Electronic Commerce, 7th Edition
Solutions 3-1
Electronic Commerce, 7th Edition
14188-37032
Chapter 3 Solutions
Review Questions
1. Write a paragraph in which you describe the conditions under which a Web
site could become profitable by relying exclusively on advertising revenue. In
a second paragraph, provide an example of a company not mentioned in the
chapter that is using the advertising-supported model and that is likely to be
successful in the long run. Explain why you think it will succeed.
Answer: A Web site that relies exclusively on advertising revenues must contend with
two major problems. First, no consensus has emerged on how to measure and charge
for site views and the second problem is that very few Web sites have sufficient
numbers of visitors to interest large advertisers. To be successful using the
advertising-supported revenue model exclusively, a Web site must be a large search
engine, because they generate sufficient traffic to be profitable. Another alternative is
to become a site that targets niche markets, for example employment-advertising
sites.
2. Describe two possible service-for-fee offerings that might become available to
users of Internet-enabled wireless devices (such as PDAs or mobile phones)
in the near future. Write one paragraph for each service in which you outline
the profit potential and risk of losses for each.
Answer: Two possible fee-for-service offerings that might become available are
medical and legal services. The profit potential for these services would be higher
than the traditional brick and mortar services offered. There are limitations placed on
these services because of licensure issues and dispensing legal and medical advice
over the Internet is still a major hurdle. As technology and the Internet mature, it will
be possible to offer these services offer the Internet.
3. In two paragraphs, explain why a customer-centric Web site design is so
important, yet is so difficult to accomplish.
Answer: An important part of a successful electronic business operation is a Web site
that meets the needs of potential customers. It is a significant challenge however, to
design an effective Web site that introduces the company to different audiences
(shareholders, the financial community, suppliers, potential alliance partners,
potential customers, current customers and so on) with very different interests.
Electronic Commerce, 7th Edition
Solutions 3-2
4. In one paragraph, define the term “presence”. Write an additional
paragraph in which you explain why firms that do business on the Web
should be more concerned about presence than firms that operate only in the
physical world.
Answer: A business presence is the public image a business conveys to its customers,
suppliers, employees, stockholders, neighbors, and the general-public. Businesses
have always created a presence in the physical world by building stores, factories,
warehouses, and office buildings.
Web presence can be critical even for the smallest and newest firms operating on the
Web. It is more important for electronic commerce companies because their Web
“presence” might constitute the only contact that customers and other stakeholders
have with the firm.
5. Many real estate agents today have Web sites that list the properties they
have for sale. These agents also advertise the properties in classified
newspaper ads and sometimes in television ads. However, most real estate
agents today would tell you that personal contact provides their most
important connections with clients, potential clients, and client referral
sources. Write three paragraphs in which you briefly describe the things that
real estate agents can best accomplish through (1) their Web sites, (2) mass
media advertising, and (3) personal contact.
Answer: Responses may be similar to the following:
Web sites: Offer mortgage loan seekers online credit review and decisions within
minutes.
Mass media advertising: Offer property listings.
Personal contact: Provide more detailed information about the property and about
obtaining mortgages.
6. Promoting products on the Web is different from using mass media
promotion or personal contact. Assume that you want to explain these
differences to a person who is planning to open a Web site that will sell
snowboarding vacation packages. Write one paragraph about each approach
(mass media, personal contact, the Web). In each paragraph, explain the
advantages and disadvantages of the approach for the snowboarding
vacation package Web business.
Answer: Promoting products on the Web is different because of the two-way
communication feature and information dissemination capacity of the Web. These
combine to create a different environment for product promotion. The two-way
communication feature has some of the major elements of personal selling; however,
the customer has most of the control over the situation. The Web is not a mass media
system and the cost of promotion to customers is not as cost effective as mass media.
Electronic Commerce, 7th Edition
Solutions 3-3
The Web is effective at reaching the “middle market” between personal selling and
mass media marketing.
Exercises
1. Page 149 includes a list of five things that Web sites can do to meet the needs
of visitors. Create a table in which the first column is a list of the five needs of
Web site visitors. Find three Web sites that meet three or more of the needs.
Create a column for each Web site next to the first column (columns two
through four) and rate how well each site meets each need in the first
column. You may want to use the Webby Awards site as a starting point in
your search, but do not use any of the award nominees or winners as your
table.
Answer: Answers will vary depending on the Web sites chosen and the degree to
which each site meets the needs defined in this chapter. For example, visit
eddiebauer.com, a retailer of business casual and casual clothing, and notice the
category links, which provide specific information about their product. The same
Web site is also capable of transaction processing and payment. In addition, the
visitor will see links that provide access to company information, shopping online or
the option of catalog shopping and tools for online shopping. At the top of the site are
links to customer service, account and order status, and even access to your shopping
cart.
2. Evaluate the usability of two Web sites that sell large-screen televisions. A list
of links to companies that sell this product is included in the Online
Companion for this exercise, but you may use other sites if you wish. In your
evaluation, compare the sites on how easy it is to learn about the product and
purchase the product. Your report should include a section of about 200
words in which you describe the criteria you used in your evaluation, a
section of about 300 words that summarizes your findings, and a section of
about 100 words in which you present your conclusion.
Answer: Criteria that can be used to evaluate the Web sites include:
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Clarity of product information
Prices relative to other online merchants
Overall look and design
Charges stated clearly before order submission
Variety of shipping options
Shipping charges
3. You have been employed by Bob Drudge, the owner of refdesk.com, to
explore revenue-generating alternatives. Currently, the site is using an
advertising-supported revenue model. Bob wants you to consider each of the
Electronic Commerce, 7th Edition
Solutions 3-4
other revenue models and the potential of strategic alliances that might make
sense for his site. Write a report of about 400 words in which you summarize
your research and state your recommendations. Your instructor might assign
you to a group to complete this exercise and might ask you to present your
recommendations in class.
Answer: Responses will vary; however, a reference site such as refdesk.com should
certainly consider all of the revenue generating options, especially the digital content,
advertising-subscription mix, for-fee-transaction, and fee-for-service models. A site
such as refdesk.com likely attracts many different types of users: those willing to pay
for as much information as possible, thereby using less advertising. It will also appeal
to those looking for a quick fact, where advertising will reach many.
4. High-end jewelry retailers such as Harry Winston and Tiffany & Co. often
use Macromedia’s Flash software to create their Web sites. Present three
arguments for and three arguments against the use of Flash animations in
sites such as these. Consider the retailers’ objectives, the characteristics of
the products being sold, and the type of customers who visit these sites. Limit
your answer to 400 words.
Answer: Responses will vary:
Advantages
 The first impression of a flash site can be awe-inspiring. Usually flash sites open
with flash intros - short, animated films on the site - which gives a more
professional look. If you add relevant background music to these intros your can
make a good first impression and convert visitors into browsers.
 The source codes of flash scripts are hard to crack by hackers because the codes
come in two pieces. The original file comes with .fla extension and the compiled file
comes with .swf extension. Browsers can support only .swf files.
Disadvantages
 Each flash page consists of many animated files. Therefore flash pages take long
time to load in the browser. This is a major drawback of flash sites. People on the
net don’t like to wait long for a page to load. Once they see that your site is slow,
they get annoyed and leave the site immediately.
 Flash files are not supported by all browsers. The old version of Microsoft Internet
Explorer and Netscape Navigator cannot display flash movies. However if the
browsers are compatible with java scripts then they can somehow display some
static images from that flash movie.
Electronic Commerce, 7th Edition
Solutions 3-5
Cases
Case 1: Lonely Planet
1. Answers may vary, but some marketing channel conflicts and cannibalization issues
mentioned in the case include: travel services offered by telephone and web, travel
information offered in books and on web, some book content offered for free online,
bulletin board info may steer customers to other travel outlets and away from Lonely
Planet travel services, site content duplicated on Yahoo! and other portal sites (who
may offer their own travel services), and people who work for companies that use
Lonely Planet corporate services may make purchases through their company rather
than directly from Lonely Planet.
Some ways for Lonely Planet to reduce these marketing channel conflicts include:
place restrictions on content licensed to Web portals (they may only link to Lonely
Planet travel services, for example), prominently advertise LP services on the
message board site, offer a for-pay section of the Web site with current information
from experts and/or official updates to various books, and only leave information on
the Web site for a limited amount of time.
2. New services suggested may vary, but could include: digital concierge service (with a
per week/trip or per service fee), a for-pay section of the Web site offering guaranteed
current information on certain destinations, a network to allow global travelers to find
traveling companions or guides using cell phones or other wireless devices, and
customized digital travel guides based on a customer’s specific interests and travel
itinerary.
One problem Lonely Planet could encounter as it introduces some of these new
services is resentment from customers who feel the company is taking away content
that used to be provided for free.
3. The customized digital travel guides mentioned above could address this concern.
Content could be delivered via Web, CD, or cell phone, and streamlined and tailored
to an individual customer’s interests, dates of travel, and itinerary.
Case 2: Association for the Study of International Business
Recommendations will vary, but the main considerations for each journal decision
include:
Annals of International Business
The two possible models are the EBSCO contract and ASIB creating and managing their
Electronic Commerce, 7th Edition
Solutions 3-6
own subscription Web site. Benefits of the EBSCO contract include no overhead costs
and guaranteed regular income. In-house creation of the Web site would require
increased staff, equipment, and overhead costs and would include financial risk
associated with potential low subscription numbers. However, if the self-created site were
successful the ASIB could potentially realize higher earnings than with the EBSCO
contract.
International Business Today
There are several possible revenue models for International Business Today. First is the
Web access only subscription model. Another is to offer only the best stories from the
print edition copied online and sell advertising to accompany the articles. Another model
mentioned is to offer only partial stories online, with the full stories available to paying
subscribers. Students should compare the strengths and weaknesses of each model from
the perspective of potential earnings, potential risks and losses, additional resources
required to implement each plan, and potential impact of each model on the print edition
and other ASIB activities.