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Study Guide

Internet Marketing and E-Commerce


By William Scannella Reviewed By Lisa T. Cordeiro

About the Author


William Scannella has more than 20 years hands-on experience in business systems analysis, software testing, quality assurance, and technical documentation. He has worked for General Electric in its aircraft engines, computer services, and finance businesses. He has a masters degree in technical and scientific communication from Miami University. He most recently participated in the specification, design, and implementation of two large Web-based e-commerce systems.

About the Reviewer


Lisa T. Cordeiro was born in Cambridge, MA. She was introduced to telecommunications while serving in the Marine Corps in Okinawa, Japan. She graduated from the University of Massachusetts at Amherst with a bachelor of arts degree in comparative literature and psychology and from Harvard Universitys Extension School with a masters degree in English and American literature. Today, she consults as a Web content developer and course designer.

INSTRUCTIONS TO STUDENTS LESSON ASSIGNMENTS LESSON 1: INTRODUCTION AND TECHNOLOGY INFRASTRUCTURE EXAMINATIONLESSON 1 LESSON 2: SELLING AND MARKETING ON THE WEB EXAMINATIONLESSON 2 LESSON 3: B2B STRATEGIES; WEB AUCTIONS AND PORTALS; E-COMMERCE ENVIRONMENT EXAMINATIONLESSON 3 LESSON 4: E-COMMERCE TECHNOLOGIES, WEB SERVERS, AND SECURITY THREATS EXAMINATIONLESSON 4 LESSON 5: SECURITY, PAYMENT SYSTEMS, AND PLANNING FOR E-COMMERCE EXAMINATIONLESSON 5 SELF-CHECK ANSWERS

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Contents Contents
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9 19

23 35

39 49

53 65

69 77 81

YOUR COURSE

Instructions Instructions
1

Welcome to the fascinating world of electronic commerce. This is a very timely and important topic, both for today and the foreseeable future. In the past few years, weve seen a tremendous push to move all kinds of commercial activity to the World Wide Web and the Internet. Weve also seen the collapse of many of these new enterprises. The so-called dot coms became the dot bombs. The industry now seems to have settled into a more balanced phase with realistic expectations for the companies using these new technologies to do business. As a start, lets try to understand what comes to mind when you hear the term electronic commerce. Do you think of Web sites where you can buy the latest music CD or a best-selling book? Perhaps you or a friend have submitted bids in an online auction. Or you may have used the Web to research the features and prices of a new car. Its true that all of these are examples of how electronic commerce is transacted today. But as youll learn in this course, the topic is much broader and covers many more aspects of business than you may have imagined. In fact, more new electronic commerce applications are showing up every day. And thats what makes electronic commerce such a lively and interesting area of study and a potentially rewarding arena for career growth. A word of caution, however. You need to keep in mind that the important part of this topic is the term commerce. Your text definition of electronic commerce in its broadest sense includes all business activities conducted using electronic data transmission technologies (page 5). This definition covers all of the activities associated with doing business of any kind. This may seem obvious, but its worth stressing. Many of the Internet businesses that were started in the past several years lost sight of this fact. The majority of these companies closed down or were scaled back because they lost sight of the importance of sticking to the fundamentals of business. Your text profiles many of these failures and draws valuable lessons from each of them.

Remember that Internet and Web technologies arent ends in themselves. Their real power in electronic commerce comes from enabling business to be transacted more efficiently and profitably.

OBJECTIVES
When you complete this course, youll be able to

Explain the basic concepts and key motivators of electronic commerce Identify major market/enterprise issues that impact electronic commerce Address critical technology issues that enable business transformation Discuss the components of electronic commerce, its advantages and disadvantages, and how it differs from traditional commerce Describe the Internet and the World Wide Web and the role these technologies play in electronic commerce Explain how firms conduct business on the Internet, including their selling and marketing strategies Discuss specific Web features such as auctions, portals, and search engines and how they contribute to the effectiveness of an electronic commerce program Detail some of the legal and ethical challenges unique to electronic commerce Describe the underlying hardware and software technologies used by Web-based electronic commerce Describe the requirements for implementing electronic commerce Web sites and the security measures needed to safeguard data resources List the primary payment methods for electronic commerce Describe the major steps in implementing an electronic commerce venture

Instructions to Students

YOUR TEXTBOOK
Your textbook for this course is Electronic Commerce, Seventh Annual Edition, by Gary P. Schneider. This book contains the material on which youll be tested. You should become familiar with its contents and organization before you begin your studies. Begin by looking at pages vxxv at the beginning of the textbook. These pages present the organization of the textbook and highlight specific features. The textbook has 12 chapters. Each chapter starts with an introduction and set of learning objectives. Each chapter also contains a summary, review questions, and suggestions for further study. At the end of your textbook, beginning on page 569, is a comprehensive glossary. This section includes the definitions of important terms presented throughout the textbook. Use this tool whenever youre unsure of the meaning of a word or phrase. Finally, an index begins on page 601. This index includes important topics covered in your textbook, along with page references where you can locate material relating to each term. Your textbook also has an Online Companion. The Online Companion is a set of Web pages maintained by the publisher of the textbook. It complements the textbook and contains links to Web pages mentioned in the book that illustrate points made by the author.

COURSE MATERIALS
This course includes the following materials: 1. This study guide, which contains an introduction to your course plus

A lesson assignments page with a schedule of study assignments Assignment introductions emphasizing the main points in the textbook

Instructions to Students

Self-checks and answers to help you assess your understanding of the material An examination for each of the lessons in this course

2. Your course textbook, Electronic Commerce, which contains the assignment reading material

A STUDY PLAN
Use the following plan to get the maximum benefit from your studies. 1. Note the pages for each assignment and read the summary material in this study guide. 2. For the textbook reading, start by noting the learning objectives. Then, study the assigned pages, keeping in mind the learning objectives and how the material relates to them. Pay particular attention to definitions and main concepts. 3. Answer the questions and problems provided in the selfchecks in this study guide. Theyll serve as a review of the material covered by the assignment. The self-checks are an integral part of the lesson. Dont move on to the next lesson without taking the self-check. Note: The field of electronic commerce is full of new terms and older terms used in new ways. Accordingly, most of the selfchecks contain questions on terminology. 4. After answering the self-check questions, check your answers with those given at the end of the study guide. 5. Complete each assignment in this way. If you miss any questions, review the pages of the textbook covering the associated material. The self-checks are designed to reveal weak points that you need to review. Do not send the self-check answers to the school. Theyre designed for you to evaluate your understanding of the material and to determine how ready you are to take the examination.

Instructions to Students

6. After youve completed and checked the self-check for each assignment lesson, turn to the examination for that lesson and complete it. Send only your answers to the examination questions to the school. 7. Follow this procedure until you complete all five lessons. If you have any questions during your studies, e-mail your instructor for assistance. Youre now ready to begin Lesson 1. When youve completed Lesson 1 and the related self-checks, complete your examination and submit your answers. Good luck with your course!

Instructions to Students

NOTES

Instructions to Students

Lesson 1: Introduction and Technology Infrastructure


For: Assignment 1 Assignment 2 Read in the study guide: Pages 1013 Pages 1418 Read in the textbook: Pages 250 Pages 51104 Material in Lesson 1

Assignments Assignments

Examination 40265700

Lesson 2: Selling and Marketing on the Web


For: Assignment 3 Assignment 4 Read in the study guide: Pages 2428 Pages 2933 Read in the textbook: Pages 106164 Pages 165216 Material in Lesson 2

Examination 40265800

Lesson 3: B2B Strategies; Web Auctions and Portals; E-Commerce Environment


For: Assignment 5 Assignment 6 Assignment 7 Read in the study guide: Pages 4042 Pages 4244 Pages 4548 Read in the textbook: Pages 217262 Pages 263308 Pages 309352 Material in Lesson 3

Examination 40265900

Lesson 4: E-Commerce Technologies, Web Servers, and Security Threats


For: Assignment 8 Assignment 9 Assignment 10 Read in the study guide: Pages 5457 Pages 5860 Pages 6064 Read in the textbook: Pages 354396 Pages 397437 Pages 438492 Material in Lesson 4

Examination 40266000

Lesson 5: Security, Payment Systems, and Planning for E-Commerce


For: Assignment 11 Assignment 12 Read in the study guide: Pages 7072 Pages 7375 Read in the textbook: Pages 493533 Pages 536568

Examination 40266100 Material in Lesson 5

Lesson Assignments

Introduction and Technology Infrastructure

Lesson 1 Lesson 1

Commerce, the buying and selling of goods and services, goes back to the earliest part of recorded history. Throughout history, businesspeople have always searched for new markets and customers. Theyve always been very responsive to new ideas that improve efficiency and maximize profits. The technologies of the Internet and the World Wide Web are some of the latest methods that businesspeople have adopted to make their enterprises more successful. Lesson 1 of this study guide consists of two assignments that correspond to the first two chapters of your textbook. Assignment 1 will be read in conjunction with Chapter 1, Introduction to Electronic Commerce. Assignment 2 will cover Chapter 2, Technology Infrastructure: The Internet and the World Wide Web.

OBJECTIVES
When you complete this lesson, youll be able to

List the basic elements of electronic commerce Discuss the differences between electronic commerce and traditional commerce Describe the advantages and disadvantages of using electronic commerce to conduct business activities Discuss the ways in which businesses use value chains to identify electronic commerce opportunities Describe the ways in which the growth of the Internet and the World Wide Web has stimulated the growth of electronic commerce Describe the general technical infrastructure of the Internet as well as common utilities and applications Discuss markup languages and their role in facilitating electronic commerce

Explain the differences between the Internet, intranets, and extranets List the various options for connecting to the Internet

ASSIGNMENT 1: INTRODUCTION TO ELECTRONIC COMMERCE


Read this assignment. Then read pages 250 in your textbook.

Commerce is the negotiated exchange of goods and services between two or more parties and all of the business activities required for the transaction to take place. Electronic commerce (or e-commerce) is used to describe business activities conducted using technologies such as the Internet and the World Wide Web. The three primary classifications of electronic commerce are business-to-consumer (B2C), business-to-business (B2B), and those transactions and processes that support selling and purchasing. Some companies have succeeded by applying electronic commerce technologies to traditional business activities. These companies look for transactions and business processes that can be made more efficient through the use of the Internet or Web technologies. However, they may find that certain business processes arent well suited to electronic commerce. Products that require personal selling or where the customer wants to physically interact with a product are poor candidates for electronic commerce. In contrast, commodity products or services are well suited to electronic commerce. Many companies have lowered their costs of doing business, and increased their competitiveness by using the Internet and the Web. The technologies have also encouraged new forms of organization, namely networks and virtual partnerships. Business innovation occurs when a company understands how its primary activities (e.g., designing, marketing, delivering) and support activities (e.g., finance, human resources) add value to the business. Electronic commerce initiatives add value by reducing cost, improving quality, and creating new ways of selling products and satisfying customer needs.

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Your text states that were going through the second wave of electronic commerce. The first wave included U.S. business dominance, using the English language, low bandwidth, and advertising as revenue. The second wave includes new ideas added to the standard business model. Companies are looking at new approaches to their business processes. Although much media attention focused on the dot com bust, B2C sales continued to grow in 2000 onward, yet at a slower rate than in the 1990s. Some products are well suited to be sold through e-commerce, such as books, CDs, and travel services. Other items are more suited to traditional commerces, such as impulse or low-cost items. And some items, such as banking, are suitable to both types of commerce. A key idea introduced in this chapter is the value chain, which is a series of activities that generate profits and meet other goals of a firm. When deciding how to use electronic commerce in a business, managers often start by examining their organizations value chain. In this way, they discover ways to improve, enhance, and expand these value-adding activities. Managers and planners use a structured technique in analyzing and evaluating business opportunities that might become electronic commerce ventures. This techniqueSWOT analysislooks first at the strengths and weaknesses of the business units. Then, it identifies opportunities in the markets served and threats from competitors. With these factors clearly identified, the company is able to make an informed judgment about going forward with a new venture and can begin to develop strategies to address issues raised during the SWOT analysis. Electronic commerce is also having an impact on the three forms of economic organization, namely markets, hierarchies, and networks. Using the technologies of the Internet and the World Wide Web, companies can now coordinate their strategies and resources. The networks resulting from this increased coordination can be thought of as strategic alliances or strategic partnerships.

Lesson 1

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Finally, the chapter concludes with a description of the international nature of electronic commerce. Youll read about various issues that come up in international commerce, such as trust, language, culture, governmental, and infrastructural issues. Before proceeding to the next assignment, take a moment to complete Self-Check 1. Remember that you can check your answers by turning to the end of this study guide.

Self-Check 1
At the end of each assignment of Internet Marketing and E-Commerce, youll be asked to pause and check your understanding of what youve just read by completing a SelfCheck exercise. Answering these questions will help you review what youve studied so far. Please complete Self-Check 1 now.

1. What is the purpose of SWOT analysis?

__________________________________________________________ __________________________________________________________
2. Name one type of business for each of the following categories: a. A business thats well suited to electronic commerce

________________________________________________________
b. A business thats well suited to traditional commerce

________________________________________________________
c. A business thats best suited to a combination of electronic and traditional commerce

________________________________________________________
3. What are some of the barriers to international electronic commerce?

__________________________________________________________ __________________________________________________________
(Continued)

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Internet Marketing and E-Commerce

Self-Check 1
Questions 47: Match each of the terms in the left-hand column with the definitions in the right-hand column. a. The total of all costs incurred by a buyer and seller as they gather information and negotiate a purchase-sale transaction b. Electronic transfer of account exchange information over secure communication networks c. Exchange between businesses of computer-readable data in a standard format d. An economic structure where online companies share information and resources as partners based on shared purposes Check your answers with those on page 81.

______ ______ ______ ______

4. Electronic funds transfer (EFT) 5. Electronic data interchange (EDI) 6. Transaction costs 7. Virtual companies

Lesson 1

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ASSIGNMENT 2: TECHNOLOGY INFRASTRUCTURE


Read this assignment. Then read pages 51104 in your textbook.

The basic technology structure that makes electronic commerce possible is the Internet, which connects computer networks around the world. A network starts when one computer is connected to, or networked with, another. This tiny network can grow, for example, from a few computers at a corporate headquarters to include hundreds of computers on a local area network (LAN). A company with multiple locations and many LANs might interconnect multiple networks into a wide area network (WAN). When these networks are connected to one another and to all other publicly accessible networks, theyre then on the Internet. In the past, the technology for networking was a single-connection model called circuit switching, where an individual connection was made between two parties. The Internet uses a common set of rules (protocols) by means of special-purpose computers and packet switching, which breaks down data transmissions into small pieces, or packets, so that they can be sent across the network. The Internet is powerful because it uses an open architecture philosophy for transmitting these packets. What this means is that regardless of how data is carried on a LAN or WAN, when it comes time to move across the Internet, it must comply with agreed-upon protocols. The two main protocols used by the Internet are Transmission Control Protocol (TCP) and Internet Protocol (IP). TCP controls how the packets are broken down before transmission and how theyre reassembled at the receiving end. IP specifies the addressing details of each packet, namely the IP address of the source computer and the destination computer. The workhorse that handles all of these details is a special-purpose computer known as a router. Routers have routing tables that specify where to send the packet next on its journey to its end destination. With packet switching, each part of a message doesnt necessarily take the same path. Consequently, the routers must be able to reassemble the packets before theyre delivered.

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Internet Marketing and E-Commerce

The format of every IP address is the same: namely, four numbers separated by periods (e.g., 211.43.87.332). This arrangement allows for 4 billion unique combinations. Already, over 2 billion addresses are in use. The more common way of designating these addresses, however, is by domain names, which are easier to remember. Examples of domain names are www.pepsi.com, www.course.com, www.whitehouse.gov, etc. The part of the address that comes after the period (also called dot) indicates what kind of organization is represented by the address: .com for a business, .edu for an educational organization, .gov for a government entity. Web addresses are also known as Uniform Resource Locators, or URLs. At its most basic form, the Internet is set up as a client-server architecture. With this type of architecture, the client (your computer) sends a request to a remote computer (the server) to send back (or serve) information. If youre requesting a response from a Web page, then the request or message is sent using the Hypertext Transfer Protocol (HTTP). Thats why Web addresses are sometimes shown as http://www.course.com. The Internet also enables electronic mail (e-mail). Although many different types of software can be used to read and send e-mail, all must adhere to a set of common protocols so that e-mail and attachments sent from one system can be read on another. Markup languages are the codes used to construct Web pages. Any kind of contentwords, pictures, video, sound can be delivered through a Web page if its marked by the correct codes or tags. The most common markup language is Hypertext Markup Language (HTML). Its derived from Standard Generalized Markup Language (SGML). Extensible Markup Language (XML) describes the meaning of the content, not just its formatting characteristics. Several easy-to-use programs make it possible to design Web pages without actually writing the HTML codes. An intranet is a network structure set up to interconnect an organizations LANs and WANs. It employs the same hardware and software technologies found on the public Internet, but it restricts access to authorized users. An extranet is a

Lesson 1

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secure network that connects organizations to authorized external users. Extranets are secured by private networking or through a virtual private network (VPN). Internet service providers (ISPs) are the primary means by which the public connects to the Internet. Several Internet connection options are available, and they have important implications for electronic commerce. Internet connections are usually classified by bandwidth or speed. The more bandwidth, the higher the speed, and the more information that can be transmitted in the same period of time. Dial-up connections over phone lines are the least expensive; however, theyre also the slowest. Broadband, in the form of Digital Subscriber Line (DSL) and cable connections, is much faster but more expensive. Other connection options include wireless networking solutions. As youll see in the next lesson, when developing an electronic commerce site, you have to keep in mind how people will be connecting to the Internet. Before proceeding to the Lesson 1 examination, take a moment to complete Self-Check 2.

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Internet Marketing and E-Commerce

Self-Check 2
1. What is the role of routers in Internet communications?

__________________________________________________________ __________________________________________________________
2. What function does the Transmission Control Protocol (TCP) play in moving data through the Internet?

__________________________________________________________ __________________________________________________________
3. Why is the Internet considered to be an implementation of the client-server architecture model?

__________________________________________________________ __________________________________________________________
(Continued)

Lesson 1

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Self-Check 2
Questions 412: Match each of the terms in the left-hand column with the definitions in the right-hand column. a. Data transmission method that breaks messages into packets, marks the address on each packet, transmits the packets, and reassembles them at their destination b. Combination of the protocol type and the domain name that forms the full address for a Web site c. Uses tunneling or encapsulation to transmit data securely over the public Internet d. Three-letter suffix that indicates the type of organization the Web site represents (e.g., .com, .edu., .org) e. Markup language that describes the semantics of the contents of a Web page f. The part of the TCP/IP protocol that determines the routing of data packets

______ ______ ______ ______ ______ ______

4. Dotted-decimal notation 5. Top-Level Domain (TLD) 6. Internet Protocol (IP) 7. Uniform Resource Locator (URL) 8. Hypertext Transfer Protocol (HTTP) 9. Virtual private network (VPN)

______ 10. Intranet ______ 11. Extensible Markup Language (XML) ______ 12. Packet switching

g. Interconnected networks of computers within a single organization that are not accessible from the public Internet h. The Internet protocol responsible for transferring and displaying Web pages i. The format for IP addresses where addresses appear as four numbers separated by periods

Check your answers with those on page 81.

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Internet Marketing and E-Commerce

Lesson 1 Introduction and Technology Infrastructure


EXAMINATION NUMBER

Examination Examination

40265700
Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com

When you feel confident that you have mastered the material in Lesson 1, go to http://www.takeexamsonline.com and submit your answers online. If you dont have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 120: Select the one best answer to each question.

1. A protocol is a collection of rules for A. displaying text on a Web page. B. formatting, ordering, and error-checking data sent across a network. C. encrypting passwords at login. D. converting formulas on a spreadsheet. 2. Why is the selling of expensive clothing not well suited for electronic commerce? A. Styles change too often. B. Item prices are too high. C. Buyers prefer to inspect expensive items before they purchase them. D. A secure payment mechanism for high-priced items is not available. 3. Which of the following markup languages would not be useful in setting up an electronic commerce site? A. SGML B. HTML C. XML D. XHTML

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4. Before data leaves a companys LAN to be transmitted over the Internet, it must be A. translated into a standard format. B. reviewed by a system administrator. C. routed to a secure server. D. cycled through memory.

5. The disassembly of an Internet message packet is controlled by A. IP. B. TCP. C. HTTP. D. SMTP.

6. When jet engine manufacturer Pratt Whitney sells parts to airplane builder Boeing through its Web site, this is an example of what type of electronic commerce? A. B2C B. C2C C. B2B D. B2M

7. Which of the following is a support activity in Ford Motor Companys value chain? A. B. C. D. Mounting tires purchased from Goodyear Making spare parts for dealers Managing employee health coverage Sponsoring NASCAR events

8. Electronic commerce technologies have helped companies to A. B. C. D. increase sales and decrease costs. determine ideal store locations. defend against liability suits. influence regulatory agencies.

9. The process of clicking a graphic on a Web page, thereby switching to another location in the same or another HTML document, is known as A. electronic transfer. B. hyperlinking. 10. The Internet was developed by A. B. C. D. Tim Berners-Lee. Vannevar Bush. the U.S. Department of Defense. Microsoft. C. page transposing. D. Web zooming.

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Examination, Lesson 1

11. For more than 30 years, banks have used this method to transfer funds. A. B. C. D. PayPals Web payment system A secure e-mail attachment An electronic funds transfer (EFT) A MasterCard e-Voucher

12. Which of the following is an invalid IP address? A. 1.7.9.3 B. 255.769.128 C. 3.174.22.88 D. 44.1.1.776

13. Which of the following statements is true about the second wave of e-commerce? A. B. C. D. Advertising is the major source of revenue. Smaller companies will join the larger ones in having an online presence. B2C models dominate over B2B models. Bar code and scanning technology comprise the main technology.

14. Which protocol enables you to send attachments, such as spreadsheets or word processor documents, by e-mail? A. SMTP B. IMAP C. POP D. MIME

15. If DuPont were to connect its internal network to Monsantos, the result would be an A. extranet. B. internet. C. intranet. D. outernet.

16. Within the client-server architecture of the Internet, which piece of software makes your PC function as a client? A. Telnet B. FTP C. Browser D. DOS

17. Which of the following Internet connection options provides the highest speed? A. ADSL B. T1 C. Dial-up D. ISDN

18. Which protocol sets the rules for Web page delivery? A. HTML B. FTP C. HTTP D. TCP/IP

Examination, Lesson 1

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19. A router receives a message packet, reads the address, and A. B. C. D. sends it to the next destination. writes a log file. copies it to memory. stores the address on disk.

20. Bluetooth and wireless Ethernet (802.11b) are types of A. B. C. D. wireless standards. leased-line connections. broadband connections. voice-grade telephone connections.

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Examination, Lesson 1

Selling and Marketing on the Web

Lesson 2 Lesson 2

As you learned in Lesson 1, businesses undertake electronic commerce initiatives to enhance profits, lower costs, and improve customer service. In this lesson, youll explore the specifics of how companies sell products and services and how they receive payment for these offerings. Electronic commerce and traditional commerce are similar in many ways; however, electronic commerce does present a number of unique advantages and challenges to selling and marketing. Lesson 2 in this study guide consists of two assignments that correspond to Chapters 3 and 4 in your textbook. Assignment 3 will be read in conjunction with Chapter 3, Selling on the Web: Revenue Models and Building a Web Presence. Assignment 4 will cover Chapter 4, Marketing on the Web.

OBJECTIVES
When you complete this lesson, youll be able to

Discuss the types of revenue models for selling on the Web Describe how to establish an effective business presence and communicate effectively with customers on the Web Describe how to meet the needs and build the trust and loyalty of Web site visitors List ways to test the usability of a Web site Discuss product-based, customer-based, affiliate, and viral marketing strategies Identify and communicate with different market segments Discuss advertising and maintaining brands on the Web Relate search engine positioning and domain name selection to effective Web marketing

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ASSIGNMENT 3: SELLING ON THE WEB


Read this assignment. Then read pages 106164 in your textbook.

The term revenue model describes the combination of strategies and techniques that a company uses to generate cash flow into the business. The revenue models found in electronic commerce are as follows. The Web catalog model. This model is a variation on the printed catalog where a seller establishes a brand image that conveys quality and low cost and uses that image to sell through printed catalogs. In the Web version, customers can browse the printed catalog online and order directly or use a toll-free number to order by telephone. Successful Web catalog sites sell computers, clothing, specialty foods, and discount items, among other products. With this model, its important to avoid channel conflict, which is when a companys Web site interferes with its existing sales outlets. The digital content revenue model. This model is used by companies providing access to intellectual property. For instance, LexisNexis offers information online, as does Pro Quest. In this model, companies charge for access to their information. The advertising-supported model. This model is based on the method used by network television wherein broadcasters provide free programming to an audience along with advertising messages paid for by companies. The money paid by the advertisers is sufficient to support the operations of the network and to pay for the programs. At first, the Web seemed to offer tremendous potential for advertising revenue. However, Web advertising hasnt been as successful as many had hoped it to be. One reason for this is that advertising success on the Web is difficult to measure both in terms of raw numbers of visitors and in the demographics of the visitors that do visit the site. However, some high-visibility sites, such as Web portals (e.g., Yahoo!), online newspapers, and employment sites (Monster.com), have found success with the advertising-supported model.

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Internet Marketing and E-Commerce

The advertising-subscription mixed model. This model resembles a typical magazine subscription in which you pay a fee and the magazine carries some advertising to meet its costs and generate a profit. Web sites using this model usually have less advertising than that found on sites supported solely by ads. The online versions of newspapers such as The New York Times and The Wall Street Journal use this mixed approach. They offer current news for free, but charge a subscription fee for access to archived stories or special research services. Fee-for-transaction model. In this case, businesses offer services and charge a fee based on the number or size of the transactions they process. Travel agencies operate on a feefor-service basis, and the Internet has proven very profitable for this type of business. Also popular in this category are services associated with sales of automobiles, stocks and bonds, insurance, real estate, and event tickets. Some online banking and financial services charge fees for transactions. Fee-for-services model. Companies using this revenue model charge a fee for services based on the value of the service itself, not on the basis of the number or size of the transactions processed as in the fee-for-transaction model. These services range from medical and legal advice to games and concerts. Companies may move from one type of revenue to another as they determine which works best for them. When a company decides to create a presence on the Web, it must decide on the image it wants to convey. A Web site can serve as a sales brochure, product showroom, financial report, employment ad, or a customer contact point. All Web sites want to attract visitors and be interesting enough for the visitor to explore the site and retrieve information. In the process, it should create an impression consistent with the companys brands and corporate image. It should build a relationship of trust that encourages the visitor to return. These goals hold true for both profit-driven organizations and nonprofits. Early electronic commerce sites overlooked the key element that makes the Internet different from other forms of marketing, namely, the ability to carry on meaningful two-way communication. Successful sites take advantage of the interactivity of the Web and provide tools for customers to communicate with the company, such as e-mail links.

Lesson 2

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A well-designed Web site looks at each visitor as a potential customer. Its design and structure serve to anticipate and meet the visitors needs. These needs may be strictly informationalto learn about the company, its products or services, its financial history and current status, or to obtain background on the owners and managers. The visitor may be interested in buying the companys products or services, or the visitor may be an existing customer looking for technical assistance or warranty help. All of these diverse needs can be met by a well-designed Web site. A successful Web site design provides users the ability to select the level of detail that they desire, clearly directs visitors to related information, and uses graphics and color appropriately. Finally, building trust and loyalty through the Web site recognizes the need for good customer service, either in the form of a live representative on call or assuring prompt response to e-mail inquiries. Companies employ a customer-centric approach to Web site design. Its now common practice to involve customers in testing a Web site for usability. This practice is the best assurance for meeting the goals outlined earlier. Guidelines for a customer-centric approach to Web design are presented on page 151 of your textbook. Three business communication modes are one-to-many, one-to-one, and many-to-one or many-to-many. With one-tomany communication, a seller sends a few messages to all. This is the way the mass media operates. At the other end of the spectrum is one-to-one communication, which is seen in personal sales. The Web uses the many-to-one or many-tomany approach, where messages are targeted to an audience not large enough for mass media but too large for personal contact. What makes communication over the Web unique is that the buyer actively participates in the communication and has more control over the scope of the conversation and its outcome. A company whose Web site recognizes this characteristic and makes the best use of it will be a winner in its electronic commerce efforts. Before proceeding to the next assignment, take a moment to complete Self-Check 3.

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Internet Marketing and E-Commerce

Self-Check 3
1. Name the stakeholders of a business whose interests must be factored into the design and implementation of a Web site.

__________________________________________________________ __________________________________________________________
2. Why would a nonprofit organization establish a Web presence on the Internet?

__________________________________________________________ __________________________________________________________
3. What do successful businesses on the web realize?

__________________________________________________________ __________________________________________________________
(Continued)

Lesson 2

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Self-Check 3
Questions 49: Match each of the terms in the left-hand column with the definitions in the right-hand column. a. When a companys Web site sales consume sales that would be made in the companys other sales channels b. A measure of how much time a user spends at a particular Web site; its an indication of the sites ability to attract and maintain interest c. The removal of an intermediary from a value chain d. Customer information thats used to place the customer in a particular group; information includes the customers address, age, gender, income level, occupation, etc. e. A network form of organization in which two or more companies join forces over a period of time f. A general-interest site used as a launching point to enter the Web

______ ______ ______ ______ ______ ______

4. Disintermediation 5. Cannibalization 6. Portal 7. Demographic information 8. Stickiness 9. Strategic alliance

Check your answers with those on page 82.

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Internet Marketing and E-Commerce

ASSIGNMENT 4: MARKETING ON THE WEB


Read this assignment. Then read pages 165216 in your textbook.

A company involved in electronic commerce uses classic marketing strategies in unique ways. The four Ps of marketing product, price, promotion, and placeall apply to the Internet marketing mix in new and interesting ways. If a company thinks of its business in terms of the products and services it sells, it will adopt a product-based marketing strategy. On the other hand, if the focus is on the nature of its customers, the company is likely to use a customer-based marketing strategy. Each approach will be reflected in how the company organizes its Web site, either as groups of products or as clusters of customer needs. The Web allows companies to mix these strategies on the same site, giving customers the choice of approach that most meets their needs. When developing a marketing campaign, different market segments may require different types of media. The three types of mediamass media, the Web, and personal contacthave different levels of trust associated with each of them. Mass media is the most impersonal, and customers have the least amount of trust in a mass media message. Personal selling has the most trust associated with it; however, this type of marketing is very expensive. A Web marketing campaign allows companies to gain some of the trust level of personal selling at a fraction of the cost. Market segmentation is a way of dividing the pool of potential customers into groupings based on demographic characteristics (age, gender, etc.), geographic location, or on values and lifestyles (i.e., psychographic segmentation). On the Web, companies can market to different market segments at a lower cost than in an actual store. These forms of segmentation marketing are based on relatively static or fixed characteristics. Customers can also be segmented based on more dynamic considerations, especially behavior. Because of the flexibility and relative low cost of doing business on the Internet, marketers can now adapt their techniques to these traits.

Lesson 2

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Electronic commerce can take advantage of usage-based market segmentation. With usage-based segmentation, the company anticipates why the person is visiting the Web site. Is the user simply browsing, ready to buy, or comparison shopping? Each of these visitor modes has particular behaviors, and the well-designed Web site accommodates each of them. More behavior-based segmentation categories are being defined, and Web sites are being designed to generate revenue from each one. These techniques are important because they help strengthen a companys relationship with its customers one of the primary goals of any marketing strategy. The discussion of advertising stresses the importance of coordinating Web-based ads with other existing campaigns. A banner ad is an object on a Web page that displays a text or graphic message and contains a hyperlink to the advertisers Web site. Banner ads can be placed or put onto the Web in three ways. The first way is through a banner exchange network that coordinates the sharing of ads. With this technique, your site runs an ad in exchange for someone elses site running your ad. The second method is by paying for space on a Web site thats likely to appeal to the same market segments as your site. The third method is by using a banner advertising network, which is a broker between advertisers and Web sites that carry ads. This last option usually has up-to-date, detailed information on the market segments found on each Web site. Its difficult to measure the effectiveness of banner ads. The most common metrics are visits, page views, and impressions. These are all measures of how many people simply viewed the ad. The most important metric is click-through, which is the number of Web site visitors who clicked on the banner ad to be transferred to the advertisers Web site. Over time, banner ads have proven to be less and less effective. Web site designers are now employing more intrusive forms of advertising such as pop-up, pop-behind, interstitial, and active ads. Web site users have grown accustomed to even these advertising formats and ignore them. A more subtle advertising approach is with companies sponsoring Web sites to promote their products or services.

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Internet Marketing and E-Commerce

Marketing via e-mail takes two forms: unsolicited e-mail and permission marketing. Unsolicited e-mail, called spam, is comparable to the hard-copy junk mail you receive at home, and is even less effective. With permission marketing, or optin e-mail, a customer requests to receive specific information via e-mail or signs up to receive a regular e-mail notification about new products or services. In the area of customer relationship management, the technology of the Web and the Internet are proving very powerful tools. Traditional relationships with customers have been characterized by one-way, mass-oriented communication. Web marketing involves helping the customer find information easily and customizing the information to the appropriate ability level. Successful electronic commerce initiatives track and analyze behaviors and may even make personalized product recommendations. Marketing brand name products and services on the Web presents some unique challenges. The key elements of a brand are differentiation, relevance, and perceived quality. The connection to a brand is often emotional. This type of appeal doesnt translate well to the electronic commerce environment. Rather, the Web favors a more rational approach to marketing, where the customer is offered assistance in exchange for viewing an ad or buying the product. Other marketing strategies used in electronic commerce are brand leveraging, affiliate marketing, viral marketing, and brand consolidation. A search engine is a Web site that collects information on other Web sites and enables users to find information on the Web. Companies doing business on the Web need to take advantage of the ability of search engines to advance their marketing strategies. Users type in keywords that describe the information theyre looking for, and the search engine replies with Web sites that contain those terms. The first few returned listings are the ones a user is most likely to consult. Its possible to pay for this preferred placement on a search engine, and it can be an effective way to feature a product or service.

Lesson 2

31

Finally, one of the most effective marketing tools on the Internet is the Web site address or domain name itself. The Web URL should become part of all company advertising; the more descriptive the URL is of the product, the easier it is to remember and use. Before proceeding to the Lesson 2 examination, take a moment to complete Self-Check 4.

Self-Check 4
1. How do companies use behavioral segmentation as a marketing tool?

__________________________________________________________ __________________________________________________________
2. What are some of the dimensions of the customer relationship that are improved or enhanced using technology-enabled customer relationship management?

__________________________________________________________ __________________________________________________________
3. Name three search engine sites and describe how they can contribute to a Web-based marketing strategy.

__________________________________________________________ __________________________________________________________
(Continued)

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Self-Check 4
Questions 410: Match each of the terms in the left-hand column with the definitions in the right-hand column. a. Strategies for getting a particular URL listed near the top of a list of search engine results b. Technique where one Web site contains information on another companys products and a link to that companys Web site c. Tactic that relies on existing customers promoting products by telling prospective customers about the products d. Relies on the cognitive appeal of the specific help offered e. Process by which a company obtains information on customers to customize its relationship with the customer f. A market segmentation technique that uses social class, personality, or approach to life as the basis for grouping customers

______ ______ ______

4. Occasion segmentation 5. Psychographics 6. Customer relationship management

______ ______ ______

7. Rational branding 8. Viral marketing 9. Affiliate marketing

______ 10. Search engine optimization

g. When behavioral segmentation is based upon things that happen at a specific time

Check your answers with those on page 83.

Lesson 2

33

NOTES

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Internet Marketing and E-Commerce

Lesson 2 Selling and Marketing on the Web

Examination Examination

EXAMINATION NUMBER

40265800
Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com

When you feel confident that you have mastered the material in Lesson 2, go to http://www.takeexamsonline.com and submit your answers online. If you dont have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 120: Select the one best answer to each question.

1. Many users find _______ more annoying than pop-up ads. A. rich media B. ad rates C. interstitials D. ad content

2. A digital content revenue model is popular with A. B. C. D. retailers of luxury goods. information services. computer manufacturers. auction sites.

3. One of the best ways for a Web site to accommodate a broad range of visitor needs is to A. B. C. D. build flexibility into the Web sites interface. stress the universal appeal of its products. appeal to brand loyalty. feature a one-size-fits-all approach.

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4. Which of the following is not one of the four Ps of marketing? A. Product B. Price C. Promotion D. Preference

5. Jeff Bezos, of Amazon.com, describes the Web as an ideal tool to reach the A. hard middle. B. downloadable few. C. impressionable many. D. easy top.

6. Which revenue model characterizes the Web site for the clothing company Lands End? A. Advertising supported B. Fee based C. Web catalog D. Subscription

7. A Web site must be tested and found usable on the lowest bandwidths because A. B. C. D. data compression causes errors. some customers might use old browser software. signal strength weakens over distance. many merchants restrict data access over slow connections.

8. Which of the following Web design decisions will have a negative effect on usability? A. B. C. D. Use of links to meet information needs Use of colors to convey meaning Starting all sessions with Flash animation Sizing text for the smallest monitors

9. A wedding-supply Web site has links on its main page to party planning, gift ideas, wedding registry, etc. What kind of marketing strategy is it pursuing? A. Customer-based strategy B. Lifestyle-based strategy C. Product-based strategy D. Interest-based strategy

10. The defining characteristic of the mass media promotion process is that the seller A. B. C. D. and the buyer are active. is active and the buyer is passive. and the buyer are passive. is passive and the buyer is active.

11. A cooking-supply Web site has links on its main page to pots and pans, cutlery, appliances, etc. What kind of marketing strategy is it pursuing? A. Customer-based strategy B. Lifestyle-based strategy C. Product-based strategy D. Interest-based strategy

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Examination, Lesson 2

12. You want the latest information on hand-held computers. You go to the Web site http://www.palmgear.com to find this information. What type of communication does this represent? A. Mass media B. One-to-one 13. The stickiness of a Web site is a measure of the A. B. C. D. complexity of the graphics. number of hyperlinks on the site. sites ability to keep visitors at the site. sites attention to textual detail. C. Many-to-one D. Many-to-many

14. The Web site http://www.flowers.com has one-click gift ordering for Mothers Day. This marketing technique is called _______ segmentation. A. trigger word B. occasion C. family-oriented D. obligation

15. As customers move through the purchase life cycle, an important goal of marketing is to _______ stage as rapidly as possible. A. B. C. D. move customers to the commitment focus firmly on the familiarity expand the awareness complete the separation

16. Click-through rates for banner ads on Web sites are A. increasing. B. decreasing. C. staying the same. D. not measurable.

17. One use of a technology-enabled customer relationship management tool is to A. B. C. D. negotiate prices of products or services. market based on Zip code. send mass mailers showing clearance items. implement uniform pricing strategies.

18. Rational branding is common to Web portals because A. B. C. D. emotional appeals are ineffective in the online environment. national brands are usually featured. users receive a valuable service in exchange for viewing an ad. the strategy is supported by research centers.

Examination, Lesson 2

37

19. When companies purchase combination packages from search engine placement brokers, theyre seeking A. B. C. D. advertising dollars. top placement in search results. elimination of links to competitors. search results independent of banner ads.

20. A type of marketing where individuals spread the word about a particular companys Web site is _______ marketing. A. affiliate B. viral C. guerrilla D. personal

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Examination, Lesson 2

B2B Strategies; Web Auctions and Portals; E-Commerce Environment


Lesson 3 in this study guide consists of three assignments that correspond to Chapters 5, 6, and 7 in your textbook. This lesson presents a varied set of concepts and related information pertaining to electronic commerce as its practiced in the business-to-business setting. Many developments in electronic commerce depend upon the increase in speed and efficiency of business communication brought about by Internet technologies. This lesson also covers some of the legal, ethical, and tax issues faced by companies engaged in electronic commerce.

Lesson 3 Lesson 3

OBJECTIVES
When you complete this lesson, youll be able to

Discuss electronic commerce strategies that businesses use to improve their purchasing, logistics, and support activities Describe the new forms of network organizations that help businesses lower costs and concentrate on their areas of expertise Explain how supply chain management, EDI, and electronic marketplaces function and how companies use them to improve their performance and lower costs Explain the various types of Web auctions and how they work Discuss how virtual communities and Web portals can generate revenue Discuss the legal, ethical, and tax issues confronting companies engaged in electronic commerce

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ASSIGNMENT 5: BUSINESS-TOBUSINESS STRATEGIES


Read this assignment. Then read pages 217262 in your textbook.

As you learned in Lesson 1, a major form of electronic commerce is business-to-business activities, and many companies are using the technology of the Internet and the Web to improve their own business processes. Primary among these processes are procurement, logistics, and support activities such as human resources. The Web is particularly effective in monitoring the purchasing process and in identifying sources for the direct and indirect materials that companies need to do business. Business-to-business Web sites have emerged that cater to the specialized needs of manufacturers and service companies. Logistics activities include managing the inbound movements of materials and supplies and the outward movements of finished goods and services. The Internet makes it more feasible to better manage these activities by providing constant connectivity and tracking information at a lower cost than was previously possible. The primary support activities of a business are finance and administration, human resources, and technology development. Businesses can move many of these activities to an intranet or outsource them. Several electronic commerce companies have emerged that handle these support activities for a fee. Training is a prime human resource activity thats well positioned to be deployed to a Web site. Federal, state, and local governments have adopted electronic commerce practices to better serve their constituents and reduce administrative costs. The network model of economic organization (see Lesson 1) can be fully realized on the Web when companies move many of their support functions to outside firms. By outsourcing support functions, companies can then concentrate on their own business expertise.

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Internet Marketing and E-Commerce

As you also learned in Lesson 1, EDI was one of the earliest forms of electronic commerce. When first implemented, it was an expensive proposition, as it relied on private, dedicated networks. Later, value-added networks were used. Now, the Internet is the universal network EDI has always needed, and the security provided on private networks can be achieved on the public Internet. Many types of transactions have been standardized, and with the cost reduction, more companies are using EDI. EDI has many advantages over paper-based purchasing. EDI also presents fewer delays and fewer chances for error. Some companies use a mixed approach to EDI, keeping their value-added network for transactions requiring high security and the public Internet for other transactions. As you saw earlier in this lesson, procurement is a key business activity that can be enhanced through electronic commerce techniques. A further improvement is possible through supply chain management. The Internet enables clear, fast, and reliable communications between companies and their suppliers. The parties can also share information on demand fluctuation, design changes, and defects. This high level of communication builds trust among suppliers and customers and reduces costs to all members of the supply chain. An early innovation in B2B electronic commerce was the electronic marketplace, also known as a vertical portal, or vortal. Electronic marketplaces were meant to be central hubs of information and trading links for particular industries. These industry marketplaces werent financially successful and many closed. In their place, private networks powered by special software (e.g., e-procurement packages) arose. Many of these private networks have enabled companies to lower their transaction costs. Before proceeding to the next assignment, take a moment to complete Self-Check 5.

Lesson 3

41

Self-Check 5
1. Direct materials become part of the _______ in the manufacturing process. 2. ________ is when companies integrate their supply management and logistics activities across multiple participants in a particular products supply chain. 3. Companies that use the Web for logistics management experience _______. 4. The use of electronic commerce to perform governmental functions is called _______. 5. The transfer of business information in standard format from one computer to another is called _______.

Check your answers with those on page 83.

ASSIGNMENT 6: WEB AUCTIONS, VIRTUAL COMMUNITIES, AND WEB PORTALS


Read this assignment. Then read pages 263308 in your textbook.

The auction, as a form of economic activity, has its roots in antiquity. In an auction, a seller offers an item or service for sale but doesnt establish a price. Potential buyers submit bids based on their own valuation of the item. An auctioneer presides over the process. The winner of the auction offers the highest bid within a specified time. The Internet is an ideal mechanism for conducting auctions, and auction sites offer revenue opportunities for conducting the sale as well as for selling advertising to targeted segments.

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Internet Marketing and E-Commerce

The seven auction types are English, Dutch, first-price sealed-bid, second-price sealed bid, open-outcry double auctions, sealed-bid double auctions, and reverse auctions. On the Web, three types of auctions have gained prominence: general consumer auctions, specialty consumer auctions, and business-to-business auctions. Among the general consumer auctions, the most successful is eBay. Yahoo! Auctions and the auctions on Amazon.com have also gained many visitors. The success of eBay is in its ability to attract enough buyers and sellers to create markets in many items. Other consumer auction sites have decided to specialize rather than compete directly with the general-purpose sites. Business-to-business auction sites have been created to help companies dispose of unusable or excess inventory. The three B2B auction types are (1) the large-business model where a company sets up its own site; (2) the small-business model where a business uses the services of a third-party auction site; and (3) the creation of a new auction by a third-party that liquidates the inventory of companies in their industry. To make auctions more reliable and trustworthy, several escrow services have emerged. These escrow services usually charge a small percentage of the transaction amount for their involvement in securing the satisfactory outcome of an auction. In addition, payment, auction monitoring, and notification services have evolved to ensure the smooth auction operation. Special auction-management software is also available. In the second wave of electronic commerce, mobile communications technology, such as PDAs and mobile phones are becoming more popular. These devices can access the Web using Wireless Application Protocol (WAP). Special software programs called intelligent software agents, or software robots (bots for short), are programs that search the Web and locate items that meet a buyers specifications. Bots can be focused on a particular product or on a general area of interest.

Lesson 3

43

Virtual communities are virtual gathering places for people and businesses who have common interests. These communities may be grounded in business connections or in shared political, artistic, or hobby interests. Some of these communities have evolved into profit-making enterprises using a variety of revenue models. One example of a successful Web community is Craigslist, which is organized by regions. Before proceeding to the next assignment, take a moment to complete Self-Check 6.

Self-Check 6
1. What are the differences between a live English auction and the computerized form of the English auction used by eBay?

__________________________________________________________ __________________________________________________________
2. What is an escrow service?

__________________________________________________________ __________________________________________________________
3. What are some examples of sticky features that a company could add to its Web portals?

__________________________________________________________ __________________________________________________________
Check your answers with those on page 84.

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Internet Marketing and E-Commerce

ASSIGNMENT 7: THE ELECTRONIC COMMERCE ENVIRONMENT


Read this assignment. Then read pages 309352 in your textbook.

Companies engaged in electronic commerce must comply with the same laws and regulations that govern the operations of all businesses. However, the nature of Internet technologies presents additional challenges in the legal, ethical, cultural, and tax arenas. For starters, just by opening an electronic commerce Web site on the Internet, a company becomes an international business. When this occurs, a business becomes subject to more laws than one operating a typical brick-andmortar operation. Businesses engaged in electronic commerce face the same laws and penalties for breaking those laws as traditional businesses. Ability to enforce laws depends on jurisdiction, which is traditionally related to geographic proximity. However, in cyberspace, where electronic commerce takes place, the concept of jurisdiction is problematic. The four elements that define jurisdiction in the physical worldpower, effects, legitimacy, and noticedont translate to the virtual world of electronic commerce. Various international bodies are working on standards and practices to overcome the jurisdiction problems of international electronic commerce. The law surrounding contracts is the basis for most commerce, traditional or electronic. Every contract contains three elements: offer, acceptance, and consideration. Not all contracts are formal or written. Any kind of agreement or exchange between parties is a contract. Therefore, sales and purchases over the Internet are considered legally binding contracts and subject to many of the same protections and restrictions as any other contract. Web sales may imply a warranty unless the seller uses an explicit disclaimer on the Web page. Contracts can be invalidated if one party doesnt have the authority to enter into an agreement. Internet sales are vulnerable to forged identities, and result in no binding contract.

Lesson 3

45

The content of Web sites gives rise to other legal issues, particularly the protection of intellectual property rights. Most Web pages are protected by copyright, but the fair use doctrine usually applies to copies of pages sent as part of the normal client-server interaction. Because exact digital copies can be sent across the Internet, the potential for illegal copyright infringement is very high. The case of Napster illustrates the potential for copyright infringement and its costs to all parties. Companies engaged in electronic commerce must also be watchful of patent and trademark infringement. Web site designers, just like off-line marketers, must avoid defamation of a competitor as well as deceptive trade practices and misleading advertising claims. The same ethical standards that apply to traditional commerce apply equally to electronic commerce. Because of the speed of communication and the open nature of the Internet, any ethical lapse will be known far and wide much more quickly than in the case of a brick-and-mortar company. Online privacy is increasingly the subject of regulation. In recent years, the electronic commerce industry has taken a more conservative approach to collecting data on Web site visitors. Electronic commerce companies now tell users what data theyre capturing, what they intend to do with it, and give users the right to opt out of the data collection process. However, many issues of online privacy are still unsettled, and several legislative initiatives are underway that would mandate restrictions on what data could be collected from users. Web-based businesses have the same tax liability as other companies and then some. Because Web-based businesses arent confined geographically, theyre subject to many forms of taxation in multiple states and countries. However, the connection of the business with the taxing authority might not be substantial enough to compel payment of taxes. Taxation standards are still evolving. State and local income taxes are due in all locations where a company does business. It hasnt been settled how an e-business pays these taxes. Sales taxes are due to states where the company resides. If a company in one state ships to a customer in another state, that customer is theoretically liable for a use tax. Very few consumers pay use taxes, and, consequently,

46

Internet Marketing and E-Commerce

many Web-based businesses enjoy a net price advantage over local brick-and-mortar retailers. Many states are banding together to create the Streamlined Sales and Use Tax Agreement (SSUTA) to simplify and agree on use taxes. In the European Union, however, companies must collect Value Added Tax (VAT) no matter where the products are sold within the Union. Before proceeding to the Lesson 3 examination, take a moment to complete Self-Check 7.

Lesson 3

47

Self-Check 7
Match each of the terms in the left-hand column with the definitions in the right-hand column. a. Detailed rules and regulations that limit a Web site owners liability b. Similar to a trademark, but used to identify services provided c. Distinctive mark, device, motto, or implement that a company affixes to the goods it produces for identification purposes d. Connection between a taxpaying entity and a government e. Exclusive right to make, use, and sell an invention granted by a government to the inventor f. Ability of a government to exert control over a person or corporation

______ ______ ______ ______ ______ ______ ______ ______ ______

1. Jurisdiction 2. Use tax 3. Terms of service 4. Copyright 5. Fair use exemption 6. Patent 7. Trademark 8. Service mark 9. Trade name

______ 10. Nexus

g. Use of a copyrighted work including copying it for purposes of criticism, comment, news reporting, teaching, scholarship, and research h. The tax a customer owes to his or her state of residence on purchases made from vendors out of state i. Name used by a business to identify itself

j. Authority granted by a government that gives the author or creator of a literary or artistic work the sole and exclusive right to print, publish, or sell the work

Check your answers with those on page 84.

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Internet Marketing and E-Commerce

Lesson 3 B2B Strategies; Web Auctions and Portals; E-Commerce Environment


EXAMINATION NUMBER

Examination Examination

40265900
Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com

When you feel confident that you have mastered the material in Lesson 3, go to http://www.takeexamsonline.com and submit your answers online. If you dont have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 120: Select the one best answer to each question.

1. The most common policy used in U.S. companies today is a/an _______ approach. A. opt-out B. advocacy C. defensive D. opt-in

2. Which of the following procurement activities has been made easier through the use of Web technologies? A. B. C. D. Finding and qualifying suppliers Inspecting shipping documents Identifying and quantifying needs Inspecting and qualifying materials

3. A visitor to a Web site is bound by the terms of the service agreement by A. B. C. D. reading the text and linked sites. clicking on the Accept button. simply using the site. sending an e-mail acknowledgement to the site administrator.

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4. The classic objective of _______ has always been to provide the right goods in the right quantities in the right place at the right time. A. outsourcing B. logistics C. procuring D. purchasing

5. A company thats responsible for transporting all or a large portion of a customers material is a/an A. 3PL. B. EDI. C. RFID. D. ACH.

6. Which one of the following statements best describes direct connection EDI? A. Each business operates its own EDI translator computer thats connected directly to other computers in the system. B. Businesses use a value-added network that stores communication software needed for the EDI transaction. C. Businesses use the Internet for EDI transactions. D. Businesses send EDI documents through the mail. 7. http://www.ofoto.com allows you to upload digital pictures to its Web site at no charge. When it sells prints of these photos to you, it engages in A. bait-and-switch tactics. B. cross-selling. C. monetizing. D. viral marketing.

8. Dell Computer is one company that has been able to reduce supply chain costs by A. B. C. D. sharing information with its suppliers. absorbing the cost. sending the cost back to consumers. reducing its need for suppliers.

9. Vendors selling indirect materials on the Web achieve a major reduction in the cost of A. B. C. D. researching replacement items. printing and shipping catalogs. negotiating with their suppliers. advertising improved products.

10. The main law governing privacy on the Internet today is the _______ Act of 1986. A. B. C. D. Privacy Rights Advocacy COPPA Electronic Communications Privacy COPA

50

Examination, Lesson 3

11. A business-to-business Web auction is an inexpensive way for a company to dispose of A. high-demand finished products. B. short-supply raw material. 12. All eBay auctions have a _______ increment. A. minimum bid B. space limit C. time limit D. maximum bid C. back-ordered spare parts. D. unusable or excess inventory.

13. In a/an _______ auction, multiple sellers submit price bids to an auctioneer who represents a single buyer. A. sealed-bid double B. reverse (seller-bid) C. Dutch D. English

14. In an EDI purchasing process, the _______ has been replaced with the data communications of an EDI network. A. federal tax return B. receiving department C. insurance claim form D. mail service

15. Until the legal environment of privacy regulation becomes more clear, privacy advocates recommend that electronic commerce Web site be _______ in their collection and use of customer data. A. generous B. conservative C. public D. liberal

16. The relationship between the government and a tax-paying entity is known as A. a nexus. B. statutory law. C. TOS. D. common law.

17. Roadway Trucking customers can determine where their shipments are by accessing a Web site that monitors truck positions using GPS technology. Using GPS and portable computing technologies is an example of A. B. C. D. just-in-time delivery management. support service management. second-wave electronic commerce. computerized inventory management.

18. Which one of the following is not a legal issue that can arise regarding the Web page content of electronic commerce sites? A. Product disparagement B. Advertising claim regulation C. Reaffirmation D. Deceptive trade practices

Examination, Lesson 3

51

19. The sales tax collection process in the United States is largely regarded as a A. growth opportunity. B. serious problem. C. profit generator. D. loss magnet.

20. _______ are those materials that become part of the finished product in a manufacturing process. A. Spot welds B. Direct materials C. Indirect materials D. Operating supplies

52

Examination, Lesson 3

E-Commerce Technologies, Web Servers, and Security Threats


Lesson 4 in the study guide consists of three assignments that correspond to Chapters 8, 9, and 10 in your text. In this lesson youll learn about the most current hardware and software available to operate and manage a successful electronic commerce Web site. Youll also learn fundamental concepts and terms concerning network and information security as they relate to electronic commerce.

Lesson 4 Lesson 4

OBJECTIVES
When you complete this lesson, youll be able to

Discuss important features of Web servers and know how to evaluate their performance Identify major Web server software packages and related programs Describe how individual servers are combined to provide large-scale Web services List the basic functions of electronic commerce software for small, medium, and large sites Compare the advantages and disadvantages of externally hosted electronic commerce solutions as compared with self-hosted solutions Discuss supply chain, customer relationship, and automated content management software Define and discuss security-related terms

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Discuss the importance of security in general and specific methods for protecting client computers and Web, application, and database servers Identify some specific threats and measures to defend against security threats

ASSIGNMENT 8: WEB SERVERS


Read this assignment. Then read pages 354396 in your textbook.

Once a company decides to move into electronic commerce, it must determine what kind of hardware and software it will need to operate its Web site. Basically, the factors involved in the decision are the volume and type of Web activities expected. Developers should ask, whats the purpose of the site? How many visitors will be connecting? What kinds of information will be offered? Are the monetary and personnel resources needed for site creation available in-house? Electronic commerce Web sites include development sites, intranets, extranet transaction-processing sites, and contentdelivery sites. The simplest Web site is a development site, which is used to experiment with different Web designs and requires only a modest hardware and software investment. An intranet may require robust hardware and software to operate, depending on the scope of the services offered. An extranet works like an intranet, but also allows certain outside parties access to some data in the system. A transaction-processing site, which handles B2B and B2C electronic commerce, must have high-availability and highreliability servers. The servers must be robust, fast, and secure. Transaction-processing sites also require backup computers to handle unforeseen downtime conditions. This type of site requires the highest capital expense and the most-qualified personnel. Content-delivery sites that sell digital information have similar hardware and software requirements to transaction-processing systems. The next decision in developing an electronic commerce Web site is whether to purchase the required hardware and software (self-hosting) or to outsource the sites operation to a Web hosting company. Service providers offer a range of services.

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Companies have many options, ranging from full to partial hands-off of the operation of the Web servers. The operating system on a personal computer runs programs, allocates memory and disk space, and provides input and output to attached devices. On a large system, it must also keep track of multiple users. Web server operating systems perform these tasks and others, and are specially programmed and optimized to handle large numbers of concurrent browser sessions and to process vast numbers of requests in very short timeframes. Web server software processes HTTP requests from clients. Other capabilities include indexing and searching content. The server software logs all of its activities and analyzes these log files to determine peak usage times and other results of interest. In addition to these core features, desirable Web software includes Web development, site management, and link-checking features. Dynamic content on Web pages is produced by server-side scripting. This technology builds pages based on requests from users. The scripting software resides on the Web server. The three primary approaches to server-side scripting are Active Server Pages (ASP) from Microsoft, JavaServer Pages (JSP) from Sun Microsystems, and PHP: Hypertext Preprocessor (PHP) from the Apache Software Foundation. The Apache Cocoon Project, Microsoft.net framework, and Oracle are looking into new ways to create dynamic content. The basic type of client/server architecture is two-tier, with one server and one client. Three-tier models allow for more processing by using software applications. More than three-tier is possible and is known as n-tier architecture. They generally include databases and database management programs as well. The three most popular Web server software applications are Apache HTTP Server, Microsoft Internet Information Server (IIS), and Sun Java System Web Server. Apaches server is more popular than all the others combined. Its free and very reliable. It runs on all popular server operating systems and has a full set of development and support tools. IIS is bundled

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with certain versions of the Windows operating systems. The third product, Sun Java Web Server, runs on many operating systems and is used on several high-volume, transactionprocessing sites. Before selecting a particular server hardware/software combination, its advisable to perform benchmark testing. This involves simulating the Web environment, testing light and heavy traffic, numbers of users, types of pages being delivered, and connection speeds. Although its difficult to measure some of these elements, two objective measures of a server can be identified: throughput, or the number of HTTP requests processed, and response time, which is the time needed to process a request. Several industry standard benchmarking programs are available to help developers decide the the best hardware and software for their application. Youll read about the various benefits and drawbacks to e-mail, such as methods and legal actions to combat spam. If a company has more than one Web server, it must decide how to connect them together along with related hardware and switches. This setup is called the server architecture. The architecture may be centralized, using a few very large and fast computers, or decentralized. With a decentralized, or distributed, architecture, the system uses a large number of less powerful computers that share the workload by means of a load-balancing system. Before proceeding to the next assignment, take a moment to complete Self-Check 8.

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Self-Check 8
Match each of the terms in the left-hand column with the definitions in the right-hand column. a. Ability of a Web site administrator to control a site from any Internet-connected computer b. Server-side programs that build dynamic Web pages c. Nonstatic information constructed in response to a Web clients request d. Amount of time a server protocol requires to process one request e. Corporate networks that house internal memos, and other corporate documents f. ______ 8. Java servlets Developed by Microsoft as a dynamic pagegeneration technology

______ ______ ______ ______ ______ ______ ______

1. Intranet 2. Active Server Pages (ASP) 3. Server farms 4. Benchmarking 5. Response time 6. Remote server administration 7. Dynamic content

g. Large collections of interconnected Web servers h. Tests used to evaluate hardware and software performance

Check your answers with those on page 84.

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ASSIGNMENT 9: ELECTRONIC COMMERCE SOFTWARE


Read this assignment. Then read pages 397437 in your textbook.

The decision on which software package will run a companys Web site depends on conventional business factors such as budget and technical issues such as the volume and complexity of user interaction. The prospective site owner must also decide whether to use an external service to host the Web site or whether to host it in-house. This latter decision will depend on whether theres an experienced IT staff available that wont be overtaxed by this new undertaking. The basic set of functions provided by electronic commerce software are usually listed as follows: catalog display, shopping cart, and transaction processing. More advanced software can be added to this basic set, such as supply chain management, customer relationship management, middleware, and automated content management tools. Catalog displays can be static, a simple HTML list that must be modified to add or change items, or they can be dynamic. With dynamic catalogs, the catalog items are kept in a database on a separate server and the items are displayed upon request. A dynamic catalog is easier to update than a static one. A shopping cart is a Web-based mechanism for keeping track of items being ordered by a customer. It replaces formbased ordering. The shopping cart retains the items until the customer is ready to check out and pay for the purchases. Shopping carts operate usually in conjunction with cookies to keep track of a particular customer and the items selected. The Web doesnt remember the results of any transmission or session: its a stateless system. Therefore, shopping cart information must be stored for the shopper to retrieve later. Transaction processing is the part of an electronic sale that occurs at checkout. Here, the software adds up the costs of the individual items in the shopping cart, calculates any taxes or shipping costs, applies any discounts, and comes up with a total. The final part of the transaction is conducted

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over a secure communication channel. Some electronic commerce software packages allow connection from the Web session into a companys internal applications, such as inventory or accounting. These connections are handled by a class of software called middleware. Application servers are that part of an electronic commerce system that accepts messages from the Web server and acts on them in a particular way, based on the content of the message. The application server acts based on business logic that contains the rules by which a particular business operates. Application server software is either page-based or component-based. Its often purchased separately. The software options for setting up an online business are classified as basic, midrange, and large. With the basic option, a small business uses an inexpensive storefront provided by an established portal (e.g., Yahoo!). The portal furnishes all of the tools needed to do business online. In general, the volume of transactions handled is small, and the fees are relatively low. The midrange option is used by larger companies. Its software can handle higher transaction volumes and provide for greater page presentation flexibility. The large systems are available for major online stores. These software systems are able to handle very large numbers of concurrent transactions and can interface with backend database systems. Before proceeding to the next assignment, take a moment to complete Self-Check 9.

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Self-Check 9
1. When companies need to incorporate electronic commerce components, they may opt to run servers in-house; this is called _______. 2. _______ integrates the electronic commerce system with a companys existing information systems, such as its inventory, accounting, database management, and shipping applications. 3. The application software that helps companies control the large amounts of text, graphics, and media files deployed on their internal and external Web sites is called _______. 4. Customer relationship management software gathers and integrates data from various sources to help companies understand each customers specific needs and then _______ a product or service that meets those needs.

Check your answers with those on page 85.

ASSIGNMENT 10: SECURITY THREATS


Read this assignment. Then read pages 438492 in your textbook.

According to many surveys, most people are uncomfortable giving out their credit card numbers on the Internet. They fear that the numbers will fall into the wrong hands and theyll incur losses. In addition, large-scale virus attacks on computers and the Internet itself have been widely reported and have created a perception that the Web is vulnerable and not well protected. The public is wary, and until that concern is dealt with, the growth of electronic commerce will be stymied. Terminology is important to this discussion. The two general types of security are physical and logical. Physical security includes tangible protection devices, such as locks, vaults, etc.

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Logical security is the protection of assets using nonphysical means. A threat is a danger to computer assets, and a countermeasure is any procedure, physical or logical, that addresses a threat. When deciding how to deal with threats, security analysts employ a risk management model. This model analyzes the probability and impact of a potential threat. The analysis yields four possible categories of risk. Once the threat is categorized, the appropriate countermeasure can be developed and applied. A high-impact, high-probability threat, for example, will require the most cautious, restrictive, and probably the most expensive countermeasure. Electronic commerce faces both physical and electronic threats. A companys risk management strategy must identify risks, determine how to protect threatened assets, and calculate how much can be spent on protection. Computer security focuses on three categories: secrecy, integrity, and availability. All three types of exposure can have severe repercussions. A company should have a written and formal security policy in place to protect its electronic commerce assets. The policy must spell out the assets to protect, whats needed to protect those assets, an analysis of the likelihood of potential threats, and the rules to enforce to protect the assets. The company then assesses what protection is in place and finally commits to acquiring the necessary hardware and software to protect the assets. Specific elements of the policy should include authentication, access control, secrecy, data integrity, and audit capabilities. The three key elements that must be protected by a comprehensive electronic commerce security strategy are client computers, the data transmitted over the Internet, and Web servers and their associated hardware. Advanced features of Web sites have created unforeseen security exposure. For example, active content adds to the functionality of static HTML pages through Java applets, JavaScript, VBScript, and browser plug-ins. However, adding active content can introduce security risks. The convenience gained by using cookies to store personal information can be very costly if a hacker gains access to this data through the misuse of active content.

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Java applets are downloaded along with a Web site to the client computer. They add functionality to business applications and can handle transactions, thus relieving a busy server. However, they can also introduce security violations. To reduce this exposure, Java applets are either trusted or untrusted. A trusted applet contains a digital signature identifying the source of the code. An untrusted applet conforms to a set of rules called the Java sandbox, and it cant access code that might cause a security breach. JavaScript routines can be programmed to collect private information from a client computer and transmit it back to an unauthorized server. It could also potentially be used to destroy hard drives or disclose e-mail content. ActiveX controls are programs that Web designers put on pages to perform specific tasks. Once downloaded, they execute like any other program, with full access to all system resources. A rogue ActiveX control could do serious damage to a client machine, even erasing data from the hard drive. Browsers can be set up to give a warning before an ActiveX control is downloaded. Finally, because graphics, browser plug-ins, and e-mail attachments can contain executable code, they, too, are potential sources for security attacks. Many of the most recent highly publicized virus attacks were launched through e-mail attachments. The dangers with viruses and worms led to the creation of antivirus software, which deletes or quarantines the program. Another method of dealing with security threats is to use a digital certificate that indicates that an e-mail or Web site is valid. The Internet as the communication channel over which messages are sent and received isnt inherently a secure medium. Data sent over the Internet can be intercepted before it reaches its final destination. As you learned earlier, the Internet relies on packet switching, which breaks up messages and transmits them over the most-available route. At any point in the journey of these packets, the message can be intercepted and read using special programs called sniffers. Electronic commerce software sometimes contains flaws that allow unauthorized persons to steal data. However, the greatest threat to secrecy comes from the inadvertent leaking of confidential information in the course of a Web session.

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Integrity threats to the communication channel take the form of active wiretapping. With active wiretapping, an intruder not only captures the information, but also alters it in some way. Cybervandalism and spoofing are two integrity violations. The denial-of-service (DOS) attack, also known as a necessity threat, is a particularly deadly form of security breach. In a DOS attack, the perpetrators gain control of a large number of computers and cause them to send large volumes of traffic to selected sites. The target sites become overwhelmed and cant function. Although Web servers can be vulnerable to security attacks, most breaches can be prevented through the careful use of the security module provided in the server administration software. Some Web server security issues are due to the fact that the Web is stateless, that is, it cant remember data from one screen to another. To ensure smooth navigation, Web servers store usernames and passwords in cookies. The cookies are then vulnerable to being intercepted during transmission. In addition, because the server stores the user and password information, the server is also highly susceptible to attack. Databases stored on back-end servers accessible through middleware share many of the same vulnerabilities as Web servers. These databases can be protected through enforcement of access levels and protection of the username/password table in the database itself. Wireless networks also have security risks. One way to minimize this risk is to use Wireless Encryption Protocol (WEP) to encrypt data. Various forms of encryption are used to encrypt data today, such as asymmetric and symmetric systems. Firewalls are one form of defense against security threats. Firewalls involve computers and software that control the flow of communication to and from the Internet. In response to several high-profile attacks, the Computer Emergency Response Team (CERT) was formed. Its a joint effort of the U.S. government and Carnegie Mellon University. The SANS Institute is another group concentrating on making computers more secure. Before proceeding to the Lesson 4 examination, take a moment to complete Self-Check 10.

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Self-Check 10
1. The process of encoding a message into a form unintelligible except to the proper recipient is called _______. 2. Crackers are people who write programs or manipulate technologies to gain _______. 3. The term for a person or device that can listen in on and copy Internet transmissions is a/an _______. 4. A _______ is software and/or hardware to control packet traffic in a network. Questions 511: Match each of the terms in the left-hand column with the definitions in the right-hand column. a. A virus coded as a small program and embedded in a file b. Software that attaches itself to another program, causing damage when the host program is run c. Protection of individual rights to nondisclosure d. An active content vehicle containing code thats downloaded to a client computer and executed there e. Prevention of unauthorized information disclosure; prevents unauthorized persons from reading information they should not be reading f. A malicious program hidden inside another seemingly harmless program thats used to attack the client or server

______ ______ ______ ______ ______

5. Trojan horse 6. JavaScript 7. Virus 8. Worm 9. Macro virus

______ 10. Secrecy ______ 11. Privacy

g. A type of computer virus that replicates itself on the computers it infects

Check your answers with those on page 85.

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Lesson 4 E-Commerce Technologies, Web Servers, and Security Threats


EXAMINATION NUMBER

Examination Examination

40266000
Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com

When you feel confident that you have mastered the material in Lesson 4, go to http://www.takeexamsonline.com and submit your answers online. If you dont have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 120: Select the one best answer to each question.

1. A key measurement for Web server performance is throughput, which is the A. rate of transfer when downloading a 1-megabyte file. B. number of HTTP requests processed in a given amount of time. C. number of concurrent users on the Web site during a given time period. D. amount of time it takes to access the home page during peak transaction periods. 2. When Web server hardware and software combination are _______, they can be adapted to meet changing requirements when their clients grow. A. scalable B. optimized C. robust D. modular

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3. Server-side scripting is used to provide A. storage requests. B. static Web site content. 4. Code Red and Nimda are examples of A. antivirus software. B. multivector viruses. C. worm busters. D. SatanBug virus/worms. C. dynamic Web site content. D. SQL tables.

5. The main disadvantage to a decentralized Web server architecture is that A. B. C. D. load balancing is not possible. operating systems become inefficient. several switches and hubs are required. peripherals cant be attached to the system.

6. A hosting service that provides the physical space to the client for the clients own Web server is called a _______ service. A. time-sharing B. distributed C. dedicated D. co-location

7. Shopping cart software keeps track of the items chosen during a Web shopping visit by A. B. C. D. having the user fill out forms. storing purchase information in Web files. using text box controls on the Web page. storing screens on a disk.

8. A _______ catalog stores the information about items in a database, usually on a separate computer thats accessible to the server thats running the Web site itself. A. analogue B. static C. dynamic D. digital

9. In a denial-of-service attack, normal processing can be disrupted when A. B. C. D. service providers lose their credit cards. someone warchalks a building. wireless access points are stolen. an excessive number of requests overwhelms a Web server.

10. Cybervandalism is an example of A. active wiretapping. B. an integrity violation. C. warchalking. D. a wireless network.

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11. The rules used in the business that cause an application server to perform a certain action based on input are called A. data directives. B. e-commerce commands. 12. Commerce service providers usually provide A. B. C. D. Web server management software and applications. unlimited software licenses to clients. customer service support for site customers. in-person desk side support for the company. C. step-by-step procedures. D. business logic.

13. _______ provides search and catalog capabilities, electronic shopping carts, online credit card transaction processing, and the ability to connect to existing back-end business systems and databases. A. Yahoo! Store B. Intershop Enfinity MultiSite C. WebSphere Commerce Suite D. Bigstep Turtle Servers

14. An important goal of companies when they install middleware is A. co-location. B. shared hosting. C. open sourcing. D. interoperability.

15. Large electronic commerce sites usually keep _______ combinations in a separate database with built-in security features. A. virus scan B. username/password C. firewall D. log file directory

16. A macro virus attack is most often launched through A. attachments to e-mail messages. B. infected floppy disks. C. sound and video files. D. corrupt Web sites.

17. If properly configured, your Internet browser can detect that a Web site is attempting to load active content to your computer and A. B. C. D. prompt you for your username and password. shift to text-only display mode. terminate the session. display a security warning message.

18. In a _______, the contents of an e-mail are often changed in a way that negates the messages original meaning. A. man-in-the-middle exploit B. encryption end run C. router jacknife D. TCP/IP protocol

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19. _______ is a programming language developed by Sun Microsystems thats used widely in Web pages to provide active content. A. ActiveX B. Klez C. Java D. Mocha

20. The Code Red worm-virus combination is an example of a A. macro virus. B. untrusted applet. C. multivector virus. D. plug-in.

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Security, Payment Systems, and Planning for E-Commerce


Lesson 5 in this study guide consists of two assignments that correspond to Chapters 11 and 12 in your textbook. In this lesson, youll be introduced to current and future online payment systems. Finally, youll explore whats required to launch an electronic commerce venture.

Lesson 5 Lesson 5

OBJECTIVES
When you complete this lesson, youll be able to

Discuss the most common methods for collecting online payments Describe credit and debit card processing for electronic commerce transactions Discuss the use of electronic cash and its possible future applications Describe electronic wallets and stored-value cards List the protocols used to protect credit card transactions Identify objectives for electronic commerce projects and align them with business strategies Discuss outsourcing and internal staffing needs for electronic commerce projects Describe how project management techniques can be used to plan and control electronic commerce activities

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ASSIGNMENT 11: PAYMENT SYSTEMS


Read this assignment. Then read pages 493533 in your textbook.

One major function of most electronic commerce sites is the handling of payments over the Internet. Processing payments electronically results in large savings for electronic commerce companies, and its more convenient for consumers. This chapter covers the four most prominent online payment methods: payment cards, electronic cash, software wallets, and smart cards. All of these methods work well for business-to-consumer Web commerce sites. Business-tobusiness transactions often require different ways to process invoices and pay for materials. Some of these financial transactions are performed online, but many arent. Payment cardscredit, debit, and charge cardsare the most popular form of online payments for customers. Merchants happily take this form of payment because theyre assured of getting promptly paid. Cardholders like the cards because theyre accepted almost everywhere and their liability is limited in case of theft. When payment cards are used, however, the merchant pays a percentage of the sale to the card issuer and the cardholder pays slightly more for the merchandise. The process for online transactions using payment cards is different than that found in a brick-and-mortar environment. When purchasing in a brick-and-mortar store, you pay with a credit card and leave with the item. When purchasing online, your purchase is validated against your card account, but shipping of the purchased item takes place later. The law in the United States requires that the item be shipped no more than 30 days after the card is charged for the purchase. Payment processing for traditional commerce transactions uses a network of merchant banks. In the online world, a number of options are available for payment processing. Most electronic commerce software can process payment cards. In addition, third-party firms provide this service in a highly secure environment. All of these methods connect to the Automated Clearing House, a network of banks, and to the major credit card authorization companies.

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Other payment methods have been introduced to facilitate electronic commerce. Electronic cash is an attempt to enable small online payments from users without incurring the prohibitive high cost of processing these payments. This method uses existing computer systems to efficiently transfer payments electronically and at a low cost. Online bill payment systems fit under this category. In this case, the Internet is facilitating a process that both businesses and individuals must perform and makes the bill-paying process easy and convenient. Some electronic payment systems are useful in specific settings. PayPal, which offers peer-to-peer payment services, for example, is widely used to settle auctions. To assist online purchasers, Web developers have developed the electronic wallet. An electronic wallet is a virtual storage area that stores personal information, credit card numbers, and any other information needed to complete an online transaction. By storing this data, a shopper has the convenience of calling up the wallet, which then automatically fills in the information requested on the form. Two examples of electronic wallets are Microsofts .NET Passport and Yahoo! Wallet. Stored-value cards can take on different forms. Magnetic strip cards hold value amounts and can be recharged. Smart cards are plastic cards with microchips to store personal, financial, and other types of information. They can store 100 times as much information as a magnetic strip card. They require a PIN to be used for greater security than a magnetic strip card. Smart cards require special hardware and are popular in Europe and Asia, but theyve not caught on in the United States. In a phishing attack, e-mail messages are sent to users asking for them to log into their account to verify information. The Web site spoofs the original Web sites appearance in order to dupe the user to provide user name and passwords. Countermeasures to phishing include warnings from companies to users and searching for counterfeit sites. Before proceeding to the next assignment, take a moment to complete Self-Check 11.

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Self-Check 11
1. The three most common forms of payment card are _______, _______, and _______. 2. An electronic cash payment system in which payments are from one type of entity to another of the same type (e.g., individuals, merchants) is called a/an _______. Questions 39: Match each of the terms in the left-hand column with the definitions in the right-hand column.

______ ______ ______ ______ ______ ______ ______

3. Micropayments 4. Credit card 5. Acquiring bank 6. Stored-value card 7. Electronic cash 8. Electronic wallet 9. Smart card

a. A secure storage space for credit card information, electronic cash, owner identification, and contact information b. A stored-value card with an embedded microchip capable of storing information in encrypted form requiring special readers to decode the data c. A value storage and exchange system that operates online in the same way government-issued currency does in the physical world d. An elaborate smart card with a microchip or a plastic card with a magnetic strip that records the currency balance e. Internet payments for items costing from a few cents to approximately a dollar f. A payment method where purchases are charged against a spending limit based on the users credit rating

g. Entity that does business with merchants who want to accept payment cards

Check your answers with those on page 85.

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ASSIGNMENT 12: PLANNING FOR ELECTRONIC COMMERCE


Read this assignment. Then read pages 536568 in your textbook.

This chapter examines with how companies plan, design, and implement electronic commerce strategies. Electronic commerce initiatives may appear to be just about the technology, but theyre first and foremost about business. Although Web and Internet projects look like IT undertakings, they must make business sense by serving the interests of the company and its customers. The planning process begins by setting objectives and then linking those objectives to business strategies. How well will the electronic commerce project fit with the mission and goals of the company? Some general objectives include increasing sales, opening new markets, serving customers better, lowering costs of doing business, etc. Many projects have been undertaken to avoid conceding a strategic advantage to competitors and to gain a presence in the online world. Regardless of the objectives, they should be measurable: Do the benefits justify the costs? How well are you doing according to the plan? Most companies try to measure the benefits of electronic commerce in tangible monetary terms. This isnt always possible to do with precision. Costs are somewhat easier to quantify and measure. Here, you must attempt to measure not only the initial cost of building the Web site, but the ongoing cost of maintaining and upgrading it. A well-known technique for comparing benefits to costs is return on investment (ROI). In the rush to stay competitive, however, many companies have made investments in electronic commerce without the usual ROI analysis. As Web sites have evolved into offering a full range of business processes, many companies have had to seek outside help in systems development. Many successful ventures involve an internal team with knowledge of the business that works closely with an outsourced vendor that provides technical expertise. The internal team has ultimate responsibility for the success of the project. It decides on objectives, which part of the development is outsourced, and which specialists to hire.

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Outsourcing may be partial, with elements such as hosting, payment processing, security, etc., being handled by one or more vendors. Choosing a hosting service is one of the teams most critical decisions. After a host is selected, its advisable to have someone monitor the hosting service for compliance with its stated service level agreements. You have a better chance of success in the implementation of an electronic commerce initiative if you use formal project management techniques. A project plan helps balance the demands of schedule against resources. Organizations with multiple IT projects going on simultaneously often practice portfolio project management. Staffing the project is a high-priority activity. Even those projects that are outsourced will require individuals familiar with the business operation. During the site development phase, the project will require staff to coordinate activities, applications specialists to write or modify software modules, and content developers to provide content. Once the site goes into production, it will require customer service personnel, as well as a systems administrator. Finally, a postimplementation audit team will need to examine the project to determine its compliance with the projects objectives, budget, and schedule. The postimplementation team can also document the lessons learned and apply them in planning future projects. Before proceeding to the Lesson 5 examination, take a moment to complete Self-Check 12.

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Self-Check 12
Match each of the terms in the left-hand column with the definitions in the right-hand column. a. Formal review of a project after its up and running b. Capital project evaluation techniques c. Collection of formal techniques for planning and controlling the activities undertaken to achieve a specific goal d. Tactics that reduce costs for the business or make its operations more efficient e. Tactics that improve the value that the business provides to its customers

______ ______ ______ ______ ______

1. Downstream strategies 2. Upstream strategies 3. Postimplementation audit 4. Return on investment (ROI) 5. Project management

Check your answers with those on page 86.

Lesson 5

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NOTES

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Lesson 5 Security, Payment Systems, and Planning for E-Commerce


EXAMINATION NUMBER

Examination Examination

40266100
Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com

When you feel confident that you have mastered the material in Lesson 5, go to http://www.takeexamsonline.com and submit your answers online. If you dont have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 120: Select the one best answer to each question.

1. You purchase an item from the Web site www.buyme.com on January 27 and pay with a credit card. However, theyve charged you twice. When is the last day that the consumer can contest an online credit card purchase? A. January 30 B. March 1 C. February 26 D. February 6

2. Which of the following statements best represents an open loop system? A. Two companies both buy and sell products to one another. B. A third party processes a financial payment. C. Two companies are involved in a financial payment without any intermediary services. D. A merchant bank is using the EMV standard.

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3. One of the disadvantages of electronic cash is that A. theres no audit trail. B. it can be easily counterfeited. C. it has high transaction costs. D. it requires special hardware.

4. Which of the following is a disadvantage to server-side electronic wallets? A. B. C. D. They arent portable. They require software downloads. Theyre subject to possible security problems. They require special hardware.

5. Which of the following represents digital cash that can be exchanged for goods or services, but not physical cash? A. Yahoo! Wallet B. Microsoft .NET Passport C. VISAs smart card D. Scrip

6. Which of the following statements best describes fast venturing? A. A company offers start-up companies location, assistance, and technology at a low cost. B. A company offers outsourcing skills for partial profits for a start-up company. C. A company offers outsourcing skills for stock options in an established company. D. An existing company joins up with another company to start an electronic commerce initiative. 7. Which of the following employees is responsible for tracking costs, objectives, and performance for a product? A. Account manager B. Project manager C. Business manager D. Portfolio manager

8. Which of the following companies represents an incubator? A. Microsoft B. Idealab C. Yahoo! D. HostCompare.com

9. What is one of the most predictable results of widespread use of electronic billing and payment over the Internet? A. Reduction in transaction costs B. Increase in online banking services C. Spread of computer literacy D. Higher network speeds

10. Which of the following is not a type of payment card? A. Charge cards B. Debit cards C. PayPal D. Credit cards

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11. Which of the following is the primary reason that online merchants accept payment cards for Web purchases? A. Assurance of payment B. Limitation of liability C. Product warranty D. No fee for transactions

12. Marianne never received the electric drill she bought from http://www.tools.com. She successfully had the charge removed from her MasterCard bill. The bank then retrieved that amount from the Web sites account in a process called a A. credit transfer. B. chargeback. C. bill reversal. D. payment revocation.

13. A type of fraud where the same electronic cash is sent to several different vendors is called A. e-cash overdrafting. B. slamming. C. double spending. D. counterfeiting.

14. What makes smart cards safer than conventional credit cards? A. Installation software B. Encryption C. Multiple-account access D. Security clearances

15. A company hesitates to build a sales Web site because they want to save money. The company loses sales due to its inaction, and has experienced a/an A. opportunity cost. B. marketing damage. C. customer loss. D. public relations fiasco.

16. To create a Web site with electronic commerce operations thats far ahead of competitors costs _______ million and up. A. five B. ten C. fifteen D. twenty

17. In which form of outsourcing does a company outsource specific components of the project? A. Early B. Late C. Partial D. Total

18. Why are electronic commerce projects shorter in duration than other information technology projects? A. B. C. D. Qualified personnel are in short supply. Technology changes rapidly. Funding is insufficient for long projects. Project benefits are too vague to measure.

Examination, Lesson 5

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19. Once the electronic commerce project is operational, a call center is needed to A. B. C. D. respond to customer inquiries. plan for future implementations. monitor the usage of server disk space. audit payment methods.

20. Which one of the following is not a tangible benefit of electronic commerce initiatives? A. B. C. D. Increased sales Reduced costs Measured faster deliveries of ordered goods Increased customer satisfaction

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Examination, Lesson 5

Self-Check 1
1. A SWOT analysis is used to identify the strengths and weaknesses of a business unit in order to analyze and evaluate business opportunities. 2. (a) Online delivery of software; (b) Sale/purchase of perishable food; (c) Sale/purchase of automobiles 3. Language barriers, currency conversions, tariffs, import/export restrictions, jurisdiction issues (laws, taxes, privacy) 4. b 5. c 6. a 7. d

Answers Answers
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Self-Check 2
1. Routers are special-purpose computers programmed with unique software designed to handle data packets. They accept data traffic, read the destination address, and transmit it to the next point as dictated by its routing tables. Theyre specially programmed to handle high-traffic periods and to reroute packets in the case of a network failure. 2. The Transmission Control Protocol (TCP) controls the disassembly of a message or file into packets before its transmitted over the Internet, and it controls the reassembly of those messages into their original formats when they reach their destination. 3. Client-server architecture consists of a client (usually a PC or workstation) issuing a request to a server. The server usually performs the computation and sends the results back to the requesting client machine. In the case of the Internet, most interaction is initiated by a client PC or terminal requesting that a Web page be sent back (or served) by the Web server.

4. i 5. d 6. f 7. b 8. h 9. c 10. g 11. e 12. a

Self-Check 3
1. The stakeholders of a firm include its customers, suppliers, employees, stockholders, neighbors, and the general public. 2. They can use the Web site to integrate image enhancement and information sharing with fund-raising in one location. 3. Every visitor to their Web sites is a potential customer. 4. c 5. a 6. f 7. d 8. b 9. e

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Self-Check 4
1. A Web site can respond to a customers known preferences based on that customers stored history of previous visits and create a separate experience for that customer. 2. Advertising is now a way to provide information in response to a specific inquiry; discounts can be tailored to specific customers; new product features can be created in response to customer demands; distribution channels can be customized to a customers needs or preferences. 3. Three of the most prominent search engines are yahoo.com, altavista.com, and google.com. Companies can pay for a top listing in a set of results generated for a particular set of search terms. They can also buy banner advertising thats keyed to the results of a search. These ads will presumably be viewed by a market segment already interested in the companys product or service. 4. g 5. f 6. e 7. d 8. c 9. b 10. a

Self-Check 5
1. finished product 2. Supply chain management 3. lower transaction costs and constant connectivity 4. e-government 5. electronic data interchange (EDI)

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83

Self-Check 6
1. In eBay English auctions, the bidders are listed but the bid amounts arent disclosed until the auction is over. Thus, the main difference between online and off-line English auctions is that the bidders in online auctions do not know who placed any specific bid until the auction is over. 2. An escrow service is an independent third party that holds a buyers payment until the buyer receives the purchased item and is satisfied that the item is what the seller represented it to be. 3. Chat rooms, e-mail, and calendar functions

Self-Check 7
1. f 2. h 3. a 4. j 5. g 6. e 7. c 8. b 9. i 10. d

Self-Check 8
1. e 2. f 3. g 4. h 5. d

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6. a 7. c 8. b

Self-Check 9
1. self-hosting 2. Middleware 3. content management software 4. customize

Self-Check 10
1. encryption 2. unauthorized access to computers and network systems 3. eavesdropper 4. firewall 5. f 6. d 7. b 8. g 9. a 10. e 11. c

Self-Check 11
1. credit card, debit card, charge card 2. peer-to-peer payment system 3. e 4. f

Self-Check Answers

85

5. g 6. d 7. c 8. a 9. b

Self-Check 12
1. e 2. d 3. a 4. b 5. c

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