence what customers buy and build
effective customer relationships and loyalty. What is the key to influencing behavior and
building these relationships?
A) understanding consumer online behavior and then influencing it through advertising and
promotions
B) understanding competitors' pricing strategy and then undercutting it
C) identifying the wants and needs of major customer segments
D) suggesting as many products as possible to online shoppers as soon as they visit the EC site
Answer: A
Diff: 3
Page Ref: 145
3) A(n) ________ is someone whose advice or view carries some weight in making a final
purchasing decision.
A) initiator
B) influencer
C) decider
D) buyer
Answer: B
Diff: 2
Page Ref: 149
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4) Marketing and advertising approaches have evolved from mass marketing to market
segmentation to one-to-one marketing. This evolution occurred because:
A) the marketing focus shifted from customers to products.
B) companies sought to decrease the number of marketing campaigns.
C) concerns about privacy have diminished.
D) the Internet enabled companies to better communicate with customers and understand their
needs and buying habits.
Answer: D
Diff: 3
Page Ref: 152
AACSB Standard: Reflective Thinking
5) By increasing customer loyalty, EC companies can achieve each of the following benefits
except:
A) lower marketing and advertising costs.
B) higher warranty claims costs.
C) lower transaction costs.
D) lower resistance to competitors.
Answer: B
Diff: 2
Page Ref: 154
AACSB Standard: Reflective Thinking
6) The introduction of EC has:
A) decreased customer loyalty because customers can more easily shop, compare, and switch to
different vendors.
B) increased customer loyalty because customers don't have time to shop around.
C) increased the cost of acquiring and retaining customers.
D) decreased advertising and promotion costs.
Answer: A
Diff: 3
Page Ref: 154
AACSB Standard: Reflective Thinking
7) The ethical issue raised by profiling customers too precisely is:
A) spamming.
B) invasion of privacy.
C) theft of intellectual property.
D) security.
Answer: B
Diff: 2
Page Ref: 154
AACSB Standard: Ethical Reasoning
49
Copyright © 2010 Pearson Education, Inc.
8) What has been the impact of the introduction of EC on customer loyalty in general?
A) Loyalty has decreased because of customers' increased ability to shop, compare prices and
features, and change vendors.
B) Loyalty has increased because of targeted relationship marketing.
C) There has been little change in loyalty because the impacts have cancelled each other out.
D) It is not known whether loyalty has increased or decreased.
Answer: A
Diff: 3
Page Ref: 155
9) According to research, customer satisfaction with an Internet store:
A) cannot be predicted.
B) depends on two types of factors: information quality and customer service quality.
C) drops dramatically when certain Web site features fail to perform properly, such as the
content's reliability, loading speed, or usefulness.
D) is higher for new customers than former customers.
Answer: C
Diff: 2
Page Ref: 155
10) An Internet merchant can increase its trustworthiness by using each of the following except:
A) a vendor evaluation, such as BBB Online
B) co-branding
C) simple design
D) a convenient return policy
Answer: C
Diff: 2
Page Ref: 157
AACSB Standard: Reflective Thinking
11) Procter & Gamble (P&G) used the Internet in the new product development of Whitestrips, a
teeth-brightening product. Based on this experience, P&G:
A) decided to add Internet research to its traditional marketing test model.
B) could not determine the target market segments for the Whitestrips.
C) learned that the cost of online surveys was about the same as similarly sized telephone
surveys, but online surveys expedited research considerably.
D) reduced the time-to-market from concept to market launch by approximately two years.
Answer: D
Diff: 3
Page Ref: 159
AACSB Standard: Reflective Thinking
12) The use of cookies:
A) is one of the most controversial issues in EC.
B) has not helped Internet marketers target their ads.
C) is a widely used method for mass marketing.
D) is being replaced by adware and spyware programs.
Answer: A
Diff: 2
Page Ref: 160
AACSB Standard: Reflective Thinking
50
Copyright © 2010 Pearson Education, Inc.
13) All of the following are correct about market research methods except:
A) It is important first to understand how groups of consumers are classified or segmented.
B) Markets can be segmented to increase the percentage of responses and to formulate effective
marketing strategies that appeal to specific consumer groups.
C) Direct mail marketing methods are usually cost-effective.
D) Market segmentation is done with the aid of tools such as data modeling and data
warehousing.
Answer: C
Diff: 3
Page Ref: 160
AACSB Standard: Reflective Thinking
14) To avoid getting inaccurate information from participants of online surveys, marketers learn
about customers by observing their behavior using each of the following except:
A) transaction logs that record user activities at a company's Web site
B) cookies that allow a Web site to store data on the user's PC
C) spyware that gathers user information through an Internet connection without the user's
knowledge
D) data mining to analyze clickstream data
Answer: D
Diff: 2
Page Ref: 160
15) Once a company knows a consumer's preferences, the company can predict, without asking
the consumer directly, what other products or services that consumer might enjoy through:
A) active web bugs.
B) spyware.
C) collaborative filtering.
D) personalization.
Answer: C
Diff: 3
Page Ref: 160
AACSB Standard: Reflective Thinking
16) Which of the following is not a specific method for collecting online data?
A) phone surveys to learn if there are too many products for the customer to look through
B) e-mail communication with individual customers
C) moderated focus groups conducted in chat rooms
D) tracking customers' movements on the Web
Answer: A
Diff: 2
Page Ref: 161
AACSB Standard: Analytic Skills
51
Copyright © 2010 Pearson Education, Inc.
17) Two key factors limiting the use of personalization to more precisely target marketing efforts
to individual customers are:
A) matching profiles with product offerings and delivering those offerings.
B) communication costs and filtering costs.
C) privacy and trust issues.
D) lack of customer loyalty and service customization costs.
Answer: C
Diff: 3
Page Ref: 163
AACSB Standard: Reflective Thinking
18) Which of the following statement about Web mining is false?
A) Web mining refers to the use of data mining techniques for discovering and extracting
information from Web documents.
B) Web mining explores both Web content and Web usage.
C) Web mining uses customer data to infer or predict customer interest in other products or
services.
D) Usage analysis is derived from clickstream data.
Answer: C
Diff: 3
Page Ref: 163
AACSB Standard: Reflective Thinking
19) What is the key problem that biometric marketing is intended to solve?
A) knowing the identity of the actual shopper
B) improving accuracy of the shopper's data
C) increasing the speed of order processing
D) creating a loyalty program
Answer: A
Diff: 2
Page Ref: 164
AACSB Standard: Reflective Thinking
20) ________ is an advertising network that a B2B company can use as part of its advertising
strategy to reach new customers.
A) Amazon.com
B) BBB Online
C) DoubleClick
D) WebMonkey
Answer: C
Diff: 2
Page Ref: 167
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21) Ways in which user profiles are typically generated by EC businesses include all of the
following except:
A) asking users to fill in a questionnaire
B) using cookies, spyware, or Web bugs to observe what people are doing online
C) using customer segmentation to identify customers' preferences
D) basing them on what customers have purchased online before
Answer: C
Diff: 2
Page Ref: 168
AACSB Standard: Reflective Thinking
22) All of the following describe click-through rate except:
A) It is the ratio between the number of clicks on a banner ad and the number of times it is seen
by viewers.
B) It is a request for data from a Web page or file.
C) It measures the success of a banner in attracting visitors to click on the ad.
D) It may be less than or equal to the conversion rate.
Answer: B
Diff: 2
Page Ref: 168
23) Word-of-mouth marketing by which customers promote a product or service by telling others
via social networks or other means is referred to as:
A) affiliate marketing.
B) viral marketing.
C) target marketing.
D) search engine marketing.
Answer: B
Diff: 2
Page Ref: 176
AACSB Standard: Reflective Thinking
24) ________, such as concerts and videos, can generate tremendous public excitement and
bring huge crowds to a Web site.
A) Live Web events
B) Webcasting
C) Phone casting
D) Mobile casting
Answer: A
Diff: 2
Page Ref: 178
AACSB Standard: Use of Information Technology
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25) The popularity of Apple's iPhone and Application Store has made ________ important to
advertisers, who see social networking widgets, restaurant locators, mobile games, and other
applications as prime targets.
A) stickiness
B) direct marketing
C) mobile advertising
D) banner ads
Answer: C
Diff: 2
Page Ref: 179
26) How many Apple Application Store downloads were made by users in the five months
spanning July 2008 to December 2008?
A) 100 million
B) 25 million
C) 5 million
D) 1 million
Answer: A
Diff: 2
Page Ref: 179
27) One of the major challenges of one-to-one advertising is ________, or the flooding of users
with junk e-mail, banners, pop-ups, and so on.
A) interstitial ads
B) permission marketing
C) spamming
D) behavioral targeting
Answer: C
Diff: 1
Page Ref: 180
28) Web site content is especially important to increase stickiness because:
A) customers are expensive to acquire.
B) Web sites are expensive to maintain.
C) competitors are always attempting to steal away customers.
D) of Internet-accessible mobile devices.
Answer: A
Diff: 3
Page Ref: 183
AACSB Standard: Reflective Thinking
54
Copyright © 2010 Pearson Education, Inc.
29) Banner advertising on Web sites helps trigger a realization that there is a gap between reality
and a desired state, which occurs in the ________ stage of the EC purchase decision-making
process.
A) need identification or recognition
B) information search
C) evaluation
D) product or merchant brokering
Answer: A
Diff: 2
Page Ref: 184
AACSB Standard: Use of Information Technology
30) As the volume of customers, products, vendors, and information increases, it becomes
uneconomical or impossible for customers to consider all relevant information, and available
products/services. The practical solution to handling such information overload is:
A) to use permission marketing.
B) to use software or intelligent agents.
C) to increase the use of ad agencies.
D) to design Web sites with minimal content.
Answer: B
Diff: 2
Page Ref: 184
4.3 Fill in the Blank
1) A(n) ________ is a person whose advice or view carries some weight in making a final
purchasing decision.
Answer: influencer
Diff: 2
Page Ref: 149
2) ________ is marketing that treats each customer in a unique way to fit marketing and
advertising with the customer's profile and needs.
Answer: One-to-one (relationship) marketing
Diff: 2
Page Ref: 150
3) The classification of groups of similar customers is called ________.
Answer: market segmentation
Diff: 2
Page Ref: 150
4) ________ is the matching of services, products, and advertising content with individual
consumers and their preferences.
Answer: Personalization
Diff: 2
Page Ref: 152
5) The requirements, preferences, behaviors, and demographic traits of a particular customer is
referred to as the ________.
Answer: user profile
Diff: 2
Page Ref: 152
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6) A(n) ________ is a data file that is placed on a user's hard drive by a remote Web server,
frequently without disclosure or the user's consent, that collects information about the user's
activities at a site.
Answer: cookie
Diff: 2
Page Ref: 152
7) ________ is the use of information collected on an individual's Internet browsing behavior to
select which advertisements to display to that individual.
Answer: Behavioral targeting
Diff: 2
Page Ref: 153
8) ________ refers to a deep commitment to rebuy or repatronize a preferred product/service
consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing.
Answer: Customer loyalty
Diff: 1
Page Ref: 154
9) Trust and ________ are the two most important factors in determining customer e-loyalty.
Answer: satisfaction
Diff: 1
Page Ref: 156
AACSB Standard: Reflective Thinking
10) ________ is the psychological status of willingness to depend on another person or
organization.
Answer: Trust
Diff: 1
Page Ref: 156
11) Several market research firms create panels of qualified Web shoppers to participate in
online ________.
Answer: focus groups
Diff: 2
Page Ref: 162
12) A(n) ________ records user activities at a company's Web site.
Answer: transaction log
Diff: 2
Page Ref: 162
13) As customers move from a Web site to other Web sites, they establish their ________, which
is a pattern of their movements on the Internet.
Answer: clickstream behavior
Diff: 2
Page Ref: 162
14) ________ are tiny graphics files embedded in e-mail messages and in Web sites that transmit
information about users and their movements to a Web server.
Answer: Web bugs
Diff: 2
Page Ref: 163
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15) ________ is software that gathers user information through an Internet connection without
the user''s knowledge.
Answer: Spyware
Diff: 1
Page Ref: 163
16) ________ is data that occurs inside the Web environment and provides a trail of the user's
activities in the Web site.
Answer: Clickstream data
Diff: 2
Page Ref: 163
17) ________ refers to the use of data mining techniques for discovering and extracting
information from Web documents.
Answer: Web mining
Diff: 2
Page Ref: 163
18) ________ refers to online marketing facilitated by the Internet, and by which marketers and
advertisers can interact directly with customers and consumers can interact with advertisers or
vendors.
Answer: Interactive marketing
Diff: 1
Page Ref: 165
AACSB Standard: Reflective Thinking
19) ________ are the number of times users call up a page that has a banner on it during a
specific period; known as impressions or page views.
Answer: Ad views
Diff: 2
Page Ref: 166
20) ________ is the fee an advertiser pays for each 1,000 times a page with a banner ad is
shown.
Answer: Cost per thousand impressions
Diff: 3
Page Ref: 166
21) ________ is the characteristic that influences the average length of time a visitor stays in a
site.
Answer: Stickiness
Diff: 2
Page Ref: 167
22) ________ are firms that offer specialized services such as brokering banner ads for sale and
helping target ads to consumers who are likely to be interested in categories of advertisements
based on consumer profiles.
Answer: Advertising networks
Diff: 2
Page Ref: 167
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23) ________ is the method of increasing a Web site's ranking on search engines based on
knowing the ranking algorithm.
Answer: Search engine optimization
Diff: 2
Page Ref: 171
24) ________ is the process of converting media products and advertisement material developed
in one environment (e.g., a country) to a form culturally and linguistically acceptable in countries
outside the original target market.
Answer: Localization
Diff: 2
Page Ref: 182
AACSB Standard: Use of Information Technology
25) Intelligent agents that support ________ help people deciding what product to buy.
Answer: product brokering
Diff: 2
Page Ref: 184
4.4 Essay
1) Identify and discuss the five phases in the generic purchasing-decision model.
Answer: The five phases are:
(1) Need identification: Consumer is faced with an imbalance between the actual and the desired
states of a need.
(2) Information search: Search of the various alternatives to satisfy the need.
(3) Alternative evaluation: Collect information to develop a set of criteria to help evaluate and
compare alternatives.
(4) Purchase and delivery: Consumer makes the purchasing decision, arranges payment and
delivery, and purchases warranties.
(5) Postpurchase behavior: Customer service and the buyer's evaluation of the usefulness of the
product.
Diff: 2
Page Ref: 147
AACSB Standard: Reflective Thinking
2) How can live Web events be used an advertising strategy? Explain three of the best practices
for successful live Web events.
Answer: Live Web events (concerts, shows, interviews, debates, videos), if properly done, can
generate tremendous public excitement and bring huge crowds to a Web site. Some of the best
practices for successful live Web events are:
- Carefully plan the content for the audience, interactivity level, preproduction, and schedule.
- Execute the production of the Live even using rich media.
- Conduct appropriate promotion via e-mails, affinity sites, and streaming media directories, and
conduct proper offline and online advertisement.
- Prepare for a high-quality delivery of the event.
- Capture data and analyze the audience's response so that improvements can be made.
Diff: 2
Page Ref: 178
AACSB Standard: Use of Information Technology
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3) List four reasons why Web advertising is growing rapidly.
Answer:
Cost. Online ads are sometimes cheaper than those in other media. In addition, ads can be
updated at any time with minimal cost.
Richness of format. Web ads can effectively use the convergence of text, audio, graphics, and
animation. In addition, games, entertainment, and promotions can be easily combined in online
advertisements..
Personalization. Web ads can be interactive and targeted to specific interest groups and/or
individuals; the Web is a much more focused medium.
Timeliness. Internet ads can be fresh and up-to-the-minute.
Location-basis. Using wireless technology and GPS, Web advertising can be location-based;
Internet ads can be sent to consumers whenever they are in a specific time and location; e.g., near
a restaurant or a theater.
Linking. It is easy to link from an online ad to a storefront–one click does it.
Digital branding. Even the most price-conscious online shoppers are willing to pay premiums
for brands they trust.
Diff: 2
Page Ref: 167
AACSB Standard: Use of Information Technology
4) What are two of the major considerations when implementing an online ad campaign?
Answer: Some of the major considerations when implementing an online ad campaign include
the following:
- The target audience needs to be clearly understood and should be online surfers.
- The traffic to the site should be estimated, and a powerful enough server must be prepared to
handle the expected traffic volume.
- Assuming that the promotion is successful, what will the result be? This assessment is needed
to evaluate the budget and promotion strategy.
- Consider cobranding; many promotions succeed because they bring together two or more
powerful partners.
Diff: 2
Page Ref: 181
5) Explain the importance of customer loyalty and identify ways to increase e-loyalty.
Answer: Attracting and retaining loyal customers remains the most important issue for any
selling company, including e-tailers. Increased customer loyalty can bring cost savings to a
company in various ways: lower marketing and advertising costs, lower transaction costs, lower
customer turnover expenses, and lower failure costs such as warranty claims.
Customer loyalty also strengthens a company's market position because loyal customers are kept
away from the competition. It can lead to enhanced resistance to competitors, a decrease in price
sensitivity, and an increase in favorable word-of-mouth.
Companies can foster e-loyalty by learning about their customers' needs, interacting with
customers, and providing superb customer service.
Diff: 3
Page Ref: 155
AACSB Standard: Use of Information Technology
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 5 B2B E-Commerce
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5.1 True/False
1) Portsmouth Hospitals NHS Trust's use of online auctions successfully enabled the UK healthcare service provider to reduce costs without reducing the quality of care.
Answer: TRUE
Diff: 2
Page Ref: 194
2) Reverse auctions are one method of electronic procurement that is very popular with public
organizations where tendering is usually mandatory.
Answer: TRUE
Diff: 3
Page Ref: 194
AACSB Standard: Use of Information Technology
3) B2B e- commerce refers to transactions between businesses that are conducted electronically
over the public Internet only.
Answer: FALSE
Diff: 1
Page Ref: 195
4) A major characteristic of B2B e-commerce is that companies attempt to electronically
automate trading, communication, and collaboration processes in order to improve them, which
cannot be done without the Internet.
Answer: FALSE
Diff: 2
Page Ref: 195
5) The availability of a secure broadband Internet platform is one of the key drivers of B2B EC.
Answer: TRUE
Diff: 1
Page Ref: 195
AACSB Standard: Reflective Thinking
6) Market forecasters estimate that by 2012 the global B2B market, both online and offline,
could reach $1 trillion.
Answer: FALSE
Diff: 2
Page Ref: 195
7) B2B EC marketplaces that involve one seller selling to many buyers is called an exchange.
Answer: FALSE
Diff: 1
Page Ref: 196
8) In one-to-many and many-to-one marketplaces, if all selling is done by one company, it is a
buy-side market.
Answer: FALSE
Diff: 2
Page Ref: 196
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9) In company-centric marketplaces, the individual company has very little control over who
participates in selling or buying transactions.
Answer: FALSE
Diff: 2
Page Ref: 196
AACSB Standard: Use of Information Technology
10) E-marketplace exchanges are usually owned and run by a third party or by a consortium.
Answer: TRUE
Diff: 2
Page Ref: 196
AACSB Standard: Use of Information Technology
11) Businesses deal with other businesses for purposes beyond just selling or buying. One
example is that of collaborative commerce, which includes communication, design, planning,
and information sharing among business partners.
Answer: TRUE
Diff: 2
Page Ref: 196
AACSB Standard: Use of Information Technology
12) Intermediaries in B2B commerce that broker transactions between buyers and sellers are
third-parties that are either virtual or brick-and-mortar.
Answer: TRUE
Diff: 2
Page Ref: 197
AACSB Standard: Reflective Thinking
13) Spot buying refers to the purchasing of goods and services according to a schedule, usually
at prevailing market prices that are determined by supply and demand.
Answer: FALSE
Diff: 2
Page Ref: 197
14) Stock exchanges and commodity exchanges (such as oil and sugar) are examples of spot
buying.
Answer: TRUE
Diff: 1
Page Ref: 197
AACSB Standard: Reflective Thinking
15) Strategic sourcing purchases involve long-term contracts that usually are based on private
negotiations between sellers and buyers.
Answer: TRUE
Diff: 2
Page Ref: 197
AACSB Standard: Reflective Thinking
16) Two examples of direct materials for a food processing company are computers and
communication devices.
Answer: FALSE
Diff: 2
Page Ref: 198
AACSB Standard: Reflective Thinking
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17) MRO, which stands for "maintenance, repair, and operation," refers to indirect or
nonproduction materials that support the production process.
Answer: FALSE
Diff: 2
Page Ref: 198
18) Markets that focus on providing materials or products that are used in various types of
industries are known as horizontal marketplaces.
Answer: TRUE
Diff: 2
Page Ref: 198
19) B2B services are completely replacing human agents in commercial real estate and travel
industries.
Answer: FALSE
Diff: 2
Page Ref: 199
20) By using the Internet and automatic-response software agents for customer service,
companies have been able to reduce their customer service costs by up to fifty percent.
Answer: FALSE
Diff: 2
Page Ref: 203
AACSB Standard: Use of Information Technology
21) If a company wants to dispose of unwanted assets without advertising to the public that it is
doing so, an intermediary-conducted public auction is a logical choice.
Answer: TRUE
Diff: 2
Page Ref: 208
22) Maverick buying refers to the planning, organizing, and coordinating of all the activities
pertaining to the purchasing of the goods and services necessary to accomplish the mission of an
enterprise.
Answer: FALSE
Diff: 2
Page Ref: 221
AACSB Standard: Use of Information Technology
23) Aggregating the catalogs of all approved suppliers and combining them into a single
electronic catalog is an effective solution for internal procurement because it minimizes
maverick buying.
Answer: TRUE
Diff: 3
Page Ref: 215
24) Caltex, a multinational oil company, reduced the number of its suppliers from over 3,000 to
800 by implementing a central catalog for internal purchasing, lowering the per unit prices.
Answer: TRUE
Diff: 3
Page Ref: 215
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25) Google's OpenSocial is a programming standard that lets developers create applications that
can run on a wide range of social networking platforms, which may increase B2B social
networking.
Answer: TRUE
Diff: 2
Page Ref: 232
5.2 Multiple Choice
1) Portsmouth Hospitals NHS Trust, which provided health-care services for almost 1 million
people in the United Kingdom, cut back-office purchasing costs by:
A) using online reverse auctions to purchase from suppliers at the the lowest mutually acceptable
purchase price.
B) implementing online catalogs.
C) buying via its intranet.
D) using collaborative commerce.
Answer: A
Diff: 2
Page Ref: 194
AACSB Standard: Use of Information Technology
2) Key business drivers for B2B are all of the following except:
A) the availability of a secure broadband Internet platform
B) numerous private and public B2B e-marketplaces
C) the willingness of companies to incur higher costs to improve collaboration
D) the need for collaborations between suppliers and buyers
Answer: C
Diff: 1
Page Ref: 195
3) B2B transactions that involve communication, design, planning, information sharing, and
activities beyond financial transactions among business partners is referred to as:
A) exchanges.
B) collaborative commerce.
C) trading communities.
D) public marketplaces.
Answer: B
Diff: 2
Page Ref: 195
4) A(n) ________ is an online third party that brokers B2B transactions between a buyer and
seller.
A) strategic source
B) horizontal marketplace
C) vertical marketplace
D) intermediary
Answer: D
Diff: 2
Page Ref: 196
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5) The purchase of goods and services as they are needed, usually at prevailing market prices, is
referred to as ________.
A) direct materials
B) consolidation
C) spot buying
D) strategic sourcing
Answer: C
Diff: 2
Page Ref: 197
6) Purchases of goods and services based on long-term contracts is referred to as ________.
A) direct materials
B) consolidation
C) spot buying
D) strategic sourcing
Answer: D
Diff: 2
Page Ref: 197
7) ________ can be supported more effectively and efficiently through direct buyer-seller
negotiations that are either offline or online, which can be done in private exchanges.
A) Strategic sourcing
B) Spot buying
C) B2C e-commerce
D) MRO
Answer: A
Diff: 2
Page Ref: 197
AACSB Standard: Reflective Thinking
8) What are the two types of materials and supplies that are traded in B2B?
A) digital and physical
B) direct and indirect
C) horizontal and vertical
D) commodities and nonproduction
Answer: B
Diff: 1
Page Ref: 198
9) Nonproduction materials such as equipment and tools that support production are called:
A) indirect materials.
B) operational materials.
C) direct materials.
D) virtual materials.
Answer: A
Diff: 2
Page Ref: 198
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10) The ________ consists of a number of interrelated subprocesses that extend from the
acquisition of materials from suppliers to packaging it and moving it to distributors and retailers.
A) supply chain
B) vertical market
C) horizontal marketplace
D) production chain
Answer: C
Diff: 2
Page Ref: 198
11) The major B2B service industries include each of the following except:
A) travel
B) financial
C) stock trading
D) retail
Answer: D
Diff: 2
Page Ref: 199
12) Which of the following is not one of the major benefits of B2B for both buyers and sellers?
A) expedites processing and reduces cycle time
B) reduces procurement costs
C) enables customized online catalogs with different prices for different customers
D) increases opportunities for collaboration
Answer: B
Diff: 2
Page Ref: 200
13) All are benefits of B2B except:
A) creates new sales or purchase opportunities
B) eliminates paper and reduces administrative costs
C) increases channel conflict
D) lowers search costs and time for buyers to find products and vendors
Answer: C
Diff: 2
Page Ref: 200
14) ________ occurs when B2B eliminates a distributor or a retailer.
A) Disintermediation
B) Channel conflict
C) Just-in-time delivery
D) Collaboration
Answer: A
Diff: 1
Page Ref: 200
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15) In a sell-side e-marketplace, a business sells its products and services to other business
customers, frequently over its:
A) exchange.
B) extranet.
C) intranet.
D) Web service.
Answer: B
Diff: 2
Page Ref: 201
AACSB Standard: Use of Information Technology
16) EC companies will usually separate their B2C orders from their B2B orders because B2C
and B2B orders have different:
A) buying and delivery processes.
B) accounting and financial processes.
C) marketing processes.
D) order-fulfillment processes and pricing.
Answer: D
Diff: 2
Page Ref: 202
17) By using the Internet and automatic-response software agents, GE reduced the cost of
customer service calls from $5.00 per call when done by phone to ________ per electronically
answered call.
A) $2.50
B) $1.00
C) $0.20
D) $0.05
Answer: C
Diff: 2
Page Ref: 202
18) Several benefits of Microsoft's ________ are that distributors can check inventory, make
transactions, and look up the status of their orders, significantly reducing the number of phone
calls, e-mails, and incorrect product shipments.
A) extranet-based order-entry tools
B) electronic data interchanges
C) customized catalogs
D) auto-responders
Answer: A
Diff: 3
Page Ref: 203
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19) High-quality bicycle manufacturer Gregg's Cycles does not sell its products online, nor do
they allow their bicycles to be sold online by others. By not selling online, Gregg's Cycles avoids
________ with its dealers and the independent bike shops that sell its bikes.
A) pricing conflict
B) channel conflict
C) multichannel distribution
D) disintermediation
Answer: B
Diff: 2
Page Ref: 204
AACSB Standard: Reflective Thinking
20) One of the major problems facing Cisco Systems and other direct sellers is:
A) how to find buyers.
B) how to find suppliers.
C) how to advertise in traditional channels.
D) how to manage the supply chain.
Answer: A
Diff: 1
Page Ref: 203
AACSB Standard: Reflective Thinking
21) Benefits of using a third-party hosting company for conducting B2B auctions instead of
developing an auction site in-house include all of the following except:
A) no hiring costs
B) no redeployment of corporate resources
C) time-to-market of several weeks
D) no need for additional resources such as hardware, bandwidth, or IT personnel
Answer: C
Diff: 3
Page Ref: 207
22) Companies use ________ to sell their unneeded assets for quick disposal or to dispose of
excess, obsolete, and returned products.
A) private auctions
B) liquidation
C) reverse auctions
D) forward auctions
Answer: D
Diff: 2
Page Ref: 208
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23) A company's acquisition Web site that uses e-procurement methods such as reverse auctions,
negotiations, or group purchasing to overcome the manual searching of e-stores is referred to as
________.
A) desktop procurement method
B) buy-side e-marketplace
C) an intermediary
D) aggregated catalog
Answer: B
Diff: 3
Page Ref: 209
24) Benefits of e-procurement over traditional procurement methods include all of the following
except:
A) increasing the productivity of purchasing agents
B) lowering purchase prices through product standardization, reverse auctions, volume
discounts, and consolidation of purchases
C) increasing the skill requirements and training needs of purchasing agents
D) streamlining invoice reconciliation and dispute resolution
Answer: C
Diff: 3
Page Ref: 212
AACSB Standard: Analytic Skills
25) The aggregation of suppliers' catalogs on the buyer's server to make it easier to centralize and
control all procurement is called a(n):
A) bartering exchange.
B) buy-side e-marketplace.
C) sell-side e-marketplace.
D) internal procurement marketplace.
Answer: D
Diff: 3
Page Ref: 215
AACSB Standard: Reflective Thinking
26) An example of a successful aggregation of suppliers' catalogs is that of ________, which
aggregates more than 10,000 items from the catalogs of approved suppliers into an internal
electronic catalog.
A) MasterCard International
B) Amazon.com
C) Google
D) Priceline.com
Answer: A
Diff: 2
Page Ref: 215
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27) With a bartering exchange, a company submits its surplus to the exchange and receives:
A) points of credit, which the company can then use to buy items that it needs.
B) an equivalent amount of products or services.
C) interest payments until it buys something from the exchange.
D) cash minus a small commission for services.
Answer: A
Diff: 2
Page Ref: 217
28) All of the following are true of dynamic pricing except:
A) Anonymity often is a key ingredient.
B) Buyers and sellers interact with bids and offers in real time.
C) E-malls are a prime example of this pricing model.
D) A deal is struck when there is an exact match between a buyer and a seller on price, volume,
and other variables, such as location or quality.
Answer: C
Diff: 3
Page Ref: 220
AACSB Standard: Reflective Thinking
29) Denver Boards, a B2B manufacturer of snowboard equipment, can reach and target new
retail customers in order to grow its online business by:
A) hiring an affiliation service to drive traffic to its Web site.
B) reviewing POS data.
C) mining data.
D) advertising in traditional media.
Answer: A
Diff: 3
Page Ref: 233
AACSB Standard: Use of Information Technology
30) Services provided by infomediaries to marketing managers include all of the following
except:
A) data mining to produce constructive knowledge
B) community services such as chat rooms and bulletin boards
C) analyzing clickstream data
D) processing existing data
Answer: B
Diff: 2
Page Ref: 234
AACSB Standard: Use of Information Technology
5.3 Fill in the Blank
1) ________ are public e-marketplaces that are open to all interested sellers and buyers.
Answer: Exchanges
Diff: 2
Page Ref: 195
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2) B2B e-commerce can be conducted either directly between a customer and a manufacturer or
indirectly by a third party though an online ________.
Answer: intermediary
Diff: 2
Page Ref: 197
3) ________ is the purchase of goods and services as they are needed, usually at prevailing
market prices.
Answer: Spot buying
Diff: 2
Page Ref: 197
4) ________ are markets that deal with one industry or industry segment such as steel or
chemicals.
Answer: Vertical marketplaces
Diff: 2
Page Ref: 198
AACSB Standard: Use of Information Technology
5) ________ are markets that concentrate on a service, product, or materials that are used in
various types of industries such as office supplies or PCs.
Answer: Horizontal marketplaces
Diff: 2
Page Ref: 198
AACSB Standard: Use of Information Technology
6) MRO types of materials, such as office supplies, are referred to as ________ materials
because they are used in activities that support production.
Answer: indirect
Diff: 2
Page Ref: 198
7) A(n) ________ e-marketplace is a B2B Web site that uses reverse auctions or other eprocurement methods.
Answer: buy-side
Diff: 2
Page Ref: 201
AACSB Standard: Use of Information Technology
8) In a(n) ________ e-marketplace, one company sells to many business buyers from e-catalogs
or auctions, usually over an extranet.
Answer: sell-side
Diff: 2
Page Ref: 201
AACSB Standard: Use of Information Technology
9) ________ management refers to the planning, organizing, and coordination of all the
management activities pertaining to the purchasing of goods and services needed to accomplish
the mission of an enterprise.
Answer: Procurement
Diff: 2
Page Ref: 210
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10) ________ refers to the unplanned purchases of items needed quickly, often at non-negotiated
higher prices.
Answer: Maverick buying
Diff: 2
Page Ref: 211
11) The electronic acquisition of goods and services for organizations is ________.
Answer: e-procurement
Diff: 2
Page Ref: 211
12) A(n) ________ is a tendering (bidding) system in which suppliers are invited to bid on the
fulfillment of an order and the lowest bid wins.
Answer: reverse auction
Diff: 2
Page Ref: 213
13) The invitation to participate in reverse auctions is a form or document called a(n) ________.
Answer: RFQ (request for quote)
Diff: 2
Page Ref: 213
14) ________ is the direct purchasing from internal marketplaces without the approval of
supervisors and without the intervention of a procurement department.
Answer: Desktop purchasing
Diff: 2
Page Ref: 215
15) With ________, orders from several buyers are combined into volume purchases so that
better prices can be negotiated.
Answer: group purchasing
Diff: 2
Page Ref: 216
16) With a(n) ________, a company submits its surplus to the exchange and receives points of
credit, which the company can then use to buy items that it needs.
Answer: bartering exchange
Diff: 2
Page Ref: 217
17) ________ refers to a rapid movement of prices over time and possibly across customers.
Answer: Dynamic pricing
Diff: 2
Page Ref: 220
18) Transaction fees and membership fees are two examples of ________ for exchanges.
Answer: revenue models
Diff: 2
Page Ref: 222
19) B2B portals that focus on a single industry or industry segment are referred to as ________.
Answer: vertical portals (or vortals)
Diff: 2
Page Ref: 223
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20) A subset of third-party exchanges is a(n) ________, an exchange formed and operated by a
group of major companies in one industry.
Answer: consortium trading exchange (CTE)
Diff: 3
Page Ref: 226
21) The strategy of providing such comprehensive, quality e-service for business partners is
sometimes called ________.
Answer: partner relationship management (PRM)
Diff: 2
Page Ref: 229
22) Of the ________ frequented by business and EC professionals, LinkedIn was the most well
known.
Answer: social networks
Diff: 2
Page Ref: 231
23) According to the model of organizational buyer behavior, age, gender, education, and
lifestyle are types of ________ influences.
Answer: individual
Diff: 2
Page Ref: 233
24) According to the model of organizational buyer behavior, authority, status, and
persuasiveness are types of ________ influences.
Answer: individual
Diff: 2
Page Ref: 233
25) The processing of existing date to identify useful information, such as trends and other
relationships in the data, is referred to as ________.
Answer: data mining
Diff: 2
Page Ref: 234
AACSB Standard: Use of Information Technology
5.4 Essay
1) List and briefly describe the four basic types of B2B transactions and activities.
Answer: Sell-side. One seller to many buyers.
Buy-side. One buyer from many sellers.
Exchanges. Many sellers to many buyer.
Supply chain improvements and collaborative commerce. Activities--other than buying or
selling--among business partners, such as supply chain improvements, communication,
collaboration, and information sharing for joint design and planning.
Diff: 1
Page Ref: 195
AACSB Standard: Use of Information Technology
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2) List five major benefits of B2B for buyers or sellers or both.
Answer:
Creates new sales or purchase opportunities
Eliminates paper and reduces administrative costs
Expedites processing and reduces cycle time
Lowers search costs and time for buyers to find products and vendors
Increases productivity of employees dealing with buying and/or selling
Reduces errors and improves quality of services
Makes product configuration easier
Reduces marketing and sales costs for sellers
Reduces inventory levels and costs
Enables customized online catalogs with different prices for different customers
Increases production flexibility, permitting just-in-time delivery
Reduces procurement costs for buyers
Facilitates customization via configuration
Provides for efficient customer service
Increases opportunities for collaboration
Diff: 2
Page Ref: 200
3) Briefly explain channel conflict caused by B2B. Give an example of how channel conflict can
be avoided or lessened.
Answer: In selling directly to customers, manufacturers may encounter channel conflict with the
regular distributors, including corporate dealers. B2B sellers that also sell B2C risk channel
conflicts with their existing distribution systems.
One solution, as illustrated by Gregg's Cycles, is for the manufacturer to sell its major product
(bicycles) only to distributors (B2B) and sell peripheral products, such as parts and accessories to
customers (B2C).
Diff: 2
Page Ref: 203
AACSB Standard: Reflective Thinking
4) List three goals or benefits of e-procurement.
Answer:
Increase the productivity of purchasing agents
Lower purchase prices
Improve information flow and management
Minimize maverick buying
Establish efficient collaborative supplier relations
Minimize human error
Reduce administrative costs
Diff: 3
Page Ref: 212
AACSB Standard: Use of Information Technology
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5) What are the three major functions of exchanges?
Answer:
Matching buyers and sellers
Facilitating transactions
Maintaining exchange policies and infrastructure
Diff: 1
Page Ref: 220
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 6 E-Supply Chains, Collaborative Commerce, and Corporate Portals
6.1 True/False
1) During the design of the Boeing Dreamliner 787, IT-supported collaboration reduced the need
for physical prototyping and testing.
Answer: TRUE
Diff: 1
Page Ref: 244
2) A company's internal operations are those that deal with relationships with suppliers and other
business partners are less critical than their customer-facing applications.
Answer: FALSE
Diff: 2
Page Ref: 245
AACSB Standard: Reflective Thinking
3) A company's success is clearly dependent on finding and retaining customers and far more
dependent on what is on the Web site than on what is going on behind the site.
Answer: FALSE
Diff: 3
Page Ref: 245
AACSB Standard: Reflective Thinking
4) The term supply chain comes from the concept of how systems and processes within an
organization are linked together.
Answer: FALSE
Diff: 2
Page Ref: 245
5) The success of many private, public, and military organizations depends on their ability to
manage the flows of materials, information, and money, which is referred to as the product life
cycle.
Answer: TRUE
Diff: 2
Page Ref: 246
6) Product delays, products not being where they are required at the right time, customer
dissatisfaction, and lost sales can all be caused by supply chain problems.
Answer: TRUE
Diff: 2
Page Ref: 245
7) A supply chain involves activities that take place during the entire product life cycle, from dirt
to dust.
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Answer: TRUE
Diff: 2
Page Ref: 246
AACSB Standard: Reflective Thinking
75
Copyright © 2010 Pearson Education, Inc.
8) The downstream part of the supply chain includes the activities of a company with its
suppliers, which can be manufacturers, assemblers, or both, or service providers, and their
connections with their suppliers.
Answer: FALSE
Diff: 1
Page Ref: 246
9) In the internal part of the supply chain, the major concerns are production management,
manufacturing, and inventory control.
Answer: TRUE
Diff: 1
Page Ref: 246
10) In the upstream supply chain, attention is directed at distribution, warehousing,
transportation, and after-sale service.
Answer: FALSE
Diff: 1
Page Ref: 246
11) SCM aims to minimize inventory levels, optimize production and increase throughput,
decrease manufacturing time, optimize logistics and distribution, streamline order fulfillment,
and overall reduce the costs associated with these activities.
Answer: TRUE
Diff: 3
Page Ref: 247
AACSB Standard: Reflective Thinking
12) E-supply chain management is the collaborative use of technology to enhance B2C processes
and improve speed, agility, real-time control, and customer satisfaction.
Answer: FALSE
Diff: 1
Page Ref: 247
AACSB Standard: Use of Information Technology
13) The success of an e-supply chain depends on managing information with strict policies,
discipline, and daily monitoring.
Answer: TRUE
Diff: 2
Page Ref: 248
AACSB Standard: Ethical Reasoning
14) The success of an e-supply chain depends on an e-supply chain that is loosely integrated both
within a company and across an extended enterprise made up of suppliers, trading partners,
logistics providers, and the distribution channel.
Answer: FALSE
Diff: 2
Page Ref: 248
AACSB Standard: Reflective Thinking
76
Copyright © 2010 Pearson Education, Inc.
15) Companies can use replenishment information to reduce inventories and eliminate stocking
points.
Answer: TRUE
Diff: 2
Page Ref: 248
16) By combining bar coding and wireless technologies, automobile dealers are able to scan in
goods electronically as they arrive and place them in inventory up to 10 percent faster than
previously.
Answer: FALSE
Diff: 2
Page Ref: 249
17) At hospitals and supermarkets, inventory reorder points have been automated so that when
inventory gets down to a certain point the system will automatically notify a human of the exact
amount to reorder.
Answer: FALSE
Diff: 2
Page Ref: 249
18) Products such as groceries or gasoline have predictable demand. For these products, an
effective supply chain emphasizes speed and flexibility to minimize the bullwhip effect rather
than low costs.
Answer: FALSE
Diff: 3
Page Ref: 251
AACSB Standard: Reflective Thinking
19) Pure EC companies are likely to have more supply chain problems if they lack a logistics
infrastructure and must use external logistics services.
Answer: TRUE
Diff: 3
Page Ref: 251
AACSB Standard: Reflective Thinking
20) Some of the limitations of RFID can be overcome by a new wireless standard, RuBee.
Answer: TRUE
Diff: 3
Page Ref: 253
AACSB Standard: Use of Information Technology
21) RuBee relies on low-frequency magnetic waves to track products and transfer information.
Answer: FALSE
Diff: 2
Page Ref: 258
22) With vendor-managed inventory, retailers make their suppliers responsible for determining
when to order and how much to order. The retailer provides the supplier with real-time
information such as point-of-sale data, inventory levels, and a threshold below which orders are
replenished.
Answer: TRUE
Diff: 2
Page Ref: 262
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23) Studies have shown that electronic-based collaboration and product lifecycle management
(PLM) can reduce product costs and travel expenses by 50 percent, as well as significantly
reduce costs associated with product-change management.
Answer: FALSE
Diff: 3
Page Ref: 263
AACSB Standard: Reflective Thinking
24) The goal of collaborative planning, forecasting, and replenishment (CPFR) is to streamline
product flow from manufacturing plants to retailers.
Answer: FALSE
Diff: 2
Page Ref: 265
25) As with any IT project, management needs to be able to justify the development and use of a
corporate portal by comparing its cost with its benefits. The challenge is that despite the tangible
benefits from investment in portal technology, such as include increased revenues and customer
loyalty, most of the benefits of portals are intangible.
Answer: TRUE
Diff: 2
Page Ref: 271
AACSB Standard: Reflective Thinking
6.2 Multiple Choice
1) A company's internal operations and its relationships with suppliers and other business
partners are frequently:
A) much more complex than customer-facing applications such as taking an order online.
B) as complex as customer-facing applications such as taking an order online.
C) much less complex than customer-facing applications such as taking an order online.
D) replaced by customer-facing applications.
Answer: B
Diff: 3
Page Ref: 245
2) For a manufacturer, the supply chain ends:
A) when the supplier delivers raw materials and component parts to the manufacturer.
B) when the product is used up and disposed of.
C) when the customer buys the product.
D) when the customer decides he/she is satisfied with a product.
Answer: B
Diff: 3
Page Ref: 246
AACSB Standard: Reflective Thinking
78
Copyright © 2010 Pearson Education, Inc.
3) The e-SCM process that includes integrated production and distribution processes is:
A) supply chain replenishment.
B) collaborative planning.
C) e-procurement.
D) e-logistics.
Answer: A
Diff: 2
Page Ref: 248
4) When planning, designing and implementing integrated supply chain operations, management
requires a holistic focus that takes into account all of the following primary factors except:
A) strategy, structure, and people
B) location and revenues
C) IT and business processes
D) culture, including performance measurement, monitoring, and incentives
Answer: B
Diff: 3
Page Ref: 248
5) The use of Web technologies to manage warehousing and transportation processes is called:
A) collaborative planning.
B) downstream processing.
C) e-logistics.
D) e-replenishment.
Answer: C
Diff: 2
Page Ref: 249
6) Which of the following about supply chain problems is not true?
A) Supply chains in military and business operations have been plagued with problems for
generations.
B) Supply chain problems have sometimes caused armies to lose wars and companies to go out
of business.
C) Supply chain problems are most apparent in complex supply chains.
D) Supply chain problems are lowest when many business partners are involved.
Answer: D
Diff: 3
Page Ref: 250
7) The last fifteen orders from a manufacturer to its suppliers range from $100,000 to
$8,750,000. This is an example of:
A) the bullwhip effect.
B) demand manipulation.
C) supply inadequacy.
D) order instability.
Answer: A
Diff: 2
Page Ref: 251
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8) A major block in the widespread implementation of collaborative commerce is:
A) the theory of collaborative commerce hasn't been proven effective in real-world applications.
B) the technology needed isn't available.
C) collaborative commerce is extremely expensive.
D) the lack of universally accepted standards.
Answer: D
Diff: 2
Page Ref: 264
9) Wal-Mart and Levi Strauss collaborate on demand forecasting in order to optimize the flow of
materials along the supply chain. This is an example of:
A) reducing design cycle time.
B) APS.
C) CPFR.
D) reducing product development time.
Answer: C
Diff: 2
Page Ref: 265
AACSB Standard: Reflective Thinking
10) The purpose of CPFR is to:
A) minimize quality problems in supplies.
B) ensure that supply chain members have the right amount of materials and goods when needed.
C) eliminate supply chain intermediaries.
D) optimize the flow of materials along the supply chain.
Answer: B
Diff: 3
Page Ref: 265
AACSB Standard: Reflective Thinking
11) ________ is a business strategy that enables manufacturers to control and share productrelated data as part of product design and development efforts.
A) Advanced planning and scheduling
B) Collaborative planning
C) Product lifecycle management
D) Internal commerce
Answer: C
Diff: 2
Page Ref: 266
12) All of the following are true about product lifecycle management (PLM) except:
A) PLM can have significant beneficial impacts in cycle time, design reuse, and engineering.
B) The demand for PLM is limited because it does not apply to products that have short life
cycles or are complex.
C) PLM is a big step for an organization because it requires integrating different processes and
systems.
D) PLM tools are offered by major IT companies such as SAP and IBM.
Answer: B
Diff: 2
Page Ref: 266
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13) Today, many business experts agree with each of the following except:
A) Supply chain integration has reduced the intensity of competition in most industries.
B) The insightful way to view contemporary business is that competition exists between or
among supply chains rather then individual companies.
C) Supply chains from the suppliers' suppliers to the customers' customers should be jointly
planned and designed for overall optimality by all of the supply chain partners.
D) The supply chain needs to be operationally integrated so that inventory activities link
seamlessly to manufacturing activities.
Answer: A
Diff: 3
Page Ref: 267
AACSB Standard: Reflective Thinking
14) Software that helps integrate different types of information systems among collaborating
companies is called:
A) middleware.
B) browser technology.
C) collaborative software.
D) extranet technology.
Answer: A
Diff: 2
Page Ref: 268
AACSB Standard: Use of Information Technology
15) Groupware is appropriate in all of the following situations except:
A) for groups to share ideas and opinions
B) for people working on different tasks or projects
C) for networked environments
D) for people in the same room
Answer: B
Diff: 3
Page Ref: 273
AACSB Standard: Reflective Thinking
16) The growth in electronic meeting systems has been driven by all of the following except:
A) lower energy costs
B) improvements in supporting technology
C) reductions in the price of the technology
D) acceptance of virtual meetings as a respected way of doing business
Answer: A
Diff: 1
Page Ref: 275
17) ________ means that the communication and collaboration are done in real time.
A) Synchronous
B) Asynchronous
C) Bi-synchronous
D) Multi-synchronous
Answer: A
Diff: 1
Page Ref: 276
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18) All of the following are types of communication and collaboration done in real time except:
A) blogging
B) webinars
C) instant messaging
D) VoIP
Answer: A
Diff: 1
Page Ref: 276
19) The major benefit of real-time collaboration is:
A) faster decision making.
B) easier decision making.
C) that it is cheaper than asynchronous collaboration.
D) greater agreement.
Answer: B
Diff: 2
Page Ref: 276
AACSB Standard: Reflective Thinking
20) ________ is the transfer of documents and computer files while videoconferencing.
A) Web conferencing
B) Interactive whiteboarding
C) Data conferencing
D) CPFR
Answer: C
Diff: 1
Page Ref: 277
AACSB Standard: Reflective Thinking
21) All of the following are characteristics of Web conferencing except:
A) It is conducted on the Internet for as few as two and as many as twenty people.
B) It allows users to simultaneously view something on their computer screens.
C) It is much cheaper than videoconferencing because it runs over the Internet.
D) The latest technological innovations support both B2B and B2C Web conferencing
applications.
Answer: A
Diff: 2
Page Ref: 278
AACSB Standard: Use of Information Technology
22) Advantages of interactive whiteboards include all of the following except:
A) All participants can join in.
B) Throughout a meeting, each user can view and draw on a single document.
C) They enable the display of video clips.
D) There is stronger data security.
Answer: D
Diff: 2
Page Ref: 278
AACSB Standard: Reflective Thinking
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23) The Lotus Notes/Domino suite includes all of the following except:
A) instant video
B) document management
C) database
D) communication support
Answer: A
Diff: 2
Page Ref: 279
24) ________ are collaborative tools that enable people to work on the same files and
documents, making changes in a very rapid way.
A) Portals
B) Wikis
C) Lotus Notes
D) Document management
Answer: B
Diff: 2
Page Ref: 281
AACSB Standard: Use of Information Technology
25) Infrastructure needed for groupware include all of the following except:
A) VoIP
B) intranets
C) extranets
D) the Internet
Answer: A
Diff: 2
Page Ref: 282
26) Corporations are moving their phone systems to ________ to cut costs and boost efficiency.
A) RTC
B) VoIP
C) GDSS
D) bluetooth
Answer: B
Diff: 2
Page Ref: 282
27) A messaging service that transposes the desktop messaging experience to the usage scenario
of being on the move is ________.
A) mobile instant messaging
B) VoIP
C) instant video
D) data messaging
Answer: A
Diff: 2
Page Ref: 282
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28) Mobile support systems include each of the following except:
A) mobile social networking
B) mobile handset
C) mobile VoIP
D) mobile instant messaging
Answer: C
Diff: 2
Page Ref: 282
AACSB Standard: Use of Information Technology
29) ________ are required to create a truly collaborative environment, to integrate different
applications, and for standardizing communication.
A) Web services
B) Portals
C) Protocols
D) Collaborative workflows
Answer: C
Diff: 2
Page Ref: 283
30) All of the following apply to instant video except:
A) It evolved from the spread of instant messaging and Internet telephony.
B) The idea is for a kind of video chat room that allows users to chat in real time and see the
people they are communicating with.
C) It is the natural result of wanting to link people via both voice and audio.
D) The highest quality approach is to add video cameras to the participants' computers.
Answer: D
Diff: 2
Page Ref: 283
6.3 Fill in the Blank
1) Boeing's Dreamliner was referred to as a ________ airliner because IT and electronic
communication were used to support its planning and many other critical activities.
Answer: paperless
Diff: 2
Page Ref: 244
2) The success of many organization
manage the flow of materials, information, and money into, within, and out of the organization.
Such a flow is referred to as a ________.
Answer: supply chain
Diff: 2
Page Ref: 245
3) The term supply chain comes from the concept of how the partnering organizations are
________ together.
Answer: linked
Diff: 2
Page Ref: 245
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4) A supply chain involves activities that take place during the entire ________, from dirt to
dust.
Answer: product life cycle
Diff: 2
Page Ref: 246
5) When a supply chain is managed electronically, usually with Web technologies, it is referred
to as a(n) ________.
Answer: e-supply chain
Diff: 1
Page Ref: 246
6) A supply chain can be broken into three major parts. The ________ part of the supply chain
includes the activities of a company with its suppliers and their connections with their suppliers.
Answer: upstream
Diff: 2
Page Ref: 246
7) ________ is the process made up of a range of activities by which an organization obtains or
gains access to the resources they require to undertake their core business activities.
Answer: Procurement
Diff: 2
Page Ref: 247
8) ________ is a complex process that requires the coordination of many activities so that the
shipment of goods and services from supplier right through to customer is done efficiently and
effectively for all parties concerned.
Answer: Supply chain management
Diff: 2
Page Ref: 247
9) Increasingly, companies are recognizing that the efficient and effective flow of information
and materials along their supply chains is a source of ________.
Answer: competitive advantage or differentiation
Diff: 2
Page Ref: 247
10) ________ is the collaborative use of technology to enhance B2B processes and improve
speed, agility, real-time control, and customer satisfaction.
Answer: E-supply chain management
Diff: 2
Page Ref: 247
11) ________ is the use of Web-based technologies to support the material acquisition,
warehousing, and transportation processes.
Answer: E-logistics
Diff: 2
Page Ref: 249
12) The ________ refers to erratic shifts in orders up and down supply chains.
Answer: bullwhip effect
Diff: 2
Page Ref: 251
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13) ________ can lead to as many as 100 days of additional inventory waiting just in case.
Answer: Stockpiling
Diff: 2
Page Ref: 251
14) Inventories can be minimized by introducing a ________ manufacturing process as well as
by providing fast and accurate information to suppliers.
Answer: build-to-order (on demand)
Diff: 2
Page Ref: 252
15) With ________, retailers make their suppliers responsible for determining when to order and
how much to order. The retailer provides the supplier with real-time information, inventory
levels, and a threshold below which orders are replenished.
Answer: vendor-managed inventory
Diff: 2
Page Ref: 262
16) ________ is a business strategy that enables manufacturers to control and share productrelated data as part of product design and development efforts and in support of supply chain
operations.
Answer: Product lifecycle management
Diff: 2
Page Ref: 263
AACSB Standard: Reflective Thinking
17) ________ is an architecture that enables the assembly of distributed applications from
software services and ties them together.
Answer: Web services
Diff: 2
Page Ref: 268
18) ________ refers to software products that support groups of people who share a common
task or goal and collaborate on its accomplishment.
Answer: Groupware
Diff: 2
Page Ref: 273
19) ________ are online meetings whose members are in different locations, even in different
countries.
Answer: Virtual meetings
Diff: 2
Page Ref: 275
20) In collaborative work, members frequently are in different locations. Using ________
software, group members can work on the same document, which is shown on the PC screen of
each participant.
Answer: screen sharing
Diff: 2
Page Ref: 277
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21) ________ are computer-based whiteboards that work like real-world whiteboards with
markers and erasers, except all participants can join in.
Answer: Interactive whiteboards
Diff: 2
Page Ref: 278
22) A ________ is an interconnected environment in which all the participants in dispersed
locations can access and interact with each other just as inside a single entity.
Answer: collaborative (shared) workspace
Diff: 2
Page Ref: 281
23) ________ refers to communication systems that transmit voice calls over Internet Protocol
based networks.
Answer: VoIP
Diff: 2
Page Ref: 282
24) ________ is a status indicator that conveys ability and willingness of a potential
communication partner.
Answer: Presence information
Diff: 2
Page Ref: 282
25) The spread of instant messaging and Internet telephony has naturally led to the idea of
linking people via a video chat room, which is called ________.
Answer: instant video
Diff: 1
Page Ref: 283
6.4 Essay
1) Define supply chain and list the activities that are involved.
Answer: A supply chain is the flow of materials, information, money, and services from raw
material suppliers through factories and warehouses to the end customers. A supply chain also
includes the organizations and processes that create and deliver products, information, and
services to the end customers. The term supply chain comes from the concept of how the
partnering organizations are linked together.
A supply chain involves activities that take place during the entire product life cycle, from dirt to
dust. However, a supply chain is more than that, because it also includes the movement of
information and money and the procedures that support the movement of a product or a service.
Finally, the organizations and individuals involved are considered part of the supply chain as
well. When looked at broadly, the supply chain actually ends when the product reaches its afteruse disposal.
Diff: 2
Page Ref: 245
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2) Identify three factors or capabilities that the success of an e-supply chain depends on.
Answer: The success of an e-supply chain depends on the following:
- The ability of all supply chain partners to view partner collaboration as a strategic asset
- A well-defined supply chain strategy
- Information visibility along the entire supply chain
- Speed, cost, quality, and customer service
- Integrating the supply chain more tightly
Diff: 2
Page Ref: 248
3) List and briefly explain the major infrastructure elements and tools of e-supply chain
management.
Answer:
Electronic Data Interchange. EDI is the major tool used by large corporations to facilitate supply
chain relationships. Many companies are shifting from internal EDI to Internet-based EDI.
Extranets. Their major purpose is to support interorganizational communication and
collaboration.
Intranets. These are the corporate internal networks for communication and collaboration.
Corporate portals. These provide a gateway for external and internal collaboration,
communication, and information search.
Workflow systems and tools. These are systems that manage the flow of information in
organizations.
Groupware and other collaborative tools. A large number of tools facilitate collaboration and
communication between two parties and among members of small as well as large groups.
Various tools, some of which are collectively known as groupware, enable such collaboration.
Diff: 2
Page Ref: 249
AACSB Standard: Use of Information Technology
4) What are three solutions to supply chain problems provided by EC?
Answer: EC technologies automate and expedite order taking, speed order fulfillment, provide
for e-payments, properly control inventories, provide for correct forecasting and thus better
scheduling, and improve collaboration among supply chain partners.
Diff: 2
Page Ref: 251
5) List three benefits of VoIP communications for businesses.
Answer:
Lowers total cost of ownership
Lowers operational costs
Reduces hardware requirements
Provides a holistic approach to security
Helps streamline workflows
Enables optimized conferencing tools to replace business travel
Diff: 2
Page Ref: 282
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 6 E-Supply Chains, Collaborative Commerce, and Corporate Portals
6.1 True/False
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1) During the design of the Boeing Dreamliner 787, IT-supported collaboration reduced the need
for physical prototyping and testing.
Answer: TRUE
Diff: 1
Page Ref: 244
2) A company's internal operations are those that deal with relationships with suppliers and other
business partners are less critical than their customer-facing applications.
Answer: FALSE
Diff: 2
Page Ref: 245
AACSB Standard: Reflective Thinking
3) A company's success is clearly dependent on finding and retaining customers and far more
dependent on what is on the Web site than on what is going on behind the site.
Answer: FALSE
Diff: 3
Page Ref: 245
AACSB Standard: Reflective Thinking
4) The term supply chain comes from the concept of how systems and processes within an
organization are linked together.
Answer: FALSE
Diff: 2
Page Ref: 245
5) The success of many private, public, and military organizations depends on their ability to
manage the flows of materials, information, and money, which is referred to as the product life
cycle.
Answer: TRUE
Diff: 2
Page Ref: 246
6) Product delays, products not being where they are required at the right time, customer
dissatisfaction, and lost sales can all be caused by supply chain problems.
Answer: TRUE
Diff: 2
Page Ref: 245
7) A supply chain involves activities that take place during the entire product life cycle, from dirt
to dust.
Answer: TRUE
Diff: 2
Page Ref: 246
AACSB Standard: Reflective Thinking
89
Copyright © 2010 Pearson Education, Inc.
8) The downstream part of the supply chain includes the activities of a company with its
suppliers, which can be manufacturers, assemblers, or both, or service providers, and their
connections with their suppliers.
Answer: FALSE
Diff: 1
Page Ref: 246
9) In the internal part of the supply chain, the major concerns are production management,
manufacturing, and inventory control.
Answer: TRUE
Diff: 1
Page Ref: 246
10) In the upstream supply chain, attention is directed at distribution, warehousing,
transportation, and after-sale service.
Answer: FALSE
Diff: 1
Page Ref: 246
11) SCM aims to minimize inventory levels, optimize production and increase throughput,
decrease manufacturing time, optimize logistics and distribution, streamline order fulfillment,
and overall reduce the costs associated with these activities.
Answer: TRUE
Diff: 3
Page Ref: 247
AACSB Standard: Reflective Thinking
12) E-supply chain management is the collaborative use of technology to enhance B2C processes
and improve speed, agility, real-time control, and customer satisfaction.
Answer: FALSE
Diff: 1
Page Ref: 247
AACSB Standard: Use of Information Technology
13) The success of an e-supply chain depends on managing information with strict policies,
discipline, and daily monitoring.
Answer: TRUE
Diff: 2
Page Ref: 248
AACSB Standard: Ethical Reasoning
14) The success of an e-supply chain depends on an e-supply chain that is loosely integrated both
within a company and across an extended enterprise made up of suppliers, trading partners,
logistics providers, and the distribution channel.
Answer: FALSE
Diff: 2
Page Ref: 248
AACSB Standard: Reflective Thinking
90
Copyright © 2010 Pearson Education, Inc.
15) Companies can use replenishment information to reduce inventories and eliminate stocking
points.
Answer: TRUE
Diff: 2
Page Ref: 248
16) By combining bar coding and wireless technologies, automobile dealers are able to scan in
goods electronically as they arrive and place them in inventory up to 10 percent faster than
previously.
Answer: FALSE
Diff: 2
Page Ref: 249
17) At hospitals and supermarkets, inventory reorder points have been automated so that when
inventory gets down to a certain point the system will automatically notify a human of the exact
amount to reorder.
Answer: FALSE
Diff: 2
Page Ref: 249
18) Products such as groceries or gasoline have predictable demand. For these products, an
effective supply chain emphasizes speed and flexibility to minimize the bullwhip effect rather
than low costs.
Answer: FALSE
Diff: 3
Page Ref: 251
AACSB Standard: Reflective Thinking
19) Pure EC companies are likely to have more supply chain problems if they lack a logistics
infrastructure and must use external logistics services.
Answer: TRUE
Diff: 3
Page Ref: 251
AACSB Standard: Reflective Thinking
20) Some of the limitations of RFID can be overcome by a new wireless standard, RuBee.
Answer: TRUE
Diff: 3
Page Ref: 253
AACSB Standard: Use of Information Technology
21) RuBee relies on low-frequency magnetic waves to track products and transfer information.
Answer: FALSE
Diff: 2
Page Ref: 258
22) With vendor-managed inventory, retailers make their suppliers responsible for determining
when to order and how much to order. The retailer provides the supplier with real-time
information such as point-of-sale data, inventory levels, and a threshold below which orders are
replenished.
Answer: TRUE
Diff: 2
Page Ref: 262
91
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23) Studies have shown that electronic-based collaboration and product lifecycle management
(PLM) can reduce product costs and travel expenses by 50 percent, as well as significantly
reduce costs associated with product-change management.
Answer: FALSE
Diff: 3
Page Ref: 263
AACSB Standard: Reflective Thinking
24) The goal of collaborative planning, forecasting, and replenishment (CPFR) is to streamline
product flow from manufacturing plants to retailers.
Answer: FALSE
Diff: 2
Page Ref: 265
25) As with any IT project, management needs to be able to justify the development and use of a
corporate portal by comparing its cost with its benefits. The challenge is that despite the tangible
benefits from investment in portal technology, such as include increased revenues and customer
loyalty, most of the benefits of portals are intangible.
Answer: TRUE
Diff: 2
Page Ref: 271
AACSB Standard: Reflective Thinking
6.2 Multiple Choice
1) A company's internal operations and its relationships with suppliers and other business
partners are frequently:
A) much more complex than customer-facing applications such as taking an order online.
B) as complex as customer-facing applications such as taking an order online.
C) much less complex than customer-facing applications such as taking an order online.
D) replaced by customer-facing applications.
Answer: B
Diff: 3
Page Ref: 245
2) For a manufacturer, the supply chain ends:
A) when the supplier delivers raw materials and component parts to the manufacturer.
B) when the product is used up and disposed of.
C) when the customer buys the product.
D) when the customer decides he/she is satisfied with a product.
Answer: B
Diff: 3
Page Ref: 246
AACSB Standard: Reflective Thinking
92
Copyright © 2010 Pearson Education, Inc.
3) The e-SCM process that includes integrated production and distribution processes is:
A) supply chain replenishment.
B) collaborative planning.
C) e-procurement.
D) e-logistics.
Answer: A
Diff: 2
Page Ref: 248
4) When planning, designing and implementing integrated supply chain operations, management
requires a holistic focus that takes into account all of the following primary factors except:
A) strategy, structure, and people
B) location and revenues
C) IT and business processes
D) culture, including performance measurement, monitoring, and incentives
Answer: B
Diff: 3
Page Ref: 248
5) The use of Web technologies to manage warehousing and transportation processes is called:
A) collaborative planning.
B) downstream processing.
C) e-logistics.
D) e-replenishment.
Answer: C
Diff: 2
Page Ref: 249
6) Which of the following about supply chain problems is not true?
A) Supply chains in military and business operations have been plagued with problems for
generations.
B) Supply chain problems have sometimes caused armies to lose wars and companies to go out
of business.
C) Supply chain problems are most apparent in complex supply chains.
D) Supply chain problems are lowest when many business partners are involved.
Answer: D
Diff: 3
Page Ref: 250
7) The last fifteen orders from a manufacturer to its suppliers range from $100,000 to
$8,750,000. This is an example of:
A) the bullwhip effect.
B) demand manipulation.
C) supply inadequacy.
D) order instability.
Answer: A
Diff: 2
Page Ref: 251
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8) A major block in the widespread implementation of collaborative commerce is:
A) the theory of collaborative commerce hasn't been proven effective in real-world applications.
B) the technology needed isn't available.
C) collaborative commerce is extremely expensive.
D) the lack of universally accepted standards.
Answer: D
Diff: 2
Page Ref: 264
9) Wal-Mart and Levi Strauss collaborate on demand forecasting in order to optimize the flow of
materials along the supply chain. This is an example of:
A) reducing design cycle time.
B) APS.
C) CPFR.
D) reducing product development time.
Answer: C
Diff: 2
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AACSB Standard: Reflective Thinking
10) The purpose of CPFR is to:
A) minimize quality problems in supplies.
B) ensure that supply chain members have the right amount of materials and goods when needed.
C) eliminate supply chain intermediaries.
D) optimize the flow of materials along the supply chain.
Answer: B
Diff: 3
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AACSB Standard: Reflective Thinking
11) ________ is a business strategy that enables manufacturers to control and share productrelated data as part of product design and development efforts.
A) Advanced planning and scheduling
B) Collaborative planning
C) Product lifecycle management
D) Internal commerce
Answer: C
Diff: 2
Page Ref: 266
12) All of the following are true about product lifecycle management (PLM) except:
A) PLM can have significant beneficial impacts in cycle time, design reuse, and engineering.
B) The demand for PLM is limited because it does not apply to products that have short life
cycles or are complex.
C) PLM is a big step for an organization because it requires integrating different processes and
systems.
D) PLM tools are offered by major IT companies such as SAP and IBM.
Answer: B
Diff: 2
Page Ref: 266
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13) Today, many business experts agree with each of the following except:
A) Supply chain integration has reduced the intensity of competition in most industries.
B) The insightful way to view contemporary business is that competition exists between or
among supply chains rather then individual companies.
C) Supply chains from the suppliers' suppliers to the customers' customers should be jointly
planned and designed for overall optimality by all of the supply chain partners.
D) The supply chain needs to be operationally integrated so that inventory activities link
seamlessly to manufacturing activities.
Answer: A
Diff: 3
Page Ref: 267
AACSB Standard: Reflective Thinking
14) Software that helps integrate different types of information systems among collaborating
companies is called:
A) middleware.
B) browser technology.
C) collaborative software.
D) extranet technology.
Answer: A
Diff: 2
Page Ref: 268
AACSB Standard: Use of Information Technology
15) Groupware is appropriate in all of the following situations except:
A) for groups to share ideas and opinions
B) for people working on different tasks or projects
C) for networked environments
D) for people in the same room
Answer: B
Diff: 3
Page Ref: 273
AACSB Standard: Reflective Thinking
16) The growth in electronic meeting systems has been driven by all of the following except:
A) lower energy costs
B) improvements in supporting technology
C) reductions in the price of the technology
D) acceptance of virtual meetings as a respected way of doing business
Answer: A
Diff: 1
Page Ref: 275
17) ________ means that the communication and collaboration are done in real time.
A) Synchronous
B) Asynchronous
C) Bi-synchronous
D) Multi-synchronous
Answer: A
Diff: 1
Page Ref: 276
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18) All of the following are types of communication and collaboration done in real time except:
A) blogging
B) webinars
C) instant messaging
D) VoIP
Answer: A
Diff: 1
Page Ref: 276
19) The major benefit of real-time collaboration is:
A) faster decision making.
B) easier decision making.
C) that it is cheaper than asynchronous collaboration.
D) greater agreement.
Answer: B
Diff: 2
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AACSB Standard: Reflective Thinking
20) ________ is the transfer of documents and computer files while videoconferencing.
A) Web conferencing
B) Interactive whiteboarding
C) Data conferencing
D) CPFR
Answer: C
Diff: 1
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AACSB Standard: Reflective Thinking
21) All of the following are characteristics of Web conferencing except:
A) It is conducted on the Internet for as few as two and as many as twenty people.
B) It allows users to simultaneously view something on their computer screens.
C) It is much cheaper than videoconferencing because it runs over the Internet.
D) The latest technological innovations support both B2B and B2C Web conferencing
applications.
Answer: A
Diff: 2
Page Ref: 278
AACSB Standard: Use of Information Technology
22) Advantages of interactive whiteboards include all of the following except:
A) All participants can join in.
B) Throughout a meeting, each user can view and draw on a single document.
C) They enable the display of video clips.
D) There is stronger data security.
Answer: D
Diff: 2
Page Ref: 278
AACSB Standard: Reflective Thinking
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23) The Lotus Notes/Domino suite includes all of the following except:
A) instant video
B) document management
C) database
D) communication support
Answer: A
Diff: 2
Page Ref: 279
24) ________ are collaborative tools that enable people to work on the same files and
documents, making changes in a very rapid way.
A) Portals
B) Wikis
C) Lotus Notes
D) Document management
Answer: B
Diff: 2
Page Ref: 281
AACSB Standard: Use of Information Technology
25) Infrastructure needed for groupware include all of the following except:
A) VoIP
B) intranets
C) extranets
D) the Internet
Answer: A
Diff: 2
Page Ref: 282
26) Corporations are moving their phone systems to ________ to cut costs and boost efficiency.
A) RTC
B) VoIP
C) GDSS
D) bluetooth
Answer: B
Diff: 2
Page Ref: 282
27) A messaging service that transposes the desktop messaging experience to the usage scenario
of being on the move is ________.
A) mobile instant messaging
B) VoIP
C) instant video
D) data messaging
Answer: A
Diff: 2
Page Ref: 282
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28) Mobile support systems include each of the following except:
A) mobile social networking
B) mobile handset
C) mobile VoIP
D) mobile instant messaging
Answer: C
Diff: 2
Page Ref: 282
AACSB Standard: Use of Information Technology
29) ________ are required to create a truly collaborative environment, to integrate different
applications, and for standardizing communication.
A) Web services
B) Portals
C) Protocols
D) Collaborative workflows
Answer: C
Diff: 2
Page Ref: 283
30) All of the following apply to instant video except:
A) It evolved from the spread of instant messaging and Internet telephony.
B) The idea is for a kind of video chat room that allows users to chat in real time and see the
people they are communicating with.
C) It is the natural result of wanting to link people via both voice and audio.
D) The highest quality approach is to add video cameras to the participants' computers.
Answer: D
Diff: 2
Page Ref: 283
6.3 Fill in the Blank
1) Boeing's Dreamliner was referred to as a ________ airliner because IT and electronic
communication were used to support its planning and many other critical activities.
Answer: paperless
Diff: 2
Page Ref: 244
2) The suc
manage the flow of materials, information, and money into, within, and out of the organization.
Such a flow is referred to as a ________.
Answer: supply chain
Diff: 2
Page Ref: 245
3) The term supply chain comes from the concept of how the partnering organizations are
________ together.
Answer: linked
Diff: 2
Page Ref: 245
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4) A supply chain involves activities that take place during the entire ________, from dirt to
dust.
Answer: product life cycle
Diff: 2
Page Ref: 246
5) When a supply chain is managed electronically, usually with Web technologies, it is referred
to as a(n) ________.
Answer: e-supply chain
Diff: 1
Page Ref: 246
6) A supply chain can be broken into three major parts. The ________ part of the supply chain
includes the activities of a company with its suppliers and their connections with their suppliers.
Answer: upstream
Diff: 2
Page Ref: 246
7) ________ is the process made up of a range of activities by which an organization obtains or
gains access to the resources they require to undertake their core business activities.
Answer: Procurement
Diff: 2
Page Ref: 247
8) ________ is a complex process that requires the coordination of many activities so that the
shipment of goods and services from supplier right through to customer is done efficiently and
effectively for all parties concerned.
Answer: Supply chain management
Diff: 2
Page Ref: 247
9) Increasingly, companies are recognizing that the efficient and effective flow of information
and materials along their supply chains is a source of ________.
Answer: competitive advantage or differentiation
Diff: 2
Page Ref: 247
10) ________ is the collaborative use of technology to enhance B2B processes and improve
speed, agility, real-time control, and customer satisfaction.
Answer: E-supply chain management
Diff: 2
Page Ref: 247
11) ________ is the use of Web-based technologies to support the material acquisition,
warehousing, and transportation processes.
Answer: E-logistics
Diff: 2
Page Ref: 249
12) The ________ refers to erratic shifts in orders up and down supply chains.
Answer: bullwhip effect
Diff: 2
Page Ref: 251
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13) ________ can lead to as many as 100 days of additional inventory waiting just in case.
Answer: Stockpiling
Diff: 2
Page Ref: 251
14) Inventories can be minimized by introducing a ________ manufacturing process as well as
by providing fast and accurate information to suppliers.
Answer: build-to-order (on demand)
Diff: 2
Page Ref: 252
15) With ________, retailers make their suppliers responsible for determining when to order and
how much to order. The retailer provides the supplier with real-time information, inventory
levels, and a threshold below which orders are replenished.
Answer: vendor-managed inventory
Diff: 2
Page Ref: 262
16) ________ is a business strategy that enables manufacturers to control and share productrelated data as part of product design and development efforts and in support of supply chain
operations.
Answer: Product lifecycle management
Diff: 2
Page Ref: 263
AACSB Standard: Reflective Thinking
17) ________ is an architecture that enables the assembly of distributed applications from
software services and ties them together.
Answer: Web services
Diff: 2
Page Ref: 268
18) ________ refers to software products that support groups of people who share a common
task or goal and collaborate on its accomplishment.
Answer: Groupware
Diff: 2
Page Ref: 273
19) ________ are online meetings whose members are in different locations, even in different
countries.
Answer: Virtual meetings
Diff: 2
Page Ref: 275
20) In collaborative work, members frequently are in different locations. Using ________
software, group members can work on the same document, which is shown on the PC screen of
each participant.
Answer: screen sharing
Diff: 2
Page Ref: 277
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21) ________ are computer-based whiteboards that work like real-world whiteboards with
markers and erasers, except all participants can join in.
Answer: Interactive whiteboards
Diff: 2
Page Ref: 278
22) A ________ is an interconnected environment in which all the participants in dispersed
locations can access and interact with each other just as inside a single entity.
Answer: collaborative (shared) workspace
Diff: 2
Page Ref: 281
23) ________ refers to communication systems that transmit voice calls over Internet Protocol
based networks.
Answer: VoIP
Diff: 2
Page Ref: 282
24) ________ is a status indicator that conveys ability and willingness of a potential
communication partner.
Answer: Presence information
Diff: 2
Page Ref: 282
25) The spread of instant messaging and Internet telephony has naturally led to the idea of
linking people via a video chat room, which is called ________.
Answer: instant video
Diff: 1
Page Ref: 283
6.4 Essay
1) Define supply chain and list the activities that are involved.
Answer: A supply chain is the flow of materials, information, money, and services from raw
material suppliers through factories and warehouses to the end customers. A supply chain also
includes the organizations and processes that create and deliver products, information, and
services to the end customers. The term supply chain comes from the concept of how the
partnering organizations are linked together.
A supply chain involves activities that take place during the entire product life cycle, from dirt to
dust. However, a supply chain is more than that, because it also includes the movement of
information and money and the procedures that support the movement of a product or a service.
Finally, the organizations and individuals involved are considered part of the supply chain as
well. When looked at broadly, the supply chain actually ends when the product reaches its afteruse disposal.
Diff: 2
Page Ref: 245
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2) Identify three factors or capabilities that the success of an e-supply chain depends on.
Answer: The success of an e-supply chain depends on the following:
- The ability of all supply chain partners to view partner collaboration as a strategic asset
- A well-defined supply chain strategy
- Information visibility along the entire supply chain
- Speed, cost, quality, and customer service
- Integrating the supply chain more tightly
Diff: 2
Page Ref: 248
3) List and briefly explain the major infrastructure elements and tools of e-supply chain
management.
Answer:
Electronic Data Interchange. EDI is the major tool used by large corporations to facilitate supply
chain relationships. Many companies are shifting from internal EDI to Internet-based EDI.
Extranets. Their major purpose is to support interorganizational communication and
collaboration.
Intranets. These are the corporate internal networks for communication and collaboration.
Corporate portals. These provide a gateway for external and internal collaboration,
communication, and information search.
Workflow systems and tools. These are systems that manage the flow of information in
organizations.
Groupware and other collaborative tools. A large number of tools facilitate collaboration and
communication between two parties and among members of small as well as large groups.
Various tools, some of which are collectively known as groupware, enable such collaboration.
Diff: 2
Page Ref: 249
AACSB Standard: Use of Information Technology
4) What are three solutions to supply chain problems provided by EC?
Answer: EC technologies automate and expedite order taking, speed order fulfillment, provide
for e-payments, properly control inventories, provide for correct forecasting and thus better
scheduling, and improve collaboration among supply chain partners.
Diff: 2
Page Ref: 251
5) List three benefits of VoIP communications for businesses.
Answer:
Lowers total cost of ownership
Lowers operational costs
Reduces hardware requirements
Provides a holistic approach to security
Helps streamline workflows
Enables optimized conferencing tools to replace business travel
Diff: 2
Page Ref: 282
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 8 Mobile Computing and Commerce, and Pervasive Computing
8.1 True/False
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1) The U.S. supermarket chain Food Lion sought an advantage against low-price competitors by
providing a high-level of convenience for shoppers.
Answer: TRUE
Diff: 1
Page Ref: 340
AACSB Standard: Use of Information Technology
2) Using wireless technologies, one can create EC applications that are not available with
wireline systems.
Answer: TRUE
Diff: 1
Page Ref: 341
3) Mobile computing refers to a computing paradigm designed for workers who travel outside
the boundaries of their organizations or for anyone on the move.
Answer: TRUE
Diff: 2
Page Ref: 344
AACSB Standard: Use of Information Technology
4) A laptop or notebook computer can become wireless with the addition of a cellular chip.
Answer: FALSE
Diff: 2
Page Ref: 344
AACSB Standard: Reflective Thinking
5) What distinguishes one type of mobile computer from another is its battery life.
Answer: FALSE
Diff: 2
Page Ref: 344
AACSB Standard: Reflective Thinking
6) A Web server may need two versions of the same We
between devices requesting the Web page.
Answer: TRUE
Diff: 1
Page Ref: 344
AACSB Standard: Use of Information Technology
7) The infrastructure to support mobile commerce is inexpensive and relatively simple to put in
place.
Answer: FALSE
Diff: 1
Page Ref: 344
AACSB Standard: Reflective Thinking
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8) Common standards for various mobile devices simplify the development of software
applications for wireless devices.
Answer: FALSE
Diff: 2
Page Ref: 345
AACSB Standard: Use of Information Technology
9) PDAs, smartphones, Internet appliances, and multimedia players appear to be converging
toward the same endpoint, which is a small-footprint, handheld mobile device that combines all
the capabilities of these devices in one package.
Answer: TRUE
Diff: 2
Page Ref: 345
AACSB Standard: Use of Information Technology
10) Short message service (SMS), or texting, is a service that supports the transmittal of long text
messages (up to 360 characters) between mobile phones on a cellular telephone network.
Answer: FALSE
Diff: 2
Page Ref: 345
AACSB Standard: Reflective Thinking
11) Multimedia messaging service (MMS) is the emerging generation of wireless messaging,
delivering rich media, including video and audio, to mobile phones and other devices.
Answer: FALSE
Diff: 2
Page Ref: 345
AACSB Standard: Use of Information Technology
12) The highest level of voice support services is a voice portal, which is a Web site with an
audio interface that can be accessed through a telephone call.
Answer: TRUE
Diff: 2
Page Ref: 346
13) Wi-Fi is a set of telecommunications standards that enables wireless devices to communicate
with each other over short distances, but which suffers from interference and security problems.
Answer: FALSE
Diff: 2
Page Ref: 347
14) WiMax is an IEEE 802.16 wireless standard for making broadband network access widely
available for data and voice over a medium-sized area.
Answer: TRUE
Diff: 2
Page Ref: 348
15) A wireless wide area network (WWAN) offers the broadest wireless coverage and relies on
the same network technologies as cell phones.
Answer: TRUE
Diff: 2
Page Ref: 348
AACSB Standard: Use of Information Technology
104
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16) Expansion of PayPal services into mobile remote payment services will facilitate a shift in
global consumer payment services now and into the future.
Answer: TRUE
Diff: 2
Page Ref: 352
AACSB Standard: Use of Information Technology
17) An m-commerce security challenge unique to mobile computing is the open-air transmission
of signals across multiple networks that opens up opportunities for interception.
Answer: TRUE
Diff: 2
Page Ref: 365
AACSB Standard: Reflective Thinking
18) When mobile users want to access the Internet, the usability of the site is critical to achieve
the purpose of the visit and to increase user stickiness.
Answer: TRUE
Diff: 2
Page Ref: 365
19) Several key ethical issues in m-commerce include isolation, loss of privacy, and potential
health damage from cellular radio frequency emissions.
Answer: TRUE
Diff: 2
Page Ref: 366
AACSB Standard: Ethical Reasoning
20) The widespread appearance of mobile devices in society has led to the need for cell phone
etiquette, the creation of cell free zones in hospitals and airport lounges, and National Cell Phone
Courtesy Month.
Answer: TRUE
Diff: 2
Page Ref: 366
AACSB Standard: Ethical Reasoning
21) A study by Seoul National University found that 30 percent of South Korean high school
students reported addiction effects, which are anxious feelings when they did not have their
phones with them.
Answer: TRUE
Diff: 2
Page Ref: 367
AACSB Standard: Ethical Reasoning
22) Pervasive computing is embedded in the environment is typically mobile.
Answer: FALSE
Diff: 2
Page Ref: 367
AACSB Standard: Reflective Thinking
105
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23) Most RFID tags have a large footprint and can be embedded or attached to most objects,
such as products, people, animals, or vehicles.
Answer: FALSE
Diff: 2
Page Ref: 368
AACSB Standard: Use of Information Technology
24) Real world awareness is a concept used to describe a company's ability to sense information
in real time from people, IT sources, and physical objects by using RFID and sensors and then
responding quickly and effectively.
Answer: FALSE
Diff: 2
Page Ref: 371
AACSB Standard: Use of Information Technology
25) Hardware and software designers need to consider the special requirements of mobile
devices such as small screens, reduced memory, limited bandwidth, and restricted input
capabilities.
Answer: TRUE
Diff: 1
Page Ref: 376
8.2 Multiple Choice
1) Food Lion is a U.S. supermarket chain that relies on ________ to compete against Wal-Mart
and other stores.
A) low prices and vast selection
B) m-commerce technology for customer convenience
C) huge online selection and fast delivery
D) organic and unique gourmet foods
Answer: A
Diff: 2
Page Ref: 340
AACSB Standard: Use of Information Technology
2) The major value-added attributes of the mobile commerce landscape include all of the
following except:
A) ubiquity
B) localization
C) security
D) personalization
Answer: C
Diff: 2
Page Ref: 341
AACSB Standard: Reflective Thinking
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3) The development of m-commerce is being driven by all of the following technological,
business, social, and economic factors except:
A) the transition to a manufacturing economy
B) the widespread availability of more powerful mobile devices
C) the growth of a handset culture and mobile workforce
D) the improved price/performance of mobile services
Answer: A
Diff: 1
Page Ref: 341
AACSB Standard: Reflective Thinking
4) As in e-commerce, m-commerce B2C applications are concentrated in each of the following
areas except:
A) retail shopping
B) advertising
C) telecommunications
D) financial
Answer: C
Diff: 3
Page Ref: 341
AACSB Standard: Reflective Thinking
5) M-commerce transactions and activities require ________ and ________.
A) wired networks; access points
B) cell phones; portable computers
C) hardware and software infrastructures; infrastructure support
D) smartphones; switches
Answer: C
Diff: 2
Page Ref: 344
AACSB Standard: Use of Information Technology
6) Infrastructures that support mobile computing are:
A) mobile devices, network access points, and servers.
B) WAP gateways, GPS locators, and GPS satellites.
C) PDAs, smartphones, and PCs.
D) Web servers, mobile devices, and microbrowsers.
Answer: A
Diff: 3
Page Ref: 344
AACSB Standard: Reflective Thinking
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7) Components of a wireless infrastructure that support delivery of services over a wireless
connection are:
A) mobile communications server switches.
B) GPS locators.
C) smartphones.
D) Web servers and microbrowsers.
Answer: B
Diff: 3
Page Ref: 344
8) Characteristics of mobile devices that need to be considered when designing mobile
computing systems include all of the following except:
A) small screens
B) reduced memory
C) restricted input capabilities
D) broad bandwidth
Answer: D
Diff: 2
Page Ref: 344
AACSB Standard: Reflective Thinking
9) The exchange of updated information with other computing devices is called:
A) docking.
B) data transferring.
C) synchronization.
D) texting.
Answer: C
Diff: 2
Page Ref: 344
10) ________ is computing that connects a mobile device to a network or another computing
device, any time, anywhere.
A) Wireless application protocol
B) Mobile operating system
C) Wireless mobile computing
D) Wireless middleware
Answer: C
Diff: 1
Page Ref: 344
11) ________ enables the determination of the location of an enabled device.
A) GPS
B) PDA
C) SMS
D) WAP
Answer: A
Diff: 2
Page Ref: 346
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12) Rick sends a message from a delayed flight to his friend on her cell phone that he will be
arriving late. The service that allows the sending and receiving of such short text messages on
mobile phones is called:
A) LOL.
B) MSG.
C) SMS.
D) TMG.
Answer: C
Diff: 2
Page Ref: 346
13) A ________ is suitable for mobile users who need to make very short-range device-to-device
wireless connections within a small space, such as a single room, and most commonly with
Bluetooth.
A) personal area network
B) local area network
C) wireless area network
D) Wi-Fi area network
Answer: A
Diff: 2
Page Ref: 346
AACSB Standard: Use of Information Technology
14) ________ systems enable users to interact with a computerized system to request and receive
information and to enter and change data using a telephone.
A) Interactive voice response (IVR)
B) Multimedia messaging
C) Mobile commerce
D) WiMax
Answer: A
Diff: 2
Page Ref: 346
15) Physically, the heart of a WLAN is a ________ that connects wireless devices to the desired
network.
A) router
B) wireless network PC card
C) wireless access point
D) modem
Answer: C
Diff: 2
Page Ref: 347
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16) Most WLANs run on a telecommunications standard known as ________, which is more
commonly called ________.
A) WLAN; hotspot
B) IEEE 802.16; WiMax
C) IEEE 802.11; Bluetooth
D) 802.11g; Wi-Fi
Answer: D
Diff: 3
Page Ref: 347
17) By using a large number of connected hotspots, one can create a wireless city. This is known
as a city-wide or ________ network.
A) 802.11b
B) WLAN
C) municipal Wi-Fi
D) GoogleWiFi
Answer: C
Diff: 3
Page Ref: 347
AACSB Standard: Use of Information Technology
18) Which of the following about wireless wide area networks (WWAN) is not true?
A) The single WWAN network standard insures compatibility of handsets within and between
countries.
B) WWANs offer the broadest wireless coverage.
C) WWANs can be distinguished by their speed, e.g., 2G, 3G, or 4G.
D) WWANs rely on the same network technologies as cell phones.
Answer: A
Diff: 3
Page Ref: 348
AACSB Standard: Use of Information Technology
19) WiMax and 3G wireless mobile technologies could offer telemedicine application
opportunities that include all of the following except:
A) Prescriptions can be transferred electronically to the appropriate pharmacy reducing errors.
B) Wearable heart monitors linked to a cell phone can automatically contact doctors or family
members at the first sign of health problems.
C) There can be eal-time consultation between a patient in one location and a medical specialist
in another.
D) There is a reduced threat of malpractice suits because there is no hands-on interaction
between the remote physician and the patient.
Answer: D
Diff: 3
Page Ref: 348
AACSB Standard: Reflective Thinking
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20) Mobile POS (point-of-sale) payments are also known as ________ or contactless payments.
A) mobility
B) remote
C) proximity
D) distance
Answer: C
Diff: 2
Page Ref: 350
21) The major enterprise mobile applications are all of the following except:
A) e-mail and cell phone contacts
B) sales force automation
C) field force automation
D) research and development
Answer: D
Diff: 2
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AACSB Standard: Reflective Thinking
22) By enabling sales force employees to record orders in real time, the enterprise would be
expected to benefit through each of the following except:
A) improved manufacturing and delivery scheduling
B) greater inventory levels
C) fewer data entry errors
D) lower clerical and administrative overhead
Answer: B
Diff: 2
Page Ref: 355
AACSB Standard: Reflective Thinking
23) All of the following are barriers to location-based m-commerce except:
A) Wireless bandwidth is limited.
B) The accuracy of location technologies is often less than consumers expect.
C) There are presently not enough location-based systems to make this a viable technology.
D) Consumers see constant location data transmissions as a violation of privacy.
Answer: C
Diff: 2
Page Ref: 360
AACSB Standard: Reflective Thinking
24) A(n) ________ is a computer system capable of integrating, storing, editing, analyzing,
sharing, and displaying spatial information.
A) GIS
B) GPS
C) L-commerce system
D) OnStar system
Answer: A
Diff: 2
Page Ref: 362
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25) You are walking near a coffee shop and suddenly your cell phone beeps with a message:
"Come inside and get a free biscotti with any purchase." This is an example of:
A) permission marketing.
B) location-based advertising.
C) customer relationship management.
D) m-commerce.
Answer: B
Diff: 2
Page Ref: 362
AACSB Standard: Reflective Thinking
26) All of the following are security-related issues of m-commerce except:
A) Post-transaction security issues of auditing and nonrepudiation are less difficult because cell
phones have the capability to store the digital equivalent of a receipt.
B) The basic security goals of confidentiality, authentication, authorization, and integrity are just
as important for m-commerce as they are for e-commerce.
C) As the capabilities of cell phones and PDAs increase and converge, the threat of attack from
malicious code increases.
D) An appropriate level of security must be maintained on each network that traffic flows
through, in spite of the fact that interoperability among the various networks is difficult.
Answer: A
Diff: 3
Page Ref: 365
27) Health risks of cell phone use include all of the following except:
A) cell phone addiction
B) damage from cell radio frequency emissions
C) spinal injury
D) repetitive stress injury
Answer: C
Diff: 2
Page Ref: 366
28) Ethical issues raised by m-commerce include all of the following except:
A) limited access to data and documents
B) privacy invasion
C) infringing on workers' personal time
D) isolation
Answer: A
Diff: 2
Page Ref: 366
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29) One of the keys to the RFID standards is the ________, which serves the same purpose as an
IP address on the Internet, providing a unique identifier for each tagged item.
A) Object Name Service (ONS)
B) Electronic Product Code (EPC)
C) IP for Smart Objects (IPSO)
D) IPv4
Answer: B
Diff: 3
Page Ref: 372
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30) In order to protect the privacy of individuals, privacy protection defenses must be:
A) designed into RFID tags, nodes, and networks.
B) addressed in a post hoc fashion.
C) addressed in an ad hoc fashion.
D) the responsibility of government agencies.
Answer: A
Diff: 2
Page Ref: 375
AACSB Standard: Ethical Reasoning
8.3 Fill in the Blank
1) ________ includes any business activity conducted over a wireless telecommunications
network.
Answer: Mobile commerce (m-commerce)
Diff: 1
Page Ref: 341
AACSB Standard: Use of Information Technology
2) A wireless mobile device provides ________ , which is availability at any location at any
time.
Answer: ubiquity
Diff: 2
Page Ref: 341
3) Businesses in which customer support and delivery of services require a high level of
________ with the customer are likely to find a high value-added component in mobile
computing.
Answer: interactivity
Diff: 1
Page Ref: 342
4) Mobile devices enable consumer ________, which is the delivery of information, products,
and services designed to meet the needs of individual consumers.
Answer: personalization
Diff: 1
Page Ref: 342
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5) Knowing where a user is physically located at any particular moment is known as ________,
which is key to offering relevant mobile services in real-time.
Answer: localization
Diff: 2
Page Ref: 342
AACSB Standard: Reflective Thinking
6) The transition from a manufacturing economy to a(n) ________ economy is encouraging the
development of mobile-based services.
Answer: service
Diff: 1
Page Ref: 343
AACSB Standard: Reflective Thinking
7) ________ transmission speeds are much slower than Wi-Fi, and have actual rates somewhere
between .1 and .5 Mbps.
Answer: 3G
Diff: 3
Page Ref: 343
8) To properly conduct m-commerce, it is necessary to have sufficient ________ to transmit the
desired information via text, picture, voice, video, or multimedia.
Answer: bandwidth
Diff: 1
Page Ref: 343
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9) ________ offers a computing environment suitable for workers who travel outside the
boundaries of their workplace or for anyone on the move.
Answer: Mobile computing
Diff: 1
Page Ref: 344
10) What distinguishes one type of mobile computer from another is its physical ________,
which refers to its size.
Answer: footprint
Diff: 2
Page Ref: 344
11) Most PDAs now have added support for wireless connectivity to the Internet through
________.
Answer: Wi-Fi
Diff: 2
Page Ref: 344
12) A ________ is a mobile phone with PDA-like or PC-like functionality.
Answer: smartphone
Diff: 1
Page Ref: 345
13) ________ is frequently referred to as texting and is a service that supports the transmittal of
short text messages.
Answer: Short Message Service (SMS)
Diff: 1
Page Ref: 345
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14) ________ is the emerging generation of wireless messaging to deliver rich media.
Answer: Multimedia Messaging Service (MMS)
Diff: 2
Page Ref: 345
15) ________ is a set of telecommunications standards that enables wireless devices to
communicate with each other over short distances of up to 20 meters (60 feet).
Answer: Bluetooth
Diff: 1
Page Ref: 346
16) ________ is a voice system that enables users to request and receive information and to enter
and change data through a telephone to a computerized system.
Answer: Interactive voice response (IVR)
Diff: 2
Page Ref: 346
17) ________ is the wireless standard (IEEE802.16) for making broadband network connections
over a medium-size area such as a city.
Answer: WiMax
Diff: 2
Page Ref: 348
18) ________ refers to the gap between people with effective access to digital and information
technology and those without such access.
Answer: Digital divide
Diff: 2
Page Ref: 352
AACSB Standard: Ethical Reasoning
19) In Las Vegas, the Luxor preregisters guests when their airplane lands and they turn on their
cell phones. This is an example of a(n) ________ system.
Answer: location-based
Diff: 2
Page Ref: 360
AACSB Standard: Reflective Thinking
20) A(n) ________ is a computer system capable of integrating, storing, editing, analyzing,
sharing, and displaying geographically referenced information.
Answer: geographical information system (GIS)
Diff: 2
Page Ref: 362
21) The highest level of voice support services is a ________, a Web site with an audio interface
that can be accessed through a telephone call.
Answer: voice portal
Diff: 2
Page Ref: 364
22) ________ remains the Wi-Fi standard of choice for inexpensive installations in most public
areas and homes.
Answer: 802.11b
Diff: 2
Page Ref: 366
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23) A widely publicized health issue is the potential health damage from cell phone usage due to
________.
Answer: radio frequency emissions
Diff: 2
Page Ref: 366
AACSB Standard: Ethical Reasoning
24) ________ is a short-range radio frequency communication technology for remotely storing
and retrieving data using tags and readers.
Answer: RFID
Diff: 2
Page Ref: 368
25) ________ is a product identification standard that specifies the manufacturer, producer,
version, and serial number of each product.
Answer: Electronic product code (EPC)
Diff: 2
Page Ref: 370
8.4 Essay
1) The development of m-commerce is being driven by the following technological, business,
social, and economic factors. Identify four of the factors.
Answer:
Widespread availability of powerful mobile devices.
The handset culture. A closely related driver is the widespread use of cell phones among the 15to 25-year-old age group.
The service economy. The transition from a manufacturing to a service-based economy is
encouraging the development of mobile-based services.
Vendors' push. Both mobile communication network operators and manufacturers of mobile
devices are advertising the many potential applications of m-commerce.
The mobile workforce. Increased mobility of the population.
Improvement of bandwidth. To properly conduct m-commerce, it is necessary to have sufficient
bandwidth to transmit the desired information via text, picture, voice, video, or multimedia.
Diff: 2
Page Ref: 341
AACSB Standard: Reflective Thinking
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2) What are two principles of pervasive computing that define its development?
Answer:
Decentralization. The decentralization of computing that began with the transition from the
centralized mainframe computer to the personal computer will continue in pervasive computing.
Indeed, computing devices in the future will not be computers but tags, sensors, badges, and
commonplace objects all cooperating together in a service oriented infrastructure.
Diversification. Computing devices will evolve from a fully functional one computer-does-all
paradigm to one in which specialized, diversified devices will suit the requirements of an
individual for a specific purpose. A person may own several devices that slightly overlap in
functionality, but each will be the preferred tool for each specific purpose.
Connectivity. The independent pervasive computing devices—tags, sensors, badges—will be
seamlessly connected to the network or to each other. Open, common standards will be required
to achieve this level of connectivity and interoperability.
Simplicity. These devices must be designed for simplicity of use. Intuitive interfaces, speech
recognition, one-handed operation, instant on, and always connected are a few of the
requirements for high, but simple, usability.
Diff: 2
Page Ref: 368
AACSB Standard: Ethical Reasoning
3) Compare the second generation (2G) and third generation (3G) of WWAN technologies.
Answer:
The 2G is based on digital radio technology and is able to accommodate voice and text messages
(SMS).
The 3G supports rich media, such as video. 3G utilizes packet switching. Connectivity is always
on. The potential exists for 3G to grow and change the way mobile devices are used and
dramatically increase m-commerce applications and activities.
Diff: 3
Page Ref: 348
AACSB Standard: Communication
4) What are two factors that are holding back the widespread use of location-based mcommerce?
Answer:
Accuracy of devices. Some of the location technologies are not as accurate a people expect them
to be.
Cost-benefit justification. For many potential users, the benefits of location-based services do
not justify the cost of the devices or the inconvenience and time required to utilize the service.
Limited network bandwidth. Wireless bandwidth is currently limited; it will be improved as 3G
technology spreads. As bandwidth improves, applications will improve, which will attract more
customers.
Invasion of privacy. When always-on cell phones are a reality, many people will be hesitant to
have their whereabouts and movements tracked throughout the day, even if they have nothing to
hide.
Diff: 3
Page Ref: 363
AACSB Standard: Ethical Reasoning
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5) Identify and briefly describe three technical limitations of mobile computing.
Answer:
Insufficient bandwidth. Sufficient bandwidth is necessary for widespread mobile computing,
and it must be inexpensive.
Security standards. Universal standards are still under development. It may take three or more
years for sufficient standards to be in place.
Power consumption. Batteries with long life are needed for mobile computing.
Transmission. Weather and terrain, including tall buildings, can limit reception.
GPS accuracy. GPS may be inaccurate in a city with tall buildings, limiting the use of locationbased m-commerce.
WAP limitations. Many mobile phone users find that WAP is expensive and difficult to access.
Potential health hazards. Potential health damage from cellular radio frequency emission is not
known yet. Known health hazards include cell phone addiction, thumb-overuse syndrome, and
accidents caused by people using cell phones while driving.
Human-computer interface. Screens and keyboards are too small, making mobile devices
uncomfortable and difficult for many people to use.
Complexity. Too many optional add-ons are available.
Diff: 2
Page Ref: 366
AACSB Standard: Ethical Reasoning
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 9 The Web 2.0 Environment and Social Networks
9.1 True/False
1) Wikipedia is the largest free online collaborative encyclopedia whose greatest strength and
biggest weakness is that users create the content.
Answer: TRUE
Diff: 1
Page Ref: 384
2) A characteristic of Web 2.0 is the frequent software updates that are needed to control the
content and data.
Answer: FALSE
Diff: 2
Page Ref: 385
AACSB Standard: Reflective Thinking
3) One of the major phenomena of Web 2.0 is the emergence and rise of e-auctions.
Answer: FALSE
Diff: 2
Page Ref: 386
4) The key feature of mass social media is that people rather than organizations control them and
third-person voice is discouraged.
Answer: TRUE
Diff: 2
Page Ref: 387
5) One-way marketing and advertising and command-and-control management are typical
examples of pull-based systems, and nowhere as efficient as push systems.
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Answer: FALSE
Diff: 3
Page Ref: 388
AACSB Standard: Reflective Thinking
6) A characteristic of social media is centralization, instead of distribution.
Answer: FALSE
Diff: 3
Page Ref: 388
AACSB Standard: Reflective Thinking
7) Companies that introduce a significant change in their industries, thus, causing radical
changes in business operations are referred to as disruptors.
Answer: TRUE
Diff: 2
Page Ref: 388
8) Disruption did not occur in the real estate brokerage industry.
Answer: FALSE
Diff: 2
Page Ref: 389
AACSB Standard: Reflective Thinking
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9) A search engine is basically a document or file retrieval system designed to help find
information stored on a computer system, such as on the Web.
Answer: TRUE
Diff: 3
Page Ref: 390
AACSB Standard: Reflective Thinking
10) GeoCities is one example of a virtual community with many subcommunities.
Answer: TRUE
Diff: 2
Page Ref: 392
11) Facebook is the second-largest social network service in the world, with more than 120
million active users worldwide as of January 2009.
Answer: TRUE
Diff: 2
Page Ref: 396
12) A logical step as a community site grows in members and influence may be to turn it into a
commercial or revenue-generating site.
Answer: TRUE
Diff: 3
Page Ref: 400
AACSB Standard: Reflective Thinking
13) Social network analysis software provides both a visual and a mathematical analysis of
relationships where the nodes in the network are the people or groups, and the links show
relationships between the nodes.
Answer: TRUE
Diff: 2
Page Ref: 400
AACSB Standard: Use of Information Technology
14) Business networking functions best when individuals offer to help others form commercial
or business relationship or to find prospects.
Answer: FALSE
Diff: 2
Page Ref: 400
15) In addition to providing leadership, entrepreneurial networks may become online
communities involved in endorsing reforms, legislation, or other municipal drives to advance
their organization's goals.
Answer: TRUE
Diff: 2
Page Ref: 404
16) MySpace's music download service that allows the site's independent musicians to sell their
work directly from their profile pages has not been successful because it's illegal.
Answer: FALSE
Diff: 2
Page Ref: 407
AACSB Standard: Use of Information Technology
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17) Mobile advertising is a rapidly developing area of advertisement on cell phones and other
mobile devices.
Answer: TRUE
Diff: 2
Page Ref: 407
18) Although advertising and sales are the major EC activities in public social networks, there
are emerging possibilities for commercial activities in business-oriented networks such as
LinkedIn and in enterprise social networks.
Answer: TRUE
Diff: 2
Page Ref: 409
19) Several companies use enterprise social networking, and virtual worlds in particular, for
training purposes. For example, Cisco is trying to use its virtual campus in Second Life for
product training and executive briefings.
Answer: TRUE
Diff: 2
Page Ref: 410
20) Caterpillar created a knowledge network system for its employees, and it even markets the
software to other companies.
Answer: TRUE
Diff: 2
Page Ref: 410
21) Social networks are only for social purposes and do not generate revenue.
Answer: FALSE
Diff: 2
Page Ref: 411
22) Many companies find it easy to justify social media and networking because most of their
benefits are intangible, or positive word-of-mouth.
Answer: FALSE
Diff: 2
Page Ref: 412
23) Apple and Google undertook a formal merger to offer iPhone capabilities, such as delivering
Google services through Apple hardware.
Answer: FALSE
Diff: 2
Page Ref: 415
24) Web 3.0 will deliver a new generation of business applications that will see business and
social computing converge on the same fundamentals as on-demand architecture is converging
with consumer applications today.
Answer: FALSE
Diff: 2
Page Ref: 417
AACSB Standard: Use of Information Technology
121
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25) LinkedIn's "gated-access approach," whereby contact with another professional requires
either a preexisting relationship or the intervention of a contact, is intended to build trust among
the service's users.
Answer: TRUE
Diff: 2
Page Ref: 423
9.2 Multiple Choice
1) Wikipedia is a free online collaborative encyclopedia that had to resolve each of the following
problems except:
A) people with malicious agendas posting false information
B) competition from the bigger Encyclopedia Britannica
C) poor or substandard quality of the content
D) invasions of privacy
Answer: B
Diff: 2
Page Ref: 384
AACSB Standard: Ethical Reasoning
2) Perspectives about Web 2.0 include all of the following except:
A) Web 2.0 is organized around pages, software, technology, individuals, and corporations.
B) Web 2.0 has become the framework for bringing together the contributions of millions of
people to enhance creativity, information sharing, and collaboration.
C) Web 2.0 communities are one of the most powerful influences on society.
D) Web 2.0 stands to greatly improve internal business processes and marketing.
Answer: A
Diff: 2
Page Ref: 385
3) The following are representative characteristics of Web 2.0 except:
A) frequent software-upgrade cycles
B) the ability to tap into the collective intelligence of users
C) making data available in new or never-intended ways
D) the presence of lightweight programming techniques and tools that lets nearly anyone act as a
developer
Answer: A
Diff: 2
Page Ref: 385
4) ________ is a Web development technique for creating quicker and more responsive Web
applications by exchanging small amounts of data with the server so that the entire Web page
does not have to be reloaded each time the user makes a change.
A) RSS
B) Ajax
C) Wiki
D) ZOPA
Answer: B
Diff: 2
Page Ref: 386
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5) The banking industry was a good candidate for disruption by person-to-person (P2P)
technology and disintermediation by ZOPA because:
A) the industry offers a widely-needed service.
B) of fierce competition and low barriers to entry.
C) the industry was making huge profit margins off customers.
D) the industry had small profit margins.
Answer: C
Diff: 2
Page Ref: 387
6) ________ are companies that introduce a significant change in their industries, thus causing a
disruption in
normal business operations.
A) Disruptors
B) Mashups
C) Information clouds
D) Web 3.0
Answer: A
Diff: 2
Page Ref: 387
AACSB Standard: Use of Information Technology
7) The real estate brokerage industry has been disrupted by companies such as Zillow and
HomeGain for each of the following reasons except:
A) Homeowners can enter zillow.com and go to zestimate to get an approximation of their
home's market value with a map of the neighborhood.
B) The Zillow and Homegain sites provide more services and information than Web 1.0.
C) The Web 2.0 real estate sites have driven down commissions from 6 percent to almost 1
percent.
D) Homeowners can get comparisons of the estimated price of their home with neighbors'
homes.
Answer: C
Diff: 3
Page Ref: 389
8) What is the expected impact of industry disruptors on the real estate industry?
A) elimination of real estate agents
B) the 6 percent realtor commission paid in the United States moving closer to the 1 percent
commission commonly paid in other countries
C) greater specialization of real estate agents with higher commissions
D) Increased competition and bidding wars to find and buy homes
Answer: B
Diff: 2
Page Ref: 389
AACSB Standard: Reflective Thinking
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9) ________ are virtual communities organized by an interest, such as political parties, or by
product, company, or health topic.
A) Associations
B) Megacommunities
C) Social networks
D) Affinity portals
Answer: D
Diff: 2
Page Ref: 390
10) ________ are communities that are country- or language-specific.
A) Associations
B) Megacommunities
C) Ethnic communities
D) Social networks
Answer: C
Diff: 1
Page Ref: 390
11) Alloy.com, bolt.com, and blueskyfrog.com are communities that:
A) cater to young people.
B) provide B2B networks.
C) are exchanges supporting community programs.
D) offer interactive Webcasts for government or professional associations.
Answer: A
Diff: 2
Page Ref: 390
12) All of the following are categories and examples of interaction in a virtual community
except:
A) communication via bulletin boards
B) information using search engines
C) EC using advertisements
D) financial sponsorship via experts
Answer: D
Diff: 1
Page Ref: 390
AACSB Standard: Reflective Thinking
13) All of the following are types of virtual communities except:
A) associations
B) affinity portals
C) search engines
D) gender and ethnic communities
Answer: C
Diff: 2
Page Ref: 390
AACSB Standard: Reflective Thinking
124
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14) What is the top social network?
A) Bebo
B) Facebook
C) Friendster
D) MySpace
Answer: D
Diff: 2
Page Ref: 393
15) ________ is the mapping and measuring of relationships and flows between people, groups,
organizations, animals, computers, or other information or knowledge processing entities.
A) Social network analysis
B) Virtual analysis
C) Social network theory
D) Internet community theory
Answer: A
Diff: 3
Page Ref: 394
16) A(n) ________ is defined as a group of people that have some kind of commercial or
business relationship such as the relationships between sellers and buyers, buyers among
themselves, buyers and suppliers, and colleagues and other colleagues.
A) affinity portal
B) Web portal
C) business network
D) entrepreneurial network
Answer: C
Diff: 2
Page Ref: 399
17) Companies can interface with social networks in all of the following ways except:
A) Use search engine optimization (SEO) to increase search engine ranking.
B) Use existing public social networks, such as Facebook or MySpace, or virtual worlds, such as
Second Life to create pages and microcommunities.
C) Create an in-house private social network and then use it for communication and
collaboration among employees and retirees or with outsiders.
D) Conduct business activities in a business-oriented social network, such as LinkedIn, or
sponsor such a site.
Answer: A
Diff: 2
Page Ref: 402
AACSB Standard: Reflective Thinking
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18) All of the following are ways social networks generate revenues except:
A) offer a premium service for a monthly or per service fee
B) charge organizations a monthly service fee
C) host auctions for individuals or enterprises
D) have members pay a fee to be affiliated with the social network
Answer: C
Diff: 3
Page Ref: 402
AACSB Standard: Reflective Thinking
19) All of the following are true about YouTube except:
A) YouTube is building a community that is highly motivated to watch and share videos.
B) The company encourages users to contact YouTube.
C) Some experts think Yahoo paid too much for YouTube.
D) The growth of YouTube has been extremely rapid, depending largely on referrals from users
who alerted their friends and family to a favorite video.
Answer: C
Diff: 2
Page Ref: 405
20) ________ , also called viral marketing, is free advertising that can increase the visibility of
niche retailers and products.
A) Mixi
B) Word-of-mouth
C) Web 4.0
D) Semantic Web
Answer: B
Diff: 2
Page Ref: 406
21) The main purpose of LinkedIn is to allow registered users to:
A) create and maintain a list of contact details of people they know and trust in business.
B) develop a client base based on referrals.
C) post and find technology jobs.
D) aid successful business launches.
Answer: A
Diff: 2
Page Ref: 407
22) Craigslist and MySpace provide ________ to search based on friends and contacts or by
geographic proximity.
A) entrepreneurial networks
B) classifieds and job listings
C) virtual malls
D) advertising campaigns
Answer: B
Diff: 2
Page Ref: 407
AACSB Standard: Use of Information Technology
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23) Apple's iPhone uses a ________ , which is an accurate and patented interface.
A) multitouch touch screen
B) dedicated control
C) touch-sensitive display
D) touch-pad
Answer: A
Diff: 2
Page Ref: 415
24) Wikis, blogs and RSS would most likely replace e-mail for all of the following reasons
except:
A) E-mail is limited as a collaborative tool.
B) E-mail is primarily for point-to-point communication.
C) CC and BCC fields in an e-mail can be dangerous because often the wrong person gets a copy
of the message.
D) Wikis, blogs, and RSS are more secure than e-mail.
Answer: D
Diff: 3
Page Ref: 416
AACSB Standard: Reflective Thinking
25) ________ has/have the potential to enable faster connectivity, richer ways of interacting, and
more powerful search engines.
A) Enterprise applications
B) Application program interface (API) services
C) Web 3.0
D) RSS and Web services
Answer: C
Diff: 2
Page Ref: 417
AACSB Standard: Reflective Thinking
26) Distinct layers of the Web 3.0 topology include each of the following except:
A) v-commerce
B) API services
C) application services
D) serviced clients
Answer: A
Diff: 3
Page Ref: 417
27) Characteristics of the next generation Internet, Web 3.0, are expected to include all of the
following except:
A) more portable and personal
B) faster, and more far-flung connectivity
C) more clout for ordinary people and more user-friendly application-creation capabilities
D) decreased use of the semantic Web
Answer: D
Diff: 2
Page Ref: 417
AACSB Standard: Reflective Thinking
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28) An evolving extension of the Web in which Web content can be expressed not only in
natural language, but also in a form that can be understood, interpreted, and used by intelligent
computer software agents is known as:
A) Net neutrality.
B) mobile social networks.
C) semantic web.
D) voice commerce.
Answer: C
Diff: 2
Page Ref: 417
29) ________ would be the environment of choice for Web 3.0 users.
A) Wireless
B) iPhone
C) Social networks
D) Google
Answer: A
Diff: 1
Page Ref: 418
AACSB Standard: Reflective Thinking
30) Each of the following is a trend that may slow EC and Web 3.0 except:
A) security concerns
B) copyright complaints
C) Net neutrality
D) choppy connectivity
Answer: C
Diff: 2
Page Ref: 419
AACSB Standard: Reflective Thinking
9.3 Fill in the Blank
1) ________ is the popular term for advanced Internet technology and applications including
blogs, wikis, RSS, and social bookmarking.
Answer: Web 2.0
Diff: 1
Page Ref: 385
2) The online platforms and tools that people use to share opinions and experiences, including
photos, videos, music, insights, and perceptions with each other are known as ________.
Answer: social media
Diff: 2
Page Ref: 385
3) Companies that introduce innovations that significantly change markets or entire industries
due to their activities are referred to as ________.
Answer: disruptors
Diff: 2
Page Ref: 387
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4) The process of lending that is done between individuals and that circumvents the bank's
traditional role is known as ________.
Answer: person-to-person lending
Diff: 2
Page Ref: 387
5) A(n) ________ is a group of people with a common interest who interact on the Internet.
Answer: virtual (Internet) community
Diff: 2
Page Ref: 389
6) ________ are communities organized by interest, such as hobbies, vocations, political parties,
or unions
Answer: Affinity portals
Diff: 2
Page Ref: 390
7) ________ are communities that are country- or language-specific.
Answer: Ethnic communities
Diff: 2
Page Ref: 390
AACSB Standard: Multicultural and Diversity
8) A(n) ________ is a place, such as MySpace, where people create their own space or home
page on which they write blogs; post pictures, videos, or music; share ideas; and link to other
Web locations they find interesting.
Answer: social network
Diff: 1
Page Ref: 391
9) The top social networking Web site as of 2009 was ________ with over 250 million users.
Answer: MySpace
Diff: 1
Page Ref: 393
10) ________ is the mapping and measuring of relationships and flows between people, groups,
organizations, animals, computers, or other information processing entities.
Answer: Social network analysis
Diff: 2
Page Ref: 394
11) ________ is a consumer media company where people can watch and share original videos
worldwide via the Web.
Answer: YouTube
Diff: 2
Page Ref: 394
12) ________ is a community-based Web site with an emphasis on technology and science
articles.
Answer: Digg
Diff: 1
Page Ref: 395
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13) ________ is a Web service for sharing Internet bookmarks for sites.
Answer: Social bookmarking
Diff: 2
Page Ref: 395
14) A(n) ________ is a group of people who have some kind of commercial or business
relationship.
Answer: business network
Diff: 1
Page Ref: 399
15) The 3D capability of ________ and the ease of manipulating avatars has opened the door to a
variety of entertainment options, most notably adult entertainment.
Answer: virtual worlds
Diff: 2
Page Ref: 403
16) ________ refers to the technologies and business practices that free the workforce from the
constraints of legacy communication such as e-mail by providing managers with access to the
right information at the right time through a Web of interconnected applications, services, and
devices.
Answer: Enterprise 2.0
Diff: 2
Page Ref: 403
AACSB Standard: Communication
17) The term ________ is an online community that uses the power of social networks for the
introduction, buying, and selling of products and services, including people's own creations.
Answer: social marketplace
Diff: 2
Page Ref: 404
18) Before being bought by ________, YouTube had an advertising-based business model.
Answer: Google
Diff: 1
Page Ref: 405
19) Increased Web site traffic, a common effect of viral marketing, inevitably brings more
________ dollars with it.
Answer: advertising
Diff: 1
Page Ref: 405
AACSB Standard: Reflective Thinking
20) ________ is word-of-mouth marketing that often takes place in social networks.
Answer: Viral blogging
Diff: 2
Page Ref: 406
21) ________ is a rapidly developing area. It refers to advertisement on cell phones and other
mobile devices.
Answer: Mobile advertising
Diff: 2
Page Ref: 407
AACSB Standard: Use of Information Technology
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22) Companies are finding that ________ outlets, such as blogs and wikis, not only generate
faster and cheaper results than traditional focus groups, but also foster closer relationships with
customers.
Answer: conversational marketing
Diff: 3
Page Ref: 408
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23) Organizations do face some ________ in opening up their marketing and advertising to
social networks.
Answer: risks
Diff: 2
Page Ref: 412
24) The ________ is an extension of the Web in which content can be expressed not only in
natural language, but also in a form that can be understood, interpreted, and used by intelligent
computer software agents.
Answer: Semantic Web
Diff: 2
Page Ref: 417
25) ________ is the next generation of the Web, which will combine social and business
computing.
Answer: Web 3.0
Diff: 1
Page Ref: 417
9.4 Essay
1) Briefly describe Web 2.0. How does it differ from the traditional Web?
Answer: Web 2.0 refers to advanced Internet technology and applications including blogs,
wikis, RSS, and social bookmarking. Web 2.0 is about everyday people (you and me) using the
Web for communication, collaboration, and creation. No one had more power to influence
society than Web 2.0 communities.
One of the most significant differences between Web 2.0 and the traditional World Wide Web is
greater collaboration among Internet users and other users, content providers, and enterprises.
Diff: 2
Page Ref: 385
AACSB Standard: Reflective Thinking
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2) Explain industry and market disruptors and one of their potential impacts. Select one industry
and discuss a disruption that can occur as a result.
Answer: Several companies have introduced Web 2.0 innovations that could disrupt and reorder
markets, or even entire industries, introducing major changes in the way companies do business.
An example is Blue Nile, which displaced hundreds of jewelers and is changing the jewelry retail
industry. Some refer to such companies as disruptors. For example, Zopa, which facilitates
person-to-person money lending, may disrupt the lending business. Consumer-generated content
is disrupting traditional media.
Specifically, large numbers of blogs and videos are posted everyday and then viewed by millions
around the globe. Content is created continuously by millions of people. The result is that
individuals are becoming both publishers of Web-based content and consumers of that content.
In real estate, disruptors are reducing the need and number of agents and decreasing the
commissions paid to agents.
Diff: 3
Page Ref: 387
AACSB Standard: Reflective Thinking
3) Define business networks and what determines their success. Identify locations where
business networking can take place.
Answer: A business network is a group of people that have some kind of commercial or
business relationship such as the relationships between sellers and buyers, buyers among
themselves, buyers and suppliers, and colleagues and other colleagues. Business networking
functions best when individuals offer to help others to find connections rather than cold-calling
on prospects.
Business networking can take place outside of traditional business physical environments. For
example, public places such as airports or golf courses provide opportunities to make new
business contacts if an individual has good social skills.
Diff: 2
Page Ref: 399
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4) What are two expected impacts of the explosive growth in mobile social networks?
Answer: The explosion of wireless Web 2.0 services and companies will enable many social
communities to be based on the mobile phone and other portable wireless devices. This extends
the reach of social interaction to millions of people who do not have regular or easy access to
computers. At minimum, existing members who use PCs will supplement their activities with
wireless devices. Thus, wireless would be the environment of choice for the Web 3.0 users.
Diff: 2
Page Ref: 395
AACSB Standard: Reflective Thinking
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5) What are two trends that may slow EC and Web 3.0 and even cripple the Internet?
Answer:
Security concerns. Both shoppers and users of e-banking and other services worry about online
security. The Web needs to be made safer.
Lack of Net neutrality. If the big telecom companies are allowed to charge companies for a
guarantee of faster access, critics fear that small innovative Web companies could be crowded
out by the Microsofts and Googles that can afford to pay more.
Copyright complaints. The legal problems of YouTube, Wikipedia, and others might result in a
loss of vital outlets of public opinion, creativity, and discourse.
Choppy connectivity. Upstream bandwidths are still constricted, making uploading of video files
a time-consuming task. Usable mobile bandwidth still costs.
Diff: 2
Page Ref: 419
AACSB Standard: Ethical Reasoning
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 10 E-Commerce Fraud and Security
10.1 True/False
1) Seattle's Northwest Hospital and Medical Center was attacked by malware that was able to
enter their network through a Windows flaw.
Answer: TRUE
Diff: 2
Page Ref: 428
2) The attacks and defense of computers can affect individuals, organizations, countries, or the
entire Web.
Answer: TRUE
Diff: 2
Page Ref: 429
3) According to the CSI 2008 Security Survey, the most expensive security incidents were those
involving viruses.
Answer: FALSE
Diff: 2
Page Ref: 429
4) Major information security methods used in 2008 included antivirus software, firewalls,
VPNs, encryption, and Web filtering.
Answer: TRUE
Diff: 2
Page Ref: 431
AACSB Standard: Use of Information Technology
5) Protection of the U.S. computer networks is in the hands of the Department of the Interior
(DOI).
Answer: FALSE
Diff: 2
Page Ref: 431
6) The Internet, or more specifically the Internet and network protocols, was never intended for
use by untrusted users or components.
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Answer: TRUE
Diff: 1
Page Ref: 431
AACSB Standard: Reflective Thinking
7) The Internet was designed for maximum efficiency and security by providing for error
checking to ensure that the message was sent and received correctly, user authentication, and
access control.
Answer: FALSE
Diff: 2
Page Ref: 432
AACSB Standard: Reflective Thinking
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8) An IP address uniquely identifies each computer connected to a network or the Internet.
Answer: TRUE
Diff: 2
Page Ref: 432
9) There is a clear shift in the nature of the operation of computer criminals from the desire for
fame to the desire for financial gain.
Answer: FALSE
Diff: 2
Page Ref: 432
AACSB Standard: Reflective Thinking
10) Social engineering is a type of technical attack to circumvent security measures by
manipulating people to get them to reveal crucial authentication information.
Answer: FALSE
Diff: 2
Page Ref: 434
AACSB Standard: Reflective Thinking
11) Risk creates vulnerability, which is the probability that this weakness will be known and
used.
Answer: FALSE
Diff: 2
Page Ref: 436
AACSB Standard: Reflective Thinking
12) Hackers are able to easily gain access to a network when IS staff do not ensure that all traffic
into and out of a network passes through a firewall.
Answer: TRUE
Diff: 3
Page Ref: 436
AACSB Standard: Reflective Thinking
13) An EC security strategy requires multiple layers of defense against risks from malware,
fraudsters, customers, and employees.
Answer: TRUE
Diff: 2
Page Ref: 437
AACSB Standard: Reflective Thinking
14) Administrators need to check the integrity of programs and patches that are installed; and
new programs and tools should be installed in a test environment before putting them into a
production environment.
Answer: TRUE
Diff: 2
Page Ref: 441
15) Shoppers can rely on online fraud protection provided by credit card issuers to protect them
from identity theft.
Answer: FALSE
Diff: 2
Page Ref: 444
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16) Spam is rampant because some people respond to it and make it profitable.
Answer: TRUE
Diff: 1
Page Ref: 447
17) Active tokens are storage devices (e.g., magnetic strip) that contain a secret code used in a
two-factor authentication system.
Answer: FALSE
Diff: 2
Page Ref: 452
AACSB Standard: Use of Information Technology
18) Biometric systems are authentication systems that identify a person by measurement of a
biological characteristic, such as fingerprints, iris patterns, facial features, or voice.
Answer: TRUE
Diff: 2
Page Ref: 452
AACSB Standard: Use of Information Technology
19) SSL makes it possible to encrypt credit card numbers and other transmissions between a
Web server and a browser, but it is not designed to check the validity of the credit card number.
Answer: TRUE
Diff: 3
Page Ref: 456
20) An intrusion detection system uses the public Internet to carry information but remains
private by using encryption, authentication, and access control to verify the identity of anyone
using the network.
Answer: FALSE
Diff: 3
Page Ref: 458
21) Because the consequences of weak network security can be severe, it is necessary that senior
management have a basic understanding of best practices in network risk management.
Answer: TRUE
Diff: 2
Page Ref: 467
22) Acceptable use policies (AUP) inform users of their responsibilities when a cyberattack or
network intrusion has occurred.
Answer: FALSE
Diff: 2
Page Ref: 468
AACSB Standard: Ethical Reasoning
23) The PCI data security standard was developed by the FTC to protect against credit card fraud
and identity theft.
Answer: FALSE
Diff: 3
Page Ref: 469
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24) A CompTIA study revealed that more than half of all information security breaches that were
related to human error had happened often because staff did not follow security procedures.
Answer: TRUE
Diff: 2
Page Ref: 470
25) Due care in EC are those actions that a company is reasonably expected to take based on the
risks affecting its business and transactions.
Answer: TRUE
Diff: 2
Page Ref: 471
10.2 Multiple Choice
1) According to the CSI 2008 Security Survey, the most expensive computer security incidents
were those involving ________.
A) financial fraud
B) viruses and worms
C) unintentional human errors
D) targeted attacks
Answer: A
Diff: 2
Page Ref: 429
AACSB Standard: Reflective Thinking
2) Which of the following is not an underlying reason why a comprehensive EC security strategy
is needed?
A) The Internet was designed for maximum efficiency without regard for its security or users
with malicious intent.
B) The shift is toward profit-motivated crimes.
C) Managers treat EC security as a process.
D) Many companies fail to implement basic IT security management best practices, business
continuity plans, and disaster recovery plans.
Answer: C
Diff: 3
Page Ref: 431
AACSB Standard: Reflective Thinking
3) The ________ translates or converts domain names to their IP addresses.
A) IPS
B) DOS
C) VPN
D) DNS
Answer: D
Diff: 2
Page Ref: 432
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4) ________ refers to the e-markets for stolen information.
A) Internet underground economy
B) Denial of service
C) Cybercriminal
D) Virtual private network
Answer: A
Diff: 2
Page Ref: 432
AACSB Standard: Ethical Reasoning
5) ________ systems are highly useful for both law enforcement and for law breaking, for
example, by providing a means to obtain passwords or encryption keys and thus bypassing other
security measures.
A) Biometric
B) Keystroke logging
C) Access control
D) Intrusion detection
Answer: B
Diff: 2
Page Ref: 433
AACSB Standard: Use of Information Technology
6) ________ is a crimeware technique used to steal the identity of target companies to get the
identities of their customers.
A) Spamming
B) Pretexting
C) Social engineering
D) Phishing
Answer: D
Diff: 2
Page Ref: 434
7) What is a vulnerability?
A) software bug
B) risk of an attack or intrusion
C) spyware
D) weakness in software or network
Answer: D
Diff: 2
Page Ref: 435
8) The process of determining what the authenticated entity is allowed to access and what
operations it is allowed to perform is known as:
A) integrity.
B) availability.
C) authentication.
D) nonrepudiation.
Answer: C
Diff: 2
Page Ref: 437
AACSB Standard: Use of Information Technology
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9) The assurance that an online customer or trading partner cannot falsely deny their purchase or
transaction is referred to as:
A) integrity.
B) availability.
C) authentication.
D) nonrepudiation.
Answer: D
Diff: 2
Page Ref: 437
10) The protection of information systems against unauthorized access to or modification of
information that is stored, processed, or being sent over a network is referred to as:
A) information assurance.
B) data integrity.
C) information integrity.
D) human firewall.
Answer: A
Diff: 2
Page Ref: 438
11) A botnet is:
A) a collection of a few hundred hijacked Internet computers that have been set up to forward
traffic, including spam and viruses, to other computers on the Internet.
B) a piece of software code that inserts itself into a host or operating system to launch DOS
attacks.
C) a piece of code in a worm that spreads rapidly and exploits some known vulnerability.
D) a coordinated network of computers that can scan and compromise other computers and
launch DOS attacks.
Answer: D
Diff: 2
Page Ref: 442
12) The incidence of online fraud and identify theft would increase for each of the following
reasons except:
A) There is growth in EC sales and the number of shoppers with higher incomes.
B) Information is a valuable form of currency.
C) Hackers are increasingly motived by fame and notoriety.
D) Scammers are outsourcing work to programmers to gain control of computers or wireless
networks.
Answer: C
Diff: 3
Page Ref: 443
AACSB Standard: Reflective Thinking
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13) Assurance that stored data has not been modified without authorization and a message that
was sent is the same message that was received is referred to as:
A) integrity.
B) availability.
C) authentication.
D) nonrepudiation.
Answer: A
Diff: 2
Page Ref: 449
14) The success and security of EC depends on the ________ of information and the business
Web site.
A) encryption, functionality, and privacy
B) quality, reliability, and speed
C) authentication, authorization, and nonrepudiation
D) confidentiality, integrity, and availability
Answer: D
Diff: 3
Page Ref: 449
15) The most cost-effective approach to EC security is to develop and implement a strategy that:
A) depends on the trust and confidence of customers.
B) proactively meets regulatory, financial, marketing and operational requirements.
C) protects against unauthorized transactions and overrides of accounting controls.
D) requires digital signatures or digital certificates for all transactions.
Answer: B
Diff: 3
Page Ref: 450
AACSB Standard: Reflective Thinking
16) All of the following are characteristics of access control except:
A) Access control determines which persons, programs, or machines can legitimately use a
network resource and which resources he, she, or it can use.
B) Access control lists (ACLs) define users' rights, such as what they are allowed to read, view,
write, print, copy, delete, execute, modify, or move.
C) All resources need to be considered together to identify the rights of users or categories of
users.
D) After a user has been identified, the user must be authenticated.
Answer: C
Diff: 2
Page Ref: 451
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17) Fingerprint scanners, facial recognition systems, and voice recognition all are examples of
________ that recognize a person by some physical trait.
A) biometric systems
B) human firewalls
C) intrusion detection systems
D) access control lists
Answer: A
Diff: 2
Page Ref: 452
18) Authentication can be based on the public key infrastructure (PKI) which is based on:
A) message digest.
B) plaintext.
C) encryption.
D) key space.
Answer: C
Diff: 2
Page Ref: 453
19) Public key infrastructure (PKI) is an authentication method that:
A) has become the cornerstone for secure e-payments and intranet applications.
B) is based on the Data Encryption Standard, which is the standard symmetric encryption
algorithm supported by U.S. government agencies.
C) encrypts and decrypts large amounts of data effectively.
D) uses encryption keys ranging from 64 bits to 128 bits.
Answer: A
Diff: 2
Page Ref: 454
20) Security functions or characteristics of digital signatures include all of the following except:
A) A digital signature is the electronic equivalent of a personal signature, which can be forged.
B) Digital signatures are based on public keys for authenticating the identity of the sender of a
message or document.
C) Digital signatures ensure that the original content of an electronic message or document is
unchanged.
D) Digital signatures are portable.
Answer: A
Diff: 3
Page Ref: 455
AACSB Standard: Use of Information Technology
21) Digital signatures or digital certificates:
A) are used to validate the sender and time stamp of the transaction so it cannot be later claimed
that the transaction was unauthorized or invalid.
B) have been compromised by phishers and spammers.
C) provide complete confidence that the transactions are secure.
D) Both A and B
Answer: D
Diff: 2
Page Ref: 455
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22) The ________ was invented by Netscape to use standard certificates for authentication and
data encryption to ensure privacy or confidentiality.
A) certificate authority
B) public key infrastructure
C) secure socket layer
D) digital envelope
Answer: C
Diff: 2
Page Ref: 456
23) Which of the following is not a disadvantage of firewalls that act as packet filters?
A) Packet-filtering routers often are the first layer of network defense.
B) An administrator might miss some important rules, which would leave a hole in the firewall.
C) Because the content of a packet is irrelevant to a packet filter, once a packet is let through the
firewall, the inside network is open to data-driven attacks.
D) An administrator might incorrectly specify a rule creating a vulnerability.
Answer: A
Diff: 3
Page Ref: 457
24) Which is not an advantage of virtual private networks (VPN) for data communications?
A) They are less expensive than private leased lines because they use the public Internet to carry
information.
B) They ensure the confidentiality and integrity of the data transmitted over the Internet without
requiring encryption.
C) They can reduce communication costs dramatically because VPN equipment is cheaper than
other remote solutions.
D) Remote users can use broadband connections rather than make long distance calls to access
an organization's private network.
Answer: B
Diff: 3
Page Ref: 458
25) A host-based intrusion detection system (IDS):
A) uses rules to analyze suspicious activity at the perimeter of a network or at key locations in
the network.
B) resides on the server that is being monitored where it can detect whether critical or securityrelated files have been tampered with or whether a user has attempted to access files that he or
she is not authorized to use.
C) can perform certain actions when an attack occurs, such as terminating network connections
based on security policies.
D) consists of information system resources–firewalls, routers, Web servers, database servers,
and files that look like production systems, but do no real work.
Answer: B
Diff: 2
Page Ref: 458
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26) Why should EC companies comply with ethical privacy practices?
A) Customers need to trust that the online marketplace and its businesses will not violate the
right to privacy.
B) Unethical privacy practices can have both immediate and long-term negative business
consequences.
C) Violators expose themselves to harsh penalties from various government agencies and
victimized customers, as well as bloggers and consumer interest groups.
D) All of the above
Answer: D
Diff: 2
Page Ref: 467
AACSB Standard: Ethical Reasoning
27) An EC security strategy and program begins with:
A) the commitment and involvement of executive management.
B) layers of hardware and software defenses.
C) information security policies and training.
D) secure design of EC applications.
Answer: A
Diff: 2
Page Ref: 467
AACSB Standard: Reflective Thinking
28) The key reasons why EC criminals cannot be stopped include each of the following except:
A) Sophisticated hackers use browsers to crack into Web sites.
B) Strong EC security makes online shopping inconvenient and demanding on customers.
C) There is a lack of cooperation from credit card issuers and foreign ISPs.
D) Online shoppers do not take necessary precautions to avoid becoming a victim.
Answer: A
Diff: 2
Page Ref: 468
AACSB Standard: Reflective Thinking
29) Which of the following statements about hardware and software security defenses is false?
A) Hardware and software security defenses protect against irresponsible business practices or
corrupt management.
B) There is no single hardware or software solution appropriate for all companies.
C) If firewalls and antivirus software are not upgraded and monitored constantly, they will not
remain useful.
D) After the EC security program and policies are defined and risk assessment completed, then
the software and hardware needed to support and enforce them can be put in place.
Answer: A
Diff: 3
Page Ref: 469
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30) Firewalls that filter requests from the Internet to a private network based on the IP address of
the computer sending or receiving those requests are called:
A) application-level proxies.
B) bastion gateways.
C) packet-filtering routers.
D) IP blockers.
Answer: C
Diff: 2
Page Ref: 473
10.3 Fill in the Blank
1) Any business activity that uses deceitful practices or devices to deprive another of property or
other rights is known as ________.
Answer: fraud
Diff: 1
Page Ref: 434
2) ________ is a nontechnical attack that uses a ruse to trick users into revealing information or
performing an action that compromises a computer or network.
Answer: Social engineering
Diff: 2
Page Ref: 434
3) ________ refers to techniques to steal the identity of a target company to get the identities of
its customers.
Answer: Phishing
Diff: 2
Page Ref: 434
4) Malicious code, also known as malware, is classified by how it ________.
Answer: spreads
Diff: 2
Page Ref: 434
5) ________ are weaknesses in software or other mechanisms that a hacker can use directly to
gain access to a system or network.
Answer: Vulnerabilities
Diff: 2
Page Ref: 435
6) ________ is a process to verify the real identity of an entity, which could be an individual,
computer, computer program, or EC Web site.
Answer: Authentication
Diff: 2
Page Ref: 437
7) ________ is the process of determining what the authenticated entity is allowed to access and
what operations it is allowed to perform.
Answer: Authorization
Diff: 2
Page Ref: 437
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8) ________ is assurance that online customers or trading partners cannot falsely deny their
purchase or transaction.
Answer: Nonrepudiation
Diff: 2
Page Ref: 437
9) ________ is the protection of information systems against unauthorized access to or
modification of information whether in storage, processing, or in transit.
Answer: Information assurance
Diff: 2
Page Ref: 438
10) ________ attacks are those in which a perpetrator uses some form of deception to trick
people into revealing information or performing actions that harm the security of a network.
Answer: Nontechnical
Diff: 1
Page Ref: 438
11) A(n) ________ is a program that appears to have a useful function but contains a hidden
function that presents a security risk.
Answer: Trojan horse
Diff: 2
Page Ref: 439
12) A(n) ________ attack is an attack in which a server gets so many requests for service or
access that it crashes and cannot respond.
Answer: denial of service (DoS)
Diff: 2
Page Ref: 441
13) A(n) ________ is a huge number (e.g., hundreds of thousands) of hijacked Internet
computers that have been set up to forward traffic, including spam and viruses, to other
computers on the Internet.
Answer: botnet
Diff: 2
Page Ref: 442
14) ________ is the assurance that data is accurate or that a message has not been altered.
Answer: Integrity
Diff: 2
Page Ref: 449
15) ________ is the assurance of data privacy.
Answer: Confidentiality
Diff: 2
Page Ref: 449
16) ________ consist of all the policies, procedures, documents, standards, hardware, software,
training, and personnel that work together to protect information, the ability to conduct business,
and other assets.
Answer: EC security programs
Diff: 2
Page Ref: 451
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17) ________ is the process of transforming or scrambling data in such a way that it is difficult,
expensive, or time-consuming for an unauthorized person to unscramble it.
Answer: Encryption
Diff: 2
Page Ref: 453
18) A mathematical computation that is applied to a message, using a private key, to encrypt the
message is called a(n) ________.
Answer: hash
Diff: 2
Page Ref: 455
19) ________ are barriers between a trusted network or PC and the untrustworthy Internet.
Answer: Firewalls
Diff: 1
Page Ref: 457
20) A virtual private network (VPN) uses the public Internet to carry information but remains
private by using ________.
Answer: encryption
Diff: 2
Page Ref: 458
21) ________ are information system resources, such as firewalls, routers, Web servers, database
servers and files, that only look like production systems to attack hackers and study their
attempts to attack a network.
Answer: Honeypots
Diff: 2
Page Ref: 459
22) ________ is an exercise that determines the impact of losing the support of an EC resource
to an organization, estimates how that loss may escalate over time, identifies the minimum
resources needed to recover from the loss, and prioritizes the steps in the recovery of the
processes and supporting systems.
Answer: Business impact analysis
Diff: 3
Page Ref: 468
AACSB Standard: Reflective Thinking
23) Policies that inform users of their responsibilities when using company networks, wireless
devices, customer data, and so forth are known as ________.
Answer: acceptable use policies (AUP)
Diff: 3
Page Ref: 468
24) The purpose of the ________ is to improve customers' trust in e-commerce, especially when
it comes to online payments, and to increase the Web security of online merchants.
Answer: PCI DSS
Diff: 3
Page Ref: 469
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25) ________ in EC are those actions that a company is reasonably expected to take based on the
risks affecting its EC business and online transactions.
Answer: Due care
Diff: 2
Page Ref: 471
10.4 Essay
1) Compare current motives of hackers to those of the past.
Answer: In the early days of EC, many hackers simply wanted to gain fame or notoriety
by defacing Web sites or gaining root, which means gaining unrestricted access to a network.
Criminals and criminal gangs are now profit-oriented, and their tactics are not limited to the
online world.
Diff: 1
Page Ref: 432
2) List and briefly describe the three assurances of the CIA security triad.
Answer: The CIA triad refers to the confidentiality, integrity, and availability (or accessibility)
of information and business Web sites.
- Confidentiality is the assurance of data privacy. The data or transmitted message is encrypted
so that it is readable only by the person for whom it is intended. The confidentiality function
prevents unauthorized disclosure of information.
- Integrity is the assurance that data is accurate or that a message has not been altered. It means
that stored data has not been modified without authorization; a message that was sent is the same
message that was received.
- Availability is the assurance that access to data, the Web site, or other EC data service is
timely, available, reliable, and restricted to authorized users.
Diff: 2
Page Ref: 449
AACSB Standard: Ethical Reasoning
3) Briefly describe nonrepudiation and its importance for EC and electronic transactions.
Answer: Nonrepudiation is assurance that an online customer or trading partner cannot falsely
deny their purchase, transaction, etc. For EC and other electronic transactions, including cash
machines or ATMs, all parties in a transaction must be confident that the transaction is secure;
the parties are who they say they are (authentication), and that the transaction is verified being
completed or final. Authentication and nonrepudiation are potential defenses against phishing
and identity theft.
Diff: 2
Page Ref: 449
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4) Why does the success of an EC security strategy and program depend on the commitment and
involvement of executive management?
Answer: The authority of senior managers is needed to establish and maintain EC security
programs. A genuine and well-communicated executive commitment about EC security and
privacy measures is needed to convince users that insecure practices, risky or unethical methods,
and mistakes due to ignorance will not be tolerated. Most forms of security (e.g., airport and
sports arena security) are unpopular because they are inconvenient, restrictive, time consuming,
and expensive. Security practices tend not to be a priority unless they are mandatory and there
are negative consequences for noncompliance.
Diff: 2
Page Ref: 467
AACSB Standard: Reflective Thinking
5) What technologies can help establish trust in EC communications and transactions?
Answer: Trust starts with the authentication of the parties involved in a transaction; that is,
identifying the parties in a transaction along with the actions they can perform. Authentication
can be established with something one knows (e.g., a password), something one has (e.g., a
token), or something one possesses (e.g., a fingerprint). Biometric systems can confirm a
person's identity. Public key infrastructure (PKI) can authenticate the parties in a transaction.
Digital signatures are themselves authenticated through a system of digital certificates issued by
certificate authorities (CAs). For the average consumer and merchant, PKI is simplified because
it is built into Web browsers and services. Such tools are secure because security is based on SSL
communications.
Diff: 3
Page Ref: 473
AACSB Standard: Use of Information Technology
Electronic Commerce 2010 (Turban / Lee / King / Liang / Turban)
Chapter 14 Economics and Justification of Electronic Commerce
14.1 True/False
1) From 1995 through 2000, many EC projects and start-up companies were funded with little
analysis of their business viability or finances.
Answer: TRUE
Diff: 1
Page Ref: 587
AACSB Standard: Reflective Thinking
2) The result of the rush to invest in EC projects and start-up companies was the 2001-2003 "dotcom bust," when hundreds of EC startups went out of business and the stock market crashed.
Answer: TRUE
Diff: 1
Page Ref: 587
3) After the dot-com bust, most IT executives acquired the knowledge and tools to do ROI
calculations on proposed EC investments.
Answer: FALSE
Diff: 2
Page Ref: 587
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4) One reason why EC justification is needed is that companies now realize that EC is not
necessarily the solution to all problems.
Answer: TRUE
Diff: 2
Page Ref: 588
AACSB Standard: Reflective Thinking
5) According to a CIO Insight report, EC justification decreases the credibility of EC projects.
Answer: FALSE
Diff: 1
Page Ref: 588
6) One basic way to categorize different EC investments is to distinguish between investment in
infrastructure and investment in specific EC applications.
Answer: TRUE
Diff: 1
Page Ref: 588
AACSB Standard: Use of Information Technology
7) Infrastructure investments are made for the short-term because of frequent technological
changes.
Answer: FALSE
Diff: 1
Page Ref: 588
AACSB Standard: Use of Information Technology
8) Cost-benefit analysis is frequently assessed by return on investment (ROI), which is also the
name of a specific method for evaluating investments.
Answer: TRUE
Diff: 2
Page Ref: 588
9) All EC investments need to be formally justified to insure that they align with the company's
competitive strategy.
Answer: FALSE
Diff: 2
Page Ref: 589
10) Metrics are used to describe costs, benefits, or the ratio between them and need to be defined
properly with a clear way to measure them.
Answer: TRUE
Diff: 3
Page Ref: 589
AACSB Standard: Analytic Skills
11) Key performance indicators (KPI) are used to qualitatively track critical metrics or success
factors.
Answer: FALSE
Diff: 2
Page Ref: 590
AACSB Standard: Analytic Skills
12) A major difficulty in justifying EC projects is that many costs and benefits are intangible and
therefore very difficult to measure.
Answer: TRUE
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Diff: 2
Page Ref: 591
AACSB Standard: Analytic Skills
13) Creating a competitive advantage, providing a benefit to society, and improving the
company's image are examples of tangible benefits that might be realized from an EC project.
Answer: FALSE
Diff: 2
Page Ref: 591
AACSB Standard: Use of Information Technology
14) Cannibalization occurs when a new EC initiative produces substantial online sales, but
traditional sales fall such that no increase in total revenue occurs.
Answer: TRUE
Diff: 2
Page Ref: 592
AACSB Standard: Use of Information Technology
15) The results of any investment justification in eCRM depend on the time frame used to
measure changes in productivity.
Answer: TRUE
Diff: 2
Page Ref: 592
AACSB Standard: Use of Information Technology
16) Because many EC investments in eCRM take five to six years to show significant positive
results, real productivity gains often do not get measured correctly.
Answer: TRUE
Diff: 2
Page Ref: 592
AACSB Standard: Use of Information Technology
17) In preparing the business case for EC investment, managers should examine the potential
additional revenues, such as increased revenues via products or services from a larger global
market because of more effective product marketing on the Web.
Answer: TRUE
Diff: 2
Page Ref: 592
AACSB Standard: Analytic Skills
18) The ROI method uses a formula that divides net revenues by the initial cost. The result is a
ratio that measures the ROI for each year or for an entire period.
Answer: FALSE
Diff: 2
Page Ref: 596
AACSB Standard: Analytic Skills
19) In an NPV analysis, analysts convert future values of benefits to their present-value
equivalents by discounting future cash flows at the risk-free rate set by the Federal Reserve
Bank.
Answer: FALSE
Diff: 2
Page Ref: 596
AACSB Standard: Analytic Skills
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20) Given the diversity of activities involved in e-procurement, the metrics used to measure the
value of e-procurement must reflect how well each process is accomplished and take into
consideration whether the company is a buyer or seller.
Answer: TRUE
Diff: 2
Page Ref: 600
AACSB Standard: Use of Information Technology
21) According to recent surveys of eCRM applications, there have been mixed payoffs, but a
majority of companies have demonstrated a significantly positive ROI for their eCRM
investments.
Answer: FALSE
Diff: 2
Page Ref: 601
AACSB Standard: Analytic Skills
22) Large companies often have several integrated intranet and other information systems that
determine the success of a Web portal. Thus, the justification for a Web portal must focus on
both business ROI and technology ROI.
Answer: TRUE
Diff: 2
Page Ref: 602
AACSB Standard: Analytic Skills
23) The average cost curve of regular products is U-shaped and has an optimal lowest point, but
with digital products the average cost per unit declines and quantity increases.
Answer: TRUE
Diff: 2
Page Ref: 607
AACSB Standard: Analytic Skills
24) Critical elements that can affect the value of EC across cultures are perceived trust, consumer
loyalty, regulation, political influences, and even the content of online ads.
Answer: TRUE
Diff: 2
Page Ref: 616
AACSB Standard: Use of Information Technology
25) Developing economies often face power blackouts, unreliable telecommunications
infrastructure, undependable delivery mechanisms, and a relatively few customers who own
computers and credit cards. These limitations can be overcome when predicting EC investment
payoffs by using a combination of break-even analysis and NPV.
Answer: FALSE
Diff: 2
Page Ref: 616
AACSB Standard: Use of Information Technology
14.2 Multiple Choice
1) CIOs need to effectively communicate the value of proposed EC projects in order to gain
approval for all of the following reasons except:
A) Companies now realize that EC is not necessarily the solution to all problems.
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B) Some large companies, and many public organizations, mandate a formal evaluation of
requests for funding.
C) The success of EC projects may be assessed in order to pay bonuses to those involved with
the project.
D) Demand for expanding or initiating e-business projects is no longer strong so there are fewer
requests for funding.
Answer: D
Diff: 2
Page Ref: 588
AACSB Standard: Analytic Skills
2) One basic way to categorize different EC investments is to distinguish between investments in
infrastructure and investments in specific EC applications because benefits from infrastructure
investments:
A) are made for the long-term.
B) depend on the EC applications.
C) are very complex.
D) have a low return.
Answer: A
Diff: 1
Page Ref: 588
AACSB Standard: Analytic Skills
3) The basic reasons that companies invest in IT and EC are all of the following except:
A) to improve business processes
B) to increase customer satisfaction and retention
C) to reduce time-to-market
D) to justify new marketing campaigns
Answer: D
Diff: 2
Page Ref: 588
AACSB Standard: Analytic Skills
4) Not all EC investments need to be formally justified. All of the following are cases where
formal evaluation may not be needed except:
A) when the value of the investment is relatively small for the organization
B) when competitors have made that type of investment
C) when the relevant data are not available, are inaccurate, or are too volatile
D) when the EC project is mandated and must be done regardless of the costs and benefits
Answer: B
Diff: 2
Page Ref: 589
AACSB Standard: Analytic Skills
5) Metrics are used to describe all of the following except:
A) standards
B) costs
C) benefits
D) the ratio of costs to benefits
Answer: A
Diff: 2
Page Ref: 589
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AACSB Standard: Analytic Skills
6) In B2C, an example of a tangible EC metric from the buyer's perspective is:
A) ease of use of EC.
B) convenience in purchasing
C) profit per customer.
D) cost/price of the product.
Answer: D
Diff: 3
Page Ref: 590
AACSB Standard: Reflective Thinking
7) For governments, an example of an intangible EC metric is:
A) reelection of candidates.
B) lower tax rates.
C) increase in participation in government programs.
D) risk reduction.
Answer: A
Diff: 2
Page Ref: 590
8) Productivity benefits from using EC are difficult to measure because:
A) the payoffs are too short.
B) there is no time lag in EC gains.
C) EC gains in certain areas of the company may be offset by losses in other areas.
D) qualitative benefits do not count.
Answer: C
Diff: 3
Page Ref: 592
AACSB Standard: Analytic Skills
9) EC costs and benefits can be classified into two broad categories:
A) direct and routine.
B) short-term and capital.
C) tangible and intangible.
D) operational and strategic.
Answer: C
Diff: 1
Page Ref: 593
AACSB Standard: Analytic Skills
10) The relationship between EC investment and organizational performance is:
A) direct.
B) indirect.
C) shared with other investments.
D) not measurable.
Answer: B
Diff: 3
Page Ref: 594
AACSB Standard: Analytic Skills
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11) The New York Metropolitan Transit Authority (MTA) did not need to open another airport
for almost two decades, even though air traffic had tripled because of productivity gains derived
from improved IT systems. IT systems added by the MTA played critical roles in ticket
reservations, passenger and luggage check-in, crew assignment and scheduling, runway
maintenance and management, and gate assignments. This case illustrates that:
A) intangible benefits can be complex, yet substantial.
B) tangible benefits can be complex, yet substantial.
C) tangible costs can be high, yet payoffs can be achieved quickly.
D) intangible costs can be high, yet payoffs can be achieved quickly.
Answer: A
Diff: 2
Page Ref: 594
AACSB Standard: Analytic Skills
12) The major steps in the process of justifying large-scale EC and IT projects include all of the
following except:
A) Lay an appropriate foundation for analysis with your vendor, and then conduct your ROI.
B) Document and verify all figures used in the calculation. Clarify all assumptions.
C) Do not leave out strategic benefits, including long-term ones.
D) Be careful not to overestimate cost and underestimate benefits (a tendency of many
managers).
Answer: D
Diff: 3
Page Ref: 594
AACSB Standard: Analytic Skills
13) Traditional methods for evaluating EC investments include all of the following except:
A) ROI
B) break-even or payback period
C) discount rate
D) NPV
Answer: C
Diff: 1
Page Ref: 596
AACSB Standard: Analytic Skills
14) Pouilly's Poodle Shop wants to produce monthly cash flows from its Internet Doggie-Cam
investment. The most appropriate method for assessing this investment is:
A) break-even analysis.
B) total cost of ownership.
C) payoff.
D) internal rate of return (IRR).
Answer: D
Diff: 2
Page Ref: 596
AACSB Standard: Analytic Skills
15) Dan Welch, who owns three World Cup Coffee shops in Portland, Oregon, estimates that his
free Wi-Fi network has added 10 percent to his overall revenue. Welch credits Wi-Fi consumers
with spending three times as much on food compared with the average consumer. This is an
example of ________.
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A) business ROI
B) business NPV
C) technology ROI
D) technology IRR
Answer: A
Diff: 2
Page Ref: 598
AACSB Standard: Analytic Skills
16) By calculating the difference between TCO and TBO, one can compute the ________ of an
IT investment.
A) break-even analysis
B) total cost of ownership
C) payoff
D) internal rate of return (IRR)
Answer: C
Diff: 1
Page Ref: 597
AACSB Standard: Analytic Skills
17) The disadvantage of the NPV method for evaluating EC and IT is:
A) the true benefits are difficult to measure.
B) it is difficult to compare projects of unequal life spans pans or sizes.
C) it assumes reinvestment at the same rate.
D) it may be difficult to classify outlays as expenses or investments.
Answer: B
Diff: 3
Page Ref: 597
AACSB Standard: Analytic Skills
18) All of the following direct metrics indicate progress in e-procurement except:
A) increased order fulfillment rate
B) decreased number of rejects received from suppliers
C) reduced inventory costs
D) increased on-time deliveries
Answer: C
Diff: 3
Page Ref: 600
AACSB Standard: Analytic Skills
19) Justifying information security projects:
A) is not needed because it is well-known that preventing network security problems is less labor
intensive than cleaning up virus infections.
B) is not done because ROI calculators are not available.
C) should focus on defending against external threats such as hackers and malware.
D) should be done because employee security training is usually poorly done.
Answer: D
Diff: 3
Page Ref: 603
AACSB Standard: Analytic Skills
20) Antivirus investments are easily justified because more than ________ percent of viruses
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enter business networks via e-mail.
A) 25
B) 33
C) 50
D) 85
Answer: D
Diff: 2
Page Ref: 606
21) The average-cost curves (AVC) of physical products and digital products:
A) are different because the AVC of digital products declines as quantity increases forming an Lshape, while the AVC of physical products is U-shaped.
B) are both U-shaped.
C) are both L-shaped.
D) are different because the AVC of physical products declines as quantity increases forming an
L-shape, while the AVC of digital products is U-shaped.
Answer: A
Diff: 3
Page Ref: 607
AACSB Standard: Analytic Skills
22) When computing agency cost, companies should:
A) consider both production-related costs and transaction costs.
B) consider only production-related costs and ignore transaction costs.
C) consider only transaction costs and ignore production-related costs.
D) ignore production-related costs and transaction costs.
Answer: B
Diff: 3
Page Ref: 607
AACSB Standard: Analytic Skills
23) Transaction costs include all of the following except:
A) production costs incurred for labor and overhead
B) search costs incurred by buyers and sellers in locating each other and specific products and
services
C) negotiation costs that result from meetings, communication-related expenses, exchanges of
technical data or brochures, entertainment, and legal costs
D) monitoring costs incurred when buyers and sellers make sure that the exchange proceeds
according to the terms under which the sale was made
Answer: A
Diff: 2
Page Ref: 608
AACSB Standard: Analytic Skills
24) EC can increase revenues by all of the following except:
A) increasing both reach and richness
B) allowing customers to order anytime from any place via the use of m-commerce and lcommerce
C) becoming an online portal
D) creating value-added content from selling searches, access to data, and electronic documents
Answer: A
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Diff: 2
Page Ref: 609
25) McAfee allows users of its VirusScan virus-detection software to automatically update the
latest security patches online. This is an example of ________ to attract customers who value
this automatic update.
A) competitive advantage
B) core competency
C) product or service differentiation
D) agility
Answer: C
Diff: 2
Page Ref: 610
AACSB Standard: Reflective Thinking
26) A Web-based seller of CDs carefully monitors the prices charged by its competitors for
identical products. This company has the ability to change a given price within three minutes in
response to changes by competitors. This is an example of EC:
A) competitive advantage.
B) core competency.
C) product or service differentiation.
D) agility.
Answer: D
Diff: 2
Page Ref: 610
AACSB Standard: Reflective Thinking
27) All of the following are critical success factors (CSFs) of the Old Economy except:
A) deliver high-value products
B) compete to sell product
C) build market share to get economies of scale
D) create new partnerships, stay with core competency
Answer: D
Diff: 2
Page Ref: 614
28) One of the strengths of EC is the ease with which its adopters can reach a global population
of consumers. However, EC-driven businesses must consider the critical elements affecting the
value of EC across cultures. Those elements include all of the following except:
A) delivery delays
B) perceived trust
C) consumer loyalty
D) political influences
Answer: A
Diff: 2
Page Ref: 616
29) All of the following apply to EC in developing economies except:
A) Developing economies often face power blackouts and unreliable infrastructure and delivery
mechanisms creating limitations that make it difficult for firms to predict whether EC
investments will pay off, and when.
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B) Developing economies, such as China and India, represent a significant opportunity for EC to
connect businesses to customers, as well as other businesses.
C) Developing economies struggle with various issues that create too many business and
technology risks to justify investment in those economies at this time.
D) The potential volume of transactions in developed countries can make EC investments more
attractive for established firms than new firms because established firms have already recovered
the costs of their IT infrastructures.
Answer: C
Diff: 2
Page Ref: 616
AACSB Standard: Analytic Skills
30) As a company moves to incorporate an online presence with its traditional brick-and-mortar
operation, it adds the costs related to training for all personnel in the capabilities of the EC
system and a new advertising campaign to announce its new site to the costs directly associated
with building the new Web presence. In this case, training and advertising are examples of
________.
A) transaction costs
B) complementary investments
C) direct costs
D) indirect costs
Answer: B
Diff: 2
Page Ref: 618
AACSB Standard: Analytic Skills
14.3 Fill in the Blank
1) Justifying an EC investment means comparing the costs of each project against its benefits in
what is known as a ________.
Answer: cost-benefit analysis
Diff: 2
Page Ref: 588
2) A ________ is a specific, measurable standard against which actual performance is compared.
Answer: metric
Diff: 1
Page Ref: 589
3) The ________ method for EC justification evaluation is used to measure the performance of
the organization by looking at a broad set of factors, not just financial ones.
Answer: balanced scorecard
Diff: 2
Page Ref: 589
4) The ________ is a very common IT investment method, which maximizes value for
unconstrained project selection.
Answer: net present value (NPV)
Diff: 1
Page Ref: 589
AACSB Standard: Analytic Skills
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5) ________, which are the quantitative expression of critically important metrics, known as
critical success factors, measure metrics that deal directly with performance, such as sales and
profits.
Answer: Key performance indicators (KPI)
Diff: 2
Page Ref: 590
AACSB Standard: Analytic Skills
6) The value of competitive advantage, quality improvement, risk of not investing, and
reputation are difficult to assess because they are ________ factors.
Answer: intangible
Diff: 2
Page Ref: 591
AACSB Standard: Analytic Skills
7) Increased online sales may decrease offline sales resulting in a situation known as ________.
Answer: cannibalism
Diff: 2
Page Ref: 592
8) A ________ is the point at which the benefits of a project are equal to the costs.
Answer: break-even point
Diff: 1
Page Ref: 596
9) ________ is a formula for calculating the cost of owning, operating, and controlling an IT
system.
Answer: Total cost of ownership
Diff: 1
Page Ref: 596
10) Benefits of ownership that include both tangible and intangible benefits are known as
________.
Answer: total benefits of ownership
Diff: 1
Page Ref: 597
11) ________ attempts to quantify the net value added by an investment.
Answer: Economic value added (EVA)
Diff: 2
Page Ref: 597
12) The ________ is the discount rate that makes the NPV of those cash flows equal to zero.
Answer: internal rate of return
Diff: 2
Page Ref: 597
AACSB Standard: Analytic Skills
13) Vendors and consulting companies have accumulated experience in developing metrics and
tools, such as a calculator that uses metrics and formulas to compute investment returns, which is
known as a(n) ________.
Answer: ROI calculator
Diff: 1
Page Ref: 598
AACSB Standard: Analytic Skills
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14) With the ________, the organization evaluates intangible benefits using a low-cost, trial EC
system before deciding to commit to a larger, more complete system.
Answer: value analysis method
Diff: 2
Page Ref: 599
AACSB Standard: Analytic Skills
15) An organization may use the ________ method to determine how much it should invest in
large EC and IT infrastructures.
Answer: management by maxim
Diff: 3
Page Ref: 599
16) In addition to buying and selling, ________ also includes selecting suppliers, getting
approval from buyers, processing purchase orders, delivering and receiving items, and
processing payments.
Answer: e-procurement
Diff: 2
Page Ref: 601
17) The ________ represents the behavior of average costs as quantity changes.
Answer: average-cost curve
Diff: 2
Page Ref: 606
AACSB Standard: Analytic Skills
18) ________ are the costs to produce the product or service a company is selling.
Answer: Production costs
Diff: 2
Page Ref: 606
19) Costs incurred in ensuring that the agent performs tasks as expected are known as ________.
Answer: agency costs
Diff: 1
Page Ref: 607
20) ________ cover a wide range of costs that are associated with the distribution (sale) and/or
exchange of products and services.
Answer: Transaction costs
Diff: 2
Page Ref: 608
AACSB Standard: Analytic Skills
21) Having special features available in products that make them distinguishable from other
products is known as ________.
Answer: product differentiation
Diff: 2
Page Ref: 610
22) An EC firm's ability to capture, report, and quickly respond to changes happening in the
marketplace and business environment is known as ________.
Answer: agility
Diff: 2
Page Ref: 610
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23) ________ is the fair market value of a business or the price at which a property would
change hands between a willing buyer and a willing seller who are both informed and under no
compulsion to act.
Answer: Valuation
Diff: 2
Page Ref: 610
AACSB Standard: Analytic Skills
24) IT-enabled capabilities in the form of digitized enterprise work processes and knowledge
systems are known as ________.
Answer: digital options
Diff: 3
Page Ref: 611
25) ________ are additional investments, such as training, made to maximize the returns from
EC investments.
Answer: Complementary investments
Diff: 2
Page Ref: 611
14.4 Essay
1) List and briefly describe three reasons why EC justification is needed.
Answer: Companies realize that EC is not necessarily the solution to all problems. Therefore,
EC projects must compete for funding and resources with other internal and external projects.
Analysis is needed to determine when funding of an EC project is appropriate.
Some large companies, and many public organizations, mandate a formal evaluation of requests
for funding.
Companies need to assess the success of EC projects after completion, and later on a periodic
basis.
The success of EC projects may be assessed in order to pay bonuses to those involved with the
project.
Diff: 2
Page Ref: 588
AACSB Standard: Analytic Skills
2) List and briefly discuss the difficulties in measuring productivity and performance gains from
EC investments.
Answer: Data, or the analysis of the data, may hide productivity gains. In service industries,
such as finance or health-care delivery, it is more difficult to define what the products are, how
they change in quality, and how they may be related to corresponding benefits and costs.
EC productivity gains in certain areas of the company may be offset by losses in other areas. For
example, increased online sales may decrease offline sales, a situation known as cannibalism.
The results of any investment justification depend on what is actually measured. To assess the
benefits of EC investment, one should look at productivity improvement in the area where the
EC project was installed. However, productivity increase may not necessarily be a profitable
improvement if there are losses in other areas.
Many EC investments, especially those in eCRM, take five to six years to show significant
positive results, but many studies do not wait that long to measure productivity changes.
Diff: 3
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AACSB Standard: Analytic Skills
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3) Explain tangible costs and benefits; and intangible costs and benefits.
Answer: Tangible costs are those that are easy to measure and quantify and that relate directly to
a specific investment. The costs involved in purchasing hardware, software, consulting, and
support services usually are tangible, as are labor costs. These costs can be measured through
accounting information.
Tangible benefits are direct benefits such as increased profitability, improved productivity, and
greater market share, can be measured with relative ease.
Intangible costs are indirect costs that may include the learning curve of the firm's customer
service employees to incorporate an EC system to respond to customer inquiries. Another
intangible cost may involve having to adapt other business processes or information systems,
such as processing items returned by customers or building and operating an inventory tracking
system.
In many cases, EC projects generate intangible benefits, such as faster time-to-market, increased
employee and customer satisfaction, easier distribution, greater organizational agility, and
improved control. These are very desirable benefits, but it is difficult to place an accurate
monetary value on them.
Diff: 2
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AACSB Standard: Analytic Skills
4) What are the ROI and payback period methods for evaluating EC investments?
Answer: The ROI method uses a formula that divides the total net benefits (revenues less costs,
for each year) by the initial cost. The result is a ratio that measures the ROI for each year or for
an entire period.
With the payback-period method, the company calculates how long it will take for the net
benefits to pay back the entire initial investment.
Diff: 1
Page Ref: 596
AACSB Standard: Analytic Skills
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5) List and explain five methods for evaluating IT investments.
Answer:
ROI. Uses a formula to determine the value of a product by dividing net benefits by the initial
cost of the project.
Payback Period. Calculates how long it will take to recover the cost of a new project.
Net Present Value. Net benefits for each year are discounted back to the present, and then
compared with the cost of doing the project.
Value Analysis. Evaluate the performance of a low-cost, small-scale version of the project
before committing major investment dollars to the full project.
Information Economics. Look at how a project will impact key organizational objectives.
Scoring Methodology. Assigns weights and scores to the various aspects of a project, then
calculates a total score for comparison to other projects.
Benchmarks. Used for infrastructure evaluation. Compares EC investments with those of
competitors.
Management by Maxim. A combination of brainstorming and consensus-reaching
methodologies used to determine investment size in infrastructure and EC.
Real-option Valuation. Look at future options opened up by the proposed project and assign
dollar values to them.
Balanced Scorecard. Look at a broad set of factors, not just financial factors to determine
organizational health.
Performance Dashboard. Utilizes a broad set of factors presented in a single view to ascertain
the success or progress of a project.
Activity-based costing. Uses managerial accounting concepts to study the success of EC.
Diff: 3
Page Ref: 599
AACSB Standard: Analytic Skills
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