Chapter 12 Launching a Successful Online Business

and EC Projects

As you read the textbook and go through this lesson, think about the

following questions:

o How does a business go about justifying the expense of an online

component or initiating a business online?

o What are some common sources of funding?

o What are some of the most common e-commerce initiatives that

are added to traditional businesses?

o How can websites be classified via functionality?

o What are some major web hosting options?

o What are domain names?

o What are some of the pitfalls of managing content on the web?

o What are the components of sound website design?

o What are components of e-commerce architecture?

o What are several options for developing an e-commerce website?

o How does an e-business go about selecting vendors and software

to support its business?

Upon completion of this chapter, you will be able to:

1. Understand the fundamental requirements for initiating an online

business.

2. Describe the process of initiating and funding a startup e-business or

large e-project.

3. Understand the process of adding EC initiatives to an existing business.

4. Describe the issues and methods of transforming an organization into an

e-business.

5. Describe the process of acquiring websites and evaluate building versus

hosting options.

6. Understand the importance of providing and managing content and

describe how to accomplish this.

7. Evaluate websites on design criteria, such as appearance, navigation,

consistency, and performance.

8. Understand how search engine optimization may help a website obtain

high placement in search engines.

9. Understand how to provide some support e-services.

10. Understand the process of building a webstore.

11. Know how to build a webstore with templates.

Answers to Pause/Break Section Review Questions

Section 12.1 Review Questions

1. List the major steps in the process of building an online business.

Identify a consumer or business need in the marketplace.

Investigate the opportunity.

Determine the business owners ability to meet the need.

2. Describe the formation process of a typical online business.

Identify customer or business need.

Investigate.

Determine ability to meet the need.

3. What special requirements must an online business consider in its

formation? In e-business planning?

Online business formation must consider the unique online aspects of the

business as well as appropriate products and services. In e-business

planning, the major difference is the understanding of the unique aspects of

the Internet and the sales channel.

4. What is a business case and how does it contribute to business success?

Business case a document that is used to justify the investment of internal, organizational resources in a specific application or project

A business case can help an entrepreneur focus their plans, and gain

financial support for them.

5. Describe initial, secondary, and IPO funding options available to a

startup.

Initial funding is usually from an incubator or an angel investor.

Secondary funding is usually from a venture capitalist.

An IPO is an initial public offering of stock to the investment community and individual investors at large.

6. What is an angel investor? An incubator?

Angel investor a wealthy individual who contributes personal funds

and possibly expertise at the earliest stage of business development

Incubator a company, university, or nonprofit organization that supports businesses in their initial stages of development

7. How does a VC company support a start-up?

In addition to providing capital, VCs may also provide strategic assistance

and connections.

Section 12.2 Review Questions

1. Which EC initiatives are brick-and-mortar organizations most likely to

add?

Initiatives include storefronts, portals, e-procurement and auctions.

2. Describe the steps in becoming an e-business and the major activities

involved in the process.

The steps are depicted in Exhibit 12.2. The processes include the

evaluation of current abilities, strategy formation, creation of new tools,

processes and abilities and the launch and operation of the e-business.

3. List some of the issues involved in transforming to an e-business.

Some example issues may include legacy systems and processes, resistance

from staff, costs and time to implement new systems and processes.

4. Define BPR and BPM.

Business Process Reengineering (BPR) and business process management

(BPM) are two systems to evaluate and improve business activities to create

efficiency and increase organizational effectiveness. Business process

management (BPM) is a method for business restructuring that combines

workflow systems and redesign methods; covers three process categoriespeople-to-people, systems-to-systems, and systems-to-people interactions.

5. Describe the major characteristics (key points) of organizational

transformation.

The organizations ways of thinking and vision will fundamentally change.

There will be revolutionary changes to the process and context involved in creating a new organizational vision and rethinking

business models and business strategy.

The change must involve a substantial break from previous ways of acting. It will likely involve discovering and developing new

opportunities and new ways of doing things.

The change must permeate through and impact the behavior of a majority of organizational members.

The change will involve creating new systems, procedures, and structures that not only enable and dictate how new processes

function, but that will also impact the deeply embedded business

models and understandings that drive the organization.

Section 12.3 Review Questions

1. Distinguish between informational, interactive, transactional and

collaborative Web sites.

Informational Web site a Web site that does little more than provide information about the business and its products and services

Interactive Web site a Web site that provides opportunities for the customers and the business to communicate and share information

Transactional Web site a Web site that sells products or services Collaborative Web site a Web site that allows for individuals or groups to collaborate

2. List the six steps in building a Web site.

Select a host

Register a domain name

Create/manage content

Design the site

Construct and test

Market and promote

Section 12.4 Review Questions

1. What are the advantages and disadvantages offered by the different Web

hosting options?

Storebuilder services are quick and inexpensive, but generally lack

customization and strong branding. ISP hosted sites can offer

customization and strong branding, but may be more expensive and difficult

to deploy.

2. What is a mirror site? Why would a company use a mirror site?

A mirror site is an exact duplicate of the original Web site that is hosted at

another location. They are used to create redundancy and balance loads.

3. What criteria should an online business consider in choosing a Web

hosting service?

Service quality

Services offered

Price

4. What is a domain name? Why is selecting a domain name an important

step for going online?

A domain name is a name-based address that identifies an Internet-

connected server. It is the address that potential customers will use to access the site.

5. How are domain names controlled in order to avoid duplication?

Domain names are controlled centrally by ICANN to avoid any duplication.

Section 12.5 Review Questions

1. What is content? Dynamic content? Personalized content?

Content the text, images, sound and video that make up a Web page Dynamic content content that changes rapidly Personalized Content Web content that is prepared to match the needs and expectations of the individual visitor

2. How can a business use content for cross selling? For up selling? For

promotion?

Content can be used to persuade customers to buy similar or enhanced

products. It can also be used to promote a site or an item for sale.

3. Where does content come from? Identify four sources of Web site content.

What is content creation?

Content can be created locally, purchased, or automatically generated.

Student answers will vary on sources of content. Content creation is the

development of content material.

4. What is syndication? How does it relate to content?

Syndication is the referral of information. Content may be freely

syndicated from some sites/services, as long as credit is given, or a price

may be charged..

5. What e-newsletter content does a subscriber value most?

It varies based on the user and industry.

6. What is the purpose of content management?

It is keeping content fresh, accurate, compelling, and credible.

7. Describe content maximization.

Using content as much as possible to make up for its creation price.

Section 12.6 Review Questions

1. Describe 10 criteria used to judge Web site design.

1. Build it for users (useful for the user, not necessarily the company).

2. Make it useful (e.g. usability test).

3. Make information easy to find.

4. Accommodate all users, including those with disabilities.

5. Build a comprehensive, responsive, and effective site.

6. Measure the site against the best of its peer group.

7. Build trust; be up front about security, privacy, and marketing

policies.

8. Assign ownership to users, but work as a team with the technical

people.

9. Set priorities; do the most beneficial activities first.

10. Watch for new developments and encourage innovation.

2. Name four site navigation aids.

Navigation bar

Navigation column

Site map

Searchable Web site

3. Why is performance a key design criterion? What causes slow

performance? What can be done to decrease download time?

Performance affects the amount of time a user may stay on the site. Slow

performance can come from many sources including incorrect code and

excessive images/media. Download time can be decreased by streamlining

the code and media used.

4. Describe some issues for proper use of color and graphics on a Web site.

Student responses will vary. Some example issues may include the use of

culturally correct colors to match the product, as well as a blend of colors

that enhances readability of the site. Graphics should complement the site

and be quick-loading.

5. What is usability? List the major criteria used to determine usability.

Web site usability is a measure of the ease-of-use of a site by its audience.

Factors involved include:

Ease of learning

Efficiency of use

Memorability

Error frequency & severity

Subjective satisfaction

Section 12.7 Review Questions

1. List the three options for Web site construction.

Internal development

External development

Partnering

2. What factors favor internal development of a Web site? What factors

favor external development?

Internal development provides absolute control while external development

can rely on experts.

3. Describe the process required for an online business to accept credit

cards over the Internet.

Open a merchant account

Purchase credit card processing software

Integrate the software into the transaction system

4. List four types of Web site content that can promote the Web site

internally.

Purchasing

Compelling content

Useful links

Useful features

5. What is search engine optimization? Why is it important?

SEO the application of strategies intended to position a Web site at the top of Web search engines. It is important because search engines can be a

marketing tool.

6. List ways Web sites can use content to manage customer relationships.

See Exhibit 12.10.

Section 12.8 Review Questions

1. List the various options for acquiring a storefront.

Options include: build from scratch, build from components, build with

templates, or use someone elses storefront.

2. What are the advantages of building with templates? What are the

disadvantages?

Templates tend to be fast and inexpensive, but may look standardized and

may not be full-featured.

3. List the typical features of a storefront.

Storefronts should allow for the presentation, selection and purchase of

products.

4. What are some of the selection criteria for a software option?

The options are varied but include the features required by the customer

base, the cost, the difficulty of implementation, and the difficulty of upkeep.

Answers to EC Application Case Questions

EC Application Case 12.1: Innovation and

Creativity at Amazon.com Questions

1. What were the opportunities and needs in the consumer market that

inspired Bezos to create Amazon.com?

There was a large market for books, but bookstores could not stock all

options. New (at the time) EC technologies made it possible to sell books

online.

2. What factors, at both personal and business levels, led Bezos to his

brilliant idea?

His experience in EC and evaluating Internet opportunities was coupled

with interest risk taking.

3. Visit Amazon.com and find some of their recent innovations.

Student responses will change based on when they go to the site.

EC Application Case 12.2: Akamai Technologies Questions

1. What services does Akamai provide?

They provide services that help Internet congestion through intelligent

traffic controls.

2. What is the companys revenue model?

Fees are charged for each data center in use.

3. What are the services limitations?

Traffic can be routed intelligently, but it does not increase available

bandwidth.

EC Application Case 12.3: THE WEBSITE DESIGN

OF ALIBABA.COM Questions

1. Go to alibaba.com and examine the layout and features of the site. Is

the site navigation effective?

The site appears to be very user-friendly.

2. Alibaba.com is designed to help Chinas small and medium enterprises (SMEs). Do you think the interface design is appropriate for nontechnical

users?

Student opinions will vary, but the site is very straightforward.

3. Do the user communities of the website help to promote loyalty and

trust of its users?

Yes, the addition of social elements should drive visits.

4. Comment on the use of color and graphics on the website.

Student opinions will vary,

EC Application Case 12.2: BAIDUS SEARCH FOR SUCCESS Questions

1. Baidu is nicknamed Chinas Google. How is Baidus business model different from that of Google?

Baidu focuses on the Chinese market, Google has a global focus.

2. Baidu offers paid search placement. Do you think such website ranking

services will promote unfair competition?

Student opinions will vary this is similar to Google.

3. Baidus localization strategy (focus on Chinese language search engine service) is its biggest competitive advantage. Explain why.

By focusing on a limited customer base, the company is able to adapt its

product to meet that groups needs specifically. A global entrant will need

to compromise options to fit a variety of tastes.

4. What lessons does the Baidu case offer to e-commerce startups and

entrepreneurs?

It is possible to be successful competing against a large firm, especially

with a focused strategy.

Answers to Discussion Questions

1. Compare and contrast setting up a traditional, brick-and-mortar business

and an online business. Consider factors such as entrepreneurial skills,

facilities and equipment, and business processes.

Both processes are similar in the planning phases with the exception of

understanding unique online aspects. Internet understanding is critical in

the online business. An off-line business obtains physical settings

(storefront, fixtures, etc.) whereas an online business creates Web sites and

systems.

2. How is an e-business plan different from a traditional business plan?

In e-business planning the major difference is the understanding of the

unique aspects of the Internet and the sales channel.

3. Describe organizational transformation, and discuss some of the

difficulties involved.

Organizational transformation is the process of changing an organization to

be more competitive. Student responses on the areas of difficulty will

vary, but may include interpersonal issues and existing systems/processes.

4. How would you decide which Web site hosting option an online business

should use? List and briefly explain factors to include in your decision.

Student answers will vary. Criteria would include:

Service quality

Services offered

Price

5. Who should be on a Web site development team for a small business? For

a large business?

Both teams should include involved stakeholders and experts in

design/development. External consultants may or may not be included.

6. Several times in this chapter online business owners are advised to

gather competitive intelligence from competitors (e.g., in SEO, what sites

link to competitor sites). Is this ethical? Why or why not?

Student answers will vary. In almost all cases this information is in the

public domain and it is generally considered ethical to use it.

7. Why is a store such as cattoys.com not economically feasible off-line?

It would be difficult to generate a consumer base for the niche products in

any geographic region.

8. What are the advantages and disadvantages of using templates to build a

storefront?

Advantages may include ease of use, quick production, improved quality

(for novices) and expert support. Disadvantages could include reduction of

control, limited templates/customizations and a fixed feature set.

9. Yahoo! provides many services, including Web site hosting, storebuilding

tools, and an online mall. List the benefits of these services. What are the

drawbacks, if any?

Student answers will vary based on the perceived benefits.

10. How is usability related to Web site design?

Website should be designed to maximize usability. Usablity is important to

ensure that the user can quickly and easily accomplish their goals at the site.

Good usability increases the chances that a user will stay longer and return

in the future.

Topics for Class Discussion and Debates

1. Compare and contrast the creation of a new online business and the

establishment of an online initiative in an existing company. Consider

factors such as resource acquisition, startup processes, and competitor

analysis.

Student opinions will vary. The discussion will focus on the advantages

and disadvantages of creating something new versus working within an

established entity.

2. Discuss the logic of outsourcing the combined Web hosting and site

construction. What are some of the disadvantages?

Student opinions will vary. The debate will focus on the issues of ease

versus control.

3. What are the trade-offs in giving the customer everything possible (e.g.,

personalized content, high-resolution graphics, a feature-full site) and the

fundamental rules of Web design?

Student opinions will vary. The discussion will focus on how much is

enough and diminishing marginal benefits.

4. What is a good time for entrepreneurial startups to go public? You may

refer to the cases of Alibaba.com (the closing case), Baidu (Case 12.4),

and Facebook (th opening case) for your discussion.

Student opinions will vary. Some responses are industry and economy

specific.

5. Debate: Could the success of Facebook (the opening case),

Amazon.com (Case 12.1), Baidu (Case 12.4), and Alibaba.com (the

closing case) be traced to the entrepreneurial attitudes of their founders?

Would it be possible for other EC entrepreneurs to duplicate Zuckerberg,

Bezos, Li, and Mas success on the strength of similar traits and characteristics?

Student opinions will vary. The debate will focus on student perceptions

of these founders.

6. Debate: Should a small business maintain its own website? Why or why

not? Should a large business maintain its own website? Why or why not?

Student opinions will vary. The debate will focus on the issues of ease

versus control.

Internet Exercises (Note: URLs may change over time; please check the Internet

Exercises on the Turban Web site for possible updates:

www.pearsonhighered.com/turban.)

1. Go to the vFinance Capital (vfinance.com) and National Venture Capital

Association (nvca.com) sites and identify any trends or opportunities in

acquiring start-up funding.

Student reports will vary based on the time of the report.

2. Go to a Yahoo! category such as tourist agencies or insurance companies

and pick 10 sites. Rate them as informational, interactive, or transactional

Web sites. Make a list of informational, interactive, or transactional

features.

Student reports will vary based on the content selected.

3. Many individuals attempt to make a living simply by buying and selling

goods on eBay. Visit ebay.com and make a list of the ways in which these

entrepreneurs use cross selling and up selling in their sales activities.

Student reports will vary based on the research.

4. Visit Webmaster Forums (webmaster-forums.net), register (for free), and

visit the Web site critique area. Compare the design rules offered in this

chapter with some of the Web sites being offered for critique here. Offer at

least one design suggestion to a Webmaster who is soliciting feedback.

Student reports will vary. Most rules are very similar.

5. Enter networksolutions.com. View the shopping cart demo. What features

impress you the most and why? What related services does it provide?

Compare it to storefront.net and nexternal.com.

Student reports will vary based on preferences.

6. Go to godaddy.com. Examine their Traffic Blazer. How can it help you

with SEO?

Student reports will vary. The site can help increase traffic and site

optimization.

7. Enter 1and1.com. Examine their hosting, development, and other tools.

Take the Test Drive. Compare it with services offered by jstreettech.com.

Write a report.

Student reports will vary based on preferences.

8. Enter willmaster.com. View its tutorials and comment on its usefulness to

EC site builders.

Student reports will vary based on preferences. The site provides a number

of tools, but their effectiveness will be a function of how they might be

used, and the alternatives available to a site owner.

9. Enter omniture.com. How does it help with site optimization? What other

services does it provide?

Student reports will vary. The site helps to evaluate and update site content

to better match SEO trends.

10. Go to checkout.google.com and find the services offered to buyers. Why

is shopping here faster than in Amazon.com or Yahoo!?

Student answers will vary based on personal experience and opinion.

Google supports the idea that the reduction of clicks between selection and

order result in faster shopping.

11. Enter documentum.com and find its enterprise content management

products. Write a report.

Student answers will vary based on the time of the report.

12. Explore the Web to find five dedicated website hosting services.

Compare them using the criteria listed in this chapter. Write a report based

on your findings.

Student answers will vary based on the services evaluated.

Team Assignments and Role Playing

1. Assignment for the Opening Case

Read the opening case and answer the following questions.

a. Log on to Facebook (facebook.com) and socialize on the website.

Compare and contrast Facebook with other social networking sites

such as MySpace, Friendster, Hi5, and LinkedIn.

b. Comment on the website design of Facebook.

c. Using Facebook as an example, discuss the revenue models of

social networking sites.

d. What contributes to the exponential growth of Facebooks user base over the past few years?

e. Do you think Facebooks idea of opening up its inner workings to outside developers is a good idea?

f. Comment on Mark Zuckerbergs decision to turn down acquisition offers from Microsoft and Google.

g. What are the merits and demerits of a startup going for an initial

public offering (IPO)? What is a good time for Facebook to go

public? (See the closing case and note the success of alibaba.coms IPO in Hong Kong in 2007.)

h. What lessons does the Facebook experience offer to e-commerce

startups and entrepreneurs?

i. Watch the video Mark Zuckerberg Named Time Person of Year (youtube.com/watch?v=CzOuTx6mpXA&feature=related). Do you think Mark Zuckerberg deserves the award?

Student opinions and responses will vary.

2. Identify a product or service that is suitable for marketing on Facebook.

Draft a promotion plan. Present your plan to the class.

Student opinions and responses will vary based on the product.

3. Enter entrepreneurs.about.com. Each team member should select two or

three of the browse topics and relate it to online businesses. Make a presentation to the class.

Student opinions and responses will vary based on the topics used.

4. Enter myownbusiness.org/s2/index.html. Obtain a template and design a

business plan for your class EC project.

Student opinions and responses will vary based on user experiences.

5. Form two teams, a client team and a Web design team. After suitable

preparation, both teams meet for their first website planning meeting.

Afterward, both teams critique their own and the other teams performance in the meeting.

Student opinions and responses will vary.

6. Enter webhosting.yahoo.com/ps/sb/index.php and download the

SiteBuilder. As a team, build a storefront for your dream business. You can

try it for free for 30 days. Use the design features available. Have visitors

check out the site. The instructor and class will review the sites for design

and usability. Awards will be given to the best stores. Alternatively, you

may use the equivalent tools from eBay or 1and1.com.

Student opinions and responses will vary.

End-of-Chapter Real-World Case Questions:

ALIBABA.COM: FROM A SMALL STARTUP TO AN

INTERNATIONAL ENTERPRISE

1. Alibaba.com has a strong commitment to assist small and medium

enterprises (SMEs) in B2B e-commerce. What are the advantages and

disadvantages of this strategy?

It allows the company to focus on a certain group, but does not address

other potential customers (like large businesses).

2. Compare and contrast the business model of Alibaba.com with other B2B

business models.

Comparisons will vary based on the other companies selected.

3. Alibaba.com is creating and maximizing a network effect that helps attract users and expand business. How?

By creating a broad customer base, it is possible for members to benefit

from the sheer size and capabilities of the network.

4. Alibaba.com is a general type of e-commerce platform so it focuses on

the horizontal coverage of specific industries. Does the horizontal coverage

limit its vertical power?

This approach is consistent with Alibabas business model, of providing a wide variety. Focusing on variety may hurt the companys effectiveness in specific sub-markets.

5. What are the limitations of Alibaba.coms business in venturing beyond the Chinese boundaries?

It may be possible to replicate these successes outside of China, but it is

also possible that some success is due to localization in China.

6. What lessons does the Alibaba.com case offer to e-commerce startups

and entrepreneurs?

It shows that a firm can specialize in a specific market and thrive.