International Diploma in Computer Studies (IDCS) 2008eCo.docx
- 1. International Diploma in Computer Studies (IDCS) 2008 eCommerce For any other enquiries please contact one of our regional offices: UK & Europe - Tel +44 (0) 161 438 6200 | Africa and the Caribbean - Tel +27 (0) 21 913 8928 East Asia - Tel +86 (0) 10 6518 9327 | Middle East and South Asia - Tel +971 (0) 4 391 2727 South East Asia - Tel +60 (0) 3 7710 5755 ISBN 1418837032 The main areas covered are as follows: • How eCommerce is used by organisations to create new products and services, and reduce the cost of existing business processes • The technologies used to conduct business online • An introduction to Internet marketing and online advertising • Business-to-business strategies • Online auctions and virtual communities
- 2. • Planning for eCommerce, including the integration of business and technology strategies Each chapter includes a real life business case, together with a short summary of related eCommerce failures that provide valuable lessons for the student. This textbook provides complete coverage of the key business and technology elements of eCommerce. It is intended to introduce the student to both the theory and practice of conducting business over the Internet and World Wide Web, and does not assume any previous eCommerce knowledge or experience. E L E C T R O N I C C O M M E R C E Seventh Annual Edition 36865_FM 1/27/2006 16:53:55 Page 1 36865_FM 1/27/2006 16:53:55 Page 2
- 3. E L E C T R O N I C C O M M E R C E Seventh Annual Edition Gary P. Schneider, Ph.D., CPA University of San Diego 36865_FM 1/27/2006 16:53:55 Page 3 Australia • Canada • Mexico • Singapore • Spain • United Kingdom • United States Electronic Commerce (Seventh Edition) Authorised English Reprint from the English language edition: Course Technology, a division of Thomson Learning, Inc. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage retrieval system, without permission from the publisher. ENGLISH language edition published by Galatea Training Services Limited. Copyright © 2007. ISBN: 1-418803703-2 Printed by B & Jo Enterprise Pte Ltd in Singapore. 36865_FM 2/21/2006 11:8:36 Page 4
- 4. BRIEF CONTENTS Preface xvii Part 1: Introduction Chapter 1 Introduction to Electronic Commerce 2 Chapter 2 Technology Infrastructure: The Internet and the World Wide Web 51 Part 2: Business Strategies for Electronic Commerce Chapter 3 Selling on the Web: Revenue Models and Building a Web Presence 106 Chapter 4 Marketing on the Web 165 Chapter 5 Business-to-Business Strategies: From Electronic Data Interchange to Electronic Commerce 217 Chapter 6 Online Auctions, Virtual Communities, and Web Portals 263
- 5. Chapter 7 The Environment of Electronic Commerce: Legal, Ethical, and Tax Issues 309 Part 3: Technologies for Electronic Commerce Chapter 8 Web Server Hardware and Software 354 Chapter 9 Electronic Commerce Software 397 36865_brief 2/16/2006 9:29:24 Page 5 Chapter 10 Electronic Commerce Security 438 Chapter 11 Payment Systems For Electronic Commerce 493 Part 4: Integration Chapter 12 Planning for Electronic Commerce 536 Glossary 569
- 6. Index 601 36865_brief 2/15/2006 15:27:23 Page 6 vi Electronic Commerce, Seventh Annual Edition TABLE OF CONTENTS Preface xvii Part 1: Introduction Chapter 1 Introduction to Electronic Commerce 2 Electronic Commerce: The Second Wave 4 Electronic Commerce and Electronic Business 5 Categories of Electronic Commerce 5 The Development and Growth of Electronic Commerce 8 The Dot-Com Boom, Bust, and Rebirth 9 The Second Wave of Electronic Commerce 11 Business Models, Revenue Models, and Business Processes 14 Focus on Specific Business Processes 14 Role of Merchandising 15 Product/Process Suitability to Electronic Commerce 15 Advantages of Electronic Commerce 17 Disadvantages of Electronic Commerce 18 Economic Forces and Electronic Commerce 20 Transaction Costs 21 Markets and Hierarchies 22 Using Electronic Commerce to Reduce Transaction Costs 24 Network Economic Structures 24 Network Effects 25
- 7. Using Electronic Commerce to Create Network Effects 26 Identifying Electronic Commerce Opportunities 26 Strategic Business Unit Value Chains 26 Industry Value Chains 28 SWOT Analysis: Evaluating Business Unit Opportunities 30 International Nature of Electronic Commerce 31 Trust Issues on the Web 32 Language Issues 33 Culture Issues 34 Culture and Government 36 Infrastructure Issues 38 Summary 41 Key Terms 41 Review Questions 42 Exercises 42 Cases 43 For Further Study and Research 47 36865_toc 2/15/2006 15:27:35 Page 7 Chapter 2 Technology Infrastructure: The Internet and the World Wide Web 51 The Internet and the World Wide Web 53 Origins of the Internet 54 New Uses for the Internet 54 Commercial Use of the Internet 55 Growth of the Internet 56 Emergence of the World Wide Web 57 Packet-Switched Networks 60
- 8. Routing Packets 60 Internet Protocols 62 TCP/IP 62 IP Addressing 63 Domain Names 64 Web Page Request and Delivery Protocols 66 Electronic Mail Protocols 66 Unsolicited Commercial E-Mail (UCE, Spam) 67 Markup Languages and the Web 68 Standard Generalized Markup Language 69 Hypertext Markup Language 70 Extensible Markup Language (XML) 76 HTML and XML Editors 81 Intranets and Extranets 82 Intranets 82 Extranets 83 Public and Private Networks 83 Virtual Private Network (VPN) 84 Internet Connection Options 85 Connectivity Overview 85 Voice-Grade Telephone Connections 86 Broadband Connections 86 Leased-Line Connections 88 Wireless Connections 88 Internet2 and the Semantic Web 92 Summary 94 Key Terms 95 Review Questions 97 Exercises 97 Cases 98 For Further Study and Research 101
- 9. Part 2: Business Strategies for Electronic Commerce Chapter 3 Selling on the Web: Revenue Models and Building a Web Presence 106 Revenue Models 107 Web Catalog Revenue Models 108 Digital Content Revenue Models 115 Advertising-Supported Revenue Models 117 Advertising-Subscription Mixed Revenue Models 121 Fee-for-Transaction Revenue Models 122 Fee-for-Service Revenue Models 130 Revenue Models in Transition 132 Subscription to Advertising-Supported Model 133 Advertising-Supported to Advertising-Subscription Mixed Model 133 36865_toc 2/21/2006 11:9:24 Page 8 viii Electronic Commerce, Seventh Annual Edition Advertising-Supported to Fee-for-Services Model 133 Advertising-Supported to Subscription Model 134 Multiple Transitions 134 Revenue Strategy Issues 136 Channel Conflict and Cannibalization 137 Strategic Alliances and Channel Distribution Management 138 Mobile Commerce 139 Creating an Effective Web Presence 140 Identifying Web Presence Goals 140
- 10. Achieving Web Presence Goals 141 Web Site Usability 146 How the Web Is Different 146 Meeting the Needs of Web Site Visitors 147 Trust and Loyalty 149 Rating Electronic Commerce Web Sites 150 Usability Testing 150 Customer-Centric Web Site Design 151 Connecting with Customers 151 The Nature of Communication on the Web 152 Summary 155 Key Terms 155 Review Questions 156 Exercises 157 Cases 157 For Further Study and Research 161 Chapter 4 Marketing on the Web 165 Web Marketing Strategies 167 Product-Based Marketing Strategies 168 Customer-Based Marketing Strategies 170 Communicating with Different Market Segments 171 Trust and Media Choice 172 Market Segmentation 173 Market Segmentation on the Web 175 Offering Customers a Choice on the Web 176 Beyond Market Segmentation: Customer Behavior and Relationship Intensity 176 Segmentation Using Customer Behavior 176 Customer Relationship Intensity and Life-Cycle Segmentation
- 11. 179 Acquisition, Conversion, and Retention of Customers 181 Customer Acquisition, Conversion, and Retention: The Funnel Model 183 Advertising on the Web 184 Banner Ads 185 Other Web Ad Formats 189 Site Sponsorships 190 Effectiveness of Online Advertising 190 E-Mail Marketing 191 Permission Marketing 191 Combining Content and Advertising 192 Outsourcing E-Mail Processing 192 Technology-Enabled Customer Relationship Management 193 CRM as a Source of Value in the Marketspace 193 Creating and Maintaining Brands on the Web 195 Elements of Branding 195 Emotional Branding vs. Rational Branding 196 Brand Leveraging Strategies 197 36865_toc 2/15/2006 15:28:16 Page 9 Table of Contents ix Brand Consolidation Strategies 197 Costs of Branding 197 Affiliate Marketing Strategies 198 Viral Marketing Strategies 199 Search Engine Positioning and Domain Names 201
- 12. Search Engines and Web Directories 201 Paid Search Engine Inclusion and Placement 202 Web Site Naming Issues 204 Summary 207 Key Terms 207 Review Questions 209 Exercises 209 Cases 210 For Further Study and Research 213 Chapter 5 Business-to-Business Strategies: From Electronic Data Interchange to Electronic Commerce 217 Purchasing, Logistics, and Support Activities 219 Purchasing Activities 220 Direct vs. Indirect Materials Purchasing 222 Logistics Activities 223 Support Activities 225 E-Government 226 Network Model of Economic Organization 228 Electronic Data Interchange 229 Early Business Information Interchange Efforts 230 Emergence of Broader EDI Standards 231 How EDI Works 232 Value-Added Networks 237 EDI on the Internet 239 Open Architecture of the Internet 240 Financial EDI 241 Supply Chain Management Using Internet Technologies 242 Value Creation in the Supply Chain 242 Increasing Supply Chain Efficiencies 244
- 13. Using Materials-Tracking Technologies with EDI and Electronic Commerce 245 Creating an Ultimate Consumer Orientation in the Supply Chain 247 Building and Maintaining Trust in the Supply Chain 247 Electronic Marketplaces and Portals 248 Independent Industry Marketplaces 248 Private Stores and Customer Portals 251 Private Company Marketplaces 251 Industry Consortia-Sponsored Marketplaces 252 Summary 254 Key Terms 254 Review Questions 255 Exercises 256 Cases 256 For Further Study and Research 259 36865_toc 2/15/2006 15:28:48 Page 10 x Electronic Commerce, Seventh Annual Edition Chapter 6 Online Auctions, Virtual Communities, and Web Portals 263 Auction Overview 264 Origins of Auctions 265 English Auctions 265 Dutch Auctions 266 First-Price Sealed-Bid Auctions 267 Second-Price Sealed-Bid Auctions 267 Open-Outcry Double Auctions 267 Sealed-Bid Double Auctions 268
- 14. Reverse (Seller-Bid) Auctions 268 Online Auctions and Related Businesses 269 General Consumer Auctions 270 Specialty Consumer Auctions 276 Consumer Reverse Auctions and Group Purchasing Sites 276 Business-to-Business Auctions 279 Business-to-Business Reverse Auctions 283 Auction-Related Services 284 Virtual Communities and Web Portals 288 Mobile Communications Technology 289 Mobile Business 290 Intelligent Software Agents 290 Virtual Communities 291 Early Web Communities 292 Web Community Consolidation 294 Web Communities in the Second Wave of Electronic Commerce 294 Revenue Models for Web Portals and Virtual Communities 296 Summary 300 Key Terms 300 Review Questions 301 Exercises 302 Cases 303 For Further Study and Research 305 Chapter 7 The Environment of Electronic Commerce: Legal, Ethical, and Tax Issues 309 The Legal Environment of Electronic Commerce 311 Borders and Jurisdiction 311 Jurisdiction on the Internet 314 Conflict of Laws 317
- 15. Contracting and Contract Enforcement in Electronic Commerce 318 Use and Protection of Intellectual Property in Online Business 322 Web Site Content Issues 322 Domain Names, Cybersquatting, and Name Stealing 326 Protecting Intellectual Property Online 327 Defamation 328 Deceptive Trade Practices 329 Advertising Regulation 329 Online Crime, Terrorism, and Warfare 331 Online Crime 331 Online Warfare and Terrorism 333 Ethical Issues 333 Ethics and Web Business Policies 334 Privacy Rights and Obligations 334 Communications with Children 339 Taxation and Electronic Commerce 340 36865_toc 2/15/2006 15:29:13 Page 11 Table of Contents xi Nexus 341 U.S. Income Taxes 341 U.S. State Sales Taxes 342 European Union Value Added Taxes 343 Summary 344 Key Terms 345
- 16. Review Questions 345 Exercises 346 Cases 346 For Further Study and Research 349 Part 3: Technologies for Electronic Commerce Chapter 8 Web Server Hardware and Software 354 Web Server Basics 356 Types of Web Sites 356 Web Clients and Web Servers 357 Dynamic Content 358 Various Meanings of “Server” 360 Web Client/Server Communication 361 Two-Tier Client/Server Architecture 361 Three-Tier and N-Tier Client/Server Architectures 362 Software for Web Servers 363 Operating Systems for Web Servers 364 Web Server Software 364 Finding Web Server Software Information 367 Electronic Mail (E-Mail) 367 E-Mail Benefits 367 E-Mail Drawbacks 367 Spam 368 Solution s to the Spam Problem 369
- 17. Web Site and Internet Utility Programs 377 Finger and Ping Utilities 378 Tracert and Other Route-Tracing Programs 378 Telnet and FTP Utilities 379 Indexing and Searching Utility Programs 380 Data Analysis Software 380 Link-Checking Utilities 380 Remote Server Administration 381 Web Server Hardware 381 Server Computers 381 Web Server Performance Evaluation 383 Web Server Hardware Architectures 384 Summary 388 Key Terms 388 Review Questions 389 Exercises 390 Cases 390 For Further Study and Research 394 36865_toc 2/16/2006 9:29:53 Page 12 xii Electronic Commerce, Seventh Annual Edition
- 18. Chapter 9 Electronic Commerce Software 397 Web Hosting Alternatives 398 Basic Functions of Electronic Commerce Software 400 Catalog Display 401 Shopping Cart 403 Transaction Processing 407 Advanced Functions of Electronic Commerce Software 407 Middleware 407 Enterprise Application Integration and Databases 408 Web Services 410 Integration with ERP Systems 413 Electronic Commerce Software for Small and Midsize Companies 415 Basic Commerce Service Providers 415 Mall-Style Commerce Service Providers 418 Estimated Operating Expenses for a Small Web Business 420 Electronic Commerce Software for Midsize to Large Businesses 421 Web Site Development Tools 421
- 19. Electronic Commerce Software for Large Businesses 423 Enterprise-Class Electronic Commerce Software 424 Customer Relationship Management Software 426 Supply Chain Management Software 428 Content Management Software 428 Knowledge Management Software 429 Summary 430 Key Terms 430 Review Questions 431 Exercises 431 Cases 433 For Further Study and Research 435 Chapter 10 Electronic Commerce Security 438 Online Security Issues Overview 440 Managing Risk 441 Computer Security Classifications 442 Security Policy and Integrated Security 442 Security for Client Computers 444 Cookies 444 Web Bugs 447
- 20. Active Content 447 Java Applets 449 JavaScript 449 ActiveX Controls 450 Graphics and Plug-Ins 450 Viruses, Worms, and Antivirus Software 451 Digital Certificates 455 Steganography 458 Physical Security for Clients 458 Communication Channel Security 459 Secrecy Threats 459 Integrity Threats 461 Necessity Threats 462 Threats to the Physical Security of Internet Communications Channels 463 Threats to Wireless Networks 463 Encryption